2017 (Taxation) Bar Exam Questions: Question 14

[Answer/discuss the question below, or see 2017 bar exam Taxation Instructions; 2016 Taxation Questions: 1234567891011121315161718, and 19; See also 2017 Bar Exam: Information, Discussions, Tips, Questions and Results]


Globesmart Services, Inc. received a final assessment notice with formal letter of demand from the BIR for deficiency income tax, value-added tax and withholding tax for the taxable year 2016 amounting to P48 million. Globesmart Services, Inc. filed a protest against the assessment, but the Commissioner of Internal Revenue denied the protest. Hence, Globesmart Services, Inc. filed a petition for review in the CTA with an urgent motion to suspend the collection of tax.

After hearing, the CTA Division issued a resolution granting the motion to suspend but required Globesmart Services, Inc. to post a surety bond equivalent to the deficiency assessment within 15 days from notice of the resolution. Globesmart Services, Inc. moved for the partial reconsideration of the resolution and for the reduction of the bond to an amount it could obtain. The CTA Division issued another resolution reducing the amount of the surety bond to P24 million. The latter amount was still more than the net worth of Globesmart Services, Inc. as reported in its audited financial statements.

(a) May the collection of taxes be suspended? Explain your answer. (3%)

(b) Is the CTA Division justified in requiring Globesmart Services, Inc. to post a surety bond as a for the suspension of the deficiency tax collection? Explain your answer. (3%)

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