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TRANSFER TAXES *** 87.

Don Cesar Soriano, a Spanish national, died on September 5, 2000 in his villa at Lucerne, Switzerland. He executed a will before his death leaving all of his properties to his girl friend Maricel Montano, a Filipino residing in Bruge, Belgium. The girl friend decided to bring the remains of Don Cesar, who was a resident of the Philippines from 1935 up to 1997 to the Philippines for burial because that was his wish as most of his friends are still living in the Philippines. She spent about P750,000.00 for funeral expenses. On September 17, 2000 Maricel met you in Hongkong and engaged your services in order to settle the estate of Don Cesar in accordance with the will which was properly probated in Switzerland. She presents to you an inventory of the properties left by Don Cesar with their corresponding values as of September 5, 2000, Don Cesars date of death. The villa in Switzerland US$1 million; an apartment building located in New York, US$5 million; a hacienda in Davao P25 million but the present valuation is now P40 million because of road constructions which enhanced the value of the property; US$15 million the value of life insurance proceeds from an insurance taken out by Don Cesar on his own life designating his estate as beneficiary from the Canton Swiss Insurance at Canton, Switzerland; P25 million proceeds of life insurance taken by Don Cesar on his own life from Philamlife Insurance in the Philippines payable to Maricel as irrevocable beneficiary; outstanding bank balance with Philippine Bank of Commerce in the amount of P5 million with Nanette as his and/or co-depositor. Shares of stock of a Hongkong company but managed from the Philippines and a P15 million apartment located in Manila, Philippines which he donated to his close friend on April 25, 1989 subject to the condition that the friend remits to Don Cessar all the rentals of the property during the lifetime of Don Cesar. a. What should be reported as part of Don Cesars gross estate and what deductions are allowable to determine his net estate? Explain. b. Are the proceeds of the P25 million life insurance to be considered as part of the gross estate of Don Cesar or Maricels income? Why? c. Supposing Maricel wants to withdraw the P5 million from the bank, what advise should you give her? d. Is Maricel being the sole beneficiary liable for the payment of the estate taxes? SUGGESTED ANSWER: a. Since Don Cesar was a non-resident decedent who at the time of his death was not a citizen of the Philippines, only that part of the entire gross estate which is situated in the Philippines, shall be included in his taxable estate. (Sec. 85, NIRC of 1997) The problem is clear that Don Cesar resided in the Philippines only from 1935 to 1997. Specifically, the part of his gross estate which are situated outside of the Philippines and excluded from the taxable estate are the US$1 million villa in Switzerland, the US$5 million apartment building in New York, U.S.A., and the proceeds of the US$15 million life insurance from the Canton Swiss Insurance. The following properties are part of his gross estate because they are situated in

the Philippines. The P25 million Davao Hacienda, the P5 million bank balance with the Philippine Bank of Commerce, the shares of stock in the Hongkong corporation and the P15 million apartment. The shares of stock have acquired a business situs in the Philippines because the foreign corporation is managed from the Philippines hence, includible as part of Don Cesarss gross estate. The P15 million apartment is part of the gross estate because it was transferred in contemplation of death. Don Cesar has retained for his life the enjoyment of the fruits of the property. (Sec. 85 (B), NIRC of 197) b. The proceeds of the P25 million life insurance is neither part of the gross estate nor income to Maricel. The proceeds are not part of the estate because the beneficiary is not the estate of Don Cesar, his executor or administrator and the designation of the beneficiary is irrevocable. (Sec. 85 (E), NIRC of 1997) The P25 million is not also income to Maricel because life insurance proceeds paid to beneficiaries upon the death of the insured are exclusions from gross income. (Sec. 32 [B] {1}, NIRC of 1997) c. I would advise Maricel to first secure a certification from the Commissioner of Internal Revenue that the appropriate estate taxes were already paid. If the amount to be withdrawn does not exceed P20,000.00, she should secure an authorization from the Commissioner even if said taxes have not yet been paid. (2nd par., Sec. 97, NIRC of 1997) d. If Maricel is at the same time the executor or administrator of the estate, then she is primarily liable. If she is not the executor or administrator, then being the beneficiary, she is subsidiary liable to the said executor or administrator. (Sec. 91 [C}, NIRC of 1997) NOTES AND COMMENTS: The valuation to be used is the valuation at the time of the decedents death NOT at the time of filing return or payment of estate tax. *** 88. The NIRC of 1997 allows as a deduction from the gross estate of a citizen or resident of the Philippines judicial expenses of the testamentary or intestate proceedings in order to arrive at the net estate subject to estate taxes. [Sec. 86 (A) (b)]. Are notarial fees paid for the extrajudicial settlement of the estate as well as attorneys fees for the guardian deductible from the gross estate as judicial expenses ? Explain briefly. SUGGESTED ANSWER: Yes. The notarial fee paid for the extrajudicial settlement is clearly a deductible expense since such settlement effected a distribution of the estate to his lawful heirs, Similarly, the attorneys fees for a guardian of the property during the decedents lifetime should also be considered as a deductible administration expense. The guardian gives a detailed accounting of decedents property and gives advice as to the proper settlement of the estate, acts which contributed towards the collection of decedents assets and the subsequent settlement of the case. (Commissioner of Internal Revenue v. Court of Appeals, et al., G.R. No. 123206, prom. March 22, 2000) NOTES AND COMMENTS: Judicial expenses are expenses of administration.

Administration expenses, as an allowable deduction from gross estate of the decedent for purposes of arriving at the value of the net estate, have been construed to include all expenses essential to the collection of the assets, payment of debts or the distribution of the property to the persons entitled to it. In other words, the expenses must be essential to the proper settlement of the estate. Not deductible are expenditures incurred for the individual benefit of the heirs, devisees or legatees. Thus, in Lorenzo v. Posadas, the Court construed the phrase judicial expenses of the testamentary or intestate proceedings as not including the compensation paid to a trustee of the decedents estate when it appeared that such trustee was appointed for the purpose of managing the decedents real property for the benefit of the testamentary heir. In another case, the Court disallowed the premiums paid on the bond filed by the administrator as an expense of administration since the giving of a bond is in the nature of a qualification for the office, and not necessary in the settlement of the estate. Neither may attorneys fees incident to litigation incurred by the heirs in asserting their respective rights be claimed as a deduction from the gross estate. (Commissioner of Internal Revenue v. Court of Appeals, et al., G.R. No. 123206, prom. March 22, 2000) 89. In 1999 Atty. Chari T. Able made the following donations: a. P 250,000.00 alumni association of her alma mater, the University of the Philippines; b. P350,000.00 to Quezon City High School, a public school located in Kamuning, Quezon City; c. P500,000.00 as prize to M. Alakas, a Filipino athlete who garnered the gold medal in an international weight lifting contest held in Moscow which contest was sanctioned by the Philippine Weightlifting Association, the national weightlifting association; d. P50,000.00 to a friend she has not seen for a long time; e. On December 31, 1998 she donated one-half of her parcel of land worth P2.5 million to her son, and on January 2, 1999, she donated the remaining one-half of the same parcel of land to the same son; and f. P750,000.00 to the Holy Order of Friars, a religious congregation to be used for the construction of a church. Atty. Chari T. Able derives her income solely from the practice of her profession. a) Should she be subject to donors taxes on the above donations ? b) Is she entitled to any exemptions ? c) Should the donation made to her son be treated as a single donation because only two days separate the donations ? d) Should she be allowed to deduct the donations from her income derived from the exercise of her profession ? SUGGESTED ANSWER: a. Atty. Able is subject to the payment of donors taxes on the following donations: 1) P250,000.00 donation to the alumni association of the University of the Philippines because the alumni association is not a school; 2) The P50,000.00 donation to a friend (not related to Atty. Able by consanguinity within the fourth

