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EMELINO T MAESTRO 's

The Mind of the Tax Strategist

BIR SHIFTS
FOCUS ON

TAXPAYER’S
LIFESTYLE
Thanks to ETM Clients, Sponsors and Students:

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THE AUTHOR

Emelino T Maestro is a graduate of Bachelor of Science in


Business Administration (BSBA) Major in Accountancy at
Pamantasan ng Lungsod ng Maynila, a BIR-accredited Tax
Agent and a Certified Public Accountant (CPA). !
ETM, as he is popularly known, decided early on that he needs
to take the road less traveled by, and so began a long and
difficult, but not impossible journey through Philippine
taxation.!
Factors that affected ETM’s career direction included the
rampant graft and corruption [GC, for short] in the
government which resulted to the current socio-economic
state of the Philippines, and the fact that taxation is not
being taught by neither the academe nor the government.! !
ETM could directly expose and prosecute those corrupt
government officials. Instead, he chose to do the Rizalian
way. He chose to educate.!
As Dr. Jose P. Rizal had said, “Through education, the country
receives light 1”. ! !

1English translation of his poem ‘Por la Educacion Recibe Lustre la Patria’


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ETM believes that Filipinos have difficulty in understanding the
complexity of Philippine taxation because they are still using
the wrong tools for learning, and what’s more upsetting is
the lack of desire to learn.
Carefully and scientifically, ETM teaches taxpayers, accountants
and business owners on how to understand taxation, and
how to apply their understanding to their businesses. He is
so persistent in advocating the concepts of transparency,
integrity, and accountability as well as firmly opposing graft
and corruption, and pre-planned tax harassment.!!
In his more than 20-years of tax practice, he has substantially
reduced the tax liabilities of a multitude of individual and
corporate clients by helping them exercise their rights. As a
result, his clients only paid what is due to the government. !
Without compromising their integrity, many of his students and
clients now know how to exercise their rights as taxpayers
and comply with the requirements of the Bureau of Internal
Revenue (BIR).
ETM has also been invited to be the resource speaker in
various gatherings, such as those organized by the
Entrepreneur Society of the Philippines (ESP), and
Department of Trade and Industry’s (DTI) GoNegosyo,
among others.! !
Today, he is engaged in tax consultancy, education, bookkeeping
outsourcing, and tax accounting software development. !
Furthermore, ETM passionately and continuously teaches local
and national taxation to discipline himself in correctly and
timely applying the basis and foundation of any civilization-
the LAW. !
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The rewarding thing about taxation is that you also get to learn
all other Philippine laws since these other laws, whether
substantive or procedural, converge and merge with the Tax
Code of the Philippines.
Finally, he believes that to eradicate and eliminate GC in and
out of the government service, EDUCATION shall be the
main character to defeat the GC’s seed and strength-
IGNORANCE.!
PLEASE PAY YOUR TAXES CORRECTLY AND ON TIME.! !! !
Here are some of his books

1. Enhanced National Tax Accounting Code!!!!!!!!


2. Tax Investigation Procedures
3. BIR’s Surcharges
4. BIR’s Audit Program and Assessment Procedures
5. BIR’s Estate Tax: Understanding, Accounting and
Reporting
6. Tax Loopholes: Exposed
7. BIR’s Code of Conduct (Publisher)
8. BIR’s The Revenue Officer’s Tax Audit Techniques
9. Tax Code (Publisher)
10. 2000 Value Added Tax Rulings
11. 2001 Value Added Tax Rulings
12. 2002 Value Added Tax Rulings
13. Tax Fraud: A Guide 2 Tax Honesty
14. The NEW Handling BIR Audit
15. InnoVATion:VAT Bookkeeping, Accounting & Reporting
16. Payroll Tax Accounting and Documentation
17. Tax Amnesty Even There is No Tax Amnesty Offer
18. Updated Tax Code
19. Mga Siniping Batas Ukol sa Katiwalian sa Gobyerno
20. Fiscal Mandated Duties
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21. Top Secrets in Winning BIR Audit
22. I Believe in Respect
23. BIR Audit Guidelines for Investigating Taxpayers’
Accounting Records
24. Auditing BIR Auditors
25. The Mind of the Tax Strategist
26. The Mind of the Tax Strategist Part 2
27. BIR Lowyer Criminally Charged Me of Libel, Perjury, and
Malicious Prosecution
28. The Winning Ways in Handling BIR Audit, Subpoena, and
Assessment as well as DOJ Criminal Prosecution

Thanks to ETM Clients, Sponsors and Students:


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THE COPYRIGHT

All material herein is, unless otherwise stated, the property of EMELINO T
MAESTRO and his heirs. Copyright and other intellectual property laws
protect this. Reproduction or retransmission of the materials, in whole or
in part, in any manner, without the prior written consent of the copyright
holder, is a violation of copyright law.
Users may not distribute such copies to others, whether or not in electronic
form, whether or not for a charge or other consideration, without prior
written consent of the copyright holder. Contact information for requests
for permission to reproduce or distribute materials available through this
is

EMELINO T MAESTRO
email ‘ineedemelinotmaestro@gmail.com’
postal ’30 plaridel street, dona aurora, quezon city’
telephone ‘ 742 0382 * 439 3918’

PHILIPPINE 2010 COPYRIGHT

ISBN ________________________
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THE APPEAL

WITHOUT the most important person in this land, the possibility


of graduating from educational institutions is remote.

Thank you so much for the taxes that you have shared. ETM was
able to successfully finish his three [3] levels of schooling free
from the headache of looking for enrollment fees.

Let us continue paying the correct taxes on time and help the less
fortunate and underprivileged Filipinos, just like ETM, morally
survive and economically change their lives for the best.

Never mind if some government officials are GC or your neighbors


are tax evaders and smugglers. They mean nothing to us and are
so negligible to be given our precious time and important
attention. Our task is to make this Philippines a better place for
our kids and family. Let us work and bind our hands together to
protect and promote the interest of this great nation, the
interest of the taxpayers.

Enjoining ETM Group and presenting your uncompromising faith


and best intentions for and to our fellow Filipinos, family and
kids are the best ways to say NO TO GC.

