Tax Admin and Enforcement

Tax Administration
Manner of assessing and collecting or enforcing tax liabilities

Two functions involve: Assessment and Collection
Stages or Processes of Taxation

1. Levy
- Legislature
- LGU
2. Assessment
- Determining the amount of tax due
- In accordance with the prevailing law
3. Payment
- Compliance
4. Refund
- Illegally / erroneously collected
- Collected without jurisdiction
- Excessive
- Manner wrongfully collected
Powers and Duties of BIR (ACEES)

1-2 primary function
1. Assess and Collect national internal revenue taxes, fees, charges

2. Enforce fines, forfeitures, penalties in the collection and assessment of taxes, fines, and
forfeitures
3. Execute judgments in all cases decided in its favor by CTA, and ordinary courts.
4. Effect and administer the supervisory and police powers conferred upon it by NIRC and other
laws.
When could BIR exercise police power

Only when necessary to exercise its primary function:
1. Assessment and collection of taxes, fees, charges
2. Enforce forfeitures, fines, penalties related to the collection and assessment of taxes
BIR headed by CIR and 4 deputies each of whom heads the following:
1. Operations
2. Legal and Inspection
3. Resource Management
4. Information System
Powers of the Commissioner

1. Interpret laws
2. Decide tax cases
3. Obtain information and to summon, examine, and take testimony of persons
4. Make assessment and prescribe additional requirements for tax administration and
enforcement
5. Authority to delegate power
6. Make arrests and seizures
7. Assign internal revenue officers
8. Impose duties on certain officers
9. Suspend business operation of taxpayers
POWER TO INTERPRET TAX LAWS

Power to interpret provisions of NIRC and other tax laws
- Under exclusive and original jurisdiction of CIR
- Subject to review of Sec of Finance
POWER TO DECIDE TAX CASES (DRPO)

1. Disputed Assessment
2. Refunds of internal revenue taxes, fees, charges
3. Penalties imposed
4. Other matters arising under NIRC or other laws administered by BIR
Rojas, RG 1
Ruling of BIR shall be presumed valid unless modified, reversed, suspended by Sec of Finance
Taxpayer who receives an adverse ruling from Commissioner within 30 days from date of
receipt of such ruling seek review of Sec of Finance.
Sec of Finance may motu proprio review rulings
POWER TO OBTAIN INFORMATION, TO SUMMON, EXAMINE AND TAKE TESTIMONY OF PERSONS (3RD
PARTY INFORMATION RULE)
3rd party information program BIR could access records of taxpayers customers and
suppliers to determine the accuracy of declared sales and purchasers.
- Lack of consent from the taxpayers does not imply that BIR illegally obtained
information / such is false or malicious.
- Does not preclude BIR from assessing deficiency taxes on taxpayers based on
documents obtained from 3rd person.
Extent of power (CITE)
- Officers / employees to make canvass from time to time of revenue district
- Obtain information on regular basis: (1) any person other than person whose tax
liability is subject to investigation; (2) officers of local, national govt, instrumentalities,
BSP, GOCC
Information to obtain
i. Cost / volume of production
ii. Receipts, sales, gross income of taxpayers
iii. Names, addresses, financial statement of corp, association etc.
- Take testimony of person concerned, under oath
- Examine any book, paper, record, data relevant to the inquiry
POWER TO MAKE ASSESSMENTS AND PRESCRIBE ADDITIONAL REQUIREMENTS FOR TAX

ADMINISTRATION AND ENFORCEMENT
Examination of returns and determination of tax due
- After the return has been filed, CIR has the power to examine the taxpayer and the
assessment of the correct amount.
- Failure to make a return, absence of return shall not prevent the CIR to make
assessment of the correct amount.
Confidentiality rule (FC-FEET)

- Although tax returns constitute as public record, they are still confidential in nature
- Thus, no unauthorized access
- Subject to following exceptions:
i. Written order of the President of the Philippines
ii. In aid of legislation, Congressional Oversight Committee
iii. Inspection authorized under Finance Regulation
iv. Tax return is material evidence in criminal case
v. Exchange of information with foreign authority, pursuant to an international
agreement
vi. Inspection authorized by taxpayer himself
GR: Return filed shall not be withdrawn / modified, exceptions:

1. Done within 3 yrs from filing (after 3 yrs, assessment shall be done)
2. No notice of investigation
Authority to make assessment based on Best Evidence Obtainable

