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EN BANC
- versus -
COMMISSIONER, BUREAU OF
INTERNAL REVENUE and THE
SECRET ARY, DEPARTMENT OF
FINANCE,
Respondents.
x- - - - - - - - - - - - - - - - - - - - - - - - -x
NATIONAL FEDERATION OF
EMPLOYEES ASSOCIATIONS OF
THE DEPARTMENT OF
AGRICULTURE (NAFEDA),
represented by its Executive Vice
President ROMAN M. SANCHEZ,
DEPARTMENT OF
AGRICULTURE EMPLOYEES
ASSOCIATION OFFICE OF THE
SECRETARY (DAEA-OSEC),
represented by its Acting President
ROWENA GENETE, NATIONAL
AGRICULTURAL AND
FISHERIES COUNCIL
EMPLOYEES ASSOCIATION
(NAFCEA), represented by its
President SOLIDAD B.
BERNARDO, COMMISSION ON
ELECTIONS EMPLOYEES UNION
(COMELEC EU), represented by its
President MARK CHRISTOPHER
D. RAMIREZ, MINES AND
GEOSCIENCES BUREAU
EMPLOYEES ASSOCIATION
CENTRAL OFFICE (MGBEA CO),
represented by its President
MAYBELLYN A. ZEPEDA,
LIVESTOCK DEVELOPMENT
COUNCIL EMPLOYEES
ASSOCIATION (LDCEA),
represented by its President JOVITA
M. GONZALES, ASSOCIATION
OF CONCERNED EMPLOYEES
OF PHILIPPINE FISHERIES
DEVELOPMENT AUTHORITY
(ACE OF PFDA), represented by its
President ROSARIO DEBLOIS,
Intervenors.
x- - - - - - - - - - - - - - - - - - - - - - - - -x
Decision 3 G.R. Nos. 213446 & 213658
CAGUIOA, J.:
G.R. Nos. 213446 and 213658 are petitions for Certiorari, Prohibition
and/or Mandamus under Rule 65 of the Rules of Court, with Application for
Issuance of Temporary Restraining Order and/or Writ of Preliminary
Injunction, uniformly seeking to: (a) issue a Temporary Restraining Order to
enjoin the implementation of Revenue Memorandum Order (RMO) No. 23-
2014 dated June 20, 2014 issued by the Commissioner of Internal Revenue
(CIR); and (b) declare null, void and unconstitutional paragraphs A, B, C, and
D of Section III, and Sections IV, VI and VII of RMO No. 23-2014. The
petition in G.R. No. 213446 also prays for the issuance of a Writ of Mandamus
to compel respondents to upgrade the P30,000.00 non-taxable ceiling of the
13th month pay and other benefits for the concerned officials and employees
of the government.
The Antecedents
On June 20, 2014, respondent CIR issued the assailed RMO No. 23-
2014, in furtherance of Revenue Memorandum Circular (RMC) No. 23-2012
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Decision 4 G.R. Nos. 213446 & 213658
The Petitions
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Decision 5 G.R. Nos. 213446 & 213658
Further, the petition also prays for the issuance of a writ of mandamus
ordering respondent CIR to perform its duty under Section 32(B)(7)(e)(iv) of
the NIRC of 1997, as amended, to upgrade the ceiling of the 13 111 month pay
and other benefits for the concerned officials and employees of the
government, including petitioners. 7
ld. at 29-33.
Id. at 27-28.
Id. at 28-29.
Id. at21, 33-35.
6
Id. at I08-1 I0.
ld. at 42-43.
Rollo (G.R. No. 213658), pp. 3-61.
