To provide a comprehensive view of Taxation Law for easier retention and application, here is a
structured flowchart and a breakdown of its core components, integrating the National Internal
Revenue Code (NIRC), the TRAIN Law, the Ease of Paying Taxes (EOPT) Act, and landmark
jurisprudence.
The Grand Flowchart of Taxation
1. THE SOURCE (Power) * Inherent Powers: (Sovereignty) Power to tax is the "power to
destroy" (Marshall) but also the "power to keep alive" (Holmes).
○ Lifeblood Doctrine: Taxes are necessary for a civilized society (CIR v. Algue).
○ Limitations: * Inherent: Public Purpose, Non-delegability, Territoriality, International
Comity.
■ Constitutional: Due Process, Equal Protection, Uniformity & Equity.
2. THE PROCESS (The Life Cycle of a Tax)
○ Levy (Legislative): Congress determines who, what, when, and how much to tax.
○ Assessment (Administrative): The BIR (under the Secretary of Finance)
discovers and computes the tax.
○ Collection (Administrative): The actual taking of money to the National Treasury.
3. TAXPAYER ENCOUNTERS (The Conflict Stage)
○ Escape from Taxation:
■ Tax Avoidance: Legal minimization (CIR v. Estate of Toda).
■ Tax Evasion: Illegal fraud/conduits (CIR v. Estate of Toda).
■ Shifting: Passing the burden (Impact vs. Incidence).
○ Exemptions: Construed strictissimi juris (Lung Center v. Quezon City).
■ Non-Profit Schools: Exempt if revenues are used actually/directly for
education (DLS-CSB v. CIR).
4. THE REMEDIES (The Battleground)
○ Government Side: Tax Lien, Distraint (Personal Prop), Levy (Real Prop).
○ Taxpayer Side: * Assessment Protest: 30 days to protest; 60 days to submit docs.
■ Refund: 2-year prescriptive period for "erroneous collection" (Mitsubishi v.
CIR).
Visualizing Core Doctrines
1. The Lifeblood Flow
● The Concept: Without revenue, the State cannot function.
● Application: This is why "No Injunction" exists—courts cannot stop the collection of taxes
because it would paralyze the government.
2. Direct Double Taxation (The 6-Element Check)
To determine if a tax is "obnoxious" double taxation (City of Manila v. Coca-Cola), use the
P-P-T-J-T-K mnemonic:
1. Property (Same subject)
2. Purpose (Same)
3. Taxing Authority (Same)
4. Jurisdiction (Same)
5. Taxing Period (Same)
6. Kind of Tax (Same)
3. The Assessment Pipeline (Due Process)
● Step 1: LOA (Letter of Authority) – The "Search Warrant" of tax. No LOA, no valid audit.
● Step 2: NOD (Notice of Discrepancy) – The new EOPT/RR requirement for initial
discussion.
● Step 3: PAN (Preliminary Assessment Notice) – 15 days to reply.
● Step 4: FAN/FLD (Final Assessment Notice) – 30 days to file a formal Protest.
4. Tax Avoidance vs. Tax Evasion
● Avoidance: Walking the edge of the law (e.g., opting for 40% OSD instead of Itemized
Deductions).
● Evasion: Breaking the law (e.g., using a "conduit" to hide profit, as seen in Estate of
Toda).
MNEMONIC SUMMARY (For Retention)
● P-A-R (Taxpayer Remedies): Protest, Appeal, Refund.
● C-A-P (LGU Exemptions): Charitable, Agricultural, Public (Religious/Educational
institutions).
● L-A-P (Stages of Taxation): Levy (Congress), Assessment (BIR), Payment (Taxpayer).
EOPT ACT 2024 Key Changes (The New "Process")
1. Classification: Taxpayers are now Micro, Small, Medium, or Large.
2. File/Pay Anywhere: No more "Wrong Venue" penalties.
3. Invoice System: All VAT transactions now use "Invoices" (Official Receipts are
deprecated for VAT).