TAXPAYERS and practitioners alike were recently bombarded by numerous
and controversial rules and regulations from the Bureau of Internal
Revenue (BIR). These issuances cover a wide variety of subjects and
affect various types of taxpayers.
Most of these issuances did
not even go through public hearing. It is more often the rule, not the
exception, that taxpayers are caught unaware of the new requirements
imposed upon them.
Not surprisingly, most taxpayers are now
confused or ambivalent about how to implement the changes brought about
by the new issuances.
On top of implementation and operational
issues, taxpayers are also not clear as to when the issuances take
effect and the periods covered by the issuances.
For instance,
Revenue Regulations No. (RR) 14-2012 provided that the regulations shall
take effect 15 days following complete publication in a newspaper of
general circulation in the Philippines.
The effectivity clause,
however, of RR No. 12-2012, Revenue Memorandum Circular (RMC) Nos.
77-2012, 75-2012, 73-2012 and 65-2012 provided that the same shall take
effect immediately.
On the other hand, RMC Nos. 76-2012, 74-2012
and 63-2012 merely enjoined all internal revenue officers and other
concerned entities or individuals to give such circulars as wide a
publicity as possible and did not provide for the date of effectivity.
With
these various issuances, the seemingly onerous compliance effort has
become even more stringent, taking also into consideration the confusion
of the public with regard to the effectivity of BIR issuances.
Before we can ascertain the effectivity of such issuances, determination as to the nature of the issuance is necessary.
Discussions
of collateral issues are also important, particularly on whether or not
publication is mandatory for an issuance to be valid and enforceable.
In addition, if and when the issuances become effective, are these
applicable prospectively or retroactively?
FORCE AND EFFECT OF LAW
The
so-called RR, RMC, BIR Ruling, Revenue Memorandum Order (RMO) and
Revenue Audit Memorandum Order (RAMO) are the most common issuances of
the BIR. These issuances, being administrative in nature, generally have
the force and effect of law.
PUBLICATION
Laws shall take
effect 15 days following the completion of their publication either in
the Official Gazette or in a newspaper of general circulation in the
Philippines, unless it is otherwise provided, pursuant to the New Civil
Code (NCC).
In a long line of decisions, the Supreme Court (SC)
has enunciated in the landmark case Tanada v Tuvera that publication is
necessary in those cases where the legislation itself does not provide
for its effectivity date -- for then the date of publication is material
for determining its date of effectivity, which is the 15th day
following its publication -- but not when the law itself provides for
the date when it goes into effect.
The clear object of the law is
to give the general public adequate notice of the various laws which
are meant to regulate their actions and conduct as citizens. It is a
requirement of due process embodied in our Constitution. It is a rule of
law that before a person may be bound by law, he must first be
officially and specifically informed of its contents.
Without
such notice and publication, there would be no basis for the application
of the legal maxim ignorantia legis non excusat (ignorance of the law
excuses no one from compliance therewith) laid down under Article 3 of
the NCC. It would be the height of injustice to punish or otherwise
burden a citizen for the transgression of a law of which he had no
notice whatsoever, not even a constructive one.
It is worthy to
note, however, that administrative issuances, such as those issued by
the BIR, may be distinguished according to their nature and substance:
legislative and interpretative. The difference is crucial in determining
whether or not p
ublication is mandatory prior to effectivity.
A legislative rule
is in the matter of subordinate legislation, designed to implement
primary legislation by providing the details thereof.
An
interpretative rule, meanwhile, is designed to provide guidelines to the
law which the administrative agency is in charge of enforcing. (BPI
Leasing Corp. v. CA, GR No. 127624, Nov. 18, 2003)
In the same
way that laws must have the benefit of public hearing, it is generally
required that before a legislative rule is adopted there must be notice,
hearing and publication.