CALL ETM 742 0382 * 439 3918


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THE PROMISE

“Luke 20:19-26
[19] The teachers of the law and the chief priests looked
for a way to arrest him immediately, because they knew he
had spoken this parable against them. But they were afraid of the
people.

[20] Keeping a close watch on him, they sent spies, who pretended to be
honest. They hoped to catch Jesus in something he said so that they might
hand him over to the power and authority of the governor. [21] So the
spies questioned him: "Teacher, we know that you speak
and teach what is right, and that you do not show
partiality but teach the way of God in accordance with the
truth. [22] Is it right for us to pay taxes to Caesar or not?"

[23] He saw through their duplicity and said to them, [24] "Show me a
denarius. Whose portrait and inscription are on it?"

[25] "Caesar's," they replied.

He said to them, "Then give to Caesar what is Caesar's,


and to God what is God's."

[26] They were unable to trap him in what he had said


there in public. And astonished by his answer, they became
silent.”
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THE CONTENT

THE PLAN 11

THE VISIONARY 13

THE TARGET 15

THE EVIDENCE 17

THE EXAMINATION 21

THE ASSESSMENT 25

THE EXCUSE 40

THE COURSE 42

THE AGREEMENT 48

THE CAS 59

THE DONATION 61
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THE PLAN

Recently, Revenue Memorandum Order No. 19-2010 was


promulgated and issued.

Its plan is to checkmate individual taxpayers who have


substantial investments and property holdings and whose
spouses, kids and relatives are showing lavish lifestyles or
spending disproportionate to what they declared in their
tax returns and financial statements.

The BIR called its audit directional policy as TAXPAYER’S


LIFESTYLE CHECK SYSTEM [LTCS] while ETM calls it
EXPENSE ARRANGEMENT ACCOUNT [EAA].

The logic behind this amazing and fantastic policy is to establish


the sources of the lavish spending being publicly displayed by
individual taxpayers.

Another similarly effective weapon being fabricated is the


TRABAHO SA RESIBO.

To place tempting value on sales invoice, an unconfirmed


report says that the BIR shall reward any person, who shall
bring and submit unregistered invoice, official receipt or the
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likes, ten [10] percent of the compromise penalty that is
imposed on preparing and issuing the said prohibited
documents. The minimum compromise penalty per
violation is ten thousand [10,000] Philippine pesos. So , if a
seller issued an ORDER SLIP instead of a BIR-registered
invoice/official receipt, his buyer shall only visit any BIR
Office, accomplish the reward application form and submit
it together with the ORDER SLIP to the BIR assigned
personnel. Once the said seller paid the penalty, the BIR
would advise the said buyer-informer when he can pick up
his P1,000 check.

Verily, the TRABAHO SA RESIBO’s purpose is to increase tax


collection and improve the asking and issuing of BIR-
registered invoice/official receipt as well as to generate jobs
and create entrepreneurial persons,

In this book, ETM will reveal the BIR SECRETS IN SILENTLY


CARRYING OUT
ITS NEWEST AND
DEADLIEST
WEAPONS.

Respect
the
Owner of
this logo
- the BIR
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THE VISIONARY

Honestly, ETM truly admires the proponents of the BIR newest


and deadliest weapons. It is a sign of respect to call them
‘the VISIONARIES.’

ETM believes that type one [T1] is a tax consultant turned BIR
official and type two [T2] is a BIR official turned school
lecturer and favorite storyteller of the accounting
profession. Both T1 and T2 have more than decades of
experiences in the field of tax consulting.

Inevitably, all TAX CONSULTANTS are keepers of their client-


taxpayers’ unusual confessions including the amount of the
take-home pays payrolled to mischievous BIR officials.

These confessions, even if not being asked for, are so sacred


and should not be revealed to anyone pursuant to a tax
consultant-client relationship.

However, unconfirmed reports state that T1 and T2 are using


these confidential data to draft BIR regulations that would
increase tax collections.
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Grossly, breaking the trust and confidence of a client-taxpayer,
whatever are the circumstances, is unacceptable and unfair.

But, T1 and T2 may reason out that national interest shall


prevail over other forms of interest. If that is the case, let
the law and order be strictly observed.

WELCOME TO THE ERA OF NCAA.

No Contact Audit and Assessment.

Are you ready?

CALL ETM @
742 0382 * 439 3918
FOR PROPER WAYS OF HANDLING NCAA
THANK YOU TO ETM CLIENTS, SPONSORS AND STUDENTS:
15

THE TARGET

Every taxpayer is a potential target of TLCS but after


scrutinizing other related BIR rules, it could be correctly
manifested that the PRESIDENT, CHIEF FINANCIAL
OFFICER and CHIEF EXECUTIVE OFFICER are the first,
main and prioritized targets because under Revenue
Regulations No. 3-2010, the President, CFO and CEO of all
individual and juridical taxpayers are required to prepare,
sign and submit a STATEMENT OF MANAGEMENT’S
RESPONSIBILITY FOR ANNUAL INCOME TAX RETURN
[SMR, for short].

In the said Statement, the legal obligation of the President, CFO


and CEO is to affirm and confirm, under the PENALTY OF
PERJURY, that the BIR-received financial statements and
annual income tax return’s data and information are
according to the contents of the taxpayer’s BIR-registered
books of accounts, whether they are traditional ones or as
outputs of a BIR-approved computerized accounting
system. Moreover, if their employer-taxpayer 2 [1] maintains
no books of accounts, [2] its books of accounts are [a] not
available and [b] inadequate, and/or [3] withholds books and

2 For discussion purposes, let us consider that the subject employer-taxpayer is a


juridical person.
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records from investigation by authorized BIR Officials, then,
either the President, CFO or CEO would be lifestyle-
checked to establish whether the sources of their
respective wealth and lavish living came from employer-
taxpayer who, in the first instance, is mandated to correctly
and timely withhold and remit taxes to the Philippine
Government.

Concluding intelligently, the real target is the employer-


taxpayer but the wonderful route must pass through its
officers and employees. The reason is so simple. If the BIR
missed the true target, it will surely land a bull’s eye either
on the President, CFO or CEO, whichever is luckiest among
them.

