HEALTH ECONOMICS WITH TAXATION AND LAND REFORM

SYLLABUS
HEALTH ECONOMICS WITH TAXATION AND LAND REFORM

Placement: BSND Level II 2nd Semester [SY: 2011 2012]
Units: 3 units lecture
Time Allotment: 54 hours lecture

COURSE DESCRIPTION:

This course is an introduction to Economics, the basic concepts of microeconomics, money and
banking, economic growth and development and international economics and its implication to
nursing. Also discussed are the basic concepts of taxation and land reform.

Terminal Performance Objective:

To introduce the students to the concepts of economics applied to health and enable them to appreciate
and apply the principles in health program decision-making and development. At the end of the
course, the student shall be able to:
1. Appreciate the basic concepts and rationale of economics
2. Discuss the concept of health with emphasis on the use of health outcomes
3. Apply the basic concepts of the Law of Supply and Demand to health related issues
4. Discuss the various roles of the different health sectors and in the provisions of health goods and
services and analyze how the government and private health sectors finance health care
5. Describe the basic principles of evaluating health programs and projects

COURSE CONTENT:

Unit I: INTORDUCTION TO ECONOMICS

1. The Concepts of Economics
a. Mans work against scarcity
b. General Economics Resources: Land, Labor, Capital & Technology
c. The universal objective of attaining the maximum output out of a given input
d. Three components of Economics: Alternative Choices, The Choices and their Costs, the effect of
Choices on the Future

Unit II: GENERAL ECONOMIC CONCEPTS: The Law of Supply and Demand

1. The Demand Curve
a. Characteristics of the Demand Curve; the Law of Downward Sloping Demand
b. Relationships between the Price of Goods and the Quantity Demanded
c. Economic Factors which Affect the Demand Curve
d. Demand Shift

2. The Supply Curve
a. Characteristics of the Supply Curve
b. The Law of Upward Sloping Supply: Relationship between the Price of Goods and the Quantity
Producers are willing to supply
c. Economic factors which affect the supply of goods
d. The Supply shift

3. The Supply and Demand Inter-relationships
a. Price, Demand and Supply
b. The Equilibrium Point
c. Elasticities

Unit III. INTRODUCTION TO THE CONCEPT OF HEALTH

1. Definition of Health
2. How is health objectively measured?
3. What determines health? The underlying and proximate determinants of health

Unit IV. ECONOMICS AND THE HEALTH CARE SECTOR

1. Demand for Health Care: Determinants of Health Seeking Behavior:
a. Economic variables which affect the demand for health care
b. Demographic variables which affect the demand for health care
c. Why are health services and commodities different from other consumer goods?

2. The supply of Health Services
a. Factors which affect the supply of health manpower
b. Trade-off between high quality manpower and abundant supply
c. Experiences from manpower substitution
d. Experiences from other input substitution

3. Concept of demographic transition

3.1 Changes in age, health risks and health stock and its effect on:
a. Probability of getting ill
b. The type of illnesses experienced
c. The type of health care commodities demanded

3.2 Population composition, demographic transition and its applications on Health Program Planning

Unit V: ECONOMIC EVALUATION OF HEALTH PROGRAMS

1. Health Costs Concepts: Types of Costs: Direct and Indirect Costs, Recurrent and Capitalized Costs
2. Cost Minimization
3. Cost Benefit Analysis
4. Cost Utility Analysis

Unit VI. DESCRIPTION OF THE HEALTH CARE SECTOR
Reaction Paper: Health Status of the Philippines and Asia

Unit VII. HEALTH FINANCE AND MANAGED CARE

1. Current Trends and Growth of Alternative Moods of Healthcare Financing in the Philippines Out-
of-pocket/Fee-for-service Medical Insurance Health Maintenance Organizations and Other Managed
Care Organizations
2. Out-of-pocket Healthcare Financing: Advantages and Disadvantages
3. Concepts: Medical Insurance Costs and Pricing of Medical Insurance: Actuarial (medical) Costs
and Administrative Costs
4. Health Maintenance Organizations: an off-shoot of medical insurance and emphasis on preventive
and promotive healthcare Growth and Trends of the HMO Industry
Conceptual Framework of the Organization of HMOs
5. Other Managed-care organizations: Description and Concepts Changing Roles of Physicians,
Nurses and Allied Medical Professionals under a managed-care system Emphasis on efficiency
outcomes

