Revocation of Revenue Regulations No. V-74 Re Filing of Income Tax Returns and Payment of Income Taxes

March 13, 1962 REVENUE REGULATIONS NO. 03-62 SUBJECT : Revocation of Revenue Regulations No. V-74 Re Filing of Income Tax Returns and Payment of Income Taxes TO : All Internal Revenue Officers and Others Concerned SECTION 1. In view of Opinion No. 175, series 1960, of the Secretary of Justice, stating that the law on where the income tax returns are to filed is merely directory, and there is no specific legal provision requiring payment of the tax at the place where the return is filed, Revenue Regulations No. V-74 is hereby revoked. SECTION 2. This regulations shall take effect immediately. FERNANDO E. V. SISON Acting Secretary of Finance Recommended by: BENEDICTO PADILLA Acting Commissioner of Internal Revenue ATTACHMENT March 14, 1962 The Director Bureau of Printing M a n i l a S i r : I have the honor to enclose herewith Revenue Regulations No. 3-62 March 13, 1962, with the request that said Regulations be published in the Official Gazette. cdt Payment will be made on your bill upon its receipt by this Office. Very truly yours, BENEDICTO PADILLA Acting Commissioner of Internal Revenue March 14, 1962 The Honorable The Secretary of Finance M a n i l a S i r : I have the honor to submit herewith proposed Revenue Regulations No. 3-62 revoking Revenue Regulations No. V-74 issued on June 30, 1961. It may be stated, in this connection, that Revenue Regulations No. V-74 was issued because, since fiscal year 1960, income taxpayers have been making payments, voluntarily or involuntarily, in cities or municipalities other than where they paid in fiscal year 1959, thereby resulting in artificial increases in income tax collections of said cities or municipalities. Under Section 360 of the Tax Code, as reinstated by Republic Act No. 2343, cities receive 30% of said increases, and provinces and municipalities receive 10% and 20%, respectively. cdi Very truly yours, BENEDICTO PADILLA Acting Commissioner of Internal Revenue March 7, 1962 The Honorable Secretary of Finance Thru: The Honorable Commissioner of Bureau of Internal Revenue Manila S i r : In behalf of this municipality and of many other places in the country similarly situated, we have the honor to petition your high office for an immediate suspension, if not outright revocation, of Revenue Regulation No. V-74 promulgated by the former Secretary of Finance sometime in June, 1961. This is the regulation that prohibits domestic corporate taxpayers from paying their income tax in a place or places other than that in which the principal office of the corporation is located. Our petition is based on the following grounds. 1. The new Finance Regulations is believed to be a repressive measure. It will wipe out opportunities of local government to bolster their share in income tax collection. 2. It will negate, if not render null and void, the very purpose and spirit of Section 11 of Republic Act 2343 which was enacted only in 1959. This Act is intended to make local governments less and less dependent upon the national government on fiscal matters by encouraging the former to increase their revenues through self-efforts. The Regulation in question, if given strict implementation, will defeat the very laudable purpose of the new law. 3. There is believed to be no patent reason for strictly requiring domestic corporation to pay its income tax in the place in which is located its principal office, while the foreign corporation is governed by another requirement. We subscribe strongly to the view that income tax is national in character and it can therefore be paid anywhere in the country. This view, we believe, is not only the view expressed by the Department of Justice; it is likewise printed in the publication, "Primer on Income Tax" caused to be issued in the past by not less than the Department of Finance. 4. The rule of precedence cannot, in our opinion, be totally disregarded. During the past two fiscal years, Section 46(c) of the Tax Code which provides payment of domestic corporate income tax in the place where the office of the corporation is located was already an existing law, and has been existing to the present time. Yet, the Bureau of Internal Revenue, possibly realizing the spirit of the amendatory law in 1959 (Section 11, RA 2343) allowed many domestic corporations during the past two fiscal years to remit their income tax payment in places where their principal businesses are operating, or even in other places of the taxpayers' choice, for that matter. 