REMEDIES OF THE TAXPAYER

1. Where the tax has not been paid

a. Dispute the assessment administratively- file with the BIR a request for reconsideration of the assessment. If the BIR decides against the taxpayer, he may appeal to the Court of Tax Appeals.

b. Appeal to the CTA- within 30 days from receipt of the decision of the CIR on the disputed assessment, the taxpayer may appeal the decision to the CTA. Refunds for internal revenue taxes, fees or other charges, penalties imposed in relation thereto are also appealable to the CTA.

The appeal taken to the CTA shall not suspend the payment, levy, distraint and/or sale of any property of the taxpayer for the satisfaction of his tax liability. However, if in the opinion of the CTA the collection of the tax may jeopardize the interest of the government or the taxpayer, the Court at any stage of the proceeding may suspend the collection of tax and require the taxpayer to deposit the amount claimed, or file a surety bond for not more than double the amount with the court.

c. Appeal to the Supreme Court.

2. Where the tax has been paid- Claim for a refund

Grounds for claiming refund or tax credit IMPT!!!!!!!!
a. the tax has been erroneously or illegally assessed or collected;
b. the penalty had been collected without authority
c. any sum which have been excessive or in any manner wrongfully collected
d. the tax was paid by mistake.

3. Action to contest forfeiture of chattel

4. Question the validity of the sale of property

5. Action against the revenue officers for damages cased in the performance of duties

6. Appeal the President of the Philippines, where the decision of the Commissioner of Internal Revenue is a revocation of privilege

Remedies of the Government in the Collection of Taxes

1. ADMINISTRATIVE

a. Distraint of personal property;
b. Levy of personal property
c. Enforcement of forfeiture of property
d. Enforcement of tax lien
e. Requiring the filing of bonds
f. Requiring proof of filing income tax returns
g. Deportation of aliens
h. Inspection of books of accounts.

2. JUDICIAL
a. ordinary civil action
b. criminal action

REMEDIES AVAILABLE TO THE GOVERNMENT IN THE COLLECTION OF THE INCOME TAX...VERY IMPT!!

1. ADMINISTRATIVE
a. Distraint of personal property;
b. Levy of personal property
c. Enforcement of forfeiture of property
d. Enforcement of tax lien
e. Requiring the filing of bonds
f. Requiring proof of filing income tax returns
g. Deportation of aliens
h. Inspection of books of accounts.

2. JUDICIAL
a. ordinary civil action
b. criminal action


DISTRAINT- seizure by the government of personal property, tangible or intangible, to enforce the payment of taxes to be followed by its public sale if the taxes are not voluntarily paid.

Kinds of Distraint
a. Actual- there is taking of possession of the personal property out of the taxpayer into that of the government;
b. Constructive- the owner is merely prohibited from disposing of his property.

LEVY- A summary administrative remedy, seizure of real property to enforce payment of taxes.

A written notice of levy, containing a description of the property upon which levy is made, the name of the taxpayer and the amounts of the tax and penalty due from them is served upon the taxpayer.

FORFEITURE- a divestiture of property without compensation, in consequence of a default or offense. In case of chattels and removal of fixtures of any sort, forfeiture is enforced by seizure and sale or destruction of the specific forfeited property. The forfeiture of real property is enforced by a judgment of condemnation and sale in a legal action or proceeding, civil or criminal, as the case may require.

TAX LIEN- a legal claim or charge on property either real or personal established by law as a security in default of the payment of taxes. The tax, together with interest, penalties and cost that may accrue in addition thereto is a lien upon all property and rights to property belonging to the taxpayer. The lien however, shall not be valid against any mortgagee, purchaser or judgment creditor until legal notice of such liens should be filed by the Commissioner of internal revenue in the Office of the Register of Deeds of the province or city where the property of the taxpayer is located. The lien attaches when the taxpayer neglects or refuses to pay the tax after demand, but relates back from the time when assessment was made by the Commissioner.

REQUIRING THE FILING OF BONDS- Filing of performance bond to secure the payment of taxes or compliance with certain provisions of tax laws and regulations. This may be required by the BIR for the issuance of a tax clearance.

REQUIRING PROOF OF FILING INCOME TAX RETURNS. – Before a license to engage in trade or business or occupation or to practice a profession can be issued to a person, partnership, association or corporation, he must submit to the officer issuing such license or permit, proof that he has filed his income tax return during the preceding year and that income taxes due have been paid thereon.

DEPORTATION OF ALIENS- any alien who
1. knowingly and fraudulently evades the payment of any internal revenue tax or
2. willfully refuses to pay such tax and its accessory penalties after the decision on the tax liability rendered by the Commissioner of Internal Revenue, or the CTA or any competent judicial tribunal shall have become final and executor, is subject to deportation. The penalty of deportation is not a bar to any proceeding taken by the government to enforce collection of tax delinquency.

INSPECTION OF BOOKS OF ACCOUNTS

JUDICIAL ACTION
1. Civil Action- After the assessment made by the Commissioner of Internal Revenue has become final and executory for failure of the taxpayer to dispute the same and appeal the disputed assessment to the Court of Tax Appeals, the government may institute civil actions to collect internal revenue taxes in the Regional Trial Court and the Metropolitan Trial Court, City and municipal courts.

