BIR Ruling [DA-170-06]

March 27, 2006 BIR RULING [DA-170-06] Sec. 204; R.R. 15-2005 Parreo Realty Brokerage and Appraisal Maglalang Bldg, J.P. Rizal St. Davao City Attention: Leopoldo P. Parreo Gentlemen : This refers to your letter dated July 13, 2005 wherein you questioned the validity of Revenue Regulations No. 15-2005. You were of the opinion that the Commissioner of Internal Revenue had no authority to order the abatement of the 25% penalty under Section 248 of the Tax Code of 1997. You pointed out that the Commissioner's authority is restricted in this regard to only two instances under Section 204 of the Tax Code; if the tax or any portion thereof appears to be unjustly or excessively assessed, or the administration and collection costs do not justify the collection of the amount due. In reply, please be informed that pursuant to Section 204 of the Tax Code of 1997, the Commissioner of Internal Revenue is authorized to compromise the payment of any internal revenue tax and abate or cancel tax liabilities, to wit: SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes . The Commissioner may (A) Compromise the payment of any internal revenue tax, when: (1) A reasonable doubt as to the validity of the claim against the taxpayer exists; or (2) The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax. xxx xxx xxx (B) Abate or cancel a tax liability, when: (1) The tax or any portion thereof appears to be unjustly or excessively assessed; or (2) The administration and collection costs involved do not juste the collection of the amount due. . . ." It stands to reason that if the Commissioner is given the power to abate or cancel the tax liability itself, the more that he is authorized to simply reduce the penalties which are merely incidental thereto. It would be absurd to construe said provision as giving him the power over the main liabilities of taxpayers while at the same time, being helpless to address mere penalties attached to those liabilities. IDSETA In addition, Revenue Regulations 15-2005 was clearly intended to provide some measure of relief to taxpayers from the payment of the 25% surcharge penalty under Section 248 of the Tax Code of 1997. As such, the said regulation actually encourages taxpayers to comply with their tax obligations by providing for a reduction of penalties and by doing so, facilitates tax collection. Accordingly, this Office is of the opinion that Revenue Regulations 15-2005 remains to be a valid tax regulation, there being no basis to question the legality of its provisions or the Commissioner of Internal Revenue's authority to implement the same. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service