OFFICIALS OF THE BIR Since we are still in the tax code, it means that we have to discuss the BIR

only. Who are the officials of the BIR? o 1. CIR The single most powerful person in the BIR. If he does not want to assess this specific person on the belief that theres actually nothing wrong with the books of accounts of that entity, nobody can force him to issue an assessment. Theres only one CIR. The term of the CIR is co-terminous with the President. So the President has to have trust and confidence in his CIR, who will deliver the funds in the budget for his term. So by the time the President will leave office, new President, if he does not have trust and confidence with the current CIR, can actually change the CIR.

o o

2. 4 deputy commissioners 3. Regional directors There are as many as there can be BIR regions. Cebu is revenue region 13. So we only have 1 regional director for region 13.

4. RDO There are as many revenue district offices in 1 region.

5. Revenue enforcement officers or examiners They are the ones we can meet on regular basis. They are those who make assessments and audits the front-liners.

POWERS AND DUTIES OF THE BIR What are the powers and duties of the BIR? o o o 1. Assessment and collection of NIRC taxes, fees and charges 2. Enforcement of all forefeitures, penalties and fines 3. Execution of judgments in all cases decided in its favour by the CTA & regular courts

So since the BIR is involved in tax administration, tax collection for that matter, the first and foremost power of the BIR office is to issue assessment of tax deficiencies, collect taxes fees and charges and on top of that, if there are violations, the BIR can enforce the forfeiture of products, inventories or any other supplies of the taxpayers, impose penalties, surcharges and fines. And thereafter, as a last recourse, execute the judgment in all cases decided in its favor by the CTA, regular courts and even the SC.

GENERAL POWERS OF THE CIR Those aforementioned are the powers of the BIR as a whole. But specifically, what are the powers of the CIR himself? o 1. Interpret the tax code and other tax laws (exclusive and original jurisdiction) When a CIR has the power to interpret the tax code, how does he deliver this power? Where does he exercise such power? What is the role of the CIR in the issuance of a revenue regulation? Does he issue a revenue regulation? Is he the approval officer or the recommending officer? If you recall in general principles, the CIR, even if hes the head of the tax department of the BIR, hes not actually the person whos going to issue, approve and sign the revenue regulations. He only has the recommending power and such recommendation will be directed to the Secretary of Finance, who actually issues the rules and regulations. The last stage of rules and regulations will bear 2 signatures approval and recommendation. Recommendation is done by the CIR. How else will he interpret tax laws apart from making-up or drafting rules and regulations or recommendations? o o When he issues rulings and opinions When does the CIR issue rulings and opinions? Rules and regulations are the general interpretations of the tax laws, which seeks to explain those provisions of the law. But an opinion or ruling is more specific in nature. It addresses the particular needs of the taxpayer, which is not hypothetical in nature. So whenever a taxpayer would inquire as to the applicability of a certain tax law, an opinion would have to be issued by the CIR or his subordinate.

It is a power that is exclusive and original on the part of the commissioner. But is his power subject to review by someone else? Subject to review by the secretary of finance

2. Power to decide disputed assessments, refunds, penalties and other matters Since the function of the BIR and the CIR is to collect taxes, one major power is to decide assessments (that has not been agreed upon by the taxpayer), claims for refund and to impose penalties and other fines and forfeitures. It simply means that any issues regarding taxes would have to go through the administrative stage of being resolved by an agency involved. Since remedies of the taxpayer, in so far as taxes are concerned, cannot directly go through the judicial process. It has to go through administratively first, then if not, resolve judicially. Thats why we have CTA.