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Decision 6 G.R. Nos. 213446 & 213658
RMO No. 23-2014 on the following grounds: (1) respondent CIR is bereft of
any authority to issue the assailed RMO. The NIRC of 1997, as amended,
expressly vests to the Secretary of Finance the authority to promulgate all
needful rules and regulations for the effective enforcement of tax provisions; 9
and (2) respondent CIR committed grave abuse of discretion amounting to
lack or excess of jurisdiction in the issuance of RMO No. 23-2014 when it
subjected to withholding tax benefits and allowances of court employees
which are tax-exempt such as: (a) Special Allowance for Judiciary (SAJ)
under Republic Act (RA) No. 9227 and additional cost of living allowance
(AdCOLA) granted under Presidential Decree (PD) No. 1949 which are
considered as non-taxable fringe benefits under Section 33(A) of the NIRC of
1997, as amended; (b) cash gift, loyalty awards, uniform and clothing
allowance and additional compensation (ADCOM) granted to court
employees which are considered de minimis under Section 33(C)(4) of the
same Code; (c) allowances and benefits granted by the Judiciary which are
not taxable pursuant to Section 32(7)(E) of the NIRC of 1997, as amended;
and (d) expenses for the Judiciary provided under Commission on Audit
(COA) Circular 2012-001. 10
Petitioners further assert that RMO No. 23-2014 violates their right to
due process of law because while it is ostensibly denominated as a mere
revenue issuance, it is an illegal and unwarranted legislative action which
sharply increased the tax burden of officials and employees of the Judiciary
without the benefit of being heard. 11
Id. at 17-20.
10
Id. at 20-42.
II Id.at43.
12
Id. at 159-160.
13
Id.at212-265.
14
Id. at 218-220.
15
Id. at 220.
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Decision 7 G.R. Nos. 213446 & 213658
dated April 2, 1987 implementing Executive Order No. 651 which was
promulgated by then Secretary of Finance Jaime V. Ongpin upon
recommendation of then CIR Bienvenido A. Tan, Jr. Thus, the CIR never
usurped the power and authority of the legislature in the issuance of the assailed
RM0. 16 Also, contrary to petitioners' assertion, the due process requirements
of hearing and publication are not applicable to RMO No. 23-2014. 17
Respondents further argue that petitioners' claim that RMO No. 23-
2014 is unconstitutional has no leg to stand on. They explain that the
constitutional guarantee of fiscal autonomy to Judiciary and Constitutional
Commissions does not include exemption from payment of taxes, which is the
lifeblood of the nation. 18 They also aver that RMO No. 23-2014 never
intended to diminish the powers oflocal government units. It merely reiterates
the obligation of the government as an employer to withhold taxes, which has
long been provided by the Tax Code. 19
Respondents also claim that RMO No. 23-2014 does not violate
petitioners' right to equal protection of laws as it covers all employees and
officials of the government. It does not create a new category of taxable
income nor make taxable those which are not taxable but merely reflect those
incomes which are deemed taxable under existing laws. 21
16
Id. at 224.
17
Id. at 222.
18
Id. at 227-229.
19
Id. at 229-230.
20
Id. at231-245.
21
Id. at 246-248.
22
Id. at 249-252.
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Decision 8 G.R. Nos. 213446 & 213658
23
Rollo (G.R. No. 213446), pp. 117-143.
24
Id.atl30-135.
25
Id. at 135-137.
26
Id.atl37-139.
27
Id. at 307-324.
28
Id. at 312.
29
Id.at316.
30 Id.
31
Id.at317.
32
Rollo (G.R. No. 213658), pp. 147-158.
33
Id. at 154.
34
Id.atl53.
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Decision 9 G.R. Nos. 213446 & 213658
aver that the implementation ofRMO No. 23-2014 resulted in the diminution
of their salaries/compensation in violation of Sections 3 and 10, Article VIII
of the Constitution. 35
3s Id.
36 Id. at 273-294.
37 Id. at 278-279.
38
Id. at 280-283.
39
Id. at 284-290.
40
Id. at 291.
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Decision 10 G.R. Nos. 213446 & 213658
2. The CIR did not abuse its discretion in the issuance of RMO No.
23-2014 because:
I.
Procedural
Non-exhaustion of administrative
remedies.
