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General Principles of Taxation
MEANING OF TAXATION
1. Taxation is the process or means by whichthe sovereign, through its law-making body,
raises income to defray the necessary
expenses of the government.
. Taxation is the power of the !tate to impose
charge or burden upon persons, property, or
property rights, for the use and support of
the government and to enable it to discharge
its appropriate functions. "t is the act of
levying tax.
PURPOSE OF TAXATION
Revenue:
The primary purpose of taxation is to raise
revenue to finance government expenditures. #lways
remember this purpose.
$ote%%%%
"t applies to all taxes, whether income,
donor&s, estate, '#T, etc. !o when you are asked why
'#T is levied, your answer should be (to raise
revenue to finance government expenditures),
sigurado check na yan. *owever, there are times that
taxes are levied for regulatory purposes. #lways
remember to check the intent why such tax was
levied as in the case of +smena vs +rbos, where it
was held that the tax is levied with a regulatory
purpose which is for the stabiliation of the petroleum
products industry.
Non-Revenue:
a. Promotion of General Welfare Taxation may
be used as an implement of police power in order
to promote the general welfare of the people.
This is illustrated in the cases of +smena vs
+rbos and epublic vs /acolod-0urcia.
Osmea vs! Or"os
GR No ##$$%& Mar'( )*& *##)
acts2 The +il Price !tabiliation und 3+P!4 was
created by President 0arcos to reimburse oil
companies for cost increases in crude oil.
!ubse5uently, the +P! was reclassified into a 6trust
liability account,6 and ordered released from the
$ational Treasury to the 0inistry of 7nergy. "t is
contended that the creation of trust fund violates the
8onstitution on the reason that if a special tax is
collected for a specific purpose, the revenue
generated as a special fund to be used only for the
purpose indicated.
"ssue2 9hether the creation of the trust fund is
unconstitutional.
*eld2 $o. The tax collected is not in pure exercise of
the taxing power. "t is levied with a regulatory
purpose, to provide a means for the stabiliation of
the petroleum products industry. The levy is primarily
in the exercise of the police power of the !tate.
Re+u"li' of t(e P(ili++ines vs! ,a'olo-Mur'ia
GR No! .-*#$/0& .-*#$/1& .-*#$/%
2ul3 #& *#%%
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acts2 # :; created the Philippine !ugar "nstitute,
a semi-public corporation. "t ac5uired the "nsular
!ugar efinery from the proceeds of the !ugar tax to
be collected under # :;. The operation of the
refinery was disastrous. /acolod-0urcia refused to
pay its contribution to the said fund contending that
the purchase of refinery with money from the
"nstitute&s fund was not authoried under # :; and
that the continued operation of the refinery is inimical
to its interest.
"ssue2 9hether /acolod- 0urcia is liable.
*eld2
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#ccordingly, the obligation to pay taxes is a
statutory liability.
/! "t is an enfor'e 'ontri"ution
# tax is not a voluntary payment or donation.
"t is not dependent on the will or contractual
assent, express or implied, of the person
taxed. Taxes are not contracts but positive
acts of the government.
Take note na ang source ng obligation to pay
taxes is ?#9, hindi sya based on contract
kasi consent is not essential. *indi kailanganna pumayag ka munang magbayad ng tax
bago ka maging liable.
)! "t is 4enerall3 +a3a"le in mone3
Tax is a pecuniary burden an exaction to
be discharged alone in the form of money
which must be in legal tender, unless
5ualified by law.
!o you cannot pay your taxes with chickens,
properties, etc., only in money. 9hy@
0ahihirapan si /" nyan, isipin mo
mapupuno ng baboy ang /".
0agkakaobligasyon pa sila na pakainin ang
mga ito, kasi kung hindi, paano kung
pumayat ang baboy. /umaba ang timbang.
!igurado bababa ang value neto. $alugi na
nga sila, nangamoy baboy pa. emember,
nagfufluctuate ang value ng properties unlike
money.
Auestion2 !hould the money be in legal
tender@#nswer2
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1. Ne'essit3 T(eor3 - The power of taxation
proceeds upon the theory that the existence
of the government is a necessity. The state
cannot continue to exist without the means
to pay its expenses, and that for these
means it has a right to compel all its citiens
and property within its limits to contribute.
Take note that what is necessary under this
theory is the 7C"!T7$87 of the
G+'7$07$T, not the 7C"!T7$87 of
T#C7!.
. ,enefits-Prote'tion T(eor3 - The basis oftaxation is found in the reciprocal duties of
protection and support between the !tate
and its inhabitants. "n return for the citien&s
contribution for the support of the
government, the !tate is supposed to make
ade5uate and full compensation in the form
of benefits and protection which it gives to
his life, liberty, and property.
Qualifications of Benefits-Protection Theory:
a. "t does not mean that only those
who are able to pay and do pay
taxes can en>oy the privileges and
protection given to a citien by the
government.b. rom the contributions received, the
government renders no special orcommensurate benefit to any
particular property or person.c. The only benefit to which the
taxpayer is entitled is that derived
from his en>oyment of the privileges
of living in an organied society
established and safeguarded by the
devotion of taxes to public
purposes.
d. # taxpayer cannot ob>ect to or resistthe payment of taxes solely
because no personal benefit to him
can be pointed out as arising from
the tax.
;. .ife"loo T(eor3 -Taxes are the lifeblood
of the government. Thus, their prompt and
certain availability is an imperious need.
9ithout taxes, the government would be
paralyed for lack of motive power to
activate and operate it.
Dnder this theory, the 7C"!T7$87 of T#C is
a necessity, not the 7C"!T7$87 of the
G+'7$07$T.
NATURE OF T8E POWER OF TAXATION
1. In(erent in soverei4nt3 The power of
taxation is inherent in sovereignty as an
incident or attribute thereof, being essential
to the existence of every government. "t can
be exercised by the government even if the
8onstitution is entirely silent on the sub>ect.
. .e4islative in '(ara'ter The power to tax
is exclusively legislative and cannot be
exercised by the executive or >udicial branch
of the government.
;. Su">e't to 'onstitutional an in(erent
limitations ? 0ost of these limitations are
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specifically provided in the 8onstitution or
implied there from while the rest are inherent
and they are those which spring from the
nature of the taxing power itself although,
they may or may not be provided in the
8onstitution.
Though taxes are the lifeblood of the
government, the power of taxation is not
absolute as held in the case of 8" vs.
#lgue, "nc.
7OMMISSIONER v! A.GUE& IN7!