“IGNORANCE IS A DISABILITY
TO IMMEDIATELY UNLEARN
WHAT IS WRONG AND TO
CORRECTLY AND TIMELY
APPLY WHAT IS RIGHT”
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THE EVIDENCE

LAND TRANSPORTATION OFFICE

LTO’s records will reveal the number and type of


vehicles owned and house-members who have
driver’s license.

Once the number of vehicles and drivers are established, the


fuel consumption, which may be based on average usage per
month, multiplied by the average monthly fuel price will give
the amount of cash spent for gasoline.

Gasoline consumption may present how complicated the


lifestyle of a President and his home companions are having.

BUREAU OF IMMIGRATION

BI’s travel documents would show how many


times a President travelled outside the
Philippines.

From this information, the BIR could establish based on


prevailing average costs of airfares, hotel accommodations,
meals and other daily expenses the total income of the
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President and then, to determine the undeclared taxable
income, it would only compare these computations to his
duly signed and filed tax returns.

AIRLINE AND SHIPPING COMPANIES

Airline and shipping companies have a legal document called


‘MANIFESTO’ where the names, addresses and other
information of their passengers are maintained and kept.

Accessing this so called ‘manifesto’ may give BIR not only the
number of times that a President rode a plane or took a
ship but also his destinations. Frequent visits to Boracay and
other famous resorts outside the reach of land vehicles may
depict how much a President really earns for a living.

MANILA ELECTRIC COMPANY

May liwanag ang buhay!

The more maliwanag ang bahay, the more


electric bill payment is to be made. The
higher the electric bills may mean that
more appliances and electric gadgets are
being used at the President’s home by
persons who are so dependent on his earned income.

HOMEOWNER’S ASSOCIATION

The type of homeowner’s association would showcase the


lifestyle and spending of a President’s family. The more
exclusive and elite an association that his family belongs, the
more income that he probably is making.
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CREDIT CARDS

Types and number of credit cards that a President have would


present his status and importance in life, especially, how
bankable and profitable he is to the banking sector. His
manner of payments and credit limits are best indicators to
establish a tax base.

LAND REGISTRATION AUTHORITY

The service of LRA or its subordinate office, Registry of Deeds


is unimportant to a President unless he acquires real
properties.

The BIR would presume that cash spent for acquiring realty
came from taxable source in which tax due is not properly
settled.

RESORTS, MEMBERSHIP CLUBS AND SIMILAR


ESTABLISHMENTS

Only people who have so much cash to spare can afford to be


members of exclusive and elite clubs, resorts and similar
organizations.

Spending in this endeavor may mean that a President is getting


more than what he is earning.

REAL ESTATE DEVELOPMENT COMPANIES

Similar to LRA and RD, information that can be obtained


therefrom may speak of capital investment which could be
interpreted that a President has ample income to play
around.
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CUSTOMER & SUPPLIER’S VAT SUMMARY LIST

Transactions of one thousand [1,000] Philippine pesos or more


requires sellers of goods and services to indicate the name,
address and taxpayer identification number of their
customer, purchaser, client or buyer. Accumulating invoices
and official receipts with an amount exceeding a thousand
[1,000] Philippine pesos is to voluntarily provide an audit-
trail for the BIR Officials to follow.

Meaning, ‘HOW COULD THIS PARTICULAR SELLER’S


CUSTOMER AFFORD TO MAKE A P1,000 PURCHASE
EVERYDAY WHEN HIS ANNUAL INCOME SHOWED
THAT HIS DAILY EARNING IS P400?’ might be the
question of a BIR Official to himself.

Call ETM @ 742 0382 * 439 3918


for the development of your
customized tax training,
seminar and workshop
21

THE EXAMINATION
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THE ASSESSMENT

In this Chapter, ETM shall show how the BIR might compute
and support its deficiency tax assessments.

LAND TRANSPORTATION OFFICE

A. Vehicles under the name of a President

Specifics Computation

Costs of acquired vehicles per year 2,700,000

Less, Bank-financed amount 500,000

Cash outlay 2,200,000

Less, Annual compensation income 700,000

BIR-presumed undeclared income 1,500,000

Add, Annual compensation income 700,000

BIR-presumed taxable income 2,200,000

Multiply, Maximum income tax rate 32%

Income tax due 704,000


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Specifics Computation

Less, Withholding tax on compensation 224,000

Deficiency income tax assessment 480,000

GOOD TO KNOW.

Bank-financed amount. If this is financed or advanced by other


than financial institution, the said person is a candidate for
TLCS.

Since the withholding of a tax on BIR-presumed taxable


compensation income is vested on the shoulder of
employer-taxpayer, it’s corporate officials and employees
shall also be civilly and criminally liable for non-withholding
and non-payment of withholding tax on compensation.

B. Vehicles under the name of the employer-taxpayer but used


by a President

Specifics Computation

Costs of acquired vehicles 2,000,000

Multiply, rate allocable to fringe benefit 10%

Net fringe benefit 200,000

Divide, Grossed-up rate for fringe benefit 68%

BIR-presumed taxable benefit 294,118

Multiply, Fringe benefit tax rate 32%

Deficiency fringe benefit tax assessment 94,118


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GOOD TO REMEMBER.

Since the withholding of a tax on BIR-presumed taxable fringe


benefit income is the obligation of the employer-taxpayer,
it’s corporate officials and employees shall also be civilly and
criminally liable for non-withholding and non-payment of
withholding tax on fringe benefit.
-end-

BUREAU OF IMMIGRATION

A. Amounts spent for foreign trips are personally shouldered


by a President, himself.

Specifics Computation

Average cost per trip based on Travel


Agencyʼs rate 150,000

Multiply, Number of trips made in a year 7

Total average foreign-trip expense 1,050,000

Less, Annual compensation income 700,000

BIR-presumed undeclared income 350,000

Add, Annual compensation income 700,000

BIR-presumed taxable compensation 1,050,000

Multiply, maximum income tax rate 32%

Income tax due 336,000


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Specifics Computation

Less, withholding tax on compensation 224,000

Deficiency income tax assessment 112,000

B. Amounts spent for foreign trips of a President are


shouldered by the employer-taxpayer.