Unit VII-A. DESCRIPTIVE STUDY ON PHILIPPINE HEALTH MAINTENANCE
ORGANIZATIONS

1. Trends in Philippine HMOs
2. Examples of HMO Plan Benefit Coverage
3. A Glimpse on the Financial/Operational Performance of HMOs

Unit VIII. TAXATION

Unit IX. LAND REFORM


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MONDAY, JULY 1 3, 2009
re: lecture notes coverage PRELIMS
TAX REVIEWER
GENERAL PRINCIPLES:
Atty. S.C. Madrona, Jr.

DEFINITION OF TAXATION
Taxation is the inherent power of the sovereign, exercised through the legislature,
to impose burdens upon the subjects and objects within its jurisdiction, for the
purpose of raising revenues to carry out the legitimate objects of the government.

TAXES
Enforced proportional contributions from properties and persons levied by the
State by virtue its sovereignty for the support of the government and for public
needs.

BASIS OF TAXATION
> GOVERNMENTAL NECESSITY
* The existence of the government depends upon its capacity to perform its two
(2) basic functions:
A.. to serve the people
B.. to protect the people

THEORY OF TAXATION
>RECIPROCAL DUTIES OF SUPPORT AND PROTECTION
1) Support on the part of the taxpayers
2) Protection and benefits on the part of the government

BENEFITS RECEIVED PRINCIPLE
(CIR vs. ALGUE)
Despite the natural reluctance to surrender part of ones hard earned income to
the taxing authority, every person who is able to must contribute his share in the
running of the government.
The government is expected to respond in the form of tangible or intangible
benefits intended to improve the lives of the people and enhanced their material
and moral values.
In return for his contribution, the taxpayer receives the general advantages and
protection which the government affords the taxpayer and his property. One is
compensation or consideration for the other. Protection for support and support
for protection.
However, it does not mean that only those who are able to
pay taxes can enjoy the privileges and protection
given to a citizen by the government.

LORENZO vs. POSADAS
> The only benefit to which the taxpayer is entitled is that derived form the
enjoyment of the privileges of living in an organized society established and
safeguarded by the devotion of taxes to public purpose. The government
promises nothing to the person taxed beyond what maybe anticipated from an
administration of the laws for the general good.
> Taxes are essential to the existence of the government. The
obligation to pay taxes rests not upon the privileges enjoyed by or the protection
afforded to the citizen by the government, but upon the necessity of money for
the support of the State. For this reason, no one is allowed to object to or resist
payment of taxes solely because no personal benefit to him can be pointed out as
arising from the tax.

ESSENTIAL ELEMENTS OF A TAX
1) It is an enforced contribution
2) It is generally payable in money
3) It is proportionate in character
4) It is levied on persons, property, or the exercise of a right or privilege
5) It is levied by the State which has jurisdiction over the subject or object of
taxation
6) It is levied by the law-making body of the State
7) It is levied for publics purpose or purposes

REQUISITES of a VALID TAX code: [P, U, J, A, N]
1) It should be for a public purpose
2) The rule of taxation should be uniform
3) That either the person or property taxed be within the jurisdiction of the taxing
authority
4) That the assessment and collection be in consonance with the due process
clause
5) The tax must not infringe on the inherent and constitutional limitations of the
power of taxation

*> Taxes are the lifeblood of the government and should be collected without
unnecessary hindrance. But their collection should not be tainted with
arbitrariness

NATURE OF TAXATION
1) Inherent in sovereignty
2) Legislative in character


SCOPE OF TAXATION
1) Comprehensive
2) Unlimited
3) Plenary
4) Supreme

TOLENTINO vs. SEC. Of FINANCE
> In the selection of the object or subject of taxation the courts have no power to
inquire into the wisdom, objectivity, motive, expediency or necessity of such tax
law. (WOMEN)