"There are, however, several exceptions
to the requirement of publication. First, an interpretative regulation
does not require publication in order to be effective. The applicability
of an interpretative regulation needs nothing further than its bare
issuance for it gives no real consequence more than what the law itself
has already prescribed. It adds nothing to the law and does not affect
the substantial rights of any person. Second, a regulation that is
merely internal in nature does not require publication for its
effectivity. It seeks to regulate only the personnel of the
administrative agency and not the general public. Third, a letter of
instruction issued by an administrative agency concerning rules or
guidelines to be followed by subordinates in the performance of their
duties does not require publication in order to be effective." (ASTEC v
ERC, GR No. 192117, Sept. 18, 2012; CIR v Michel J. Lhuillier Pawnshop,
Inc.,).
PUBLIC HEARING
In the case of Commissioner of
Internal Revenue (CIR) v. Fortune Tobacco, et al., (21 SCRA 236), the SC
nullified an RMC which reclassified certain cigarettes and subjected
them to a higher tax rate, holding it invalid for lack of notice,
publication and public hearing.
"(T)he doctrine enunciated in
Fortune Tobacco, and reiterated in CIR v. Michel J. Lhuillier Pawnshop,
Inc., (GR 150497) is that when an administrative rule goes beyond merely
providing for the means that can facilitate or render less cumbersome
the implementation of the law and substantially increases the burden of
those governed, it behooves the agency to accord at least to those
directly affected a chance to be heard and, thereafter, to be duly
informed, before the issuance is given the force and effect of law. In
Lhuillier and Fortune Tobacco, the Court invalidated the revenue
memoranda concerned because the same increased the tax liabilities of
the affected taxpayers without affording them due process." (BPI Leasing
v. CA)
PROSPECTIVE APPLICATION
The principle is well
entrenched that statutes, including administrative rules and
regulations, operate prospectively, unless the legislative intent to the
contrary is manifest by express terms or by necessary implication.
They may, however, be applied retroactively in cases of procedural and interpretative laws, among others.
Any
revocation, modification or reversal of any of the rules and
regulations promulgated by the BIR or any of the rulings or circulars
promulgated by the CIR shall not be given retroactive application if the
revocation, modification or reversal will be prejudicial to the
taxpayers except in the following cases: (a) where the taxpayer
deliberately misstates or omits material facts from his return or in any
document required of him by the BIR; (b) where the facts subsequently
gathered by the BIR are materially different from the facts on which the
ruling is based; or (c) where the taxpayer acted in bad faith (Section
246 of the 1997 Tax Code, as amended).
Hence, in the light of the
foregoing, circulars, rulings or other issuances promulgated by the CIR
have no retroactive application if such would tantamount to prejudice
to the taxpayers.
Conversely, if the same is beneficial to taxpayers, it must be given retroactive application to lighten the taxpayer’s burden.
The
power of taxation should be exercised with caution to m
inimize injury to the rights of a taxpayer. This has been reiterated and
re-emphasized in our laws and vast array of Supreme Court decisions.
TAXPAYERS’ REMEDIES
To
summarize: despite the harshness of implementation, BIR issuances
mandating all taxpayers to strictly comply with its provisions still
have the force and effect of law.
Taxpayers, however, are not
deprived of remedies. The validity and enforceability of BIR issuances
may be assailed if proven to be suffering from legal infirmities and are
in violation of the clear and categorical provisions of the
Constitution and statutes intended to protect the rights vested on the
taxpayers.
Source: Punongbayan and Araullo
Monday, December 3, 2012
Tuesday, July 10, 2012
Rule on Succession: Marcos Siblings on Civil Case of Ill-Gotten Wealth
SC Reinstates Marcos Children as Defendants in Ill-Gotten Wealth Case; Scores Conduct of Prosecution by PCGG and OSG
sc.judiciary.gov.ph
In a 27-page decision penned by Justice Maria Lourdes P.A. Sereno, the Court’s Second Division partially granted the petition of the Republic to maintain the Marcos siblings as defendants in Civil Case No. 0002 before the anti-graft court. It also directed that a copy of the decision be furnished to the Office of the President (OP) so that it may look into the circumstances of this case and determine the liability, if any, of the lawyers of the OSG and the PCGG in the manner by which this case was handled in the Sandiganbayan.
