1st Meeting

1st meeting
INTRODUCTION
VALUE ADDED TAX
 Value Added Tax – it is a buyer’s tax.

 If the business has 3 million income and below, it cannot have a 12% VAT. (non – VAT)
 If the business has more than 3 million income (meaning 3 million plus 1) it is subject to 12%
VAT
 3 million is the THRESHOLD WHETHER THE INCOME OF THE BUSINESS WILL BE SUBJECTED TO
VAT.
 Formula in computing the VAT = Purchase price, divided by 1.12 = the VAT
DONATION
 Documentary Stamp Tax – it is a requirement in donation with regard to tax.
FILING OF THE TAX RETURN
 Prescriptive Period to run against the BIR

o 3, 5, or 10 years
o It is the right of the government to investigate and to collect commences to run
o Once the taxpayer files his Tax return, it is only the time which the prescriptive period
commences to run. Hence, without filing the tax return, the prescriptive period does not
apply.
o If the entries in the tax return are true and correct, the usual three (3) years prescriptive
period will be applied.
LETTER OF AUTHORTIY
 It is not a notice identifying the tax liability of a taxpayer
BIR TAX is different from a LOCAL TAX.
4 Books in Taxation law
 Tax code
o Train law
o Create act
o Bayanihan act
o Revenue regulation
 Local Tax
 Realty Tax
 Tariff Tax
GENERAL PRINCIPLES
Power of Taxation
 Who uses the power of taxation?

o Congress
o President
o Province
o Municipality
o Barangay
o City
 As a general rule, Congress can ONLY use the power of taxation.
 BIR does not have any power of taxation.
 President – has the power of taxation with regard to import and export taxes (activities). Hence,
the president does not have any power in the Internal Revenue (IR).
POWER OF CONGRESS TO TAX
 The power of Congress to tax is an inherent power of the State.

 Doctrine of non – use is inapplicable to tax.
OBJECT OF TAXATION (SCOPE) – BITRA-PPP
 Business, Interest, Rights, Act, Transaction, Persons, Properties, Privileges

 Doctrine of Territoriality – in order for the state to be able to tax it must be inside the country.
 ILLUSTRATION
Businessman (who resides in the Philippines)

o Pay business tax both local tax and BIR (local tax still needs to be paid even if the
business is already getting bankrupt or losing profit, you’re paying the local tax
because you are customarily engaged in the business
o The businessman is also an overseas contract worker, who works for a number of
years, he bought a condo in Singapore and rents it to the people who resides near
Singapore. Question: Is the leasing of his condo subject to Business Tax? – NO.
business tax is not applicable because citizenship is not a factor and the doctrine of
territoriality is inapplicable. When it comes to real properties, citizenship is not a
factor and doctrine of territoriality is not applicable.
 Even if the property is being rented (hinuhulugan) or mortgaged, you still need to pay the real
property tax. You need to pay the real property tax in the City or Municipality or Province where
the property is located.
 If the payment of tax was made in a wrong govt. authority – it is as if there is no payment of tax.
 The exercise of a right is an exception to the doctrine of territoriality
ILLUSTRATION
Taxpayer (TP), income earner, threshold of exception is 250,000, the TP went above the
threshold of 250K. TP earned 1 million.
Analysis: Income tax is not a property tax; it is a right and citizenship is a factor and the doctrine
of territoriality is applicable because to receive an income is a right.
QUESTION: is there an income tax?

Answer: Yes, the exercise of a right is an exception to the doctrine of territoriality
 Tax Credit – you don’t have to be afraid you just need to report it (Example: Pacquiao’s income
fights abroad, is subject to tax credit since he already paid his taxes in the country where the
fight happened)
 When is the citizenship of the Filipino subject to income tax?
o Seaman; or
o Overseas contract worker (even if not POEA registered, so long as he/she works outside
the Philippines)
o Is there a violation of the equal protection clause of the Constitution of an overseas
contract worker v. Normal worker?
 No. Equal protection clause and uniformity clause is not applicable.
 Ex: Tio case – a landmark case; no violation of uniformity and equality clause of
the constitution because they are not similarly situated. Hence, there’s no
discrimination
o ILLUSTRATION
4 kids, to wit:
Eldest – college student; receiving 150 pesos as daily allowance

2 children – SHS and JHS; receiving 75 pesos as daily allowance
Youngest – grade 1; receiving 5 pesos as daily allowance
Is there a violation of uniformity and equal protection clause of the constitution? -

None
POWER OF TAX
 How does tax are made? Laws always originates from the
o Congress makes the law lower house (Origination Rule)
Lower House
Upper house has no power to

create a law, ONLY the lower
Upper House
house has the power to create a
law
But how does the upper house

exercise the power to create a
tax?
AARMS – the upper house has

the power to AMEND, ADOPT,
REVISE, MODIFY OR SUBSTITUTE
the lower house proposed law.
The power to substitute is

