Photo from Unsplash | Kelly Sikkema
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of a lawyer or you may directly contact and consult Alburo Alburo and Associates Law Offices to address your specific legal concerns, if there is any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
xxx the powers of the Commissioner of Internal Revenue in the Philippines are extensive and multifaceted, encompassing tax assessment and collection, enforcement of tax laws, issuance of regulations, administrative management, policy formulation, and representation. Each of these powers plays a crucial role in ensuring the efficiency and effectiveness of the tax system. By exercising these powers judiciously, the Commissioner contributes significantly to the stability of the nation’s fiscal system, the promotion of tax compliance, and the overall economic well-being of the country.
In the intricate web of governance and administration, the role of the Commissioner of Internal Revenue (CIR) in the Philippines stands out as pivotal to the nation’s economic stability and development. The National Internal Revenue Code of 1997 so provides:
The Bureau of Internal Revenue shall have a chief to be known as Commissioner of Internal Revenue.
But what are the powers of the CIR?
The Power to Interpret tax laws and to decide cases
Section 4 of the 1997 NIRC reads:
SEC 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. – The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds in internal revenue taxes, fees or other charges. penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals.
It is clear from the wordings of the law that although the CIR has the power to interpret tax laws and decide tax cases, it is nevertheless subject to the review if the Secretary of Finance.
The Court in the case of Power Sector Assets and Liabilities Management Corp. v. CIR held:
The first paragraph of Section 4 of the 1997 NIRC provides that the power of the CIR to interpret the NIRC provisions and other tax laws is subject to review by the Secretary of Finance, who is the alter ego of the President. Thus, the constitutional power of control of the President over all the executive departments, bureaus, and offices is still preserved. The President’s power of control, which cannot be limited or withdrawn by Congress, means the power of the President to alter, modify, nullify, or set aside the judgment or action of a subordinate in the performance of his duties. (Emphasis supplied)
In the similar case however, the court held that it is in conflict PD 242. The Court held:
The second paragraph of Section 4 of the 1997 NIRC, providing for the exclusive appellate jurisdiction of the CTA as regards the CIR’s decisions on matters involving disputed assessments, refunds in internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under NIRC, is in conflict with PD 242. Under PD 242, all disputes and claims solely between government agencies and offices, including government-owned or controlled corporations, shall be administratively settled or adjudicated by the Secretary of Justice, the Solicitor General, or the Government Corporate Counsel, depending on the issues and government agencies involved.
Hence, in the aforesaid case the Court ruled that in order to harmonize Section 4 of the 1997 NIRC with PD 242, the following interpretation should be adopted: (1) As regards private entities and the BIR, the power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the NIRC or other laws administered by the. BIR is vested in the CIR subject to the exclusive appellate jurisdiction of the CTA, in accordance with Section 4 of the NIRC; and (2) Where the disputing parties are all public entities (covers disputes between the BIR and other government entities), the case shall be governed by PD 242.
Power to Obtain Information and to summon or examine and take testimony of persons
Similar to the first power, the power of the CIR to examine is likewise subject to the review of the CTA. The Court in the case of CIR v. Lancaster Philippines (G.R. No. 183408, July 12, 2017), Inc. held:
It must be stressed that the assessment of internal revenue taxes is one of the duties of the BIR. Section 2 of the NIRC states:
Sec. 2. Powers and Duties oftheBureau of Internal Revenue. – The Bureau of Internal Revenue shall be under the supervision and control of the Department of Fin[:l.11ce and its powers: and duties shall comprehend the assessment and collection of all national internal revenue taxes, fees, andcharges, and the enforcement of all forfeitures, penalties, and fines connected therewith, including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts.
The Bureau shall give effect to and administer the supervisory and police powers conferred to it by this Code or other laws. (emphasis supplied)
In connection therewith, the CIR may authorize the examination of any taxpayer and correspondingly make an assessment whenever necessary. Thus, to give more teeth to such power of the CIR, to make an assessment, the NIRC authorizes the CIR to examine any book, paper, record, or data of any person. The powers granted by law to the CIR are intended, among other things, to determine the liability of any person for any national internal revenue tax.
Xxx
From the foregoing, it is clear that the issue on whether the revenue officers who had conducted the examination on Lancaster exceeded their authority pursuant to LOA No. 00012289 may be considered as covered by the terms “other matters” under Section 7 of R.A. No. 1125 or its amendment, R.A. No. 9282. The authority to make an examination or assessment, being a matter provided for by the NIRC, is well within the exclusive and appellate jurisdiction of the CTA.
Power to make assessments and prescribe additional requirements for tax administration and enforcement
Tax collection is part and parcel of the CIR’s power to make assessments and prescribe additional requirements for tax administration and enforcement.
