PRINCIPLES OF TAXATION

A.) Describe the nature, scope, classification, and essential characteristics.

Nature

1.) Legislative – this power can only be exercised by the law making body (Congress)
not the executive or the judicial branch of the government, except when delegated
by the national legislative body to a local legislative body or to the executive
branch, subject to limitations as may be provided by law;

2.) Inherent in sovereignty – the power exists as an incident or attribute of every

government. The power can therefore be exercised even without the constitution
or any law expressly conferring such power.

Scope

The scope of Taxation is that it is comprehensive, unlimited, supreme and plenary, but
subject to constitutional and inherent limitations.

 Comprehensive because it covers persons, businesses, activities, professions,

rights and privileges.
 Unlimited because its force is so searching to the extent that the courts scarcely
venture to declare that it is subject to any restrictions.
 Supreme only in so far as the selection of the subject of taxation.
 Plenary in the sense that it is complete.

Classifications of Taxes

As to scope

a.) National – imposed by the National Government of the Philippines

b.) Local – imposed by the local government units of the Philippines

As to subject matter or object:

a.) Personal, poll or capitation –a fixed amount tax that is imposed upon individuals,
whether citizens or not, residing within a specified territory without regard to their
property or the occupation in which he may be engaged.
 b.) Property – tax imposed on property, whether real or personal, in proportion either
to its value, or in accordance with some other reasonable method of
apportionment.
c.) Excise – any tax which does not fall within the classification of a poll tax or a
property tax. This is a tax on the exercise of certain rights and privileges. It may
also refer to the tax levied or imposed on sin products and non-essential goods
such as cigars and liquors.

As to who bears the burden:

a.) Direct – tax which is demanded from the person who also shoulders the burden of
tax or tax which the taxpayer cannot shift to another. Both the incidence (liability
for the payment of the tax) as well as the impact or burdent of the tax falls on the
same person (e.g. income tax, estate tax, donor’s tax.)
b.) Indirect – tax which is demanded from one person in the expectation and intention
that he shall indemnify himself at the expense of another. These are taxes wherein
the incidence of or the liability for the payment of the tax falls on one person but
the burden thereof can be shifted or passed on to another person.

As to determination of amount:

a.) Specific – tax of fixed amount imposed by the head or number, or by some
standard of weight or measurement.
b.) Ad Valorem – tax of fixed proportion of the value of the property with respect to
which the tax is assessed.

As to purpose:

a.) Primary – tax imposed solely for the general purpose of the government.
b.) Secondary – tax imposed for a specific purpose/

As to graduation or rate:

a.) Proportional – tax based on a fixed percentage of amount of the property, receipts,
or other basis to be taxed
b.) Progressive or graduated – tax the rate of which increases as the tax base or
bracket increases
c.) Regressive – tax the rate of which decreases as the tax base or bracket increases.

As to taxing authority:
 a.) National – taxes imposed under the National Internal Revenue Code collected by
the national government through the Bureau of Internal Revenue and other
national government agencies.
b.) Local – taxes imposed by local government units.

ESSENTIAL CHARACTERISTICS

- An enforced contribution
- Generally Payable in Money
- Proportionate in Character
- Levied on Persons
- Levied by the law-making body of the state.
- Levied for Public Purpose

CASE EXAMPLE:

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-31156 February 27, 1976

PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., plaintiff-appellant,

vs.
MUNICIPALITY OF TANAUAN, LEYTE, THE MUNICIPAL MAYOR, ET AL., defendant
appellees.

Sabido, Sabido & Associates for appellant.

Provincial Fiscal Zoila M. Redona & Assistant Provincial Fiscal Bonifacio R Matol and
Assistant Solicitor General Conrado T. Limcaoco & Solicitor Enrique M. Reyes for
appellees.

MARTIN, J.:

This is an appeal from the decision of the Court of First Instance of Leyte in its Civil Case
No. 3294, which was certified to Us by the Court of Appeals on October 6, 1969, as
involving only pure questions of law, challenging the power of taxation delegated to
municipalities under the Local Autonomy Act (Republic Act No. 2264, as amended, June
19, 1959).