degree) which is considered as a donation to a stranger hence subject to a donors tax of thirty percent (30%) of the net gift; and 3) the donation to her son. b. She is entitled to an exemption on the first P100,000.00 of the 1999 net donations. Furthermore, the following donations are exempt from donors taxes: 1) P250,000.00 donation to Quezon City High School as the same is considered as a donation to the government; 2) the donation to M.A. Lakas under the provisions of Republic Act No. 7549, as it is clear that the conditions in the said law are met; and 3) the donation to the religious congregation because it is evident that the whole amount is not to be used for administration purposes. c. The donation to the son should be treated as separate donations because donors taxes are computed on the basis of net gifts made during a calendar year. d. The donation to M.A. Lakas is allowed as a deduction because it is a prize to an athlete in an international sports tournament held abroad and sanctioned by the national sports association. (Sec. 1, R.A. No. 7549) Also allowed as a deduction is the donation to Quezon City High School. 90. On September 29, 1989, former President Marcos died in Hawaii, U.S.A. A special audit team created to conduct investigations and examinations of the tax liability of the late president disclosed that the Marcoses failed to file a written notice of death of the decedent and an estate tax return in violation of the NIRC. The Commissioner of Internal Revenue thereby caused the preparation and filing of the Estate Tax Return for the estate of the late president. On July 26, 1991, the BIR issued a deficiency tax assessment against the estate which were served constructively upon Ms. Imelda Marcos (through her caretaker Mr. Martinez) at her last known address at No. 204 Ortega St., San Juan, M .M. The deficiency tax assessment was not protested administratively by Mrs. Marcos and the other heirs of the late president. On February 22, 1993, the BIR Commissioner issued twenty-two notices of levy on real property against certain parcels of land owned by the Marcoses - to satisfy the alleged estate tax, among others. Other notices of levy were made until the properties were sold at public auction, with the lots being forfeited in favor of the government for lack of bidders. The validity of the BIR's actions is now raised. SUGGESTED ANSWER: The approval of the court sitting in probate, or as a settlement tribunal over the estate of the deceased is not a mandatory requirement for the collection of the estate. The probate court is determining issues which are not against the property of the decedent, or a claim against the estate as such, but is against the interest or property right which the heir, legatee, devisee, etc. has in the property formerly held by the decedent. The notices of levy were regularly issued within the prescriptive period. The tax assessment having become final, executory and enforceable, the same can no longer be contested by means of a disguised protest. (Marcos, II v. Court of Appeals, et al., 273 SCRA 47)

91. Mr. Fil I. Pino, a Canadian citizen and a resident of Ontario, Canada, sends a gift of US$20,000.00 to his future daughter-in-law who is to be married to his only son in the Philippines. The marriage actually took place on the date the gift was received. a. Is the donation by Mr. Pino subject to tax ? Explain. Would your answer be the same if Mr. Pino is a Filipino citizen but is a non-resident ? b. What is the tax consequence, if any, to the Mr. Pinos daughter-in-law ? SUGGESTED ANSWER: a. Yes, because a non-resident alien is exempt only from the payment of donors taxes if his gifts are made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government. He is subject to tax because the gift was not made in favor of an educational and/or charitable, religious, cultural or social welfare corporation, institution, foundation, trust or philanthropic organization or research institution or corporation which does not use more than 30% of the donation for administration purposes. If Mr. Pino was a non-resident Filipino my answer would still be the same. b. None. the amount should not be considered as part of her income as the same is one of the exclusions, Neither is there any donors tax due from her because the tax is to be paid by the donor and not the recipient. RETURNS 92. What is the probative value of income tax returns as evidence ? SUGGESTED ANSWER: Income tax returns being public documents, until controverted by competent evidence, are competent evidence, are prima facie correct with respect to the entries therein. (Ropali Trading v. NLRC, et al., 296 SCRA 309, 317) NOTES AND COMMENTS: While the above cited case is a labor case, the author suggests that the same could find application in taxation as well. 93. Bill and Hillary are married to each other. Bill is employed as a government employee deriving annual gross compensation income amounting to P120,000.00 while Hillary derives income from selling baby dresses. Her monthly income fluctuates, but for the year 2000, she grossed P500,000.00. The couple have no children. Are they allowed to file separate income tax returns ? Why ? SUGGESTED ANSWER: No. As a general rule, they are not allowed to file separate returns as only married individuals who are both earning purely compensation income are allowed to file separate income tax returns. Section 51 (D) of the NIRC of 1997 provides that, Married individuals, whether citizens, resident or non-resident aliens, who do not derive income purely from compensation shall file a return for the taxable year to include the income of both spouses, but where it is impracticable for the spouses to file one return, each spouse may file a separate return of income but the returns so filed shall be consolidated by the Bureau for purposes of verification There is no showing in the

problem that it is impracticable for Bill and Hillary to file one return, hence they should file a single return. *** 94. Who are the individuals required to file an income tax return ? SUGGESTED ANSWER: a. Every Filipino citizen residing in the Philippines; b. Every Filipino citizen residing outside the Philippines on his income from sources within the Philippines; c. Every alien residing in the Philippines on income derived from sources within the Philippines; and d. Every nonresident alien engaged in trade or business or in the exercise of profession in the Philippines. (Sec. 51 [A] {1}, NIRC of 1997) ***95. Who are the individuals who are not required to file an income tax return ? SUGGESTED ANSWER: a. An individual whose gross income does not exceed his total personal and additional exemptions for dependents, Provided, That a citizen of the Philippines and any alien individual engaged in business or practice of profession within the Philippines shall file an income tax return regardless of the amount of gross income; b. An individual with respect to pure compensation income for services in whatever form paid, including, but not limited to fees, salaries, wages, commissions, and similar items, derived from sources within the Philippines, the income tax on which has been correctly withheld, Provided, That an individual deriving compensation concurrently from two or more employers at any time during the taxable year shall file an income tax return: Provided, further, That an individual whose pure compensation income derived from sources within the Philippines exceeds Sixty thousand pesos (P60,000.00), shall also file an income tax return; c. An individual whose sole income has been subject to final withholding tax; d. An individual who is exempt from income tax pursuant to the provisions of the NIRC of 1997, and other laws, general or special. (Sec. 51 [A] {2}, NIRC of 1997) NOTES AND COMMENTS: An individual who is not required to file an income tax return may nevertheless be required to file an information return. (Sec. 51 [A] {3}, NIRC of 1997) 96. F Corporation brought to court the issue of whether it should be made liable for the payment of the withholding tax at source since it is merely an agent and not the tax payer. Rule on the issue with reasons. SUGGESTED ANSWER: F Corporation as the withholding agent is explicitly made personally liable under the Tax Code for the payment of the tax required to be withheld. Reason: The law sets no condition for the personal liability of the withholding agent to attach. This is in order to compel the withholding agent to withhold the tax under any and all circumstances. In effect, the responsibility for the collection of the tax as well as the payment thereof is concentrated upon the person over whom the

