2.1 L A ASISTENCIA PERSONAL
2.1.2 Perfil de personas con discapacidad beneficiarias de prestación económica
2.1.2.1 Cooperativa de personas usuarias: Oficinas de Vida Independiente
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. I n other words, what the constitution simply requires is that the initiative or the fi ling of the Revenue and Tariff bills must originate fr om the H OR.
(as synthesized by J. Dimaampao)J. Dimaampao:Reasons? Why?
Student: Because as local representatives elected by their own districts, they are expected to be more sensitive to the local needs and problems. The Senate on the other hand, given that they are nationally (nationwide) elected, they are expected to approach these problems from the national perspective.
J. Dimaampao: Let us focus on the TRAIN Law, with regard to Speaker Alvarez’ contention that the excise tax on coal was not on the version of HOR, answered by Senator Drilon that “ We have the power to propose amendments.”. Now, whose contention is tenable?
Student: It is the Senator’s contention that is more tenable. The Constitution merely requires that Revenue and Tariff bills must originate from the HOR, not the statute itself.
J. Dimaampao: What do you mean by the word amend? Does it include modification or adding something which was not originally proposed.
Student: Amendment, according to Tolentino vs Secretary of Finance, may include modification of the terms of the house bill. It may likewise include rewording, or a total overhaul of the provision included in the House Bill.
J. Dimaampao: You focus on pages 631 (661) and 633 (663) of Tolentino, et. al vs Secretary of Finance.
In pg. 631, there you will find the ruling of the case citing the 2 reasons. In pg. 663, there the Court said what the constitution simply requires is that the initiative or the filing of the Revenue and Tariff bills must originate from the HOR.
Another favorite question of Bar Examiners is that which is found in Art. 6, Sec. 28 par. 3 of the Constitution as discussed there in your book. Compare this with another constitutional provision Art. 14, Sec. 4, par. 3. Now, point out the distinctions.
What are the taxes covered by that exemption? What are the institutions covered by the exemptions? To avoid confusion, I made a comparative table there
Student: Art. 6, Sec. 28 par. 3 Art. 14, Sec. 4, par. 3
Institutions Exempt Religious, Charitable, & Educational NonStock & Nonprofit Educational Taxes Covered Property Tax Income Tax, Custom Duties, & Property
Tax (DECS Order No. 137-87 J. Dimaampao: Sec. 30(e) of NIRC, grant exemptions from income tax to Religious and Charitable Institutions, but for Educational Institutions, it depends.There are 3 kinds of educational institutions, private, public, and nonstock nonprofit. Which of these 3 are exempt?
Student:Government (Sec. 30 (i) of NIRC) and NonStock & Nonprofit Educational are exempt, however private proprietary educational institutions are exempt. The rate may either be the corporate rate or the
10% preferential rate.
J. Dimaampao: You must read Sec. 30 (e) of the NIRC (National Internal Revenue Code), because it likewise provides exemptions for religious and charitable institutions from corporate income tax.
Now what are the constitutional criteria?
Student: Art. 6, Sec. 28 par. 3 Art. 14, Sec. 4, par. 3 Scope Lands, Buildings, & Improvements Revenues and Assets
Criteria Actually, Directly, & Exclusively Used Actually, Directly, & Exclusively Used J. Dimaampao: Are you familiar with the Lung Center Case? Have you been there? There are commercial establishments there. Are they exempt? What was the ruling of the case?
Student: No, only those properties, Directly, & Exclusively Used shall be exempt from tax.
J. Dimaampao: What was the definition of the court of the word exclusively? The Supreme Court liberally construed that.
Student: The word exclusively, should be construed to mean that it must be solely, primarily used for their main purpose.
J. Dimaampao: That is why, the old principle including incidentally used properties among has now been abandoned. What do you mean by actually, directly, and exclusively? Let’s focus on exclusively.
Student: Actually- opposed to seemingly, pretendedly, or feignedly as actually engaged in farming means, truly in fact.
Directly- in a direct way without anything intervening; not by secondary, but by direct means.
Exclusively- Apart from all others; without admission of others to participation; in a manner to exclude.
(National Power Corp. vs. Central Board of Assessment Appeals)
J. Dimaampao:You answer this basic question. You always hear about these, “exemptions”. Exemptions are granted to charitable institutions. So now, I ask you, what is the rational of granting these exemptions.
You must have a mastery of that, because you might be asked why we grant exemptions.
