SECTION 1.
Short Title
- This Act shall be cited as the "Tax Reform Act of 1997".
SEC. 2.
State Policy.
– It is hereby declared the policy of the State to promote sustainable
economic growth through the rationalization of the Philippine internal
revenue tax system, including tax administration; to provide, as much
as
possible, an equitable relief to a greater number of taxpayers in order
to improve levels of disposable income and increase economic activity;
and to create a robust environment for business to enable firms to
compete
better in the regional as well as the global market, at the same time
that
the State ensures that Government is able to provide for the needs of
those
under its jurisdiction and care.
SEC. 3.
Presidential Decree No. 1158, as amended by, among others, Presidential
Decree No. 1994 and Executive Order No. 273, otherwise known as the
National
Internal Revenue Code, is hereby further amended.
TITLE
IORGANIZATION
AND FUNCTION OFTHE
BUREAU
OF INTERNAL REVENUE
SECTION 1. Title
of the Code.
- This Code shall be known as the National Internal Revenue Code of
1997.
SEC.
2. Powers and Duties of the Bureau of Internal Revenue.
- The Bureau of Internal Revenue shall be under the supervision and
control
of the Department of Finance and its powers and duties shall comprehend
the assessment and collection of all national internal revenue taxes,
fees,
and charges, 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.
SEC.
3. Chief Officials of the Bureau of Internal Revenue.
- The Bureau of Internal Revenue shall have a chief to be known
as
Commissioner of Internal Revenue, hereinafter referred to as the
Commissioner
and four (4) assistant chiefs to be known as Deputy Commissioners.
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 of 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.
SEC.
5. Power of the Commissioner to Obtain Information, and to Summon,
Examine,
and Take Testimony of Persons.
- In ascertaining the correctness of any return, or in making a return
when none has been made, or in determining the liability of any person
for any internal revenue tax, or in collecting any such liability, or
in
evaluating tax compliance, the Commissioner is authorized:
(A)
To examine any book, paper, record, or other data which may be relevant
or material tosuch inquiry;
(B) To obtain
on
a regular basis from any person other than the person whose internalrevenue tax liability is subject to audit or investigation, or from any
office or officer of thenational and local governments, government agencies and
instrumentalities,
including theBangko Sentral ng Pilipinas and government-owned or -controlled
corporations,
any
information such as, but not limited to, costs and volume of
production,
receipts or sales
and gross incomes of taxpayers, and the names, addresses, and financial
statements of
corporations, mutual fund companies, insurance companies, regional
operatingheadquarters of multinational companies, joint accounts, associations,
joint ventures ofconsortia and registered partnerships, and their members;
(C) To summon
the
person liable for tax or required to file a return, or any officer or
employee of such person, or any person having possession, custody, or
care
of thebooks of accounts and other accounting records containing entries
relating
to thebusiness of the person liable for tax, or any other person, to appear
before
theCommissioner or his duly authorized representative at a time and place
specifiedin the summons and to produce such books, papers, records, or other
data,
andto give testimony;
(D) To take
such
testimony of the person concerned, under oath, as may be relevant or
material to such inquiry; and
(E) To cause
revenue
officers and employees to make a canvass from time to time of anyrevenue district or region and inquire after and concerning all persons
therein who may beliable to pay any internal revenue tax, and all persons owning or
having
the care,management or possession of any object with respect to which a tax is
imposed.
The
provisions
of the foregoing paragraphs notwithstanding, nothing in this Section
shall
be construed as granting the Commissioner the authority to inquire into
bank deposits other than as provided for in Section 6(F) of this Code.
SEC.
6. Power of the Commissioner to Make assessments and Prescribe
additional
Requirements for Tax Administration and Enforcement.
-
(A) Examination
of Returns and Determination of Tax Due. - After a return has been
filed asrequired under the provisions of this Code, the Commissioner or his
duly
authorizedrepresentative may authorize the examination of any taxpayer and the
assessmentof the correct amount of tax: Provided, however; That failure
to
file a return shall not
prevent the Commissioner from authorizing the examination of any
taxpayer.