Government has jurisdiction. Thus, the withholding agent is the constituted agent both of the government and the taxpayer. With respect to the collection and/or withholding of the tax, he is the Governments agent. In regard to the filing of the necessary income tax return and the payment to the Government, he is the agent of the taxpayer. The withholding agent, therefore, is no ordinary government agent especially because under the Tax Code he is personally liable for the tax he is duty bound to withhold; whereas, the Commissioner of Internal Revenue and his deputies are not made liable under the law. (Filipinas Synthetic Fiber Corporation v. Court of Appeals, et al., G.R. Nos. 118498 & 124377, prom. October 12, 1999) NOTES AND COMMENTS: Do not confuse the above holding with question no. 97, infra. The issue in this question is the liability of the withholding agent for the unpaid taxes WHILE under question no. 97 the issue is whether a withholding agent is within legal contemplation a taxpayer who could avail of the tax amnesty. The two (2) types of withholding at source are the 1) final withholding tax; and 2) creditable withholding tax. Under the final withholding tax system the amount of income tax withheld by the withholding agent is constituted as a full and final payment of the income due from the payee on the said income. [1st sentence, 1st par., Sec. 2.57 (A), Rev. Regs. No. 2-98] The liability for payment of the tax rests primarily on the payor or the withholding agent.. Thus, in case of his failure to withhold the tax or in case of under withholding, the deficiency tax shall be collected from the payor withholding agent. The payee is not required to file an income tax return for the particular income. Example: Mara won P200,000.00 from the Pera or Bayong contest. It should be the sponsor-payor who is required to deduct the appropriate withholding tax from the P200,000.00 prize before it is given to Mara. Mara, the payee is not required to file an income tax return for the P200,000.00. Failure to withhold subjects the sponsorpayee to the tax. Under the creditable withholding tax system, taxes withheld on certain income payments are intended to equal or at least approximate he tax due from the payee on the said income. The income recipient is still required to file an income tax return and/or pay the difference between the tax withheld and the tax due on the income. [1st and 2nd sentences, Sec. 257(B), Rev. Regs. No. 2-98] The two kinds of creditable withholding taxes are 1) taxes withheld on income payments covered by the expanded withholding tax; and 2) taxes withheld on compensation income. Exemptions from the requirement of withholding or when no withholding taxes required: Payments to the following: 1. National Government and its instrumentalities including provincial, city, or municipal governments; 2. Persons enjoying exemption from payment of income taxes pursuant to the provisions of any law, general or special, such as but not limited to the following: a. Sales of real property by a corporation which is registered with and certified by

the HLURB or HUDCC as engaged in socialized housing project where the selling price of the house and lot or only the lot does not exceed P180,000.00 in Metro Manila and other highly urbanized areas and P150,000.00 in other areas or such adjusted amount of selling price for socialized housing as may later be determined and adopted by the HLURB; b. Corporations registered with the Board of Investments and enjoying exemptions from income under the Omnibus Investment Code of 1997; c. Corporations exempt from income tax under Sec. 30, of the Tax Code, like the SSS, GSIS, the PCSO, etc. However, income payments arising from any activity which is conducted for profit or income derived from real or personal property shall be subject to a withholding tax. (Sec. 57.5, Rev. Regs. No. 2-98) 97. Andres Soriano, a U.S. citizen and resident, formed A. Soriano Y Cia, which was subsequently renamed ANSCOR. He owned originally issued common shares which subsequently earned stock dividends. When he died, part of the shares passed on to his widow and another part to his estate. Stock dividends were again declared. Subsequently, ANSCOR reclassified its existing common shares into common and preferred shares. The widow and the estate exchanged their common stockholdings for preferred shares, with the estate retaining some common shares. ANSCOR then redeemed the common shares belonging to the estate after which the BIR assessed ANSCOR for deficiency withholding tax-at source on the transactions of exchange and redemption of stocks. May ANSCOR, as the withholding agent avail of the beneficent provisions of P.D. No. 67, which condones, the collection of all internal revenue taxes including the increments of penalties on account of non-payment as well as all civil, criminal or administrative liabilities arising from or incident to (voluntary) disclosures under the NIRC of previously untaxed income and/or wealth realized here or abroad by any taxpayer, natural or juridical. ? SUGGESTED ANSWER: No. In the operation of the withholding tax system, the withholding agent is the payor, a separate entity acting no more than an agent of the government for the collection of the tax in order to ensure its payments. The payor of the tax is the taxpayer, he is the person subject to tax imposed by law; and the payee is the taxing authority. In other words, the withholding agent is merely a tax collector, not a taxpayer. Under the withholding system, however, the agent-payor becomes a payee by fiction of law. His (agent) liability is direct and independent from the taxpayer, because the income tax is still imposed on and due from the latter. The agent is not liable for the tax as no wealth flowed into him, he earned no income. The Tax Code only makes the agent personally liable for the tax arising from the breach of its legal duty to withhold as distinguished from its duty to pay tax since, the government cause of action against the withholding agent is not for the collection of income tax, but for the enforcement of the withholding provisions of the Tax Code, compliance with which is imposed on the withholding agent and not upon the taxpayer.

A withholding agent, not being a taxpayer is not covered by the protective embrace of a tax amnesty because the provisions of the implementing rules of P.D. No. 370 which expanded amnesty on previously untaxed income is explicit in excluding tax liabilities on withholding tax at source. (Commissioner of Internal Revenue v. Court of Appeals, et al., G.R. No. 108576, January 20, 1999) NOTES AND COMMENTS: The above Commissioner of Internal Revenue v. Court of Appeals, et al., (ANSCOR), case may have an impact on the doctrine enunciated in Commissioner of Internal Revenue v. Procter & Gamble Philippine Manufacturing Corporation, 204 SCRA 377, 383-386. Procter & Gamble held that a taxpayer is defined under the NIRC as any person subject to tax. Since, the withholding agent who is required to deduct and withhold any tax is made personally liable for such tax, subject to and liable for deficiency assessments, surcharges and penalties should the amount of the tax be finally determined to be less than that required to he withheld by law, then he is a taxpayer. He has sufficient legal interest to bring a suit for refund of taxes he believes were illegally collected from him. (citing Philippine Guaranty Company, Inc. v. Commissioner of Internal Revenue, 15 SCRA 1) The reader should take note that, in case of doubt, tax amnesties are to be strictly construed against the government. Tax statutes being burdens are not to be presumed beyond what the tax amnesty expressly and clearly declares. (Republic v. Intermediate Appellate Court, 196 SCRA 335) To summarize, if the issue is application for refund, the withholding agent is a taxpayer (Procter & Gamble), but for tax amnesty purposes, he is not. (Anscor)