Jan. 6, 2011 Thursday

GENERAL POWERS OF THE CIR What is the next power of the CIR? o 3. Obtain information and to summon, examine and take testimony of persons What do you mean by that? Information from whom? Lets take the case, if you have a business and you maintain 2 sets of books one for the government and one for yourself. In cases of assessments, would you show them the 2 sets of books that youre keeping? How can this be an effective power of the CIR obtaining information from whom? What is the objective of the BIR again? To collect proper taxes and to in determining the taxes that have been paid are correct, exact and proper, on the belief that it needs to obtain information, to issue summons, examine and take testimony of persons in order to gather sufficient information in making the correct assessment of taxes. But from whom can the BIR gather information and such information would be a valid assessment against the taxpayer? o Other agencies involved the BIR can work hand-in-hand with the local government units in the sense that LGUs receive annually whenever a business renews its business permit, it is able to obtain the gross receipts for the entire year. So the BIR can actually make a comparison whether the gross receipts declared for BIR purposes and for the LGU purposes are the same. If not, then, it may be subject to further investigation. But is the government only allowed to take information or obtain information from other government agencies and is that the only information that remains to be valid information? Also from the taxpayer himself but the person who is already under investigation or the government is questioning such person already, that person would only issue statements that are self-serving and issue documents that would only support whatever he has filed as tax returns and pay the taxes. It will never actually give out any information that is prejudicial to himself. What type and from whom would this information come from that would become a valid basis for assessing or making an assessment of taxes? Can it be any person? YES. The primary source of assessment is the taxpayer himself. But if the BIR is not agreeable with the declaration of taxes and the pament of taxes made by the taxpayer himself, its other sources is to obtain information and as the law provides, information from any person. It can be any person and we call that information as a 3rd party information. But of course, it has to be reliable 3rd party information. EXAMPLE (reliable 3rd party information): Those actors and actresses who have been charged with tax evasion? Do you think the CIR made the assessment of tax evasion purely based on what was declared by these artists? I (Mam Tiu) dont think those artists will be giving out the documents that would prejudice themselves. The BIR can gather information from any person so long as that information is reliable in so far as making the assessment of taxes is concerned. In the example of the actors and actresses or any other professionals who have been charged with tax assessments and tax evasion, more often than not, the sources made by the BIR is not purely the documents provided by these professionals or artists. It came from another sources with whom that person has contracted any business with. So if youre a professional model and you earn 100m for appearing in a particular advertisement, so if you get 100m, the obligation of the payor-company, lets say San Miguel, would have to, as a withholding agent, under the law, withhold 15% of the professional fee. What will be given is only 85m. 15m will be remitted to the BIR. How much will that professional or model declare as an income at the end of the year? 100m because the tax withheld is a creditable withholding tax (not a final withholding tax; not a passive income; its an income that you earned in the regular course of your profession). So, lets say, Manny Pacquiao has to declare 100m, compute his taxes according to the table of 5-32% and whatever tax is left, deduct whatever has been withheld. So if he does not declare fully the

100m, lets say 50m lang, but he deducts the 15m withheld because the 15m is supported by a certificate that it has been withheld, its good if theres no comparison with the records of San Miguel. On the face of the professional, its perfect 50m less 15m, theres no really individualization. But when theres matching of records already, San Miguel will be reflecting how much in expenses? 100m. Do you think San Miguel will only reflect lower than what it has actually paid? No. It will reflect the true expenses because it is for its own benefit in the business. It will reflect 100m in expenses. And what will the BIR do with the 100m? It will check whether it has withheld the taxes and check (because theres submission of who among the persons have been withheld by San Miguel), it will have to be traced back. With the advent of computerization in the BIR, its very easy to match the records and it will automatically, 50m x 32%, will be your tax assessment as the professional has not declared the true income plus the surcharges. So any information. Its not just about the taxpayer so long as his transaction can be traced with another taxpayer, either it be sale of service or goods or expenses, it is possible to match the records. Just like the Premyo sa Resibo in BIR wherein you get to win 1m if you key-in or if your cell phone number is picked out. What you need to do is simply get a receipt from the establishment from where you bough your item, key-in the TIN of that business and the amount of purchase. If your number gets picked, you may win as much as 1m. It will be traced back to the establishment. The government will check the official receipt or invoice issued by that establishment. If the duplicate reflects only half or little of what was declared by the customer, who text-in the details of the invoice or official receipt, that is another area of deficiency or discrepancy of amount, subject to immediate assessment of taxes. So any person can be the source of information.

o 4. Make assessments

As an overview, before we dig-in deeper on how to go about the assessment, what do you understand about assessments made by the BIR? Assessments may be made by the BIR through: 1. Examination of returns and determination of tax due o Say for example, the assessment is initially made upon the examination of the returns that have been filed vis--vis the taxes that have been paid. If a taxpayer does not file a tax return for a particular tax liability, what will be the basis of the assessment or will there be any assessment at all? YES, there will still be assessment and the basis would be on the best-evidence obtainable. Assessment is not purely dependent on the availability of tax returns that have been filed. So whether or not the tax return has been filed by a particular taxpayer, assessments may be made. If a return has been filed, you have a starting point. You look at the return. Compare it with the books of the taxpayer. Any deficiency or discrepancy would have to be paid or issued an assessment for payment. If no return is filed, you simply have to rely on the best evidence obtainable by the BIR.