Specifics Computation

Average cost per trip based on Travel


Agency rate 50,000

Multiply, Number of trips made in a year 7

Net fringe benefit 350,000

Divide, Grossed up rate for fringe benefit 68%

Taxable fringe benefit 514,706

Multiply, Fringe benefit tax rate 32%

Deficiency fringe benefit tax assessment 164,706

-end-
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LAND REGISTRATION AUTHORITY
REGISTRY OF DEEDS

A. TCT and CCT under the name of a President

Specifics Computation

Costs of acquired land per year 12,700,000

Less, Bank-financed amount 2,000,000

Cash outlay 10,700,000

Less, Annual compensation income 700,000

BIR-presumed undeclared income 10,000,000

Add, Annual compensation income 700,000

BIR-presumed taxable income 10,700,000

Multiply, Maximum income tax rate 32%

Income tax due 3,424,000

Less, Withholding tax on compensation 224,000

Deficiency income tax assessment 3,200,000

-end-
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LOCAL GOVERNMENT UNIT
Improvements on land such as building, townhouse, etc.

A. Tax declaration or building permit under President’s name

Specifics Computation

Stated costs in the building permit, etc. 5,700,000

Less, Bank-financed amount 1,500,000

Cash outlay 4,200,000

Less, Annual compensation income 700,000

BIR-presumed undeclared income 3,500,000

Add, Annual compensation income 700,000

BIR-presumed taxable income 4,200,000

Multiply, Maximum income tax rate 32%

Income tax due 1,344,000

Less, Withholding tax on compensation 224,000

Deficiency income tax assessment 1,120,000

B. Tax declaration or building permit under the name of the


employer-taxpayer but the usufruct is to a President

Specifics Computation

Contract price to build 5,000,000

Multiply, Rate allocable to fringe benefit 2.5%


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Specifics Computation

Net fringe benefit 125,000

Divide, Grossed up rate for fringe benefit 68%

Taxable fringe benefit 183,824

Multiply, Fringe benefit tax rate 32%

Deficiency fringe benefit tax assessment 58,824

-end-

ETM EDUCATION. TAXATION


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REAL ESTATE DEVELOPMENT COMPANIES

A. Contract to Sell under the name of a President

Specifics Computation

Stated costs in the Contact to Sell 5,700,000

Less, Bank-financed amount 1,000,000

Payable for more than a year 3,000,000 4,000,000

Cash outlay 1,700,000

Less, Annual compensation income 700,000

BIR-presumed undeclared income 1,000,000

Add, Annual compensation income 700,000

BIR-presumed taxable income 1,700,000

Multiply, Maximum income tax rate 32%

Income tax due 544,000

Less, Withholding tax on compensation 224,000

Deficiency income tax assessment 320,000

B. Contract to Sell under the name of employer-taxpayer

SPECIFICS COMPUTATION

RELEIF - BIR presumed gross receipt 5,000,000

Multiply, VAT factor 3/28


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SPECIFICS COMPUTATION

Deficiency VAT assessment 535,714

Less, VAT summary list amount {5,000,000}

BIR-presumed gross selling price 4,464,286

Multiply, Income tax rate 30%

Deficiency income tax assessment 1,339,286

BIR-presumed gross selling price 4,464,286

Multiply, Rate allocable to fringe benefit 2.5%

Net fringe benefit 111,607

Multiply, Grossed-up rate for fringe benefit 68%

Taxable fringe benefit 164,128

Fringe benefit rate 32%

Deficiency fringe benefit tax assessment 52,521

DEFICIENCY TAX ASSESSMENT

1. Value added 535,714

2. Income 1,339,286

3. Fringe benefit 52,521


-end-
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HOMEOWNER’S ASSOCIATION

A. Residential unit under the name of a President

Specifics Computation

Deed of Sale per Registry of Deeds 6,700,000

Less, Bank-financed amount 2,000,000

Payable for more than a year 3,000,000 5,000,000

Cash outlay 1,700,000

Less, Annual compensation income 700,000

BIR-presumed undeclared income 1,000,000

Add, Annual compensation income 700,000

BIR-presumed taxable income 1,700,000

Multiply, Maximum income tax rate 32%

Income tax due 544,000

Less, Withholding tax on compensation 224,000

Deficiency income tax assessment 320,000

B. Residential unit under the name of the employer-taxpayer

SPECIFICS COMPUTATION

RELEIF - BIR presumed gross receipt 5,000,000

Multiply, VAT factor 3/28


35
SPECIFICS COMPUTATION

Deficiency VAT assessment 535,714

Less, VAT summary list amount {5,000,000}

BIR-presumed gross income 4,464,286

Multiply, Income tax rate 30%

Deficiency income tax assessment 1,339,286

BIR-presumed gross income 4,464,286

Multiply, Rate allocable to fringe benefit 2.5%

Net fringe benefit 111,607

Multiply, Grossed-up rate for fringe benefit 68%

Taxable fringe benefit 164,128

Fringe benefit rate 32%

Deficiency fringe benefit tax assessment 52,521

DEFICIENCY TAX ASSESSMENT

1. Value added 535,714

2. Income 1,339,286

3. Fringe benefit 52,521

The homeowner’s association dues and water, telephone and


electric bills as well as payments made to household helpers
which the employer-taxpayer shouldered are also subject to
fringe benefit tax.
-end-
36
CREDIT CARD COMPANIES

A. Monthly payments made by a President

Specifics Computation

Annual credit card bills 2,200,000

Less, Unpaid amount 500,000

Annual credit card payments 1,700,000

Less, Annual compensation income 700,000

BIR-presumed undeclared income 1,000,000

Add, Annual compensation income 700,000

BIR-presumed taxable income 1,700,000

Multiply, Maximum income tax rate 32%

Income tax due 544,000

Less, Withholding tax on compensation 224,000

Deficiency income tax assessment 320,000

B. Monthly payments made by the employer-taxpayer

Specifics Computation

Annual credit card payments 1,000,000

Multiply, Rate allocable to fringe benefit 100%

Net fringe benefit 1,000,000


37
Specifics Computation

Divide, Grossed up rate for fringe benefit 68%

Taxable fringe benefit 1,470,588

Multiply, Fringe benefit tax rate 32%

Deficiency fringe benefit tax assessment 470,588

RESORTS, MEMBERSHIP CLUBS OR SIMILAR


ESTABLISHMENTS

GOOD TO REMEMBER.

