A Critical Analysis of
Revenue Regulations No.
18-2013
“Taxes
are the lifeblood of the government and so should be collected without
unnecessary hindrance. On the other hand, such collection should be made in
accordance with law as any arbitrariness will negate the very reason for
government itself. It is
therefore necessary to
reconcile the apparently conflicting interests of the authorities and the
taxpayers so that the real purpose of taxation, which is the promotion of the
common good, may be achieved.
But even as we concede the inevitability and
indispensability of taxation, it is a requirement in all democratic regimes
that it be exercised reasonably and in accordance with the prescribed
procedure. If it is not, then the
taxpayer has a right to complain and the courts will then come to his succor.
For all the awesome power of the tax collector, he may still be stopped in his
tracks if the taxpayer can demonstrate x x x that the law has not been observed.” (CIR vs. Metro Star Superama,
Inc., G.R. No. 185371, December 8, 2010)
I. Statement of the Facts
On November 28, 2013, upon the
recommendation of the Commissioner of Internal Revenue Kim s. Jacinto-Henares,
Secretary Cesar V. Purisima of the Department of Finance promulgated Revenue
Regulations (RR) No. 18-2013, amending certain sections of RR No. 12-99
relative to the due process requirement in the issuance of a deficiency tax
assessment.
To summarize, below are the changes
introduced by RR No. 18-2013 that amended RR No. 12-99:
1. It deleted
Section 3.1.1 of RR No. 12-99, which provides the requirement for the
preparation of a Notice of Informal Conference before a Preliminary Assessment
Notice (PAN) is issued.
2. Mandates the
issuance of a Final Assessment (FAN) within 15 days from receipt of the protest
to PAN.
3. Provides
distinctions between a reconsideration and reinvestigation. In this regard, RR
13-2013 requires the taxpayer to identify the nature of the protest filed –
whether a reconsideration or reinvestigation. The submission of
additional documents within 60 days from filing of protest is allowed only in
the case of reinvestigation. For motion for reconsideration, the decision
of the BIR will be based only on documents already submitted to the BIR prior
to the issuance of FAN and no new evidence will be accepted.
4. Mandates that
protest should include the facts, law, rules, regulations on which the protest
is based. Otherwise, the protest is void and of no effect. For items in
the assessment not properly protested, these shall become final and demandable
and collection letters shall be issued immediately.
5. Section 5.5 now
requires the imposition of a 20% delinquency interest per annum on assessments
unpaid which shall be computed from the time stated for its payment in the FAN
until paid. This shall be in addition to the 20% deficiency interests
imposed on assessments from time it is due until it is paid.
6. Final Decision on
Disputed Assessment (FDDA) issued by an authorized representative of the
Commissioner (such as the Regional Directors or Assistant Commissioner in the case
of the Large Taxpayers Service) may be appealed to the Court of Tax Appeals (in
a judicial appeal) or to the Commissioner (in an administrative appeal) within
30 days from receipt of decision. For administrative appeal, no new or
additional evidence may be introduced.
7. Service of the
PAN/FAN/FDDA may be done by personal service, substituted service or by
registered mail.
II. Statement of Issue
This now leads to the
question: Is the removal of the preparation of a Notice of Informal Conference
before a Preliminary Assessment Notice (PAN) is issued tantamount to a denial of due process? Specifically, are the
requirements of due process satisfied if only the PAN and FAN stating the
computation of tax liabilities and a final demand to pay within the prescribed
period was sent to the taxpayer?
III. Arguments/Discussion
It is an elementary
rule enshrined in the 1987 Philippine Constitution that no person shall be
deprived of property without due process of law. In balancing the scales between the power of the State to tax and its
inherent right to prosecute perceived transgressors of the law on one side, and
the constitutional rights of a citizen to due process of law and the equal
protection of the laws on the other, the scales must tilt in favor of the
individual in case of doubt, for a citizen’s right is amply protected by the
Bill of Rights under the Constitution.[1]
However, it is worthy
to note at this juncture, that Section 228 of the Tax Code only requires that
the taxpayer must first be informed that he is liable for deficiency taxes
through the sending of a PAN. He must be informed of the facts and the law upon which the assessment is
made. This is the substantive requirement of the law. Thus, to proceed
heedlessly with tax collection without first establishing a valid assessment is
evidently violative of the cardinal principle in administrative investigations—that
taxpayers should be able to present their case and adduce supporting evidence.[2]
The Notice of Informal Conference is a
mere superfluity. The removal of such process does not constitute a denial of
due process because the kernel of Section 228, which is being implemented by RR
No. 12-99, as amended by RR No. 18-2013, is the issuance of the PAN which
contains the facts and the law upon which the
assessment is made.
In administrative
proceedings, such as the one contemplated by RR 18-2013, procedural due process
simply means the opportunity to explain one’s side. The
requirement of due process is satisfactorily met as long as the parties are
given the opportunity to present their side.[3]
Therefore, as long as a party is given
the opportunity to defend his interests in due course, he would have no reason
to complain, for it is this opportunity to be heard that makes up the essence
of due process.[4]
It is crystal clear
that the removal of the Notice of Informal Conference as a precondition to the
issuance of the PAN is intended to streamline the process of assessment.
Instead of being violative of the due process, the removal of such requirement will
be beneficial to both the BIR and the taxpayer because this will mean that
disputes on assessments will be resolved expeditiously. As a consequence of this,
the BIR can collect taxes more efficiently.
The taxpayer, on the
other hand, will be able to prove his/its claims much faster. If he loses,
because of the speedy disposition of the disputed assessments, the interests
and surcharges may be reduced.
As one of the fundamental powers of a
sovereign, taxation is designed to ensure that sufficient revenues must be
collected by the government to defray its expenses. As such, tax administration
and regulations should be continually updated and revisited, in keeping with
the ever changing demands of time, in accordance with and pursuant to the
fiscal policy set by the administration.[5]
But let us not
forget, that, while “taxes are the lifeblood of the government,” the power to
tax has its limits, in spite of all its plenitude it must abide by the
fundamental law of the land.
[1] Commissioner of Internal Revenue vs. Algue, 241 Phil. 829 (1988)
[2] Ang
Tibay v. Court of Industrial Relations,
69 Phil. 635 (1940)
[3] Milwaukee Industries, Corp. vs. CTA, et al., G.R. No. 173815, 24 November
2010
[4] RCBC vs. CIR, G.R. No. 168498, 16 June 2006
[5] See No PAN Intended by Atty. Deo
D. Saludario at http://www.bdblaw.com.ph/index.php?option=com_dms&task=doc_download&id=455&Itemid=164