Any return,
statement
of declaration filed in any office authorized to receive the same shall
not be withdrawn: Provided, That within three (3) years from
the
date of such filing, the same may be modified, changed, or amended: Provided,
further, That no notice for audit or investigation of such return,
statement or declaration has in the meantime been actually served upon
the taxpayer.
(B) Failure to
Submit
Required Returns, Statements, Reports and other Documents. - Whena report required by law as a basis for the assessment of any national
internal revenuetax shall not be forthcoming within the time fixed by laws or rules and
regulations orwhen there is reason to believe that any such report is false,
incomplete
or erroneous,the Commissioner shall assess the proper tax on the best evidence
obtainable.
In case a
person
fails to file a required return or other document at the time
prescribed
by law, or willfully or otherwise files a false or fraudulent return or
other document, the Commissioner shall make or amend the return from
his
own knowledge and from such information as he can obtain through
testimony
or otherwise, which shall be prima facie correct and sufficient for all
legal purposes.
(C) Authority
to
Conduct Inventory-taking, surveillance and to Prescribe Presumptive
GrossSales and Receipts. - The Commissioner may, at any time during the
taxable year, orderinventory-taking of goods of any taxpayer as a basis for determining
his
internal revenuetax liabilities, or may place the business operations of any person,
natural
or juridical,under observation or surveillance if there is reason to believe that
such
person is not
declaring his correct income, sales or receipts for internal revenue
tax
purposes. Thefindings may be used as the basis for assessing the taxes for the other
months orquarters of the same or different taxable years and such assessment
shall
be deemedprima facie correct.
When it is
found
that a person has failed to issue receipts and invoices in violation of
the requirements of Sections 113 and 237 of this Code, or when there is
reason to believe that the books of accounts or other records do not
correctly
reflect the declarations made or to be made in a return required to be
filed under the provisions of this Code, the Commissioner, after taking
into account the sales, receipts, income or other taxable base of other
persons engaged in similar businesses under similar situations or
circumstances
or after considering other relevant information may prescribe a minimum
amount of such gross receipts, sales and taxable base, and such amount
so prescribed shall be prima facie correct for purposes of determining
the internal revenue tax liabilities of such person.
(D) Authority
to
Terminate Taxable Period. - When it shall come to the knowledge of
theCommissioner that a taxpayer is retiring from business subject to tax,
or is intending toleave the Philippines or to remove his property therefrom or to hide or
conceal hisproperty, or is performing any act tending to obstruct the proceedings
for the collection ofthe tax for the past or current quarter or year or to render the same
totally
or partlyineffective unless such proceedings are begun immediately, the
Commissioner
shalldeclare the tax period of such taxpayer terminated at any time and
shall
send thetaxpayer a notice of such decision, together with a request for the
immediate
paymentof the tax for the period so declared terminated and the tax for the
preceding
year orquarter, or such portion thereof as may be unpaid, and said taxes shall
be due andpayable immediately and shall be subject to all the penalties hereafter
prescribed,unless paid within the time fixed in the demand made by the
Commissioner.
(E) Authority
of the Commissioner to Prescribe Real Property Values. - The
Commissioner
ishereby authorized to divide the Philippines into different zones or
areas
and shall, uponconsultation with competent appraisers both from the private and public
sectors,determine the fair market value of real properties located in each zone
or area. Forpurposes of computing any internal revenue tax, the value of the
property
shall be,whichever is the higher of:
(1) the fair
market
value as determined by the Commissioner, or
(2) the fair
market
value as shown in the schedule of values of the Provincial and CityAssessors.
(F) Authority
of
the Commissioner to inquire into Bank Deposit Accounts. -
Notwithstandingany contrary provision of Republic Act No. 1405 and other general or
special
laws, theCommissioner is hereby authorized to inquire into the bank deposits of:
(1) a
decedent
to determine his gross estate; and
(2) any
taxpayer
who has filed an application for compromise of his tax liability underSec. 204 (A) (2) of this Code by reason of financial incapacity to pay
his tax liability.
