Seminars Schedules

Changing Accounting Period – LT

Monday, 15 August 2011, 14:09 | Category : Updates
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Large Taxpayers Service (LTS) is now included in the policies, guidelines and procedures on the application for change in accounting period under Section 46 of the NIRC of 1997, as amended. This is by virtue of Revenue Regulations No. 9-2011 (RR No. 9-11) amended Revenue Regulations No. 3-2011 (RR N0. 3-11).

To initiate the change in accounting period for large taxpayers, a letter request addressed to the RDO or appropriate Large Taxpayers (LT) Office having jurisdiction over the place of business of the taxpayer must be submitted seeking approval for change in accounting period. Said letter must indicate the following:

a. The original accounting period and the proposed new accounting period to be adopted; and
b. The reasons for desiring to change the accounting period.

The reason stated should convince the BIR the need for such change so it would easily be approved.

Source:

REVENUE REGULATIONS NO. 9-2011: AMENDMENT TO REVENUE REGULATIONS NO. 03-2011 PROVIDING FOR THE POLICIES, GUIDELINES AND PROCEDURES ON THE APPLICATION FOR CHANGE IN ACCOUNTING PERIOD UNDER SECTION 46 OF THE NATIONAL INTERNAL REVENUE CODE (NIRC) OF 1997, AS AMENDED DATED 28 JUNE 2011

Principles of Sound Tax System

Sunday, 14 August 2011, 13:59 | Category : National Taxes
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The following are the basic principles of a sound tax system:

Fiscal adequacy means that government revenues from taxation must suffice to meet fiscal requirements. This implies that a good tax system of a State may not budget deficit.

Administrative feasibility means that tax laws, rules and regulations must be capable of being administered and complied with. Citizenry must easily understand its application for its compliance. No matter how willing and able a taxpayer in complying the mandates of a tax law if he could not comprehend, he could not fully comply the same without lapses. Notably, each error in compliance is penalized and good faith is not always a good defense.

Theoretical justice has something to do with taxpayer’s capacity to pay. Taxes imposed should be capable of being paid by the taxpayers; otherwise, its imposition would not serve the purpose because no matter how willing they are to pay, they are not capable of doing so.

I leave it now to you to determine whether or not Philippines has a sound tax system based on the above criteria.

Classifications of Taxes

To further understand the concept of taxes, the following classifications are commonly provided:

According to subject matter (What is being taxed?):

a. Property tax – imposed upon the property located in a particular community. Example is real property tax under the Local Government Code of the Philippines.
b. Personal tax – imposed upon a person belonging to a particular community. Example is the community tax certificates or sedula in common language.
c. Excise tax – imposed upon the exercise of certain rights and privileges.

According to who bears the burden (who actually pays the tax?):

a. Direct tax – the one who is required by law to shoulder the tax is the same person who is bound to remit the tax to the government. Examples: Income tax, the taxpayer who earns taxable income is the one taxed on such income and is the same person who is required to remit the tax due to the government; in donor’s tax, the donor is the one being taxed and is the one required to remit the tax due to the government. In case of non-payment, the government will run after the taxpayer.

b. Indirect tax – the one who is required by law to shoulder the tax is different from the one who is bound to remit the tax to the government. Typical example is the value-added tax (VAT), which is an indirect tax where the customers are being passed on the 12% but it is the seller establishment that is bound to remit the tax. In case the seller establishment fails to remit the tax, then, it is the one liable and not the consumers.

According to how amounts are determined:
a. Ad valorem – taxes imposed as a certain percentage based on the value of the taxable subject or article. Example, income tax is a percentage of taxable income – 30% if corporation, 5%-32% for individuals; value-added tax is 12% of the gross sales or gross receipts.

b. Specific tax – taxes imposed at a certain amount based on a unit of measure such as weight or volume. Example is excise tax on alcoholic products, a certain centavos/pesos based on volume of say, 100ml; tax on cigarettes that is a certain amount per pack of a particular cigarette grade.

According to administering authority:

a. National internal revenue tax or national tax – those imposed by the national government. Examples are VAT, income tax, donor’s tax, estate tax, other percentage tax.

b. Local taxes – those imposed by the local government units such as real property tax, community tax certificates, business taxes, idle lands tax, sand and gravel tax, etc. N.B. Special levy or special assessment is not a tax in technical sense because its purpose is not to raise revenue but simply to recover or to seek reimbursement of the cost of the public expenditure.

According to the purpose of the tax:
a. General – those whose proceeds go to the general fund of the government through the National Treasury, Bureau of Treasury (BTr). In government accounting, they are called general funds. As a rule, government revenues goes to the BTr through the general fund, appropriated to government agencies and instrumentalities through the Appropriations Act of the Congress, and from such budget, government agencies and instrumentalities disburse.
b. Special – those imposed for a particular or specific purpose. This is commonly imposed by special laws such as the Sugar Adjustment Act before that was used above as an example.

According to graduation
a. Proportional tax
b. Progressive tax
c. Regressive tax