On February 14, 1963, the plaintiff-appellant, Pepsi-Cola Bottling Company of the

Philippines, Inc., commenced a complaint with preliminary injunction before the Court of
First Instance of Leyte for that court to declare Section 2 of Republic Act No.
2264. 1 otherwise known as the Local Autonomy Act, unconstitutional as an undue
delegation of taxing authority as well as to declare Ordinances Nos. 23 and 27, series of
1962, of the municipality of Tanauan, Leyte, null and void.

On July 23, 1963, the parties entered into a Stipulation of Facts, the material portions of
which state that, first, both Ordinances Nos. 23 and 27 embrace or cover the same subject
matter and the production tax rates imposed therein are practically the same, and second,
that on January 17, 1963, the acting Municipal Treasurer of Tanauan, Leyte, as per his
letter addressed to the Manager of the Pepsi-Cola Bottling Plant in said municipality,
sought to enforce compliance by the latter of the provisions of said Ordinance No. 27,
series of 1962.

Municipal Ordinance No. 23, of Tanauan, Leyte, which was approved on September 25,
1962, levies and collects "from soft drinks producers and manufacturers a tai of one-
sixteenth (1/16) of a centavo for every bottle of soft drink corked." 2 For the purpose of
computing the taxes due, the person, firm, company or corporation producing soft drinks
shall submit to the Municipal Treasurer a monthly report, of the total number of bottles
produced and corked during the month. 3

On the other hand, Municipal Ordinance No. 27, which was approved on October 28,
1962, levies and collects "on soft drinks produced or manufactured within the territorial
jurisdiction of this municipality a tax of ONE CENTAVO (P0.01) on each gallon (128 fluid
ounces, U.S.) of volume capacity." 4 For the purpose of computing the taxes due, the
person, fun company, partnership, corporation or plant producing soft drinks shall submit
to the Municipal Treasurer a monthly report of the total number of gallons produced or
manufactured during the month. 5

The tax imposed in both Ordinances Nos. 23 and 27 is denominated as "municipal

production tax.'

On October 7, 1963, the Court of First Instance of Leyte rendered judgment "dismissing
the complaint and upholding the constitutionality of [Section 2, Republic Act No. 2264]
declaring Ordinance Nos. 23 and 27 legal and constitutional; ordering the plaintiff to pay
the taxes due under the oft the said Ordinances; and to pay the costs."

From this judgment, the plaintiff Pepsi-Cola Bottling Company appealed to the Court of
Appeals, which, in turn, elevated the case to Us pursuant to Section 31 of the Judiciary
Act of 1948, as amended.

LIFE APPLICATION:
The Government expects each person to know the Law as well as know Taxation. It is
expected that we obey and have knowledge towards Taxation and that we as Philippine
Citizens have an obligation to pay our Taxes so that our Government can be able to
provide us the benefits and privileges they can accommodate to us from our paid taxes.
The importance of knowing how taxation works will give future taxpayers ideas and
financial strategies to overcome collections of taxes and it will give them an explanation
on why it is important to contribute to paying taxes.

B.) Identify the principles of a sound tax system

Principles of a Sound Tax System

1.) Fiscal Adequacy – The sources (proceeds) of tax revenue should coincide with
and approximate the needs of the government expenditures.
2.) Theoretical Justice – The tax system should be fair to the average taxpayer
and based upon his ability to pay.
3.) Administrative Feasibility – The tax system should be capable of being properly
and efficiently administered by the government and enforced with the least
inconvenience to the taxpayer.

HYPOTHETICAL CASE: In order to find out Taxpayer A’s Tax due amount
without being unjust and with the least amount of inconvenience, The Tax Due
shall be computed by Adding all of his Annual Income and reducing the amount
by his expenses and basic and personal exemptions, after that we will be able
to identify his taxable income which will then be checked using the graduated
tax table (SECTION 24A-NIRC) In order to get his Tax due for the year.

