TAX EXEMPTION – a grant of immunity to Q: The BIR assessed Garments Co deficiencies on

particular persons or corporations from the taxes for non-payment of VAT on its undeclared
A tax amnesty, much like a tax exemption, is never obligation to pay taxes. sales. While the case was pending before the SC,
favored or presumed in law. The grant of a tax amnesty, Garment Co filed a Manifestation and Motion that it
similar to a tax exemption, must be construed strictly LEGAL BASIS: had availed and was able to comply with the
against the taxpayer and liberally in favor of the taxing government’s tax amnesty program under the
authority (Asia International Auctioneers, Inc. v. CIR, No law granting any tax exemption shall be 2007 Tax Amnesty Law. However, BIR contends
G.R. No. 179115, September 26, 2012). passed without the concurrence of a majority that Garment Co is disqualified per “BIR RMC 19-
of all the members of Congress 2008” or “A Basic Guide on the Tax Amnesty Act of
(ART VI.SEC 28(4) OF THE 1987 2007” which disqualifies taxpayers with issues
CONSTITUTION) and cases that were ruled by any court (even
NATURE OF TAX AMNESTY
without finality) in favor of the BIR prior to
DIFFERENCES: amnesty availment of the taxpayer. Did Garment
TAX AMNESTY TAX EXEMPTION Co qualify for the tax amnesty program?
1. General or intentional overlooking by the
state of its authority to impose penalties Immunity from all Immunity from civil
criminal, civil and liability only A: YES. While tax amnesty, similar to a tax exemption,
on persons otherwise guilty of evasion or
administrative must be construed strictly against the taxpayer and
violation of a revenue or tax law.
liabilities arising liberally in favor of the taxing authority, it is also a
2. Partakes of an absolute forgiveness of from non payment wellsettled doctrine that the rule-making power of
waiver of the government of its right to of taxes administrative agencies cannot be extended to amend or
collect. Applies only to past Prospective expand statutory requirements or to embrace matters
3. To give tax evaders, who wish to relent tax periods, hence application not originally encompassed by the law. Administrative
and are willing to reform a chance to do retroactive
regulations should always be in accord with the
so. application
provisions of the statute they seek to carry into effect,
and any resulting inconsistency shall be resolved in
RULES ON TAX AMNESTY favour of the basic law. Thus, BIR RMC 19-2008 is
Questions:
invalid as the exception goes beyond the scope of the
1. Tax amnesty a) like tax exemption, it is Q: Does the mere filing of tax amnesty return provisions of the 2007 Tax Amnesty Law (CS Garment,
never favored nor presumed b) construed shield the taxpayer from immunity against Inc. v. CIR, G.R. No. 182399, March 12, 2014).
strictly against the taxpayer (must show prosecution? -----
complete compliance with the law)
2. Government not estopped from questioning A: NO. The taxpayer must have voluntarily disclosed his Tax Payer Suit
the tax liability even if amnesty tax payments previously untaxed income and must have paid the
It is a case where the act complained of directly involves
were already received. corresponding tax on such previously untaxed income
the illegal disbursement of public funds collected
(People v. Judge Castañeda, 165 SCRA 327[1988]).
through taxation.
Reason: Erroneous application and
enforcement of the law by public officers do -----
In the case of Abaya v. Ebdane (515 SCRA 720), the
not block subsequent correct application of the prevailing doctrine in the taxpayer’s suits is:
Q: Can a taxpayer claim tax amnesty if he is a
statute. The government is never estopped by
withholding tax agent?
mistakes or errors of its agents. 1. To allow the taxpayers to question contracts entered
A: The claim of a taxpayer under a tax amnesty shall be into by the National Government or government owned
Basis: Lifeblood Theory allowed when the liability involves the deficiency in and controlled corporations allegedly in contravention of
payment of income tax. However, it must be disallowed law;
3.Defense of tax amnesty, like insanity, is a when the taxpayer is assessed on his capacity as a
personal defense. 2. To allow the taxpayer to sue when there is a claim
withholding tax agent because the person who earned
Reason: Relates to the circumstances of a that public funds are illegally disbursed or public money
the taxable income was another person other than the
particular accused and not the character of the is being deflected to any improper purpose, or that there
withholding agent (LG Electronics Philippines, Inc. v.
acts charged in the information. is a wastage of public funds through the enforcement of
CIR, G.R. No. 165451, December 3, 2014).
an invalid or unconstitutional law;
---------------------------------------------------- -----
 1. Public funds derived from taxation are disbursed by a A. GENERAL OR INDIRECT CONSTITUTIONAL
political subdivision or instrumentality and in doing so, a LIMITATIONS
3. Significantly, a taxpayer need not be a party to the law is violated or some irregularity is committed; and
contract to challenge its validity.
