Chapter 2: Tax Administration

TAX ADMINISTRATION – a system involving enforcement of taxes through the following aspects taxation
– Assessment and Collection

STAGES OR PROCESSES OF TAXATION

1. Levy
2. Assessment
3. Tax Payment/Collection

LEVY (imposition of tax) – involves the passage of tax laws or ordinances through the legislature

Tax laws should determine the following

1. Kind
2. Subject
3. Objective
4. Rate and base of tax
5. Manner of imposing and collecting tax

ASSESSMENT – involves the act of administration and implementation of the tax laws by the executive
through its administrative agencies such as the BIR and Bureau of Customs; appraisal and valuation of
the subject of taxation

Self-Assessing – means that the taxpayer can compute his taxes by himself

PAYMENT OF TAX (tax collection)– process involving the act of compliance by the taxpayer in
contributing his share to defray the expenses of the government

IMPACT OF TAXATION – first two stages – Levy and Assessment

INCIDENCE OF TAXATION – third stage – Payment of Tax

As a rule, the aspects of taxation that can be delegated are Assessment and Collection, since they are
administrative in nature

LEGISLATIVE FUNCTION – Levy – Tax Policy

ADMINISTRATIVE FUNCTION – Assessment and Collection – Tax Administration

PRINCIPLES OF A SOUND TAX SYSTEM (based on Adam Smith’s Canons of Taxation)

1. Fiscal Adequacy
2. Equality or Theoretical Justice
3. Administrative Feasibility

FISCAL ADEQUACY – states that the sources of revenue of the government should be sufficient to meet
the demand of public expenditures regardless of business condition.

Budget Surplus – Revenue > Expenses; Budget Deficit – Revenue < Expenses
EQUALITY AND THEORETICAL JUSTICE – states that the tax burden must be proportionate to the
taxpayer’s ability to pay

ADMINISTRATIVE FEASIBILITY – tax laws must be convenient, just, uniform and effective in their
administration – free from confusion and certainty. Applications of administrative feasibility:

1. Collection of taxes at source (withholding tax)

2. Assigning of duly authorized banks to collect taxes
3. Quarterly filing and payment of income taxes

Fiscal adequacy and theoretical justice – Tax Policy

Administrative Feasibility – Tax Administration

TAX ADMINISTRATIVE AGENCIES

Department of Finance is the principal administrative agency of the government for tax administration

1. Bureau of Internal Revenue (BIR) – the administrative agency of the government in charge of the
primary function regarding the execution of the NIRC and other tax laws and regulations
2. Bureau of Customs (BoC) and Tariff Commission – main agencies tasked to enforce the tariff and
customs code
3. Land Transportation Office (LTO) – the office responsible to collect registration fees and motor
vehicle tax
4. Duly and lawfully Authorized Collectors – persons, agencies or duly accredited banks authorized
by the BIR, BoC, TC, :TC
5. Local Offices in charge to enforce local taxation

Other government offices that may have incidental functions regarding tax enforcement and
interpretation of tax laws:

1. The Secretary of Justice (Chief Legal Officer) – has the authority to render administrative
interpretation and ascertain the validity of tax laws subject to review by the Courts of Justice
2. Various offices that indirectly provide assistance in the collection of Taxes:
a. The Courts
b. Register of Deeds
c. Secretary of Public Work and Highways offices
d. City Fiscals
e. Notaries Public

THE BIR – principally tasked with the enforcement of the NIRC

BIR Officers:

1. The Commissioner of Internal Revenue

2. 4 Deputy Commissioners of Internal Revenue
3. Revenue Regional Director
4. Revenue District Officer
 5. Revenue Examiners and Officers
6. Division Chiefs of the BIR
7. BIR Collection agents

Constituted Agents of the BIR Commissioner to collect National Internal Revenue Taxes:

1. Commissioner of Customs and his subordinates – with respect to the collection of national taxes
on imported goods
2. The head of the appropriate government office and his subordinates – with respect to the
collection of energy tax
3. Banks duly Accredited by the BIR Commissioner – with respect to receipt of payments of internal
revenue taxes authorized to be made through banks

POWERS AND DUTIES OF BIR

1. To assess and collect all national internal revenue taxes, fees, and charges
2. To enforce all forfeitures, penalties and fines connected with the above
3. To execute judgments in all cases decided in its favor by Court of Tax Appeals and the ordinary
courts
4. To administer, supervise and effect police powers authorized by the NIRC

POWERS OF INTERNAL REVENUE

1. Interpret tax laws

2. Decide tax cases
3. Summon and obtain information or testimony of persons
4. Make assessments and prescribe additional tax requirements
5. Delegate powers