Student: Charitable institutions provide for free goods and services to the public which would otherwise fall on the shoulders of the government. Thus, as a matter of efficiency, the government forgoes taxes which should have been spent to address public needs, because certain private entities already assume a part of the burden. This is the rationale for the tax exemption of charitable institutions. The loss of taxes by the government is compensated by its relief from doing public works which would have been funded
from the appropriations from the Treasury.
J. Dimaampao:So, what are the three reasons for the grant of exemptions?
Student: First, they perform ministrant functions that would have done by the government. Second, in exchange for those taxes that have been forgone, are the services that these charitable institutions render.
Third, the loss of taxes is compensated by the relief it gives to the government to perform certain acts that may require appropriation from the Treasury.
J. Dimaampao: Now, let’s go to tax evasion. In 1998 Bar Exam, it asked, what is the distinction between tax avoidance and tax evasion?
Student:
Tax E vasion (Tax Dodgi ng) -
Willful act to defeat or circumvent the law in order to illegally reduce one’s tax liability.Tax Avoidance (Tax Minimization)-
It is the act of taking advantage of legally available tax opportunities in order to minimize one’s tax liabilityJ. Dimaampao: Can you give an example of tax avoidance relative to income tax? Okay, I will give you an example. When you sell capital assets, personal property. Apply this holding period rule. Holding period rule, Sec. 39 (b) of the National Internal Revenue Code. When you sell capital asset, this is what
you should do, so that, should gain be derived from that transaction, only half of it will be subjected to capital gains tax.
So, this is a legally available tax opportunity. You can take advantage of that. So when are you going to sell your capital asset, within what period?
Student:Sell it after twelve months.
J. Dimaampao: What about a classic example of tax evasion? Have you read the Benigno Toda case?
The mother of all tax evasion cases according to one author. There the Court cited the elements of Tax evasion, what are the elements? I must pressure you to memorize this.
Student: Tax evasion connotes three factors:
1. the end to be achieved i.e. the payment of less than that known by the taxpayer to be legally due, or the nonpayment of tax when it is shown that tax is due;
2. an accompanying state of mind which is described as being “evil”, in “bad faith”, “willful”, or
“deliberate and not accidental”;
3. a course of action or failure of action which is unlawful;
J. Dimaampao: Have you heard of estate planning scheme? Did I not mention the case of Delcar Trade vs IAC (159 SCRA 349) Read that, I might ask you that in your exam. What is estate planning? Please memorize that.
Student: The preparation of the management of the person’s estate. How? Through wills, trust, insurance policies, and other arrangements designed to reduce administration costs and estate tax liabilities.
J. Dimaampao: If a person fails to pay tax, will he be liable for tax evasion? Mere understatement of income, will that amount to tax evasion?
Student: No, there has to be fraud! That is the defense of a taxpayer, e.g. honest mistake.
J. Dimaampao: I mentioned in my example tax avoidance with regard to sale of capital asset. This time, can you mention another form of tax avoidance? When you deposit your money in the bank, that would earn interest income, hence it will be subject to 20% final tax. Now, how do you minimize it? This will eventually come out in your Bar exams.
Student:Through Long Term deposits. The term of which is 5 years are exempt from tax.
J. Dimaampao: Double Taxation was asked in the last Bar Exam as we predicted. That’s a favorite bar question. There are two kinds of Double Taxation. They are? Distinguish one from the other. Which one is prohibited or forbidden?
Student: Direct Double Taxation Indirect Double
Taxation
Elements: 1. Same Property/Subject Matter; If among the elements of
2. Same Purpose; Direct Double Taxation,
3. Same State/ Government/ Taxing Authority; one of them is absent, 4. Same jurisdiction/taxing district; then it amounts to
5. Same taxing period; indirect double taxation.
6. Same kind/character of tax.
J. Dimaampao:You memorize that! Why is direct double taxation prohibited? What is the constitutional provision that is being violated?
Student: Direct double taxation is prohibited because it would amount to confiscation of property without due process of law.
J. Dimaampao: Another probable bar question is International Juridical Double Taxation as enunciated in CIR vs S. C. Johnson & Sons. What do you understand by that? Is that an example of direct or indirect double taxation?
Student: International Juridical Double Taxation refers to the imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject matter and for incidental periods. Double taxation usually takes place when a person is resident of a contracting state and derives income from, or owns capital in, the other contracting state and both states impose tax on that income or capital.
This is an example of indirect double taxation because the tax is imposed by different jurisdiction and taxing authority.
J. Dimaampao:What are its elements?
Student:The elements of International Juridical Double Taxation are: 1. There are two or more states; 2.
There is one and the same taxpayer; 3. The same subject matter is taxed; 4. The same period. (This is supplemented only by me according to the definition given by the Supreme Court.)
