Published 23 March 2020, The Daily Tribune
The government lives and breathes through taxation. Consistent is the Supreme Court in ruling that “taxes are the lifeblood of the government, and their prompt and certain availability is an imperious need. Taxes are the nation’s lifeblood through which government agencies continue to operate and which the State discharges its functions for the welfare of its constituents.” This was echoed in the 2018 case of Asian Transmission Corporation vs Commissioner of Internal Revenue (CIR) and the 2015 case of CIR vs Next Mobile, among others. The classic 1988 case of CIR vs Algue states that “without taxes, the government would be paralyzed for lack of the motive power to activate and operate it.”
This “lifeblood doctrine” has been invoked to validate many of the Bureau of Internal Revenue’s (BIR) action, including advanced collection of taxes, the no-injunction rule in taxation, taxes being a preferred credit, among others. Staying true to the doctrine, even with the precarious situation brought about by COVID-19 and the declaration of a State of Public Health Emergency under Proclamation 929 series of 2020 by the Office of the President, the BIR has to remain resolute in collecting taxes. This revolves in one overarching consideration: the government needs to collect taxes, now and as mandated by law.
It is important to underscore that deadlines are etched in law. It is a basic principle that what is set forth in law can only be changed by another law — by an act of the legislature. For instance, Section 77(B) of the Tax Code provides that the final adjustment return, which is the annual income tax return (ITR), shall be filed on or before the fifteenth (15th) day of April if the corporation follows the calendar year. The BIR, being an administrative agency under the Executive branch, cannot encroach upon the power of the legislative department to amend Section 77(B), unless expressly authorized by law.
However, in times of crisis, when mobility and manpower are restricted, can the BIR do anything to adjust to the taxpayers’ predicament? Does the BIR have the power to prevent the goose that lays the golden egg from perishing as it complies with tax obligations?
The Tax Code does not leave the BIR incapable. Section 53 of the Tax Code provides that the CIR may, in meritorious cases, grant a reasonable extension of time for filing returns of income. The phraseology does not include returns of other taxes. Independent of Section 53, in RMC 07-2020, the CIR “found it proper to suspend the deadlines, for the month of January (2020), on the filing and payment of tax returns in Batangas until such time that the situation returns to normal” due to the eruption of the Taal Volcano. Just this week, in Revenue Memorandum Circular (RMC) 28-2020 dated 18 March 2020, the BIR pushed the deadline of the annual ITR to 15 May. In RMC 29-2020 dated 19 March 2020, the BIR extended the deadlines of various taxes for the February and March 2020 period such as the February monthly value-added tax (VAT) declaration, the March 2020 final quarterly VAT return, documentary stamp tax return, the withholding tax return, among others, by one full month.
Relaxing documentary requirements may also be done. For instance, the filing of the Sworn Declaration of Loss Arising from Casualty, Theft, Robbery or Embezzlement (BIR Form 0806) was extended by the BIR in RMC 018-2014 for victims of super typhoon “Yolanda.” In the earlier mentioned RMC 25-2020 on 2019 ITR, the BIR extended submission of the required attachment to 15 June 2020.
Further, Section 204(B) of the Tax Code recognizes the CIR’s power to abate or cancel a tax liability. Of particular note is the fact that late filing and amending of returns may give rise to the imposition of now 12 percent interest per annum and 25 percent surcharge pursuant to Sections 248 and 249 of the Tax Code, in addition to the compromise penalties for failure to file or pay internal revenue taxes at the time required by law or regulations. All of these — interest, surcharges and compromise penalties — may be the subject of abatement.
For instance, when the RELIEF system was introduced, BIR strengthened the Voluntary Assessment and Abatement Program through Revenue Regulations (RR) 12-2002. The BIR has likewise made abatements available in RR 15-2006 and RR 3-2007 to encourage tax settlements. When the eFPS system went down due to the volume of taxpayers filing and paying, the penalties attendant to the late filing of returns and payment were waived pursuant to RMC 28-2014. In all of these, the CIR effectively invoked its power to abate or cancel tax liabilities pursuant to Section 2o4(B) of the Tax Code.
In RMC 25-2020, specifically referring to the 2019 annual ITR, the BIR stated in no uncertain terms that “an amendment that will result to additional income tax to be paid can still be paid without the imposition of corresponding penalties if the same shall be done not later than 15 June 2020.” Notwithstanding that the additional income taxes that may be paid beyond the deadline of 15 May, RMC 25-2020 and RMC 28-2020 operate as a unilateral waiver of interest, surcharge and compromise penalties.
The BIR, however, lamented the delay in tax collections amounting to P145 billion. With this, taxpayers should endeavor filing returns and paying taxes within the statutory deadline. Early filing is encouraged for taxpayers to not crowd banks and/or BIR offices, and be able to observe social distancing. Further, online payment platforms may likewise be utilized by the taxpayer to avoid going out during the period of quarantine. These tax revenues are crucial, particularly considering that the government may utilize these funds to fight COVID-19.
When the lives of taxpayers are on the line, the BIR may grant concessions: waive penalties, relax documentary requirements, and extend deadlines. However, in times when government funds are needed to set up defenses against the ravaging pandemic, taxes are indeed the lifeblood of the government.
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