House Rules:
1. Do not come to class unprepared.
2. Class recitations will include probable bar questions and recent jurisprudence.
3. Do not pull a sleep in class, or else, you will be asked to step out of the room.
4. Do not talk to your seatmate or classmate. Listen to your classmate’s recitation instead.
5. Observe proper court decorum in class as if you are already a lawyer.
6. Raise your hand if you want to go to the restroom.
7. Answer the questions briefly, concisely, and with legal basis.
8. I am only here to guide you, not to terrorize you.
January 6, 2018
GENERAL PRINCIPLES
Recitation:
1. These are basic questions; in fact, these are the first three questions in the 2016 bar examinations.
So, memorize these. Explain briefly the lifeblood doctrine, necessity theory and symbiotic theory?
The lifeblood doctrine is one that is enunciated by the Supreme Court in Commissioner of Internal
Revenue v. Pineda, as follows: “Taxes are the lifeblood of the government and their prompt and
certain availability is an imperious need.” This means that, without taxes, the State can neither
exist nor endure. Taxes should be collected without unnecessary hindrance.
The necessity theory, as pronounced by the Supreme Court in Philippine Guaranty Co., Inc. v.
Commissioner of Internal Revenue, states that taxation is a power predicated upon necessity. It is a
necessary burden to preserve the State’s sovereignty and a means to give the citizenry an army to
resist aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public
improvements for the enjoyment of the citizenry, and those which come within the State’s territory
and facilities and protection which a government is supposed to provide.
The doctrine of symbiotic relationship is a term culled from the ruling of the Supreme Court in
Commissioner of Internal Revenue v Algue, Inc., which stressed that: “Taxes are what we pay for a
civilized society. Without taxes, the government would be paralyzed for lack of the motive power to
activate and operate it. Hence, despite the natural reluctance to surrender part of one’s hard-
earned income to the taxing authorities, every person who is able to must contribute his share in the
burden of running the government. The government, for its part, is expected to respond in the form
of tangible and intangible benefits intended to improve the lives of the people and enhance their
material and moral values.”
2. Let us have cases on lifeblood theory. I citied 17. With all humility, 8 or 9 of these cases came
out in the previous bar. Now, holistic approach --- interplay of lifeblood theory and tax remedies. This
happened in the last bar exams. In enunciating certain rule, the court cited lifeblood theory and you must
mark this with Sec. 112 of NIRC. Sec. 112 was asked in the bar for three consecutive bar exams. It will
come out again. Now you must know how the court mentioned lifeblood theory here. Sec. 112 is about
3. Camp John Hay Development Corporation v. CBAA, 706 SCRA 547, also appeared in the bar
exam. It is about the interplay of the lifeblood theory and another tax remedy - one of the rules under real
property taxation. Mentioned therein is the provision of Sec. 252 of R.A. No. 7160, which is denominated
as payment under protest. When must the payment under protest be lodged?
It must be lodged within 30 days from payment of the tax.
Explain the rule of payment under protest.
Payment under protest means payment of real property tax before filing a protest.
What does the lifeblood doctrine dictate or require regarding the application of Sec. 252? Before you can
protest, you must first pay the real property tax. What does lifeblood doctrine require regarding the rule of
payment under protest?
The lifeblood doctrine requires strict compliance of this rule. Payment under protest is thus consistent
with the lifeblood doctrine, and as such their collection cannot be curtailed by injunction or any like
action; otherwise, the state or, in this case, the local government unit, shall be crippled in dispensing
the needed services to the people, and its machinery gravely disabled.
4. CIR v. Pineda, 21 SCRA 105, came out in the difficult bar exam in 1999 where only 5% passed
taxation. What is the ruling of the Court in this case?
This case enunciates that the Bureau of Internal Revenue has the necessary discretion to avail itself
of the most expeditious way to collect taxes because taxes are the lifeblood of the government and
their prompt and certain availability is an imperious need.
Explain such ruling.
The ruling means that no one should interfere with the remedy availed of by the BIR to collect taxes
because it has the discretion to do so.
What was the administrative remedy resorted to by the BIR in that case, which may in effect bring about
speedy collection of taxes?
Enforcement of tax lien was resorted to by the BIR.
Why is enforcement of a tax lien the most expeditious way to collect taxes? Hint: What is the difference
between administrative and judicial remedies?
5. Davao Gulf Lumber Corporation v. CIR, 293 SCRA 77 came out in the bar exam in 1998. Why
are tax exemptions strictly construed against the taxpayer and liberally construed in favor of the
government? Hint: relinquish power, lose revenue, odious to the law.
Tax exemptions are strictly construed against the taxpayer and liberally construed in favor of the
government because taxes are the lifeblood of the government. This is so because by the
government’s relinquishment of its power to tax, it loses revenue. Thus, exemptions from taxation
are highly disfavored, so much so that they may almost be said to be odious to the law.
6. This is yet to be asked in the Bar. What are the exceptions to the principle of strictissimi juris?
Read pp. 127-128. This may be asked in the form of enumeration, objective questions or application.
The exceptions to the principle of strictissimi juris are:
1) when the law expressly provides for liberal interpretation or construction of tax exemptions;
2) when the grantee of tax exemption is a religious or charitable institution;
3) when the grantee of tax exemption is the government, its political subdivisions or
instrumentalities (Maceda v. Macaraig, Jr., 197 SCRA 771);
4) when the taxpayer falls within the purview of exemption by clear legislative intent (CIR v.
Arnoldus Carpentry Shop, 159 SCRA 199);
5) when the grantee is a municipal corporation with respect to its public property only (J. Cooley,
pp. 1414-1415); and
6) when the imposition is special taxes relating to special cases and affecting only special classes of
persons.
What is the principle of strictissimi juris?
This principle states that tax exemptions are strictly construed against the taxpayer and liberally
construed in favor of the government.
What is a political subdivision?
Political subdivisions include provinces, municipalities, cities, and barangays.
Is GSIS an instrumentality or GOCC?
GSIS is a government instrumentality.
Why does the principle of strictissimi juris not apply to government, its political subdivisions or
instrumentalities?
It is because it will result in the absurd situation of the government taking money from one pocket and
putting it in another.
When do you apply this rule: exemption is the rule and taxation the exemption? The general rule is that
taxation is the rule and exemption is the exemption.
It shall apply when the grantee is a municipal corporation, and the property is not held in private
ownership but a public property.
7. This case is asked thrice already in the bar examinations. What is the jurisprudential ruling of the
Court in Ferdinand Marcos II v. Court of Appeals, 273 SCRA 47?
8. Philex Mining Corporation v. CIR, 294 SCRA 687, was also asked in the bar exam. It is about
setoff of taxes. What is the ruling of the Court in that case?
The Court did not allow the setoff of taxes. The lifeblood doctrine disfavors the setoff of taxes
because it will reduce tax collection and there will be less revenue for the government.
May the taxes be the subject of setoff or compensation?
No. Taxes may not be the subject of setoff or compensation because: (1) taxes are not ordinary
obligations which may be governed by the Civil Code; (2) taxes are not based on a contract, debt or
judgment, but on legal impositions; and (3) the government and the taxpayer are not creditors and
debtors of each other. (Republic v. Mambulao Lumber Co., 4 SCRA 622; Francia v. IAC, 162 SCRA
753)
Is there an exception to this rule?