In case a taxpayer
files an application to compromise the payment of his tax liabilities
on
his claim that his financial position demonstrates a clear inability to
pay the tax assessed, his application shall not be considered unless
and
until he waives in writing his privilege under Republic Act No. 1405 or
under other general or special laws, and such waiver shall constitute
the
authority of the Commissioner to inquire into the bank deposits of the
taxpayer.
(G) Authority
to
Accredit and Register Tax Agents. - The Commissioner shall
accredit
andregister, based on their professional competence, integrity and moral
fitness,
individualsand general professional partnerships and their representatives who
prepare
and file taxreturns, statements, reports, protests, and other papers with or who
appear
before, theBureau for taxpayers. Within one hundred twenty (120) days from January
1, 1998, theCommissioner shall create national and regional accreditation boards,
the
members ofwhich shall serve for three (3) years, and shall designate from among
the
senior officialsof the Bureau, one (1) chairman and two (2) members for each board,
subject
to suchrules and regulations as the Secretary of Finance shall promulgate upon
therecommendation of the Commissioner.
Individuals
and
general professional partnerships and their representatives who are
denied
accreditation by the Commissioner and/or the national and regional
accreditation
boards may appeal such denial to the Secretary of Finance, who shall
rule
on the appeal within sixty (60) days from receipt of such appeal.
Failure
of the Secretary of Finance to rule on the Appeal within the prescribed
period shall be deemed as approval of the application for accreditation
of the appellant.
(H) Authority
of
the Commissioner to Prescribe Additional Procedural or DocumentaryRequirements. - The Commissioner may prescribe the manner of
compliance
with anydocumentary or procedural requirement in connection with the submission
or preparationof financial statements accompanying the tax returns.
SEC.
7. Authority of the Commissioner to Delegate Power.
- The Commissioner may delegate the powers vested in him under the
pertinent
provisions of this Code to any or such subordinate officials with the
rank
equivalent to a division chief or higher, subject to such limitations
and
restrictions as may be imposed under rules and regulations to be
promulgated
by the Secretary of finance, upon recommendation of the Commissioner: Provided,
however, That the following powers of the Commissioner shall not be
delegated:
(a) The power
to
recommend the promulgation of rules and regulations by the Secretary ofFinance;
(b) The power
to
issue rulings of first impression or to reverse, revoke or modify any
existingruling of the Bureau;
(c) The power
to
compromise or abate, under Sec. 204 (A) and (B) of this Code, any taxliability: Provided, however, That assessments issued by the
regional
offices involvingbasic deficiency taxes of Five hundred thousand pesos (P500,000) or
less,
and minorcriminal violations, as may be determined by rules and regulations to
be
promulgated bythe Secretary of finance, upon recommendation of the Commissioner,
discovered
byregional and district officials, may be compromised by a regional
evaluation
board whichshall be composed of the Regional Director as Chairman, the Assistant
Regional
Director,the heads of the Legal, Assessment and Collection Divisions and the
Revenue
District
Officer having jurisdiction over the taxpayer, as members; and
(d) The power
to
assign or reassign internal revenue officers to establishments where
articlessubject to excise tax are produced or kept.
SEC.
8. Duty of the Commissioner to Ensure the Provision and
Distribution
of forms, Receipts, Certificates, and Appliances, and the
Acknowledgment
of Payment of Taxes.-
(A) Provision
and Distribution to Proper Officials. - It shall be the duty of theCommissioner, among other things, to prescribe, provide, and distribute
to theproper officials the requisite licenses internal revenue stamps, labels
all otherforms, certificates, bonds, records, invoices, books, receipts,
instruments,appliances and apparatus used in administering the laws falling within
thejurisdiction of the Bureau. For this purpose, internal revenue stamps,
stripstamps and labels shall be caused by the Commissioner to be printed withadequate security features.
