Taxpayer's Right against prolonged and unscrupulous investigations

RULES DEROGATING THE TAXPAYER’S RIGHT AGAINST PROLONGED AND UNSCRUPULOUS INVESTIGATIONS

Rules derogating taxpayers' right against prolonged and unscrupulous investigations are strictly construed against the government. The law on prescription should be interpreted in a way conducive to bringing about the beneficent purpose of affording protection to the taxpayer within the contemplation of the Commission which recommended the approval of the law. To the Government, its tax officers are obliged to act promptly in the making of assessment so that taxpayers, after the lapse of the period of prescription, would have a feeling of security against unscrupulous tax agents who will always try to find an excuse to inspect the books of taxpayers, not to determine the latter's real liability, but to take advantage of a possible opportunity to harass even law-abiding businessmen. Without such legal defense, taxpayers would be open season to harassment by unscrupulous tax agents. (Commissioner of Internal Revenue v. FMF Development Corporation, 579 Phil. 174, 185 (2008) citing the case of Republic v. Ablaza, 108 Phil. 1105, 1108 (1960))

IS THE LAW PRESCRIBING A LIMITATION OF ACTIONS FOR THE COLLECTION OF THE INCOME TAX IS BENEFICIAL BOTH TO THE GOVERNMENT AND TO ITS CITIZENS? 

Yes. In the case of Republic v. Ablaza, the Court held that the law prescribing a limitation of actions for the collection of the income tax is beneficial both to the Government and to its citizens. 

The law prescribing a limitation of actions for the collection of the income tax is beneficial both to the Government and to its citizens; to the Government because tax officers would be obliged to act promptly in the making of assessment, and to citizens because after the lapse of the period of prescription citizens would have a feeling of security against unscrupulous tax agents who will always find an excuse to inspect the books of taxpayers, not to determine the latter's real liability, but to take advantage of every opportunity to molest peaceful, law-abiding citizens. Without such legal defense taxpayers would furthermore be under obligation to always keep their books and keep them open for inspection subject to harassment by unscrupulous tax agents. The law on prescription being a remedial measure should be interpreted in a way conducive to bringing about the beneficient purpose of affording protection to the taxpayer within the contemplation of the Commission which recommends the approval of the law. (CIR vs THE STANLEY WORKS SALES (PHILS.), INCORPORATED)

THE POWER TO ASSESS AND COLLECT TAXES IS LIMITED BY SECTION 203 OF THE NATIONAL INTERNAL REVENUE CODE 


The Court held in the case of Republic v.  GMCC United Development Corporation that the power of the Commissioner of Internal Revenue to assess and collect taxes, as provided under Section 2 of the National Internal Revenue Code, is limited by Section 203 of the National Internal Revenue Code. 


MUTUAL BENEFITS OF THE WAIVER OF THE STATUTE OF LIMITATIONS

GOVERNMENT	TAXPAYER
To the Government because tax officers would be obliged to act promptly in the making of assessment.	To citizens because after the lapse of the period of prescription citizens would have a feeling of security against unscrupulous tax agents who will always find an excuse to inspect the books of taxpayers, not to determine the latter's real liability, but to take advantage of every opportunity to molest peaceful, law-abiding citizens.