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Decision 11 G.R. Nos. 213446 & 213658
remedy in the ordinary course of law against the assailed issuance of the
CIR. 41 The plain, speedy and adequate remedy expressly provided by law is
an appeal of the assailed RMO with the Secretary of Finance under Section 4
of the NIRC of 1997, as amended, to wit:
The CIR's exercise of its power to interpret tax laws comes in the form
of revenue issuances, which include RMOs that provide "directives or
instructions; prescribe guidelines; and outline processes, operations,
activities, workflows, methods and procedures necessary in the
implementation of stated policies, goals, objectives, plans and programs of the
Bureau in all areas of operations, except auditing." 43 These revenue issuances
are subject to the review of the Secretary of Finance. In relation thereto,
Department of Finance Department Order No. 007-02 44 issued by the
Secretary of Finance laid down the procedure and requirements for filing an
appeal from the adverse ruling of the CIR to the said office. A taxpayer is
granted a period of thirty (30) days from receipt of the adverse ruling of the
CIR to file with the Office of the Secretary of Finance a request for review in
writing and under oath. 45
41
Estrada v. Office ofthe Ombudsman, 751 Phil. 821, 890(2015), citing lnterorient Maritime Enterprises,
Inc. v. NLRC, 330 Phil. 493, 502 (1996).
42
Emphasis and underscoring supplied.
43
"Revenue Issuances," <https://www.bir.gov.ph/index.php/revenue-issuances.html> (last accessed on
June 28, 2018).
44
PROVIDING FOR THE IMPLEMENTING RULES OF THE FIRST PARAGRAPH OF SECTION 4 OF THE NATIONAL
INTERNAL REVENUE CODE OF 1997, REPEALING FOR THIS PURPOSE DEPARTMENT ORDER NO. 005-99
AND REVENUE ADMINISTRATIVE ORDER No. 1-99, May 7, 2002.
45
DOF Department Order No. 007-02, Sec. 3.
46
565 Phil. 255 (2007).
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Decision 12 G.R. Nos. 213446 & 213658
47
Id. at 270-271.
48
The lloilo City Zoning Board of Adjustment and Appeals v. Gegato-Abecia Funeral Homes, Inc .. 462
Phil. 803, 812 (2003), citing Paat v. Court ofAppeals, 334 Phil. 146, 152-153 (1997).
49
747 Phil. 811 (2014).
50
Id. at 823-824.
51
SEC. 7. Jurisdiction. - The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:
I. Decisions of the Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal Revenue or other laws
administered by the Bureau of Internal Revenue[] (Underscoring supplied)
52
726 Phil. 9 (2014).
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Decision 13 G.R. Nos. 213446 & 213658
ARTICLE [VIII]
JUDICIAL DEPARTMENT
53
The Philippine American Life and General Insurance Co. v. Secretary ofFinance, supra note 49, at 831.
54
793 Phil. 97 (20 I 6).
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Decision 14 G.R. Nos. 213446 & 213658
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Decision 15 G.R. Nos. 213446 & 213658
On June 16, 1954, Republic Act No. 1125 created the Court of Tax
Appeals not as another superior administrative agency as was its
predecessor - the former Board of Tax Appeals - but as a part of the
judicial system with exclusive jurisdiction to act on appeals from:
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Decision 16 G.R. Nos. 213446 & 213658
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Decision 17 G.R. Nos. 213446 & 213658
In other words, within the judicial system, the law intends the Court
of Tax Appeals to have exclusive jurisdiction to resolve all tax problems.
Petitions for writs of certiorari against the acts and omissions of the said
quasi-judicial agencies should, thus, be filed before the Court of Tax
Appeals.
Republic Act No. 9282, a special and later law than Batas Pambansa
Blg. 129 provides an exception to the original jurisdiction of the Regional
Trial Courts over actions questioning the constitutionality or validity of tax
laws or regulations. Except for local tax cases, actions directly challenging
the constitutionality or validity of a tax law or regulation or administrative
issuance may be filed directly before the Court of Tax Appeals.
55
Id. at 118-125. Emphasis supplied; citations omitted.
56
Dagan v. Office of the Ombudsman, 721 Phil. 400, 413 (2013 ).
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Decision 18 G.R. Nos. 213446 & 213658
delay the disposition of the case at hand and to promote the vital interest of
justice. As the Court held in Bloomberry Resorts and Hotels, Inc. v. Bureau
ofInternal Revenue: 57
From the foregoing jurisprudential pronouncements, it would
appear that in questioning the validity of the subject revenue memorandum
circular, petitioner should not have resorted directly before this Court
considering that it appears to have failed to comply with the doctrine
of exhaustion of administrative remedies and the rule on hierarchy of
courts, a clear indication that the case was not yet ripe for judicial remedy.