“Tell me where you frequently go and relax and I can tell you
how much is your yearly earnings.”

STATEMENT OF ASSETS, LIABILITIES &


NETWORTH

Those who availed the 2005 Tax Amnesty Program and had
submitted their respective SALN are TLCS’ potential
candidate.

The assets and liabilities stated in the SALN shall be the


reckoning point in establishing and determining the increase
in assets and decrease in liabilities which might be
compared to the declared income stated in the duly-filed
Annual Income Tax Return and its accompanying financial
statements such as balance sheets, profit and loss
statements, statements of cash flows, statements of retained
earnings and their particular notes and disclosures. -end-
38
MANILA ELECTRIC COMPANY

A. Monthly payments made by a President 3

Specifics Computation

Annual electric bill 2,500,000

Less, Unpaid amount 800,000

Annual electric bill payments 1,700,000

Less, Annual compensation income 700,000

BIR-presumed undeclared income 1,000,000

Add, Annual compensation income 700,000

BIR-presumed taxable income 1,700,000

Multiply, Maximum income tax rate 32%

Income tax due 544,000

Less, Withholding tax on compensation 224,000

Deficiency income tax assessment 320,000

B. Monthly payments made by the employer-taxpayer

Specifics Computation

Annual electric bill payments 1,000,000

Multiply, Rate allocable to fringe benefit 100%

3 Electric meter account is under the Presidentʼs name


39
Specifics Computation

Net fringe benefit 1,000,000

Divide, Grossed up rate for fringe benefit 68%

Taxable fringe benefit 1,470,588

Multiply, Fringe benefit tax rate 32%

Deficiency fringe benefit tax assessment 470,588

GOOD TO REMEMBER

The higher the electric bills may mean more electric appliances
being used at home by several persons whose existence
may be solely dependent on the yearly income earned by a
President.

Types and numbers of electric and electronic appliances and


equipments could be used to estimate past income and
predict future ones.
40

THE EXCUSE

The President may use the following excuses;

1. Placing his assets under the name of his kid.


2. Declaring his assets as part of inherited properties.
3. Presenting his assets as gifts from friends.
4. Showing his assets as results of his winnings.

It is very hard to cover up the lifestyle of a President. If he lives


a modest and simple life, nobody may believe him that he is
really doing business. This public perception will jeopardize
the bottom-line of his employer-taxpayer. He must show off
to develop his image and character thereby helping his
employer-taxpayer’s profit maximization program.

PLACING HIS ASSETS UNDER THE NAME OF HIS KID

This excuse just passes only his tax problem to his kid. The
BIR might be so skeptical on how his kid accumulated such
wealth at a very short moment. If the kid failed to prove
that the acquired assets came from his taxable income, the
said transaction could be considered as a donation of a
President to his kid. Thus, it will be subjected to DONOR
TAX and the father-President is not relieved from proving
41
the sources of such income, which may either be subjected
to income tax on compensation or value added and income
taxes on business income.

DECLARING HIS ASSETS AS PART OF INHERITED ASSETS

To prove that such assets are inherited assets, he must show


papers that his parents are already dead. If they are still
alive, he already committed perjury and said assets may be
treated as donations of his parents to him. Thus, it may
place his own parents under scrutiny of the BIR for failure
to pay DONOR TAX.

If such properties are really inherited ones, he must prove that


they were properly declared in his parents’ estate tax
return and the corresponding ESTATE TAX had been
correctly paid on time. His failure to do this shall expose
said assets to estate taxation.

PRESENTING HIS ASSETS AS GIFTS FROM FRIENDS

Do his friends have capacity to donate? If they do, is the


DONOR TAX correctly and timely paid? If he failed to
answer these two [2] questions appropriately, then he
placed his friend in great danger and big problem for
fraudulently evading the donor tax.

SHOWING HIS ASSETS AS RESULTS OF HIS WINNINGS

Winnings in game shows, gambling activities, etc are subject to


final tax. He has to prove that final taxes on winnings were
properly paid. If not, he is in dire trouble.
-end-
42

THE COURSE

TAX AUDIT AND CONSULTANCY - Managing the BIR


audit processes professionally and efficiently and
ensuring that you comply with the relevant tax laws
shall be the main focal points of this course.

When a BIR Official forcefully requests you to attend his


FREE seminar which may be identical to what ETM is
also offering, please attend with open mind See if he is
helping you or he is only giving you more problems.
Study his gestures and postures, they might give you
clues about his real purpose. Then, you must be so
skeptical by asking yourself why it is FREE and attend
ETM’s TAXMINAR and WORKSHOP so that you can
SCIENTIFICALLY compare and LOGICALLY
ANALYZE his and ETM’s style of educating you.
When a BIR Official shows a bad mouth toward
EMELINO T MAESTRO [ETM], please listen attentively
because you will learn more about his character and
integrity. Then, believe slowly and call ETM to hear his
explanation because by doing so, you already elevated
yourself from lackluster to an educated person.
His sole purpose is to COLLECT MORE TAXES which
could be more than what you can pay for.
43
DO NOT WORRY. ETM is always on your side, on the
taxpayer’s side. ETM’s aim is to legally REDUCE and
SAVE you MORE TAXES so that YOU CAN HAVE
MORE SAVINGS FOR RETIREMENT AND
RECREATIONAL NEEDS.
He believes that TAX IGNORANCE is the cause of your
sleepless nights. Wrong advises from all corners are
the epitome of your cash-miseries and long-hour of
work. ETM wants to empower and provide you with
more legal options, alternatives and solutions so that
you have more time to your family, friends and self.
Now is the right time to act. ARM YOURSELF WITH
TRUE AND CORRECT KNOWLEDGE AND
KNOWHOW. Call ETM to learn more on how he could
help and assist you and remove you from the bondage
of ‘GC’ which was a product of illiteracy that is passed
on from generation to generation and a product of not
so transparent governmental directional policies and
procedures.
Even WITHOUT a DEGREE in ACCOUNTING or LAW,
you have the right to know how BIR Officials conduct
audit, why did they choose you to be an audit
candidate and what are your legal remedies and
privileges in every audit phase.
You have the power and authority to equip yourself with
TRUE AND CORRECT KNOWHOW IN AUDITING
THE BIR AUDITORS such as the RO, GS, RDO, CAD,
CLD and RD.
It’s about time to KNOW THEIR SECRETS.
1. Role of RDO in choosing audit candidates
2. Role of RO and GS in examining books and records
44
3. Role of CAD in reviewing and issuing assessment
notices
4. Role of CLD in relentlessly pursuing subpoena
duces tecum
5. Other tax modular training courses are
a) Validating tax deficiency assessments for
expanded withholding tax, withholding tax on
compensation, fringe benefit tax, improperly
accumulated earning tax, value added tax,
documentary stamp tax, income tax and
minimum corporation income tax
b) Taxpayer’s remedies
c) Investigative practices and techniques and
jurisdictional issues
d) Assessment stages such as selection,
investigation, assessment and prosecution
processes; and
e) Collection states such as collection and
prosecution processes