2. Assess the proper tax on the best-evidence obtainable o What do you mean by best evidence obtainable? Can you just illustrate or give an example? Say this is what has been reflected by the taxpayer: sales of 1b, but its income tax due at 30% is only 1m. So its taxable income is around 3m. If youre from the BIR, would you rely on such records? How will you know the proper tax due? What is the best evidence that you can get in order to determine the proper tax due? If no books of accounts is made available? (Its possible because some taxpayers do not really give out books of accounts or details) What are the methods which the BIR can use in order to determine the proper taxes if it appears that the taxes declared are not believable or unconscionably low? What about the net worth method? Net worth method can be another method wherein the BIR can determine the proper taxes for a taxpayer who has not fully declared its income or paid properly its taxes for a number of years. Say for example, in a span of 3 years, only 1m every year is paid by a company. The net worth for 2007 is 10b. The net worth in 2010 is 20b. What is the formula for net worth? Assets minus liabilities. Dba, in every business or in every individual taxpayer, you simply determine what your assets are, how much your liabilities are, then, you will arrive at what is really your true value. If the net worth has increased 10b in 3 years and it is determined

that everything, the increase in income, is not paper income, its realized income, the taxes may be directly computed against the 10b the increase in net worth. Dba, its impossible for a business to grow 10b net worth with only 3m income every year for 3 years. So this is one method wherein the BIR can determine the proper taxes.

3. Conduct inventory-taking, surveillance and to prescribe presumptive gross sales and receipts o o In some cases, the BIR will conduct inventory-taking, surveillance of the business itself and its operations, and to prescribe presumptive gross sales and receipts. Prescribing presumptive gross sales and receipts is another type of method to determine the true income of the taxpayer and thereafter its assessments. If a taxpayer, say for example, a particular manufacturing company has been declaring sales at 10m a year. Cost of sales at 9.9m with a taxable income of 100k. If its unbelievably low, the BIR will presume gross receipts and sales, how will it make presumptive gross sales and receipts? By looking at similar businesses within the same industry. If its a shipbuilding company, it will determine what are the gross sales and receipts on the average of other shipbuilding companies in that same industry. If its at 1b and the other company is reflecting 10b, it may use the data from all other companies on the average so long as they are in the same business. Its like comparing green apples to green apples or red apples to red apples but not to red apples to green apples. It must be the same business.

4. Issue jeopardy assessments and terminate the taxable period o What is the difference between assessment as a general rule from jeopardy assessment? What is jeopardy assessment? Its a tax assessment made by an authorized Revenue Officer without the benefit of a complete or partial audit in light of the Revenue Officers belief that the assessment and collection of the deficiency tax will be jeopardized by delay caused by the taxpayers failure to: 1. Comply with audit and investigation requirements to present his books of accounts and/or pertinent records 2. Substantiate all or any of the deductions, exemptions or credit claimed in his return

When the BIR makes assessment, the general rule is that it can only be made valid against the taxpayer if a complete and full audit has been made in so far as the documents obtainable are concerned. But sometimes, the law allows incomplete and partial and even in the absence of any formal audit made, an assessment may be considered valid and its called jeopardy assessment. What is the reason why a jeopardy assessment can be made by the CIR? If its not the taxpayers fault and prescription is about to lapse, will jeopardy assessment be allowed? NO. The law is not so unreasonable as to prejudice the taxpayer in allowing BIR to at any time issue assessments without any formal audit and investigation. The general rule is that a full audit and investigation has to be made detailing all the violations under the tax law, detailing all the discrepancies and figures and the demand for payment, that is the formal way of issuing an assessment. Other than that, it will be an invalid assessment. The taxpayer can simply consider it as non-existent and not pay the taxes that has been assessed. In some special cases, jeopardy assessment can be made and the term jeopardy assessment, it implies that the BIR did not exert the same effort as he would have exerted if he made the formal assessment. In short, dinalian the assessment is made haphazardly without the benefit of a full nor partial audit or investigation of the books of the taxpayer. But it has to be supported by a valid cause on why jeopardy assessment has been made, such as when the prescription is about to lapse without the fault of the government due to reasons within the control of the taxpayer. But more importantly, jeopardy assessment is issued whenever the governments right to collect is jeopardized or will be jeopardized because the prescription period is about to lapse with the taxpayer not having complied with the requirements for full investigation. Example: BIR issues a notice that it will be investigated. But the taxpayer does not provide proper information and theres only a remaining month to make the audit investigation. If the BIR sees that the collection will be jeopardized, if no assessment is issued, then jeopardy assessment is allowed.