GR No! .-/$$#%& Fe"ruar3 *@& *#$$*1$ S7RA #
Fa'ts2 #lgue "nc. filed its income tax returns showing
deductions, for promotional fees paid, from their gross
income. The /" assessed #lgue based on such
deductions contending that the promotional fees are
not ordinary, reasonable and necessary expenses,
thus, disallowed. #lgue was able to prove that the
professional fees were necessary and reasonable in
the light of the efforts exerted by the payees in
inducing investors and prominent businessmen to
venture in an experimental enterprise and involve
themselves in a new business re5uiring millions of
pesos.
Issue2 9hether the /" correctly disallowed the
deduction.
8el2 $o, because #lgue was able to prove that the
professional fees were ordinary, necessary and
reasonable. "t is well-settled that taxes are the
lifeblood of the government and so should be
collected without unnecessary hindrance +n the other
hand, such collection should be made in accordance
with law as any arbitrariness will negate the very
reason for government itself. "t is therefore necessary
to reconcile the apparently conflicting interests of the
authorities and the taxpayers so that the real purpose
of taxation, which is the promotion of the common
good, may be achieved.
/ut even as we concede the inevitability and
indispensability of taxation, it is a re5uirement in all
democratic regimes that it be exercised reasonably
and in accordance with the prescribed procedure. "f it
is not, then the taxpayer has a right to complain and
the courts will then come to his succor. or all the
awesome power of the tax collector, he may still be
stopped in his tracks if the taxpayer can demonstrate,
as it has here, that the law has not been observed.
Roas v 7TA
GR No .-/1B0)& A+ril /%& *#%$
acts2 The oxas brothers inherited from their
grandparents several properties which included
farmlands. The government, in l ine with the
constitutional mandate to ac5uire big landed estates
and apportion them among landless tenants-farmers,
persuaded the oxas brothers to part with their
landholdings The brothers agreed to sell the lots to
the government. Dnfortunately, the government did
not have funds so the brothers agreed to a purchase
by installment. !ubse5uently, the 8" demanded from
the brothers the payment of deficiency income taxes
resulting from the sale.
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"ssue2 whether the brothers are liable.
*eld2 $o. "t should be borne in mind that the sale of
the farmlands to the very farmers who tilled them for
generations was not only in consonance with, but
more in obedience to the re5uest and pursuant to the
policy of our Government to allocate lands to the
landless. "n order to maintain the general public&s trust
and confidence in the Government this power must
be used >ustly and not treacherously. "t does not
conform with the sense of >ustice for the Government
to persuade the taxpayer to lend it a helping hand and
later on penalie him for duly answering the urgent
call.
ASPE7TS OF TAXATION
1. .ev3 determination of the persons,
property or excises to be taxed, the sum or
sums to be raised, the due date thereof and
the time and manner of levying and
collecting taxes 3strictly speaking, such
refers to taxation4
. 7olle'tion consists of the manner of
enforcement of the obligation on the part of
those who are taxed. 3this includes payment
by the taxpayer and is referred to as tax
administration4
The two processes together constitute the
(taation s3stem).
EXTENT OF T8E .EGIS.ATICE POWER TO
TAX
1. !ub>ects or ob>ects to be taxed. Purpose of the tax
;. #mount or rate of the taxE. 0anner, means and agencies of collection of
the tax
,ASI7 PRIN7IP.ES OF A SOUN; TAX
SSTEM
1. Fis'al Ae5ua'3 ? the sources of tax
revenue should coincide with, and
approximate the needs of government
expenditure. $either an excess nor a
deficiency of revenue vis-F-vis the needs of
government would be in keeping with the
principle.
7(aveD v On4+in
GR No @%@@$& 2une %& *##B
Fa'ts: President 8oraon #5uino issued 7+ B;
increasing the basis for assessment of real property
tax. 8have, a taxpayer and landowner, 5uestioned
the constitutionality of 7+ BE. *e alleged that it will
bring unreasonable increase in real property taxes.
Issue: 9hether 7+ B; is constitutional.
*eld2
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of real properties that have occurred since then is not
in consonance with a sound tax system.
iscal ade5uacy, which is one of the characteristics of
a sound tax system, re5uires that sources of revenue
must be ade5uate to meet government expenditures
and their variations.
. Aministrative Feasi"ilit3 ? tax laws
should be capable of convenient, >ust and
effective administration.
;. T(eoreti'al 2usti'e the tax burden should
be in proportion to the taxpayer&s ability to
pay (ability-to-pay principle). The 1HB
8onstitution re5uires taxation to be e5uitable
and uniform.
$ote%%%%%%%
$on-observance of these principles will not
necessarily render the tax imposed invalid except to
the extent that specific constitutional limitations are
violated.
7.ASSIFI7ATION OF TAXES
As to Su">e't matter
1. Personal& 'a+itation or +oll taes taxes
of fixed amount upon all persons of a certain
class within the >urisdiction of the taxing
power without regard to the amount of their
property or occupations or businesses in
which they may be engaged in.
7xample2 community tax
. Pro+ert3 Taes taxes on things or
property of a certain class within the
>urisdiction of the taxing power.
7xample2 real estate tax
;. E'ise Taes charges imposed upon the
performance of an act, the en>oyment of a
privilege, or the engaging in an occupation.
7xamples2 income tax, value-added tax,
estate tax or donor&s tax
As to ,uren
1. ;ire't Taes taxes wherein
the incidenceas well as the impactor
burden of the tax faces on one person.
7xamples2 income tax, community tax,
donor&s tax, estate tax
. Inire't Taes taxes wherein the
incidence of or the liability for the payment of
the tax falls on one person, but the burden
thereof can be shifted or passed to another
person.
7xamples2 '#T, percentage taxes, customs
duties excise taxes on certain specific
goods.
$ote%%%%%%%%%
Im+a'tmeans the point on which a tax is originally
imposed. In'ien'e is the point on which the tax
burden settles down. Tandaan itong mabuti. ?et&s take
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for example the case of income tax.