Notably, however, in addition to the justifiable grounds relied upon by
petitioner for its immediate recourse (i.e., pure question of law, patently
illegal act by the BIR, national interest, and prevention of multiplicity of
suits), we intend to avail of our jurisdictional prerogative in order not to
further delay the disposition of the issues at hand, and also to promote the
vital interest of substantial justice. To add, in recent years, this Court has
consistently acted on direct actions assailing the validity of various
revenue regulations, revenue memorandum circulars, and the likes,
issued by the CIR. The position we now take is more in accord with latest
jurisprudence.xx x 58
II.
Substantive
The petitions assert that the CIR's issuance of RMO No. 23-2014,
particularly Sections III, IV, VI and VII thereof, is tainted with grave abuse
of discretion. "By grave abuse of discretion is meant, such capricious and
whimsical exercise of judgment as is equivalent to lack of jurisdiction." 59 It is
an evasion of a positive duty or a virtual refusal to perform a duty enjoined by
law or to act in contemplation of law as when the judgment rendered is not
based on law and evidence but on caprice, whim and despotism. 60
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Decision 19 G.R. Nos. 213446 & 213658
In this case, the Court finds the petitions partly meritorious only insofar as
Section VI of the assailed RMO is concerned. On the other hand, the Court
upholds the validity of Sections III, IV and VII thereof as these are in fealty to
the provisions of the NIRC of 1997, as amended, and its implementing rules.
The withholding tax system was devised for three primary reasons,
namely: ( 1) to provide the taxpayer a convenient manner to meet his probable
64
750 Phil. 349 (20 I 5).
65
Id. at 399, 4I2.
66
Supra note 49.
67
Id. at 831-832.
68
Recalde, E.R., A Treatise on Philippine Internal Revenue Taxes (2014 ), pp. 257-258, citing RR No. 2-
98, Sec. 2.78.l(A).
69
ING Bank N. V. v. Commissioner of Internal Revenue, 764 Phil. 418, 443 (2015).
70
Id. at 446.
71
See RR No. 2-98, Sec. 2.78.l(A).
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Decision 20 G.R. Nos. 213446 & 213658
income tax liability; (2) to ensure the collection of income tax which can
otherwise be lost or substantially reduced through failure to file the
corresponding returns; and (3) to improve the government's cash flow. 72 This
results in administrative savings, prompt and efficient collection of taxes,
prevention of delinquencies and reduction of governmental effort to collect
taxes through more complicated means and remedies. 73
Section 2.78.3 of RR No. 2-98 further states that the term employee
"covers all employees, including officers and employees, whether elected or
appointed, of the Government of the Philippines, or any political subdivision
thereof or any agency or instrumentality"; while an employer, as Section
2.78.4 of the same regulation provides, "embraces not only an individual and
an organization engaged in trade or business, but also includes an
organization exempt from income tax, such as charitable and religious
organizations, clubs, social organizations and societies, as well as the
Government of the Philippines, including its agencies, instrumentalities, and
political subdivisions."