Internal
revenue
stamps, whether of a bar code or fusion design, shall be firmly and
conspicuously
affixed on each pack of cigars and cigarettes subject to excise tax in
the manner and form as prescribed by the Commissioner, upon approval of
the Secretary of Finance.
(B) Receipts
for
Payment Made. - It shall be the duty of the Commissioner or his
dulyauthorized representative or an authorized agent bank to whom any
payment
ofany tax is made under the provision of this Code to acknowledge the
paymentof such tax, expressing the amount paid and the particular account for
which such
payment was made in a form and manner prescribed therefor by the
Commissioner.
SEC.
9. Internal Revenue Districts.
- With the approval of the Secretary of Finance, the Commissioner shall
divide the Philippines into such number of revenue districts as may
form
time to time be required for administrative purposes. Each of these
districts
shall be under the supervision of a Revenue District Officer.
SEC.
10. Revenue Regional Director.
- Under rules and regulations, policies and standards formulated by the
Commissioner, with the approval of the Secretary of Finance, the
Revenue
Regional director shall, within the region and district offices under
his
jurisdiction, among others:
(a) Implement
laws,
policies, plans, programs, rules and regulations of the department oragencies in the regional area;
(b)
Administer
and enforce internal revenue laws, and rules and regulations, including
theassessment and collection of all internal revenue taxes, charges and
fees.
(c) Issue
Letters
of authority for the examination of taxpayers within the region;
(d) Provide
economical,
efficient and effective service to the people in the area;
(e)
Coordinate
with regional offices or other departments, bureaus and agencies in the
area;
(f)
Coordinate
with local government units in the area;
(g) Exercise
control
and supervision over the officers and employees within the region; and
(h) Perform
such
other functions as may be provided by law and as may be delegatedby the Commissioner.
SEC.
11. Duties of Revenue District Officers and Other Internal Revenue
Officers.
- It shall be the duty of every Revenue District Officer or other
internal
revenue officers and employees to ensure that all laws, and rules and
regulations
affecting national internal revenue are faithfully executed and
complied
with, and to aid in the prevention, detection and punishment of frauds
of delinquencies in connection therewith.
It shall be the
duty
of every Revenue District Officer to examine the efficiency of all
officers
and employees of the Bureau of Internal Revenue under his supervision,
and to report in writing to the Commissioner, through the Regional
Director,
any neglect of duty, incompetency, delinquency, or malfeasance in
office
of any internal revenue officer of which he may obtain knowledge, with
a statement of all the facts and any evidence sustaining each case.
SEC.
12. Agents and Deputies for Collection of National Internal Revenue
Taxes.
- The following are hereby constituted agents of the Commissioner:
(a) The
Commissioner
of Customs and his subordinates with respect to the collection ofnational internal revenue taxes on imported goods;
(b) The head
of
the appropriate government office and his subordinates with respect to
thecollection of energy tax; and
(c) Banks
duly
accredited by the Commissioner with respect to receipt of payments
internalrevenue taxes authorized to be made thru bank.
Any officer
or
employee of an authorized agent bank assigned to receive internal
revenue
tax payments and transmit tax returns or documents to the Bureau of
Internal
Revenue shall be subject to the same sanctions and penalties prescribed
in Sections 269 and 270 of this Code.
SEC.
13. Authority of a Revenue Offices.
- subject to the rules and regulations to be prescribed by the
Secretary
of Finance, upon recommendation of the Commissioner, a Revenue Officer
assigned to perform assessment functions in any district may, pursuant
to a Letter of Authority issued by the Revenue Regional Director,
examine
taxpayers within the jurisdiction of the district in order to collect
the
correct amount of tax, or to recommend the assessment of any deficiency
tax due in the same manner that the said acts could have been performed
by the Revenue Regional Director himself.
SEC.
