Taxation

Taxation Jurisprudence by J. Leonen TAX EXEMPTION, NATURE OF EXCISE TAX, POWER OF TAXATION, CONSTITUTIONAL PROHIBITION AGAINST DOUBLE TAXATION, BIR AND CTA and TAX AMNESTY

BIR AND CTA 

CIR v. SAN MIGUEL CORPORATION G.R. Nos. 205045 & 205723, January 25, 2017

While estoppel generally does not apply against government, especially when the case involves the collection of taxes, an exception can be made when the application of the rule will cause injustice against an innocent party.

Respondent had already acquired a vested right on the tax classification of its San Mig Light as a new brand. To allow petitioner to change its position will result in deficiency assessments in substantial amounts against respondent to the latter’s prejudice.

The authority of the Bureau of Internal Revenue to overrule, correct, or reverse the mistakes or errors of its agents is conceded. However, this authority must be exercised reasonably, i.e., only when the action or ruling is patently erroneous or patently contrary to law. For the presumption lies in the regularity of performance of official duty, and reasonable care has been exercised by the revenue officer or agent in evaluating the facts before him or her prior to rendering his or her decision or ruling-in this case, prior to the approval of the registration of San Mig Light as a new brand for excise tax purposes. A contrary view will create disorder and confusion in the operations of the Bureau of Internal Revenue and open the administrative agency to inconsistencies in the administration and enforcement of tax laws.

This Court accords the highest respect to the factual findings of the Court of Tax Appeals. We recognize its developed expertise on the subject as it is the court dedicated solely to considering tax issues, unless there is a showing of abuse in the exercise of authority.  We find no reason to overturn the factual findings of the Court of Tax Appeals on the amounts allowed for refund.

TAX AMNESTY

ING BANK N.V., ENGAGED IN BANKING OPERATIONS IN THE PHILIPPINES AS ING BANK N.V. MANILA BRANCH v. CIR G.R. No. 167679, July 22, 2015

Qualified taxpayers with pending tax cases may still avail themselves of the tax amnesty program under Republic Act No. 9480, otherwise known as the 2007 Tax Amnesty Act. Thus, the provision in BIR Revenue Memorandum Circular No. 19-2008 excepting “[i]ssues and cases which were ruled by any court (even without finality) in favor of the BIR prior to amnesty availment of the taxpayer” from the benefits of the law is illegal, invalid, and null and void. The duty to withhold the tax on compensation arises upon its accrual.

Contrary to respondent Commissioner of Internal Revenue’s stance, Republic Act No. 9480 confers no discretion on respondent Commissioner of Internal Revenue. The provisions of the law are plain and simple. Unlike the power to compromise or abate a taxpayer’s liability under Section 204 of the 1997 National Internal Revenue Code that is within the discretion of respondent Commissioner of Internal Revenue, its authority under Republic Act No. 9480 is limited to determining whether (a) the taxpayer is qualified to avail oneself of the tax amnesty; (b) all the requirements for availment under the law were complied with; and (c) the correct amount of amnesty tax was paid within the period prescribed by law. There is nothing in Republic Act No. 9480 which can be construed as authority for respondent Commissioner of Internal Revenue to introduce exceptions and/or conditions to the coverage of the law nor to disregard its provisions and substitute his own personal judgment.

Republic Act No. 9480 provides a general grant of tax amnesty subject only to the cases specifically excepted by it. A tax amnesty “partakes of an absolute . . . waiver by the Government of its right to collect what otherwise would be due it[.]” The effect of a qualified taxpayer’s submission of the required documents and the payment of the prescribed amnesty tax was immunity from payment of all national internal revenue taxes as well as all administrative, civil, and criminal liabilities founded upon or arising from non-payment of national internal revenue taxes for taxable year 2005 and prior taxable years.