1. Due Process Clause (Art. III, Sec. 1,
NOTE: A taxpayer’s suit would fail if what are alleged to
A taxpayer is allowed to sue where there is a 1987 Constitution)
be illegally disposed of are object which were acquired
claim that public funds are illegally disbursed, or that from private sources (Joya, et al. v. PCGG, et al., G.R.
Requisites:
No. 96541, August 24, 1993).
a. The interests of the public as distinguished
2. The petitioner is directly affected by the alleged act.
public money is being deflected to any improper from those of a particular class require the
purpose, or that there is wastage of public funds through intervention of the State. (Substantive
the enforcement of an invalid or unconstitutional law limitation)
(Land Bank of the Philippines v. Cacayuran, 696 SCRA i. Interpretation, Application (Construction) b. The means employed must be reasonably
861, G.R. No. 191667, April 17, 2013). of Tax Laws; necessary to the accomplishment of the
purpose and not unduly oppressive.
A taxpayer’s suit is proper only when there is an - In case of doubt, tax laws must be (Procedural limitation)
exercise by the Congress of its spending or taxing
construed strictly against the state and
power.
liberally in favor of the taxpayer. The constitutionality of a legislative taxing act
In the case of a taxpayer’s suit, plaintiff is allowed questioned on the ground of denial of due process
GR: Tax statutes must be construed strictly against requires the existence of an actual case or
to sue where there is a claim that public funds are
illegally disbursed, or that public money is being
the government and liberally in favor of the taxpayer controversy.
deflected to any improper purpose, or that there is a (MCIAA v. Marcos, G.R. No. 120082 September 11,
wastage of public funds through the enforcement of an 1996). The imposition of a tax cannot be presumed. 2. Equal Protection Clause ( Art. III,
invalid or unconstitutional law (Francisco, Jr. v. Sec. 1, 1987 Constitution
Nagmamalasakit na mga Manananggol ng mga
Manggagawang Pilipino, Inc., 415 SCRA 44, G.R. No.
Requisites of a Valid Classification:
XPN: Unless a statute imposes a tax clearly,
160262, November 10, 2003).
expressly and unambiguously, what applies is the a. based upon substantial distinctions
In a citizen’s suit, the interest of the petitioner assailing equally wellsettled rule that the imposition of a tax
cannot be presumed. Where there is doubt, tax laws b. germane to the purposes of the law
the constitutionality of a statute must be direct and
personal. He must be able to show, not only that the law must be construed strictly against the government
c. not limited to existing conditions only
or any government act is invalid, but also that he and in favour of the taxpayer. This is because taxes
sustained or is in imminent danger of sustaining some are burdens on the taxpayer, and should not be d.apply equally to all members of the class
direct injury as a result of its enforcement, and not unduly imposed or presumed beyond what the
merely that he suffers thereby in some indefinite way. It statutes expressly and clearly import (CIR v. The
must appear that the person complaining has been or is Philippine American Accident Insurance, Inc., 453
about 3. Freedom Of Speech And Of The Press (Art. III,
SCRA 668,
G.R. No. 141658 March 18, 2005). Sec. 4, 1987 Constitution)

The rule that, in case of doubt of legislative intent, There is curtailment of press freedom and freedom of
to be denied some right or privilege to which he is
the doubt must be liberally construed in favor of thought and expression if a tax is levied in order to
lawfully entitled or that he is about to be subjected to
taxpayer does not extend to cases involving the suppress this basic right and impose a prior restraint.
some burdens or penalties by reason of the statute or
act complained of (Francisco, Jr. v. Nagmamalasakit na issue of the validity of the tax law itself which, in (Tolentino vs. Secretary of Finance, GR No. 115455,
mga Manananggol ng mga Manggagawang Pilipino, Inc., every case, is presumed valid. August 25, 1994)
415 SCRA 44, G.R. No. 160262, November 10, 2003).
4. Non-Infringement Of Religious Freedom And
2. Constitutional and Inherent Limitations Worship (Art. III, Sec. 5, 1987 Constitution)
on the Power of Tax.
Two (2) requisites of a Taxpayer’s suit:
TAXATION LAW REVIEWER
Based on the lectures of Atty. Gerald Yu
SRT Faelnar Notes