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$P8 has been exempted from both direct and indirect
taxation, the $P8 must be held exempted from
absorbing the economic burden of indirect taxation
a !cetylene case, an" sabi n" #, $apa" e%empt
da& si #onsumer sa ta%, e%empt lan" sya doon sa
m"a ta% na sya ay '*#T+ +!B+* a case na
ito, hindi directly liable si .apocor at /0! sa sales
ta% i Philippine !cetylene #o nc an" directly liable
1anun din sa 2aceda case 'ahil e%empt si
consumer, hindi p&ede ipasa ni seller an" ta% $ay
consumer
3alos pareho rin an" situation sa case ni 4ohn
1otamco and ons, an" e%empt ay si #0.52*,
pero sabi ni # hindi rin liable si *++* sa ta%
7IR v Gotam'o
GR No .-)*B#/& Fe"ruar3 /@& *#$@
acts2 The contract for the construction of the building
of 9*+ in 0anila was awarded to Gotamco. 9*+
en>oys tax exemptions. 9*+ received an opinion
from the 8" stating that the ;M contractor&s tax is an
indirect tax, and thus 9*+ is exempt. !ubse5uently,
the 8" reversed his opinion stating that the ;M
contractor&s tax is not a direct or indirect tax due on
9*+, but a tax primarily due from the contractor.
"ssue2 9hether Gotamco is liable for the tax.
*eld2 $o. 9here the exemption from indirect tax is
given to the contractee, but the evident intention is to
exempt the contractor so that such contractor may no
longer shift or pass on any tax to the contractee, the
contractor may claim tax exemption on the
transaction.
!a case na ito, hindi liable si 8+$T#8T+
3!7??74 sa tax dahil daw ang intention ay i-exempt
si 9*+ sa pagbayad ng tax, whether direct or
indirect. 0as mabuting i-exempt na rin si G+T#08+
sa contractor&s tax para wala na itong maipasa kay
9*+. 9*+&s exemption from (indirect taxes) implies
that Gotamco is exempt from contractor&s tax.
7IR v Ameri'an Ru""er 7om+an3
GR No .-*#%%@& Novem"er /#& *#%%
acts2 #merican ubber sold its rubber products
locally and declared the same for tax purposes in
which the 8ommissioner accordingly assessed. The
company paid under protest claiming that its rubber
products were agricultural products exempt from
sales tax under !ection 1HHb of the Tax 8ode.
"ssue2 whether #merican rubber is entitled to recover
the sales tax paid by it.
*eld2
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*! GeneralFis'alRevenue tax imposed for
the general purposes of the government, i.e.,
to raise revenues for governmental needs.
7xamples2 income taxes, '#T, and almost all
taxes
/! S+e'ialRe4ulator3 tax imposed for
special purposes, i.e., to achieve some
social or economic needs.
7xamples2 !pecial 7ducational fund tax
under eal Property Taxation. 31M ito ng
#!!7!!7= '#?D7 ng real property, >ust incase na tanungin sa recit4
As to Measure of A++li'ation
1. S+e'ifi' Ta tax imposed per head, unit or
number, or by some standard of weight or
measurement and which re5uires no
assessment beyond a listing and
classification of the sub>ects to be taxed.
6un&ari, piso per bottle
7xamples2 taxes on distilled spirits, wines,
and fermented li5uors
. A Calorem Ta tax based on the value of
the article or thing sub>ect to tax. 6un&ari,
789 n" value n" property
7xample2 real property taxes, customs duties
As to Rate
1. Pro4ressive Ta the rate or the amount of
the tax increases as the amount of the
income or earning 3tax base4 to be taxed
increases.
7xamples2 income tax, estate tax, donor&s
tax
. Re4ressive Ta the tax rate decreases as
the amount of income or earning 3tax base4
to be taxed increases. alan" re"ressive
ta% sa pinas
;. Mie Ta tax rates are partly progressiveand partly regressive.
E. Pro+ortionate Ta tax rates are fixed on a
flat tax base.
7xamples2 real estate tax, '#T, and other
percentage taxes
As to S'o+e or aut(orit3 im+osin4 t(e ta
1. National Ta ?tax imposed by the $ational
Government.
7xamples2 national internal revenue taxes,
customs duties
. Muni'i+al.o'al Ta tax imposed by ?ocal
Government units.
7xamples2 real estate tax, professional tax
TAXES ;ISTINGUIS8E; FROM OT8ER
IMPOSITIONS
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Toll vs! Ta
Toll sum of money for the use of something,
generally applied to the consideration which is paid
for the use of a road, bridge of the like, of a public
nature.
Ta vs! Toll
demand of sovereignty demand of proprietorship
paid for the support of
the government
paid for the use of
another&s property
generally, no limit as to
amount imposed
amount depends on the
cost of construction or
maintenance of the public
improvement used
imposed only by the
government
imposed by the
government or private
individuals or entities
Penalt3 vs! Ta
Penalt3 any sanctions imposed as a punishment for
violations of law or acts deemed in>urious.
Ta vs Penalt3
generally intended to raise revenue designed to regulate conduct
imposed only by the government imposed by the government or private
individuals or entities
S+e'ial Assessment vs Ta
S+e'ial Assessment an enforced proportional
contribution from owners of lands especially or
peculiarly benefited by public improvements.
Ta vs S+e'ial Assessment
imposed on persons, property and excise levied only on la
personal liability of the person assessed not a persona
assessed, i.e. h
the land involved
based on necessity as well as on benefits
received
based wholly on
general in application 3#postolic Prefect
vs Treas. +f /aguio, B1 Phil IEB4
exceptional both
Im+ortant Points to 7onsier Re4arin4 S+e'ial
Assessments:
1. !ince special assessments are not taxes
within the constitutional or statutory
provisions on tax exemptions, it follows that
the exemption under !ec. H3;4, #rt. '" of
the 8onstitution does not apply to special
assessments.. *owever, in view of the exempting proviso
in ec ;
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enforced contribution assessed by
sovereign authority to defray public
expenses
legal compensation or reward of an officer
for specific purposes
for revenue purposes for regulation purposes
an exercise of the taxing power an exercise of the police power
generally no limit in the amount of tax to
be paid
amount is limited to the necessary
expenses of inspection and regulation
imposed also on persons and property imposed on the right to exercise privilege
non-payment does not necessarily make
the act or business illegal
non-payment makes the act or business
illegal
Im+ortan'e of t(e istin'tions "et6een ta an
li'ense fee:
1. !ome limitations apply only to one and not to
the other, and that exemption from taxes
may not include exemption from license
fees.
. The power to regulate as an exercise of
police power does not include the power to
impose fees for revenue purposes.
0insan nakakalito kasi ang tawag sakanya ay (tax)
pero ang purpose nya naman ay regulatory. 0insan
ang tawag sakanya ay (license) o (fee) pero ang
purpose nya naman is to raise revenue. That is why it
is very important to identify whether it is a tax or a
license fee.
