Fiscal Adequacy The principle of fiscal adequacy states that the sources of revenue of the government should be sufficient

t to meet the demand of the public expenditures regardless of business condition.

Equality on Theoretical Justice The principle states that the tax burden must be proportionate to the taxpayer s ability to pay. It is based on the philosophy that he who received more should give more

Administrative Feasibility The law must be convenient, just, uniform and effective in their administration free from confusion and uncertainty. The applications of administrative feasibility are: The collection of taxes at source Assigning of duly authorized banks to collect taxes, and Quarterly filing and payment of income taxes The Department of Finance is the principal agency of the government for taxes administration. It has executive supervision and control over the agencies, such as: Bureau of Internal revenue (BIR) Bureau of Customs (BC) and Tariff Commission (TC) Land transportation Office (LTO) Duly and lawfully authorized collectors Local offices in charged to enforce local taxation: Provincial, City, Municipal and Barangay Treasurers Provincial and City Assessors Provincial and City Board of assessment Appeals: and Central Board of Assessment Appeals

The other governmental offices that may have incidental functions regarding tax enforcement and interpretation of tax laws are as follows: The secretary of Justice Offices that provides assistance in the collection of taxes: The courts Register of deeds The secretary of Public Works and Highways Offices: City Fiscals; and BIR Collection agents

Bureau of Internal revenue (BIR) The BIR is principally tasked with the enforcement of the NITC. Sections 2, 10, 9, 13 and 14 of the NIRC list the following BIR officers:       The Commissioner of the Internal Revenue; Four Deputy Commissioner of the Internal Revenue; Revenue Regional Director; Revenue District Officers; Division Chiefs of the BIR; and BIR Collection Agents

When BIR Commissioner may terminate One's tax period Retires from business subject to tax; Intends to leave the Philippines; Prescribe real property taxes; Inquire into bank deposit accounts; Accredit and register tax agents; and Prescribe additional procedural or documentary.

Secrecy of Bank Deposit BIR is authorized only to inquire into the bank deposits of:   A decedent to determine the gross estate of such decedent; and Any taxpayer who has filed an application for compromise of his tax liability under Section 204(A) of the tax code by reason of financial incapability to pay his tax liability.

Authority to delegate The following powers of the commissioner shall not be delegated:  The power to recommend the promulgation of rules and regulations by the Secretary of Finance The power to issue first interpretation regarding rulings, or to reverse, revokes or modifies any existing ruling of the bureau. The power to assign or re-assign internal revenue officers to establishments where articles subject to exercise tax are produced or kept; and The power to compromise or abate.

Authority to Abate or Cancel Tax Liability The BIR Commissioner may abate or cancel the tax liability when:  The tax or any portion thereof appears to be unjustly or excessively assessed; or The administration and collection costs involved do not justify the collection of the amount due.

Authority to Refund or Cancel Taxes The BIR Commissioner may:  Credit or refund taxes erroneously or illegally received or penalties imposed without authority. Refund the value of Internal Revenue stamps when they are returned in good condition by the purchaser; and

Redeem or change unused stamps that have been rendered unfit

Cancellation of Registration The registration of a person who ceases to be liable to tax type shall be cancelled upon filing with the Revenue district Office where he is registered and where he applied for registration information update in a prescribed form.

Printing of Receipts, Sales or Commercial Invoices The following are the requirements before receipts, sales or commercial invoices are printed:   BIR s authority to print. Other requirements.

Issuance of Receipts or Sales or Commercial Invoices Rules to be followed:  The time for issuance of receipts or invoices should be the time when transaction is affected. All persons subject to any internal revenue tax are required to issue receipts or sales invoice when the value of merchandise sold or service rendered is twenty-five pesos or more. When receipt invoice is not required. Cases when issuance of receipts is required regardless of the amount. Cases when the receipts should indicate the name, business (if any) address of the purchaser, customer or client. The original receipt shall be issued to the purchaser, and the issuer shall keep the duplicate in his place of business for three years. The purchaser or the issuer should keep their copy of the receipt for three years in his place of business from the close of taxable year in which such invoice or receipt was made.

  

Certificate of Payment The certificate or receipt showing payment of taxes issued to a person engaged in a business subject to annual registration fee shall be kept in plain view at the place where the business is conducted. In case of a peddler or other persons not having fixed place of business, it shall be kept in the position of the holder thereof, and shall be presented upon demand of any internal revenue officer.

Business of diseased Person No additional payment shall be required for the remaining period within which the tax was paid. The person who will continue the business should submit inventories of goods or stocks to the BIR within 30 days from the death of the decedent. Same requirement (1&2) shall be applied in case of transfer of ownership or change of the name of the business establishment.

Collection of taxes By nature, the government s power to impose taxes carries with it the power to enforce contribution. As the lifeblood of the government, taxes are not optional and the taxpayer thereof must make payment promptly.

Imposition of Injunction The Tax Law provides that injunctions are not available to restrain collection of National Internal Revenue, fee or charge imposed by the Tax code. The imposition of injunction is only applicable within the discretion of the Tax court.

Collection Remedies Available to Government Distraint of personal property;

Levy of real property; and Other civil or criminal action

Distraint of Personal Property Distraint of personal property is the seizure by the government of personal property tangible or intangible to enforce the payment of taxes, to be followed by its public sale if taxes accruing thereto are not voluntarily paid.

