OTHER FUNDAMENTAL DOCTRINES IN TAXATION

1. Marshall Doctrine – “The power to tax involves the power to destroy.” Taxation power
can be used as an instrument of police power. It can be used to discourage or prohibits
undesirable activities or occupation. As such, taxation power carries with it the power to
destroy.
However, the taxation power does not include the power to destroy if it is used solely for
the purpose of raising revenue. (Roxas vs. CTA)

2. Holme’s Doctrine – “Taxation power is not the power to destroy while the court sits.”
Taxation power may be used to build or encourage beneficial activities or industries by
the grant of tax incentives. While the Marshall Doctrine and the Holme’s Doctrine appear
to contradict each other, both are actually employed in practice. A good manifestation of
the Marshall Doctrine is the imposition of excessive tax on cigarettes while application of
the Holme’s Doctrine includes the creation of Ecozones with tax holidays and provision
of incentives, such as the Omnibus Investment Code (E.O. 226) and the Barangay Micro-
Business Enterprise (BMBE) Law.

3. Prospectivity of Tax Laws- Tax laws are generally prospective in operation. An ex post
facto law or a law that retroacts is prohibited by the Constitution.

Exceptionally, income tax laws may operate retrospectively if so, intended by Congress
under certain justifiable conditions. For example, Congress can levy tax on income
earned during periods of foreign occupation even after the war.

4. Non-compensation or set-off- Taxes are not subject to automatic set-off or

compensation. The taxpayer cannot delay payment of tax to wait for the resolution of a
lawsuit involving his pending claim against the government. Tax is not a debt; hence, it is
not subject to set-off. This rule is important to allow the government sufficient period to
evaluate the validity of the claim. (See Philex vs. CIR, G.R. 125704)

Exceptions:
a. Where the taxpayer’s claim has already become due and demandable such as
when the government already recognized the same and an appropriation for
refund was made.
b. Cases of obvious overpayment of taxes
c. Local Taxes

5. Non-assignment of Taxes- Tax obligations cannot be assigned or transferred to another

entity by contract. Contracts executed by the taxpayer to such effect shall not prejudice
the right of the government to collect.

6. Imprescriptibility in Taxation- Prescription is the lapsing of a right due to the passage

of time. When one sleep on his right over an unreasonable period of time, he is presumed
 to be waiving his right. The government’s right to collect taxes does not prescribe unless
the law itself provides for such prescription.

Under the NIRC, tax prescribes if not collected within 5 years from the date of its
assessment. In the absence of an assessment, tax prescribes if not collected by judicial
action within 3 years from the date the return is required to be filed. However, taxes due
from taxpayers who did not file a return or those who filed fraudulent returns do not
prescribe.

7. Doctrine of Estoppel- Under the Doctrine of Estoppel, any misrepresentation made by

one party toward another who relied therein in good faith will be held true and binding
against that person who made the misrepresentation.

The government is not subject to estoppel. The error of any government employee does
not bind the government. It is held that the neglect or omission of government officials
entrusted with the collection of taxes should not be allowed to bring harm or detriment to
the interest of the people. Also, erroneous applications of the law by public officers do
not block the subsequent correct application of the same.

8. Judicial Non-Interference- Generally, courts are not allowed to issue jurisdiction against
the government’s pursuit to collect tax as this would unnecessarily defer tax collection.
This rule is anchored on the Lifeblood Doctrine.

9. Strict Construction of Tax Laws- When the law clearly provides for taxation, taxation is
the general rule unless there is a clear exemption. Hence the maxim, “Taxation is the
rule, exemption is the exception.”
When the language of the law is clear and categorical, there is no room for interpretation.
There is only room for application. However, when taxation laws are vague, the doctrine
of strict legal construction is observed.
Vague Tax Laws are construed against the government and in favor of the taxpayers. A
vague tax law means no tax law. Obligation arising from law is not presumed. The
Constitutional requirement of due process requires laws to be sufficiently clear and
expressed in their provisions.
Vague Exemption Laws are construed against the taxpayer and in favor of the
government. A vague tax exemption law means no exemption law. The claim for
exemption is construed strictly against the taxpayer in accordance with the lifeblood
doctrine.
The right of taxation is inherent to the State. It is a prerogative essential to the perpetuity
of the government. He who claims exemption from the common burden must justify his
claim by the clearest grant of organic or statute law.
TAXATION LAW
Taxation law refers to any law that arises from the exercise of the taxation power of the State.
Types of Taxation Laws
1. Tax Laws – These are laws that provide for the assessment and collection of taxes.

Examples:
a. The National Internal Revenue Code (NIRC) - governs income tax, VAT, estate
tax, etc.
b. The Tariff and Customs Code - governs import duties and tariffs.
c. The Local Tax Code - governs taxes imposed by local government units.
d. The Real Property Tax Code - governs taxes on real estate properties.
2. Tax Exemption Laws- These are laws that grant certain immunity from taxation.