P(ili++ine Airlines& In'! C! Eu
G!R! No! .- 0*)$)& Au4ust *1& *#$$
acts2 Dnder its franchise, P#? is exempt from the
payment of taxes. The ?and Transportation
8ommissioner issued a regulation re5uiring all tax
exempt entities, among them P#? to pay motor
vehicle registration fees. The money collected from
the motor vehicle registration fees are intended for
the construction and maintenance of public roads,
streets and bridges.
"ssue2 9hether or not motor vehicle registration fees
are considered as taxes.
*eld2
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is in reality a tax on income which the city cannot
impose.
"ssue2 whether the supervision fee is a tax on income.
*eld. $o. The general rule is that the imposition is a
tax if its primary purpose is to generate revenue and
regulation is merely incidentalK but if regulation is the
primary purpose, the fact that incidentally revenue is
also obtained does not make the imposition of a tax.
!ince the supervision fee is for regulatory purpose, it
is not a tax.
;e"t vs! Ta
=ebt is based upon >uridical tie, created by law,
contracts, delicts or 5uasi-delicts between parties for
their private interest or resulting from their own acts or
omissions.
Ta vs ;e"t
based on law based on contracts, express or impliedgenerally, cannot be assigned assignable
generally payable in money may be paid in kind
generally not sub>ect to set-off or
compensation
may be sub>ect to set-off or compensation
imprisonment is a sanction for non-
payment of tax except poll tax
no imprisonment for non-payment of debt
governed by special prescriptive periods
provided for in the Tax 8ode
governed by the ordinary periods of
prescriptions
does not draw interest except only when
delin5uent
draws interest when so stipulated, or in
case of default
General Rule:Taxes are not sub>ect to set-off or legal
compensation.
P(ile Minin4 7or+oration v 7IR
GR No */1@B0& Au4ust /$& *##$
acts2 /" demanded from Philex the payment of its
tax liabilities. Philex protested the demand stating that
it has pending claims for '#T inputOrefund, which
should be applied against it tax liabilities.
"ssue2 whether legal compensation can take place.
*eld2 $o. The government and the taxpayer are not
creditors and debtors or each other. +bligations in the
nature of debts are due to the government in its
corporate capacity, while taxes are due to the
government in its sovereign capacity.
Fran'ia v Intermeiate A++ellate 7ourt
GR No .-%@%0#& 2une /$& *#$$
acts2 rancia was the registered owner of a house
and lot a portion of which was expropriated by the
epublic of the Philippines. /ecause he was not able
to pay real property taxes from 1:; to 1BB, his
property was sold in a public auction. rancia
contends that his tax delin5uency has been
extinguished by legal compensation. *e claims that
the government owed him when a portion of his land
was expropriated.
"ssue2 whether the expropriation payment
compensate for the real estate taxes due.
*eld2 $o. There can be no offsetting of taxes against
the claims that the taxpayer may have against the
government. # person cannot refuse to pay a tax on
the ground that the government owes him an amount
e5ual to or greater than the tax being collected.
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The collection of a tax cannot await the results of a
lawsuit against the government. "nternal revenue
taxes cannot be the sub>ect of compensation. The
Government and the taxpayer are not mutually
creditors and debtors of each other under #rticle 1BH
of the 8ivil 8ode and a claim of taxes is not such a
debt, demand, contract or >udgment as is allowed to
be set-off.
E'e+tion: 9here both the claims of the government
and the taxpayer against each other have already
become due and demandable as well as fully
li5uated.
;omin4o Cs Garlitos
G!R! NO! *$##) 2une /#& *#%)
acts2 "n =omingo vs 0oscoso, the !8 declared as
final and executor the order for the payment of the
estate and inheritance taxes, charges and penalties
by the estate of the of the late 9alter Price. "t appears
that the Government is indebted to the estate of
Price. !uch claim has been recognied and the
amount has been appropriated by a corresponding
law 3# BJJ4.
"ssue2 whether legal compensation may take place in
the case at bar.
*eld2
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corresponding duties to be paid for
the same.. #s duties payable on goods
imported or exported 3P= $o. ;J4;. #s the system or principle of
imposing duties on the
importationOexportation of goods.
I. Internal Revenue refers to taxes imposed
by the legislative other than duties or imports
and exports.
:. Mar4in Fee a currency measure designed
to stabilie the currency.
B. Tri"ute synonymous with taxK taxation
implies tribute from the governed to some
form of sovereignty.
H. Im+ost in its general sense, it signifies any
tax, tribute or duty. "n its limited sense, it
means a duty on imported goods and
merchandise.
IN8ERENT POWERS OF T8E STATE
1. Police Power
. Power of 7minent =omain
;. Power of Taxation
;istin'tions
Taation Poli'e Po6er Eminent
;omain
P5P0*
- levied for the - exercised to - taking of
purpose of
raising
revenue
promote public
welfare thru
regulations
property for
public use
!205.T 0> *?!#T0.
- no limit - limited to the
cost of
regulations,
issuance of the
license or
surveillance
- no exaction,
compensation
paid by the
government
B*.*>T *#*/*'
- no special or
direct benefits
received but
the en>oyment
of the
privileges of
living in an
organied
society
- no direct benefits
but a healthy
economic
standard of
society or
damnum abs@ue
inAuria is attained
- direct benefit
results in the
form of >ust
compensation
.0.-2P!2*.T 0> #0.T!#T
- the
impairment
rule subsist
- contract may be
impaired
- contracts may
be impaired
T!.>* 0> P0P*T 13T
- taxes paid
become part
of public
funds
- no transfer but
only restraint on
the exercise of
property right
exists
- property is
taken by the
gov&t upon
payment of >ust
compensation
#0P*
- affects all
persons,
property and
excise
- affects all
persons, property,
privileges, and
even rights
- affects only
the particular
property
comprehended
B!
- public - public necessity -public
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necessity and the right of
the state and the
public to self-
protection and
self-preservation
necessity,
private
property is
taken for public
use!5T30T 3#3 *?*#* T3* P0*
- only by the
government
or its political
subdivisions
- only by the
government or its
political
subdivisions
- may be
granted to
public service,
companies, or
public utilities
There are situations where taxation was used asan implement of police power.
