Tax Remedies of the Government

Importance
1. They enhance and support the government’s tax collection.
2. They are safeguards of taxpayer’s rights against arbitrary action.

TAX COLLECTION CANNOT BE RESTRAINED BY COURT INJUNCTION (SEC. 218, 1997 NIRC)

Justification: Lifeblood Theory

Exception: Injunction may be issued by the CTA in aid of its appellate jurisdiction under RA 1125 (as
amended by RA 9282).

Conditions for the Issuance of an Injunction by the Court of Tax Appeals

a. If in its opinion the same may jeopardize the interest of the government and/or the taxpayer.
b. In this instance, the court may require the taxpayer either to deposit the amount claimed or file a
surety bond for not more than double the amount with the court.

* Before enforcement of remedies, assessment is necessary to trigger the process. If no return is filed, the
Commissioner is empowered to obtain information, and to summon/examine, and take testimony of persons to
determine the amount of tax due. (Sec.5, 1997 NIRC)

TAX REMEDIES OF THE GOVERNMENT TO EFFECT COLLECTION OF TAXES

1. Compromise (Sec. 204)
2. Distraint (Actual and Constructive)(Secs. 205-208)
3. Levy (Sec. 207B)
4. Tax Lien (Sec. 219)
5. Civil Action (Sec. 221)
6. Criminal Action (Secs. 221, and 222)
7. Forfeiture of Property (Sec.224-225)
8. Suspension of business operations in violation of VAT(Sec. 115)
9. Enforcement of Administrative Fine

Judicial Actions

- Civil and criminal actions and proceedings instituted in behalf of the Government under the
authority of the Tax Code or other laws enforced by the Bureau of Internal Revenue shall be
filed with the regular courts and brought in the name of the Government of the Philippines and
shall be conducted by the legal officers of the BIR (Sec. 220, NIRC)
- “Any provision of Laws or Rules of Court to the contrary notwithstanding, the criminal action
and corresponding civil action should be simultaneously instituted within the same proceedings
and no right to reserve such similar action separately from the criminal action will be
recognized. (Sec. 7[b][1] or RA 1125, as amended by RA 9282).
- No civil or criminal actions for the recovery of taxes or the enforcement of any fine, penalty, or
forfeiture shall be filed without the approval of the Commissioner of Internal Revenue. (Sec.
220, NIRC). The approval of the Commissioner required for the judicial enforcement of tax
 liability is not jurisdictional; the lack of such approval merely affects the cause of action or
capacity to sue. (Arches vs. Bellosillo, 20 SCRA 32)
- Revenue Administrative Order Nos 5-83 and 10-95 allows delegation of the authority of the
Commissioner to file civil and criminal cases to the Regional Directors and to be handled by
Special Attorney in the Legal Branch of the Revenue Region.

Civil Actions

- For tax remedy purposes, these are actions instituted by the government to collect
internal revenue taxes. It includes filing by the government with the probate court
claims against the deceased taxpayer.

Two Ways to enforce civil liability through civil action

1.By filing a civil case for collection of a sum of money with the proper regular court; or
2.By filing an answer to the petition for review filed by taxpayer with CTA

When Resorted To?

1.When a tax is assessed but the assessment becomes final and unappealable because the
taxpayer fails to file an administrative protest with the CIR within 30 days from receipt; or

2.When a protest against assessment is filed and a decision of the CIR was rendered but the said
decision becomes final, executory, and demandable for failure of the taxpayer to appeal the
decision to the CTA within 30 days from receipt of the decision.

3. When the protest is not acted upon by the CIR within 180 days from the submission of the
documents and the taxpayer failed to appeal with the CTA within 30 days from the lapse of the
180 days period(Sec. 228, NIRC).