Examples:
a. The Minimum Wage Law - exempts minimum wage earners from income tax.
b. The Omnibus Investment Code of 1987 (E.O.226) - gives tax incentives to
encourage investments.
c. Barangay Micro-Business Enterprise (BMBE) Law - exempts small businesses
from certain taxes to support grassroots enterprises.
d. Cooperative Development Act - gives tax exemptions to registered cooperatives.
TAX LAWS, REVENUE REGULATIONS, and RULINGS
Tax Laws are laws that provide for the assessment and collection of taxes. Philippine Tax laws
are civil and not political in nature.
Revenue Regulations are issuances signed by the Secretary of Finance upon recommendation of
the Commissioner of Internal Revenue (CIR) that specify prescribe, or define rules and
regulations for the effective enforcement of the provisions of the National Internal Revenue Code
(NIRC) and related statutes.
Revenue Regulations are formal pronouncements intended to clarify or explain the tax law and
carry into effect its general provisions by providing details of administration and procedure.
Revenue regulation has the force and effect of a law, but is not intended to expand or limit the
application of the law; otherwise, it is void.
BIR Rulings are official positions of the Bureau to queries raise by taxpayers and other
stakeholders relative to clarification and interpretation of tax laws.
Rulings are merely advisory or a sort of information service to the taxpayer such that none of
them is binding except to the addressee and may be reversed by the BIR at any time.
TAX ADMINISTRATION
Tax Administration refers to the management of the tax system. Tax administration of the
national tax system in the Philippines is entrusted to the Bureau of Internal Revenue which is
under the supervision and administration of the Department of Finance.
TAXPAYER CLASSIFICATION FOR PURPOSES OF TAX ADMINISTRATION
1. Large Taxpayer’s- under the supervision of the Large Taxpayer Service (LTS) of the BIR
National Office.
2. Non-Large Taxpayer’s- under the supervision of the respective Revenue District Offices
(RDOs) where the business, trade or profession of the taxpayer is situated.
CRITERIA FOR LARGE TAXPAYERS:
A. As to payment
1. Value Added Tax- At least P200,000 per quarter for the preceding year.
2. Excise Tax- At least P1,000,000 tax paid for the preceding year.
3. Income Tax- At least P1,000,000 annual income tax paid for the preceding year
4. Withholding Tax- At least P1,000,000 annual withholding tax payments or
remittances from all types of withholding taxes.
5. Percentage Tax- At least P200,000 percentage tax paid or payable per quarter for the
preceding year.
6. Documentary Stamp Tax- At least P1,000,000 aggregate amount per year.
B. As to financial conditions and results of operations
1. Gross Receipts or Sales- P1,000,000,000 total annual gross sales or receipts
2. Net Worth- P300,000,000 total net worth at the close of each calendar or fiscal year
3. Gross Purchases- P800,000,000 total annual purchases for the preceding year
4. Top corporate taxpayer listed and published by the Securities and Exchange
Commission
POWERS OF THE BUREAU OF INTERNAL REVENUE (BIR)
1. Assessment and collection of taxes
2. Enforcement of all forfeitures, penalties, and fines, and judgements in all cases
decided in its favor by the courts
3. Giving effect to, and administering the supervisory and police powers conferred to it
by the NIRC and other laws
4. Assignment if internal revenue officers and other employees to other duties
5. Provisions and distribution of forms, receipts, certificates, stamps, etc. to proper
officials
6. Issuance of receipts and clearances
7. Submission of annual report, pertinent information to Congress and reports to the
Congressional Oversight Committee in matters of taxation
POWERS OF THE COMMISSIONER OF INTERNAL REVENUE
1. To interpret the provisions of the NIRC, subject to review by the Secretary of Finance
2. To decide tax cases, subject to the exclusive appellate jurisdiction of the court of Tax
Appeals
3. To obtain information and to summon, examine, and take testimony of persons to
effect tax collection
4. To make an assessment and prescribe additional requirement for tax administration
and enforcement
5. To examine tax returns and determine tax due thereon
6. To conduct inventory taking or surveillance
7. To prescribe presumptive gross sales and receipts for a taxpayer
8. To terminate tax period when the taxpayer is retiring from business, intending to
leave the Philippines and intending to remove, hide, or conceal his property
9. To prescribed real property value
10. To compromise tax liabilities of taxpayers
11. To inquire into bank deposits
12. To accredit and register tax agents
13. To refund or credit internal revenue taxes
14. To abate or cancel tax liabilities in certain cases
15. To prescribe additional procedures or documentary requirements
16. To delegate his powers to any subordinate officer with a rank equivalent to a division
chief of an office

Non-Delegated Power of the CIR

1. The power to recommend the promulgation of rules and regulations to the Secretary
of Finance.
2. The power to issue rulings of first impression or to reverse, revoke, or modify any
existing rulings of the bureau.
3. The power to compromise or abate any tax liability
4. The power to assign and reassign internal revenue officers to establishments where
articles subject to exercise tax are produced or kept.