Tax Judicial Remedies Of Government

JUDICIAL REMEDIES OF GOVERNMENT Prepared by: Nolen B. Endaya

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The Role of the Bureau of Internal Revenue Tax is the life and blood of the Government, without which the government will be useless. In this regard the Bureau of Internal Revenue was created with the main function to raise revenues for the operation of the government. Section 220 of the NIRC of the Philippines- civil or criminal actions and proceedings can be instituted in behalf of the Government to effect the collection of delinquent taxes. Such action shall be brought in the name of the Government of the Philippines and shall be conducted by legal officers of the BIR.

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The Role of the Bureau of Internal Revenue

However, the approval of the Commissioner is required before any civil or criminal actions for recovery of taxes or the enforcement of any fine, penalty or forfeiture under the code shall be filed.

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Judicial Remedies of the Government The Role of the Judiciary in Taxation

The role of courts is limited to the application and interpretation of tax laws. The courts check abuses and injustices of the legislative and administrative agents of the State in the exercise of the power of taxation.

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The Role of the Judiciary in Taxation In Section 218 of NIRC it was expressly stated that No court shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by the Tax Code. However, under Section 7 of R.A. 1125, the CTA was given the power to restrain the collection of national internal revenue taxes subject to certain condition, which makes section 218 not absolute. Name of Presenter Position Department/College (click View>>Master>>Slide Master to edit)

Judicial Remedies of the Government Also, under the revenue memorandum order no. 42-2010 issued on May 4, 2010 it states that “it prohibits the issuance of the Temporary Restraining Order (TRO) on the collection of taxes against the BIR by courts other than the CTA” which means that only the CTA can validly grant or issue a TRO with respect to collection of taxes.

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Judicial Remedies of the Government Collector of Internal Revenue vs. Jose Avelino et al., “It therefore appears that when it refers to the Collection of income tax it is mandatory that the right of the Collector of Internal Revenue to collect it by the summary methods of distraint and levy be exercised within the period of three years from the time the income tax return is filed, otherwise the right can only be enforced by judicial action

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Judicial Remedies of the Government Collector of Internal Revenue vs. Jose Avelino et al., Since, admittedly, the deficiency taxes in question were assessed and the warrants for their collection by distraint and levy were issued after the period of three years from the filing of the returns, it is evident that said warrants, as well as the steps taken in connection with the sale of the properties of the taxpayer, were issued without authority of the law and, hence, the Court of Tax Appeals acted properly in enjoining their enforcement as prayed for by petitioner”.

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Judicial Remedies of the Government CIVIL ACTION The civil tax liability of a taxpayer is enforced by the Government in two (2) ways: 1. By filing the civil case for the collection of the sum of money with the proper regular court (i.e., MTC or RTC). 2. By filing an answer to the petition for review filed by the taxpayer with the Court of Tax Appeals.

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Judicial Remedies of the Government CIVIL ACTION When the CIR files the civil action for the collection of taxes, the party plaintiff is the Republic of the Philippines and not the Commissioner of Internal Revenue. But when it is the taxpayer that files a petition for review in the CTA, the respondent is the CIR, not the Republic of the Philippines.

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Judicial Remedies of the Government Jurisdiction over Civil Actions The Government can only initiate civil action when the tax liability becomes delinquent and collectible. In civil Action the Jurisdiction of the court is determined based on the amount of delinquent taxes to be collected as stated in the civil action filed/to be filed. If it is Less than one (1) Million it is under the jurisdiction of the RTC and the jurisdiction is vested to the CTA if it is one (1) million or more.

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Judicial Remedies of the Government Collectibility of Tax Liability 1. Self-assessed tax shown in the return was not paid within the date prescribed by law. Internal revenue taxes are self-assessing and no further assessment by the government is required to create the tax liability, where the taxpayer merely filed his tax return showing an amount of tax due, without paying the same or paying only a portion thereof. In such case, the taxpayer is immediately considered as delinquent with respect to the unpaid amount of tax.

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Judicial Remedies of the Government Collectibility of Tax Liability Note: Taxes are considered delinquent when it remains unpaid after the lapse of the last day prescribed by law for its payment. Likewise, it could also be considered as delinquent where an assessment for deficiency tax has become final and the taxpayer has not paid it within the period given in the notice of assessment.

