Taxation, 2018 Bar — Question XIX

QUESTION

The BIR assessed Kosco, Inc., an importer of food products, deficiency income and value-added taxes, plus 50% surcharge after determining that Kosco, Inc. had under-declared its sales by an amount exceeding 30% of that declared in its income tax and VAT returns. Kosco, Inc. denied the alleged under-declaration, protested the deficiency assessment for income and value-added taxes and challenged the imposition of the 50% surcharge on the ground that the surcharge may only be imposed if Kosco, Inc. fails to pay the deficiency taxes within the time prescribed for their payment in the notice of assessment. (a) Is the imposition of the 50% surcharge proper? (2.5%) (b) If your answer to (a) is yes, may Kosco, Inc. enter into a compromise with the BIR for reduction of the amount of surcharge to be paid? (2.5%)

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