Where to File

1.Court of Tax Appeals – where the principal amount of taxes and fees, exclusive of charges and
penalties claimed is One million pesos and above.
2.Regional Trial Court, Municipal Trial Court, Metropolitan Trial Court –where the principal
amount of taxes and fees, exclusive of charges and penalties claimed is less than One million
pesos. (Sec. 7, RA No. 9282)

Defenses which are Precluded by Final and Executory Assessments

1. Invalidity or illegality of the assessment; and

2. Prescription of the government’s right to assess.

Criminal Actions
 - In criminal actions, the judgment of the court shall not only impose the penalty but likewise
order payment of the taxes subject of the criminal case as finally decided by the Commissioner
of Internal Revenue. (Sec. 295, NIRC)

Purpose for filing a criminal complaint

Criminal complaint is instituted not to demand payment but to penalize taxpayer for the
violation of the NIRC.

Criminal action is resorted to not only for collection of taxes but also for enforcement of
statutory penalties of all sorts.

Two common crimes punishable under the NIRC

1.Willful attempt to evade or defeat tax (Sec. 254, NIRC)-‐the conviction or acquittal obtained
under this Section shall not be a bar to the filing of a civil suit for the collection of taxes.

2.Failure to file return, supply correct and accurate information, pay tax, withhold and remit tax
and refund excess taxes withheld on compensation (Sec. 255, NIRC)

Where to File

1.Court of Tax Appeals – on criminal offenses arising from violations of the NIRC or TCC and
other laws administered by the BIR and the BOC, where the principal amount of taxes and fees,
exclusive of charges and penalties claimed is One million pesos and above.

2.Regional Trial Court, Municipal Trial Court, Metropolitan Trial Court – on criminal offenses
arising from violations of the NIRC or TCC and other laws administered by the BIR and the BOC,
where the principal amount of taxes and fees, exclusive of charges and penalties claimed is less
than One million pesos or where there is no specified amount claimed. (Sec. 7, RA No. 9282)

Effect of Acquittal of The Taxpayer In A Criminal Action

It does not necessarily result in the exoneration of said taxpayer from his civil liability to pay
taxes.

Rationale: The duty to pay tax is imposed by statute prior to and

independent of any attempt on the part of the taxpayer to evade payment. It is not a mere
consequence of the felonious acts charged, nor is it a mere civil liability derived from a
crime.(Republic vs. Patanao, GR No. L-14142, May 30, 1961)

Effect of Subsequent Satisfaction of Civil Liability

The subsequent satisfaction of civil liability by payment or prescription does not extinguish the
taxpayer’s criminal liability.

No Subsidiary Imprisonment
 In case of insolvency on the part of the taxpayer, subsidiary imprisonment cannot be imposed as
regards the tax which he is sentenced to pay. However, it may be imposed in cases of failure to
pay the fine imposed. (Sec. 280, 1997 NIRC)

Criminal Action may be Filed during the Pendency of an Administrative Protest in the BIR

It is not a requirement for the filing thereof that there be a precise computation and assessment
of the tax, since what is involved in the criminal action is not the collection of tax but a criminal
prosecution for the violation of the NIRC. Provided, however, that there is prima facie showing
of a willful attempt to evade taxes. (Ungab vs. Cusi, GR Nos. L-41919-24, May 30, 1980 in
relation to Commissioner vs. Court of Appeals, GR No. 119322, June 4, 1996)

Rule on Recovery of Tax based on False or Fraudulent Returns

In the case of a false or fraudulent return with intent to evade tax or of failure to file a return, a
proceeding in court for the collection of such tax may be filed without assessment, at any time
within 10 years after the discovery of the falsity, fraud or omission (Sec. 222 (a), NIRC)

Informer’s Reward

Reward to persons instrumental:

1.In the discovery of violations of the NIRC; and

2.In the discovery and seizure of smuggled goods

Requirements to Claim the Reward

1.Voluntarily file a confidential information under oath with the Law Division of the BIR alleging
therein the specific violations constituting fraud;

2.The information must not yet be in the possession of the BIR, or refer to a case already
pending or previously investigated by the BIR;

3.One should not be a government employee or a relative of a government employee within the
sixth degree of consanguinity; and

4.The information must result to collections of revenues and/or fines and penalties (Sec. 282,
NIRC)

Amount of the Reward

1. For discovery of violation of the NIRC – the amount of reward shall be whichever is lower
between:
a. 10% of the revenues, surcharges or fees recovered and/or fine/penalty imposed; or
b. One Million Pesos (P1,000,000)
NOTE:The same amount of reward shall also be given to an informer where the offender has
offered to compromise the violation of law committed by him and his offer has been accepted
by the CIR and collected from the offender.