Yes, that is the case of Domingo v. Garlitos, 8 SCRA 443 (1962). The peculiar circumstance therein is
the enactment of R.A. No. 2700 appropriating certain amount of money for the taxpayer’s claim that
made such claim due and demandable or liquidated. Thus, the Court allowed compensation.
9. YMCA v. CIR, 298 SCRA 83, also came out in the bar exams. YMCA claimed that as a non-stock,
non-profit organization, it should be exempt from income taxation with regard to its profits on leasing its
facilities to non-exempt entities. What is ruling in that landmark case?
YMCA is taxable on its rental income. The exemption provided in Section 30(e) of the NIRC must
be strictly construed against YMCA. Moreover, it is taxable because the Tax Code provides that the
income of charitable organizations, such as YMCA, from any of their properties, real or personal,
or from any of their activities conducted for profit regardless of the disposition made of such
income, shall be subject to tax.
What does YMCA stand for?
YMCA is short for Young Men’s Christian Association.
Read Section 30(e) of the NIRC.
Non-stock corporation or association organized and operated exclusively for religious, charitable,
scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part of its net income
or asset shall belong to or inures to the benefit of any member, organizer, officer or any specific
person.
Read the last paragraph of Section 30 of the NIRC. That is the YMCA doctrine.
10. Explain the stages or aspects of taxation. These aspects do not refer to the fundamental principles
of taxation. This is so basic.
The stages of taxation are: (1) levy or imposition, which refers to the enactment of tax laws; (2)
assessment and collection, which provides for the implementation, enforcement or administration
of tax laws; and (3) payment, which is defined as the compliance by the taxpayer.
What is the nature of levy or imposition?
It is legislative in nature.
What is the nature of assessment and collection?
They are administrative in nature.
What is the technical term for levy or imposition?
It is the impact of taxation.
What is the technical term for payment?
It is the incidence of taxation.
13. What are the requisites or conditions for a valid assessment of real property tax? There are five
requisites.
In Meralco v. Narvales, 433 SCRA 11, the Supreme Court enumerated the following guideline:
(1) The assessment must contain the kind of property.
(2) It must set forth the assessed value of the real property.
(3) It must indicate the level of assessment.
(4) It must specify the fair market value of the property.
(5) It must clearly indicate the actual use of property.
Keyword: liquidation
15. Why is the power to tax inherent in a sovereign State? Read pp. 14-15, footnote 19.
It is considered inherent in a sovereign State because it is a necessary attribute of sovereignty.
Without this power, no sovereign State can exist nor endure. The power to tax proceeds upon the
theory that the existence of a government is a necessity and this power is an essential and inherent
attribute of sovereignty, belonging as a matter of right to every independent State or government.
No sovereign State can continue to exist without the means to pay its expenses, and that for those
means, it has the right to compel all citizens and property within its limits to contribute, hence, the
emergence of the power to tax.
16. Explain the two-fold nature of taxation. Read p. 15, footnote 20.
Taxation is an inherent attribute of sovereignty, and it is also legislative in character. Such power is
exclusively vested in the Congress. This is based upon the principle that “taxes are a grant of the
people who are taxed, and the grant must be made by the immediate representatives of the people.
And where the people have laid the power, there it must remain and be exercised.”
If you can cite that, the bar examiner will surely be impressed. Try to memorize.
18. This came out in the bar. Reconcile these seemingly conflicting views:
(1) Chief Justice Marshall opines that the power to tax is the power to destroy.
(2) Justice Malcolm opines that the power to tax does not include the power to destroy. This is worth 5
points. Read p. 20 of your book.
The conflict is more apparent than real. Chief Justice Marshall is correct in the sense that the
power to tax is the power to destroy if it is used validly as an implement of the police power of the
State. Justice Malcolm is likewise correct in this perspective: where the power to tax is used solely
for the purpose of raising revenues, it cannot be allowed to confiscate or destroy. (J. Isagani Cruz)
What is the meaning of the phrase “the conflict is more apparent than real”?
It means that there is no real conflict here.
What does this mean: “the power to tax is not the power to destroy, so long as the Supreme Court sits”?
Read Sison v. Ancheta, 130 SCRA 654.
While taxation is said to be the power to destroy, it is by no means unlimited. If so great an abuse is
manifested as to destroy natural and fundamental rights which no free government could consistently
violate, it is the duty of the judiciary to hold such an act unconstitutional. The Constitution as the
fundamental law of the land overrides any legislative or executive act that runs counter to it. In any
case, therefore, where it can be demonstrated that the challenged statutory provision fails to abide by
its command, then the court must so declare and adjudge it null.
Keywords: CUPS
Comprehensive
Unlimited
Plenary
Supreme
20. State the three fundamental principles of a sound taxation system. Briefly explain each.
The three fundamental principles of a sound taxation are fiscal adequacy, theoretical justice, and
administrative feasibility. Fiscal adequacy dictates that sources of revenue must be sufficient to
meet government expenditures. Theoretical justice mandates that taxes must be imposed based on
the taxpayer’s ability to pay. Administrative feasibility requires that tax laws must be capable of
effective and efficient enforcement.
If a tax law violates any of these principles, will it render the tax law invalid?
The purpose of these principles is to make tax laws sound. A tax law will therefore retain its validity
even if it is not in consonance with the principles of fiscal adequacy and administrative feasibility
because the Constitution does not expressly require so. However, if a tax law runs contrary to the
principle of theoretical justice, such violation will render the law unconstitutional considering that
under the Constitution, the rule of taxation should be uniform and equitable. (Section 28(1), Article
VI)
21. What are the non-revenue /regulatory /secondary purposes of taxation? There are four. Explain
each.
The secondary purposes of taxation are as follows:
1) reduction of social inequality
2) implement of the police power of the State
3) protection of the local industry against unfair competition
4) encouragement of the growth of local industries
Taxation is used to reduce the inequality in the distribution of wealth by preventing its undue
concentration in the hands of a few individuals. It is likewise used in the form of exemtions and
reliefs to serve as incentives to encourage investment in the local industry and thereby promote
economic growth. It protects the local industry by imposing certain taxes upon imported goods or
articles. It may be used as an implement of the police power of the State through the imposition of
taxes with the end in view of regulating a particular activity.
Keywords: RIPE
Reduction
Implement
Protection
Encouragement
We really look for keywords. The keyword here is price regulatory measures.
Assignment:
A. Start from the inherent and constitutional limitations of taxation.
Exemption of the government from taxation is an emerging favorite bar question.
B. Find the 16 instrumentalities exempt from taxation in the following cases:
Manila International Airport Authority v. Court of Appeals, 495 SCRA 591, 618, 632,
633
MIAA is one.
On page 618, there are four other instrumentalities enumerated by the Supreme Court.
On pages 632-633, there are eight more.
1. Manila International Airport Authority
2. Mactan-Cebu International Airport Authority
3. Philippine Ports Authority
4. University of the Philippines
5. Bangko Sentral ng Pilipinas
6. Philippine Rice Research Institute
7. Laguna Lake Development Authority
8. Philippine Fisheries Development Authority
9. Bases Conversion Development Authority
10. Philippine National Railways
11. Cagayan de Oro Port Authority
12. San Fernando Port Authority
13. Cebu Port Authority
Republic of the Philippines v. City of Parañaque, 677 SCRA 246
There is only one mentioned in this case. This is the one asked in the bar.