5. The interest of about 34 provinces and 26 cities is at stake in this regulation. If the latter will be given an unimpeded course this year, many-a-long range program of many local administrations will suffer a big upset which apparently will generate popular discontent throughout the country. 6. By allowing local governments to continue receiving the benefits accorded by Section 11 of RA 2343, the revenue of the national government in income tax will, in its totality, not be much drained. The ratio, according to the 1960-61 records, will still stand to be 25% for the local governments and 75% for the national government. In our paternalistic system of government in this country, it is our sentiment, and the Filipino sentiment for that matter, that the mother individual, by an exercise of stronger feeling of self-abnegation, is always prone to give way to the case and comfort of her daughter children. It is, therefore, our earnest appeal that the regulation in question be reconsidered and an immediate decision in favor of the local governments in which the businesses of many domestic corporations are located be promulgated. cdta Very respectfully, (SGD.) CIRIACO INGCO Municipal Mayor (SGD.)VIRGILIO B. BUENDIA (SGD.) SEVERINO A. GARCIA Municipal Treasurer Chairman Budget and Appropriations Municipal Council Strongly recommending favorable action on the foregoing petition: (SGD.) BONIFACIO MASILUNGAN (SGD.) L. C. GUTIERREZ Acting Provincial Governor Provincial Treasurer Board Members: (SGD.) ISIDORO ACLAN (SGD.) LORGIA MEDINA-ILAGAN (SGD.) FLORENCIO MERCADO A certified true copy: MAXIMINO B. CASTILLO Municipal Secretary DEPARTMENT OF FINANCE Manila 1st Indorsement September 22, 1960 Respectfully referred to the Secretary of Justice, Manila requesting the favor of his opinion on the instructions requested by the Commissioner of Internal Revenue in the last paragraph of his basic communication. In this connection, it is the view of this Department that provinces and municipalities are entitled to participate in the excess of income tax collections made therein over the collections for the basic year 1959 in accordance with the provisions of Republic Act No. 2343, regardless of whether the income tax has been paid in municipalities other that where the income tax return should have been filed. The Commissioner cites Section 45 and 46 of the National Internal Revenue Code which states that an individual taxpayer should file his income tax return in the city or municipality where he has his legal residence or place of business, and in the case of a corporation, the city or municipality in which its principal office is located. In practice, however, taxpayers are allowed to file their tax returns in the place of their choice and they have not been held for violating the said sections of the Tax Code. The law on where they are to file their tax returns is therefore merely directory instead of mandatory. Furthermore, the Commissioner states that taxes on income must be paid at the places where the tax returns are filed because under the provisions of Republic Act No. 2343 the tax must be paid upon the filing of the return. It should be noted that under the provisions of this Act payment in installments is authorized and that possibly it is only the payment of the first installment that has to be paid at the place where the return is filed. There is no express provision of law that payment of the income tax must be made at the place where the tax return has been filed. In fact, in the interest of sound revenue administration, taxpayers should be allowed to make payments in the places of their choice, this being a national tax. The collecting officers are mere deputies of the Commissioner of Internal Revenue. Payment of a tax in a municipality or city other than where the income tax return had been filed does not violate the law. On the questions of the participation of chartered cities in the revenues involved, the Commissioner of Internal Revenue, in the penultimate paragraph of his basic communication; holds that chartered cities cannot lawfully be deprived of the special allotment granted under Section 360 of the Tax Code, as revised by Republic Act No. 2343. This Department concurs in the position taken by the Commissioner. In this connection, the undersigned notes that the deliberations in Congress when this Act was under consideration, as shown in the accompanying copies of excerpts from the congressional records, are quite indefinite and rather hazy as regards the rights of chartered cities to the special allotment from this revenue. Under the provisions of Section 366 of the National Internal Revenue Code, for purposes of internal revenue allotments, a chartered city is considered as both a province and a municipality and is entitled to the full internal revenue allotment