SMART COMMUNICATIONS, INC., PETITIONER, VS.

MUNICIPALITY OF MALVAR

No. The fees in Ordinance No.18 are not taxes. Since the main purpose of
Ordinance No. 18 is to regulate certain construction activities of the identified
special projects, which included "cell sites" or telecommunications towers, the
fees imposed in Ordinance No. 18 are primarily regulatory in nature, and not
primarily revenue-raising. While the fees may contribute to the revenues of the
Municipality, this effect is merely incidental. Thus, the fees imposed in
Ordinance No. 18 are not taxes.
G.R. No. L-17962 April 30, 1965
REPUBLIC OF THE PHILIPPINES, vs. BLAS GONZALES

Suggested Answer: (charot!) The suit for tax evasion will prosper. In the case of Republic vs Gonzales it was held that failure of the
tax payer to declare for taxation purposes his true and actual income derived from business for two consecutive years is a
concrete evidence that may be utilized to prove tax evasion.

In the case at bar upon the audit investigation conducted by the BIR it was discovered that Anne Nonimus failed to declare for
taxation purposes his true and actual income from maintaining Sinking Pinoy for the years 2015 and 2016.

In view of the Lifeboold Doctrine and since tax evasion is an illegal or fraudulent means to defeat or lessen payment of tax and
further considering the circumstances at bar a case for tax evasion against Anne will prosper.
Willful Blindness Doctrine
MERE RELIANCE on another person in preparing, filing and paying income taxes is not a justification for failure to file the right information on
income taxes.

In People v. Gloria Kintanar (CTA EB Crim. No. 006, Dec. 3, 2010), Ms. Kintanar was charged with failure to make or file her income tax returns
(ITR), violating Section 255 of the 1997 National Internal Revenue Code (NIRC), as amended. She claimed that she did not actively participate in
the filing of her joint ITR with her husband since she entrusted such duty to the latter who, in turn, hired an accountant to perform their tax
responsibilities. She testified that she did not know how much her tax obligation was; nor did she bother to inquire or determine the facts
surrounding the filing of her ITRs. Despite several notices and subpoena received by the accused, only an unsupported protest letter made by her
husband was filed with the Bureau of Internal Revenue (BIR). The Court of Tax Appeals (CTA) En Banc found her neglect or omission tantamount
to “deliberate ignorance” or “conscious avoidance”. As an experienced businesswoman, her reliance on her husband to file the required ITR
without ensuring its full compliance showed clear indication of deliberate lack of concern on her part to perform her tax obligations. This ruling
was sustained by the Supreme Court (SC) in 2012.

Based on the foregoing, the willful blindness doctrine was applied by the CTA, as sustained by SC on cases where there is a natural presumption
that the taxpayer knows his/her tax obligations under the law considering the factual circumstances of the case, such as being a businesswoman
or official of a company. This case set a precedent that mere reliance on a representative or agent (i.e., accountant or husband) is not a valid
ground to justify any noncompliance in tax obligations. The taxpayer must inquire, check and validate whether or not his/her representative or
agent has complied with the taxpayer’s tax responsibilities.

However, in the recent case of People v. Judy Ann Santos (CTA Crim. Case no. 012, Jan. 16, 2013), the CTA Division seemed to have a change of
heart and acquitted Ms. Santos despite having almost the same circumstances as that of the case of Ms. Kintanar. In this case, Ms. Santos was
accused of failure to supply correct and accurate information in her ITR. She claimed that by virtue of trust, respect and confidence, she has
entrusted her professional, financial and tax responsibilities to her manager since she was 12 years old. She participated and maintained her
intention to settle the case, and thus provided all the documents needed as well as payment of her taxes. The element of willfulness was not
established and the CTA found her to be merely negligent. The CTA also noted the intention of Ms. Santos to settle the case, which negates any
motive to commit fraud. This was affirmed by the SC in its resolution issued April 2013.
G.R. No. 175410 November 12, 2014
SMI-ED PHILIPPINES TECHNOLOGY, INC., Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE

Petitioner is not entitled to benefits given to PEZA-registered enterprises, including the 5% preferential tax rate under Republic Act No. 7916 or the
Special Economic Zone Act of 1995. This is because it never began its operation.

Essentially, the purpose of Republic Act No. 7916 is to promote development and encourage investments and business activities that will generate
employment.59 Giving fiscal incentives to businesses is one of the means devised to achieve this purpose. It comes with the expectation that persons who
will avail these incentives will contribute to the purpose’s achievement. Hence, to avail the fiscal incentives under Republic Act No. 7916, the law did not
say that mere PEZA registration is sufficient.

Based on these provisions, the fiscal incentives and the 5% preferential tax rate are available only to businesses operating within the Ecozone.60 A
business is considered in operation when it starts entering into commercial transactions that are not merely incidental to but are related to the purposes
of the business.
G.R. No. 215427 December 10, 2014
PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR), Petitioner,
vs.
THE BUREAU OF INTERNAL REVENUE

Pursuant to Section 1 of R.A.9337, amending Section 27(C) of the NIRC, as amended, PAGCOR is no longer exempt from corporate
income tax as it has been effectively omitted from the list of government-owned or controlled corporations (GOCCs) that are exempt
from income tax. Accordingly, PAGCOR’s income from its operations and licensing of gambling casinos, gaming clubs and other similar
recreation or amusement places, gaming pools, and other related operations, are subject to corporate income tax under the NIRC, as
amended.