14. Philippine Reclamation Authority, formerly Public Estates Authority
City of Lapu-Lapu v. Philippine Economic Zone Authority, 742 SCRA 524
The remaining two instrumentalities can be found in this case.
15. Philippine Economic Zone Authority
Recitation:
You must know the prevailing jurisprudence here on pages 33-34 of your book. You must have noticed
the decided cases there. There are mentioned 1,2,3,4. These were asked twice already in the bar exams.
1. In Progressive Development Corp. vs Quezon City, 172 SCRA 629, is market stall fee a license or
a tax? The case involves a market in Cubao – the Farmers’ Market. So, there is this issue whether
the market stall fee collected by the city government is a tax or a license. What is the prevailing
jurisprudence?
The market stall fees are considered as license because the objective of imposing market stall fees is
regulation and not revenue generation. Tax is imposed in the exercise of police power primarily for
purposes of regulation, while the latter is imposed under the taxing power primarily for purposes of
raising revenues. Thus, if the generating of revenue is the primary purpose and regulation is merely
incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally
revenue is also obtained does not make the imposition a tax.
What is the reason behind this ruling?
Tax is imposed in the exercise of police power primarily for purposes of regulation, while the latter is
imposed under the taxing power primarily for purposes of raising revenues. Thus, if the generating of
revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if
regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the
imposition a tax.
Based on my experience as bar examiner for two bar exams, some examinees never take full credit though
their answers were correct because their reasons are not enough to explain the SC ruling.
2. This came out in the bar examination. What are the distinctions between a license and a tax?
As to the exercise of power – a tax is levied in the exercise of the taxing power, while license fees
emanate from the police power of the State.
As to purpose – the primary purpose of taxation is to generate revenues, while license fees are
imposed primarily for regulation.
As to subject – the subject of taxation is persons, properties, activities, while the subject of license is
limited to the right to engage in a business or activity.
As to consequence in case of non-payment – failure to pay tax makes your business illegal. while
failure to pay does not have that effect as it is merely a regulatory fee.
3. Let’s have another case. This has yet to be asked in the bar exam. This is about the charge
imposed under the EPIRA Law (Electric Power Industry Reform Act of 2001) called the
Universal Charge. Is that a license or a tax?
In Gerochi v. Department of Energy, 527 SCRA 696, the Supreme Court held that the Universal
Charge is a license. It is imposed and can be amply discerned as regulatory in character because in
the EPIRA Law, the State’s police power, particularly its regulatory dimension, is invoked.
If you cannot cite these reasons, you cannot be entitled to full credit.
6. Update your jurisprudence, this is not in your book. This is very popular in Quezon City –
Socialized Housing Tax, the proceeds of which can be used for noble purposes. This may cover
garbage fee. It is a probable bar question because this is a landmark case. Is the Socialized
Housing Tax a tax or a regulatory fee?
It is not a tax imposed by the local government but a license/regulatory fee. Its name is misleading.
(Ferrer Jr. vs. Bautista, 760 SCRA 652)
What is the reason behind this ruling?
It is levied with a regulatory purpose. The levy is primarily in the exercise of the police power for the
general welfare of the entire city. It is greatly imbued with public interest. Removing slum areas in
Quezon City is not only beneficial to the underprivileged and homeless constituents but advantageous
to the real property owners as well. The situation will improve the value of the their property
investments, fully enjoying the same in view of an orderly, secure, and safe community, and will
enhance the quality of life of the poor, making them law-abiding constituents and better consumers of
business products.
7. What are the inherent limitations on the exercise of the power of taxation?
The inherent limitations on taxation are as follows:
1. public purpose
2. territoriality
3. international comity
4. exemption from taxation of government agencies and instrumentalities
5. non-delegation of the power to tax
8. What is the latest jurisprudence on the meaning of the word “public purpose”? It is a broad
concept.
9. In this case concerning the grant of 20% discount to senior citizens, the Court explained the
contemplation of the word “public” in public purpose. What is the test? Is it the number of
persons benefitted?
“Public” may refer to a special group of persons. The senior citizens are a special group of persons
who have contributed to the general welfare and common good of the nation in the prime of their
lives. They are the parents and grandparents who have molded us into good citizens.
10. Let us focus on the principle of territoriality. This might come out in the bar exam. It is about a
doctrine in value-added tax. Explain the meaning of Destination Principle. This is answered by
the ruling in Atlas Consolidated Mining and Development Corporation v. CIR, 524 SCRA 73.
It is a principle applied in value-added tax. It dictates that value-added tax may be imposed on
goods and services only in the country where these are consumed.
Let us go back to value-added tax. VAT is an emerging favorite topic in the bar exams. Explain the Cross
Border Doctrine. This was a shocker question in the Bar.
The Cross Border Doctrine mandates that no VAT shall be imposed to form part of the cost of the
goods destined for consumption outside the territorial border of the taxing authority. Hence, actual
export of goods and services from the Philippines to a foreign country must be free of VAT, while those
destined for use or consumption within the Philippines shall be imposed with 10% VAT.
11. This was once asked in the Bar. Can the income of the Ambassador of the United States derived
from sources within the Philippines be subject to income tax?
No, because it is one of the inherent limitations – international comity. Subjecting their income to
income tax will violate the internationally accepted principle of sovereign equality among nations.
Does it have a constitutional basis?
Yes. Article 2, Section 2 of the Constitution that the Philippines adopts the generally accepted
principles of international law as the law of the land. Such generally accepted principle pertains to the
sovereign equality of nations. Neither can we impose real property tax on the foreign embassies as
these are extension of territories of sovereign states.
12. What are the 16 Exempt Instrumentalities of the National Government? I gave this as assignment.
This may be asked in the Bar. This is the time to have mastery of this.
The following instrumentalities are exempt from tax:
1. Philippine Economic Zone Authority
2. Government Service Insurance System (Mactan Cebu International Airport Authority vs Lapu-
Lapu City, 757 SCRA 323). This has effectively abandoned no less than 3 decisions of the Court. Before,
GSIS is exempt from real property taxation subject to certain qualifications. Now, in that ruling in 2015,
there are no more qualifications.
3. Bangko Sentral ng Pilipinas
4. Mactan-Cebu International Airport Authority
5. Philippine Ports Authority
6. San Fernando Port Authority
7. University of the Philippines
8. Philippine Fisheries Development Authority
9. Philippine Rice Research Institute
10. Cagayan De Oro Port Authority
11. Cebu Port Authority
12. Manila International Airport Authority
13. Philippine Reclamation Authority
14. Laguna Lake Development Authority
15. Bases Conversion Development Authority
16. Philippine National Railways
The Supreme Court has yet to rule on the status of SSS. In the meantime, it is not considered as an
instrumentality.
13. What underlying settled doctrine/principle will be violated if we allow the delegation of power to
tax?
Delegation of power to tax violates the principle of separation of powers. Delegation is allowed
when expressly authorized by the Constitution. Under the Constitution, there are two provisions:
1. Art. VI, Sec. 28 (2) – Tariff powers of the President
2. Art. X, Sec. 5 – Delegation to Local Government
14. Congress passed a law authorizing the President to impose income tax on certain items of income.
Is that covered by that constitutional provision?
