Ch2 - Taxes, Tax Laws, and Tax Administration

Taxation law

refers to any law that arises from the exercise of the taxation power of the State

Tax laws

these are laws that provide for the assessment and collection of taxes

Tax exemption laws

these are laws that grant certain immunity from taxation

Revenue regulations

are issuances signed by the Secretary of Finance upon recommendation of the Commissioner of Internal Revenue (CIR) that specify, prescribe, or define rules and regulations for the effective enforcement of the provisions of the National Internal Revenue Code (NIRC) and related statutes.

True

True/False

Revenue regulations are formal pronouncements intended to clarify or explain the law and carry into effect its general provisions by providing details of administration and procedure.

Revenue Memorandum Orders (RMOs)

Are issuances that provide directives or instructions; prescribe guidelines; and outline processes, operations, activities, workflows, methods, and procedures necessary in the implementation of stated policies, goals, objectives, plans, and programs of the Bureau in all areas of operations except auditing.

Revenue Memorandum Rulings (RMRs)

are rulings, opinions and interpretations of the CIR with respect to the provisions of the Tax Code and other tax laws as applied to a specific set of facts, with or without established precedents, and which the CIR may issue from time to time for the purpose of providing taxpayers guidance on the tax consequences in specific sitatuations.

False, they cannot contravene otherwise the rulings are null and void ab initio

True/False

BIR Rulings can contravene duly issued RMRs.

Revenue Memorandum Circulars (RMCs)

Are issuances that publish pertinent and applicable portions as well as amplifications of laws, rules ,regulations and precedents issued by the BIR and other agencies/offices

Revenue Bulletins (RB)

Refer to periodic issuances , notices , and official announcements of the commissioner of internal revenue that consolidate the bureau of internal revenue's position on certain specific issues of law or administration in relation to the provisions of the tax code , relevant tax laws , and other issuances for the guidance of the public

BIR Rulings

are official positions of the Bureau to queries raised by taxpayers and other stakeholders relative to clarification and interpretation of tax laws.

False, they are merely advisory and a sort of information service to the taxpayer such that none of them is binding except to the addressee and may be reversed by the BIR at anytime.

True/False

Rulings are absolute and binding, but they may be reversed by the BIR at anytime.

True, they are mere conventions of financial reporting

True/False

Generally Accepted Accounting Principles are not laws.

False, they are civil and not political in nature

True/False

Philippine Tax Laws are political in nature.

True

True/False

Philippine Tax Laws are effective even during periods of enemy occupation

False, not penal in nature

True/False

Our internal revenue laws are penal in nature because they are intended to secure taxpayers' compliance.

Tax

is an enforced proportional contribution levied by the lawmaking body of the State to raise revenue for public purpose

1 Tax must be levied by the taxing power

2 Tax must not violate Constitutional and inherent limitations

3 Tax must be uniform and equitable

4 Tax must be for public purpose

5 Tax must be proportional in character

6 Tax is generally payable in money

Elements of a valid tax (6)

Fiscal or revenue tax

a tax imposed for general purpose

Regulatory

a tax imposed to regulate business, conduct, acts or transactions

Sumptuary

a tax levied to achieve some social or economic objectives

Personal, poll or capitation

a tax on persons who are residents of a particular territory

Property tax

a tax on properties, real or personal

Excise or privilege tax

a tax imposed upon the performance of an act, enjoyment of a privilege or engagement in an occupation

Direct tax

when both the impact and incidence of taxation rest upon the same taxpayer

Direct tax

The statutory taxpayer is the economic taxpayer

Indirect tax

when the tax is paid by any person other than the one who is intended to pay the same

Statutory taxpayer

is the person named by law to pay the tax

Economic taxpayer

is the one who actually pays the tax

Specific tax

a tax on a fixed amount imposed on a per unit basis such as per kilo, liter, or meter

Ad valorem

a tax of a fixed proportion imposed upon the value of the tax object

Proportional tax

This is a flat or fixed rate tax

Progressive or graduated tax

This is a tax which imposes increasing rates as the tax base increases

Regressive tax

This tax imposes decreasing tax rates as the tax base increases

False, regressive

True/False

Progressive tax is regarded as anti-poor as it directly violates the Constitutional guarantee of regressive taxation.

