Business Mirror

Atty. Mabel L. Buted discusses how the valid exercise of the power to tax could destroy a business and reminds everyone to be compliant.

Tax Compliance is Important

By: Atty. Mabel L. Buted

The power of taxation, along with the power of eminent domain and police power, is one of the inherent powers of the government. It is an inherent attribute of sovereignty. This means that it exists simply because the State exists.

It is unlimited, comprehensive and encompassing as it can cover almost every person, property or right. This power is exercised to raise revenues to defray the necessary expenses of the government. It is sometimes regarded as the strongest among the three inherent powers of the government, as taxes serve as its lifeblood. It is supreme.

In the valid exercise of this power, it can actually destroy. As once was opined by U.S. Chief Justice Marshall, the "power to tax involves the power to destroy."

I agree and I can attest to this.

We have recently seen how our tax authorities assess and enforce collection of taxes. Our Bureau of Internal Revenue can also suspend business operations and even close down business establishments, for some instances involving violations of the Tax Code.

The power to tax does not need to go this far – to destroy. Besides, its main purpose is to raise revenues for the government, and not to destroy. However, when taxpayers are remiss in their duty to pay taxes, the government is left with no choice but to implement its mandate to assess and collect taxes, even if this results in destruction. The government needs to sustain its life through taxes.

The law and our courts will not also protect those who defy. Only those legitimate entities are accorded with constitutional protection. Destruction will happen only to those persons and entities who disobey. The State will not also intend to kill the ‘hens that lay golden eggs.’

Hence, it is very important for taxpayers not only to comply but also to know their tax obligations. Otherwise, they will suffer the devastating consequences of non-compliance and contribute to their self-destruction.

Interest and penalties alone on missed tax payments can cost taxpayers hundreds of millions of pesos. Mere failure or refusal to issue receipts and invoices, when required, could subject them to criminal prosecution. Unlawful pursuit of business and willful failure to pay will lead them to jail. Failure to file returns and report income and transactions which are subject to tax is likewise punishable by law.

Ignorance will not save taxpayers from the destructive power of taxation, and more so for their negligence and evasion in paying taxes. The defense is always to come with clean hands. The law and our courts will protect them only if they do.

I therefore encourage our taxpayers to be faithful in knowing and complying with their tax obligations. Be compliant and the government can never destroy you. Seek the help of tax experts if you need to.