2. Criminal Action- maybe pursued by the authorities for the collection of delinquent taxes. An assessment of a tax deficiency is not necessary to a criminal prosecution for tax evasion. The crime is complete when the violator has knowingly and willfully filed a fraudulent return or neglected to file a return with intent to evade the tax. If the taxpayer is acquitted, the government may still collect the tax in a civil action, because the payment of a tax is an obligation imposed by statute and does not arise from a criminal act.

FORMS OF ESCAPE FROM TAXATION/ EXEMPTION FROM TAXATION

FORMS OF ESCAPE FROM TAXATION

1. Shifting
2. Capitalization
3. Transformation
4. Avoidance
5. Exemption
6. Evasion

Shifting- process by which tax burden is transferred from statutory taxpayer to another without violating the law.

Kinds of Shifting

1. Forward shifting- when burden of tax is transferred from a factor of production through the factors of distribution until it finally settles on the ultimate purchaser or consumer

2. Backward shifting – when the burden is transferred from consumer through factors of distribution to the factors of production;

3. Onward shifting- when the tax is shifted 2 or more times either forward or backward.

Capitalization- is the reduction in the price of the taxed object equal to the capitalized value of the future taxes which the purchaser expects to be called upon to pay.

Transformation- the manufacturer or producer upon whom the tax has been imposed, fearing the loss of his market if he should add the tax to the price, pays the tax and endeavors to recoup himself by improving his process of production thereby turning out his units at a lower cost.

Tax avoidance- exploitation by the taxpayer of legally permissible alternative tax rates or methods of assessing taxable property or income, in order to avoid or reduce tax liability.

Tax Exemption- grant of immunity to particular persons or corporations of a particular class from a tax which persons and corporations generally within the same state or taxing district are obliged to pay.

Basic Principles Regarding Tax Exemptions

1. Exemptions are highly disfavored by law and he who claims an exemption must be able to justify his claim by the clearest grant of law.

2. He who claims tax exemption should prove by convincing proofs that he is exempted

3. Tax exemptions should be strictly construed against the person claiming it.

4. Taxation is the rule and exemption Is the exception

5. Constitutional grant of tax exemptions are self-executing

6. In the same way that taxes are personal, tax exemptions are also personal

7. Deductions for income tax purposes partake of the nature of tax exemptions, therefore deductions should also be construed strictly against the taxpayer.

Tax evasion- use of taxpayer of illegal or fraudulent means to defeat or lessen the payment of tax.

Indicia of Fraud in tax evasion

1. Failure to declare for taxation purposes true and actual income derived from business for 2 consecutive years;

2. Substantial under declaration of income tax returns of the tax payer for 4 consecutive years coupled with intentional overstatement of deductions.

Role of the Judiciary in Taxation

The power of taxation is based on the reciprocal obligation of protection by the State of its citizens and the support by such citizens of the State to give funds to provide them protection.

Consequently, the citizen has a right to have a sympathetic and vigilant court or tribunal to check whatever injustices or abuses that may be committed by the administrative agents of the state in the exercise of the power of taxation.

Tax Evasion vs. Tax Avoidance

TAX EVASION VS. TAX AVOIDANCE

Tax Evasion occurs when the taxpayer resorts to unlawful means to lessen or to get away with his tax liability. This is also known as tax dodging.

Tax Avoidance happens when the taxpayer minimizes his tax liability by taking advantage of a legally available tax planning opportunities. This is otherwise known as tax minimization.

Distinction between Tax Evasion and Tax Avoidance

1. Tax avoidance is legal and not subject to criminal penalty WHILE tax evasion is illegal and subject to criminal penalty.
2. Tax avoidance is minimization of taxes WHILE tax evasion always results in absence of tax payments.

Double and Multiple Taxation

Double taxation- both taxes where imposed in the same year for the same purpose, upon property owned by the same person and by the same taxing authority.

Kinds:

Direct duplicate taxation- the same property is taxed twice when it should only be taxed once.

Indirect duplicate taxation- not prohibited and usually allowed provided no violation of equal protection and uniformity clauses in the constitution.

Remedies of Double or Multiple Taxation

1. Provide for exemption;

2. Allowance for tax deduction

3. Allowance for tax credit for foreign taxes

4. Enter into treaties with other states

5. Allowance of the principle of reciprocity.

Situs of Taxation

SITUS OF TAXATION- literally means the place of taxation, or the country that has jurisdiction to levy a particular tax on persons, property, rights or business.

Basis: Symbiotic relationship. The jurisdiction, state or political unit that gives protection has the right to demand support.

The situs of taxation is determined by a number of factors

a. Subject matter- or what is being taxed. He may be a person or it may be a property, an act or activity;

b. Nature of tax- or which tax to impose. It may be an income tax, an import duty or a real property tax;

c. Citizenship of the taxpayer

d. Residence of the taxpayer.

SITUS OF PERSONS
1. Residence tax- place where the person resides
2. Income Tax-
a. citizenship, or the country of which he is a citizen
b. legal residence
c. place where the income is derived.
3. Estate Tax- residence of the decedent at the time of his death
4. Donor’s Tax- residence of the donor at the time of donation
5. Business/occupation tax- where the business is done or the occupation is engaged in;
SITUS OF TAXATION OF PROPERTY
1. Real Property- location of the property
2. Tangible personal property- location of the property
3. Intangible personal property- domicile or residence of the owner