CIR V. ANSCOR (TAX)

A taxpayer cannot be compelled to answer for the non-performance by the withholding agent of its legal duty to withhold unless there is collusion or bad faith. In addition, the former could not be deemed to have evaded the tax had the withholding agent performed it duty.

An income taxpayer covers all persons who derive taxable income. ANSCOR was assessed for deficiency withholding tax under the 1939 Code. As such, it is being held liable in its capacity as a withholding agent and not its personality as a taxpayer.

In the operation of the withholding tax system, the withholding agent is the payor, a separate entity acting no more than an agent of the government for the collection of the tax in order to ensure its payments; the payer is the taxpayer - he is the persons subject to tax imposed by law; and the payee is the taxing authority. In other words, the withholding agent is merely a tax collector, not a taxpayer. Under the withholding system, however, the agent-payor becomes a payee by fiction of law. His liability is direct and independent from the taxpayer, because the income tax is still imposed on and due from the latter. The agent is not liable for the tax as no wealth flowed into him - he earned no income.

The Tax Code only makes the agent personally liable for the tax arising from the breach of its legal duty to withhold as distinguished from its duty to pay tax since the government's cause of action against the withholding is not for the collection of income tax, but for the enforcement of the withholding provision of the Tax Code, compliance with which is imposed on the withholding agent and not upon the taxpayer.

Not being a taxpayer, a withholding agent, like ANSCOR in this transaction is not protected by the amnesty under the decree.

Codal provisions on withholding tax are mandatory and must be complied with by the withholding agent. The taxpayer should not answer for the non-performance by the withholding agent of its legal duty to withhold unless there is collusion or bad faith. The former could not be deemed to have evaded the tax had the withholding agent performed his duty.

This could be the situation for which the amnesty decree was intended. Thus, to curtail tax evasion and give tax evaders a chance to reform, it was deemed administratively feasible to grant tax amnesty in certain instances. In addition, a TAX AMNESTY much like tax exemption, is never favored nor presumed in law and if granted by statute, the term of the amnesty like that of tax exemption must be construed strictly against the taxpayer and liberally in favor of the taxing authority. The rule on strictissimi juris equally applies. So that any doubt in the application of an amnesty law/decree should be resolved in favor of the taxing authority.