Opinion BusinessMirror
opinion@businessmirror.com.ph
Friday, October 28, 2016 A11
May a deficiency tax Gifts from the dead assessment be increased Tito Genova Valiente on appeal?
annotations
Reynaldo M. Prudenciado Jr.
Tax Law for Business
T
he term “assessment” refers to the determination of amounts due from a person obligated to make payments. In the context of national internal-revenue collection, it refers to the determination of the taxes due from a taxpayer under the National Internal Revenue Code. (GR 175410, November 12, 2014)
The highest Court had declared that the Court of Tax Appeals (CTA) has no power to make an assessment at the first instance. On matters such as tax collection, tax refund and others related to the national internal-revenue taxes, the CTA’s jurisdiction is appellate in nature. In simple words, a tax assessment should be initiated and originate from the Bureau of Internal Revenue (BIR), but may be reviewed by the CTA following the prescribed procedures. There is no doubt that if the BIR makes an assessment against a taxpayer, the latter may dispute that assessment before the same agency. If the taxpayer is not satisfied with the decision of the BIR, he may invoke the review power of the CTA. The CTA then has to review the correctness of the BIR’s assessment and decision. There is also no doubt that in making its own determination of a taxpayer’s tax liabilities, the Tax Court may uphold, reduce, or cancel the deficiency tax assessment. May the Tax Court also increase a taxpayer’s deficiency tax assessment in case its own determination shows a higher tax or a higher (or additional) tax base than that included by the BIR in its assessment? This question is sometimes crucial for some taxpayers in considering whether to appeal an assessment case. To help answer this question, we refer to some of the decided cases, which, although the question may not have been initially raised as specific issue, would provide a glimpse on whether an assessment could possibly be increased. In CTA Case 8291, July 13, 2015, the Court found that the premium collections, which should be the basis for the value-added tax, is higher than the amount used by the BIR in its assessment. Accordingly, the Court used that higher amount in computing the deficiency tax. Naturally, the taxpayer questioned the increase, arguing that the jurisdiction of the Court does not include making assessments by increasing and making additional impositions. In justifying the validity of the increase, the Court held that its finding did not result in a “new” assessment, as it merely determined the true and correct amount of the tax to be collected. The Court also noted that the subject matter remains the same as that of the original. Thus, the increase of premium collections is valid. In CTA Case 7696 and 7728, July 15, 2015, the Court found that the BIR committed an error in the amount of expenses disallowed as deduction for failure to subject the same to
withholding tax. Instead of disallowing the related expense, which is the tax base of the withholding tax, the disallowance in the BIR assessment was the amount of the withholding tax. While there was an error in the disallowed amount, the Court noted that the error would result in the disallowable expenses being exponentially greater than what has been assessed. Considering that the power to assess is lodged in the BIR and is not within its province, the Court was constrained to limit its findings based on BIR’s assessment, albeit the erroneous computation. In a more recent case (CTA Case 8794, September 23, 2016), the Court sustained the BIR assessment disallowing a provision for bad debt as deductible expense. Apparently, the amount disallowed by the BIR in its assessment is the net of the provision made for the year and the reversal of an allowance. The Court found that it was an error on the part of the BIR to offset the reversal against the provision. Hence, in making its recomputation of the deficiency tax, the Court disallowed the full amount of the provision, not only the net amount as indicated in the BIR deficiency tax assessment. In this case, the Court effectively increased the amount of assessment by increasing the disallowed amount, which it found to be erroneous to what it considered as the correct amount. It is interesting to note, however, that the presiding justice made a concurring and dissenting opinion, holding that the disallowance cannot be increased because the Court has no assessment power. It seems clear that in making its review of an assessment case brought before it, the Court cannot make assessment. But an increase in the deficiency tax assessment can still be made if the resulting increase does not arise from a “new assessment”. And whether an increase is a result of a new assessment or not would depend on the facts of each case. We hope that subsequent cases will further clarify this issue.
The author is a senior associate of Du-Baladad and Associates Law Offices (BDB Law), a memberfirm of World Tax Services (WTS) Alliance. The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported, therefore, by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at reynaldo.prudenciado@bdblaw.com.ph or call 403-2001 local 380.
Feel good to be good Siegfred Bueno Mison, Esq.
