Tax Law in the Philippines

Tax 111 – Income TaxationFerdinand C. Importado

CPA, MBA

Objectives

• Identify the purpose of enacting a tax law.• Illustrate the steps in the legislative

process.• Explain the sources of tax laws.• Discuss the instances when taxation

favors the government and strictly against the taxpayer.

Objective of enacting tax law

The primary objective of the government in enacting a tax law is to raise revenues for

government operations.

Steps in the legislative process

First reading

Committee on Ways and Means

Second reading

Steps in the legislative process

Public hearing Difference Senate 2nd reading

Steps in the legislative process

Bicameral

Reconciliation

Senate 3rd reading

Senate approval

Tax law

Sources of tax law

• Constitution • Statutory enactments• Administrative rulings and regulations• Judicial decisions

Sources of tax law

Constitution• The power of taxation is merely regulated by

the Constitution.• Taxation can be exercised even without the

Constitution.

Statutory enactments• Tax laws passed by the Congress.• National Internal Revenue Code (NIRC).

Sources of tax law

Administrative rulings• Administrative rulings refers to less

general interpretation of tax laws issued on a timely basis by the Commissioner of the Bureau of Internal Revenue (BIR).

• Issued by request of the taxpayer to clarify certain provisions of a tax law.

• BIR Rulings.

Sources of tax law

Administrative regulations• These are intended to clarify or explain the

law and carry into effect its general provisions by providing details of administration and procedure.

• Issued by the Secretary of Finance upon the recommendation of the Commissioner of the BIR.

• Revenue Regulations.

Sources of tax law

Judicial decisions• These refers to the decisions of the Court

of Tax appeals and the Supreme Court applying or interpreting tax laws.

• Part of the jurisprudence on taxation and the legal system of the Philippines.

• Appealable to the Supreme Court.

Interpretation of tax laws

• Always in favor of the taxpayer and against the government except:– When the statutes granting exemptions provides for

liberal construction thereof;– Exemptions in favor of the government, political

subdivisions or instrumentalities;– Exemptions in favor of exemptees traditionally

exempt such as churches and educational institution; and

– Special circumstances of persons such as the granting of exemptions to victims of calamities.