Life Application: As the time comes when we finally have a livelihood, we are
also required to pay the government our contribution in the form of taxes. Every
person has a different amount of taxable income but Taxes are to be paid in an
amount which does not put taxpayers in a very tight financial situation. Taxes
should be estimated without giving so much inconvenience to the tax payer and
those said taxes should be placed in funding of important government
expenditures that can benefit said tax payers in the future.

C.) Discuss the limitations on the power of taxation

The power of taxation can be said to be very powerful since it is above General Law,
however this power also bears Limitations that can regulate its use and to avoid potential
abuses of this powers. The Limitations of Taxation are both Inherent and Constitutional:

a.) Inherent Limitations

1.) Taxation must be for a Public purpose
2.) Taxation is inherently legislative
3.) Taxation is territorial.
4.) Taxation is subject to international comity.
b.) Constitutional Limitations

A.) Direct

1.) Due Process

- Should not be harsh, oppressive, or confiscatory
- (Substantive)
- By authority of valid law (Substantive)
- Must be for a public purpose (Substantive)
- Imposed within territorial jurisdiction (Substantive)
- No arbitrariness in assessment and collection (Procedural)
- Right to notice and hearing (Procedural)

2.) Equal protection

 All persons subject to legislation shall be treated alike, under like
circumstances and conditions both in privileges conferred and liabilities
imposed.
 Power to tax includes power to classify provided:
a.) Based on substantial distinction
b.) Apply to present and future conditions
c.) Germane to purpose of law
d.) Apply equally to all members of the same class

3.) Non-impairment clause

Rules
a.) When government is party to contract granting exemption cannot be
withdrawn without violating non-impairment clause
b.) When exemption granted under a franchise- withdrawal does not
violate
c.) When exemption granted under a franchise may be revoked
because the constitution provides that franchise is subject to
amendment, alteration, or repeal by Congress.
4.) Must be uniform and equitable
 Uniform- all articles or properties of the same class taxed at same rates
Tax operates with the same force and effect in every place where the
subject may be found.

Classification is permitted:

1.) If the standards used therefor are not arbitrary but reasonable and substantial.
2.) If the classification is germane to achieve the purpose of the legislation.
3.) If that classification applies to both present and future conditions, other
circumstances being equal.
4.) If the classification applies equally to all those belonging to the same class.

5.) Non-imprisonment for non-payment of poll tax

No person shall be imprisoned for non-payment of a poll tax (Art II, Sec
20)

6.) Congress shall evolve a progressive system of taxation (Art VI, Sec
28, par 1)
As resources of the taxpayer becomes higher, his tax rate likewise
increases

Constitution does not prohibit regressive taxes; this is a directive upon

Congress, not a justiciable right.

7.) All appropriation, revenue or tariff bills shall originate exclusively

in the House of Representatives, but the Senate may propose or
concur with amendments
- It is the bill, not the law that must originate from House; bill may
undergo extensive changes in Senate
- Rationale: members of House are more sensitive to local needs.

8.) Charitable institution, churches and parsonages or convents

appurtenant thereto, mosques and non-profit cemeteries and all
lands, buildings and improvements ACTUALLY, DIRECTLY, and
EXCLUSIVELY USED for charitable, religious and educational
purposes shall be exempt from taxation (Art VI, Sec 28, par 3)
9.) Tax exemption of all revenues and assets of
a.) Non-stock, non-profit educational institutions
b.) Used ACTUALLY, DIRECTLY AND EXCLUSIVELY for educational
purposes

Revenue must both be:

a.) Derived from an activity in pursuance of educational purpose; and

b.) Proceeds must be used for the same purpose

Income exempt provided it is used for maintenance or improvement of

institution.

Distinguish from tax treatment of

a.) Proprietary educational institutions

b.) Government educational institutions

10.) Delegated authority of President to impose tariff rates, import

and export quotas, tonnage and wharf age dues
- Delegated by Congress
- Through a law
- Subject to Congressional limits and restrictions
- Within the framework of national development program

11.) Law granting tax exemption (includes amnesties,

condonations and refunds) shall be passed with concurrence of
Congress – majority of all members voting separately.

