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Taxes
are the lifeblood of the government. It is the means by
which a country or state supports itself, to pay for and
render basic services to its people. It is, therefore,
essential that the government be armed with the
necessary tools to be able to collect the proper amount
of taxes from delinquent taxpayers.
One such
tool available to the government is the examination of
the books of accounts and accounting records and the
subsequent issuance of an assessment notice to the
taxpayer if the findings warrant the assessment of
taxes. An assessment refers to the official action of an
administrative officer in determining the amount of tax
due from a taxpayer. It must contain the amount that the
officer believes to be the liability of the taxpayer, as
well as a demand to pay the same within a stated period
of time.
This
assessment is usually issued by the Bureau of Internal
Revenue (BIR) after it has conducted an audit and
examination of the books of account and other accounting
records. If after such audit it is determined by the
revenue officer that the taxpayer is liable for
deficiency taxes, the BIR informs the taxpayer through
the issuance of a Preliminary Assessment Notice (PAN).
This PAN
must show in detail the facts and the laws, rules and
regulations on which the assessment is based. A taxpayer
is then given a period of 15 days within which to file a
reply. If the BIR is not satisfied with the reply filed
by the taxpayer, a Formal Assessment Notice (FAN),
together with a letter of demand, is issued to the
taxpayer. A taxpayer who is issued a FAN need not
despair. He is still given 30 days by tax law within
which to file a protest.
For a
protest to be valid, it must contain the following
particulars:
a.
Name and
address of the taxpayer;
b.
Nature
of the request, whether it is a reinvestigation or
reconsideration;
c.
Taxable
periods covered;
d.
Assessment number;
e.
Date of
receipt of assessment notice or letter of demand;
f.
Itemized
statement of the findings to which the taxpayer agrees
to be a basis for computing the tax due, which amount
should be paid immediately upon the filing of the
protest;
g.
Itemized
schedule of the adjustments with which the taxpayer does
not agree; and
h.
Statement of facts and/or law in support of the protest.
In
preparing the protest, the nature of such protest,
whether in the form of a request for reinvestigation or
a request for reconsideration, must be meticulously and
strictly evaluated. The option chosen by the taxpayer is
significant since it would affect the running of the
prescriptive period for the collection of the assessed
tax.
A
request for reconsideration refers to a plea for a
reevaluation of an assessment on the basis of existing
records without need for additional evidence. It may
involve both a question of fact, law, or both. On the
other hand, a request for reinvestigation refers to a
plea for reevaluation of an assessment on the basis of
new or additional evidence that a taxpayer intends to
present in the investigation. It may also involve a
question of fact or law or both.
The
Supreme Court, in the case of Commissioner of Internal
Revenue (CIR) v. Philippine Global Communications, Inc.
(GR No. 167146 dated October 31, 2006), had the occasion
to rule that the main difference between these two types
of protests lies in the records or evidence to be
examined by internal revenue officers, whether these are
existing records or newly discovered or additional
evidence. A reevaluation of existing records that
results from a request for reconsideration does not toll
the running of the prescription period for the
collection of an assessed tax. The suspension of the
running of the statute of limitations is limited to
instances when reinvestigation is requested by a
taxpayer and is granted by the CIR. A reinvestigation,
which entails the reception and evaluation of additional
evidence, will take more time than a reconsideration of
a tax assessment, which will be limited to the evidence
already at hand. This is why the former can suspend the
running of the statute of limitations on collection of
the assessed tax, while the latter cannot. (Bank of the
Philippine Islands v. Commissioner of Internal Revenue,
GR No. 139736 dated October 17, 2005.)
With
these considerations, it is necessary that taxpayers
should, in filing protests against assessments,
determine whether a request for reinvestigation or
reconsideration should be the proper mode.
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The author is an associate of BDB Law. If you have any
comments or questions concerning the article, you can
e-mail the author at
Ma.Ursula.Cristina.S.Casa@bdblaw.com.ph
or call 856-2952. |