TAX ACCOUNTING BOOKKEEPING - Comprehensive


approach in preparing and processing primary
evidences, making entries in the books of accounts
and communicating results in the tax returns and their
accompanying statements and schedules with the sole
legal purpose to align them altogether with the Tax
Code and the rules issued under its authority are the
main subject of this course.
45
In 2006, the BIR issued a directive - ‘The submission of
this Office that, for purposes of taxation, it is the
financial statements which is in conformity with the Tax
Code that should be attached in the filing of Income
Tax Return.’

In RMO 29-2002, its Commissioner mandated those


taxpayers who maintain and use Computerized
Accounting Software, whether customized or of-the-
shelf such as MYOB, PEACHTREE or QUICKBOOKS,
to secure permit before using it. Otherwise, he, as a
warning, shall slap P25,000 fine or a year
imprisonment.

Finally, to immediately pinpoint and easily catch who


should be criminally prosecuted for preparing
financial statements and annual income tax return that
were drafted either from unregistered, no-accounting-
entry books of accounts or entries therein that are
prepared NOT IN CONFORMITY WITH THE TAX
ACCOUNTING RULE, the BIR issued RR 3-2010.

The said RR jointly and severally identified the


PRESIDENT, Chief Financial Officer [CFO] and Chief
Executive Officer [CEO] to be responsible and
accountable for the above-stated BIR directional
policies.

Time in memorial, the sole purpose of a BIR audit is to


help and assist taxpayers in determining whether an
income is taxable and an expense is deductible. Thus,
BIR Officials assigned to conduct tax-audit are
required to design and develop tax policy, procedure
and practice manual that a taxpayer must use in
46
preparing documents, maintaining books and records,
issuing financial statements and filing tax returns.
However, audit notices such as LETTER OF
AUTHORITY, TAX VERIFICATION NOTICE, LETTER
NOTICE, MISSION ORDER, SUBPOENA DUCES
TECUM, ASSESSMENT NOTICE AND NOTICE FOR
INFORMAL CONFERENCE, as ETM believes, are
being used to inflict pain to and establish twilight-moon
in the mind and heart of any taxpayer.

Because of this, ETM is encouraging you to be more


PROACTIVE and ANNOUNCE AND ATTEND TAX
ACCOUNTING BOOKKEEPING COURSES for

1. Hotel, restaurant, catering, cafe, club and other


eating places;
2. Building, road, house, subdivision and bridge
construction companies;
3. Lessors of property, whether personal or real;
4. Pawnshop;
5. Dealers and distributors of chemicals and
pesticides;
6. Life and non-life insurance companies;
7. Hospital and medical clinics;
8. Review centers;
9. Schools and universities;
10. Health providers;
11. Professionals;
12. Cooperatives;
13. Logistic providers;
14. Real estate dealers and developers;
15. NGOs and foundations;
16. Retailers and wholesalers;
17. Cement;
47
18. Banking;
19. Shipping;
20. Petroleum;
21. Show business and entertainment;
22. Agri-products/supplies dealers; and
23. Taxpayers who failed to submit VAT summary list

You’ll learn tools and tactics to help you

(a) easily navigate appropriate tax accounting rules;


(b) correctly and timely apply BIR accounting
regulations;
(c) immediately know and use ‘accounting entries’
hierarchy;
(d) deliberately develop and design tax chart of
accounts with legal definition;
(e) truly and correctly interpret business facts;
(f) willfully avoid making false entries;
(g) readily prepare primary and supporting
evidences, documents and papers.
(h) relevantly understand contents and format of tax
returns and schedules;
(i) correctly prepare tax-basis financial statement;
and
(j) knowingly devise and organize notes and
disclosures of the items in the tax-basis
financial statements and tax returns;

Course syllabus shall only be revealed and given to paid


participants.
Please inform ETM if you want him to design and develop tax accounting and
bookkeeping courses directly related to your business sector or company requirement
by emailing him at ‘ineedemelinotmaestro@gmail.com’ or calling
Cess @ 742 0382 and Sonia @ 439 3918.
48

THE AGREEMENT

This document serves as a legal agreement between the


CLIENT COMPANY whose true name and principal
address appeared in Signature section hereof and
hereinafter referred to as "you or your", wherein the
term ‘you and your’ will include your officials and
employees, and EMELINO T MAESTRO as hereinafter
referred to as!“I, me, mine or my", wherein the term
“I, me, mine and my” shall include my people. Wherein
both parties are referenced, the term "we, us, our"
shall be applied.

MY ROLE: I am an independent contractor. I am neither


your employee nor anyone who represents me. I own
my business. I pay my taxes, set my hours and bill you,
my client, for service rendered. Within this
Agreement, I shall satisfactorily perform the
professional services described in Schedule A and its
subject matters as incorporated herein by reference.

In supplying my output(s), the term ‘satisfactorily


perform’ shall mean a standard of care and diligence
according to all applicable laws and regulations and
good moral values.
49
INSUFFICIENT DATA: Your failure, neglect or refusal to
voluntarily supply data or information that are
ordinary and necessary to come up with the true and
correct report(s) shall relieve me from any legal and
financial liability that may come from the
consequences of my recommendations as well as the
interpretation of the facts-on-hand. You cannot
force or coerce me to either render recommendation
or interpret facts if I feel and think that your data
are insufficient in substance.