TARIFF AND CUSTOMS CODE 98. When does importation begin and when does it end ? SUGGESTED ANSWER: Importation begins when the conveying vessel or aircraft enters the jurisdiction of the Philippines with intention to unlade therein. Importation is deemed terminated upon payment of the duties, taxes and other charges due upon the agencies, or secured to be paid, at the port of entry and the legal permit for withdrawal shall have been granted. In case the articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs. (Sec. 1202, TCCP) 99. What is meant by the flexible tariff clause ? SUGGESTED ANSWER: This is a provision in the Tariff and Customs Code, which implements the constitutionally delegated power of the President of the Philippines, in the interest of national economy, general welfare and/or national security upon recommendation of the NEDA to increase, reduce or remove existing protective rates of import duty, PROVIDED THAT, the increase should not be higher than 100% ad valorem; to establish import quota or to ban imports of any commodity, to impose additional duty on all imports not exceeding 10% ad valorem.

*** 100. The Tariff and Customs Code provides for the imposition of special customs duties. What are these duties and what is their nature and purpose ? SUGGESTED ANSWER: Special customs duties are additional import duties imposed on specific kinds of imported articles under certain conditions. The special customs duties are the anti-dumping duty, the countervailing duty, the discriminatory duty and the marking duty. The special customs duties are imposed for the protection of consumers and manufacturers, as well as Philippine products. *** 101. Explain briefly what is meant by anti-dumping duty and when is it imposed ? SUGGESTED ANSWERS: A special duty imposed on the importation of a product, commodity or article of commerce into the Philippines at less than its normal value when destined for domestic consumption in the export country, which is the difference between the export price and the normal value of such product, commodity or article. (Sec. 301 (s) (1), TCC, as amended by R.A. No. 8752, AntiDumping Act of 1999.) The anti-dumping duty is imposed where the importation of the product, commodity or article of commerce described above is causing or is threatening to cause material injury to a domestic industry, or materially retards the establishment of a domestic industry producing the like product. (Sec. 301 (a), TCC, Ibid.) NOTES AND COMMENTS: The definition under the R.A. No. 8752, the Anti-Dumping Act of 1999, is substantially the definition provided for under R.A. No. 7843, the Anti-Dumping Act of 1994. 102. Explain the meaning of normal value for purposes of imposing the antidumping duty. SUGGESTED ANSWER: It is the comparable price at the date of sale of like product, commodity, or article in the ordinary course of trade when destined for consumption in the country of export. (Sec. 301 (s) (3 ), TCC, as amended by R.A. No. 8752, Anti-Dumping Act of 1999.) 103. What is meant by dumped import/product ? SUGGESTED ANSWER: Any product, commodity or article of commerce introduced into the Philippines at an export price less than its normal value in the ordinary course of trade, for the like product, commodity or article destined for consumption in the exporting country, which is causing or is threatening to cause material injury to a domestic industry, or materially retarding the establishment of a domestic industry producing the like product. (Sec. 301 (s) (5), TCC, as amended by R.A. No. 8752, Anti-Dumping Act of 1999.) *** 104. Who imposes the anti-dumping duty.

SUGGESTED ANSWER: The Secretary of Trade and Industry in the case of nonagricultural product, commodity, or article or the Secretary of Agriculture, in the case of agricultural product, commodity or article, after formal investigation and affirmative finding of the Tariff Commission. Even when all the requirements for the imposition have been fulfilled, the decision on whether or not to impose a definitive anti-dumping duty remains the prerogative of the Tariff Commission. (Sec. 301 (a), TCC, as amended by R.A. No. 8752, AntiDumping Act of 1999.) NOTES AND COMMENTS: R.A. No. 8752, Anti-Dumping Act of 1999 abolished the Special Committee on Anti-Dumping created under R.A. No. 7843, the AntiDumping Act of 1994. Criteria used by the Tariff Commission whether or not to impose the anti-dumping duty. It may consider among others, the effect of imposing an anti-dumping duty on the welfare of the consumers and/or the general public, and other related local industries. (Sec. 301 (a), TCC, as amended by R.A. No. 8752, Anti-Dumping Act of 1999.) *** 105. What is the amount of anti-dumping duty that may be imposed ? SUGGESTED ANSWER: The difference between the export price and the normal value of such product, commodity or article. (Sec. 301 (s) (1), TCC, as amended by R.A. No. 8752, Anti-Dumping Act of 1999.) The anti-dumping duty shall be equal to the margin of dumping on such product, commodity or article thereafter imported to the Philippines under similar circumstances, in addition to ordinary duties, taxes and charges imposed by law on the imported product, commodity or article, *** 106. What are countervailing duties ? SUGGESTED ANSWER: Additional customs duties imposed on any product, commodity or article of commerce which is granted directly or indirectly by the government in the country of origin or exportation, any kind or form of specific subsidy upon the production, manufacture or exportation of such product commodity or article, and the importation of such subsidized product, commodity, or article has caused or threatens to cause material injury to a domestic industry or has materially retarded the growth or prevents the establishment of a domestic industry. (Sec. 302, TCCP as amended by Section 1, R.A. No. 8751) *** 107. What are marking duties ? SUGGESTED ANSWER: Additional customs duties imposed on foreign articles (or its containers if the article itself cannot be marked), not marked in any official language in the Philippines, in a conspicuous place as legibly, indelibly and permanently in such manner as to indicate to an ultimate purchaser in the Philippines the name of the country of origin. *** 108. What is a discriminatory duty ? SUGGESTED ANSWER: New and additional customs duty imposed upon articles

wholly or in part the growth or product of, or imported in a vessel, of any foreign country which imposes, directly or indirectly, upon the disposition or transportation in transit through or reexportation from such country of any article wholly or in part the growth or product of the Philippines, any unreasonable charge, exaction, regulation or limitation which is not equally enforced upon like articles of every foreign country, or discriminates against the commerce of the Philippines, directly or indirectly, by law or administrative regulation or practice, by or in respect to any customs, tonnage, or port duty, fee, charge, exaction, classification, regulation, condition, restriction or prohibition, in such manner as to place the commerce of the Philippines at a disadvantage compared with the commerce of any foreign country. 109. What is the doctrine of primary jurisdiction ? SUGGESTED ANSWER: The Bureau of Customs has exclusive administrative jurisdiction to conduct searches, seizures and forfeitures of contraband without interference from the courts. It could conduct searches and seizures without need of a judicial warrant except if the search is to be conducted in a dwelling place. ***110. The Collector of Customs issued a Warrant of Seizure and Detention of 25,000 baga of rice, bearing the name of SNOWMAN, Milled in Palawan shipped on board the M/V Alberto which was then docked at Pier 6 at Cebu City. The warrant was issued on the basis of a report that the rice had been illegally imported as it was landed in Palawan by a foreign vessel and then placed in sacks marked SNOWMAN, Milled in Palawan. It was then shipped to Cebu City on board the M/V Alberto. Forfeiture proceedings were then started in the Cebu City customs office. The consignee then filed a civil suit for injunction before the Cebu City RTC, which issued the injunction because there was alleged lack of probable cause for customs to effect the seizure. Was the issuance of the injunction proper ? SUGGESTED ANSWER: No. There is no question that RTCs are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of Customs and to enjoin or otherwise interfere with these proceedings. The Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods. RTCs are precluded from assuming cognizance over such matters even through petitions of certiorari, prohibition or mandamus. (The Bureau of Customs, et al., v. Ogario, et al., G.R. No. 138081, prom. March 20, 2000) NOTES AND COMMENTS: a. The Tariff and Customs Code and the Act Creating the Court of Tax Appeals specify the proper fora and procedure for the ventilation of ant legal objections or issues raised concerning seizure and forfeiture proceedings. Thus, actions of the Collector of Customs are appealable to the Commissioner of Customs, whose decision, in turn, is subject to the exclusive appellate jurisdiction of the Court of Tax Appeals and from there to the Court if Appeals. The rule that RTCs have no review powers over such proceedings is anchored upon