No, it is not covered by that constitutionally delegated power.
So, what are the taxes covered by that constitutionally delegated power?
It made no mention about income tax, donor’s tax, estate tax, value-added tax. The taxes covered are
customs duties.
The constitutional provision says that the Congress may, by law, authorize the President to fix within
specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and
export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the
national development program of the Government. What is that law authorizing the President to increase
or decrease tariff rates?
That law is the flexible power clause under Sec. 221 of the Old Tariff and Customs Law. However,
there is a new law: R.A. No. 10863 – Customs Modernization and Tariff Act.
Read Sec. 102 (u) in relation to Sec. 1608 of RA 10863.
15. Explain the flexible power clause. The Constitution says, “within the national development
program of the Government.” Under what conditions or criteria will the President increase or
decrease tariff rates?
Under the Constitution, it says “within the national development program of the Government,”
meaning in the interest of the national economy.
Unfortunately, this is now deleted. I could not understand why it was deleted! It’s what the Constitution
says! That’s how brilliant our Congressmen are. The most important criterion is deleted. What are left are
“in the interest of national security,” “in the interest of the general welfare of the people.” Read Sec.
1608, you will not find therein this constitutional criterion “within the national development program of
the Government.”
17. Tax ordinance is valid if complies with these fundamental principles of local government
taxation. Assessment, or appraisal or collection or real property tax is valid if it complies with
these fundamental principles of real property taxation. What are the common principles?
1. Rule on uniformity
2. That taxes must be equitable
3. No let principle
19. What about the collection of income tax, of internal revenue tax? Can that be delegated to private
corporations such as banks?
Yes. You should know that distinction. In the case of local tax or real property tax, in the light of
that honored principle, the collection thereof should not be delegated or entrusted to private
corporations. That’s why you must have noticed that banks are not authorized to collect local taxes
or real property tax. But in the case of income tax, donor’s tax, estate tax, and other internal
revenue taxes, these can be collected by authorized agents.
20. In the last bar examination, this was asked: common limitations on local government taxation,
meaning these taxes cannot be imposed by local government units. When the Constitution says
under Art. X, Sec. 5 “subject to limitations as the Congress may provide,” that refers to Sec. 133
of R.A. No. 7160 which enumerates 15 taxes or charges which could not be imposed by local
government units. Can you mention some of them?
SECTION 133. Common Limitations on the Taxing Powers of Local Government
Units. -
Unless otherwise provided herein, the exercise of the taxing powers of provinces,
cities, municipalities, and Barangays shall not extend to the levy of the following:
(1) Income tax, except when levied on banks and other financial institutions;
(2) Documentary stamp tax;
(3) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa,
except as otherwise provided herein;
(4) Customs duties, registration fees vessels and wharfage on wharves, tonnage dues,
and all other kinds of customs fees, charges and dues except wharfage on wharves
constructed and maintained by the local government unit concerned;
(5) Taxes, fee and charges and other impositions upon goods carried into or out of,
or passing through, the territorial jurisdictions of local government units in the guise
of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees or charges
in any form whatsoever upon such goods or merchandise;
(6) Taxes, fees, or charges on agricultural and aquatic products when sold by
marginal farmers or fishermen;
(7) Taxes on business enterprises certified to by the Board of Investments as pioneer
or non-pioneer for a period of six (6) and (4) four years, respectively from the date
of registration;
(8) Excise taxes on articles enumerated under the National Internal Revenue Code,
as amended, and taxes, fees or charges on petroleum products;
(9) Percentage or value added tax (VAT) on sales, barters or exchanges or similar
transactions on goods or services except as otherwise provided herein;
(10) Taxes on the gross receipts of transaction contractors and persons engaged in
the transportation of passengers or freight by hire and common carriers by air, land
or water, except as provided in this Code;
(11) Taxes on premium paid by way or reinsurance or retrocession;
(12) Taxes, fees or charges for the registration of motor vehicle and for the issuance
of all kinds of licenses or permits for the driving thereof, except tricycles;
You note here that all national internal revenue taxes are not within the taxing authority of the local
government units. You must memorize these.
21. In the last item there, (15) Taxes, fees or charges, of any kind on the National Government, its
agencies and instrumentalities, and local government units, it was cited in the landmark case of
Manila International Airport Authority. Justice Carpio mentioned that. Since Manila International
Airport Authority is an instrumentality of the national government, the City Government of
Paranaque cannot impose real property tax against it. Now, he cited this Doctrine of Supremacy
of National Government over Local Government Units. Explain the Doctrine of Supremacy of
National Government over Local Government Units based on three American cases.
(Cases of McCollins vs. Maryland, Jackson vs. Maryland, US vs. _____) These cases are the sources
of the doctrine. The doctrine finds support in RA 7160, Sec. 133 (o).
22. The basis of these limitations proceeds from this Doctrine of Pre-emption. This was explained in
1 case, Victorias Milling vs. Municipality of Victorias, 25 SCRA 192. What is this Doctrine of
Pre-emption?
The imposition of these limitations is a classic application of that Doctrine. Pre-empt. To pre-empt
the exercise. Here, where it not for these limitations, local government units may impose these
taxes. But the national government elects to over these field or area of taxation thereby withholding
this power to tax on the part of local government units. So those taxes which may not be covered by
these, they can be imposed by local government units. In other words, if the national government
does not impose taxes on certain subject, that may be taxed by the LGU.
CONSTITUTIONAL LIMITATIONS
23. How do you classify these constitutional provisions? These are provisions affecting the power of
taxation. Classify them.
1. Constitutional Limitations (these provisions involve restrictions) (direct or indirect)
2. Constitutional Conferment (delegation)
3. Constitutional Exemptions
25. There are so many cases decided by the Supreme Court on this. I must tell you that in the
previous bar exams cases involving violations are the ones being asked. Can you think of a case
where the Supreme Court held that this ordinance is discriminatory?
Ormoc Sugar Co. vs. Treasurer of Ormoc City; Motor vehicles in Manila; Association of Customs
Brokers vs. Manila
There was this tax imposed on export sale made by Ormoc Sugar Co. The ruling of the Court was
clearly, the tax was discriminatory. It singled out a particular sugar industry. It applied only to
existing conditions.
26. Can you cite other cases that show violation of the equal protection clause? How do you cure the
defect in the Ormoc Sugar Co. case? To conform with that condition number 2 that it must apply
to both present and future conditions? Make it applicable to all sugar companies.
If an ordinance was passed imposing tax on installation manager conditioned on the ground
that it singled out a particular group of people, will you challenge that claiming that you were
singled out and therefore it violates the equal protection clause. This is where the Supreme Court
applies this- inequality or inequity, resulting from singling out a particular class for taxation or
exemption infringe no constitutional limitation. The mere fact that he is singled out does not
necessarily infringe constitutional limitations since all the requisites are present. Differential tax
treatment or classification that will result in singling out a particular class provided that all the
requisites of a valid classification are present. In other words, differential tax treatment is allowed
as long as the classification is valid, meaning it must have all the requisites of a valid classification.