Tio Cs! Cieo4ram Re4ulator3 ,oar
*1* S7RA /B$ G!R! No! .-@1%#@ *$ 2un *#$@
Fa'ts: Tio assails the validity of P= 1HB entitled (#ct
8reating the 'ideogram egulatory /oard) which
imposes a ;JM tax on gross receipts. Tio contends
that the imposition is harsh, confiscatory, oppressive
andOor unlawfully restraints trade in violation of the
due process clause of the 8onstitution.
Issue: 9hether P= 1HB is a valid exercise of the
power of taxation@
*eld2
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1. $on-impairment of the !upreme 7ourts&
>urisdiction in Tax 8ases1;. Tax exemption of Revenuesand #ssets,
including Grants, 7ndowments, =onations or
8ontributions to 7ducation "nstitutions
Ot(er 7onstitutional Provisions relate to
Taation
1. Su">e'tand Title of /ills. Power of the Presientto 'eto an items in
an #ppropriation, evenue or Tariff /ill;. $ecessity of an A++ro+riationmade before
moneyE. A++ro+riationof Public 0oneyI. Taxes ?evied for S+e'ialPurposes:. #llotment to .G7
IN8ERENT .IMITATIONS
Pu"li' Pur+ose of Taes
a. "f taxation is for a public purpose, the tax
must be used2
1. for the support of the state or. for some recognied ob>ects of
governments or;. directly to promote the welfare of
the community 3taxation as an
implement of police power4
b. The term public purposeis synonymous
with "overnmental purposea purpose
affecting the inhabitants of the state or taxing
district as a community and not merely as
individuals.
c. # tax levied for a private purpose constitutes
a taking of property without due process of
law.
d. The purposes to be accomplished by
taxation need not be exclusively public.
#lthough private individuals are directly
benefited, the tax would still be valid
provided such benefit is only incidental.
e. The test is not as to who receives the
money, but the character of the purpose for
which it is expendedK not the immediate
result of the expenditure but rather the
ultimate.
f. "n the imposition of taxes, public purpose is
presumed.
Test in eterminin4 Pu"li' Pur+oses inta
a. ;ut3 Test whether the thing to be
threatened by the appropriation of public
revenue is something which is the duty of the
!tate, as a government, to protect.
b. Promotion of General Welfare Test
whether the law providing the tax directly
promotes the welfare of the community in
e5ual measure.
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Pas'ual vs Se'retar3 of Pu"li' Wor9s an
7ommuni'ations
**B P(il! ))*
Fa'ts: Pascual assailed the validity of # J
appropriating PHI,JJJ.JJ for the construction,
reconstruction, repair, extension and improvement
Pasig feeder road terminals). *e claimed that the
appropriation was actually going to be used for
private use for the terminals sought to be improved
were part of the #ntonio !ubdivision. The said
!ubdivision is owned by !enator Lose Sulueta who
was a member of the same !enate that passed and
approved # J.
"ssue2 9hether or not the appropriation is valid.
*eld2 $o, the appropriation is void for being an
appropriation for a private purpose. ("n accordance
with the rule that the taxing power must be exercised
for public purposes only, money raised by taxation
can be expanded only for public purposes and not for
the advantage of private individuals.) "nasmuch as
the land on which the pro>ected feeder roads were to
be constructed belonged then to Sulueta, the result is
that said appropriation sought a private purpose, and,
hence, was null and void.
Non-ele4a"ilit3 of Tain4 Po6er
Rationale: =octrine of !eparation of PowersK
Taxation is purely legislative, 8ongress cannot
delegate the power to others.
E'e+tions:
a 'ele"ation to the President (!rt/ ec
;C(;) 7DCE #onstitution)
The power granted to
8ongress under this constitutional
provision to authorie the President to
fix within specified limits and sub>ect to
such limitations and restrictions as it
may impose, tariff rates and other duties
and imposts include tariffs rates even for
revenue purposes only. 8ustoms dutieswhich are assessed at the prescribed
tariff rates are very much like taxes
which are fre5uently imposed for both
revenue-raising and regulatory
purposes (1arcia vs *%ecutive
ecretary, et al, 1 .o 787;E
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Bottlin" #o of the Phil, nc vs #ity of
Butuan, et al, +-;;C7=, !u" ;C, 7DGC)
c 'ele"ation to !dministrative !"encies &ith
respect to aspects of Ta%ation not
le"islative in character
.imitations on ;ele4ation
1. "t shall not contravene any
8onstitutional provisions or inherent
limitations of taxationK
. The delegation is effected either bythe 8onstitution or by validly
enacted legislative measures or
statuteK and;. The delegated levy power, except
when the delegation is by an
express provision of 8onstitution
itself, should only be in favor of the
local legislative body of the local or
municipal government concerned.
Ta .e4islation vis-H-vis Ta Aministration
7very system of taxation consists of two parts2
a. the elements that enter into the
imposition of the tax, or tax
regulationK andb. the steps taken for its assessment
and collection or tax administration
"f what is delegated is tax legislation, the
delegation is invalidK but if what is involved is only tax
administration, the non-delegability rule is not
violated.
Territorialit3 or Situs of Taation
1. Territoriality or !itus of Taxation
means place of ta%ationdepending on the
nature of taxes being imposed.. "t is an inherent mandate that taxation shall
only be exercised on persons, properties,
and excise within the territory of the taxing
power because2
a. Tax laws do not operate beyond a
country&s territorial limit.b. Property which is wholly and
exclusively within the >urisdiction of
another state receives none of the
protection for which a tax is
supposed to be compensation.
;. *owever, the fundamental basis of the right
to tax is the capacity of the government to
provide benefits and protection to the ob>ect
of the tax. # person may be taxed, even if he
is outside the taxing state, where there is
between him and the taxing state, a privity of
relationship >ustifying the levy.
Fa'tors to 7onsier in eterminin4 Situs of
Taation
1. kind and 8lassification of the Tax. location of the sub>ect matter of the tax;. domicile or residence of the personE. citienship of the person
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I. source of income:. place where the privilege, business or
occupation is being exercised
Eem+tion of t(e Government from Taes
Reasons for Eem+tions:
1. To levy tax upon public property would render
necessary new taxes on other public property for
the payment of the tax so laid and thus, the
government would be taxing itself to raise money
to pay over to itselfK. "n order that the functions of the government
shall not be unduly impedeK and;. To reduce the amount of money that has to be
handed by the government in the course of its
operations.
Dnless otherwise provided by law, the exemption
applies only to government entities through which the
government immediately and directly exercises its
sovereign powers (nfantry Post *%chan"e vs
Posadas, F= Phil CGG)$otwithstanding the immunity,
the government may tax itself in the absence of any
constitutional limitations. Government-owned or
controlled corporations, when performing proprietary
functions are generally sub>ect to tax in the absence
of tax exemption provisions in their charters or law
creating them.
