**Facts:**
This case revolves around the legality of Revenue Memorandum Order (RMO) No. 23-2014 issued by the Commissioner of the Bureau of Internal Revenue (CIR) which aimed to clarify and consolidate the responsibilities of the public sector in terms of withholding taxes on its transactions. Various government employee associations and individuals questioned the RMO, particularly its classification of certain allowances, bonuses, and benefits as taxable compensation. They argued that these were previously considered non-taxable and that RMO No. 23-2014 imposed new taxes without legislative backing, violated fiscal autonomy, discriminated against government employees, and usurped legislative power.
The petitions filed by these government employee associations and individuals were consolidated by the Supreme Court due to their similarity in questioning the legality of RMO No. 23-2014. They argued that the RMO was issued with grave abuse of discretion as it effectively created new categories of taxable income and penalties without the authority to do so.
**Issues:**
1. Whether RMO No. 23-2014 imposed new taxes without legislative authority.
2. Whether RMO No. 23-2014 violated the fiscal autonomy of government branches.
3. Whether RMO No. 23-2014 discriminated against government employees.
4. Whether RMO No. 23-2014 usurped legislative power.
**Court’s Decision:**
The Supreme Court partially granted the petitions. It declared Section VI of RMO No. 23-2014 null and void to the extent that it designated certain government officials as responsible for withholding taxes, a responsibility not specified in the National Internal Revenue Code (NIRC) of 1997 or its implementing rules. However, the Court upheld Sections III, IV, and VII of RMO No. 23-2014, stating that they merely echoed existing laws on compensation income and withholding tax obligations. The Court also found that the RMO did not violate fiscal autonomy, did not discriminate against government employees, and did not usurp legislative power. The petition for Mandamus related to raising the non-taxable income ceiling for government employees was deemed moot and academic due to subsequent legislation addressing the issue.
**Doctrine:**
This case reiterates the doctrine that administrative issuances must not override, supplant, or modify the law, but must remain consistent with the law they intend to carry out. It also highlights that any claims of tax exemption must be proven with substantial evidence and that the responsibility to withhold and remit taxes lies with those specifically designated by law or its implementing rules.
**Class Notes:**
– Administrative issuances cannot create new taxes, categories of taxable income, or penalties without legislative authority.
– Government employee allowances, bonuses, and benefits are generally subject to income tax and withholding tax unless specifically exempted by law.
– Claims for tax exemption require substantial evidential proof.
**Historical Background:**
RMO No. 23-2014 was issued within the context of the government’s efforts to clarify and strengthen tax compliance among public sector entities. This case underscores the ongoing debate between the government’s need to secure revenue through taxation and the rights of employees (government or otherwise) to exemptions and benefits entrenched in law. The decision has a significant impact on the interpretation of tax laws, particularly regarding compensation income of government employees and underscores the authoritative boundary between legislative power and administrative enforcement in the realm of taxation.
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