the policy of placing no unnecessary hindrance on the governments drive, not only to prevent smuggling and other frauds upon Customs, but more importantly, to render effective and efficient the collection of import and export duties due the State, which enables the government to carry out the functions it has been instituted to perform. b. The customs authorities do not have to prove to the satisfaction of the court that the articles on board a vessel were imported from abroad or are intended to be shipped abroad before they may exercise the power to effect customs searches, seizures, or arrests provided by law and continue with the administrative hearings. (The Bureau of Customs, et al., v. Ogario, et al., G.R. No. 138081, prom. March 20, 2000) 111. Acting on information that a shipment from Hongkong on board the S/S Sa Dragon violated the Tariff and Customs Code, as amended, agents of the EIIB seized the shipment. It was found that the 40 ft. van was made to appear as a consolidation shipment consisting of 232 packages with Translink Intl. Freight Forwarded as shipper and Transglobe Intl. Inc., as consignee; that there were eight (8) shippers and eight (8) consignees declared as co-loaders and co-owners of the contents of the van, when in truth the entire shipment belongs only to one entity; that the items as declared (various industrial items) were found in the van, instead it was found to be fully stuffed with textile piece goods. As a result of the above, the appropriate warrant of seizure was issued and the goods forfeited in favor of the government. The consignee filed a petition for redemption of the shipment and the hearing officer recommended the release of the shipment upon the payment of its domestic value as the shipment consists of goods which are in legal contemplation not prohibited, nor the release thereof to the claimant contrary to law. The Commissioner of Customs denied the offer of redemption on the grounds (1) that the shipment was made to appear an innocuous consolidation shipment destined for shipment outside of the CY-CFS in order to conceal the textile fabrics; (2) the eight co-loaders/consignes of the shipment are all fictitious; and (3) CMO 8792 provides for a denial of an offer of redemption when the seized shipment is consigned to a fictitious person. Would you allow the redemption ? Why ? SUGGESTED ANSWER: Yes. There is absent the following circumstances hence, it would be proper to allow the redemption of forfeited property upon payment of its computed domestic market value. (Transglobe International, Inc. v. Court of Appeals, et al., G.R. No. 126634, January 25, 1999) a. There is fraud; b. The importation is absolutely prohibited, or c. The release of the property would be contrary to law. (Ibid.) Misdeclarations in manifest and rider cannot be ascribed to a consignee since it was not the one that prepared them. As said in Farolan, if at all, the wrongful making or falsity of the documents can only be attributed to the foreign suppliers or shippers. .

(Ibid.) NOTES AND COMMENTS: Fraud as defined in Sec. 1, par. 1.a., CMO-87-92 must be actual, not constructive. Sec. 1.a., CMO-87-92 is of the same tenor as Sec. 2530, pars., (f) and (m), subpars. 3, 4 and 5, which deals with falsities committed by the owner, importer, exporter or consignee or importation/exportation through any other practice or device. In Aznar v. Court of Tax Appeals, 58 SCRA 519, reiterated in Farolan, Jr. v. Court of Tax appeals, et al., 217 SCRA 298, the Supreme court clarified that the fraud contemplated by law must be actual and not constructive. It must be intentional, consisting of deception, willfully and deliberately done or resorted to in order to induce another to give up some right. *** Forfeiture proceedings are in the nature of proceedings in rem. Forfeiture of seized goods in the Bureau of Customs is a proceeding against the goods and not against the owner. It is in the nature of a proceeding in rem, i.e. directed against the res or imported goods and entails a determination of the legality of their importation. In this proceeding, it is in legal contemplation the property itself which commits the violation and is treated as the offender, without reference whatsoever to the character or conduct of the owner. The issue is limited to whether the imported goods should be forfeited and disposed of in accordance with law for violation of the Tariff and Customs Code. .(Transglobe International, Inc. v. Court of Appeals, et al., G.R. No. 126634, January 25, 1999) The one-year prescriptive period for forfeiture proceedings applies only in the absence of fraud. (Commissioner of Customs v. Clurt of Tax Appeals, et al., G.R. No. 132929, prom. March 27, 2000) 112. On April 10, 1997, the Collector of Customs conducted a public auction sale of Lot No. 15 consisting of various marble processing machine and grinding machine which included a Special Circular Saw and a Diamond Sawing Machine. The award was made to Engr. Franklin Policarpio, the highest bidder. After Engr. Policarpio signed the Gate Pass evidencing withdrawal of Lot No. 15 from customs custody, he found that the two saws were missing and upon his investigation found that the items were installed in the compound of Carrara Marble Philippines, Inc. Consequently, for alleged violations of Section 2536 (non-payment of duties and taxes) and Section 2530 [e] (illegal removal of articles from warehouse) of the Tariff and Customs Code (TCC) the saws were seized by authority of a Warrant of Seizure and Detention dated May 29, 1991, from the compound of Carrara Marble. Carrara Marble failed to present evidence of payment of duties and taxes and its defense is an alleged local sale evidenced by notarized Deeds of Sale. In the meantime, Engr. Policarpio intervened and claimed ownership of the saws. Carrara Marble then offered to settle the case in accordance with the provisions of the TCC. However, the offer was refused by the Bureau of Customs, which then declared the articles forfeited in favor of the Government. Resolve the following issues explaining briefly the reasons for your answer:

a. Is it valid to forfeit an article found in the possession of a third party after the sale at public auction ? b. Has the importation been terminated ? c. Who has the right to retain possession over the two (2) saws ? SUGGESTED ANSWERS: a. Yes, because there is showing that the imported saws were acquired by Carrara Marble while they were in customs custody without showing that the correct duties and taxes were paid thereon. The TCC subjects to forefeiture any article which is removed contrary to law from any public or private warehouse under customs supervision, or released irregularly from customs custody. Before forfeiture proceedings are instituted, the law requires the presence of probable cause. Once established the burden of proof is shifted to the claimant. Customs officers with proper authorization from the Commissioner in writing, may demand evidence of payment of duties and taxes on foreign articles openly offered for sale or kept in storage; and if no such evidence can be produced, such articles may be seized and subjected to forfeiture proceeding; provided however, that during such proceedings the person or entity from whom such articles were seized shall be given an opportunity to prove or show the source of such articles and the payment of duties and taxes thereon. Under the circumstances, it is clear that before the delivery of the items to Engr. Policarpio, the Bureau of Customs had custody of said saws. It was only when the whole was handed over to Engr. Policarpio that it was discovered that the two saws were missing. In this case the forfeiture takes effect immediately upon the commission of the offense. The forfeiture of the subject machineries, retroacted to the date they were illegally withdrawn from customs custody. The governments right to recover the machineries proceeds from its right as lawful owner and possessor thereof upon abandonment by the importer. Such right may be asserted no matter in whose hands the property may have come, and the condemnation when obtained avoids all intermediate alienations. The forfeiture of the saws rests on a different statutory basis from Policarpios right to receive the property as the winning bidder in the auction sale. It was based upon the governments right to recover property illegally withdrawn from its custody. b. Importation was already terminated after Engr. Policarpio has signed the Gate Pass evidencing withdrawal of Lot 15 from customs custody. Importation is deemed terminated upon payment of duties, taxes and other charges due or secured to be paid upon the articles at a port of entry, and upon the grant of a legal permit for withdrawal; or in case said articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs. The forfeiture of the subject saws however, is not dependent on whether or not the importation was terminated; rather it is premised on the illegal withdrawal of goods from customs custody. Thus, regardless of the termination of importation, customs authorities may validly seize goods which, for all intents and purposes, still belong to the government.

c. Compromise could not be allowed anymore since the subject machineries had already been awarded to Policarpio, being the highest bidder in the public auction. The government has the rightful possession of the saws but it should turnover the same to Policarpio. (Carrara Marble Philippines, Inc., v. Commissioner of Customs, G.R. No. 129680, prom. September 1, 1999) NOTES AND COMMENTS: Administrative and judicial procedures relative to customs searches, seizures and forfeitures: a. Determination of probable cause and issuance of warrant. The Collector of Customs upon probable cause that the articles are imported or exported, or are attempted to be imported or exported, in violation of the tariff and customs laws shall issue a warrant of seizure. (Sec. 6, Title III, CAO No. 9-93) If the search and seizure is to be conducted in a dwelling place, then a search warrant should be issued by the regular courts not the Bureau of Customs. There may be instances where no warrants issued by the Bureau of Customs or the regular courts is required, as in search and seizures of motor vehicles and vessels. b. Actual seizure of the articles. Master this procedure. Requirements for release under bond of seized articles: This is a probable area so master. Settlement of seizure case by payment of fine or redemption of forfeited property. This is another probable area. LOCAL TAXATION *** 113. What are the fundamental principles of local taxation ? SUGGESTED ANSWER: The fundamental principles of local taxation are: a. Uniformity; b. Taxes, fees, charges and other impositions shall be equitable and based on ability to pay, for public purposes, not unjust, excessive, oppressive or confiscatory, not contrary to law, public policy, national economic policy or in restraint of trade; c. The levy and collection shall not be let to any private person; d. Inures solely to the local government unit levying the tax; e. The progressivity principle must be observed. *** 114. On June 26, 1992, the Sangguniang Panlalawigan of Bulacan passed Provincial Ordinance No. 3, to take effect on July 1, 1992, which levies a tax of 10% of the fair market value in the locality per cubic meter of ordinary stones, gravel, sand, earth and other quarry resources extracted from areas of public land within its territorial jurisdiction. It now collects the said tax upon quarry resources extracted from private lands by Republic Cement. It claims authority to do so under the provisions of the Local Government Code as well as under the Regalian theory of State ownership over all natural resources. Is the collection correct ? SUGGESTED ANSWER: No, because the authority under the Local Government Code to collect taxes on quarry resources applies only to those extracted from public

lands. (Sec. 134 in relation to Sec. 138, Local Government Code) Furthermore, the Local Government Code prohibits local government units from collecting excise taxes on articles enumerated under the NIRC, and taxes, fees or charges on petroleum products. (Sec. 133 [h], Local Government Code in relation to the Tax Code) The tax imposed is an excise tax upon the performance, carrying on, or the exercise of an activity. While the Tax Code levies a tax on all quarry resources, regardless of origin, whether extracted from public or private lands, the Local Government Code authorizes the local government unit to impose such taxes on those taken from public lands. Thus, those extracted from private lands are taxable under the NIRC and not by local government units. The Regalian doctrine may not be applied because taxes, being burdens, are not to be presumed beyond what the applicable statute expressly and clearly declares, tax statutes being construed stricitssimi juris against the government. (The Province of Bulacan, et al., v. The Court of Appeals, etc., et al., 299 SCRA 442) *** 115. Philippine Basketball Association contested the deficiency amusement tax assessed against it by the BIR for conducting the professional basketball games and for the cession of advertising and streamer spaces to Vintage Enterprises, Inc. a) Should the amusement taxes be paid to the local government instead of the BIR ? b) Is the cession of advertising and streamer spaces to Vintage Enterprises, Inc. subject to the payment of amusement taxes ? SUGGESTED ANSWER: a. No. Professional basketball games should pay the amusement taxes collected by the BIR and not the amusement taxes collected by the local governments. The amusement tax which provinces and cities are allowed to collect under Sec. 140 of the Local Government Code, refers to an amusement tax to be collected from proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement. The authority to tax professional basketball games is not included therein because it is a national tax provided for under Sec. 125 of the 1997 Tax Code which provides that, There shall be collected from the proprietor, lessee or operator of cockpits, cabarets, night or day clubs, boxing exhibitions, professional basketball games, Jai-Alai and racetracks, a tax equivalent to: xxxx (d) Fifteen percent (15%) in the case of professional basketball games envisioned in Presidential Decree No. 971: Provided, however, That the tax herein shall be in lieu of all other percentage taxes of whatever nature and description; xxx b) Yes. The second to the last paragraph of Sec. 125 of the 1997 Tax Code provides that, the term gross receipts embraces all the receipts of the proprietor, lessee or operator of the amusement place.. This term is broad enough to embrace the cession of advertising and streamer spaces as the same embraces all the receipts of the proprietor, lessee or operator of the amusement place. It is thus, a national tax not a local tax. The recognition by the BIR of such income from cession as a local tax is of no moment because the Government is never estopped by the mistake or error on the

