Catching Its Tail Forever

Article excerpt

For decades, the yardstick for measuring the performance of the Bureau of Internal Revenue and its Commissioners has been its success in meeting the revenuetarget. They need to reach the elusive goal month after month, and year after year. The constant pressure to meet the target has driven the Commissioners to work for solutions that could produce instant results. In recent years, this meant revising circulars and regulations that revoked exemptions, changed the rules, and gave new interpretation to tax laws. A classic example is the imposition of the VAT (value added tax) on association dues and membership fees collected by condominium corporations. The VAT is imposed on the sale of goods or services and the BIR interpreted that association dues and membership fees fall within this purview. The BIR asserted that association dues are compensation of the corporation for beneficial services that are rendered to members. Having been part of the team at DOF that formulated the VAT as well as its expansion, I knew by heart that the BIR was amiss in this ruling. Association charges are not payment for a service. They represent the share of a condominium owner on expenses on common utilities such as the lighting of stairs and passageway. Fortunately, The First e-Bank Tower Condominium Corporation brought the matter to court which ruled against the BIR. The Court said that the Revenue Memorandum Circular 65-2012 did not merely interpret or clarify existing BIR rulings but in fact legislated a new legislation. It did not respect due process of law and since the effectivity of the ruling was made immediate, it was prejudicial to the rights of a taxpayer. …