THE PATRIOT
M
abuhay Evenings is a new TV show of Global News Network (GNN), which is aired every Wednesday night. The show seeks to inspire all viewers to believe that there is hope in the Filipino, that nothing is impossible with God, and that, with our collective efforts, our Philippines can be great again. The philosophy of the show is that every Filipino needs to be more aware that there are many positive and uplifting stories about the greatness of our culture and our people. However, close to 80 percent of the media coverage has
been more about the negative, e.g., corruption, criminality, killings, inefficiency, etc. Mabuhay Evenings producer Ricky Rivera envisioned a program to recognize a few good Filipinos with the objective of sharing their feel-good stories with its
T
here is a brass dragonfly magnet on my small refrigerator. One night, as I was cleaning my odd collection of horses— porcelain, wooden, clay figures—this insect was perched confidently near the handle. The magnet was a gift from the late Dr. Lydia Yu-Jose, one of the pioneering scholars of Japanese Studies and, for a long time, my director in the Japanese Studies Program of the School of Social Sciences of Ateneo de Manila University.
I looked around and saw a mixed, confused herd of tiger, rhinoceros and elephants, I dabbed baby oil on a medium-sized toothbrush and started to remove the grime off the tiny wild animals all made of dark wood. A menagerie was staring back at me and most of the beasts in the collection from Lydia. I wonder why Lydia gave me these gifts. Soon, I was not looking at the collection. I was recalling many things, wonderful things about this gift-giver. She was stern, but few people know that she has the gift of an open mind. In one of our
cultural festivals in the university, some years ago, I was frantic looking for the Japanese film that we would be showing for the celebration. I turned to Lydia and shared with her my anxiety. I could not locate the key to the cabinet where all the film were kept. “What do you have there?” she asked. “Oshima Nagisa’s In The Realm of Passion.” “Well, show it!” For those who do not know, the film by Oshima is noted for blurring the line between pornography and art. The screening was a success. There is one more treasure I keep in my apartment: a program with the
autograph of the great mime, Marcel Marceau. The picture shows the artist as a young Bip, the character he assumed to tell many stories about love of all kinds—great love, beautiful love many unrequited and always with bits of pain in them. With his signature, he drew a flower that was bent from wilting. My sister, Lilibeth, recalls that moment in the theater. We went to the backstage and met up with Marcel Marceau. I did not know what to do. Without the makeup, he looked like a doting grandfather, with a shock of white and gray, golden hair giving him an amused appearance. My sister hugged him, and he placed his hand on her forehead. He understood the sign of respect and he beamed and wrote his dedication on the program.
There are many more gifts in my apartment from people who have passed on. There is nothing morbid at all about these gifts. When someone gives you a gift. Another Marcel—Marcel Mauss—wrote the most primal reference on gifts in that small sociological book called The Gift. In it, Marcel Mauss talks about how the gift bears with it the obligation to give and to receive, and to give back. This brings me to the next question: What have I done to receive these gifts and what have I given back. This will be part of my remembrance, as well. As I look and inventory these gifts from the dead, I sense they are really gifts from those who would live, in my heart, forever. E-mail: titovaliente@yahoo.com.
Duterte’s pivot to China: A game theoretic analysis Joselito T. Sescon
EAGLE WATCH Part One
T
he article is an academic attempt to analyze the political and economic outcomes of the foreign policy shift of the Duterte administration toward China. Academic in the sense that the frames of analyses are based on game theory and is fully independent of the author’s personal political and economic views and opinion.
There are several versions of the definition of game theory. Citing from the Stanford Encyclopedia of Philosophy, “Game theory is the study of the ways in which interacting choices of economic agents produce outcomes with respect to the preferences of those agents, where the outcomes in question might have been intended by none of the agents.” In layman terms, it studies the interactions among people grouped together voluntarily or involuntarily to achieve differing or common results. The application of game theory spans the disciplines of economics, political science, sociology and anthropology, biology, computer science and sociobiology, among others. In this article, I will apply it in development economics and political science. Game theory in development economics shows how social norms and institutions can shape the “rules of the game” or the process of how society work together. To simplify,
consider the most common type of game, called coordination games. There are two significant games, “battle of the sexes” (BOS) and the “stag-hunt game” (SHG). BOS has this curious title because of its common representation depicting a couple deciding where to go on a date, wherein one activity is favored by the man and the other by the woman. The game assumes that the couple loves each other so much, so that they prefer to be together even if one of them had to endure engaging the favorite activity of his or her partner. We then adopt this game to United States—Philippines foreign policy stance on China. There are two possible extreme results, either both parties are antiChina or pro-China. We provided a