part of its agents, specially on the matter of taxes. (Philippine Basketball Association v. Court of Appeals, et al., G.R. No. 119122, prom. August 8, 2000) 116. The City Treasurer discovered that the Knechts failed to pay their real property taxes on their property consisting of a parcel of land with an area of 8,102 sq.m. The property was subsequently sold at public auction for the tax delinquency. However, the Knechts did not receive any notice of their tax delinquency and that the Rgister of Deeds did not order them to surrender their owners duplicate for annotation of the tax lien prior to the sale. Neither did they have notice of the auction sale nor was the certificate of sale annotated on their title nor with the title in the possession of the Register of Deeds. Is the tax sale valid ? Reason out your answer. SUGGESTED ANSWER: No. It has been ruled that the notice and publication, as well as the legal requirements for a tax delinquency sale, are mandatory, and the failure to comply therewith can invalidate the sale. The prescribed notices must be sent to comply with the requirements of due process. (De Knecht, et al,. v. Court of Appeals; De Knecht, et al., v. Honorable Sayo, 290 SCRA 223,236) The reason behind the notice requirement is that tax sales are administrative proceedings which are in personam in nature. (Puzon v. Abbellera, 169 SCRA 789, 795; De Asis v. I.A. C., 169 SCRA 314) NOTES AND COMMENTS: All of the above cases were decided interpreting the provisions of C.A. No. 470, the old Assessment Law, and P.D. No. 464, the Real Property Tax Code, both of which required personal notice to the taxpayer in addition to the requisite advertisement. The provisions of Sec. 260 of the Local Government Code on Advertisement and Sale does not require personal notice to the delinquent taxpayer. In view of the above, the author believes that personal notice of the auction sale is not required anymore under the provisions of the Local Government Code of 199 which repealed C.A. No. 470 and P.D. No. 464) REAL PROPERTY TAXATION ***117. What are the fundamental principles of real property taxation ? a. Appraisal at current and fair market value; b. Classification for assessment on the basis of actual use; c. Assessment on the basis of uniform classification; d. Appraisal, assessment, levy and collection shall not be let to a private person; e. Appraisal and assessment shall be equitable. 118. Determination of various items: a. The reasonable market value is determined by the assessor in the form of a schedule of fair market values. The schedule is then enacted by the local sanggunian. b. The assessment level is fixed by ordinances of the appropriate sanggunian.

c. The tax rate is also fixed by ordinances of the appropriate sanggunian. 119. Property exempt from the payment of real property tax: a. Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted to a taxable person for a consideration or otherwise; b. Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries, and all lands, buildings and improvements actually, directly and exclusively used for religious, charitable and educational purposes; c. Machineries and equipment, actually, directly and exclusively used by local water districts; and government owned and controlled corporations engaged in the supply and distribution of water and generation and transmission of electric power; d. Real property owned by duly registered cooperatives; e. Machinery and equipment used for pollution control and environmental protection. 120. The protest contemplated under Section 252 of R.A. No. 7160 is needed where there is a question of reasonableness of the amount assessed, not where the question raised is on the very authority and power of the assessor to impose the assessment and of the treasurer to collect the tax. (Ty v. Trampe, 250 SCRA 500) 121. On April 3, 1987, Raul purchased from Estrella two lots, both located in Cebu City. Lot no. 1 contained an area of 49 sq.m. while lot no. 2 contained an area of 48 sq.m. more or less. Both lots had improvements, which were described as "a residential house of strong materials constructed on the lots above-mentioned." Raul declared the real property constructed on the said lots for purposes of tax assessment as a residential house of strong materials with a floor area of 60 sq.m. Effective 1987, the declared property was assessed by the City Assessor under Tax Declaration 1 at a market value of P60,000.00 and an assessed value of P36,900.00. During a tax-mapping operation conducted in February 1996, the City Assessor discovered that the real property declared and assessed under Tax Declaration No. 1 was actually a residential building consisting of four (4) storeys with a fifth storey used as a roof deck. The building has a total floor area of 500.20 sq. m. The area for each floor was 100.04 square meters. As a result of the findings, the City Assessor issued Tax Declaration No. 2 effective in the year 1996, canceling the previous Tax Declaration and assessing the building therein at a net market value of P499,860.00 and an assessed value of P374,900.00. The 1987-1991 Schedule of Market Value was applied in the assessment. Raul protested the new assessment for being "excessive and unconscionable," contending that it was increased by more than 1,000% as compared to its previous market of P60,000.00 or assessed value of P36,900.00 under Tax Declaration No. 02-20454 and "that he bought the building including the lots for only P100,000.00

on April 3, 1987, which amount should be the market value of the building for purposes of determining its assessed value." He questioned the new assessment before the Local Board of Assessment Appeals of Cebu City, which dismissed his appeal on January 11, 1997. Raul elevated his case to the Central Board of Assessment Appeals. On September 17, 1998, the CBAA rendered a decision ordering the Cebu City Assessor to issue a new Tax Declaration in the amount of P281,588.00. Raul then filed a motion for the reconsideration of the CBAA's decision. Raul and the City Assessor jointly agreed that the revised valuation of the property is P78,330.00 as assessed value, classifying the property at P1,110 per sq. m., the building having been completed and occupied in 1957 or forty-two (42) years ago. The CBAA then ruled that for purposes of determining the back taxes due on the excess area of subject building from 1988 to 1996, the Cebu City Assessor should issue in accordance with Sec. 222 of the Local Government Code: a. Tax Declaration effective 1988 to June 30, 1996, based on the minimum rate per sq. m. for the type of building in accordance with the 1985-1986 Schedule of Values; b. Tax Declaration to supersede Tax Declaration No. 1 to be effective from July 1, 1994 to the year 1995, based on the minimum rate per sq. m. for the type of building, in accordance with the 1988-1991 Schedule of Values; and c. Tax Declaration to supersede Tax Declaration No. 2 to take effect in 1996, based on the revised valuation of the property as agreed upon by the parties. Raul disagrees with the above findings, based on the following: a) The CBAA erred in resolving the issue of back taxes from 1988 to 1995, despite the fact that such issue was not raised in the appeal to it, under its pretext that it is applying Sec. 222 of the Local Government Code. b) The CBAA erred in not strictly applying par. (l), Sec. 199 of the Local Government Code, defining "Fair Market Value" as basis for computing the "assessed value." c) The CBAA's ruling is discriminatory, unjust, confiscatory and unconstitutional. To what court should Raul elevate the adverse decision of the CBAA ? Would his appeal prosper ? SUGGESTED ANSWER: Raul should appeal the decision of the CBAA to the Court of Appeals, under Rule 43 of the 1997 Rules of Civil Procedure, by filing a petition for review within a period of fifteen (15) days from receipt of the adverse CBAA decision. Raul's appeal would not prosper for the following reasons: a. The facts of the case do not show that Raul has paid under protest the tax assessed against his property. This is a mandatory requirement under Sec. 252 of the Local Government Code. This is so, because the issue is reasonableness of the amount assessed and not on the very authority and power of the assessor to impose the assessment and of the treasurer to collect the tax. (Ty v. Trampe, 250 SCRA 500) b. Appellate courts as well as appellate administrative agencies, have inherent authority to review unassigned errors (1) which are closely related to an error