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Decision 21 G.R. Nos. 213446 & 213658
5. Payments of benefits made under the Social Security System Act of 1954 as
amended [Section 32(B)(6)(e) of the NIRC of 1997, as amended and Section
2.78.l(B)(l)(e) of RR No. 2-98];
6. Benefits received from the GSIS Act of 1937, as amended, and the retirement
gratuity received by government officials and employees [Section 32(B)(6)(f)
of the NIRC of 1997, as amended and Section 2.78. l(B)(l)(t) of RR No. 2-
98];
7. Thirteenth (13th) month pay and other benefits received by officials and
employees of public and private entities not exceeding :P82,000.00 [Section
32(B)(7)(e) of the NIRC of 1997, as amended, and Section 2.78.l(B)(l 1) of
RR No. 2-98, as amended by RR No. 03-15];
8. GSIS, SSS, Medicare and Pag-Ibig contributions, and union dues of individual
employees [Section 32(B)(7)(f) of the NIRC of 1997, as amended and Section
2.78.1(8)(12) of RR No. 2-98];
10. Remuneration for domestic services [Section 28, RA No. 10361 and Section
2. 78.1 (B)(3) of RR No. 2-98];
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Decision 22 G.R. Nos. 213446 & 213658
11. Remuneration for casual labor not in the course of an employer's trade or
business [Section 2.78.l(B)(4) of RR No. 2-98];
12. Remuneration not more than the statutory minimum wage and the holiday pay,
overtime pay, night shift differential pay and hazard pay received by Minimum
Wage Earners [Section 24(A)(2) of the NIRC of 1997, as amended);
15. The proceeds of life insurance policies paid to the heirs or beneficiaries upon
the death of the insured, whether in a single sum or otherwise, provided
however, that interest payments agreed under the policy for the amounts which
are held by the insured under such an agreement shall be included in the gross
income [Section 32(B)(l) of the NIRC of 1997, as amended and Section
2.78.l(B)(7) of RR No. 2-98);
16. The amount received by the insured, as a return of premium or premiums paid
by him under life insurance, endowment, or annuity contracts either during the
term or at the maturity of the term mentioned in the contract or upon surrender
of the contract [Section 32(B)(2) of the NIRC of 1997, as amended and Section
2.78.l(B)(8) of RR No. 2-98);
18. Income of any kind to the extent required by any treaty obligation binding upon
the Government of the Philippines [Section 32(B)(5) of the NIRC of 1997, as
amended and Section 2.78.l(B)(lO) of RR No. 2-98);
19. Fringe and De minimis Benefits. [Section 33(C) of the NIRC of 1997, as
amended); and
20. Other income received by employees which are exempt under special laws
(RAT A granted to public officers and employees under the General
Appropriations Act and Personnel Economic Relief Allowance granted to
government personnel).
Petitioners assert that RMO No. 23-2014 went beyond the provisions
of the NIRC of 1997, as amended, insofar as Sections III and IV thereof
impose new or additional taxes to allowances, benefits or bonuses granted to
government employees. A closer look at the assailed Sections, however,
reveals otherwise.
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Decision 23 G.R. Nos. 213446 & 213658
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Decision 24 G.R. Nos. 213446 & 213658
A. Thirteenth (13 111 ) Month Pay and Other Benefits not exceeding
Thirty Thousand Pesos (P30,000.00) paid or accrued during the
year. Any amount exceeding Thirty Thousand Pesos (P30,000.00)
are taxable compensation. This includes:
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Decision 25 G.R. Nos. 213446 & 213658
C. Fringe benefits which are subject to the fringe benefits tax under
Section 33 of the NIRC, as amended;
J. Holiday pay, overtime pay, night shift differential pay, and hazard pay
received by Minimum Wage Earners (MWEs);
K. Benefits received from the GSIS Act of 1937, as amended, and the
retirement gratuity/benefits received by government officials and
employees under pertinent retirement laws;
L. All other benefits given which are not included in the above
enumeration but are exempted from income tax as well as withholding
tax on compensation under existing laws, as confirmed by BIR. 77
77
Emphasis and underscoring supplied.
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Decision 26 G.R. Nos. 213446 & 213658
Clearly, Sections III and IV of the assailed RMO do not charge any new
or additional tax. On the contrary, they merely mirror the relevant provisions
of the NIRC of 1997, as amended, and its implementing rules on the
withholding tax on compensation income as discussed above. The assailed
Sections simply reinforce the rule that every form of compensation for
personal services received by all employees arising from employer-employee
relationship is deemed subject to income tax and, consequently, to
withholding tax, 78 unless specifically exempted or excluded by the Tax Code;
and the duty of the Government, as an employer, to withhold and remit the
correct amount of withholding taxes due thereon.
78
ING Bank N. V. v. Commissioner of Internal Revenue, supra note 69, at 443.