PURPOSES OF TAXATION

PRIMARY
- To raise revenue in order to support the government

SECONDARY
1) Used to reduce social inequality
2) Utilized to implement the police power of the State
3) Used to protect our local industries against unfair competition
4) Utilized by the government to encourage the growth of local industries



LIFEBLOOD DOCTRINE
> Taxes are the lifeblood of the nation

> Without revenue raised from taxation, the government will not survive,
resulting in detriment to society. Without taxes, the government would be
paralyzed for lack of motive power to activate and operate it. (CIR vs. ALGUE)

> Taxes are the lifeblood of the government and there prompt and certain
availability is an imperious need.

> Taxes are the lifeblood of the nation through which the agencies of the
government continue to operate and with which the state effects its functions for
the benefit of its constituents

ILLUSTRATIONS OF THE LIFEBLOOD THEORY
1) Collection of the taxes may not be enjoined by injunction
2) Taxes could not be the subject of compensation or set off
3) A valid tax may result in destruction of the taxpayers property
4) Taxation is an unlimited and plenary power


POWER TO TAX AND POWER TO DESTROY

* > The power to tax includes the power to destroy if it is used as an implement of
the police power (regulatory) of the State. However, it does not include the power
to destroy if it is used solely for the purpose of raising revenue. (ROXAS vs. CTA)

NOTES:
> If the purpose of taxation is regulatory in character, taxation is used to
implement the police power of the state

> If the power of taxation is used to destroy things, businesses, or enterprises
and the purpose is to raise revenue, the court will come in because there will be
violation of the inherent and constitutional limitations and it will be declared
invalid.


NATURE OF THE TAXING POWER
1) Attribute of sovereignty and emanates from necessity, relinquishment of which
is never presumed
2) Legislative in character, and
3) Subject to inherent and constitutional limitations


NECESSITY THEORY
> Existence of a government is a necessity and cannot continue without any
means to pay for expenses


BENEFITS PROTECTION THEORY
> Reciprocal duties of protection and support between State and inhabitants.
Inhabitants pay taxes and in return receive benefits and protection from the State

SCOPE OF LEGISLATIVE TAXING POWER
1) The persons, property and excises to be taxed, provided it is within its
jurisdiction
2) Amount or rate of tax
3) Purposes for its levy, provided it be for a public purpose
4) Kind of tax to be collected
5) Apportionment of the tax
6) Situs of taxation
7) Method of collection

ASPECTS OF TAXATION
1) LEVY or IMPOSITION
enactment of tax laws
legislative in character
2) ASSESSMENT
collection
administrative in character

NOTES:
> It is inherent in the power to tax that the State is free to select the object of
taxation

> The power of the legislature to impose tax includes the power
1) what to tax
2) whom to tax
3) how much to tax

BAGATSING vs. RAMIREZ
> What cannot be delegated is the legislative enactment of a tax measure but as
regards to the administrative implementation of a tax law that can be delegated.

> The collection may be entrusted to a private corporation.

> The rule that the power of taxation cannot be delegated does not apply to the
administrative implementation of a tax law

> There is no violation because what is delegated or entrusted is the collection
and not the enactment of such laws

> The issuance of regulations or circulars by the BIR or the Secretary of Finance
should not go beyond the scope of the tax measure

BASIC PRINCIPLES OF A SOUND TAX SYSTEM
1) THEORETICAL JUSTICE
2) FISCAL ADEQUACY
3) ADMINISTRATIVE FEASIBILITY

NOTES:
FISCAL ADEQUACY
- VIOLATION VALID
> Sources of revenue should be sufficient to meet the demands of public
expenditure

> Revenues should be elastic or capable of expanding or contracting annually in
response to variations in public expenditure

>Elasticity may be obtained without creating annually any new taxes or any new
tax machinery but merely by changes in the rates applicable to existing taxes

> Even if a tax law violates the principle of Fiscal Adequacy , in other words, the
proceeds may not be sufficient to satisfy the needs of the government, still the tax
law is valid

ADMINISTRATIVE FEASIBILITY
- VIOLATION VALID
> The tax law must be capable of effective or efficient enforcement
> Tax laws should be capable of convenient, just and effective administration

> Tax laws should close-up the loopholes for tax evasion and deter
unscrupulous officials from committing fraud
> There is no law that requires compliance with this principle, so even if the tax
law violates this principle; such tax law is valid.