corresponding to provinces and municipalities. Moreover, as Republic Act No. 2343 is intended to encourage local tax collection agencies to intensify the collection of this revenue, it would be incompatible with this intention of the law to deprive chartered cities of their participation. Certainly the tax collecting officials in chartered cities should be given the same incentive in the interest of revenue collection. In view of the foregoing, an early action of that Office on the matter will likewise be appreciated as the distribution of the revenues in question is now being made by the Bureau of Internal Revenue. cd (SGD.) DOMINADOR R. AYTONA Secretary OPINION NO. 175, 1960 2nd Indorsement October 6, 1960 Respectfully returned to the Secretary of Finance, Manila, concurring in his view that provinces and municipalities are entitled to the special allotment in the excess of income tax collections made therein over the collections for the basic year 1959 provided for in Section 360 of the National Internal Revenue Code, regardless of whether the income tax has been paid in municipalities other than where the income tax returns have been or should have been filed. Since the law on where the income tax returns are to be filed is merely directory, and as there is no specific legal provision requiring payment of the tax at the place where the tax return has been filed, the mere fact that the income tax returns have been filed elsewhere should not be a compelling reason for depriving the provinces and municipalities of the special allotment in the excess of income tax payments made therein. This view, if we may add, is more in consonance with the avowed purpose of the law to give more "incentive to the local government so that the increased participation will be due at the end to their own efforts. "(per Senator Puyat, Senate Diario No. 53, April 16, 1959). This Department is also in full accord with the view, shared by both the Secretary of Finance and the Commissioner of Internal Revenue, that chartered cities cannot lawfully be deprived of the special allotment granted under Section 360 of the Tax Code, which reads: "In addition to the foregoing whenever the total annual collection of the income taxes within a municipality or province, as the case may be, exceeds the total collection of such taxes within such municipality or province during the fiscal year nineteen hundred fifty nine, all the excess shall be apportioned as follows: twenty per cent to the municipality, ten per cent to the province and seventy per cent to the National Government." Doubt has been voiced as to the right of chartered cities to the special allotment granted by the above provision arising from the following exchange of interpellations between Senators Pelaez and Primicias when this particular provision was being discussed on the floor of the Senate viz: SENATORS PRIMICIAS. Now, as regards the apportionment of excess collections compared to 1959. Your Honor says that the 20% shall accrue to the municipalities. "SEN. PELAEZ. Twenty percent to the municipalities, 10% to the provinces, and 70% to the national government. "SEN. PRIMICIAS. Let us take the case of Manila. "SEN. PELAEZ. The 30% to the Provinces and the municipalities are not. "SEN. PRIMICIAS. Not to chartered cities? "SEN. PELAEZ. Not to chartered cities. May I state, Mr. President, that this amendment has been co-authorized by the distinguished gentlemen from Albay, Senator Sabido, the gentlemen from Manila, and myself." (Senate Diario No. 53, April 16, 1959) cdta The doubt, as we see it, is more apparent than real. To the query of Senator Primicias as to "the case of Manila" obviously meaning what percentage should be the share of Manila Senator Pelaez replied: "The 30% to the provinces and the municipalities are not . The word " not "' gives the statement no other sense than that Manila's share shall be 30% of the excess collections, or the " not " amount after the 70% share of the National Government shall have been deducted. Taking this reply of Senator Pelaez as premise it is safe to surmise that the word " not " in the subsequent interpellation of Senator Primicias as well as in the corresponding retort of Senator Pelaez was, conceivably, a typographical error and was meant to be "net". But at any rate, the fact is that under Section 366 of the National Internal Revenue Code, "Chartered cities shall receive the shares which they would receive if they were both a municipality and a regularly organized province, and for the purpose hereof shall be deemed to the both the one and the other." Without necessarily sharing the observation of the Commissioner of Internal Revenue that "the senators participating