Finally, the documentary stamp tax and onshore income tax are covered by the tax amnesty program under Republic Act No. 9480 and its Implementing Rules and Regulations. Moreover, as to the deficiency tax on onshore interest income, it is worthy to state that petitioner ING Bank was assessed by respondent Commissioner of Internal Revenue, not as a withholding agent, but as one that was directly liable for the tax on onshore interest income and failed to pay the same.

TAX EXEMPTION, NATURE OF EXCISE TAX, POWER OF TAXATION, CONSTITUTIONAL PROHIBITION AGAINST DOUBLE TAXATION

LA SUERTE CIGAR & CIGARETTE FACTORY V. CA  G.R. No. 125346, November 11, 2014

Excise tax is a tax on the production, sale, or consumption of a specific commodity in a country. Section 110 of the 1986 Tax Code explicitly provides that the “excise taxes on domestic products shall be paid by the manufacturer or producer before [the] removal [of those products] from the place of production.” “It does not matter to what use the article[s] subject to tax is put; the excise taxes are still due, even though the articles are removed merely for storage in some other place and are not actually sold or consumed.”159 The excise tax based on weight, volume capacity or any other physical unit of measurement is referred to as “specific tax.” If based on selling price or other specified value, it is referred to as “ad valorem” tax.

Taxation is the rule, exemption is the exception. Accordingly, statutes granting tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. The cigarette manufacturers must justify their claim by a clear and categorical provision in the law. Otherwise, they are liable for the specific tax on stemmed leaf tobacco found in their possession pursuant to Section 127 of the 1986 Tax Code, as amended.

The power of taxation is inherently legislative and may be imposed or revoked only by the legislature. Moreover, this plenary power of taxation cannot be delegated by Congress to any other branch of government or private persons, unless its delegation is authorized by the Constitution itself. 

Hence, the discretion to ascertain the following — (a) basis, amount, or rate of tax; (b) person or property that is subject to tax; (c) exemptions and exclusions from tax; and (d) manner of collecting the tax — may not be delegated away by Congress.

However, it is well-settled that the power to fill in the details and manner as to the enforcement and administration of a law may be delegated to various specialized administrative agencies like the Secretary of Finance in this case.

The authority of the Secretary of Finance to prescribe the “conditions” refers only to procedural matters and should not curtail or modify the substantive right granted by the law.

The contention that the cigarette manufacturers are doubly taxed because they are paying the specific tax on the raw material and on the finished product in which the raw material was a part is also devoid of merit.

For double taxation in the objectionable or prohibited sense to exist, “the same property must be taxed twice, when it should be taxed but once.” “[B]oth taxes must be imposed on the same property or subject- matter, for the same purpose, by the same . . . taxing authority, within the same jurisdiction or taxing district, during the same taxing period, and they must be the same kind or character of tax.”

At all events, there is no constitutional prohibition against double taxation in the Philippines. This court has explained in Pepsi-Cola Bottling Company of the Philippines, Inc. v. Municipality of Tanauan, Leyte:

There is no validity to the assertion that the delegated authority can be declared unconstitutional on the theory of double taxation. It must be observed that the delegating authority specifies the limitations and enumerates the taxes over which local taxation may not be exercised. The reason is that the State has exclusively reserved the same for its own prerogative. Moreover, double taxation, in general, is not forbidden by our fundamental law, since We have not adopted as part thereof the injunction against double taxation found in the Constitution of the United States and some states of the Union. Double taxation becomes obnoxious only where the taxpayer is taxed twice for the benefit of the same governmental entity or by the same jurisdiction for the same purpose, but not in a case where one tax is imposed by the State and the other by the city or municipality.

“It is something not favored, but is permissible, provided some other constitutional requirement is not thereby violated, such as the requirement that taxes must be uniform.”

Excise taxes are essentially taxes on property because they are levied on certain specified goods or articles manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition, and on goods imported. In this case, there is no double taxation in the prohibited sense because the specific tax is imposed by explicit provisions of the Tax Code on two different articles or products: (1) on the stemmed leaf tobacco; and (2) on cigar or cigarette.

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