International 7omit3
1. The property of a foreign state or
government may not be taxed by another.
. The grounds for the above rule are2
a. sovereign e5uality among statesb. usage among states that when one
enter into the territory of another, there
is an implied understanding that the
power does not intend to degrade its
dignity by placing itself under the
>urisdiction of the latterc. foreign government may not be sued
without its consent so that it is useless
to assess the tax since it cannot be
collectedd. reciprocity among states
7ONSTITUTIONA. .IMITATIONS
;ue Pro'ess of .a6
,asis: ec 7 !rt < .o person shall be deprived oflife, liberty or property &ithout due process of la& % x
x.)
1. The interest of the public generally as
distinguished from those of a particular class
re5uire the intervention of the stateK. The means employed must be reasonably
necessary to the accomplishment for the
purpose and not unduly oppressiveK;. The deprivation was done under the
authority of a valid law or of the constitutionK
and
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E. The deprivation was done after compliance
with fair and reasonable method of
procedure prescribed by law.
"n a string of cases, the !upreme 8ourt held that
in order that due process of law must not be done in
an arbitrary, despotic, capricious, or whimsical
manner.
E5ual Prote'tion of t(e .a6
,asis: ec7 !rt < %%% .or shall any person be
denied the e@ual protection of the la&s
1. 75ual protection of the laws signifies that all
persons sub>ect to legislation shall be treated
under circumstances and conditions both in
the privileges conferred and liabilities
imposed. This doctrine prohibits class legislation which
discriminates against some and favors
others.
e5uisites for a 'alid 8lassification
1. 0ust not be arbitrary. 0ust not be based upon substantial
distinctions;. 0ust be germane to the purpose of law.E. 0ust not be limited to existing conditions
onlyK andI. 0ust play e5ually to all members of a class.
Uniformit3& E5uita"ilit3 an Pro4ressivit3 of
Taation
,asis:!ec. H314 #rt. '". The rule of taxation shall be
uniform and e5uitable. The 8ongress shall evolve a
progressive system of taxation.
1. Uniformit3 3e5uality or e5ual protection of
the laws4 means all taxable articles or kinds
or property of the same class shall be taxed
at the same rate. # tax is uniform when the
same force and effect in every place where
the sub>ect of it is found.. E5uita"lemeans fair, >ust, reasonable and
proportionate to one&s ability to pay.;. Pro4ressive s3stem of Taationplaces
stress on direct rather than indirect taxes, or
on the taxpayers& ability to payE. "ne5uality which results in singling out one
particular class for taxation or exemption
infringes no constitutional limitation. (see
#ommissioner vs +in"ayen 1ulf *lectric,
7G= #! ;E)I. The rule of uniformity does not call for
perfect uniformity or perfect e5uality,
because this is hardly attainable.
Freeom of S+ee'( an of t(e Press
,asis:!ec. E #rt. """. $o law shall be passed
abridging the freedom of speech, of expression or of
the pressx x x (
1. There is curtailment of press freedom and
freedom of thought if a tax is levied in order
to suppress the basic right of the people
under the 8onstitution.
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. # business license may not be re5uired for
the sale or contribution of printed materials
like newspaper for such would be imposing a
prior restraint on press freedom
;. *owever, an annual registration fee on allpersons sub>ect to the value-added tax does
not constitute a restraint on press freedom
since it is not imposed for the exercise of a
privilege but only for the purpose of
defraying part of cost of registration.
Non-infrin4ement of Reli4ious Freeom
,asis: !ec. I #rt. """. ($o law shall be made
respecting an establishment of religion or prohibiting
the free exercise thereof. The free exercise and
en>oyment of religious profession and worship,
without discrimination or preference, shall be forever
be allowed.)
1. ?icense feesOtaxes would constitute a
restraint on the freedom of worship as they
are actually in the nature of a condition or
permit of the exercise of the right.. *owever, the 8onstitution or the ree
7xercise of eligion clause does not prohibit
imposing a generally applicable sales and
use tax on the sale of religious materials by
a religious organiation. (see Tolentino vs
ecretary of >inance, ;
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amenmentsJ but also (to propose
amendments). (Tolentino vs ec of >inance)
;ele4ation of .e4islative Aut(orit3 to Fi Tariff
Rates& Im+orts an E+ort uotas
,asis:!ec. H34 #rt. '" (x x x The 8ongress may, by
law, authorie the President to fix within specified
limits, and sub>ect to such limitations and restrictions
as it may impose, tariff rates, import and export
5uotas, tonnage and wharfage dues, and other duties
or imposts within the framework of the national
development program of the government.
Ta Eem+tion of Pro+erties A'tuall3& ;ire'tl3 an
E'lusivel3 use for Reli4ious& 7(arita"le an
Eu'ational Pur+oses
,asis:!ec. H3;4 #rt. '". (8haritable institutions,
churches and parsonages or convents appurtenant
thereto, mos5ues, non-profit cemeteries, and all
lands, building, and improvements actually, directly
and e%clusivelyused for religious, charitable or
educational purposes shall be exempt from taxation.)
1. Test of the tax exemption2 the use and not
ownership of the property. To be tax-exempt, the property must be
actually, directly and exclusively used for the
purposes mentioned.
;. The word (exclusively) means (primarily&.E. The exemption is not limited to property
actually indispensable but extends to
facilities which are incidental to and
reasonably necessary for the
accomplishment of said purposes.
I. The constitutional exemption applies only to
property tax.
Cotin4 Re5uirements in 'onne'tion 6it( t(e
.e4islative Grant for ta eem+tion
,asis:!ec. H3E4 #rt. '". ($o law granting any tax
exemption shall be passed without the concurrence of
a ma>ority of all the members of the 8ongress.) The
provision re5uires the concurrence of a ma>ority not of
attendees constituting a 5uorum but of all members of
the 8ongress.
Non-im+airment of t(e Su+reme 7ourtsK
>urisi'tion in Ta 7ases
,asis:!ec. I 34 #rt. '""". (The 8ongress shall have
the power to define, prescribe, and apportion the
>urisdiction of the various courts but may not deprive
the !upreme 8ourt of its >urisdiction over cases
enumerated in !ec. I hereof.) !ec. I 3b4 #rt. '""".
