Atty. Irwin Nidea, Jr. discusses the power of the CTA to suspend the collection of tax and its apparent limitations.
Why not a TRO?
By Atty. Irwin C. Nidea Jr.
"The law appears to limit the power of the CTA to only grant “suspension of collection of tax”. The Rules of Court on the other hand, is explicit in stating the power of the regular courts to issue a TRO, preliminary injunction and a permanent injunction. It is therefore necessary to clearly define what the power of the CTA is in terms of injunction. Is the current law enough for the CTA to issue TROs or a law must be passed to expand its powers?"
What will you do if you receive a Warrant of Distraint and Levy from the Bureau of Internal Revenue (BIR) or worse, a Notice of Garnishment from your bank? It means that the government is now enforcing the collection of what it believes a delinquent taxpayer owes the government. WDL is usually issued when the taxpayer’s protest against an assessment notice is denied by the BIR and all efforts for reinvestigation and reconsideration have failed. Can you still stop the BIR at this point? Is everything lost?
When a WDL or a Notice of Garnishment is received by a taxpayer, his only recourse is to appeal to the Court of Tax Appeals (CTA) within 30 days from receipt of the same. It is important to note though, that when a taxpayer appeals a WDL or a Notice of Garnishment, he is not questioning the validity of the assessment but only the validity of the BIR’s collection enforcement. This has implications in laying down a defense in court.
As regards the collection process, only the CTA can stop the BIR from flexing its enormous power to take a taxpayer’s property. The regular courts are prohibited from issuing orders that will enjoin the BIR from garnishing a bank account or from selling real properties of taxpayers in a public auction. The Tax Code provides that, no court shall have the authority to grant an injunction or sustain the collection of any national internal revenue tax, fee or charge. However, the law creating the CTA provides that no appeal taken to the CTA from the decision of the BIR on a disputed assessment shall suspend the payment, levy, distraint, and/or sale of any property of the taxpayer for the satisfaction of his tax liability, unless the CTA suspends the collection after payment of bond that is twice the amount being assessed.
To stop the BIR from enforcing collection, a taxpayer must file a motion for suspension of collection of tax with the CTA, together with its Petition or at any time while the case is pending in court. But is this remedy given by law to taxpayers enough to temporarily clip the power of the BIR to collect until the taxpayer’s liability is determined with finality by the courts?
I am afraid it is not. When compared to the regular courts, the power of the CTA appears to be limited. The regular courts in ordinary cases have the power to issue a 72-hour temporary restraining order (TRO) and a preliminary injunction to preserve the status quo. After hearing, the regular courts can issue a permanent injunction. But the CTA as far as I know, does not issue a 72-hour TRO nor a preliminary injunction. What it grants is a permanent injunction or a suspension of collection of tax. So, while the motion for suspension of collection of tax is being heard at the CTA, the BIR is not being stopped from enforcing the WDLs and notice of garnishment.
The law appears to limit the power of the CTA to only grant “suspension of collection of tax”. The Rules of Court on the other hand, is explicit in stating the power of the regular courts to issue a TRO, preliminary injunction and a permanent injunction. It is therefore necessary to clearly define what the power of the CTA is in terms of injunction. Is the current law enough for the CTA to issue TROs or a law must be passed to expand its powers?
The BIR recently issued WDLs even on cases where the CTA has already ruled that the assessment issued by the BIR is void. The BIR is still pursuing the collection of these cases because it believes that if they are still on appeal and that there is no order coming from the CTA stopping them. In some cases, the CTA made a stand and declared that the BIR must not issue WDLs when the CTA has already promulgated a decision against it. The problem though is that between the time that the WDL and the notice of garnishment are issued and the time that the CTA grants the motion to suspend the collection of tax, bank accounts may have already been seized by the government and real properties might have already been sold in a public auction.
I hope the government including the lawmakers will address this loophole and shield taxpayers from irreparable damage.
The author is a senior partner of Du-Baladad and Associates Law Offices, a member-firm of WTS Global.
The article is for general information only and is not intended, nor should be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at This email address is being protected from spambots. You need JavaScript enabled to view it. or call 8403-2001 local 330.