UNIFORMITY IN TAXATION
27. Equal protection clause, Art. 3, Sec. 1, you cannot avoid equality here that’s why you jump to
Art. VI, Sec. 28 (1) (Question No. 1 in Bar Exam 1996). Explain the rule of uniformity in
taxation.
Uniformity means that things belonging to the same class shall be treated alike - impositions,
privileges conferred, limitation imposed. Uniform requires that persons, corporations, associations
similarly situated must be taxed similarly. So, the important word there is “similarly situated” to
make it allowed.
DUE PROCESS
30. The due process clause prohibits the taking of property, deprivation of property without due
process of law. So here, in taxation, the government is in effect taking your money. That’s why
due process must be observed. Can you think of a case wherein the Supreme Court held that a tax
law is not valid or unconstitutional because it violated the due process of law? Relate this to tax
remedies. If you fail to pay your tax, the government will resort to these remedies- distraint of
personal property, levy of real property, tax lien. These are taking of property. But these could
only be done with due regard with the requirement of due process law.
Before the government will take your property as a result of your failure to pay your tax, there has
to be notice. That is why we have this Notice of Assessment. That is mandated by due process. In
your book, I hope you have come across the case of Reyes vs. Almanzor. That’s a case that shows a
classic violation of due process. It is about a land in Tondo, Manila that has been the subject of real
property assessment. That the land was in the nature of a residential and therefore subject to the
Rental Control Law. So here, the Court ruled that there is a violation of due process. The
assessment of real property tax is unjust, oppressive, and confiscatory. It is in this case that the
Supreme Court recognized two (2) methods of making an assessment – comparable sales approach
method and income approach method. So, when a local government unit will make an assessment,
it must be governed by this. It must observe either comparable sales approach method and income
approach method. It turned out that the real property tax exceeded the income derived from the
lease of the property, that’s why it is unjust, oppressive and confiscatory. So, if the property is
leased, income is derived therefrom, this jurisprudence tells us that if the real property tax is more
than the income derived from the lease of the property, is unjust, oppressive and confiscatory and is
a violation of the due process of law.
31. This question came out in Political Law. The question in taxation has something to do with Value
Added Tax. These are the two cases: (1) Tolentino et al vs. Secretary of Finance and (2)
NON-IMPAIRMENT CLAUSE
32. The old case is the Tolentino case. Casanova vs Court - new case. Justice Vitug asked this in the
bar exams. It has something to do with revocation of tax exemptions. You associate that with
revocation of tax exemption. When will the revocation of tax exemption constitute impairment of
contract?
Exemption may be granted under Congressional franchise. You recall this? Congress may grant a
franchise subject to amendment or repeal. Can that be revoked unilaterally? Yes. Congress can
unilaterally revoke a franchise it granted because the provision says “subject to amendment or
repeal.”
33. So, when will it result in the violation of this non-impairment clause?
When the exemption is based on contract whereby valuable consideration has been given.
(Casanova ruling). In the case of Tolentino et al. vs. Secretary of Finance, it was an imposition of
Value Added Tax on the sale of real property. At the time of the passage of that Act, VAT, which
imposes VAT on the sale of real property, there were contracts executed for the sale of real estate.
The parties argued it is a violation of non-impairment. Is there a violation? No. There can only be a
violation when it involves revocation of tax exemption based on contract whereby valuable
consideration has been given. That’s the settled jurisprudence. That where contracts were executed
before the passage of a law, a subsequent tax law may be filed by Congress imposing tax on these
certain contracts, that is allowed. Because it does not involve exemption. So, your knowledge of
exemption comes into play.
Assignment:
We will finish General Principles next meeting. Read Tolentino v. Secretary of Finance.
J. Dimaampao: We will finish General Principles today, so that next week we will start with Tax
Remedies. So we will start with a very interesting case, the case of Tolentino, et.al., vs. Secretary of
Finance. Two prominent senators of the Republic questioned the constitutionality of the Expanded Value
Added Tax (VAT) Law, on the ground that the same fails to comply with the constitutional requirement
under Art. 6, Sec. 2 of the Constitution. What was the main argument of Senators’ Tolentino & Salonga?
Student: In that case they are questioning the constitutionality of RA 7716 or the Expanded Value Added
Tax Law because according to them it did not follow the procedural requirement in the constitution
regarding the tax bills, which should originate from the House of Representatives (HOR). According to
them the law that was passed was the consolidation of the senate and the HOR’s version, thus,
unconstitutional. But, according to the Supreme Court
J. Dimaampao: So, House Bill No. 1197 and Senate Bill 1630, what happened to this two?
Student: Uhmmmm…House Bill No. 1197 and Senate Bill 1630, are separate and distinct versions of the
the Expanded Value Added Tax Law..
J. Dimaampao: What happened?
Student: Sir, when it was brought to the Senate, they made their own version and what was passed was
merely a consolidation of the distinct versions of the HOR and the Senate.
J. Dimaampao: You mean that, no single provision of House Bill No. 1197 has been enacted?
Student: No Sir, there are similar provisions coming from the House.
J. Dimaampao: So, what was the findings of the bicameral committee on this. Did it adopt majority of
the provisions of House Bill No. 1197 or majority of the provisions of Senate Bill 1630? Yes, these two
were consolidated. Did you come across the discussion, along that line? There were a lot of dissenting
opinions. Anyway, what was the majority view? What is the prevailing jurisprudence?
Student: Sir, the prevailing jurisprudence was that what was required by the Constitution is that..
J. Dimaampao: Constitutional or not?
Student: It is constitutional.
J. Dimaampao: Reason out in accordance with the ruling of the court. That was already asked in the bar
exams, 10 points. Ruling of the Court, RA 7716 is declared constitutional, in other words it complies with
the constitutional requirement under Art. 6, Sec. 2 of the Constitution. What was the reason?
Student: The reason for that, what was required by the Constitution, is that the bill and not the law which
must originate exclusively in the HOR, to insist that the bill must originate exclusively in the HOR, would
undermine the power of the Senate.
J. Dimaampao: There are two reasons cited by the Supreme Court. What are they?
Student: The first is that, to insist that the revenue statute must be substantially the same as that of the
HOR’s version would be to deprive the Senate of their power not only to concur but also to propose
amendments. Moreover, this will violate the principle of co-equality of legislative powers as it would
make the House superior to the Senate. In other words, what the constitution simply requires is that the
initiative or the filing of the Revenue and Tariff bills must originate from the HOR. (as synthesized by
J. Dimaampao)
J. Dimaampao: Reasons? Why?
J. Dimaampao: You memorize those periods! When do you apply the general rule that taxes are
imprescriptible? Taxes as a rule are imprescriptible for those which are not covered by any statute of
limitations! What is that tax? Minimum Corporate Income Tax?
Student: Improperly Accumulated Earnings Tax.
J. Dimaampao: You cannot compel corporations to report this. In effect its imprescriptible. Now when
do you apply or consider that Taxes are imprescriptible?
Student: If the law is silent.
J. Dimaampao: Yes! If the law is silent, if it did not provide for any limitations! Thus, you cannot apply
this rule to those 4 kinds of tax since the law provides for prescriptive periods. Now, what did you learn
from your study of Civil Law, with regard to the application of laws? Is it applicable to tax laws? As a
rule tax laws apply prospectively, except when it provides for its retroactive application.
