Sources of Tax Laws:

1. Constitution

The 1987 Philippine Constitution sets limitations on the exercise of the power to tax.
The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive
system of taxation.  (Article VI, Section 28, paragraph 1)

All money collected on any tax levied for a special purpose shall be treated as a special fund and
paid out for such purpose only.  If the purpose for which a special fund was created has been
fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of the
Government.  (Article VI, Section 29, paragraph 3)

The Congress may, by law, authorize the President to fix within specified limits, and subject to
such limitations and restriction as it may impose, tariff rates, import and export quotas, tonnage
and wharfage dues, and other duties or imposts within the framework of the national development
program of the Government (Article VI, Section 28, paragraph 2) The President shall have the
power to veto any particular item or items in an appropriation, revenue or tariff bill, but the veto
shall not affect the item or items to which he does not object.  (Article VI, Section 27, second
paragraph)

The Supreme Court shall have the power to review, revise, reverse, modify or affirm on appeal or
certiorari, as the law or the Rules of Court may provide, final judgments and orders of lower
courts in x x x all cases involving the legality of any tax, impost, assessment, or toll or any penalty
imposed in relation thereto.  (Article VIII, Section 5, paragraph)
        
Tax exemptions are limited to those granted by law.  However, no law granting any tax exemption
shall be passed without the concurrence of a majority of all the members of the Congress. 
(Article VI, Section 28, par. 4).  The Constitution expressly grants tax exemption on certain
entities/institutions such as (1) charitable institutions, churches, parsonages or convents
appurtenant thereto, mosques, and nonprofit cemeteries and all lands, buildings and
improvements actually, directly and exclusively used for religious, charitable or educational
purposes (Article VI, Section 28, paragraph 3); (2) non-stock non-profit educational institutions
used actually, directly and exclusively for educational purposes. (Article XVI, Section 4(3))

In addition to national taxes, the Constitution provides for local government taxation. (Article X,
Section 5) (Article X, Section 6)  Parenthetically, the Local Government Code provides that all
local government units are granted general tax powers, as well as other revenue-raising powers
like the imposition of service fees and charges, in addition to those specifically granted to each of
the local government units.  But no such taxes, fees and charges shall be imposed without a
public hearing having been held prior to the enactment of the ordinance.  The levy must not be
unjust excessive, oppressive, confiscatory or contrary to a declared national economic policy
(Section 186 and 187) Further, there are common limitations to the grant of the power to tax to
the local government, such that taxes like income tax, documentary stamp tax, etc. cannot be
imposed by the local government.

2. Statutes/laws – tax laws passed by the Congress (general vs. special)

Basic Tax Laws of the Philippines

a. National Internal Revenue Code (NIRC) – Republic Act (RA) No. 8424, otherwise known as
the “Tax Reform Act of 1997” (Approved/Signed into law: December 11, 1997; Effectivity:
January 1, 1998)
 - Latest amendment: Republic Act (RA) No. 10963 (otherwise known as the Tax Reform
for Acceleration and Inclusion or “TRAIN” Law) (Approved/Signed into law: December
19, 2017; Effectivity: January 1, 2018)
- It is the initial package of the Comprehensive Tax Reform Program (CTRP) signed into
law by President  Rodrigo Duterte on December 19, 2017. The TRAIN Act is the first of
four packages of tax reforms to the National Internal Revenue Code of 1997, or the Tax
Code, as amended. This package introduced changes in personal income tax (PIT),
estate tax, donor's tax, value added tax (VAT), documentary stamp tax (DST) and the
excise tax of tobacco products, petroleum products, mineral products, automobiles,
sweetened beverages, and cosmetic procedures.

b. Tariff and Custom Code

c. The Local Tax Code
d. The Real Property Tax Code

3. Administrative rulings and regulations

The Secretary of Finance, upon the recommendation of the Commissioner, promulgates needful
rules and regulations for the effective enforcement of the provisions of the Tax Code   (Section
244, Tax Code of 1997). The Commissioner of Internal Revenue, however, has the exclusive and
original power to interpret the provisions of the Tax Code, but subject to review by the Secretary
of Finance.

