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MARY JOY P. JUNIO, CPA

Notre Dame of Midsayap College

Midsayap, Cotabato

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The

Concept of Taxation

INHERENT POWERS OF THE STATE POLICE EMINENT

DOMAIN

TAXATION

The Power to

protect citizensand provide forsafety and

 welfare society.

The power to takeprivate property(with justcompensation)for public use.

The power toenforcecontributions tosupport thegovernment, andother inherentpowers of thestate.

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Power

Co-extensive with sovereignty to demand contributions for public purposes to support the government

Process

It passes a legislative act through the enactment of tax lawsby the Congress which will be implemented by the Executivebranch through the BIR 

Means 

 A way of collecting and apportioning the cost of governmentamong those who are privileged to enjoy its benefits 

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 •Inherent power of sovereignty•Essentially a legislative function•For public purpose•Territorial in operation•Tax exemption of government•The strongest among the

inherent powers•Subject to constitutional andinherent limitations

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•Taxation is as old as government itself. Itsexistence commences with the fourelements of a state- people, territory,sovereignty and government.•From the moment a state is born, itautomatically possesses the power tocollect taxes from its inhabitants.•

The government having sovereignty canenforce contributions upon its citizenseven without a specific provision in theConstitution authorizing it.

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The law-making body of thegovernment and its political

subdivisions exercise the power oftaxation. The powers to enact lawsand ordinances, and to impose and

collect taxes are given to theCongress.

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PUBLICPurpose

The tax revenues are for a public

purpose if utilized for the benefit of thecommunity in general. An alternativemeaning is that tax proceeds should beutilized only to attain the objectives of

government.Public use is no longer confinedto the traditional notion of use by thepublic but held synonymous with publicinterest, public benefit, public welfare,and public convenience. (Commissionerof Internal Revenue v. Central LuzonDrug Corporation, G.R. No. 159647,

 April 16, 2005)

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Territorial in

Operation As a rule, the power to tax can only be

exercised within the territorial jurisdiction of a taxing authority except

 when there exists a privity ofrelationship between the taxing Stateand the object of tax.

 Where privity of relationship exists, thestate can still exercise its taxing powersover its citizens outside its territory. 

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Tax

Exemption

of the

Government

The State immunity fromtaxation is inherent in itspower to impose tax.

Tax exemption applies onlyto government entitiesthrough which the

government immediately anddirectly exercises itsgovernmental functions.

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  Taxation power is the

strongest of all inherent powers ofthe government because, withoutmoney, the government can

neither survive nor dispense anyof its other powers and functionseffectively.

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Subject to

Inherent

Limitations

Inherent

Limitations•Taxes may be levied only for

public purpose•Being inherently legislative,taxation may not be

delegated•Tax power is limited toterritorial jurisdiction of theState•Taxation is subject tointernational comity•Government entities are

generally exempt

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Subject toConstitutional

Limitations

Constitutional

Limitations•Due process of law•

Equal protection of law•Rule of uniformity and equity•President’s power to veto separateitems in revenue or tariff bill•No public money shall be

appropriated for religious purposes•Majority of all the members of theCongress granting tax exemption•The Congress may not deprive theSupreme Court of its jurisdiction in

all cases involving the legality of anytax•No imprisonment for nonpaymentof poll tax•Tax collection shall be generally be

treated as general funds