2. For discovery and seizure of smuggled goods – a cash reward equivalent to whichever is
lower between:
a. 10% of the fair market value of the smuggled and confiscated goods; or
b. One Million Pesos (P 1,000,000)

NOTE:The informer shall not be entitled to a reward where no revenue, surcharges or fees be
actually recovered or collected

CASE DIGESTS:

Republic vs. Patanao,GR No. L-14142, May 30, 1961

Facts:

Pedro B. Patanao, an Agusan timber concessionaire, was prosecuted for failure to file income
tax returns and for non-payment of income tax. He was ACQUITTED. Later, the government sued
him civilly for the collection of the tax due. Patanao alleges that the civil claim cannot prosper
anymore because:

1. He was already acquitted in the criminal case;

2. The collection of the tax was not reserved in the criminal action.

Held:

1. The acquittal in the criminal case is not important. Under the Revised Penal Code, civil liability
is the result of a crime; in the Internal Revenue Code, civil liability arises first, i.e., civil liability to
pay taxes arises from the fact that one has earned income or has engaged in business, and not
because of any criminal act committed by him. In other words, criminal liability comes only after
failure of the debtor to satisfy his civil obligation.

2. The collection of the tax could not have been reserved in the criminal case – because criminal
prosecution is not one of the remedies stated in the law for the collection of the tax. (Pp vs
Arnault, L-4288, Nov 20, 1952; Pp vs Tierra, L-17177-17180, Dec 28, 1964). Indeed civil liability is
not deemed included in the criminal proceeding. The tax certainly is not a mere civil liability
arising from a crime, that could be wiped out by the judicial declaration of non-existence of the
criminal acts charged. (Castro vs Internal Revenue, L-12174, April 20, 1962).
UNGAB VS. CUSI,GR NOS. L-41919-24, MAY 30, 1980

Facts:

"An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to
defeat and evade the income tax."

The BIR filed six criminal charges against Quirico Ungab, a banana saplings producer, for
allegedly evading payment of taxes and other violations of the NIRC. Ungab, subsequently filed a
motion to quash on the ground that (1) the information are null and void for want of authority
on the part of the State Prosecutor to initiate and prosecute the said cases; and (2)that the trial
court has no jurisdiction to take cognizance of the case in view of his pending protest against the
assessment made by the BIR examiner. The trial court denied the motion prompting the
petitioner to file a petition for certiorari and prohibition with preliminary injunction and
restraining order to annul and set aside the information filed.

Issue:

Is the contention that the criminal prosecution is premature since the CIR has not yet resolved
the protest against the tax assessment tenable?

Held:

NO.

The contention is without merit. What is involved here is not the collection of taxes where the
assessment of the Commissioner of Internal Revenue may be reviewed by the Court of Tax
Appeals, but a criminal prosecution for violations of the National Internal Revenue Code which is
within the cognizance of courts of first instance. While there can be no civil action to enforce
collection before the assessment procedures provided in the Code have been followed, there is
no requirement for the precise computation and assessment of the tax before there can be a
criminal prosecution under the Code.

An assessment of a deficiency is not necessary to a criminal prosecution for willful attempt to

defeat and evade the income tax. A crime is complete when the violator has knowingly and
wilfully filed a fraudulent return with intent to evade and defeat the tax. The perpetration of the
crime is grounded upon knowledge on the part of the taxpayer that he has made an inaccurate
return, and the government's failure to discover the error and promptly to assess has no
connections with the commission of the crime.