J. Dimaampao: In the case of Philippines vs Germany, where the same taxpayer is being taxed on royalties, what were the ways enunciated by this case to eliminate/minimize double taxation. When did they use the word eliminate and minimize?
Student:In order to eliminate double taxation, a tax treaty may be entered into, resorting to two methods.
Exemption Method- the income or capital which is taxable in the state of source or situs is exempted in the state of residence, although in some instances it may be taken into account in determining the rate of tax applicable to the taxpayer’s remaining income or capital. The focus is on the income or capital itself.
It eliminates double taxation.
Credit Method- the tax paid or levied in the state of source is credited against the tax levied in the state o residence. The focus is upon the tax. It only minimizes double taxation
J. Dimaampao:Think of Manny Pacquiao, for you to understand this tax credit method. He earns income from the US, he also earns income here. He is taxed in both jurisdictions; thus he is claiming the taxes he paid in the US as a deduction from his tax liability in the Phils. It’s a classical definition of th at.
Again there is that double taxation, but to minimize its effect there is that tax credit. So, it does not eliminate double taxation here, it only minimizes. There is a case I mentioned in your book, which involves double taxation. It’s about Ericsson Telecommunications vs. City of Pasig. You mark that case, it’s a possible bar question. What is that case all about? It’s a classic case of direct double taxation. It boils down to the tax base. What must be the tax base?
Student: The imposition of local business tax based on gross revenue will inevitably result in the constitutionally proscribed double taxation – taxing the same person twice by the same jurisdiction for the same thing- inasmuch as petitioner’s gross revenue or income for a taxable year will definitely include its gross receipts already reported during the previous year and for which local business tax has already been paid.
J. Dimaampao: Sec. 143 of RA 7160 provides that the tax base for local business tax should be gross sales or gross receipts, not gross revenue. Gross Sales are derived from the sale of goods and properties, on the other hand, gross receipts are derived from sale of services. So, with that, how will that amount to double taxation? Which is broader, gross sales or gross revenue? Gross revenue, because it covers both gross sales and gross receipts. So that, when the local government of Pasig prescribed it as the tax base, that compounded the tax because a portion of it has already been paid in the previous year. That is the simplification of the ruling.
In case of a building can it be taxed twice? What is the tax that is imposed by the local and national government? Real Property tax. The income from the lease of the building, is it not subject to income tax?
Rent Income is subject to income tax.
In estate tax, what is that form of or method/device which may minimize the effect of double taxation?
There may be double taxation there, what is that method/device? It’s a special form of deduction.
Vanishing deduction. Do you recall there is double taxation there? This property has been taxed in the previous decedent, and when its transferred it was taxed in the present decedent.\
Vanishing deduction presupposes double taxation. Because the same property forms part of the two estate, hence it is taxed twice. The purpose of double taxation is to reduce, minimize, lessen double taxation. What are its elements?
1. Death of the decedent occurring within 5 years from the transfer of the property through succession;
2. Identity of property;
3. The same property is taxed;
4. It was previously taxed;
5. No previous vanishing deduction;
J. Dimaampao:What is this imprescriptibly of taxes? What is the general rule?
Student: As a rule, taxes are imprescriptible as they are the life blood of the government. However, tax statutes may provide for statute of limitations.
J. Dimaampao: You must bear in mind that there are four major tax statutes, namely?
Student:1. National Internal Revenue Code, as amended by the TRAIN Act (RA 10963);
2. Local Government Code (Book II Title 1, RA 7160);
3. Real Property Taxation (Book II Title 2, RA 7160);
4. Customs Modernization and Tariffs Act (RA 10863), this used be Tariff and Customs Code.
J. Dimaampao: Do you apply the rule that taxes are imprescriptible in all these tax laws? State the rules.
Taxes are imprescriptible; however tax laws may provide for statute of limitations.
Student:
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. Yo u 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
There is a public concern which may affect the people. It involves the general welfare of the people.
What about this doctrine of transcendental importance? There are tax cases which involves matters of transcendental importance. Its an exception of the requirement of locus standi.
In making this one of the coverage, it only pertains to tax cases.
So locus standi may be relaxed when a cases has transcendental importance. So, you need not prove this so called locus standi. What do you think, does this apply to the TRAIN Act?
Student:Yes, Sir!
J. Dimaampao: Yes, it applies to the TRAIN Act. Can you think of other tax cases that are of transcendental importance, that’s why that doctrine is now included in the coverage? E -Vat Law RA 7716.
So that ends our review on General Principles.
February 3, 2018 TAX REMEDIES
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
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