in the discussion appeared not to be aware of the provision of Section 366 of the Tax Code", the undersigned would say that the individual opinions of the two legislators in the discussion quoted above cannot be accepted as conclusive in the interpretation of Section 360 of the Tax Code to the extent of nullifying completely Section 366 of the same Code. "Granting that in the legislative proceedings for the approval of the law, a Congressman who sponsored the same, declared that the purpose of the law is to exempt new and necessary industries from the payment of internal revenue taxes, said statement cannot over ride the express limitation in the law that the taxes from which the exemption is made must be payable by an industry 'in respect thereto'" (Collector of Internal Revenue vs. Marcelo Steel Corporation and Court of Tax Appeals, G. R. No. L-9248. October 31, 1956) "The motives and opinions of individual members of the legislature are not considered, much less can they control, in the interpretation off a statute, unless there is indication that such motives and opinions were understood and acquiesced in by other members, and unless there is doubt in the language of the law, which does not yield to any other reasonable solution. One reason for this rule, it has been correctly said, is that the legislators who speak do not always express the views of those who do not." (Opinion of the Secretary of Justice, No. 243, series of 1957) "Explanatory statements of members of the legislature in charge of the bill, made in presenting the bill for passage, cannot control, or even be considered, where the language of the enactment is clear, or where taking the statute as a whole, the effect of the language used is clear to the court, and construction according to its terms does not lead to absurd or impracticable consequences." (50 Am. Jur., 328-329, citing Railroad Commission v. Chicago, B & Q.R. Co., 257 U. S. 563, 66 L ed 371, 42 S Ct. 232, 22 ALR 1086; United States v. Missouri P. R. Co., 278 US 269, 73 L ed 322, 49 S Ct. 133)". Furthermore, the Secretary of Finance and the Commissioner of Internal Revenue, who are the chief officials charged with the enforcement of the National Internal Revenue Code, are agreed that chartered cities are entitled to 30% of the excess income tax collections made therein over the collections for the basic year 1959. "Courts," it has been often held, "will and should respect the contemporaneous construction placed upon a statute by the executive officers, whose duty it is to enforce it, and unless such interpretation is clearly erroneous, will ordinarily be controlled thereby" (Molina vs. Rafferty, 37 Phil. 545; In re Allen, 2 Phil. 630; Everett vs. Bautista, 69 Phil. 137; Tamayo, et al., vs. Manila Hotel Co., G. R. No. L-8975.) The queries are therefore answered accordingly. (SGD.) ALEJO MABANAG Secretary of Justice June 30, 1961 REVENUE REGULATIONS NO. V-74 SUBJECT : Filing of income tax returns and payment of income taxes. TO : All Internal Revenue Officers and Other Concerned: Pursuant to the provisions of section 338 in relation to section 4 of commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, the following regulations concerning the enforcement of sections forty-five and fifty-one of the National Internal Revenue Code, as amended by Republic Act No. 2343 which introduced what is commonly known as the Pay-as-You File system, is hereby promulgated and shall be known as Revenue Regulations No. V-74. cdlex Section 1. Purpose and Scope . These regulations propose to establish a uniform procedure in the filing of income tax returns and the payment of income taxes. Section 2. Where to File Returns . Section 45(b) and 46(c) of the National Internal Revenue Code prescribe the rules for filing income tax returns: "(b) Where to file . The return shall be filed with the Collector of Internal Revenue, provincial revenue agent, or treasurer of the province, city or municipality in which such person has his legal residence or principal place of business, or if there be no legal residence or place of business in the Philippines, then with the Collector of Internal Revenue in Manila "(Sec. 45) "(c) Where to file . The return shall be made to the Collector of Internal Revenue, provincial revenue agent or to the treasurer of the province, city or municipality in which is located the principal office of the corporation where its books of accounts and other data from which the return is prepared are kept, or in the case of a foreign corporation, to the Collector of Internal Revenue, provincial revenue agent, or to the treasurer of the province, city or municipality in which is located its principal place of business