79
460 Phil. 830, 1006-1028 (2003).
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Decision 27 G.R. Nos. 213446 & 213658
by law, in accordance with law and pursuant to the wisdom and dispatch its
needs may require from time to time." 80
To be sure, settled is the rule that exemptions from tax are construed
strictissimi Juris against the taxpayer and liberally in favor of the taxing
authority. 83 One who claims tax exemption must point to a specific provision
of law conferring, in clear and plain terms, exemption from the common
burden84 and prove, through substantial evidence, that it is, in fact, covered by
the exemption so claimed. 85 The determination, therefore, of the merits of
petitioners' claim for tax exemption would necessarily require the resolution
of both legal and factual issues, which this Court, not being a trier of facts,
has no jurisdiction to do; more so, in a petition filed at first instance.
Among the factual issues that need to be resolved, at the first instance,
is the nature of the fringe benefits granted to employees. The NIRC of 1997,
as amended, does not impose income tax, and consequently a withholding tax,
on payments to employees which are either (a) required by the nature of, or
necessary to, the business of the employer; or ( b) for the convenience or
advantage of the employer. 86 This, however, requires proper documentation.
Without any documentary proof that the payment ultimately redounded to the
80
Id. at 1028. Emphasis and underscoring supplied.
81
236 Phil. 307 (1987).
82
Id. at 315-316. Emphasis and underscoring supplied.
83
Diageo Philippines, Inc. v. Commissioner ofInternal Revenue, 698 Phil. 3 85, 395 (2012), citing Quezon
City v. ABS-CBN Broadcasting Corp., 588 Phil. 785, 803 (2008).
84
The City of Iloilo v. Smart Communications, Inc. (SMART), 599 Phil. 492, 497 (2009).
85
Quezon City v. ABS-CBN Broadcasting Corp., supra note 83, at 803, citing Agpalo, R.E., Statutory
Construction (2003 ed.), p. 301.
86
Recalde, E.R., supra note 68, at 266, citing Section 33(A) of the NIRC of 1997, as amended.
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Decision 28 G.R. Nos. 213446 & 213658
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Decision 29 G.R. Nos. 213446 & 213658
in the said list, although of relatively small value, shall not be considered as
de minimis benefits; hence, shall be subject to income tax as well as
withholding tax on compensation income, for rank and file employees, or
fringe benefits tax for managerial and supervisory employees, as the case may
be. 94
All told, the Court finds Sections III and IV of the assailed RMO valid.
The NIRC of 1997, as amended, is clear that all forms of compensation
income received by the employee from his employer are presumed taxable
and subject to withholding taxes. The Government of the Philippines, its
agencies, instrumentalities, and political subdivisions, as an employer, is
required by law to withhold and remit to the BIR the appropriate taxes due
thereon. Any claims of exemption from withholding taxes by an employee, as
in the case of petitioners, must be brought and resolved in the appropriate
administrative and judicial proceeding, with the employee having the burden
to prove the factual and legal bases thereof.
TITLE X
Statutory Offenses and Penalties
G) Daily meal allowance for overtime work and night/graveyard shift not exceeding
twenty-five percent (25%) of the basic minimum wage on a per region basis; and
(k) Benefits received by an employee by virtue of a collective bargaining agreement
(CBA) and productivity incentive schemes provided that the total annual monetary
value received from both CBA and productivity incentive schemes combined, do not
exceed ten thousand pesos (PI 0,000) per employee, per taxable year.
94
See Section 2 of RR No. 5-2011; see also "Additional PI 0, 000 nontaxable De Minimis Benefits effective
January I, 2015'' by Orlando Calundan on Jan 10th, 2015 <http://philcpa.org/2015/0l/additional-
p 10000-nontaxable-de-minimis-benefits-effective-january-1-2015/> (last accessed on June 28, 2018).
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Decision 30 G.R. Nos. 213446 & 213658
CHAPTER I
Additions to the Tax
xx xx
SEC. 251. Failure ofa Withholding Agent to Collect and Remit Tax.
- Any person required to withhold, account for, and remit any tax imposed
by this Code or who willfully fails to withhold such tax, or account for and
remit such tax, or aids or abets in any manner to evade any such tax or the
payment thereof, shall, in addition to other penalties provided for under this
Chapter, be liable upon conviction to a penalty equal to the total amount of
the tax not withheld, or not accounted for and remitted. 97
95
RR No. 2-98, Sec. 2.80(C)(3) states:
(C) Additions to Tax. -
xx xx
(3) Deficiency Interest - Any deficiency in the basic tax due, as the term is
defined in the Code, shall be subject to the interest prescribed in paragraph (a) hereof,
which interest shall be assessed and collected from the date prescribed for its payment until
the full payment thereof.
