Customs Duties & Tax

• Tariff is a list of commodities with corresponding duties or charges.
• Customs originally denoted customary tolls paid by merchants on commodities.

Customs Duties and Tax

• "Tax" includes all government contributions, including customs duties and imposts.
• "Duties" apply to customs and are nearly synonymous with "imposts."

Classification of Customs Duties

As to Form

• Specific Duty: Levied proportionally to the number of items or units imported, without regard to value.
  • Example: P500,000.00 per unit of Automobile.
• Ad Valorem Duty: A tax levied as a percentage of the value of imported articles.
  • Example: 5% of the dutiable value of Rhum.
• Mixed or Compound Duty: A tax comprising both specific and ad valorem rates.
  • Example: P500,000.00 per unit of Automobile and 30% ad valorem on Dutiable Value of Automobile.

As to Economic Purpose or Effect

• Revenue Duty: Designed to raise revenue for the government, usually minimal or modest and levied on products not produced locally.
• Protective Duty: Intended to protect domestic products from foreign competition by imposing a higher duty on imported commodities.
• Customs duties can serve both revenue-raising and regulatory purposes.

As to Special Purpose

• Anti-dumping Duty: Imposed in addition to the regular duty to prevent the dumping of imported articles at a lower price than in their domestic markets.
• Countervailing Duty: A special duty equal to the amount of subsidy granted, intended to offset the subsidy granted by the exporting country.
• Safeguard Duty: An increased tariff or additional special safeguard duty levied against covered products being imported in increased quantity.

As a Form of Penalty

• Discriminatory Duty: A penalty duty imposed against the articles or product of a country that discriminates against the product of the discriminated country.
• Marking Duty: A penalty duty imposed against imported articles or containers not properly marked with the country of origin, computed at 5% of the dutiable value.

Government Power of Taxation

• Taxation is how a government raises revenue to cover necessary expenses from those who benefit from it.
• Taxation is a mode by which governments make exactions for revenue to support their existence and carry out their legitimate objectives.
• Taxation is the exercise of sovereign power to raise revenue for the expense of the government.
• Taxation is a method of apportioning the cost of government among those who are privileged to enjoy its benefits.

Nature of the Power of Taxation

• The power of taxation is two-fold:
  • An inherent power of the state and an attribute of sovereignty.
  • Legislative in character, involving the promulgation of rules.
• The power to tax is considered inherent in a sovereign state because it is necessary for the state's existence.

Purposes of Taxation

• Revenue purposes: The basic purpose of taxation is to raise revenues.
• Sumptuary or regulatory purpose: The secondary purpose is to promote the general welfare and to protect the health, safety or morals of inhabitants Non-Revenue (or Sumptuary) Objectives of Taxation
• Taxation can strengthen anemic enterprises.
• Taxes may be increased in periods of prosperity to curb spending and halt inflation and lowered in periods of slump to expand business and ward off depression.
• Taxes on imports may be increased to protect local industries.
• Taxes on imported goods may be used as a bargaining tool by a country by setting tariff rates first at a relatively high level before trade negotiations.
• Taxes can discourage certain businesses (e.g., tobacco and alcohol).
• Taxes can also minimize inequity.

Scope of Legislative Taxing Power

• Amount or rate of tax
• Apportionment of the tax
• Kind of tax
• Method of collection
• Purpose/s of its levy (must be for public purpose)
• Subject to be taxed (must be within jurisdiction)
• Situs of taxation

Characteristics of Taxes

• Forced charge
• Pecuniary burden payable in money
• Levied by the legislature
• Assessed with some reasonable rule of apportionment
• Imposed by the State within its jurisdiction
• Levied for a public purpose

Sources of Customs Taxation

• Primary source: 1987 Constitution.
• Statutory Basis: RA 10863 (An Act Modernizing the Customs and Tariff Administration).
• Administrative enactments: Customs Administrative Order (CAO).
• Jurisprudence: Doctrine of stare decisis.
• Treaties or International Agreements.

Fundamental Doctrines Applicable to Customs and Tariff

• Lifeblood Doctrine: Taxes are essential for the state to finance the needs of the citizenry.
• Doctrine of Primary Jurisdiction: Courts cannot determine a controversy within the jurisdiction of an administrative tribunal.
• Doctrine of Fresh / (Hot) Pursuit: Customs or Coast guard officers can follow or chase a vessel or imported article violating Customs and Tariff laws.
• Doctrine of Exhaustion of Administrative Remedies: All administrative remedies must be exhausted before seeking judicial remedy.

Constitutional Provisions Affecting Tariff

• The President has the power to veto any separate item or items in a tariff bill.
• Congress may authorize the President to fix tariff rates within specific limits.

How the Philippine Tariff is Made

• Tariff bills originate in the House of Representatives and are referred to the Ways and Means Committee.
• Sub-committees hold public hearings.
• The Philippine Tariff Commission provides technical information.
• The Committee discusses and revises the bill.
• The bill is reported out of committee for consideration by the House.
• This process is repeated in the Senate by the Committee on Finance.
• A Conference Committee reconciles the differences between the House and Senate versions of the bill.
• The bill is sent to the President for approval, who may sign it into law.

To Import is Not a Right But a Privilege

• Importing merchandise is not a right but a privilege granted by Congress.