expenditures such as administrative and interest expenses
1. Chamber of Real Estate Builders Association v. Executive were not taken into account. Thus pegging the tax base of Secretary! MCIT on gross income is tantamount to confiscation of capital Chamber of REB is an association of real estate developers and because gross income unlike net income is not realized gain.!
builders in the Philippines! Court disagrees.!
Taxes are the lifeblood of the government.! It assails the validity of the imposition of minimum corporate income tax (MCIT) on corporations.! Power to tax is plenary and unlimited in its range.! Tax statutes will not be shot down as unconstitutional on the Section 27(E) provides for MCIT on domestic corporations, implemented by RR 9-98.! mere allegation of arbitrariness by the taxpayer.! Certainly an income tax is arbitrary and confiscatory if it taxes Chamber argues that the MCIT violates the due process clause because it levies income tax even if there is no realized gain.! capital because capital is not income.! But MCIT is not a tax on capital!! ISSUE: WHETHER OR NOT THE IMPOSITION OF THE MCIT ON DOMESTIC CORPORATIONS IS UNCONSTITUTIONAL! MCIT is imposed on gross income arrived at by deducting the capital spent by a corporation in the sale of its goods (cost of HELD! goods) and other direct expenses from gross sales.! Under the MCIT scheme, a corporation, beginning on its 4th year of operation, is assessed an MCIT of 2% of its gross MCIT is not an additional imposition because it is imposed in lieu of normal net income tax if the latter is lower than MCIT.! income when such MCIT is greater than the normal corporate income tax imposed under 27(A).! ! 2. CIR v. PAL! If regular income tax is higher than MCIT, the corp does not pay MCIT.! 3. Manila Wine Merchants v. CIR! 4. CIR v. Tuason! Any excess of MCIT over normal tax shall be carried forward and credited against normal income tax for 3 immediately 5. Cyanamid v. CA! succeeding taxable years.! 6. BIR Ruling 25-02 The MCIT is a result of the perceived inadequacy of the self- assessment system in capturing the true income of corporations.! It is a means to make sure that everyone will make some minimum contribution to support the public sector.! Domestic corps owe their corporate existence and their privilege to do business to the government. They benefit from government efforts to improve financial market and to ensure a favorable business climate.! It is to go around schemes of under-declaration of income or over-deduction of expenses otherwise called tax shelters! MCIT not violative of due process!! Chamber claims that gross income only considers the cost of goods sold and other direct expenses; other major