viewers. Ricky has nothing but love for our country since he and my law partner Alex Lacson became roommates in University of the Philippines Diliman. He has been in the communications industry for quite some time now—starting as field reporter to writer to PR manager to PR crisis consultant. So far, Mabuhay Evenings has guested overseas Filipino workers (OFW) champion Toots Ople, aviation industry game changer Aimee Carandang, antihuman-trafficking crusader Darlene Pajarito, maritime lawyer Iris Baguilat, author of the best-selling book series of 12 Little Things Alex Lacson, solar-power promoter Abdulgani Macatoman and Party-list Rep. John Bertiz III of ACTS-OFW. There are still quite a few people out there whose stories need to be shared, not for their personal ag-
grandizement but to inspire others to do what they can to help themselves and our country. One feelgood story closer to home is about my former student and colleague at University of the East (UE), who is now a Philippine Airlines junior executive. He spent most of his younger years behind the wheels of a jeepney (or next to it as his father was a jeepney driver). Since his parents only had meager resources, Renny Esteban Domingo was practically forced by circumstances to ply the jeepney route from Fairview, Quezon City, to Quiapo, Manila. Pursuing further studies without financial support from his parents, Renny worked as a student assistant in UE all throughout his college and law school days. He saw himself as a lawyer, became a lawyer, and is
possible result matrix (arbitrarily assigned numbers), which form the incentives for both players. The nature of the game is that if one player (the US or the Philippines) sticks to one strategy, it is better for the other party to do the same, or else, she gets a negative 2 while the other gets 0. For example, if both are pro-China the US gets 1 while the Philippines gets 3, and vice versa if both are antiChina. In short, differing choices of results lead to one losing more than the other. Applying this to the present, we ask the following questions, (1) Are the incentives as represented by the BOS game represent the real political and economic outcomes? And, (2) If it is true, can the Philippines strategically make a credible threat to stick to a pro-China strategy to bring the US to at least to let the Philippines independently chart its own pro-China foreign policy stance? In the case of both parties being anti-China, which, more or less, represents the past policy stance of previous administrations before President Duterte, the US gets 3 while the Philippines gets 1. To provide a base of analysis, we narrowing down the basis of the policy stance in regard to the West Philippines Sea (WPS) issue. We may agree that the US has greater benefits (3) having great economic and political interests that the WPS sea lanes remain free for international navigation. Having an ally like the Philippines to stand on the Permanent Court
Philippines Anti-China Pro-China Anti-China 3, 1 0, -2 United States Pro-China -2, 0 1, 3
now a highly respected lawyer, especially in the field of labor law. In the words of Johann Wolfgang von Goethe, “If you treat an individual as he is, he will remain how he is. But if you treat him as if he were what he ought to be and could be, he will become what he ought to be and could be.” I suppose lawyer Renny refused to see himself the way his father saw him. Producer Ricky wants Filipinos to see feel-good stories in our country for a better Philippines. President Duterte refuses to look at our country as mediocre or a lapdog of other countries. We have so many other Filipinos out there who can be better if only they look at themselves differently. It all starts with how we see ourselves. Media plays a major role in this vision formation. We become what we think. We become
of Arbitration decision on July 12, 2016, under the United Nations Convention on the Law of the Sea ruling that China’s claim of historic rights is invalid, is strategically beneficial to the US interests. In the case of the Philippines, does the gain of 1 as represented in the game above reflects the true nature of the bargain? Does the Philippines gain little to stand firm against China based on the international Permanent Court of Arbitration? So far, we have lost the rich fishing ground around Scarborough Shoal, where China’s coast guards are driving away Filipino fishermen. The US did little (as far as the author’s information and knowledge on the shoal’s issue) to stop China from occupying the shoal, probably also calculating the political risks of directly intervening in the dispute. Why did not the US put a stake or put itself at some risk by showing direct support to the Philippines in the disputed shoal? Does the US have more stake to maintain peaceful coexistence with China in the disputed WPS and, thus, it can afford to let the Philippines lost the shoal? We may opine that the US strategic position is to let China win a little in the short run, but it will put consistent international pressure for China until it withdraws its aggressive occupation of the shoal and the disputed islands in the long run. With the international court’s decision hovering at China’s aggressive behavior, the US should find an optimistic outcome in the future. Thus, it is strategic for the US that the Philippines stand on the international court’s decision. To be continued
what we say. I believe that all Filipinos are ambassadors of our country to the extent that whatever we say or do reflects on us all as a people. After all, the image of our country and our people does not solely depend on what Duterte says and does. And that’s how the Mabuhay Evenings show strives to be relevant. It highlights the positive vibes of good Filipinos to make its viewers believe that they themselves can be the best they can be. Perhaps, with some patience, a lot of perspiration, and by divine providence, we can all be “good” like an lawyer Renny, a Producer Ricky, or even a President Rody. It all starts by feeling “good” within ourselves and feeling “good” about our country. For questions and comments, e-mail me at sbmison@gmail.com