When the Marcoses filed their respective Demurrers to Evidence to the charges, the Sandiganbayan, on December 6, 2005, issued the assailed resolution granting all the Demurrers to Evidence except the one filed by Imelda R. Marcos primarily because she had categorically admitted that she and her husband owned properties enumerated in the Complaint, while stating that these properties had been lawfully acquired. Aside from the P200 billion and use of media networks, the Marcoses were being sued for the alleged use of De Soleil Apparel for dollar salting and illegal acquisition and operation of the bus company Pantranco North Express, Inc. (Pantranco).
“While it was not proven that respondents conspired in accumulating ill-gotten wealth, they may be in possession, ownership, or control of such ill-gotten wealth, or the proceeds thereof as heirs of the Marcos couple. Thus, their lack of participation in any illegal act does not remove the character of the property as ill-gotten and, therefore, as rightfully belonging to the State,” explained the Court.
The Court further noted that under the rules of succession, the heirs instantaneously became co-owners of the Marcos properties upon the death of the former President. The property rights and obligations to the extent of the value of the inheritance of a person are transmitted to another through the decedent’s death. In this concept, nothing prevents the heirs from exercising their right to transfer or dispose of the properties that constitute their legitimines, even absent their declaration or absent the partition or the distribution of the estate.
“In sum, the Marcos siblings are maintained as respondents, because (1) the action pending before the Sandiganbayan is one that survives death, and, therefore, the rights to the estate must be duly protected; (2) they allegedly control, possess or own ill-gotten wealth, through their direct involvement in accumulating or acquiring such wealth may not have been proven,” the Court held.
In the same decision, the Court also bewailed the prosecution’s failure to adhere to something as basic as the best evidence rule which “raises serious doubts on the level and quality of effort given to the government’s cause.” The Court encouraged the OP, the OSG, and the PCGG to conduct the appropriate investigation and consequent action on this matter.
The Court noted that despite the prosecution’s having the expansive resources of government, the members of the prosecution did not even bother to provide any reason whatsoever for their failure to present the original documents or the witnesses to support the government’s claims. Even worse was presenting in evidence a photocopy of the transcript of stenographic notes (TSN) of the PCGG proceedings instead of the original, or a certified true copy of the original, which the prosecutors themselves should have had in their custody. “Such manner of legal practice deserves the reproof of this Court. We are constrained to call attention to this apparently serious failure to follow a most basic rule in law, given the special circumstance surrounding this case,” the Court held.
“The best evidence rule has been recognized as an evidentiary standard since the 18th century. For three centuries, it has been practiced as one of the most basic rules in law…Thus, it is deeply disturbing that the PCGG and the OSG – the very agencies sworn to protect the interest of the state and its people – could conduct their prosecution in the manner that they did. To emphasize, the PCGG is a highly specialized office focused on the recovery of ill-gotten wealth, while the OSG is the principal legal defender of the government. The lawyers of these government agencies are expected to be the best in the legal profession,” held the Court. (GR No. 171701, Republic v. Marcos-Manotoc, February 8, 2012)
Emphasis and links provided
by Broker Rem Ramirez 0922.883.9308 broker.ramirez@yahoo.com.ph
Monday, July 9, 2012
Northrail Project is not an Executive Agreement
SC Rules China-Based Northrail Contractor Not Immune from Suit; Allows RTC to Hear Validity of Northrail Contract and Loan Agreements`
sc.judiciary.gov.ph
In a 23-page decision penned by Justice Maria Lourdes P. A. Sereno, the Court En Banc denied CNMEG’s petition assailing the dismissal by the Court of Appeals of its (CNMEG’s) petition for certiorari assailing the RTC’s denial of its (CNMEG’s) motion to dismiss Civil Case No. 06-203 for lack of jurisdiction.
The Court stressed that the Contract Agreement was not concluded between the government of the Philippines and China but between Northrail and CNMEG, which is neither a government nor a government agency of China but a corporation duly organized and created under the laws of the People’s Republic of China.