12.) No use of public money or property for religious purposes

except if priest is assigned to armed forces, penal institutions,
government orphanage or leprosarium.

13.) Special purpose – special fund for said purpose, balance goes
to general funds

14.) Veto power of the President – revenue/tariff bill

15.) Power of review, revise, reverse, modify or affirm on appeal or

certiorari of the SC – Rules of Court

16.) Power of Local Government to create their own sources and

levy taxes, fees, charges
 17.) Just share of local government in national revenue which shall
be automatically released.

18.) Tax exemption of all revenues and assets of

a.) Proprietary or cooperative educational institutions
b.) Subject to limitations provided by law
19.) Tax exemption of grants, endowments, donations or
contributions USED ACTUALLY, DIRECTLY and EXCLUSIVELY for
educational purposes.

B.) Indirect

1. Freedom of religion
2. Freedom of press/ expression
3. Mandatory Character of Constitutional Provision
CASE EXAMPLE:

PLDT vs. Globe and Smart

RA 7926 provides for equality of treatment of the telecommunications

industry cannot be a valid basis for PLDT to claim the same exemption and
privilege granted to Globe and Smart. PLDT is not similarly situated nor is
the same as Globe and Smart who provide for handheld phone
communication. Being not similarly situated, the same is not of similar class.
Hence, no room for the application of uniformity and equality.

LIFE APPLICATION:
Knowing the Limitations of the Power of Taxation can give us a proper
understanding of how Taxation treats other types of businesses and specific
organizations. It also shows us an insight on how to taxation is treated towards
non-profit and religious organizations.

D.) Differentiate Tax Evasion vs. Tax Avoidance

Tax Evasion – a.k.a Tax Dodging – connotes fraud through the use of pretenses and
forbidden devices to lessen or defeat taxes; must be willful and intentional

Tax Avoidance – a.k.a Tax Minimization – tax saving device that is legally permissible
HYPOTHETICAL CASE:

Taxpayer A donates his property to a non-profit institution which is qualified for Tax
exemption. Taxpayer A Commits Tax Avoidance.

Company C made a taxable income report with an amount that is less than what it is really
amounted to, Company C Commits Tax Evasion.

LIFE APPLICATION: One way to distinguish an Evasion from Avoidance is from the way
it is committed. If committed though unethical standards of reporting or making off record
sales which cannot be found in company records can be said to be an evasion to pay
taxes while making donations or reducing owned properties through selling them is
considered Tax Avoiding because of the legal means of reducing tax payment. The
importance of distinguishing tax avoidance and tax evasion will help those who are
planning on starting a business of their own. Being able to understand both terms can
prevent illegal applications of tax evasions while giving businessmen wise thoughts on
applying tax avoidance in their businesses.

E.) Determine the situs/ place of taxation

Factors to consider in determining the situs of taxation:

a.) Subject matter

-persons
-property
-activity

b.) Nature of the tax

c.) Citizenship
d.) Residence of the taxpayer
e.) Source of income
f.) Place of excise, business or occupation being taxed

SITUS EXAMPLES:

Persons – Residence of the Taxpayer

Real Property – Location

Personal Property – Place of Transaction

LIFE APPLICATION: Determining the Situs is an important factor when it comes to
regulating and recording for tax purposes. It gives a detailed background in case of
problems occurred in either both parties and can also give tax collectors proper
information towards what they are planning on taxing. In case you have decided to
become a tax collector in your field, knowing the situs of your taxpayer will give you
suitable information that will help you keep track of the taxpayer’s information, both
personal and business.

F.) EXPLAIN DOUBLE TAXATION

Double Taxation can be referred to as direct duplicate taxation or indirect double taxation.
It is when a person, property or right is being taxed twice. It isn’t considered an illegal
practice; however, it is mostly frowned upon due to its unjust application.

Direct Duplicate:

- -taxing same person, property or right twice

- for the same purpose
- -by the same taxing authority
- -within the same jurisdiction or taxing district
- -within the same taxable period
- -and they must be of the same kind or character of tax

Indirect Duplicate:

- Exists if any of the elements for Direct taxation is not present

- No constitutional prohibition on double taxation. However, where there is direct
duplicate taxation then there may be violation of the constitutional precepts of
equal protection and uniformity in taxation.