But there are only certain glaring instances when jeopardy assessment is allowed or wherein the governments right to collect will be jeopardized. What are these instances that will give rise to the issuance of jeopardy assessments? When the taxpayer is: o 1. Retiring from business subject to tax; or o o because hes trying to avoid the payment of taxes by stopping everything and leave the assessment hanging

2. Intending to leave the Phils. or to remove his property therefrom or to hide or conceal his property; 3. Performing any act tending to obstruct the proceedings for the collection of the tax for the past or current quarter or year or to render the same totally or partially ineffective unless such proceedings are begun immediately

5. Prescribe real property values The CIR has the power to prescribe real property values or the FMV of real properties. Dba, there are two FMVs under the law in so far as real properties are concerned those FMV identified or issued by the CIR himself or the zonal valuation by the local assessors. But the CIR himself has the power to determine zoning or the FMV of every zones in the area.

6. Inquire into bank deposits Under the Bank Secrecy Law, our deposits are confidential, as a general rule. Nobody can get the records of our bank deposits, as a rule. But there are many exceptions in various laws. But RA 1405 under Regular Peso Deposits and under the Foreign Currency Deposits Acts, every deposit is held secret or sworn to secrecy by the financial institutions. Nobody can simply get the records in order to protect the confidentiality of the records. But the tax code is one of those laws, which provides for an exception. What are the exceptions of the Bank Secrecy Law? 1. When the CIR is given the power to inquire into the bank deposits of a decedent for purposes of determining his gross estate and in the end, determining the correct estate tax due to the government o In this case, no need of written waiver.

2. If the taxpayer has waived in writing his privilege under RA 1405 (Bank Secrecy Law) or under other general or special laws and such taxpayer has filed an application for compromise of his tax liability by reason of financial incapacity to pay his tax liability o Say for example, you do not believe on the veracity and truthfulness of that assessment issued by the CIR. You have grounds to believe that your computation is correct. So it makes the assessment doubtful. You offered a compromise to pay only a percentage, say half of what has been assessed. Does that give the CIR the right to inquire into your bank deposits? NO, because the CIR only has the right to inquire into the bank deposits if the taxpayer has filed an application for compromise of his tax liability by reason of financial incapacity to pay his tax liability and not by reason of the existence of reasonable doubt as to the validity of the claim against the taxpayer. Since there are 2 grounds for asking a compromise of tax liability one is when youre financially incapable of settling the tax assessment and number two is when there is reasonable doubt as to the validity of the assessment made by the BIR only one of these 2 grounds in asking for a compromise will give the CIR the right to inquire into bank deposits and that would only be the asking for compromise under the ground of financial incapacity.

3. The exchange of information by the BIR of tax matters pursuant to internationally-agreed tax standards (RA 10021)

Section 3. Authority of the Commissioner of Internal Revenue to Inquire into Bank Deposit Accounts and Related Information Held by Financial Institutions. - Section 6(F) of Republic Act No. 8424, as amended, otherwise known as the National Revenue Code of 1997, as amended, is hereby further amended to read as follows: "SEC. 6. Power of the Commissioner to Make Assessments and Prescribe Additional Requirements for Tax Administration and Enforcement. "xxx "(F) Authority of the Commissioner to Inquire into Bank Deposit Accounts and Other Related Information Held by Financial Institutions. - Notwithstanding any contrary provision of Republic Act No. 1405, Republic Act No. 6426, otherwise known as the Foreign Currency Deposit Act of the Philippines, and other general and special laws, the Commissioner is hereby authorized to inquire into the bank deposits and other related information held by financial institutions of:

"(1) A decedent to determine his gross estate. "(2) Any taxpayer who has filed an application for compromise of his tax liability under Sec. 204 (A)(2) reason of financial incapacity to pay his tax liability. "In case a taxpayer files an application to compromise the payment of his tax liabilities on his claim that his financial position demonstrates a clear inability to pay the tax assessed, his application shall not be considered unless and until he waives in writing his privilege under Republic Act No. 1405, Republic Act No. 6426, otherwise known as the Foreign Currency Deposit Act of the Philippines, or under other general or special laws, and such waiver shall constitute the authority of the Commissioner to inquire into the bank deposits of the taxpayer. "(3) A specific taxpayer or taxpayers subject of a request for the supply of tax information from a foreign tax authority pursuant to an international convention or agreement on tax matters to which the Philippines is a signatory or a party of: Provided, That the information obtained from the banks and other financial institutions may be used by the Bureau of Internal Revenue for tax assessment, verification, audit and enforcement purposes. "In case of request from a foreign tax authority for tax information held by banks and financial institutions, the exchange of information shall be done in a secure manner to ensure confidentiality thereof under such rules and regulations as may be promulgated by the Secretary of Finance, upon recommendation of the Commissioner. "The Commissioner shall provide the tax information obtained from banks and financial institutions pursuant to a convention or agreement upon request of the foreign tax authority when such requesting foreign tax authority has provided the following information to demonstrate the foreseeable relevance of the information to the request: "(a) The identity of the person under examination or investigation; "(b) A statement of the information being sought including its nature and the form in which the said foreign tax authority prefers to receive the information from the Commissioner; "(c) The tax purpose for which the information is being sought; "(d) Grounds for believing that the information requested is held in the Philippines or is in the possession or control of a person within the jurisdiction of the Philippines; "(e) To the extent known, the name and address of any person believed to be in possession of the requested information; "(f) A Statement that the request is in conformity with the law and administrative practices of the said foreign tax authority, such that if the requested information was within the jurisdiction of the said foreign tax authority then it would be able to obtain the information under its law or in the normal course of administrative practice and that it is conformity with a convention or international agreement; and "(g) A statement that the requesting foreign tax authority has exhausted all means available in its own territory to obtain the information, except those that would give rise to disproportionate difficulties. "The Commissioner shall forward the information as promptly as possible to the requesting foreign tax authority. To ensure a prompt response, the Commissioner shall confirm receipt of a request in writing to the requesting tax authority and shall notify the latter of deficiencies in the request, if any, within sixty (60) days from the receipt of the request. "If the Commissioner is unable to obtain and provide the information within ninety (90) days from the receipt of the request, due to obstacles encountered in furnishing the information or when the bank or financial institution refuses to furnish the information, he shall immediately inform the requesting tax authority of the same, explaining the nature of the obstacles encountered or the reasons of refusal." "The term 'foreign tax authority', as used herein, shall refer to the tax authority or tax administration of the requesting State under the tax treaty or convention to which the Philippines is a signatory or a party of." o EXAMPLE: The Phils. and Australia. Under the RP-Australia tax treaty, towards the end provisions of such treaty, there is a stipulation that both government have the right to exchange information of its constituents. Who is conducting an investigation? Is it the Phil. government or the foreign authorities? o Its a request from foreign authorities.

Without such request, can the CIR, by himself, look into the bank deposits of the taxpayers? NO.

What could be the one reason why a foreign tax authority would be interested in determining the bank deposits of a Phil. taxpayer or Phil. individual? Section 2. Declaration of Policy. - It is the declared policy of the State to promote and pursue a tax environment that contributes in sustaining a favorable international investment climate and instills confidence in the adequacy and capacity of the country's tax administration to comply with its commitments under existing international conventions or agreements on tax matters. Pursuant to this declared policy, the government shall comply with or commit to the internationally-agreed tax standards required for the exchange of tax information with its tax treaty partners to help combat international tax evasion and avoidance and to help address tax concerns that affect international trade and investment. The government shall likewise adopt measures and procedures to enhance cooperation with other countries in the