Tax Lien A tax lien is a legal claim granted to the government to secure the proper payment of taxes, surcharges, interest and cost on all the property subject to levy or distraint.

Forfeiture Forfeiture or confiscated article implies taking of property without compensation s a result of an offense committed.

Forfeiture to government for Want of Bidder In case there is no bidder for real property exposed for sale or if the highest bid is for an amount insufficient to pay the taxes, penalties and costs, the Internal Revenue Officer conducting the sale shall declare the property forfeited to the government in the satisfaction of the claim in question.

Compromise Compromise is a contract whereby the parties, by reciprocal concessions, avoid litigation or put an end to the one already commenced.

When to Effect Compromise A reasonable doubt as to the validity of the claim against the taxpayer exist; or The financial position of the tax payer demonstrates a clear inability to pay the assessed tax.

The following should be considered in a tax compromise agreement:  The taxpayer must have a tax liability,

There must be an offer by the taxpayer or Commissioner of an amount to be paid by the taxpayer. There must be an acceptance by the commissioner or taxpayer

Manufacturers and importers Bond Manufacturers and importers of articles (alcohol and tobacco products) subject to excise tax shall post a bond subject to the following conditions:   Initial Bond Bond for succeeding years of operation

Requiring Proof of Filing Income Tax Return Before a renewal of license to engage in trade, business or occupation or practice a profession can be issued to a person, partnership, association or corporation required by law to file an income tax return.

Informer s Reward For voluntary sworn information given to the BIR which lead to the discovery of frauds thereby resulting in revenue recoveries, 10% of such amount recovered may be rewarded to the informer.   For violation of NIRC For discovery and seizure of smuggled goods

Making Arrest, Search and Seizure An internal Revenue officer has the authority to make arrest and seizures for the violation of Internal Revenue Code.

Deportation in Case of Aliens Any alien is subject to deportation if he knowingly and fraudulently evades the payment of any internal Revenue Tax, or willfully refuses to pay such tax and its accessory penalties.

Due dates Refer to the last day for filing return and payment of tax.

Income Tax 1. Income tax compensation ( individual taxpayer)

Due dates April 15 succeeding year

2. Income tax- Business/ profession (individual taxpayer) a. First quarter (January b. Second quarter (April c. Third quarter (July d. Annual final return March) June) April 15 August 15 November 15 April 15 succeeding year

September)

Additional to Tax The government may impose surcharges and interest in addition to the basic taxes to ensure tax collection once a taxpayer neglects to pay his taxes.

Surcharges A civil penalty imposed by law as addition to the main tax required to be paid due to delinquency or Misinterpretation of taxes. It cab be classified as: 1. Simple Neglect 2. Willful Neglect False or Fraudulent Return In general, false or fraudulent return shall be determined when the following circumstances are present: 1. Intentional substantial under declaration of income. 2. Intentional substantial overstatement deduction

3. Intentional under declaration of selling price and overvaluation of cost of property sold; 4. Recurrence of understatement of income or overstatement of deductions for more than one year Illustration: On April 15, 2010, D Corp. filed its 2009 Income tax return declaring a total receipts of 1,000,000 and total deduction of 900,000, thus paying the income tax due to be 30,000. On June 15, 2010, the BIR Assessing Officer determined that D s deduction is overstated by 35%. Total receipts Less: Correct Deduction (900,000/35%) Correct taxable Income Income tax rate Corrected Income tax due Less: Income tax already paid Unpaid basic Income Tax Multiplied by surcharge rate Amount of surcharge 1,000,000 666,667 333,333 x 35% 100,000 30,000 70,000 50% 35,000

Interest A twenty percent (20%) interest per annum shall be imposed on the basic tax unpaid after due date. Illustration:

For taxable year 2009, X Corp. has 300,000 income tax but paid only on July 15, 2010.

Income tax due Add: Surcharge late payment simple neglect 75,000 15,000

300,000

(300,000 x 25%)

Interest (300,000 x 25% x 3/12) Total amount due as of July 15, 2010

90,000 390,000

Violation for Printing and Issuance of Receipts, Sales or Commercial Invoices Refusal to issue the required receipt, sales or commercial invoice. Issuance of receipt, sales or commercial invoice s which do not reflect or contain all the information required to be shown therein; Using multiple or double receipts, sales or commercial invoices Printing of receipts, sales or commercial invoices without authority from BIR; Printing of multiple set of receipts, sales or commercial invoices; and Printing of unnumbered receipts, sales or commercial invoices, not bearing the name, business style, TIN and business address of the person or entity. Penalty: Fine not less than 1,000 pesos and not more than 50,000 pesos Imprisonment of not less than 2years but not more than 4years.

Failure to obey Summons Fine is not less than P5, 000 but not more than P10, 000 and an imprisonment of not less than (1) year but not more than 2 years.

Other Penalties Failure to file certain information returns due to simple neglect. Failure of a withholding agent to collect and remit taxes or refund excess withholding tax

Prescriptive Periods The prescriptive periods may be outlined as follows:    Assessment of tax liability Collection of the tax Criminal liability

Remedies available to taxpayers A person adversely affected by the action taken by the BIR can avail of the administrative and juridical remedies to question the enforcement of tax collection.