Measures to avoid double taxation:

a.) Treaty provisions against double taxation

b.) Reciprocity provisions
c.) Tax credit provisions
CASE EXAMPLE:

Villanueva vs City of Iloilo

The Supreme Court held that there is no constitutional prohibition against “double
taxation” in the Philippines. However, in its strict sense, there is “direct” double taxation
(strict sense) when the same property is taxed twice when it should be taxed once
provided both taxes must be imposed.

- On the same property or subject matter

- For the same purpose
- By the same State/ Government or taxing authority
- Within the same jurisdiction or taxing district
- During the same period; and
- They must be the same kind or character of tax

LIFE APPLICATION:

Double Taxation can be a big problem towards tax payers. Despite being legal in the
Philippines, this kind of practice is also unfavorable. This, however, can be avoided.
Knowing Double Taxation can be helpful especially when you are being a victim of Double
Taxation and this concept may also provide a good amount of knowledge toward your
rights as a tax payer.

G.) Discuss the legislation of tax laws.

Tax law in the Philippines covers national and local taxes. National taxes refer
to national internal revenue taxes imposed and collected by the national
government through the Bureau of Internal Revenue (BIR) and local taxes refer
to those imposed and collected by the local government. The Legislation of tax
laws are not simply declared but they are processed and passed on to different
departments and government official to ensure its lawful and just in order for
the public to accept and obey those said laws.

Construction of Tax Laws

- Public purpose is always presumed

- If the law is clear, apply the law in accordance to its plain and simple
tenor.
- A statute will not be construed as imposing a tax unless it does so
clearly, expressly and unambiguously.
 - In case of doubt, it is construed most strongly against the Government,
and liberally in favor of the taxpayer.
- Provisions of a taxing act are not to be extended by implication.
- Tax laws operate prospectively unless the purpose of the legislature to
give retrospective effect is expressly declared or may be implied from
the language used.
- Tax laws are special laws and prevail over a general law.

Different Sources of Tax Laws

a.) Constitution
b.) National Internal Revenue Code
c.) Tariff and Customs Code
d.) Local Government Code (Book II)
e.) Local tax ordinances/ City or municipal tax codes
f.) Tax Treaties and International Agreements
g.) Special Laws
h.) Decisions of the Supreme Court and the Court of Tax Appeals
i.) Revenue Rules and Regulations and Administrative Rulings and Opinions

Effectivity of Revenue Rules and Regulations

-except when the law otherwise expressly provides, the aforesaid revenue tax issuances
shall not begin to be operative until after due notice thereof may be fairly assumed.

Purpose of rules and regulations.

a.) To properly enforce and execute the laws

b.) To clarify and explain the law
c.) To carry into effect the law’s general provisions by providing details of
administration and procedure

Requisites for validity of rules and regulations

a.) They must not be contrary to law and the Constitution.

b.) They must be published in the Official Gazette or a newspaper of general
circulation.

CASE EXAMPLE:

Civil Case No. 13-1405, July 25, 2014

Saint Paul College of Makati vs. Hon. Kim Jacinto S. Henares

The Regional Trial Court of Makati City held that under the Constitution, all revenues and
assets of non-stock, non-profit educational institutions used actually, directly and
exclusively for educational purposes shall be exempt from taxes and duties. Upon the
dissolution or cessation of the corporate existence of such institutions, their assets shall
be disposed of in the manner provided by law. The exemption, which is given by the
Constitution itself, may not be diminished by legislation or by administrative regulation.

Applying the foregoing rationale of the provision on tax-exemption, the Court found
Revenue Memorandum Order (RMO) No. 20-2013 unconstitutional as it imposes as a
prerequisite to the enjoyment by non-stock, non-profit educational institutions of the
privilege of tax exemption under the Constitution both a registration and approval
requirement particularly, that they submit an application for tax exemption ruling (TER)
which is valid for a period of 3 years and subject to renewal. This requirement of filing a
TER is in addition to the filing of an Annual Information Return that they are currently
required to submit to the BIR pursuant to Section 4 of DOR Order No. 137-87.