(The !upreme 8ourt shall have the following powers2
x x x34 eview, revise, modify or affirm on appeal or
certiorari x x x final >udgments and orders of lower
courts in x x x all cases involving the legality of any
tax, impost, assessment, or toll or any penalty
imposed in relation thereto.)
Ta Eem+tions of Revenues an Assets&
in'luin4 4rants& eno6ments& onations or'ontri"utions to Eu'ational Institutions
,asis:!ec. E3E4 #rt. C"'. (!ub>ect to the conditions
prescribed by law, all grants, endowments, donations
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or contributions used actually, directly and exclusively
for educational purposes shall be exempt from tax.)
1. The exemption granted to non-stock, non-
profit educational institution covers income,
property, and donor&s taxes, and custom
duties.. To be exempt from tax or duty, the revenue,
assets, property or donation must be used
actually, directly and exclusively for
educational purpose.;. "n the case or religious and charitable
entities and non-profit cemeteries, the
exemption is limited to property tax.E. The said constitutional provision granting tax
exemption to non-stock, non-profit
educational institution is self-executing.I. Tax exemptions, however, of proprietary 3for
profit4 educational institutions re5uire prior
legislative implementation. Their tax
exemption is not self-executing.:. ?ands, /uildings, and improvements
actually, directly, and exclusively used for
educational purposed are exempt from
property tax, whether the educational
institution is proprietary or non-profit.
Ot(er 7onstitutional Provisions relate to
Taation
Su">e't an Title of ,ills
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(#ll money collected or any tax levied for a special
purpose shall be treated as a special fund and paid
out for such purpose only. "t the purpose for which a
special fund was created has been fulfilled or
abandoned the balance, if any, shall be transferred to
the general funds of the government.)
#n example is the +il Price !tabiliation und created
under P.=. 1I: to stabilie the prices of imported
crude oil. "n a decide case, it was held that where
under an executive order of the President, this special
fund is transferred from the general fund to a (trust
liability account,) the constitutional mandate is not
violated. The +P!, according to the court, remains
as a special fund sub>ect to 8+# audit 30smeHa vs
0rbos, et al, 1 .o DDCCG, 2ar ust share,
as determined by law, in the national taxes which
shall be automatically released to them.)
SITUS OF TAXATION AN; ;OU,.E
TAXATION
Situs of Taationliterally means the Pla'e of
Taation!
,asi' Rule state where the sub>ect to be taxed has
a situs may rightfully levy and collect the tax
Persons Poll tax may be levied upon persons who
are residents of the !tate.
Real Pro+ert3 is sub>ect to taxation in the !tate in
which it is located whether the owner is a resident or
non-resident, and is taxable only there
Tan4i"le Personal +ro+ert3 taxable in the state
where it has actual situs where it is physically
located. #lthough the owner resides in another
>urisdiction.
Intan4i"le Personal Pro+ert3 situs or personal
property is the domicile of the owner, in accordance
with the principle MO,I.IA SEUUNTUR
PERSONAMJ, said principle, however, is not
controlling when it is inconsistent with express
provisions of statute or when >ustice demands that it
should be, as where the property has in fact a situs
elsewhere. 3ells >ar"o Ban$ v #ollector E8 P3+
isher +-77G;;, 4anuary, 7DG7)
In'ome properly exacted from persons who are
residents or citiens in the taxing >urisdiction and even
those who are neither residents nor citiens provided
the income is derived from sources within the taxing
state.
,usiness& O''u+ation& an Transa'tion power tolevy an excise tax depends upon the place where the
business is done, of the occupation is engaged in of
the transaction not place.
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Gratuitous Transfer of Pro+ert3 transmission of
property from donor to donee, or from a decedent to
his heirs may be sub>ect to taxation in the state where
the transferor was a citien or resident, or where the
property is located.
Multi+li'it3 of Situs
There is multiplicity of situs when the same sub>ect of
taxation, like income or intangible, is sub>ect to
taxation in several taxing >urisdictions. This happens
due to2
1. 'ariance in the concept of (domicile) for tax
purposesK. 0ultiple distinct relationship that may arise
with respect to intangible personalityK and;. The use to which the property may have
been devoted, all of which may receive the
protection of the laws of >urisdiction other
than the domicile of the owner
Reme3 taxation >urisdiction may provide2
a. 7xemption or allowance of deductions or tax
credit for foreign taxesb. 7nter into treaties with other states
=ouble Taxation
Two Ninds
O"noious or ;ire't ;u+li'ate Taation ('ouble
ta%ation in its strict sense) - "n the ob>ectionable or
prohibited sense means that the same property is
taxed twice when it should be taxed only once.
Re5uisites:
1. !ame property is taxed twice. !ame purpose;. !ame taxing authorityE. 9ithin the same >urisdiction
I. =uring the same taxing period:. !ame kind or character of tax
Permissive or Inire't ;u+li'ate Taation('ouble
ta%ation in its broad sense) This is the opposite of
direct double taxation and is not legally
ob>ectionable. The absence of one or more of the
foregoing re5uisites of the obnoxious direct tax makes
it indirect.
Instan'es of ;ou"le Taation in its ,roa Sense
1. # tax on the mortgage as personal property
when the mortgaged property is also taxed
at its full value as real estateK. # tax upon a corporation for its capital stock
as a whole and upon the shareholders for
their sharesK;. # tax upon a corporation for its capital stock
as a whole and upon the shareholders for
their sharesKE. # tax upon depositions in the bank for their
deposits and a tax upon the bank for their
property in which such deposits are investedI. #n excise tax upon certain use of property
and a property tax upon the same propertyK
and:. # tax upon the same property imposed by
two different states.
Means to Reu'e t(e 8ars( Effe't of Taation
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1. Ta ;eu'tion ? subtraction from gross income
in arriving a taxable income. Ta 7reit ? an amount subtracted from an
individual&s or entity&s tax liability to arrive at the
total tax liability
# deduction differ from a tax credit in that a
deduction reduces taxable income while credit
reduces tax liability
;. Eem+tionsE. Treatieswith other !tatesI. Prin'i+le of Re'i+ro'it3
7onstitutionalit3
=ouble Taxation in its strictersense is undoubtedly
unconstitutional but that in the broadersense is not
necessarily so.
General Rule: +ur 8onstitution does not prohibit
double taxationK hence, it may not be invoked as a
defense against the validity of tax laws.
1. 9here a tax is imposed by the $ational
Government and another by the city for the
exercise of occupation or business as the
taxes are not imposed by the same public
authority 3#ity of Ba"uio vs 'e +eon, 0ct
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Im+a't of taation is the point at which a tax is
originally imposed.