If the withholding agent is the government or any of its agencies, political
subdivisions, or instrumentalities, or a government-owned or controlled corporation, the
employee thereof responsible for the withholding and remittance of tax shall be personally
liable for the surcharge and interest imposed herein.
96
RR No. 2-98, Sec. 2.80(C)(2) states:
(C) Additiom to Tax. -
xx xx
(2) Interest- There shall be assessed and collected on any unpaid amount of tax,
an interest at the rate of twenty percent (20%) per annum, or such higher rate as may be
prescribed for payment until the amount is fully paid.
97
RR No. 2-98, Sec. 2.80(A) provides:
(A) Employer. -
(I) In general, the employer shall be responsible for the withholding and
remittance of the correct amount of tax required to be deducted and withheld from the
compensation income of his employees. If the employer fails to withhold and remit the
correct amount of tax, such tax shall be collected from the employer together with the
penalties or additions to the tax otherwise applicable.
(2) The employer who required to collect, account for and remit any tax imposed
by the NIRC, as amended, who willfully fails to collect such tax, or account for and remit
such tax or willfully assist in any manner to evade any payment thereof, shall in addition
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Decision 31 G.R. Nos. 213446 & 213658
CHAPTER II
Crimes, Other Offenses and Forfeitures
xx xx
CHAPTER III
Penalties Imposed on Public Officers
xx xx
to other penalties, provided for in the Code, as amended, be liable, upon conviction, to a
penalty equal to the amount of the tax not collected nor accounted for or remitted.
(3) Any employer/withholding agent who fails, or refuses to refund excess
withholding tax not later than January 25 of the succeeding year shall, in addition to any
penalties provided in Title X of the Code, as amended, be liable to a penalty equal to the
total amount of refund which was not refunded to the employee resulting from any excess
of the amount withheld over the tax actually due on their return.
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Decision 32 G.R. Nos. 213446 & 213658
98
See RR No. 2-98, Secs. 4.1I4(E) and 5.116(0).
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Decision 33 G.R. Nos. 213446 & 213658
The following officials are duty bound to deduct, withhold and remit
taxes:
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Decision 34 G.R. Nos. 213446 & 213658
99
See RR No. 2-98, Sec. 2.58(C), 2.82 and 2.83.1.
100
See RR No. 2-98, Secs. 4.114(8), 4.1 l4(E)(J) and 5.116(0)(1 ).
101
Respondents' Consolidated Comment, rollo (G.R. No. 213658), pp. 222-226.
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Decision 35 G.R. Nos. 213446 & 213658
repealed with the enactment of the NIRC of 1997, as amended, and RR No.
2-98, these previous issuances of the Secretary of Finance have ceased to have
the force and effect of law.
Accordingly, the Court finds that the CIR gravely abused its discretion
in issuing Section VI ofRMO No. 23-2014 insofar as it includes the Governor,
City Mayor, Municipal Mayor, Barangay Captain, and Heads of Office in
agencies, GOCCs, and other government offices, as persons required to
withhold and remit withholding taxes, as they are not among those officials
designated by the 1997 NIRC, as amended, and its implementing rules.
The Court takes judicial notice of RA No. 10653, which was signed
into law on February 12, 2015, which increased the income tax exemption for
13th month pay and other benefits, under Section 32(B)(7)(e) of the NIRC of
1997, as amended, from P30,000.00 to P82,000.00. 103 Said law also states that
every three (3) years after the effectivity of said Act, the President of the
Philippines shall adjust the amount stated therein to its present value using the
Consumer Price Index, as published by the National Statistics Office. 104
Recently, RA No. 10963, 105 otherwise known as the "Tax Refonn for
Acceleration and Inclusion (TRAIN)" Act, further increased the income tax
exemption for 13th month pay and other benefits to P90,000.00. 106
102
AN ACT ADJUSTING THE l 3TH MONTH PAY AND OTHER BENEFITS CEILING EXCLUDED FROM THE
COMPUTATION OF GROSS INCOME FOR PURPOSES OF INCOME TAXATION, AMENDING FOR THE PURPOSE
SECTION 32(8) CHAPTER VI OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED,
February 12, 2015.