efficient collection of taxes, consistent with the international understanding to ensure the payment of taxes due the respective taxing jurisdictions of the treaty partners. o But even under this law, the law requires utmost confidentiality of records. Even if the BIR is allowed to request the financial institutions to provide these data to be transmitted to the foreign tax authorities, such should be made in a secure manner. It would not be made available to all BIR officers and any violation of its confidentiality and getting it in a secure manner would give rise to a fine or imprisonment or both. And if a financial institution also refuses to give out the information to the BIR for the BIR to transmit to the foreign tax authorities, it will give rise to the same fine or imprisonment or both under the same law. But what is the condition, under this law, that the foreign tax authority must be able to prove in requesting our own tax authority to get such confidential information? The foreign tax authority must be able to demonstrate the foreseeable relevance of the information to the request and it must be able to prove that it has exhausted all means available in its own territory to obtain the information, except those that would give rise to disproportionate difficulties.

7. Accredit and register tax agents This simply means that the CIR has the sole power to accredit practitioners or CPAs who can audit financial statements.

8. Prescribe additional procedural or documentary requirements This is a catch-all provision. Are these general powers of the CIR allowed to be delegated to his subordinates? All of these general powers? Are the general powers of the CIR himself delegable? YES, but not all of the general powers.

AUTHORITY OF THE COMMISSIONER TO DELEGATE POWER GR: The CIR may delegate powers vested in him to subordinate officials (with a rank equivalent to a division chief or higher). Exception non-delegable powers are: o o 1. Power to recommend the promulgation of rules and regulations by the Sec. of Finance 2. Power to issue rulings of first impression or to reverse, revoke, modify any existing ruling What are rulings of first impression? These are rulings that are novel as to the issues. If there are issues raised by a taxpayer asking for an opinion or ruling from the CIR or the subordinates, which issue has never been addressed similarly in the past, meaning there are no precedent BIR rulings available, it has to be the CIR who will sign such rulings, otherwise, if its not a ruling of first impression, general rule is that the deputy commissioner or the assistant commissioner will be allowed to sign a ruling that already has many precedents.

Another type of ruling, which can only be issued and signed by the CIR? If there are existing rulings, which the CIR believes that should have been interpreted the other way around, only the CIR can issue and sign the reversal, modification and revocation of such existing ruling.

Dba, in general principles, a Commissioner or an Officer of the Bureau is not bound by the interpretations made by his predecessors.

Jan. 11, 2011 Tuesday AUTHORITY OF THE COMMISSIONER TO DELEGATE POWER General rule: . Exceptions: .. o 3. Power to compromise or abate any tax liability (except assessments issued by the regional offices involving basic deficiency taxes of 500k or less, and minor criminal violations) What is the difference between the power to compromise and the power to abate tax liability? (Sec. 204) Both have different grounds. The power to compromise is the power to lessen the tax liability of the taxpayer while the power to abate is the power to cancel the tax liability of the taxpayer. The CIR can enter into compromise reducing the tax liability to the extent of only 10% or 40% depending on what ground you are entering into such compromise or the CIR can abate the tax liability by foregoing totally the

collection of taxes, sometimes only the penalties will have to be foregone or the collection of surcharges or interests. In most cases, what is foregone is the collection of the surcharges, penalties and interests, such as if it happens that you have filed in a wrong venue due to miscommunication of the BIR after you have actually transferred to a different Revenue District Office but due to the fault of the BIR, you filed in the wrong venue. Supposedly, you will be liable for the surcharge of 25% for filing in the wrong venue but due to reasons not entirely within your control or due to equal fault between the government and the taxpayer, you may ask for abatement of the surcharge of 25%. But would compromise and abatement exclusively belong to the CIR? Would the power to enter into a compromise or abatement exclusively belong to the CIR, such as if youre seeking for an abatement of 100 peso tax liability, would you have to go to Manila and ask for the approval of the CIR? Can he delegate such power? The power to compromise or abate any tax liability is non-delegable except assessments issued by the regional offices involving basic deficiency taxes of 500k or less, and minor criminal violations.

What are the grounds for entering into compromise? 1. A reasonable doubt as to the validity of the claim against the taxpayer exists; or o The taxpayer contends as to the reasonable doubt.

2. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax

How about abatement? Why is it that its only the CIR who has the power to abate tax liabilities? The grounds for abatement are: 1. The tax or any portion thereof appears to be unjustly or excessively assessed; or 2. The administration and collection costs involved do not justify the collection of the amount due

4. Power to assign or reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept Why does it have to be the CIR? What is the purpose of this provision? Because the articles kept or produced are subject to excise tax. So what makes excisable articles special? o Excisable articles, the liability of excise tax would fall at the time or would be due at the time that these are withdrawn from its place of production or from its place where its kept. You will notice that t he word sold is not provided therein. So excisable articles in SM and Gaisano Metro, such as cigars, cigarettes, wines, and liquors, theres no more need of assignment and reassignment of internal revenue officers but for warehouses and production places of excisable articles, it has to be assigned a revenue officer because the payment of taxes would be upon withdrawal of these items. Dba, you will see the seal of tax payment in every cigarette pack or bottle of liquor the rectangular or just like a stamp. So in order to avoid building good relations and familiarity between the owner of the establishment and the internal revenue officer, there has to be continuous assignment and reassignment or reshuffling of officers, otherwise, it would be easy to escape excise taxes with simply an agreement between the officer such as withdrawal without payment of excise of taxes upon withdrawal. So being a special case, it has to be the CIR who will not be privy to the different places nationwide where establishments are keeping or producing excisable articles.

So if the articles kept or produced are not excisable, say soap, toothpaste, will it be the CIR who will make the assignment or reassignment of officers? NO.

RULE ON ESTOPPEL Would estoppel run against the taxpayer? o YES, because of lifeblood doctrine.

Would estoppel run against the government? o o NO, because of lifeblood doctrine still. So estoppel would not run against the government as provided in the case of PNOC vs. CA. PNOC VS CA F. The Government cannot be estopped from collecting taxes by the mistake, negligence, or omission of its agents. The new BIR Commissioner, Commissioner Ong, had acted well within his powers when he set aside the compromise agreement, dated 22 June 1987, after finding that the said compromise agreement was without legal

basis. When he took over from his predecessor, there was still a pending motion for reconsideration of the said compromise agreement, filed by private respondent Savellano on 24 March 1988. To resolve the said motion, he reviewed the compromise agreement and, thereafter, came upon the conclusion that it did not comply with E.O. No. 44 and its implementing rules and regulations. It had been declared by this Court in Hilado v. Collector of Internal Revenue, et al., that an administrative officer, such as the BIR Commissioner, may revoke, repeal or abrogate the acts or previous rulings of his predecessor in office. The construction of a statute by those administering it is not binding on their successors if, thereafter, the latter becomes satisfied that a different construction should be given. It is evident in this case that the new BIR Commissioner, Commissioner Ong, construed E.O. No. 44 and its implementing rules and regulations differently from that of his predecessor, former Commissioner Tan, which led to Commissioner Ongs revocation of the BIR approval of the compromise agreement, dated 22 June 1987. Such a revocation was only proper considering that the former BIR Commissioners decision to approve the said compromise agreement was based on the erroneous construction of the law ( i.e., E.O. No. 44 and its implementing rules and regulations) and should not give rise to any vested right on PNOC. Furthermore, approval of the compromise agreement and acceptance of the compromise payment by his predecessor cannot estop BIR Commissioner Ong from setting aside the compromise agreement, dated 22 June 1987, for lack of legal basis; and from demanding payment of the deficiency withholding tax from PNB. As a general rule, the Government cannot be estopped from collecting taxes by the mistake, negligence, or omission of its agents because: o . . . Upon taxation depends the Government ability to serve the people for whose benefit taxes are collected. To safeguard such interest, neglect or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or detriment to the people, in the same manner as private persons may be made to suffer individually on account of his own negligence, the presumption being that they take good care of their personal affairs. This should not hold true to government officials with respect to matters not of their own personal concern. This is the philosophy behind the government's exception, as a general rule, from the operation of the principle of estoppel.

TIU: The approval by the previous or predecessor CIR of the compromise agreement and subsequent acceptance of the compromise settlement would not estop the government from collecting the correct taxes if it so determines that the previous compromise is without legal basis. As a general rule, estoppel cannot run against the government and would allow the collection of taxes despite the mistake, negligence or omissions of its officers or agents.