Power to assign internal revenue officers and other employees
The CIR has the power to assign and reassign internal revenue officers. In fact, it is frequently the subject of jurisprudence, specifically its interplay with the power of the CIR to investigate taxpayers’ accounts.
In the case of Republic of the Philippines v. Robiegie Corporation (G.R. No. 260261. October 03, 2022), the Court held:
Section 17 of the NIRC, which provides:
SEC. 17. Assignment of Internal Revenue Officers and Other Employees to Other Duties. – The Commissioner may, subject to the provisions of Section 16 and the laws on civil service, as well as the rules and regulations to be prescribed by the Secretary of Finance upon the recommendation of the Commissioner, assign or reassign internal revenue officers and employees of the Bureau of Internal Revenue, without change in their official rank and salary, to other or special duties connected with the enforcement or administration of the revenue laws as the exigencies of the service may require: Provided, That internal revenue officers assigned to perform assessment or collection functions shall not remain in the same assignment for more than three (3) years; Provided, further, That assignment of internal revenue officers and employees of the Bureau to special duties shall not exceed one (1) year.
Section 17 of the current NIRC is the statutory descendant of Section 12 of the 1939 NIRC. The current Section 17 retains the modifiers “other” and “special” to describe the duties to which revenue officers may be reassigned. However, the current provision departs from the old Section 12 in that: 1) Section 17 incorporates the principle enunciated by this Court in the abovequoted ruling, that such reassignments must be for a limited time only, i.e., one year; and 2) Section 17 explicitly states that “internal revenue officers assigned to perform assessment or collection functions shall not remain in the same assignment for more than three (3) years.”
In view of the foregoing, it becomes clear that Section 17 of the NIRC contemplates three types of reassignments: 1) reassignments to other and special duties, which shall not exceed one year, and, following the Castro ruling, must pertain to functions not regularly performed by the reassigned officer or employee; 2) reassignments of revenue officers involved in excise tax functions under Section 16; and 3) reassignments of revenue officers assigned to perform assessment or collection functions, which must be done every three (3) years. However, the text of Section 17 is clearly limited to the CIR’s power to reassign BIR officers and employees. While the CIR is empowered and mandated to regularly reassign revenue officers who perform assessment or collection functions, such mandate is distinct and separate from the CIR’s investigatory power, which is governed by other provisions of the NIRC. As the CTA en banc correctly points out:
[There is] nothing in [Section 17 which] would justify dispensing with the issuance of a valid LOA in favor of the Revenue Officer concerned. x x x
x x x x
[T]he statutory requirement of issuing a new LOA in no way prevents the CIR from validly assigning or re-assigning the Revenue Officers and employees of the BIR. It does not even require that audit must be completed before such employee can be transferred. Rather, what is simply required by the law is that in case of reassignment, a new LOA be issued to the Revenue Officer to whom the case is transferred to. To rule otherwise and dispense with the requirement of the issuance of an LOA runs counter to both law and jurisprudence.
Power to suspend business operations of a taxpayer for violations of VAT rules
The Tax Code of 1997 empowers the Commissioner of Internal Revenue to suspend the business operations of a taxpayer on certain grounds, pertinent provisions of which provides:
“Sec. 115- Power of the Commissioner to Suspend the Business Operations of a Taxpayer – The Commissioner or his authorized representative is hereby empowered to suspend the business operations and temporarily close the business establishment of any person for any of the following violations:
(a) In the case of a VAT-registered Person –
(1) Failure to issue receipts or invoices;
(2) Failure to file a value-added tax return as required under Section 114; or
(3) Understatement of taxable sales or receipts by thirty percent (30%) or more of his correct taxable sales or receipts for the taxable quarter.
(b) Failure of any Person to register as required under Section 236.
The temporary closure of the establishment shall be for the duration of not less than five (5) days and shall be lifted only upon compliance with whatever requirements prescribed by the Commissioner in the closure order.”
Indeed, the powers of the Commissioner of Internal Revenue in the Philippines are extensive and multifaceted, encompassing tax assessment and collection, enforcement of tax laws, issuance of regulations, administrative management, policy formulation, and representation. Each of these powers plays a crucial role in ensuring the efficiency and effectiveness of the tax system. By exercising these powers judiciously, the Commissioner contributes significantly to the stability of the nation’s fiscal system, the promotion of tax compliance, and the overall economic well-being of the country.
Related Article/s:
Functions of the Bureau of Internal Revenue
Force and Effect of BIR Rulings and Revenue Regulations
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 0917-5772207/ 09778050020.
All rights reserved.