103
RA No. 10653, Sec. I.
104
Id.
105
AN ACT AMENDING SECTIONS 5, 6,24,25,27,31, 32,33, 34, 51, 52, 56, 57, 58, 74, 79, 84, 86, 90, 91, 97, 99, 100,
IOI, 106, 107, 108, 109, 110, 112, 114, 116, 127, 128, 129, 145, 148, 149, 151, 155, 171, 174, 175, 177, 178, 179,
180, 181, 182, 183, 186, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197,232,236,237,249,254,264,269,AND
288; CREATING NEW SECTIONS 51-A, 148-A, 150-A, 150-B, 237-A, 264-A, 264-B, AND 265-A; AND REPEALING
SECTIONS 35, 62, AND 89; ALL UNDER REPUBLIC ACT No. 8424, OTHERWISE KNOWN As THE NATIONAL
INTERNAL REVENUE CODE OF 1997, AS AMENDED AND FOR OTHER PURPOSES, December 19, 2017.
106
RA No. 10963, Sec. 9.
107
Jacinto-Henares v. St. Paul College of Makati, G.R. No. 215383, March 8, 2017, 820 SCRA 92, IOI.
~
Decision 36 G.R. Nos. 213446 & 213658
With the enactment of RA Nos. 10653 and I 0963, which not only
increased the tax exemption ceiling for 13th month pay and other benefits, as
petitioners prayed, but also conferred upon the President the power to adjust
said amount, a supervening event has transpired that rendered the resolution
of the issue on whether mandamus lies against respondents, of no practical
value. Accordingly, the petition for mandamus should be dismissed for being
moot and academic.
As a final point, the Court cannot tum a blind eye to the adverse effects
of this Decision on ordinary government employees, including petitioners
herein, who relied in good faith on the belief that the appropriate taxes on all
the income they receive from their respective employers are withheld and
paid. Nor does the Court ignore the situation of the relevant officers of the
different departments of government that had believed, in good faith, that
there was no need to withhold the taxes due on the compensation received by
said ordinary government employees. Thus, as a measure of equity and
compassionate social justice, the Court deems it proper to clarify and declare,
pro hac vice, that its ruling on the validity of Sections III and IV of the assailed
RMO is to be given only prospective effect. 108
Sections III, IV and VII of RMO No. 23-2014 are DECLARED valid
inasmuch as they merely mirror the provisions of the National Internal
Revenue Code of 1997, as amended. However, the Court cannot rule on
petitioners' claims of exemption from withholding tax on compensation
income because these involve issues that are essentially factual or evidentiary
in nature, which must be raised in the appropriate administrative and/or
judicial proceeding.
108
See Development Bank (){the Philippines v. Commission on Audit, G.R. No. 221706, March 13, 2018;
National Transmission Corp. v. Commission on Audit, G.R. No. 227796, February 20, 2018; Nayong
Pilipino Foundation, Inc. v. Pulido Tan, G.R. No. 213200, September 19, 2017; National Transmission
Corporation v. Commission on Audit, G.R. No. 223625, November 22, 2016, 809 SCRA 562; Silang v.
Commission on Audit, 769 Phil. 327 (2015).
/~
Decision 37 G.R. Nos. 213446 & 213658
SO ORDERED.
WE CONCUR:
az:1
ANTONIO T. CARPIO
enior Associate Justice
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Decision 38 G.R. Nos. 213446 & 213658
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NOEL GI NE TIJAM
Assorie Jus ice
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ANDRE&iti:YES, JR.
Assbcijj_~ Justice Associate Justice
CERTIFICATION
ANTONIO T. CARPIO
Senior Associate Justice
(Per Section 12, R.A. 296,
The Judiciary Act of 1948, as amended)
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~ 0. ARICHETA
Clerk of Court En Banc
Supreme Court