Authority of Congress, Secretary of Finance, and Commissioner of Internal Revenue (CIR) under Philippine Taxation Law

Taxation in the Philippines is a core function of government, stemming from the inherent power to tax. However, the exercise of this power is structured by the Philippine Constitution and further defined under the National Internal Revenue Code (NIRC), among other legal provisions. The authority to legislate, administer, and enforce tax laws is primarily vested in Congress, the Secretary of Finance, and the Commissioner of Internal Revenue (CIR), each having distinct but interrelated functions. Below is a comprehensive analysis of their powers, functions, and limitations under Philippine taxation law.

1. Authority of Congress in Taxation

A. Legislative Power to Tax

Congress, as the legislative branch of the Philippine government, holds the exclusive power to create tax laws. This authority is derived from Article VI, Section 28(1) of the Philippine Constitution, which states, “The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.” As such, Congress is empowered to:

Impose, amend, and repeal taxes on incomes, properties, transactions, goods, and services.
Determine the rates of taxation and how they are applied across various sectors and individuals.
Enact exemptions and incentives that may serve as exceptions to general taxation rules, such as those provided in laws like the Tax Code, the Tax Reform for Acceleration and Inclusion (TRAIN) Act, and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act.

B. Constitutional Limitations on Congress’s Taxing Power

Congress’s taxing authority is subject to certain constitutional limitations:

Uniformity and Equity: Taxation must be applied uniformly and equitably, meaning that tax laws should treat similar entities in similar circumstances equally.
Due Process and Equal Protection: Tax laws must not violate due process and equal protection clauses, protecting individuals and entities from arbitrary or discriminatory tax rules.
Progressivity: The system of taxation must evolve progressively, imposing higher taxes on those with greater ability to pay.
Non-Delegation Doctrine: The power to tax is a legislative function and cannot be delegated to administrative agencies except when Congress expressly authorizes such delegation within constitutional bounds. For instance, Congress may delegate authority to the executive branch to enforce tax laws but cannot delegate the essential power to determine who is taxed, the type of tax, and the rate.

C. Oversight Functions

Congress exercises oversight over tax administration through legislative inquiries, budget allocation, and appropriations. This power allows Congress to monitor the implementation and effectiveness of tax laws by the executive branch, specifically agencies like the Bureau of Internal Revenue (BIR).

2. Authority of the Secretary of Finance

The Secretary of Finance, as the head of the Department of Finance (DOF), holds delegated powers to administer and implement tax policies enacted by Congress. The Secretary’s powers primarily revolve around administrative functions and regulatory authority.

A. Regulatory Authority

Under the NIRC and other tax laws, the Secretary of Finance has the authority to:

Issue rules and regulations to implement the provisions of tax laws, as delegated by Congress. These regulations have the force of law, provided they are within the bounds set by enabling legislation.
Approve tax rulings and opinions issued by the Bureau of Internal Revenue (BIR), especially on complex tax interpretations or cases with policy implications.
Adjust, prescribe, or suspend certain tax rates or exemptions in specific circumstances, as delegated by law. For example, under the CREATE Act, the Secretary of Finance may modify tax incentives based on economic goals.

B. Administrative and Supervisory Functions

The Secretary of Finance has the administrative duty to oversee agencies under the Department of Finance, including:

The Bureau of Internal Revenue (BIR), which implements and enforces tax collection laws.
The Bureau of Customs (BOC), which is responsible for duties and taxes related to imports.
Monitoring and ensuring efficient tax collection, ensuring that the BIR and BOC meet revenue targets.

C. Limitations on the Secretary of Finance

The Secretary’s authority is limited to the confines of the law and must operate within the specific mandates and policies set by Congress. The Secretary cannot create new taxes or change substantive aspects of tax laws, as this power rests solely with Congress.

3. Authority of the Commissioner of Internal Revenue (CIR)

The Commissioner of Internal Revenue (CIR) heads the Bureau of Internal Revenue (BIR), which is primarily responsible for tax administration, collection, and enforcement of internal revenue taxes.

A. Power to Interpret Tax Laws and Implement Regulations

The CIR has the authority to interpret tax laws and issue necessary rules and regulations to enforce tax policies. Key functions include:

Issuing Revenue Regulations, Memorandum Orders, and Circulars: These are essential for explaining the details and operationalization of tax laws.
Granting rulings and opinions on specific tax issues or disputes raised by taxpayers, which can serve as guidance in the application of tax laws.
Setting procedural requirements and systems to facilitate taxpayer compliance, such as filing, reporting, and remittance processes.

B. Tax Collection and Enforcement Powers

The CIR’s authority includes broad powers to ensure effective tax collection and enforcement:

Assessment and Collection: The CIR has the power to assess tax liabilities and collect taxes based on records, returns, and other documents filed by taxpayers.
Audit and Investigation: The CIR can order the examination of a taxpayer’s records to determine the correct tax due and ensure compliance.
Impose Penalties and Interest: The CIR has the authority to impose surcharges, penalties, and interest on delinquent taxpayers and other tax violations.
Power of Levy and Distraint: In cases of tax delinquency, the CIR has the power to seize a taxpayer’s property to satisfy unpaid taxes.
Issuance of Warrants of Garnishment: The CIR may garnish bank accounts and other financial assets of delinquent taxpayers.
Abatement or Compromise of Tax Liabilities: The CIR, under specified conditions, can agree to compromise or abate tax assessments, providing relief for taxpayers under certain circumstances.

C. Power to Recommend Legislative Amendments

While not empowered to legislate, the CIR can recommend changes to tax laws to Congress, especially if certain provisions impede effective tax administration or reflect outdated economic realities.

D. Delegation of Power within the BIR

The CIR can delegate powers to deputies or assistant commissioners for operational efficiency, as the BIR operates on a national scale with multiple revenue regions and districts. However, certain powers—such as the issuance of final rulings on tax assessments—cannot be fully delegated and must be exercised directly by the CIR or a specifically authorized officer.

E. Limitations and Checks on the CIR’s Authority

The CIR’s powers are also constrained by law:

Due Process Requirements: In tax assessments and collection, due process requirements must be strictly observed. Taxpayers have the right to be informed, to contest assessments, and to appeal adverse decisions.
Subject to Secretary of Finance Approval: Certain rulings and interpretations may require the concurrence or approval of the Secretary of Finance, especially those affecting significant public interest or policy.

Summary of Key Points

Congress has the exclusive authority to enact tax laws, impose new taxes, modify rates, and create exemptions or incentives. Their power is limited by constitutional principles of uniformity, equity, and progressivity.
The Secretary of Finance implements and oversees the administration of tax laws, issuing regulations within the bounds of legislation and providing necessary guidance to the BIR.
The Commissioner of Internal Revenue (CIR) is tasked with administering tax collection, enforcement, and interpretation of tax laws, focusing on efficient and lawful revenue collection within procedural constraints.

Together, these three entities form the backbone of the Philippine tax structure, each playing a pivotal role in tax administration and policy implementation, ensuring that the system operates in compliance with constitutional and legislative mandates.