The imposition of the aforementioned requisites serves as diminution of the Constitutional

privilege which even the Congress cannot diminish by legislation, and thus more so by
the Commissioner of Internal Revenue who merely exercises quasi- legislative function.

LIFE APPLICATION: The Tax Laws are to be taken in a strict manner and we should
realize that these laws are not simply made, but they are constructed through thorough
research and are decided by high officials in the government. It is our obligation to know
and understand these laws so that we may not commit mistakes in the future and to also
not become victims of violations that we have not seek to know about.

H.) Apply the impact of taxes in nation building

It is understood that as we gain our own source of income and when we are above the
minimal wage earners, we are obliged to pay our annual tax. These taxes are what makes
our country progress, when it comes to Tourism, Economy, Agriculture, etc. Our
contributions in the form of tax payments helps us build a nation that is striving to become
a Developed Country. If our contributions are consistent and continuous, the nation would
develop new projects that would be of great benefit to our citizens and to those residing
in the Philippines.

HYPOTHETICAL EXAMPLE:
With our tax contributions, the Government could create more developed ways of
transportation for the citizens in both cities and provinces. Our Government could develop
new roads that can loosen traffic as well with the right budget.

LIFE APPLICATION: As Citizens of the Philippines, no matter how much taxes are a
burden towards our savings, it is a sworn duty to us for being a citizen of the Philippines,
we may not see it but as time goes by, our Nation could become a better place if we would
put our contributions in the hands of the Government.

I.) Evaluate ethical tax compliance and administration.

Paying taxes can give heavy burdens not only to individual tax payers but also to
businesses in the Philippines. The tax compliance in the Philippines today can be
considered to be stable and individuals are still cooperating when it comes to their
taxes due. Exemptions to taxpayers are accommodating and with the use of the
graduated tax table and with the exemptions of minimal wage earners to pay taxes is
a fair practice to all citizens in the Philippines.

The Tax Administration in the Philippines is very uniform and strict when it comes to
Tax Collecting and Recording. Because of its wide array of tax laws, Organizations
like BIR for example take Taxation seriously by keeping all records in order and have
a strict approach when bringing notices to individual and corporate taxpayers.

BIR CASE:

G.R. No. 147188 September 14, 2004

COMMISSIONER OF INTERNAL REVENUE vs. THE ESTATE OF BENIGNO P. TODA,

JR

Summary: The Estate is suspected to be adjusting its income tax returns in order to avoid
payment of taxes, the BIR took action and filled a case towards the estate of Toda to
clarify if the estate did commit tax evasion by adjusting its records.

J.) Describe the organization of the following:

1.) Bureau of Internal Revenue

The Bureau of Internal Revenue, under the supervision and control of the Department of
Finance, are the ones responsible for the comprehensive assessment and collection of
all national internal revenue taxes, fees, and charges, and the enforcement of all
forfeitures, penalties, and fines connected therewith, including the execution of judgments
in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts. Its
Mission is to collect taxes through just enforcement of tax laws for the purpose of nation-
building and the upliftment of all Filipino lives. The Vision of the BIR is that it sees itself
as an institution of service excellence and integrity.

The Organization of the BIR is headed by the Office of the Commissioner of Internal
Revenue, which composes of 7 Offices. Those departments responsible for future
developments and further improvements of the organization are found in the Planning
and Management Service, Project Management and Implementation Service. It’s
offices for financial and tax services are found in the Large Taxpayers Service and the
4 Groups of the Office of the Deputy Commissioner (Operations, Legal, Information
Systems, Resource Management).
 2.) Bureau of Customs

The Bureau of Customs are responsible for the control and monitoring of the export-
import of Weapons of Mass Destruction and dual purpose articles in the Philippines. Its
power makes them the first and last line of defense in enforcement of export control laws
in the country. The Bureau of Customs are the ones who assess and collect the lawful
revenues from imported articles and other fees, dues, charges, fines and penalties
accruing under the tariff and customs laws. They also function as a means of preventing
and suppressing incidences of smuggling or frauds that occur in the Philippines, as well
as supervise and control the entrance and clearance of vessels and aircraft who are
engaging in foreign commerce. They strongly enforce the tariff, custom and other laws
which makes them an organization dedicated to the law and for the sole purpose of
protecting the country from illegal means of importing and exporting unauthorized and
unlawful cargo.