CONFIDENTIALITY: You are welcome to talk about any


aspect of our working relationship with anyone.
However without your prior electronic, verbal or
written consent, I will neither knowingly discuss,
disclose or communicate with anyone in any form or
fashion your confidential personal or business plans,
strategies, opportunities, pricing, or other financial
data, clients, transactions, or conversations, which
are not known to the public.

If either of us desires that the information provided to


the other under this Agreement be held in confidence,
the disclosing party will identify the information as
confidential or proprietary. The receiving party may
not disclose the other party’s confidential or
proprietary information and may use it only for
purposes specifically contemplated in this Agreement.
The receiving party will treat tangible business and
financial information of the disclosing party that has
been previously identified as confidential, with the
same degree of care as it does to its own similar
information. The foregoing obligations do not apply to
information which: [a] was in the possession of, or
was known by, the receiving party prior to its receipt
from the disclosing party; [b] is or becomes generally
50
known to the public without violation of this
Agreement; [c] is obtained by the receiving party from
a third party, without an obligation to keep such
information confidential; or [d] is independently
developed by the receiving party without the use of
the confidential or proprietary information.

Upon your request, I agree to return any written


documentation, information, computer or paper files,
or business stationery that you have provided me.

This section shall not affect any other confidential


disclosure agreement between us.

COPYRIGHTS: We will negotiate to our mutual satisfaction


copyrights and any financial gain or legal ownership
on intellectual, electronic or written documents that
originated as a result of our mutual collaboration.
This shall be defined in a separate and written
agreement. Without such written agreement, all my/
your rights are deemed waived.

Breach of this Confidentiality section may result in


irreparable damages to you. If you make an
application to a court of competent jurisdiction and
the ruling is in your favor, I shall be liable for the
losses, costs, expenses and damages, including
attorney’s fees sustained by said ruling. Furthermore,
we agree to use the national capital judicial region as
the legal venue for this.

LIMITS OF MY LIABILITY: You understand that I am not


your decision-maker. I will neither knowingly
perform any service that is legally questionable or
contrary to the Philippine legal system, public order,
public policy, public safety and moral values or make
51
any decision for you in which any substantial
financial risk may occur. This Agreement represents
our entire Agreement and my obligations are
accurately and completely described herein. The
service that I shall provide to you shall be performed
only within the scope of an independent contractor. I
will perform to the best of my ability the
professional services that are clearly stated in
Schedule A hereof. I am not liable for any
misunderstanding, expectation, error, or omission
occurring outside of this Agreement except for a
written Addendum containing our notarized
signatures. If you are not pleased with my outputs for
any reason other than those mentioned herein, you
may void this according to VOID section. In any event,
you agree to hold me harmless of any liability and
claim for damages due to your dissatisfaction.

You assume all legal and financial responsibilities of


your business in every respect, form and fashion.
Your signature indicates that you agree to be legally
and morally bound to these limits.

My aggregate liability, if there is any, to you for claims


relating to this Agreement, whether for breach or in
tort shall be limited to 50,000 Philippine pesos.

Besides specifically specified, neither of us will be


eligible for any indirect, punitive, special, incidental
or consequential damages in connection with or
arising out of this Agreement including loss of
business, revenue, profit, use, data or other economic
advantage, however it arises, whether for breach or
in tort, even if that either of us have been previously
advised of the possibility of such damage.
52
MY APPEARANCE: I shall be available through my
representatives, personal appearance or phone
conversation. I shall always be provided with a
comfortable and conducive working area.

MY FEES: My fee is clearly and completely stated in


Schedule B and incorporated herein by reference.
Applicable 12% value added tax and 15% expanded
withholding tax shall be for your account. You shall
supply me the required number of BIR Form No. 2307.
Otherwise, you authorize me to prepare and sign it
for you.

Security deposit of P50,000 shall be paid upon signing


this. It is a standby fund that shall answer for any
accident that my people may sustain during their tour
of duty or for unpaid fee due me. However, it shall be
refunded to you a year after this Agreement has been
concluded or voided.

Out-of-pocket expenses. Taxi, FX, bus, jeep, airplane, ship


fares, meals, lodging, gas, supplies and other expenses
attributable to this shall be for your account.

TERMINATION: This Agreement is either automatically


concluded upon full payment of my fee or a written
notice rendering this void or completion of
deliverables stated in Schedule A.

VOID: If at any point our business relationship isn't


working to our mutual or individual satisfaction for
any reason, we maintain the right to void this
Agreement by giving the other party written notice
effective upon receipt of notice. To void this
Agreement simply means we wish to cease doing
business with each other.
53

INDEMNIFICATION: In protecting, promoting and defending


your rights and interest, I may put myself into
difficult legal situations. If the Philippine government
or other third parties shall charge me
administratively, civilly and criminally for doing my
legal obligations to you, you shall defend my life and
liberty and hold me harmless from all associated
damages, losses, costs and expenses, including
attorney’s fees.

WITHDRAWAL FEE. If you disengage me while the case is


still ongoing by reason of harassment or pressures
from any BIR official or party related directly or
indirectly therewith, you agree to pay me an
additional 150% of the total contract price including
applicable taxes thereon. Its payment does not relieve
you in paying the actual contract price stated in
schedule b.

COLLECTION: If I reluctantly force to pursue the


collection of any unpaid or delinquent fee, you
acknowledge by signing this Agreement that you shall
be liable for all court costs, legal fees and incurred
expenses that are necessary to collect the unpaid or
delinquent fees.

CROSS OVER. If you shall employ any of my people to work


for you on full-time basis, a P150,000 buy-out fee
shall be handed to me.

Guarantee. I guarantee that as my client, you will


receive cost-effective professional service, which
shall be delivered on time. I promise to involve you
regularly with my work. I cannot guarantee outcomes
but i do guarantee your satisfaction with my
54
professional tax service. If i or my people do not
perform to your satisfaction, inform me promptly. So,
I shall resolve the issue to your satisfaction.

NOTICE: All snail mail to/from us shall be sent to the


addresses indicated herein unless a prior written
change of address is already sent to and received by
you/me.

SIGNATURE: You understand that this Agreement is


separate and distinct from other Agreement that we
have or have not. It supersedes all our prior
electronic, verbal or written agreements having the
same subject matter.