Exception to the exception as held in Republic vs Oasan Vda. De Fernandez, is when its retroactive
application will impose harsh and oppressive tax or would amount to denial of due process.
That is the time when you will disregard the retroactive application of tax.
There have been rulings in taxpayers suit. What are the two indispensable requisites of taxpayer’s suit as
held in Gonzales vs Marcos?
Student: The requisites of taxpayer’s suit under Gonzales vs Marcos are, First, illegal or unlawful
disbursement of public funds. Second, the public funds must be derived from taxes.
J. Dimaampao: Did I not mention that the coverage of your Bar Exam includes the distinction of
taxpayers’. suit and citizens suit? What do you mean by a citizen’s suit. You discuss that under the
Constitution. Did I not ask you to research on that? Its discussed in David vs Arroyo. Including the
doctrine of transcendental importance. This doctrine is always discussed in all these landmark cases. Its
there in the case of 489 SCRA 160.
In citizen’s suit the filer/ petitioner is just an instrument of public concern. There is a public concern
there, its just that it don’t involve disbursement of public funds. If you question this TRAIN Law, what
will you file, a taxpayer suit or a citizen suit?
Recitation:
1. There are remedies that may be availed of by the government. There are remedies that may be
resorted to by the taxpayer. What are the remedies of the government?
These are:
1) compromise
2) enforcement of a tax lien
3) forfeiture
4) distraint of personal property
5) levy of real property
6) civil action
7) criminal action
8) civil penalties
2. What is the purpose of the remedies that may be availed of by the government? Why is there a
need for such remedies insofar as the government is concerned? Explain in not more than two sentences.
*We really hate verbose answers.*
These remedies available to the government are designed to ensure the collection of taxes. In
resorting to these remedies, the government must observe/comply with the legal parameters that
are set forth in the tax laws.
3. On the other hand, what is the underlying purpose of the remedies that may be resorted to by the
taxpayer? *Clue: You really have to check whether the collection of taxes by the government is in
accordance with law.*
The purpose of these taxpayer’s remedies is to safeguard the interests of the taxpayers against
unreasonable or arbitrary assessment, collection or investigation.
4. These remedies are either administrative or judicial. What is the difference between these
administrative and judicial remedies? *Do not use the word “exercise.” We are not talking about power.
Use the words “resorted to,” “availed of” because these are remedies.*
Administrative remedies are those that do not require judicial proceedings, whereas judicial
remedies are those that require/necessitate/warrant judicial actions or proceedings.
5. There are two aspects of taxation: assessment and collection. In the bar examination, this came
out: what is the difference between assessment and collection?
Assessment is the written notice and demand to the taxpayer of his due tax liability. Collection is
the enforcement of the assessment.
7. What is meant by assessment? Adamson v. Court of Appeals, 588 SCRA 27 is the authoritative
definition. You memorize that.*
An assessment contains not only a computation of tax liabilities, but also a demand for payment
within a prescribed period. It also signals the time when penalties and interests begin to accrue
against the taxpayer. To enable the taxpayer to determine his remedies thereon, due process
requires that it must be served on and received by the taxpayer.
9. What are the requisites of a valid assessment under the NIRC? *You are not asked to define. You
are asked to enumerate.*
The requisites of a valid assessment under the NIRC are as follows:
1) It must be a written notice and demand.
2) It must state the due tax liability of a taxpayer.
3) The taxpayer’s tax liability must be final.
4) It must state the law and the facts upon which it is based. (Section 228, NIRC; Commissioner v.
Reyes)
5) It must be served on and duly received by the taxpayer. (Commissioner v. Pascor)
The BIR wrote the taxpayer allowing him to counter or present his side, or asking him if the assessment is
to be his final tax liability. Will that constitute valid assessment?
No, because it does not contain the taxpayer’s final tax liability.
An affidavit executed by a revenue officer or agent setting forth the final tax liability of the taxpayer. Will
that qualify as assessment?
No, because there is no written notice and demand. It is just an affidavit.
If there is a violation of the 4th or the 5th requisite, what is the effect on the assessment?
The assessment is void ab initio because it is a violation of due process.
There must be proof of receipt by the taxpayer of the assessment. Who has the burden of proof?
It is the BIR who must prove that the assessment is duly received by the taxpayer. This is an exception
to the presumption of regularity in the performance of official functions.
Can the BIR invoke the presumption of regularity in the performance of official functions to discharge the
burden of proof?
No, because this is an exception to the presumption.
12. What are the requisites of a valid assessment for purposes of customs duties?
The requisites are as follows:
1) It must contain the final computation and ascertainment of duties on imported merchandise.
2) It must be based on official reports as to the quantity, character, and value of the imported
merchandise.
3) It must set forth/contain the collector’s own finding as to the applicable rate of duty.
13. In your book, I mentioned methods that may be used by the BIR to make an assessment. What are
these methods?
The methods of assessment are:
1) networth method of investigation (Section 43 of the NIRC)
2) presumed gross sales or receipts method
3) expenditures method (Collector v. Jamir, 4 SCRA 718)
14. The networth method of investigation finds support in the Best Evidence Obtainable Rule. It is a
different concept in Remedial Law. What do you mean by best evidence obtainable? What does it consist
of?
This includes corporate and accounting records of the taxpayer who is the subject of the assessment
process; the accounting records of other taxpayers engaged in the same line of business, including
their gross profit and net profit sales; data, record, paper, document or any evidence gathered by
internal revenue officers from other taxpayers who had personal transactions or from whom the
subject taxpayer received any income; and record, data, document and information secured from
government offices or agencies, such as the SEC, the BSP, the BOC and the TCC.
15. What are the four instances wherein the BIR may resort to this best evidence obtainable rule?
These are:
1. When a report required by law as a basis for the assessment of any national internal revenue tax
shall not be forthcoming within the time fixed by laws or rules and regulations
2. When there is reason to believe that any such report is false
3. When there is reason to believe that any such report is incomplete
4. When there is reason to believe that any such report is erroneous
(Section 6b, NIRC)
18. Best evidence obtainable allows the BIR to use the networth investigation method. How do you
apply this method?
Step 1: Get the difference of networth end and networth beginning.
Step 2: Add the non-deductible expenses which understated the income.
Step 3: Deduct the exclusions which overstated the income.
Step 4: Compare the total amount obtained with the taxpayer’s taxable income reported in the
return. If there is discrepancy between the two, this will be the subject of assessment.
19. When is it proper for the BIR to fix the presumed gross sales or receipts?
It is resorted to in the following cases:
1) When it is found that a person has failed to issue receipts and invoices in violation of the
requirements of Sections 113 and 237 of this Code, or
2) When there is reason to believe that the books of accounts or other records do not correctly
reflect the declarations made or to be made in a return required to be filed under the provisions of
this Code. (Section 6(c), NIRC)
20. Collector v. Jamir discusses the other method of assessment: the expenditures method. How does
it apply?
It is applied by deducting the aggregate yearly expenditures from the declared yearly income, not
the expenditures incurred each month, from the declared income therefor. If the amount spent is
more than the amount earned for the same year, the excess is the unreported income.
Sections 203, 222 and 223 of the NIRC provide for prescriptive periods. This clearly shows that internal
revenue taxes are prescriptible. Let us discuss in this regard these three related provisions.