PAGCOR’s other income that is not connected with the foregoing operations are likewise subject to corporate income tax under the
NIRC, as amended.
PAGCOR’s contractees and licensees are entities duly authorized and licensed by PAGCOR to perform gambling casinos, gaming clubs
and other similar recreation or amusement places, and gaming pools. These contractees and licensees are subject to income tax under
the NIRC, as amended.
we have already declared petitioner’s income tax liability in view of the withdrawal of its tax privilege under R.A. No. 9337. However, we made
no distinction as to which income is subject to corporate income tax, considering that the issue raised therein was only the constitutionality of
Section 1 of R.A. No. 9337, which excluded petitioner from the enumeration of GOCCs exempted from corporate income tax.

For clarity, it is worthy to note that under P.D. 1869, as amended, PAGCOR’s income is classified into two: (1) income from its operations
conducted under its Franchise, pursuant to Section 13(2) (b) thereof (income from gaming operations); and (2) income from its operation of
necessary and related services under Section 14(5) thereof (income from other related services). In RMC No. 33-2013, respondent further
classified the aforesaid income as follows:
1. PAGCOR’s income from its operations and licensing of gambling casinos, gaming clubs and other similar recreation or amusement places,
gaming pools, includes, among others:
(a) Income from its casino operations;
(b) Income from dollar pit operations;
(c) Income from regular bingo operations; and
(d) Income from mobile bingo operations operated by it, with agents on commission basis. Provided, however, that the agents’ commission
income shall be subject to regular income tax, and consequently, to withholding tax under existing regulations.

2. Income from "other related operations "includes, but is not limited to:
(a) Income from licensed private casinos covered by authorities to operate issued to private operators;
(b) Income from traditional bingo, electronic bingo and other bingo variations covered by authorities to operate issued to private operators;
(c) Income from private internet casino gaming, internet sports betting and private mobile gaming operations;
(d) Income from private poker operations;
(e) Income from junket operations;
(f) Income from SM demo units; and
(g) Income from other necessary and related services, shows and entertainment.12

After a thorough study of the arguments and points raised by the parties, and in accordance with our Decision dated March 15, 2011, we sustain
petitioner’s contention that its income from gaming operations is subject only to five percent (5%) franchise tax under P.D. 1869, as amended,
while its income from other related services is subject to corporate income tax pursuant to P.D. 1869, as amended, as well as R.A. No. 9337.
G.R. No. 169507
AIR CANADA, Petitioner,
vs.
COMMISSIONER OF INTERNAL REVENUE

Issue:
Third, whether the Republic of the Philippines-Canada Tax Treaty applies, specifically:
a. Whether the Republic of the Philippines-Canada Tax Treaty is enforceable; YES
b. Whether the appointment of a local general sales agent in the Philippines falls under the definition of "permanent establishment" under
Article V(2)(i) of the Republic of the Philippines-Canada Tax Treaty

A.) In this case, there is a tax treaty that must be taken into consideration to determine the proper tax rate.

The obligation to comply with a tax treaty must take precedence over the objective of RMO No. 1-2000. Logically, noncompliance with tax
treaties has negative implications on international relations, and unduly discourages foreign investors. While the consequences sought to be
prevented by RMO No. 1-2000 involve an administrative procedure, these may be remedied through other system management
processes, e.g., the imposition of a fine or penalty. But we cannot totally deprive those who are entitled to the benefit of a treaty for failure to
strictly comply with an administrative issuance requiring prior application for tax treaty relief.
A tax treaty is an agreement entered into between sovereign states "for purposes of eliminating double taxation on income and capital,
preventing fiscal evasion, promoting mutual trade and investment, and according fair and equitable tax treatment to foreign residents or
nationals."73 Commissioner of Internal Revenue v. S.C. Johnson and Son, Inc.74 explained the purpose of a tax treaty:
The purpose of these international agreements is to reconcile the national fiscal legislations of the contracting parties in order
to help the taxpayer avoid simultaneous taxation in two different jurisdictions. More precisely, the tax conventions are drafted with a view
towards the elimination of international juridical double taxation, which is defined as the imposition of comparable taxes in two or more
states on the same taxpayer in respect of the same subject matter and for identical periods.

Observance of any treaty obligation binding upon the government of the Philippines is anchored on the constitutional provision that the
Philippines "adopts the generally accepted principles of international law as part of the law of the land[.]"76 Pacta sunt servanda is a
fundamental international law principle that requires agreeing parties to comply with their treaty obligations in good faith.

Hence, the application of the provisions of the National Internal Revenue Code must be subject to the provisions of tax treaties entered into
by the Philippines with foreign countries.

B.) Even though there is no fixed place of business, an enterprise of a Contracting State is deemed to have a permanent establishment in the
other Contracting State if under certain conditions there is a person acting for it.

Through the appointment of Aerotel as its local sales agent, petitioner is deemed to have created a "permanent establishment" in the
Philippines as defined under the Republic of the Philippines-Canada Tax Treaty.
Ambot! Lisud sabton murag siya!
Taxpayer’s suit vs Citizen’s suit
Wala nako kabalo asa na ni dapit guys. Sorry. Beyond na yata ni sa coverage.
Marsian eh. Waley. K vye!