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Judicial Remedies of the Government Collectibility of Tax Liability Note: A “delinquent account” refers to the amount of tax due from a taxpayer who failed to pay the same within the time prescribed for its payment arising from (a) a self-assessed tax, whether or not a tax return was filed , or (b) a deficiency assessment issued by the BIR, which has become final and executory. Where no return was Filed, the taxpayer shall be considered delinquent as of the time the tax on such return was due, and in availing of the compromise, a tax return shall be filed as a basis for computing the amount of compromise to be paid.

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Judicial Remedies of the Government Collectibility of Tax Liability 2. Final assessment is not protested administratively within 30 days from date of receipt. The assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and regulations. Otherwise, the assessment shall become final ( Sec. 229, NIRC). The filing of the protest within the thirty (30) day period is mandatory and it is not extendable, and if the BIR imposes certain conditions for the approval of such protest, said conditions must be satisfied with by the taxpayer.

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Judicial Remedies of the Government Collectibility of Tax Liability Marcos II vs. Court of Appeals, 273 SCRA 47

“Failure to question assessment served upon the decedent’s heirs. – Apart from failing to file the required estate tax return, petitioner and the other Marcos heirs failed to question the assessment served on them as heirs of the late President Ferdinand Marcos, thereby allowing said assessment to lapse into finality. Said assessment having become final and executory, the same may be collected by summary remedy of distraint or levy .” Name of Presenter Position Department/College (click View>>Master>>Slide Master to edit)

Judicial Remedies of the Government Collectibility of Tax Liability 3. Non-compliance with the condition laid in the approval of protest. The protest letter filed by the taxpayer or his authorized agent, provided it is not considered as pro forma, is generally approved by the Commissioner. In some instances, the Commissioner imposes certain conditions or requires the filing of position papers in granting the request for reinvestigation or reconsideration, in order to adequately evaluate the validity of the arguments and documents mentioned in the protest letter. Thus, failure of the taxpayer to comply . Name of Presenter Position Department/College (click View>>Master>>Slide Master to edit)

Judicial Remedies of the Government Collectibility of Tax Liability Dayrit vs Cruz, 165 SCRA 571 Facts: Estate and inheritance taxes were assessed against the estate of Spouses Marta Teodoro and Don Toribio Teodoro. The heirs then filed a request for reconsideration of the assessments and asked that they be given 30 days within which to submit their position paper in support of their claim. The position paper was not submitted. When the Government sought to collect the tax liabilities in the settlement proceedings on the estate, the heirs interposed the defense that the assessment have not become final and executory.

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Judicial Remedies of the Government Collectibility of Tax Liability Dayrit vs Cruz, 165 SCRA 571 Held: Supreme Court ruled that the request for reconsideration cannot be considered as a protest against the assessment. The failure of the heirs to substantiate their claim against the assessment due to the non-submission of their position paper justified the Commissioner’s action in collecting the tax in the court settlement proceedings .

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Judicial Remedies of the Government Collectibility of Tax Liability 4. Failure to file a timely appeal to the CTA on the final decision of the Commissioner or his authorized representative on the disputed assessment.

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Judicial Remedies of the Government Collectibility of Tax Liability Basa vs Republic, 138 SCRA 34 Taxpayer filed with the BIR a request for reinvestigation after he was assessed deficiency income tax. Subsequently, a letterdecision demanding payment was issued by BIR. Since the taxpayer did not appeal, a civil action for collection was filed by the Government. The court ruled that the taxpayer’s failure to appeal the decision to the CTA deprive him of the right to question the commissioner’s authority to collect the tax within the prescribed period provided by law .

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Judicial Remedies of the Government Collectibility of Tax Liability Mambulao Lumber Co. vs. Republic, 132 SCRA 1 Where the taxpayer failed to comply with a conditioned laid down by the Commissioner for the reinvestigation of the case and its failure to appeal to the CTA made the assessment final and executory, so that if an action to collect the tax assessment is filed by the government in the ordinary court, this is akin to an action to enforce a judgment such that no inquiry can be made thereon as to the merits of the original case or the justness of the judgment relied upon.

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Judicial Remedies of the Government Collectibility of Tax Liability Fernandez Hermanos, Inc. vs. Commissioner, 29 SCRA 552 The fact that no civil action to collect the taxpayer’s tax liability was filed by the Government (in the RTC) is no ground for claiming that the right of the Government to collect said liability had already prescribed. The Supreme Court ruled that prescription had not set in inasmuch as the Government’s answer in the CTA was filed well within the prescriptive period prescribed by law.