Administrative issuances which may be relied upon in interpreting the provisions of the Tax Code,
which are signed by the Secretary of Finance, or the Commissioner of Internal Revenue, or his
duly authorized representative, come in the form of Revenue Regulations, Revenue
Memorandum Orders, Revenue Memorandum Rulings, Revenue Memorandum Circulars,
Revenue Memorandum Rulings, and BIR Rulings.

a. Revenue Regulations (RRs) are issuances signed by the Secretary of Finance upon
recommendation by the Commissioner of Internal Revenue that specify, prescribe or define
rules and regulations for the effective enforcement of the provisions of the National Internal
Revenue Code (NIRC) and related statutes.
b. Revenue Memorandum Orders (RMOs) are issuances 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.
c. Revenue Memorandum Rulings (RMRs) are rulings, opinions, and interpretations of the
Commissioner of Internal Revenue with respect to the provisions of the Tax Code and other
tax laws, as applied to a specific set of facts, with or without established precedents, and
which the Commissioner may issue from time to time for the purpose of providing taxpayers
guidance on the tax consequences in specific situations. BIR Rulings, therefore cannot
contravene duly issued RMRs; otherwise, the Rulings are null and void ab initio.

d. Revenue Memorandum Circulars (RMCs) are issuances that publish pertinent and
applicable portions, as well as amplifications, of laws, rules, regulations and precedents
issued by the BIR and other agencies/offices.

e. BIR Rulings are the official position of the Bureau to queries raised by taxpayers and other
stakeholders relative to clarification and interpretation of tax laws.
 4. Judicial decisions

In the Philippines, Supreme Court decisions form part of the law of the land.  As such, decisions
by the Supreme Court (sc.judiciary.gov.ph) in the exercise of its power to review, revise, reverse,
modify or affirm on appeal or certiorari, as the law or the Rules of Court may provide, final
judgments and orders of lower courts cases involving the legality of any tax, impost, assessment,
or toll or any penalty imposed in relation thereto are adhered to and recognized as binding
interpretations of Philippine tax law.  Court of Appeals and Court of Tax Appeals decisions which
have become final and executory are also recognized interpretations of Philippine tax law.

5. Presidential decree
6. Provincial, City, Municipal and barangay ordinance
7. Treaties and international agreements (Double tax agreements)
The Philippines has entered into several tax treaties for the avoidance of double taxation and
prevention of fiscal evasion with respect to income taxes.  At present, there are 43 Philippine Tax
Treaties in force (https://www.bir.gov.ph/index.php/international-tax-matters/international-tax-
agreements.html).

Legislation of Tax Laws

1. Concurrence by majority of all members of the congress to pass tax exemption [Article VI,
Section 28 (4)]
2. Appropriation, revenue or tariff bills shall originate exclusively from the House of Representatives
(Article VI, Section 24)
a. Appropriation
b. Revenue bill – levies taxes and raises funds for the government
c. Tariff bill – specifies the rates or duties to be imposed on imported articles
3. Senate may propose or concur with amendments (Article VI, Section 24)
4. Conference Committee. The committee will harmonize the bill introduced by the House of
Representative and a parallel bill introduced by the Senate
5. President’s Approval. The harmonized bill signed by the president becomes law.
6. President’s veto. The president shall have the power to veto any particular item or items in an
appropriation, revenue, or tariff bill, but the veto shall not affect the item/s to which he does not
object. (Article VI, Section 27 (2)]
7. The Congress may authorize the President to fix tariff rates, import and export quotas, tonnage
and wharfage dues and other duties or imports (Article VI, Section 28 (2)]
8. The congress may provide for incentives including tax deductions to encourage private
participation in programs of basic and applied scientific research (Article XIV, Section 11)

Escape from Taxation

a. Shifting of tax burden - the process by which the burden of a tax is transferred from the
statutory taxpayer or the one whom the tax was assessed or imposed to another without violating
the law (only indirect taxes may be shifted)
1. Forward shifting – When the burden of the tax is transferred from a factor of production
through the factors of distribution until it finally settles on the ultimate purchaser or consumer
2. Backward shifting – When the burden of the tax is transferred from the consumer or
purchaser through the factors of distribution to the factors of production
3. Onward shifting – When the tax is shifted two or more times either forward or backward
b. Tax avoidance – The tax saving device within the means sanctioned by law. This method should
be used by the taxpayer in good faith and at arm’s length. (Example: When a taxpayer avails of
deductions allowed by law)
c. Tax evasion – is a scheme used outside of those lawful means and when availed of, it usually
subjects the taxpayer to further or additional civil or criminal liabilities.