Q. A is a contractor, building roads for the government which has not paid him P100M. Before he filed his income tax returns, he wrote a letter to the BIR Commissioner proposing a set-off between the State and A considering that his tax liability amounts to P10M and the State has not paid him despite demand. Is A correct? (Solved)

1. A is correct because the State and A are mutually debtor and creditor of each other.

2. A is not correct because tax is the life blood of the government.

3. A is correct, otherwise, the State would enrich itself at the expense of A.

4. A is not correct because a tax is different from an ordinary debt, and they are not mutually debtors and creditors of one another.