Using the Best Evidence Obtainable to amend the return
- The CIR may make / amend the return according to his own knowledge, or from
testimony of others.
- Best evidence rule any evidence gathered by CIR, with whom the taxpayer had
previous transaction
This applies when the tax report for assessment is not available or incomplete
Assessment made by CIR is prima facie presumed correct and sufficient for all legal
purposes.
- Burden of proof to show incorrectness lies on the taxpayer
- Subpoena duces tecum not a condition sine qua non before resorting to best
evidence obtainable; to obtain documents / records
Rojas, RG 2
The CIR may still exercise power under NIRC (to obtain information) to determine the
tax liability.
Naked Assessment
- Prima facie presumption of correctness of assessment shall not apply upon proof that
the assessment was without foundation (testimony, records to form knowledge of CIR),
thus arbitrary and capricious.
Authority to conduct inventory-taking and surveillance and to prescribe presumptive gross sales and
receipts
Order inventory-taking of goods

Place the business operations of the person under surveillance / surveillance
Benchmarking
Point of reference / standard by which to measure the performance or compliance of taxpayer
in particular industry.
- Ratio of VAT and Income Tax due : gross sales
Authority to terminate taxable period RLPO

- Taxpayer retiring from business
- Taxpayer intending to leave the Philippines
- Taxpayer intending to conceal properties in Philippines.
- Taxpayer intending to obstruct proceedings for collection of taxes.
Authority to Prescribe Real Property Values

Divide Philippines into different zones upon consultation with public / private sectors to
determine the FMV of real properties.
Authority to Inquire into Bank Deposits of the Taxpayers

1. To determine the decedents gross estate
2. Taxpayer who filed an application for compromise his tax liability by reason of financial
incapacity to pay taxes
Taxpayer to execute a waiver in writing
3. Request for supply of information from foreign authority pursuant to international
agreement.
AUTHORITY TO DELEGATE POWERS

CIR may delegate power to subordinate with rank division chief / higher.
The following cannot be delegated:
- Recommend promulgation of rules and regulations by Sec of Finance
- Issue rulings of first impression or reverse, revoke, and modify any existing ruling of the
BIR
- Power to compromise or abate tax liabilities
- Assign / re-assign Internal Revenue Officers.
AUTHORITY TO MAKE ARRESTS AND SEIZURES

Authority to make arrests and seizures for violation of penal law or regulation administered by
BIR
4. Person arrested to be brought before the court to be dealt according to law.
This does nor require any previous warrant
- BUT ONLY FOR VIOLATIONS COMMITTED WITHIN THE VIEW / PRESENCE OF INTERNAL
REVENUE OFFICERS.
POWER TO SUSPEND BUSINESS OPERATIONS OF TAXPAYERS

In the case of VAT registered person:
i. Failure to issue receipts / invoices
ii. Failure to file VAT return
iii. Understatement of taxable receipts by 30% / more, than the correct taxable
receipts
Failure of any person to register, in which case the temporary closure of the business shall be
for duration not less than 5 days and shall be lifted only upon compliance with requirements
in closure order.
Rojas, RG 3
CIR has no power to prescribe penalties
SEC OF FINANCE ISSUES RULES AND REGULATIONS
ADMINISTRATIVE ISSUANCES
1. Revenue Regulations:
The details of carrying out the law is oftentimes left to admin agencies entrusted with their
enforcement
Requisite for Revenue Regulation to be valid:
For proper enforcement of laws
Not contrary to law and the Constitution
Published in the Official Gazette
2. BIR Rulings: less formal interpretation by CIR / subordinates involving tax provision, maybe
amended by a subsequent ruling issued by same or another CIR.
BIR rulings
VAT rulings
International tax affairs division rulings
Delegated authorities or unnumbered rulings
Review of Rulings by Sec of Finance

Ruling of CIR shall be presumed valid, unless modified, reversed, or superseded by SOF
Taxpayer has 30 days from receipt of ruling to seek review by SOF
POWER OF REVIEW LIMITED ONLY ON RULINGS ISSUED BY CIR WHICH ARE ADVERSE ON
TAXPAYER.
KINDS OF BIR INTERPRETATIVE RULINGS

1. Rulings of first impression
Rulings of CIR with respect to NIRC and other tax laws without established precedent
Must not be against the law
Must be issued only by CIR
2. Ruling with established precedent