14. Authority of Officers to Administer Oaths and Take Testimony.
- The Commissioner, Deputy Commissioners, Service Chiefs, Assistant
Service
Chiefs, Revenue Regional Directors, Assistant Revenue Regional
Directors,
Chiefs and Assistant Chiefs of Divisions, Revenue District Officers,
special
deputies of the Commissioner, internal revenue officers and any other
employee
of the Bureau thereunto especially deputized by the Commissioner shall
have the power to administer oaths and to take testimony in any
official
matter or investigation conducted by them regarding matters within the
jurisdiction of the Bureau.
SEC.
15. Authority of Internal Revenue Officers to Make Arrests and
Seizures.
- The Commissioner, the Deputy Commissioners, the Revenue Regional
Directors, the Revenue District Officers and other internal revenue
officers
shall have authority to make arrests and seizures for the violation of
any penal law, rule or regulation administered by the Bureau of
Internal
Revenue. Any person so arrested shall be forthwith brought before a
court,
there to be dealt with according to law.
SEC.
16. Assignment of Internal Revenue Officers Involved in Excise Tax
Functions
to Establishments Where Articles subject to Excise Tax are Produced or
Kept.
- The Commissioner shall employ, assign, or reassign internal
revenue
officers involved in excise tax functions, as often as the exigencies
of
the revenue service may require, to establishments or places where
articles
subject to excise tax are produced or kept: Provided, That an
internal
revenue officer assigned to any such establishment shall in no case
stay
in his assignment for more than two (2) years, subject to rules and
regulations
to be prescribed by the Secretary of Finance, upon recommendation of
the
Commissioner.
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
function 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.
SEC.
18. Reports of Violation of Laws.
- When an internal revenue officer discovers evidence of a violation of
this Code or of any law, rule or regulations administered by the Bureau
of Internal Revenue of such character as to warrant the institution of
criminal proceedings, he shall immediately report the facts to the
Commissioner
through his immediate superior, giving the name and address of the
offender
and the names of the witnesses if possible: Provided, That in
urgent
cases, the Revenue Regional director or Revenue District Officer, as
the
case may be, may send the report to the corresponding prosecuting
officer
in the latter case, a copy of his report shall be sent to the
Commissioner.
SEC.
19. Contents of Commissioner's Annual Report.
- The Annual Report of the Commissioner shall contain detailed
statements
of the collections of the Bureau with specifications of the sources of
revenue by type of tax, by manner of payment, by revenue region and by
industry group and its disbursements by classes of expenditures.
In case the
actual
collection exceeds or falls short of target as set in the annual
national
budget by fifteen percent (15%) or more, the Commissioner shall explain
the reason for such excess or shortfall.
SEC.
20. Submission of Report and Pertinent Information by the
Commissioner
(A) Submission
of Pertinent Information to Congress. - The provision of Section
270
of thisCode to the contrary notwithstanding, the Commissioner shall, upon
request
ofCongress and in aid of legislation, furnish its appropriate Committee
pertinentinformation including but not limited to: industry audits, collection
performance
data,status reports in criminal actions initiated against persons and
taxpayer's
returns:Provided, however, That any return or return information
which can
be associatedwith, or otherwise identify, directly or indirectly, a particular
taxpayer
shall befurnished the appropriate Committee of Congress only when sitting in
ExecutiveSession Unless such taxpayer otherwise consents in writing to such
disclosure.
(B) Report
to
Oversight Committee. - The Commissioner shall, with reference to
Section
204of this Code, submit to the Oversight Committee referred to in Section
290 hereof,through the Chairmen of the Committee on Ways and Means of the Senate
and
Houseof Representatives, a report on the exercise of his powers pursuant to
the said section,every six (6) months of each calendar year.
SEC.
21. Sources of Revenue.
- The following taxes, fees and charges are deemed to be national
internal
revenue taxes:
(a) Income tax;
(b) Estate and
donor's
taxes;
(c) Value-added
tax;
(d) Other percentage
taxes;
(e) Excise taxes;
(f)
Documentary
stamp taxes; and
(g) Such other taxes
as are or hereafter may be imposed and collected by the Bureau ofInternal Revenue. |