properly raised, or (2) upon which the determination of the error properly assigned is dependent, or (3) where the court or administrative agency finds that consideration of them is necessary in arriving at a just decision of the case. There was no error, because Raul himself is assailing the subject assessment as "excessive and unconscionable." Thus, CBAA was duty-bound to review the factual antecedents of the case and to apply hereon the pertinent provisions of law. In the process, CBAA has to apply Sec. 222 of the Local Government Code which authorizes the collection of back taxes. c. The excess areas resulting from the revision must be understood as never having been declared before. This is evident from the provisions of Sec. 222 of the Local Government Code which reads: "Sec. 222. Assessment of Property Subject to Back Taxes. -Real property declared for the first time shall be assessed for taxes for the period during which it would have been liable but in no case for more than ten (10) years prior to the date of initial assessment: Provided, however, That such taxes shall be computed on the basis of the applicable schedule of values in force during the corresponding period." It is neither just that a landowner should be permitted by an involuntary mistake or through other causes, not to say bad faith, to state an area far less than that actually contained in his land and pay a tax to the State a tax far below that which he should really pay. d. Raul's contention on the use of market value for the computation of the assessed value is erroneous. Par. (l) Sec. 199 of the Local Government Code merely defines "Fair Market Value." It does not in any way direct that the "Fair Market Value" should be used as a basis for purposes of real property taxation. On the other hand, par. (a), Sec. 198 of the same Code provides unequivocally that, "Real property shall be appraised at its current and fair market value." The current value of like properties and their actual or potential uses, among others, are also considered. Unscrupulous sellers of real estate often understate the selling price in the deed of sale to minimize their tax liability. Moreover, the value of real property does not remain stagnant, it is unrealistic to expect that the current market value of a property is the same as its cost of acquisition ten years ago. In this light, a general revision of real property assessment is required by law within two (2) years after the effectivity of the Local Government Code and every three (3) years thereafter. (Sec. 219, Local Government Code) e. When back taxes were imposed on Raul's property, there was no violation of the rule that laws shall have only prospective applicability. The provisions of Sec. 25 of P.D. No. 464, The Real Property Tax Code (now Sec. 222 of the Local Government Code) is not penal in character, hence it may not be considered as an ex post facto law. (Sesbreno v. Central Board of Assessment Appeals, et al., G.R. No. 106588, March 24, 1997) 122. What are the administrative remedies that are provided for under the provisions of R.A. No. 7160, the Local Government Code, before resort to courts is made relative to real property taxes ?

SUGGESTED ANSWER: A taxpayer may question the constitutionality or legality of a tax ordinance on appeal within thirty (30) days from effectivity thereof, to the Secretary of Justice. The taxpayer after finding that his assessment is unjust, confiscatory, or excessive, must bring the case before the Secretary of Justice for questions of legality or constitutionality of a city ordinance. An owner of real property who is not satisfied with the assessment of his property may, within sixty (60) days from notice of assessment, appeal to the Local Board of Assessment Appeals. Should the taxpayer question the excessiveness of the amount of tax, he must first pay the amount due. Then, he must request the annotation of the phrase paid under protest and accordingly appeal to the Local Board of Assessment Appeals by filing a petition under oath together with copies of the tax declarations and affidavits or documents to support his appeal. (Lopez v. City of Manila, et al., G.R. No. 127139, February 19, 1999) NOTES AND COMMENTS: Remedies of real property owner who questions validity of tax ordinance: Secretary of Justice can take cognizance of a case involving the constitutionality or legality of tax ordinances where there are factual issues involved. (Figuerres v. Court of Appeals, et al., G.R. No. 119172, March 25, 1999) Questions on validity or legality of a tax ordinance. Taxpayer files appeal to the Secretary of Justice, within 30 days from effectivity thereof. In case the Secretary decides the appeal, a period also of 30 days is allowed for an aggrieved party to go to court. But if the Secretary does not act thereon, after the lapse of 60 days, a party could already seek relief in court. These three separate periods are clearly given for compliance as a prerequisite before seeking redress in a competent court. Such statutory periods are set to prevent delays as well as enhance he orderly and speedy discharge of judicial functions. For this reason the courts construe these provisions of statutes as mandatory. (Reyes, et al., v. Court of Appeals, et al., G.R. No. 118233, prom. December 10, 1999) Public hearings are mandatory prior to approval of tax ordinance, but this still requires the taxpayer to adduce evidence to show that no public hearings ever took place. (Ibid.) 123. What are the steps to be f ollowed for the mandatory conduct of General Revision of Real Property Assessments ? a. Preparation of Schedule of Fair Market Values; b . Enactment of Ordinances; 1) levying an annual ad valorem tax on real property and an additional tax accruing to the Special Education Fund; 2) Fixing the assessment levels to be applied to the market values of real properties;

3) Providing the necessary appropriations to defray expenses incident to general revision of real property assessments,; and 4) Adopting the Schedule of Fair Market Values prepared by the assessors. (Lopez v. City of Manila, et al., G.R. No. 127139, February 19, 1999) NOTES AND COMMENTS: Public hearings are required to be conducted prior to the enactment of an ordinance imposing real property taxes. (Figuerres v. Court of Appeals, et al., G.R. No. 119172, March 25, 1999) 124. What are the steps to be followed in the preparation of fair market values ? a. The city or municipal assessor shall prepare a schedule of fair market values for the different classes of real property situated in their respective Local Government Units for the enactment of an ordinance by the sanggunian concerned; and b. The schedule of fair market values shall be published in a newspaper of general circulation in the province, city or municipality concerned or the posting in the provincial capitol or other places as required by law. (Lopez v. City of Manila, et al., G.R. No. 127139, February 19, 1999) NOTES AND COMMENTS: Proposed fair market values of real property in a local government unit as well as the ordinance containing the schedule must be published in full for three (3) consecutive days in a newspaper of local circulation, where available, within ten (10) days of its approval, and posted in at lease two (2) prominent places in the provincial capitol, city, municipal or barangay hall for a minimum of three (3) consecutive weeks. (Figuerres v. Court of Appeals, et al,. G.R. No. 119172, March 25, 1999) 125. What is the procedure to be followed in computing real property taxes ? SUGGESTED ANSWER: a. Ascertain the assessment level of the property; b. Multiply the market value by the applicable assessment level of the property; and c. Find the tax rate which corresponds to the class (use) of the property and multiply the assessed value by the applicable tax rate. For easy reference, the computation of real property tax is cited below: Market value P x x x Multiplied by Assessment Level ( x %) Assessed value P x x x Multiplied by Rate of Tax ( x %) Real Property Tax P x x x (Lopez v. City of Manila, et al., G.R. No. 127139, prom. February 19, 1999) NOTES AND COMMENTS: It is farfetched that the above question would be given. It was included only for illustrative purposes. However the following concept relative to the determination of real property taxes in order to ease the predicament of the low and middle-income groups of taxpayers, may be asked: With the introduction of assessment levels, tax rates could be maintained, although tax payments can be made either higher or lower depending on their percentage

(assessment level) applied to the fair market value of property to derive its assessed value which is subject to tax. Moreover, classes and values of real properties can be given proper consideration, like assigning lower assessment levels to residential properties and higher levels to properties used in business. (Lopez v. City of Manila, et al., G.R. No. 127139, prom. February 19, 1999)