23. In the case of individual taxpayers, when will be the deadline for filing the return? What about the
corporate taxpayers?
24. The return has been amended. When do you commence/reckon the three-year period? *Check the
Phoenix doctrine in p. 205. Read the case.*
It depends. If the amendment is substantial, the three-year period will be reckoned from the filing
of the substantially amended return. Otherwise, the period will be reckoned from the date of the
original filing.
25. What is the distinction between Section 203 and Section 222?
In Section 203, the return is neither false nor fraudulent. Section 222, on the other hand,
contemplates three situations *triple F*: when a false or fraudulent return is filed, or when there is
failure or omission to file a return.
26. How do you apply the five-year period in Section 222? How about the ten-year period?
The five-year period only applies to collection. It is reckoned from the assessment of the tax.
The ten-year period is applied to both assessment and collection. It is reckoned from the discovery
of the falsity, fraud or omission. This allows collection even without prior assessment.
27. Having discussed these prescriptive periods in Section 203 and 222, you must know the grounds
in Section 223 to suspend the prescriptive period. What are these grounds?
The grounds for suspension of prescriptive period are as follows:
1) when the Commissioner is prohibited from making the assessment or beginning distraint or levy
or a proceeding in court and for sixty (60) days thereafter;
2) when the taxpayer requests for a reinvestigation which is granted by the Commissioner;
3) when the taxpayer cannot be located in the address given by him in the return filed upon which a
tax is being assessed or collected;
4) when the warrant of distraint or levy is duly served upon the taxpayer, his authorized
representative, or a member of his household with sufficient discretion, and no property could be
located;
5) when the taxpayer is out of the Philippines; and
6) when there is a waiver of the Statute of Limitations. (not found in Section 223)
7) when the Commissioner files an answer to taxpayer’s petition for review (Fernandez Hermanos
v. Commissioner, 29 SCRA 552)
30. Read Pacquiao v. CTA, 789 SCRA 19. The Court reiterated therein that a bond must be posted,
whether cash or surety bond. If surety bond is posted, what is the requirement of the law?
The surety bond must be posted for more than double the amount of the tax sought to be collected.
31. The posting of the bond in order to suspend the collection of taxes admits of two exceptions.
What are these?
1) if the method employed by the Collector of Internal Revenue in the collection of tax is not
sanctioned by law (Collector of Internal Revenue v. Avelino)
2) if the collection of taxes was made after the lapse of the three-year limitation period (Collector of
Internal Revenue v. Zulueta)
32. The prescriptive periods may be extended by agreement between the BIR and the taxpayer. What
are the requisites of valid waiver of prescriptive period? *Read the landmark case on the waiver of the
prescriptive period: Commissioner v. Kudos Metal Corporation, 620 SCRA 232. It discussed the
requisites in Revenue Memorandum Order No. 2090.*
1) An agreement must be reached /made before the expiration of the prescriptive period.
2) It must be in writing.
3) It must be signed by the BIR authorized representative and the taxpayer.
4) It must be approved by the BIR.
5) If the taxpayer is a corporation, the Board must approve the waiver.
33. There are five grounds for suspension of the prescriptive period under Section 223. Another
ground is the waiver of prescriptive period. What is the other ground for suspension of prescriptive
period? *It is a judicial ground*
The judicial ground for suspension of prescriptive period is the filing of Answer to taxpayer’s
petition for review. (Fernandez Hermanos v. Commissioner, 29 SCRA 552)
34. Let us now discuss one of the most important topics - compromise. The BIR is authorized to
compromise internal revenue tax cases. What are the grounds upon which the BIR may compromise an
internal revenue tax?
The grounds as stated in Section 204 of the NIRC are:
1) the existence of doubtful validity of the assessment against the taxpayer, or
2) the financial incapacity of the taxpayer to pay the assessed tax.
36. Another one asked in the Bar is jeopardy assessment. It is another doubtful validity case. What is
a jeopardy assessment? What may be jeopardized? Why is doubtful?
A jeopardy assessment is a tax assessment made by an authorized Revenue Officer without the
benefit of complete or partial audit, in light of the revenue officer's belief that the government’s
interest will be jeopardized by delay caused by the taxpayer.
It is doubtful because there is no audit made by the BIR. That makes it doubtful.
37. Out of these nine cases, these two are the most important – assessment based on best evidence
obtainable and jeopardy assessment. Read the other seven cases of doubtful validity in the book.
The other seven cases are:
1) Assessment appearing to be arbitrary or based on presumptions
2) Failure of taxpayer to file protest on account of alleged failure to receive notice of assessment or
preliminary assessment
3) Failure of taxpayer to file request for reinvestigation or reconsideration within 30 days from
receipt of final assessment notice
4) Failure of taxpayer to elevate to CTA an adverse decision of the Commissioner or his
representative within 30 days from receipt thereof
5) Assessment issued on or after January 1, 1998, where demand allegedly failed to comply with the
formalities of the Tax Code of 1997
6) Assessment issued within the extended prescriptive period where the waiver of the statute of
limitations is being questioned or at issue
7) Assessment based on an issue decided against the Bureau, but for which the SC has not decided
upon with finality
38. Can you mention the obvious grounds under the cases of the taxpayer’s financial incapacity?
There are five in your book.
These are:
1) when the corporation ceased operation or is already dissolved.
2) when the taxpayer is suffering from surplus or earnings deficit resulting in impairment of the
original capital by at least 50%.
3) when the taxpayer is suffering from a networth deficit.
4) when the taxpayer is a compensation income earner with no other source of income, and the
family’s gross monthly compensation income does not exceed the levels provided for under the
revenue regulations.
5) when the taxpayer has been granted by the SEC or the competent tribunal a moratorium or
suspension of payments to creditors, or otherwise declared bankrupt or insolvent.
Let us have a brief review of these three administrative remedies that may be availed of the government:
enforcement of a tax lien, distraint and levy.
40. Section 219 – Enforcement of a tax lien. It is defined in your book. How is tax lien defined?
A tax lien is a legal claim or charge on property, whether real or personal, established by law as a
sort of security for the payment of tax obligations. (Hong Kong and Shanghai Banking Corp. v.
Rafferty)
42. Who has the superior claim to these barges in CIR v. NLRC, 238 SCRA 42? Between a claim
based on judgment and a claim based on tax lien, which will prevail? Explain.
The government’s claim predicated upon a tax lien is superior to a claim based on judgment. The
reasons are as follows:
1) A tax lien attaches upon all property and rights to property of the taxpayer in case he fails to pay
taxes. (Section 219)
2) It attaches from the moment the taxpayer fails to pay the tax. Thus, there is nothing left to be
attached by the sheriff for a claim based on judgment because the government has acquired tax lien
on the property.
45. May the Collector of Customs avail of the enforcement of tax lien?
Under the Old Customs Code, the answer is yes.
Under the Customs and Tariff Modernization Act (R.A. No. 10863), the answer is no.
47. It is clear under Section 207(a) that the BIR is allowed to resort to distraint. Is distraint an
available remedy under the LGC?
Yes. (Section 175, LGC)
Section 175. Distraint of Personal Property. - The remedy by distraint shall proceed as follows:
48. It is clear under Section 207(b) that the BIR is allowed to resort to levy. Is levy available under
the LGC?