Commissioner of Customs

Internal Administration Revenue Collection and

Monitoring Group

Assessment and Operation and Intelligence Group

Coordination Group

Enforcement Group Post Entry Audit Group Management Information

System and Technology
Group

The Bureau of Customs is operated by Commissioner of Customs which consists of

several other groups:

1.) Internal Administration – those responsible for the management of the Bureau of
Customs itself and consists of Divisions which keep track of the organization’s
finance, budgeting, administration, accounting, etc.
2.) Assessment and Operation and Coordination Group – those who are in charge of
assessing various imports, exports and other forms of exchanges that occur in the
Philippines.

3.) Revenue Collection Monitoring Group – those who monitor the flow of revenues
that occur in the Philippines for the purpose of regulation and security of our
citizens and our economy.

4.) Intelligence Group – those who collect data and conduct researches that may
predict potential outcomes as well as investigate on those who may or may not
commit unlawful acts in the Philippines.

5.) Enforcement Group – those who take action in cases of serious events and those
willing to take risks for the protection and prevention of unlawful, illegal and harmful
transactions in the country.

6.) Management Information System and Technology Group – the group is

responsible for managing and maintaining the organization’s internal systems such
as database management, software maintenance, programming, etc.

7.) Post-Entry Audit Group – those who keep track of transactions that have passed
the lawful standards of the organization and are being recorded in this group.

3.) Local Government Tax Collecting Units

Local Fiscal Administration Systems

The Local Financial Systems, drawn from the theory and practice of local fiscal
administration of the Philippines, encompasses the systems of development planning,
taxation and revenue generation, budgeting and spending, borrowing, budget
accountability and audit.

Fiscal Systems and Citizen Participation

There are four classifications of Local Governments in the Philippines with each
classification having a set of officials, both elective and appointive, and performs a well-
defined set of executive or legislative functions.

The Governor or Mayor is the Chief Executive Officer of a province, city and municipality,
while the Barangay Captain is the Chief Executive of the Barangay Government. On the
side of the Legistlative Branch, the Local Sanggunian (Council) headed by the Vice-
Governor in Provinces or the Vice Mayor in Cities and Municipalities, along with the
members of the Sanggunian, exercise the power of legislation.

The Sanggunian makes policies through ordinances and resolutions, and approves
among others:

 The Annual Budget

 The Local Revenue Code
 The Local Development Plan
 The Annual Investment Program
 The Comprehensive Land Use Plan

Table 1. LGU Elected Officials and Members of the Sanggunian (RA 7160)

LGU Executive Legislature: The Sanggunian and its Composition

Branch
Sangguniang Panlalawigan
- Vice Governor
Province Governor - Board members (number varies from 6 to 12 depending
on income class)
- President of the provincial chapter of the Liga ng mga
Barangay
 - President of the provincial federation of the Sangguniang
Kabataan
- Sectoral representatives
Sangguniang Panlungsod
- Vice Mayor
City Mayor - Councilors (number varies from 10 to 36 councilors,
depending on the number of districts and the number of
councilors per district)
- President of the city chapter of the Liga ng mga
Barangay
- President of the city federation of the Sangguniang
Kabataan
- Sectoral representatives
Sangguniang Bayan
- Vice Mayor
Municipality Mayor - Councilors (number varies from 8 to 12)
- President of the municipal chapter of the Liga ng mga
Barangay
- President of the municipal federation of the Sangguniang
Kabataan
- Sectoral representatives
Barangay Sangguniang Barangay
Captain
- Barangay Captain
- 7 members elected at-large
Barangay - Sangguniang Kabataan chairperson
SK Chairperson Sangguniang Kabataan
- Sangguniang Kabataan Chairperson
- 7 members elected at-large

4.) Board of Investments

 5.) PEZA (Philippine Economic Zone Authority)

The Philippine Economic Zone Authority (PEZA), attached to the Department of Trade
and Industry, is tasked to promote investments, extend assistance, register, grant
incentives to and facilitate the business operations of investors in export-oriented
manufacturing and service facilities inside selected areas throughout the country
proclaimed by the President of the Philippines as PEZA Special Economic Zones.