“Since the Contract Agreement explicitly provides that Philippine Law shall be applicable, the parties have effectively conceded that their rights and obligations thereunder are not governed by international law…It is therefore clear from therefore clear from the foregoing reasons that the Contract Agreement does not partake of the nature of an executive agreement. It is merely an ordinary commercial contract that can be questioned before the local courts,” the Court held.
The Court further ruled that CNMEG engaged in a propriety activity hence was not covered by sovereign immunity. The Memorandum of Understanding (MOU) between CNMEG and Northrail shows that CNMEG sought the construction of the Luzon Railways as a proprietary or commercial venture in the ordinary course of its business. “Clearly, it was CNMEG that initiated the undertaking, and not the Chinese government,” ruled the Court.
The Court further held that based on the MOU, the Loan Agreement, and the letter of Chinese Ambassador to the Philippines Wang Chungui stating CNMEG and not the Chinese government initiated the Northrail Project, it was clear that the Northrail Project was a purely commercial transaction.
The Court held that even assuming arguendo that CNMEG performs governmental functions, such claim does not automatically vest it with immunity. Following the Court’s ruling in Deutshe Gesellschaft Für Technische Zusammernarbeit v. CA, in the absence of evidence to the contrary, CNMEG is to be presumed as a government-owned and-controlled corporation without an original charter. As a result, it has the capacity to sue and be sued under Section 36 of the Corporation Code. In this connection, the Court noted CNMEG failed to present a certification from the Department of Foreign Affairs that it is entitled to sovereign or diplomatic immunity.
The Court also held that an agreement to submit any dispute to arbitration may be construed as an implicit waiver of immunity from suit. Under the contract agreement, CNMEG and Northrail, if any dispute arises, are bound to submit the matter to the HKIAC for arbitration.
In September 2002, CNMEG entered into a MOU with Northrail for the conduct of a feasibility study on a possible railway line from Manila to San Fernando, La Union or known as the Northrail Project.
In August 2003, the EXIM Bank and the Department of Finance (DOF) entered into a MOU, wherein China agreed to extend Preferential Buyer’s Credit to the Philippine government to finance the Northrail Project. The Chinese government designated EXIM Bank as the lender, while the Philippine government named the DOF as the borrower. Under the August 30 MOU, EXIM Bank agreed to extend an amount not exceeding US$400,000,000 in favor of the DOF, payable in 20 years, with a 5-year grace period, and at the rate of 3% per annum.
In October 2003, Ambassador Wang wrote the DOF of CNMEG’s designation as the Prime Contractor for the Northrail Project.
On December 30, 2003, Northrail and CNMEG executive a Contract of Agreement for the Construction of Section 1, Phase 1 of the North Luzon Railway System from Caloocan to Malolos on a turnkey basis. The contract price for the Northrail Project was pegged at US$421,050,000.
On February 26, 2004, the Philippine government and EXIM Bank entered into a counterpart financial agreement – Buyer Credit Loan Agreement No. BLA 04055, where EXIM Bank agreed to extend Preferential Buyer’s Credit in the amount of US$400M in favor of RP to finance the construction of Phase I of the Northrail Project.
On February 13, 2006, respondent taxpayers filed in the Makati RTC a complaint for annulment of contract and injunction against CNMEG, the Office of the Executive Secretary, the DOF, the Department of Budget and Management (DBM), the National Economic Development Authority (NEDA), and Northrail before the RTC. The RTC set the case for hearing on the issuance of injunctive reliefs, prompting CNMEG to file an Urgent Motion for Reconsideration of this order. Before the RTC could rule on this, CNMEG filed a motion to dismiss the case arguing the RTC did not have jurisdiction over it.
On May 15, 2007, the RTC issued an omnibus order denying CNMEG’s motion to dismiss eventually prompting CNMEG to elevate case to the CA. (GR No. 185572, China National Machinery & Equipment Corp. Group v. Judge Santamaria, February 7, 2012)
Emphasis, title and links provided by Broker Rem Ramirez 0922.883.9308 broker.ramirez@yahoo.com.ph
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