After you review and have a clear understanding of this


Agreement, place your signature below as an
indication of your oath to be legally bound to this
Agreement and all covenants attached thereto. Return
the signed, all copies to me or mail them to the
address below, along with your deposit and initial
fees. Later on, I will send you the original copy of it
containing my signature.

With the approval of the management/board of the


company that you represent, you voluntarily enter
into this Agreement knowingly understand and accept
the contents and consequences herein specified:

NAME OF DESIGNATED OFFICIAL / SIGNATURE


55

NAME OF THE COMPANY

ADDRESS / TELEPHONE NOS.

I concur:

ETM / AUTHORIZED SIGNATORY

30 Plaridel, Dona Aurora, Quezon City


T# 02-7420382 / 02-4393918

This Agreement is as many as the number of subject matters


which shall be considered as separate and distinct from one
another.

Pages and Counterparts. This has six [6] pages including its
schedules and three [3] counterparts, which shall legally
be considered as all originals.
56
SCHEDULE A
Title of subject matter:

Your role:

a. provide copies of communications to/from BIR;

b. have custody of books of accounts and available


accounting records;

c. supply primary evidences to support your claims


and information shown in the duly filed
statements, notices, returns and the likes;

d. have responsibility to the correctness of


provided data and information;

e. approve plans and programs that I recommend in


defending your factual and legal position;

f. prepare and keep updated books of accounts and


available accounting records;

g. prepare and provide other data that may be


required by the BIR;

h. sign and send all notices; and

i. pay deficiency tax, if there is any.


57
My role:

1. represent you before any BIR office;

2. reduce legally your deficiency tax;

3. prepare and submit to you factual and technical


position papers;

4. design, develop, devise and defend tax strategies,


plans, and procedures;

5. explain to you the benefits and risks involved in


employing my tax strategies, plans, and
procedures;

6. Not to prepare books of accounts or fabricate


any legal evidence;

7. promote and protect your business interest and


rights;

8. enter into legal compromise settlement with no


illegal transaction;

9. inform you the strength and weakness of BIR


position; and

10.do moral and legal acts as dictated by this


Agreement or the situation at hand.

Schedule B

Professional fee and its payment terms and


conditions

Tax case [_______] - P ___,000 net


58

PF -net

Grossed up rate for EWT 85%

Total pf with EWT

Vat rate 12%

Your input tax

PF with EWT and VAT

2307 WVT

2307 EWT

Good to Remember:

the fifty percent of the contract price net of


applicable taxes as well as the security deposit
and BIR Form No. 2307 shall be handed to me upon
signing this Agreement.

Failure on your part to hand me my 2307 shall mean


that you allow me to prepare and sign it for your
behalf.

As stated, I will give you the original copy of this


plus the required BIR-registered official receipt
of mine.

For the fifty percent balance, a 120 day post-dated


check shall also be handed to me once a copy of a
duly signed Agreement is supplied to you.

Thank you for trusting me and my people.

- end -
59

THE CAS

Creditors such as IMF, WB, ADB, JICA, etc, are questioning the
Government of the Republic of the Philippines [RP] why
despite producing and exporting more I.T. professionals
than other countries, its taxpayers are still using Jurassic,
traditional and manual accounting method of documenting,
recording and safekeeping their business transactions.

In reply, RP issued a general guideline through the Bureau of


Internal Revenue [BIR] that would set forth the contents
and format of an acceptable Computerized Accounting
System [CAS].

This policy direction has two [2] major benefits. First, taxpayers
who would shift to CAS method shall no longer be required
to show their books of accounts during tax mapping
operations. Lastly, RP may save admin costs that pertain to
examination and investigation of taxpayers’ books and
records because its staff shall no longer be required to visit
taxpayers’ offices, thereby, avoiding contacts with taxpayers
and eruption of miscommunication and corruption.

ETM believes that micro, small and medium taxpayers [MSMT]


should not be left behind when CAS revolution and invasion
60
rolled on. So, ETM designed, developed and distributes what
he called ‘CAS 4 MSMT’ or EMELINO T MAESTRO-
COMPUTERIZED TAX ACCOUNTING BOOKKEEPING
SOFTWARE [ETM-CTABS].

ETM CTABS reduces the works of MSMT’s bookkeepers,


accounting clerks and accountants from weeks into hours.
Isn’t it called ‘EFFICIENCY’?

Because ETM-CTABS is not only in conformity with the Tax


Code but also a multi-tasking machine, MSMT shall only
prepare and enter the five [5] business transactions [1]
sales entries, [2] purchase entries, [3] cash receipt entries,
[4] cash disbursement entries, and [5] adjusting entries and
ETM-CTABS will supply and provide nine [9] books of
accounts, ten [10] tax returns and reports, and one [1]
management report.

Unlike other CAS, which combined financial and managerial


accounting with tax accounting, ETM-CTABS caters only to
the needs and requirements of the Tax Code because ETM
believes that the law prevails over International Accounting
Standards [IAS] and managerial policies. Also, the
extinguishment of obligations that the law sets forth is
paramount and a priority over other types of obligations.

Use financial and managerial accounting, which composed of


confidential data and information for whatever purpose but
when Philippine taxation is concerned, the BIR has different
types of needs and requirements. It has high expectation
from MSMT that is IGNORANCE OF THE TAX CODE
DOES NOT EXIST.

For owning an ETM-CTABS, please call 742 0382 * 439 3918


61

THE DONATION

Those who have less in life should not be deprived of the true
and correct knowledge and knowhow in tax accounting.

Please donate cash or kind to help ETM continue his effort to


lessen ‘graft and corruption’ activity in the field of taxation
and support his NATIONAL TAX AWARENESS AND
LITERACY PROGRAM.

ETM needs your help and assistance as you need his


authoritative and professional advise.

Please deposit your donations to Bank of the Philippine Island -


D. Tuazon Branch - Emelino T Maestro’s Checking Account
numbered 9625-0022-46. A BIR-REGISTERED OFFICIAL
RECEIPT SHALL BE ISSUED.

I promise to use your donations to build lasting solutions


against IGNORANCE AND ITS AFTERMATH -
CORRUPTION.

Thank you very much.

April 2010, Manila City, Philippines


62

OWNERʼS NAME/ADDRESS/CONTACT#