applicable only provided that it’s
the same title of the law which
originated from the lower house
SUBSTITUTE – introduce by
Former President Cory Aquino.
QUESTION: WHAT IF THE VERSION OF THE LOWER IS DIFFERENT FROM THE UPPER HOUSE? WHAT
VERSION SHOULD PREVAIL?
Answer: None. Instead, there will be a Bicameral Committee and the latter harmonize the 2 version of
the lower and upper house. After harmonization, the president can now sign it.
QUESTION: WHAT IF THE BICAMERAL COMMITTEE ADDED PROVISIONS IN THE VERSION OF EITHER
UPPER HOUSE OR LOWER HOUSE, did they exercise the power of tax?
Answer: No because the version made by the Bicameral Committee is subject to review and approval of
the Congress.
Once there is already a harmonized version, the president can now sign it and publication will be made,
subject to the 15-day publication requirement in the general news circulation, as provided by the
Constitution.
Note:
 During the Marcos Regime, there is not VAT, only when the Former President Cory Aquino the
VAT was introduced.
 Is there money in VAT compared to VAT?
o Answer: Yes. There is no money in income tax because of the following:
 there are a lot of people who are unemployed.
 Because of a tax treaty
 Because a lot of income taxpayer are not declaring their true income tax.
NO INJUNCTION RULE
 Injunctions/TRO is inapplicable to stop or prohibit the power of taxation. Hence, Congress

cannot be enjoined with TRO.
 If congress cannot be enjoined with TRO, is this rule applicable also to LGU?
o Answer: No. LGU can be enjoined by filing a petition for TRO because their power to tax
is only a delegable power and not an inherent power.
 BASIS of LGU to tax
o Constitution
o Congress – enacted the Local Government Code.
 What else can the “no injunction rule” may be used?
o Answer: As a general rule the no injunction rule may also be used when the BIR is
enforcing a judicial collection case. Hence, no injunction rule apply if the BIR filed a tax
collection.
EXPN:
 Court of Tax Appeals can enjoin the injunction petition filed by a tax payer.
Provided that, there is a pending appeal before the CTA; otherwise, the CTA has
no power to enjoin the petition for TRO.
 Supreme Court may also enjoin a petition for injunction, the basis of its power is
the Constitution.
SANGGUNIANG PANLALAWIGAN CANNOT ADOPT WHAT IS ALREADY PROVIDED IN THE TAX CODE
 LGU cannot enact laws to tax which are already in the tax code, they need to enact laws to tax
on their own. Otherwise, there will be a case of double taxation.
DOCTRINE OF JUDICIAL NON – INTERFERENCE
 When the congress is exercising the power of tax/power to create a tax law, the courts are
prohibited from questions in its efficacy because of the settled principle of separation of powers.
 What is the role of the courts in tax issues?
o Supreme Court is allowed to determine if there’s a correct application, or interpretation
by the executive department in the implementation of the tax laws.
CONGRESS BASIS OF ITS POWER OF TAXATION
 Life Blood doctrine – government will no run without money or deliver basic services to the
people with taxation.
 Necessity Theory – need by the government
 Benefit received theory – also known as symbiotic relationship
o MRSP – mutual, reciprocal, support and protection
VIOLATION OF THE TAX CODE
 Violation of the tax code is criminal and civil in nature.

 Taxes are not debts
 If you are paying taxes, you are giving your support to the government.
Note:
Issue of Bongbong Marcos in taxation
 1982, 1983 and 1984 = He is the Vice – Governor of Ilocos Norte

 He is employed as a government employee. The employer is the automatic person who will
compute the income tax.
 Since he is employed, the employer of Marcos has the responsibility of remitting the taxes of
Marcos and if there are discrepancies in the remittances of taxes, it is the employer or the
withholding agent of Marcos who should be liable.
 Question: Is there moral turpitude?
o Answer: No, because it is not tantamount to moral turpitude.
 IMPORTANT
o In 1986, Former President Cory Aquino passed an executive order providing that non –
filing of tax is tantamount to disqualification from holding a public office.
o It must be remembered that Marcos was a Vice – Governor of Ilocos Norte only in 1982,
1983 and 1984, hence, it cannot retroact to the situation of Marcos because it will
violate the ex post facto law of the Constitution.

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VALUE ADDED TAX

 Value Added Tax – it is a buyer’s tax.

 Documentary Stamp Tax – it is a requirement in donation with regard to tax.

FILING OF THE TAX RETURN

 Prescriptive Period to run against the BIR

 It is not a notice identifying the tax liability of a taxpayer

BIR TAX is different from a LOCAL TAX.

4 Books in Taxation law

 Who uses the power of taxation?

POWER OF CONGRESS TO TAX

 The power of Congress to tax is an inherent power of the State.

OBJECT OF TAXATION (SCOPE) – BITRA-PPP

 Business, Interest, Rights, Act, Transaction, Persons, Properties, Privileges

Businessman (who resides in the Philippines)

QUESTION: is there an income tax?

Eldest – college student; receiving 150 pesos as daily allowance

Is there a violation of uniformity and equal protection clause of the constitution? -

Upper house has no power to

But how does the upper house

AARMS – the upper house has

The power to substitute is

 Injunctions/TRO is inapplicable to stop or prohibit the power of taxation. Hence, Congress

DOCTRINE OF JUDICIAL NON – INTERFERENCE

CONGRESS BASIS OF ITS POWER OF TAXATION

VIOLATION OF THE TAX CODE

 Violation of the tax code is criminal and civil in nature.

Issue of Bongbong Marcos in taxation

 1982, 1983 and 1984 = He is the Vice – Governor of Ilocos Norte

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