in the Philippines, or if it has no office of any kind or agency in the Philippines, then to the Collector of Internal Revenue in Manila. All such returns shall be received be transmitted forthwith by the officer receiving them to the Collector of Internal Revenue." (Sec. 46) Section 5 of Republic Act No. 2655, the law relieving local treasurers from collecting internal revenue taxes, also provides: Section 5. Any and all reference in the National Internal Code to the Provincial and city treasurers and their deputies, their functions and duties in connection with internal revenue shall from the approval of this Act be deemed to refer to the collection agents of the Bureau of Internal Revenue." Considering the foregoing provisions and present requirement that the tax must be paid upon the filing of income tax returns (see section 3 hereof) and in order to prevent confusion and to facilitate the processing of returns and the compilation of statistical information therefrom as well as the orderly accounting of payments which are now made in the respective Regional Officer, the following rules are hereby made regarding the filing of income tax returns: (a) An individual shall file his income tax return with the collection agent of the city or municipality in which he legally resides. If he is engaged in business, he shall file the return in the city or municipality where the principal office of his business is located and where his books of accounts are kept. (b) A corporation or registered general copartnership shall file its income tax return with the collection agent of the city or municipality where its principal office is located and where its book of accounts are kept. (c) If the individual, corporation or registered general copartnership has no legal residence, office or agency of any kind in the Philippines, the return must be filed with the Collection Agent of Manila. (d) The Regional Office or Provincial Revenue Office located in a city or municipality may also receive the returns otherwise to be filed with the collection agent of said city or municipality. Sec. 3. Where to Pay . Section 51(a)(1) of the Tax Code, as amended by Republic Act No. 2343, provides as follows: Sec. 51. Payment and assessment of income tax . (a) Payment of tax . (1) In General . The total amount of tax imposed by this Title shall be paid at the same time the return is filed but not later that the fifteenth day of April following the close of the calendar year, or if the return is made on the basis of a fiscal year, then not later than the fifteenth day of the forth month following the close of the fiscal year. Such tax shall be paid by the person subject thereto, and in the case of a corporation, by the president, vice-president, or other responsible officer thereof: Provided That if in any preceding year, the payer was entitled to a refund of any amount thereof, if not yet refunded, it may be deducted from the amount of tax to be paid. "If the return is filed after the time prescribed by law (including cases in which an extension of time for filing the return has been granted under section forty-seven of this Code) there shall be paid at the time of such filing the tax or installment which would have been payable on or before such time if the return had been filed within the time prescribed by law, and the remaining installment shall be paid at the time at which, and in the amount in which, it would have been payable if the return had been so filed subject to the payment of interest at twelve per centum per annum from the original due date." The amendment introduced by Section 8 of Republic Act No. 2343 innovated in the Philippines the Pay-as-You-File system in force of sometime now in the United States. In accordance therewith, and since payment of the income tax in a place other than where the return is filed complicates the accounting thereof the following rules on payment are hereby issued: (a) The income tax must be paid at the time of filing the return and necessarily to the collection agent of the city of municipality specified in Section 2 hereof. (b) If the tax is over P500.00 and will be paid by installments, the second installment shall be paid also to the collection agent where the corresponding return was filed and the first installment was paid. Sec. 4. Relief by Collection Officers : Before the formal relief of the city or municipal treasurer by the revenue collection officer, pursuant to Section 5 and 8 of Republic Act No. 2655, the returns shall be filed with said city or municipal treasurer, but after such relief the return shall be filed with the collection officers. Sec. 5. Proper Address in Return . Every individual, including an