According to the SC, government and taxpayers must stand on reasonably equal terms.
Basically, the remedies that may be availed of by the Government or the taxpayer may be grouped into:
a. Administrative remedies b. Judicial remedies
If the tax law is silent on administrative remedies, the government may still avail of the usual administrative remedies such as Distraint of personal property, or Levy on real property. But that may be resorted to by the government in the collection of taxes are:
a. Distraint of personal property b. Enforcement of tax lien c. Levy on real property.
- Distrain and levy can only be done if notice is given.
If the tax law is silent on administrative remedies, the taxpayer may still avail of the usual administrative remedies of protest and refund for purposes of convenience and expediency.
If the tax law is explicit on administrative remedies, the taxpayer must observe the principle of exhaustion of administrative remedies. Under the Tax Code, if an assessment is made by the BIR, the remedy of the taxpayer is to protest first the assessment. It is the decision of the BIR on that disputed assessment that is being appealed to the CTA.
In claiming for tax refund, the taxpayer have to file first a written claim for refund with the BIR Commissioner.
Exception to the Principle of Exhaustion of Administrative Remedies:
a. if it involves judicial questions
b. if it involves disregards of due process c. if it involves an illegal act.
Judicial Remedies:
IF the tax law is silent on judicial remedies, the government can still avail of the usual judicial remedy. Example: filing an action for collection with the court.
If the tax is silent on judicial remedies, the taxpayer may file a special civil action for declaratory relief. But this does not apply as far as the NLRC or the TCC is concerned because these particular tax laws are explicit on this judicial remedies.
If the tax law is explicit on judicial remedies, the government should observe the provisions of the law.
Example:
The filing of an action for collection with the Court must be approved by the BIR Commissioner.
Distinction between the Distraint and Levy Distraint of personal property
1. The subject matter is personal property, stocks and securities, bank accounts, debts and credits.
2. In the event that the taxpayer failed to pay the tax, the BIR will issue warrant of distraint.
3. The only requirement is posting of notice of sale in 2 public or conspicuous places
4. If the bid is not equal to the amount of tax liability, the BIR may purchase the property distrained for and in behalf of the government.
5. There is no right of redmption
6. There is that remedy of constructive distraint of personal property.
Levy of real property
1. The subject property is real property
2. What is issued is in the nature of an authenticated certificate describing the property and stating the name of the taxpayer as well as the amount due
3. Requires not only posting but also publication of the notice of sale in a newspaper of general circulation in 3 consecutive weeks.
4. If the bid is not equal to the tax liability of there is no bidder, the BIR may forfeit such real property levied by the government.
5. There is right of redemption within 1 year from the date of sale plus 15% interest.
6. There is no such remedy as constructive levy of property.
Constructive Distraint can only be resorted to under the following situation: Code:
C.A.R.L.)
1. When a taxpayer cancels or hides his property
2. If he performs any act which will obstruct the collection efforts of the BIR 3. If he is retiring from business subject to tax
4. When he is about to leave the Philippines Enforcement of the tax lien:
If the taxpayer failed despite receipt of notice to pay the BIR, a lien is created against the properties of the taxpayer.
It is the discretion of the BIR to avail itself of remedies which may result in the expeditious collection of taxes.
Case: Which is preferred, the claim of the government arising from tax lien or the claim of the workers predicated on the judgment rendered by the NLRC?
Held: The claim of the government arising from tax lien is superior to the claim of a private litigant predicated on a judgment.
Exception: The claim of the laborers may be superior under Art. 110 of the Labor Code when the employer was declared bankrupt of judicial liquidation.
*In observing the provisions of the tax code in regard to distraint or levy, the BIR cannot apply or invoke the presumption of regularity in administrative proceedings.
So, if the procedure had been questioned by the taxpayer, it is not for the taxpayer to prove that the procedures under the NLRC in regard to distraint on levy had been complied with.
Revenue taxes are self-assessing taxes.
Requisites of Assessment:
1. Written notice stating that the amount is due as tax.
2. Written notice must contain a demand for the payment of such tax.
Assessment is not a condition sine qua non for purposes of collecting taxes. This is so because demand is not required. The rule under Art. 1169 of the NCC that demand is required before a person may incur in delay cannot be applied.
Taxpayer incurred in delay if he fails to pay the tax on date fixed by Tax Code.
Assessments, made by the BIR Commissioner are presumed correct. The presumption does not violate the due process under the Constitution because the presumption is merely disputable.
Normally, the BIR may require the taxpayer to submit reports, documents, books of accounts and other report to establish his tax liability. In the absence of these reports, documents, etc., the BIR may determine the tax liability by using other methods.
*The BIR can determine the tax liability of the taxpayer on the basis of that so-called best evidence obtainable in the absence of said reports etc. In one case, agents of the BIR used the books of account seized as a result of raid by means of search warrant.
NET WORTH OR INVENTORY METHOD (also called Net Investigatory Method)
- This is another method that may be employed by the BIR in determining the tax liability of the taxpayer. This is an expansion of that accounting principle, assets less liabilities equals net worth.
Assessment is made when it is mailed, released or sent.
Example: If it was received by the taxpayer in a particular date (Dec. 5, 1997), you should count the prescriptive period for making an assessment from the date it was mailed, released or sent by the BIR and not from the receipt of the notice of assessment by the taxpayer.
The assessment may be subject to revision by the BIR. If revised, the prescriptive period will commence to run from the safe when such revised assessment is mailed, released or sent.
So, it is not from the date the original assessment is mailed etc. but from the date the revised assessment has been mailed.
The making of assessment is prescriptible.
The rule is, the BIR may collect taxes with or without prior assessment.
PRESCRIPTIVE PERIOD FOR MAKING