Yes. (Section 176, LGC)
Section 176. Levy on Real Property. - After the expiration of the time required to pay the delinquent tax,
fee, or charge, real property may be levied on before, simultaneously, or after the distraint of personal
property belonging to the delinquent taxpayer.
52. Is notice of sale still required to be served on the delinquent taxpayer? Did you not learn that
publication is a notice to the whole world? Read Section 213, para. 4 of the NIRC.
Yes, because the taxpayer cannot exercise his right under Section 213 to prevent the sale if he is not
informed of such sale. What you learned that publication is a notice to the whole world does not
apply here because of that provision.
SEC. 213. Advertisement and Sale. – x x x
At any time before the day fixed for the sale, the taxpayer may discontinue all proceedings by paying the
taxes, penalties and interest.
Assignment:
We will review what you have learned in protest and refund. I have lengthily discussed refund in the book
because it always comes out in the bar. Read:
Protest – pp. 218-225 (mentioned seven cases, five of which came out in the bar)
Refund – pp. 225-242 (mentioned 35 cases, all of which came out in the bar)
CTA – pp. 243-263 (mentioned 18 cases in CTA, 2/3 of which came out)
Appendix B – New Revenue Regulations
Cases which will answer this bar question: what may constitute decisions of the BIR appealable
to the CTA?
1. Republic v. Lim Tian Teng Sons, 16 SCRA 584
2. Surigao Electric v. CA, 57 SCRA 523
3. Commissioner v. Ayala Securities Corporation, 70 SCRA 204
4. Yabes v. Flojo, 115 SCRA 278
Check the recent case on the SC website regarding the definition of payment under protest.
RESEARCH: Payment under protest and appeal to the Local Board of Assessment Appeals are
"successive administrative remedies to a taxpayer who questions the correctness of an
Section 228 of the NIRC is not complete. It is clarified by Appendix B of your book (Revenue
Regulations)
What must be protested? The final assessment notice or final letter of demand
Is notice of informal conference under Rev. Reg. 12-1999 required? YES
Is notice of informal conference under Rev. Reg. 18-2013 required? NO LONGER REQUIRED.
Is preliminary assessment notice required? Yes (CIR v. Metro Star Superama, 637 SCRA 633, page 223
of the book)
Why? Due process requires PAN.
What is the prescriptive period to respond? 15 days from receipt of PAN
When there is no response given within 15 days, what will happen? The BIR will issue the FAN/FLD.
What is the difference between request for reinvestigation and request for reconsideration?
Request for reinvestigation Request for reconsideration
Basis Newly discovered evidence Existing records
Suspension of prescriptive Allowed (Section 228) Not allowed
period
(Section 223)
What is the case explaining why request for reinvestigation suspends the running of prescriptive period?
CIR v. Philippine Global Communication, p.220
What is the reason?
If both suspend the running of prescriptive period, then an erroneous assessment may never prescribe.
Who can issue PAN? BIR and its duly authorized representative
Who are the duly authorized representatives? Regional Revenue Directors
Memorize definitions.
If there is a decision, the taxpayer may opt to appeal to the CTA within 30 days from receipt of the
decision or file a request for reinvestigation within 30 days from receipt
Two cases on the term “await final decision” are decided by the Supreme Court. With all due respect, this
is a judicial legislation. The taxpayer must wait final decision. It is not in the law. Do not criticize this.
You might not pass the bar.
So let’s have tax refund. In comparative rules, where to file? Then prescriptive period? Let’s have
National Internal Revenue Code.
NIRC is 2 years from the date of payment so it’s available in the NIRC under sec. 229
Let’s go to Local Government taxation. Is there a remedy available to taxpayer?
Sec. 196
Where do you file?
The Local Treasurer
Prescriptive Period?
2 years from the date of payment or from the time he is entitled thereto.
You don’t find that in the NIRC. Under the NIRC sec. 229 is from the date of payment. Here (LGC) is
from the date of payment or from the time he is entitled thereto. I am talking about Sec. 196 of RA 7160
of Local Government Taxation.
What do you think the difference or its legal implications “from the time he is entitled thereto”? In sec.
229, is the doctrine of supervening cause or event applicable?
No, very clear, regardless of any event arises from the date.
So Let’s us focus on Sec. 229, we can review here a lot of jurisprudence. I hope you recall. I think I cited
38 decisions of the court from page 225 to 242. Some of them has already asked in the bar exam. With
that number of cases, this serve as a notice of you that this is the most favorite bar question next to
protest.
Bar Question. Here in NIRC, you need to file so-called refund, what are the requisites?
First, it must be in writing. Written claim for refund.
Second, it must contain a categorical demand. What is that? You are requesting for a refund. Therefore,
demand for reimbursement of taxes illegally, erroneously, unlawfully or excessively assessed or
collected.
Third, it must file 2 years from the date of payment.
SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - no suit or proceeding shall be
maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have
been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected
Understand before you memorize. If you understood what the Supreme Court Said, that the time you
memorize that.
When you appeal to the CTA en banc, what is the exception to the 30 day period?
Sec.3(b) Rule 8.Revised Rules of CTA:
Republic v. Lim The CIR did not reply to the request for reinvestigation. Instead, he referred the case to
the Solicitor General for collection of the tax. The lower court correctly interpreted this
action of the Collector of Internal Revenue as a denial of defendant's request for
reinvestigation.
Surigao Electric v. CA The letter of demand constitutes final action taken by the Commissioner on the petition’s
several requests for reconsideration & recomputation. In this letter, the Commissioner not only
demanded that the petitioner pay the delinquent taxes but also give warning that if it failed to
pay, the Commissioner would be constrained to enforce the collection by means of the
remedies provided by law.
Commissioner v. Ayala The letter was a reiteration of the demand by the BIR for the settlement of the assessment
Securities Corporation already made. Said letter amounted to a decision on a disputed or protested assessment.
Yabes v. Flojo what may be considered as final decision or assessment of the Commissioner is the
filing of the complaint for collection in the respondent Court of First Instance of
Cagayan
Commissioner v. Advertising The letter directing the thetaxpayer to pay the deficiency taxes within ten days from
Associates receipt of demand; otherwise, the Bureau would enforce the warrants of distraint
embodies the final decision of the Commissioner.
Commissioner v. Algue As a rule, the warrant of distriant is proof of finality of the assessment is tantamount to
outright denial of the request for reconsideration. The receipt of the warrant commences the
running of the 30 day period to appeal.
Commissioner v. Union BIR should always indicate to the taxpayer, in clear & unequivocal language, what constitutes
Shipping Lines final action on dispute assessment to avoid repeated requests for reconsideration by the
taxpayer.
Commissioner v. Isabela A final demand letter from BIR reiterating to the the taxpayer the immediate payment of a tax
Cultural Corporation deficiency assessment previously made, is tantamount to a denial of the taxpayer’s request fro
reconsideration
Oceanic Wireless Network, The demand letter constitutes the denial of the request for reconsideration when it reiterated
Inc. v. Commissioner the tax deficiency assessments due from petitioner and requested for its payment.
Allied Banking Corporation A formal letter of demand with assessment notices stating that it is the final decision based on
v. Commissioner investigation is appealable to the CTA.