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Monday, August 15, 2005
Tobacco firm asks high court to rule on P1B tax refund
A CIGARETTE company has asked the Supreme Court (SC) anew to rule with finality on its refund of over P1 billion in excess of its payment of excise tax to the Bureau of Internal Revenue (BIR) from year 2000 to 2002.
In a comment, Fortune Tobacco through lawyer Angelo Raymundo Valencia asked the high court to dismiss the petition of the BIR, seeking to overturn the rulings of both the Court of Appeals (CA) and the Court of Tax Appeals (CTA).
The CA and the CTA earlier held that the Lucio Tan-led firm is entitled to a tax refund or, as an alternative, tax credit certificates equivalent to its overpayment of tax dues to the government amounting to P1.035 billion.
Valencia said the tax bureau cannot, by administrative fiat, amend the tax laws passed by Congress by making compliance to it more burdensome.
"Despite its adequate legal position, Fortune Tobacco continued to pay under protest the excess cigarette excise taxes with amount ranging from P25 million to P30 million a month for the last 60 months," he said in a plea.
Last June 26, the BIR asked the SC to overturn the rulings of the CA and the CTA that granted Fortune's claim for tax refund, while noting that the tax bureau was guilty of unauthorized "administrative legislation" when it imposed a 12 percent excise tax rate increase on eight of Fortune's cigarette brands.
The company noted that the BIR imposed the tax measure after a change in the cigarette tax system from ad valorem to specific tax through the 1997 Tax Reform Law, which is not in consonance with Republic Act (RA) 8240.
The administrative regulation, Fortune claimed, had made it pay from year 2000 to 2002 more than what it owed the government after the change in the cigarette tax system to specific tax from ad valorem through the 1997 Tax Reform Law.
"A revenue regulation that overrides and is inconsistent with the law it seeks to implement is inimical to the established principles of taxation and should be struck down. Any revenue regulation must merely carry out the law but not supplant nor modify it," Valencia said.
The assailed regulation has, among others, extended the three-year transitory period provided for in the 1997 law, levied tax rates for cigarettes packed by machines other than what was specified, and varied the rate of increase other than the 12-percent stipulated in the law, he said.
The refund represented an additional tax burden for Fortune Tobacco of almost P30 million a month for the 36-month period covered by the refund application.
Fortune claimed that the BIR erred by not taxing the company based on their current net retail price.
Under Section 145 of the Internal Revenue Code, four levels of excise tax rates for various classes of cigarettes were established, namely, premium (P12), high (P8), medium (P5) and low (P1).
In the old system, Fortune Tobacco cigarettes were imposed a tax equivalent to P6.96 per pack. With the shift to the specific system of taxation, its cigarettes should fall within the P5.95 per pack tax bracket as stated in the Tax Code.
Under the 1997 law, existing cigarette brands are given a three-year transitory period, by paying ad valorem taxes as a "minimum" to cushion the impact of a 12-percent increase in excise tax rates by year 2000.
For its part, the BIR said the appellate courts' decisions may pose a dangerous precedent to other players in the industry who might use the tax refund case as a precedent to "unduly extract money" from government.
"As borne by congressional records, the three-year period is meant to soften the impact of the excise tax rate increase...It was never meant to give respondent (Fortune), or any player for that matter, the tax planning opportunity to lower the excise taxes they had to pay beginning Jan. 1, 2001," the tax revenue said.
The BIR said Fortune could not claim that its tax obligations are meant to decrease after the end of a three-year period. (ECV)
(August 15, 2005 issue)
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