Reiteration of previous rulings / interpretation of CIR
As delegated to duly authorized internal revenue officer
3. Delegated Authorities / Unnumbered Rulings

Ruling signed by revenue officials lower than the CIR
Authorized to sign because of previous ruling
4. Revenue Memorandum Rulings (RMR)

Rulings, opinions and interpretation of CIR to the provision of tax laws
as applied to specific set of facts with or without established precedents
3. Revenue Memorandum Circulars (RMC)

Issued to amplify the rules, precedent, laws and orders issued by agencies other than
BIR
For guidance and compliance of revenue personnel
4. Revenue Memorandum Orders (RMO)

Directives outlining procedures which are necessary to carry out policy and objective
5. Revenue Admin Orders

Issuances which cover subject matter relating to more or less permanent administrative
set-up of BIR
Organizational structures, statement of functions and liabilities
REVENUE REGULATION AND BIR ISSUANCES

Secretary of Finance
Promulgates revenue regulations, upon recommendation of BIR Commissioner
Delegated power to issue legal provisions that have the effect of law.
Delegated from legislature to Sec of Finance via law
Revenue regulation is binding upon the courts
Regulation to be binding upon the courts:
Germane to the object of the law
Rojas, RG 4
Not contract, but conform to the standards prescribed by the law
Issued to carry-out into effect the general provisions of our tax laws.
In the event of conflict between the basic law and revenue regulation, the basic law prevails,
because it cannot go beyond the terms and provisions of the basic law.
Rule in the interpretation of imposing tax will not be construed as imposing tax, unless, the law
clearly, unambiguously, expressly imposing the same.
BIR Rulings
Revenue memorandum-circulars are considered as admin rulings
But it could not contravene that law on which it was based
Commissioner of internal revenue is not bound by the rulings of the predecessors
Conflict Between Laws and General Law

NIRC being a special law prevails over the general law, e.g. Civil Code
Ex-post facto laws; tax laws are civil in nature

Tax Code would not in counter with the constitutional prohibition on ex-post facto laws
1. The imposition is but a compensation to the state for delay in payment of tax
Thus, it is compensatory, and not penal in nature
2. Prohibition on ex-post facto law applies only to penal and nor civil matters.
3. Tax code is but a regulation of persons civil / private rights.
Doctrine of Equitable Recoupment

Taxpayer who claims refund against the government, but was not able to file his written claim
for refund because the reglementary period has prescribed
But despite the lapse of the period, the doctrine of equitable recoupment allows that the tax
that should have refunded be credited instead to his existing or other tax liability.
Not allowed in our jurisdiction.
Rojas, RG 5

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Tax Admin and Enforcement

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Tax Administration

Manner of assessing and collecting or enforcing tax liabilities

Stages or Processes of Taxation

Powers and Duties of BIR (ACEES)

1. Assess and Collect national internal revenue taxes, fees, charges

When could BIR exercise police power

Powers of the Commissioner

POWER TO INTERPRET TAX LAWS

POWER TO DECIDE TAX CASES (DRPO)

POWER TO MAKE ASSESSMENTS AND PRESCRIBE ADDITIONAL REQUIREMENTS FOR TAX

Confidentiality rule (FC-FEET)

GR: Return filed shall not be withdrawn / modified, exceptions:

Authority to make assessment based on Best Evidence Obtainable

Order inventory-taking of goods

Authority to terminate taxable period RLPO

Authority to Prescribe Real Property Values

Authority to Inquire into Bank Deposits of the Taxpayers

AUTHORITY TO DELEGATE POWERS

AUTHORITY TO MAKE ARRESTS AND SEIZURES

POWER TO SUSPEND BUSINESS OPERATIONS OF TAXPAYERS

Review of Rulings by Sec of Finance

KINDS OF BIR INTERPRETATIVE RULINGS

2. Ruling with established precedent

3. Delegated Authorities / Unnumbered Rulings

4. Revenue Memorandum Rulings (RMR)

3. Revenue Memorandum Circulars (RMC)

4. Revenue Memorandum Orders (RMO)

5. Revenue Admin Orders

REVENUE REGULATION AND BIR ISSUANCES

Conflict Between Laws and General Law

Ex-post facto laws; tax laws are civil in nature

Doctrine of Equitable Recoupment

Not allowed in our jurisdiction.

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