TAXPAYERS and practitioners alike were recently bombarded by numerous
and controversial rules and regulations from the Bureau of Internal
Revenue (BIR). These issuances cover a wide variety of subjects and
affect various types of taxpayers.
Most of these issuances did
not even go through public hearing. It is more often the rule, not the
exception, that taxpayers are caught unaware of the new requirements
imposed upon them.
Not surprisingly, most taxpayers are now
confused or ambivalent about how to implement the changes brought about
by the new issuances.
On top of implementation and operational
issues, taxpayers are also not clear as to when the issuances take
effect and the periods covered by the issuances.
For instance,
Revenue Regulations No. (RR) 14-2012 provided that the regulations shall
take effect 15 days following complete publication in a newspaper of
general circulation in the Philippines.
The effectivity clause,
however, of RR No. 12-2012, Revenue Memorandum Circular (RMC) Nos.
77-2012, 75-2012, 73-2012 and 65-2012 provided that the same shall take
effect immediately.
On the other hand, RMC Nos. 76-2012, 74-2012
and 63-2012 merely enjoined all internal revenue officers and other
concerned entities or individuals to give such circulars as wide a
publicity as possible and did not provide for the date of effectivity.
With
these various issuances, the seemingly onerous compliance effort has
become even more stringent, taking also into consideration the confusion
of the public with regard to the effectivity of BIR issuances.
Before we can ascertain the effectivity of such issuances, determination as to the nature of the issuance is necessary.
Discussions
of collateral issues are also important, particularly on whether or not
publication is mandatory for an issuance to be valid and enforceable.
In addition, if and when the issuances become effective, are these
applicable prospectively or retroactively?
FORCE AND EFFECT OF LAW
The
so-called RR, RMC, BIR Ruling, Revenue Memorandum Order (RMO) and
Revenue Audit Memorandum Order (RAMO) are the most common issuances of
the BIR. These issuances, being administrative in nature, generally have
the force and effect of law.
PUBLICATION
Laws shall take
effect 15 days following the completion of their publication either in
the Official Gazette or in a newspaper of general circulation in the
Philippines, unless it is otherwise provided, pursuant to the New Civil
Code (NCC).
In a long line of decisions, the Supreme Court (SC)
has enunciated in the landmark case Tanada v Tuvera that publication is
necessary in those cases where the legislation itself does not provide
for its effectivity date -- for then the date of publication is material
for determining its date of effectivity, which is the 15th day
following its publication -- but not when the law itself provides for
the date when it goes into effect.
The clear object of the law is
to give the general public adequate notice of the various laws which
are meant to regulate their actions and conduct as citizens. It is a
requirement of due process embodied in our Constitution. It is a rule of
law that before a person may be bound by law, he must first be
officially and specifically informed of its contents.
Without
such notice and publication, there would be no basis for the application
of the legal maxim ignorantia legis non excusat (ignorance of the law
excuses no one from compliance therewith) laid down under Article 3 of
the NCC. It would be the height of injustice to punish or otherwise
burden a citizen for the transgression of a law of which he had no
notice whatsoever, not even a constructive one.
It is worthy to
note, however, that administrative issuances, such as those issued by
the BIR, may be distinguished according to their nature and substance:
legislative and interpretative. The difference is crucial in determining
whether or not p
ublication is mandatory prior to effectivity.
A legislative rule
is in the matter of subordinate legislation, designed to implement
primary legislation by providing the details thereof.
An
interpretative rule, meanwhile, is designed to provide guidelines to the
law which the administrative agency is in charge of enforcing. (BPI
Leasing Corp. v. CA, GR No. 127624, Nov. 18, 2003)
In the same
way that laws must have the benefit of public hearing, it is generally
required that before a legislative rule is adopted there must be notice,
hearing and publication.
"There are, however, several exceptions
to the requirement of publication. First, an interpretative regulation
does not require publication in order to be effective. The applicability
of an interpretative regulation needs nothing further than its bare
issuance for it gives no real consequence more than what the law itself
has already prescribed. It adds nothing to the law and does not affect
the substantial rights of any person. Second, a regulation that is
merely internal in nature does not require publication for its
effectivity. It seeks to regulate only the personnel of the
administrative agency and not the general public. Third, a letter of
instruction issued by an administrative agency concerning rules or
guidelines to be followed by subordinates in the performance of their
duties does not require publication in order to be effective." (ASTEC v
ERC, GR No. 192117, Sept. 18, 2012; CIR v Michel J. Lhuillier Pawnshop,
Inc.,).
PUBLIC HEARING
In the case of Commissioner of
Internal Revenue (CIR) v. Fortune Tobacco, et al., (21 SCRA 236), the SC
nullified an RMC which reclassified certain cigarettes and subjected
them to a higher tax rate, holding it invalid for lack of notice,
publication and public hearing.
"(T)he doctrine enunciated in
Fortune Tobacco, and reiterated in CIR v. Michel J. Lhuillier Pawnshop,
Inc., (GR 150497) is that when an administrative rule goes beyond merely
providing for the means that can facilitate or render less cumbersome
the implementation of the law and substantially increases the burden of
those governed, it behooves the agency to accord at least to those
directly affected a chance to be heard and, thereafter, to be duly
informed, before the issuance is given the force and effect of law. In
Lhuillier and Fortune Tobacco, the Court invalidated the revenue
memoranda concerned because the same increased the tax liabilities of
the affected taxpayers without affording them due process." (BPI Leasing
v. CA)
PROSPECTIVE APPLICATION
The principle is well
entrenched that statutes, including administrative rules and
regulations, operate prospectively, unless the legislative intent to the
contrary is manifest by express terms or by necessary implication.
They may, however, be applied retroactively in cases of procedural and interpretative laws, among others.
Any
revocation, modification or reversal of any of the rules and
regulations promulgated by the BIR or any of the rulings or circulars
promulgated by the CIR shall not be given retroactive application if the
revocation, modification or reversal will be prejudicial to the
taxpayers except in the following cases: (a) where the taxpayer
deliberately misstates or omits material facts from his return or in any
document required of him by the BIR; (b) where the facts subsequently
gathered by the BIR are materially different from the facts on which the
ruling is based; or (c) where the taxpayer acted in bad faith (Section
246 of the 1997 Tax Code, as amended).
Hence, in the light of the
foregoing, circulars, rulings or other issuances promulgated by the CIR
have no retroactive application if such would tantamount to prejudice
to the taxpayers.
Conversely, if the same is beneficial to taxpayers, it must be given retroactive application to lighten the taxpayer’s burden.
The
power of taxation should be exercised with caution to m
inimize injury to the rights of a taxpayer. This has been reiterated and
re-emphasized in our laws and vast array of Supreme Court decisions.
TAXPAYERS’ REMEDIES
To
summarize: despite the harshness of implementation, BIR issuances
mandating all taxpayers to strictly comply with its provisions still
have the force and effect of law.
Taxpayers, however, are not
deprived of remedies. The validity and enforceability of BIR issuances
may be assailed if proven to be suffering from legal infirmities and are
in violation of the clear and categorical provisions of the
Constitution and statutes intended to protect the rights vested on the
taxpayers.
Source: Punongbayan and Araullo