Mixed tax

this tax manifests tax rates which is a combination of any of the other types of tax

National tax

tax imposed by the national government

Income tax

tax on annual income

Estate taqx

tax on gratuitous transfer of properties by a decedent upon death

Donor's tax

tax on gratuitous transfer of properties by a living donor

Value Added Tax

Consumption tax collected by VAT business taxpayers

Other percentage tax

consumption tax collected by non-VAT business taxpayers

Excise tax

tax on sin products and non-essential commodities such as alcohol, cigarettes and metallic minerals

Documentary stamp tax

a tax on documents, instruments, loan agreements, and papers evidencing the acceptance, assignment, sale or transfer of an obligation, right or property incident thereto

Local tax

tax imposed by the municipal or local goverment

False, bali

True/False

The amount imposed is revenue but the amount collected is tax

Revenue

refers to all income collections of the government which includes taxes, tariff, licenses, toll, penalties, and others

True

True/False

Tax is a post-activity imposition whereas license is a pre-activity imposition

True

True/False

Tax is a demand of sovereingty whereas toll is a demand of ownership

False, bali

True/False

Tax can be subject to set-off and can be paid in kind (Dacion en pago). Debt is not subject to set-off and is generally payable in money.

False, tax, taxpayer

True/False

Debt draws interest only when the debtor is delinquent.

Special assesment

is levied by the government on lands adjacent to a public improvement

False, without

True/False

Tax is levied with expectation of a direct proximate benefit

True

True/False

Special assessment attaches to the land.

False, bali

True/False

Tariff is broader than tax

Tariff

is the amount imposed on imported or exported commodities

True

True/False

Penalty may be imposed by both the government and private individuals. It may arise both from law or contract whereas tax arises from law

Tax system

refers to the methods or schemes of imposing, assessing, and collecting taxes.

1 National tax system

2 Local tax system

The Philippine Tax System is divided into 2:

Progressive

tax system employed in the taxation of income of individuals, and certain local business taxes

Proportional

tax system employed in taxation of corporate income and business

Regressive

tax system not employed in the Philippines

False, cannot

True/False

A direct tax can be shifted

True

True/False

A progressive tax system is one that emphasizes direct taxes

True

True/False

A regressive tax system is one that emphasizes indirect taxes.

False, regressive tax system due to the prevalence of business taxes

True/False

It is widely believed that the Philippines has a dominantly progressive tax system.

Withholding system on income tax

Under this collection system, the payor of the income withholds or deducts the tax on the income before releasing the same to the payee and remits the same to the government

Withholding tax on compensation

an estimated tax required by the government to be withheld by employers against the compensation against their employees

Expanded withholding tax

an estimated tax required by the government to be deducted on certain income payments made by taxpayers engaged in business

Final withholding tax

a system of tax collection wherein payors are required to deduct the full tax on certain income payments

Withholding system on business tax

when the national government agencies and instrumentalities including government-owned and controlled corporations purchase goods or services from private suppliers, this system is what the law requires

Voluntary compliance system

Under this collection system, the taxpayer himself determines his income, reports the same through income tax returns and pays the tax to the government.

Self-assessment method

Voluntary compliance system is also known as

Assessment or enforcement system

Under this collection system, the government identifies non-compliant taxpayers, assess their tax dues including penalties, demands for taxpayer's voluntary compliance or enforces collections by coercive means such as summary proceeding or juridical proceedings when necessary

1 Fiscal adequacy

2 Theoretical justice

3 Administrative feasibility

Principles of a sound tax system (3)

Fiscal adequacy

requires that the sources of government funds must be sufficient to cover government costs

Theoretical justice or equity

Suggests that taxation should consider the taxpayer's ability to pay

Administrative feasibility

suggests that tax laws should be capable of efficient and effective administration to encourage compliance.

Tax administration

refers to the management of the tax system

1 Commissioner

2 Deputy commissioners

a Operations group

b Legal Enforcement group

c Information Systems group

d Resource Management group

Chief officials of the BIR

Zonal Value

The CIR is authorized to divide the Philippines into zones and prescribe real property values after consultation with competent appraisers. The values thus prescribed are referred to as __________________

3 years

Zonal values are subject to automatic adjustment once every ___________

Higher of

Zonal value as prescribed by commissioner

Fair Market value as shown in the schedule of market values

FV of real property shall mean ______________

True

True/False

The NIRC previously use the assessed value which is merely a fraction of the market value

1 Commissioner 4 Deputies

The Evaluation Board is composed of _________

Bureau of Customs

is tasked to administer collection of tariffs on imported articles and collection of the VAT on importation

Department of Finance

Together with the BIR, the BOC is under the supervision of the _______________

Board of Investments

is tasked to lead the promotion of investments in the Philippines by assisting Filipinos and foreign investors to venture and prosper in desirable areas of economic activities

Department of Trade and Industry

The BOI is an attached agency of the _______________

Philippine Economic Zone Authority

is created to promote investments in export-oriented manufacturing industries in the Philippines and, among myriads of functions, supervise the grant of both fiscal and non-fiscal incentives

Fiscal Incentive Review Board

has oversight function on the administration and grant of tax incentives by the Investment Promotion Agencies and other government agencies administering tax incentives.

Large Taxpayers

under the supervision of the Large Taxpayer Service of the BIR National Office

Non-large Taxpayers

under the supervision of the respective Revenue District Offices where the business, trade, or profession of the taxpayer is situated.