estate or trust, shall state in his return his legal residence, or the address of the principal office of his business if engaged therein. In the case of a corporation or registered general copartnership, the address of its principal office shall be stated in its return. Sec. 6. Penalty for Incorrect Address . Any person, including corporation and registered general copartnership, who fails to state in his return his correct legal residence or the address of the principal office of his business shall be penalized by a fine of not exceeding P300.00 or imprisonment for not more than six (6) months or both. Sec. 7. COLLECTION OFFICERS Not to Accept Outside Returns and Payments . No collection officer in a city or municipality shall accept a return or payment of income tax from a taxpayer whose legal residents, or principal office of business, is located in another city or municipality. Sec. 8. Applicability to Withholding Taxes . These rules shall apply also to withholding taxes, including those withheld on wages, and the returns therefor. Sec. 9. Effectivity . These regulations shall take effect upon publication in the Official Gazette and shall supersede all regulations and rulings inconsistent herewith. casia (SGD.) DOMINADOR R. AYTONA Secretary Recommended by: (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue STATEMENT OF THE 30% OF THE EXCESS INCOME TAX COLLECTIONS OVER THE FISCAL YEAR 1959 AGAINST THE GENERAL FUND OF THE NATIONAL GOVERNMENT IN FAVOR OR THE LOCAL GOVERNMENTS AS PER R.A. 2343 F.Y . 1960 F.Y . 1961 (1959-1960) (1960-1961) PROVINCES: 1. Abra P11.20 P235.82 2. Agusan 65,660.25 156,065.29 3. Aklan 839.51 1,767.42 * 4. Albay 9,561.15 5. Antique 181.31 1,155.40 6. Bataan 30,555.98 72,314.57 7. Batanes 348.28 1,369.56 * 8. Batangas 1,087,784.76 2,151,074.00 9. Bohol 9,659.39 145,765.07 10. Bukidnon 1,201.29 331,028.19 11. Bulacan 130,395.28 561,879.65 12. Cagayan 16,033.22 13,223.40 13. Camarines Norte 3,210.47 77,025.08 14. Camarines Sur 32,693.01 53,270.09 15. Capiz 4,690.33 8,541.02 16. Catanduanes 72.55 17. Cavite 5,686.71 10,869.53 * 18. Cebu 10,855.11 33,665.90 19. Cotabato 3,923.95 22,779.27 20. Davao 25,320.00 * 87,161.08 21. Ilocos Norte 136.45 22. Ilocos Sur 230.66 2,745.35 23. Iloilo 44,403.55 2,541.82 24. Isabela 11,384.31 5,953.15 25. Laguna 63,560.40 372,844.45 26. Lanao a) Lanao del Norte 45,839.69 58,501.26 * b) Lanao del Sur 6,520.00 27. La Union 809.38 128,727.88 28. Leyte del Norte) Leyte del Sur) 6,742.10 1,872.66 29. Marinduque 994.20 1,993.51 30. Masbate 2,500.00 * 574.88 31. Mindoro Occidental 275.66 77.21 * 32. Mindoro Oriental 5,001.01 579.68 * 33. Misamis Occidental * 33,368.50 34. Misamis Oriental 8,880.85 19,942.60 35. Mountain 202,773.19 509,281.51 36. Negros Occidental 62,138.15 1,002,162.09 37. Negros Oriental 13,057.73 20,112.17 38. Nueva Ecija 1,735.58 2,593.91 39. Nueva Vizcaya 1,723.05 3,431.66 40. Palawan 5,508.66 1,806.12 * 41. Pampanga 100,515.56 110,926.75 42. Pangasinan 21,293.43 11,542.64 43. Quezon 50,345.51 71,448.10 44. Rizal 2,535,144.77 8,188,521.72 45. Romblon 588.21 119.38 46. Samar 1,570.05 1,409.91 47. Sorsogon 2,037.17 1,238.49 48. Sulu 2,457.90 2,751.26 49. Surigao 110,676.40 a) Surigao del Norte 35,014.19 b) Surigao del Sur 275,351.01 50 Tarlac 123,061.26 220,753.68 51. Zambales 648,903.46 1,291,140.00 52. Zamboanga del Norte 2,860.90 4,511.82 * 53. Zamboanga del Sur 19,912.84 149,295.11 Total Provinces P5,542,265.91 P16,263,104.89 =========== ============= CITIES: 1. Bacolod P P24,393.04 2. Baguio 30,671.19 994,625.92 3. Basilan 4. Butuan 932.26 19,849.86 5. Cabanatuan 6. Cagayan de Oro 104,906.25 441,568.70 7. Calbayog 8. Cavite 8,563.75 2,562.91 9. Cebu 255,496.27 384,067.06 10. Cotabato 41,334.62 11. Dagupan 12. Davao 104,910.51 107,786.05 13. Dumaguete 11,962.70 15,343.42 14. Gingoog 15. Iligan 13,392.27 16. Iloilo 85,105.59 65,136.61 17. Lapu-Lapu 18. Legaspi 10,735.25 3,876.62 19. Lipa 1,364.45 77,059.52 20. Lucena 21. Marawi (Dansalan) 161.98 229.73 22. Naga 4,097.05 7,053.14 23. Ormoc 12,274.16 1,750.78 24. Ozamis 56,736.61 25. Pasay 617,921.96 899,861.55 26. Quezon 3,218,805.77 3,183,920.57 27. Roxas 28. San Carlos 30,128.72 29. San Pablo 81,283.34 165,251.67 30. Silay 136,220.99 64,024.26 31. Tacloban 695.60 32. Tagaytay 33. Toledo 100,428.44 34. Trece Martires 1,050.38 2,421.00 35. Zamboanga 53,267.05 57,648.89 Total Cities except Manila 4,740,426.90 6,760,451.96 MANILA 5,847,137.08 5,933,748.10 GRAND TOTAL P16,129,829.89 P28,957,304.95 =========== =========== NOTE: * Pending final verification of the actual income tax collections by municipalities the figures for the provinces are tentative. CERTIFIED CORRECT: HORACIO J. CRUZ Acting Chief, Statistical Division