In'ien'e of Taation is the point on which a tax
burden finally rests or settles down.
Relations amon4 S(iftin4& Im+a't an In'ien'e
of Taation the impact is the initial phenomenon,
the shifting is the intermediate process, and the
incidence is the result.
Lins of S(iftin4:
1. For6ar S(iftin4 the burden of tax is
transferred from a factor of production
through the factors of distribution until it
finally settles on the ultimate purchaser or
consumer. ,a'96ar S(iftin4 effected when the
burden of tax is transferred from the
consumer or purchaser through the factors
of distribution to the factor of production;. On6ar S(iftin4 this occurs when the tax
is shifted two or more times either forward or
backward
8apitaliation
The reduction in the price of the taxed ob>ect e5ual to
the capitalied value of future taxes which the
purchaser expects to be called upon to pay
Transformation
The method whereby the manufacturer or producer
upon whom the tax has been imposed, fearing the
loss of his market if he should add the tax to the price,
pays the tax and endeavors to recoup himself by
improving his process of production thereby turning
out his units of products at a lower cost.
Ta Evasion
The use of the taxpayer of illegal or fraudulent means
to defeat or lessen the payment of a tax.
Ini'ia of Frau in Taation
1. ailure to declare for taxation purposes
true and actual income derived from
business for two consecutive years,
and. !ubstantial underdeclaration of income
tax returns of the taxpayer for four
consecutive years coupled &ith
overstatement of deduction
7vasion of the tax takes place only when there are no
proceeds. 7vasion of Taxation is tantamount, fiscally
speaking, to the absence of taxation.
Ta Avoian'e
The use by the taxpayer of legally permissible
alternative tax rates or method of assessing taxable
property or income in order to avoid or reduce tax
liability.
Tax #voidance is not punishable by law, a taxpayer
has the legal right to decrease the amount of what
otherwise would be his taxes or altogether avoid by
means which the law permits.
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EXEMPTION FROM TAXATION
Ta Eem+tion is a grant of immunity, express or
implied, to particular persons or corporations from the
obligations to pay taxes.
Nature of Ta Eem+tion
1. "t is merely a personal privilege of the
grantee. "t is generally revocable by the
government unless the exemption is
founded on a contract which is protected
from impairment, but the contract mustcontain the other essential elements of
contracts, such as, for example, a valid
cause or consideration.;. "t implies a waiver on the part of the
government of its right to collect what
otherwise would be due to it, and in this
sense is pre>udicial thereto.E. "t is not necessarily discriminatory so
long as the exemption has a reasonable
foundation or rational basis.
Rationale of ta Eem+tion
Public interest would be subserved by the
exemption allowed which the law-making body
considers sufficient to offset monetary loss entailed in
the grant of the exemption. (# vs Bothelo hippin"
#orp, +-;7G
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. Im+lie Eem+tion ? 7xist whenever
particular persons, properties or excises are
deemed exempt as they fall outside the
scope of the taxing provision itself
#s to etent
1. Total Eem+tion ?8onnotes absolute
immunity. Partial Eem+tion ? +ne where collection
of a part of the tax is dispensed with
Prin'i+les Governin4 t(e Ta Eem+tion
1. 7xemptions from taxation are highlydisfavored by law, and he who claims an
exemption must be able to >ustify by the
clearest grant of organic or statute of
law. (!siatic Petroleum vs +lanes, =D
P3+ =GG #ollector of nternal evenue
vs 2anila 4oc$ey #lub, DC P3+ GE8). *e who claims an exemption must >ustify
that the legislative intended to exempt
him by words too plain to be
mistaken. (/isayan #ebu Terminal vs
#, +-7DFeb ;E, 7DGF);. *e who claims exemptions should
convincingly proved that he is exemptE. Tax exemptions must be strictly
construed (Phil !cetylene vs #, +-
7DE8E, !u" 7E, 7DGE)I. Tax 7xemptions are not
presumed. (+ealda *lectric #o vs #,
+-7G=;C, !pr
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occupying enemy. (3ilado vs #ollector,
788 P3+ ;CC);. Tax laws not being penal in character, the
rule in the 8onstitution against the
passage of the ex post facto laws cannotbe invoked, e'e+tfor the penalty
imposed.
Im+res'ri+ti"ilit3 of Taes
General Rule: Taxes are imprescriptible
E'e+tion: 9hen provided otherwise by the tax lawitself.
7xample2 $"8 provides for statutes of limitation
in the assessment and collection of taxes therein
imposed
The law on prescription, being a remedial
measure, should be liberally construed to afford
protection as a corollary, the exceptions to the law on
prescription be strictly construed. (# vs #! 1
.o 78=7E7, >eb ;=, 7DDD)
;o'trine of E5uita"le Re'ou+ment
"t provides that a claim for refund barred by
prescription may be allowed to offset unsettled tax
liabilities should be pertinent only to taxes arising
from the same transaction on which an overpayment
is made and underpayment is due.
This doctrine, however, was re>ected by the !upreme
8ourt, saying that it was not convinced of the wisdom
and proprietary thereof, and that it may work to tempt
both the collecting agency and the taxpayer to delay
and neglect their respective pursuits of legal action
within the period set by law. (#ollector vs 5T, 78=
P3+ 78G;)
Ta+a3erKs Suit
"t is only when an act complained of, which may
include legislative enactment, directly involves the
illegal disbursement of public funds derived from
taxation that the taxpayer&s suit may be allowed.
Inter+retation an 7onstru'tion of Ta Statutes
1. +n the interpretation and construction of tax
statutes, legislative intention must be
considered.
. "n case of doubt, tax statutes are construed
strictly against the government and liberally
construed in favor of the taxpayer.
;. The rule of strict construction against the
government is not applicable where the
language of the tax law is plain and there isno doubt as to the legislative intent.
E. The exemptions 3or e5uivalent provisions,
such as tax amnesty and tax condonation4
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are not presumed and when granted are
strictly construed against the grantee.
I. The exemptions, however, are construed
liberally in favor of the grantee in the
following2
a. 9hen the law so provides for such
liberal constructionKb. 7xemptions from certain taxes granted
under special circumstances to special
classes of personsK
c. 7xemptions in favor of the
Government, its political subdivisionsKd. 7xemptions to traditional exemptees,
such as, those in favor of charitable
institutions.
:. The tax laws are presumed valid.
B. The power to tax is presumed to exist.