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Judicial Remedies of the Government Collectibility of Tax Liability

In other words, the answer filed by the government in the CTA was tantamount to the filing of the civil action for collection in the regular court. Incidentally, when action for collection filed in the regular courts, prescription is tolled.

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Judicial Remedies of the Government Who approves the filing of Civil Action? Sec. 220, NIRC- No civil or criminal action for the recovery of taxes or the enforcement of any fine, penalty or forfeiture under this code shall be filed in court without the approval of the Commissioner . Republic vs Hizon, 320 SCRA 574 A Regional Director may also approve the filing of civil actions for collection of delinquent tax, if this power is expressly delegated to him by the Commissioner under an appropriate revenue memorandum (or Administrative) order on the matter. Name of Presenter Position Department/College (click View>>Master>>Slide Master to edit)

Judicial Remedies of the Government Who approves the filing of Civil Action? Republic vs Domecillo, CA – GR SP No. 17676, Feb, 9, 1990 Complaints in civil actions for the collection of delinquency taxes are required to be approved by the Solicitor General before they are filed. However, BIR legal officers deputized as Special Attorneys and stationed outside Metro Manila may file verified complaints without the approval of the Solicitor General, provided that the Solicitor General is furnished a copy of the complaint, and thereafter, the Solicitor General files a notice of appearance in the court where the action is filed. If the complaint is found to be improperly filed, a motion to dismiss is filed with the court.

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Judicial Remedies of the Government When to go to court?

General Rule : The BIR can file a civil action for the collection of a tax that has become delinquent or collectible within five (5) years from the date of assessment.

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Judicial Remedies of the Government When to go to court? Republic vs. Lim Tian Teng Sons, 16 SCRA 584 “the Supreme Court held that nowhere in the tax code is the Commissioner required to rule first on the taxpayer’s request for reinvestigation before he can go to court for the purpose of collecting tax assessed. The legislative policy is to give the Commissioner much latitude in the speedy and prompt collection of taxes because it is on taxation that the Government depends to obtain the means to carry on its operations. Name of Presenter Position Department/College (click View>>Master>>Slide Master to edit)

Judicial Remedies of the Government When to go to court? Republic vs. Lim Tian Teng Sons, 16 SCRA 584 The court further said that when the Commissioner did not reply to the taxpayer’s request for reconsideration and instead referred the case to the Solicitor General for judicial collection, this was indicative of his decision against reinvestigation. Failure on the part of the taxpayer to file the appeal to the CTA makes the final decision of the Commissioner on the disputed assessment final and executory. Name of Presenter Position Department/College (click View>>Master>>Slide Master to edit)

Judicial Remedies of the Government When to go to court? BPI vs. Commissioner, GR No. 139736, Oct. 17, 2005

Distraint and levy proceedings are validly begun or commenced by the issuance of the warrant and service thereof on the taxpayer. – under Section 233 (c) of the Tax Code, it is not essential that the warrant of distraint and/or levy be fully executed so that it can suspend the running of the statute of limitations on the collection of the tax.

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Judicial Remedies of the Government When to go to court? BPI vs. Commissioner, GR No. 139736, Oct. 17, 2005

It is enough that the proceedings have validly begun and that their execution has not been suspended by reason of the voluntary desistance of the CIR. Jurisprudence establishes that distraint and levy proceedings are validly begun or commenced by the issuance of the warrant and service thereof on the taxpayer .

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Judicial Remedies of the Government When to go to court? Yabes vs Flojo, 115 SCRA 278

However, the filing of a civil action in the regular court (RTC) to collect a tax which was the subject of a pending protest in the BIR was a justifiable basis for the taxpayer to appeal to the CTA and to move for a dismissal in the trial court of the Government’s action to collect a tax liability under dispute.

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Judicial Remedies of the Government When to go to court? Republic vs. Dorego, GR L-16594, Apr. 26, 1962 Another exception relates to an action to collect on the bonds, which is an action separate and distinct from an action to collect taxes. Art. 1144 of the civil code which provides that action upon a written contract must be brought within ten (10) years from the time the right of action accrues, finds a fitting application. It appearing that said bonds were executed on June 12 and 29, 1946, the right of the government to collect the amounts covered thereby, prescribed on June 12 and 29, 1956. the complaint was filed on February 18, 1953. Name of Presenter Position Department/College (click View>>Master>>Slide Master to edit)

thank you

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