It oversees and administers incentives to developers/operators of locators in world-class,

ready-to-occupy, environment-friendly secured and competitively priced Special
Economic Zones. PEZA’s dynamic, responsive and client-oriented ethics have earned
the trust and confidence of investors in its Special Economic Zones, the local business
sector, and the foreign chambers of commerce in the Philippines. All Industrial Economic
Zones are manned by a PEZA officer and staff to immediately attend to stakeholders'
needs and concerns. Information Technology companies are attended to by Head Office.

PEZA is ISO 9001:2000 certified.

The creation of PEZA, the development of Special Economic Zones throughout the
country, and the very competitive incentives available to investments inside PEZA Special
Economic Zones are embodied in the Special Economic Zone Act of 1995 (Republic Act
No. 7916), a law passed by the Philippine Congress.
As provided in the Special Economic Zone Act, the PEZA Board is chaired by the
Secretary of the Department of Trade and Industry. Vice-Chair is the Director General
(Chief Executive Officer) of PEZA. Members of the Board are Undersecretaries
representing nine (9) key government Departments, to ensure efficient coordination
between PEZA and their respective Departments on matters pertaining to investors’
operations inside the Special Economic Zones.

The PEZA Head Office is can be Metro Manila (National Capital Region).
The Organizational Chart of the PEZA consists of several groups operated by the Office
of the Director General:

1.) Office of the Deputy Director General for Policy and Planning
- handles Management Information System and Corporate Planning functions.
- it is tasked on future development planning and promotes its on-going policies in
the organization.

2.) Office of the Deputy Director General for Finance and Administration
- handles the Financial tasks and Personnel of the Organization
- in charge of keeping records of the organization transactions and financial
budgeting, accounting, bookkeeping as well as handle employees with its Human
Resource Department under the organization’s Personnel and Administrative
Services Group.

3.) Office of the Deputy Director General for Operations

- Mainly handles the Enterprise Regulations and Support Services and
the Enterprise Assistance group

Other Groups in the Organization consists of:

- Promotion and Press Relations Group

 - Legal Affairs Group
- Internal Control Group

REFERENCES:

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BIR Mandate, Vision and Mission. (n.d.). Retrieved from

https://www.bir.gov.ph/index.php/transparency/transparency-seal/bir-mandate.html

BIR Organizational Structure. (n.d.). Retrieved from

https://www.bir.gov.ph/index.php/transparency/bir-organizational-structure.html

Cuaresma, J. C., & Padilla, A. (n.d.). A Citizen’s Guide to Understanding Local

Government Units’ Finances, Systems and Functions. Retrieved from
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understanding-local-government-units-finances-systems-and-functions-units-finances-
systems-and-functions

Davide, Jr., C.J. (Ed.). (n.d.). G.R. No. 147188 September 14, 2004. Retrieved from
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Guide to Philippines Tax Law Research. (n.d.). Retrieved from

https://www.bir.gov.ph/index.php/rulings-and-legal-matters/guide-to-philippines-tax-law-
research.html

Martin, J. (Ed.). (n.d.). G.R. No L-31156 February 27, 1976. Retrieved from
http://www.lawphil.net/judjuris/juri1976/feb1976/gr_31156_1976.html

Philippine Economic Zone Authority. (n.d.). Retrieved from

http://investphilippines.gov.ph/incentives/philippine-economic-zone-authority/

Tabag, E.D., & Garcia, E.J. (2017). Income Taxation, Quezon City: MaxCor Publishing
House, Inc.