THEORETICAL JUSTICE
- VIOLATION INVALID
> This principle mandates that taxes must be just, reasonable and fair
Taxation shall be uniform and equitable

> Equitable taxation has been mandated by our constitution, as if taxes are
unjust and unreasonable then they are not equitable, thus invalid.

> The tax burden should be in proportion to the taxpayers ability to pay
(ABILITY TO PAY PRINCIPLE)



DISTINCTIONS:

TAXATION vs. POLICE POWER vs. EMINENT DOMAIN
1) As to purpose:
Taxation for the support of the government
Eminent Domain_- for public use
Police Power to promote general welfare, public health, public morals, and
public safety.

2) As to compensation:
Taxation Protection and benefits received from the government.
Eminent Domain just compensation, not to exceed the market value declared
by the owner or administrator or anyone having legal interest in the property, or
as determined by the assessor, whichever is lower.
Police Power The maintenance of a healthy economic standard of society.

3) As to persons affected:
Taxation and Police Power operate upon a community or a class of individuals
Eminent Domain operates on the individual property owner.

4) As to authority which exercises the power:
Taxation and Police Power Exercised only by the government or its political
subdivisions.
Eminent Domain may be exercised by public services corporation or public
utilities if granted by law.

5) As to amount of imposition:
Taxation Generally no limit to the amount of tax that may be imposed.
Police Power Limited to the cost of regulation
Eminent Domain There is no imposition; rather, it is the owner of the property
taken who is just paid compensation.

6) As to the relationship to the Constitution:
Taxation and Eminent Domain Subject to certain constitutional limitations,
including the prohibition against impairment of the obligation of contracts.
Police Power Relatively free from constitutional limitations and superior to the
non-impairment provisions thereof.

TAX DISTINGUISHED FROM LICENSE FEE:
a) PURPOSE: Tax imposed for revenue WHILE license fee for regulation. Tax for
general purposes WHILE license fee for regulatory purposes only.

b) BASIS: Tax imposed under power of taxation WHILE license fee under police
power.

c) AMOUNT: In taxation, no limit as to amount WHILE license fee limited to cost
of the license and expenses of police surveillance and regulation.

d) TIME OF PAYMENT: Taxes normally paid after commencement of business
WHILE license fee before.

e) EFFECT OF PAYMENT: Failure to pay a tax does not make the business illegal
WHILE failure to pay license fee makes business illegal.
f) SURRENDER: Taxes, being lifeblood of the state, cannot be surrendered
except for lawful consideration WHILE a license fee may be surrendered with or
without consideration.

IMPORTANCE OF DISTINCTION BETWEEN TAXES AND LICENSE FEES.
It is necessary to determine whether a particular imposition is a tax or a license
fee, because some limitations apply only to one and not to the other.
Furthermore, exemption from taxes does not include exemption from license fees



TAXES DISTINGUISHED FROM OTHER IMPOSITIONS:
1) toll amount charged for the cost and maintenance of property used;

2) compromise penalty amount collected in lieu of criminal prosecution in
cases of tax violations;

3) special assessment levied only on land based wholly on the benefit accruing
thereon as a result of improvements of public works undertaken by government
within the vicinity.

4) license fee regulatory imposition in the exercise of the police power of the
State;

5) margin fee exaction designed to stabilize the currency

6) custom duties and fees duties charged upon commodities on their being
imported into or exported from a country;

7) debt a tax is not a debt but is an obligation imposed by law.


Special assessment v. tax

1. A special assessment tax is an enforced proportional contribution from owners
of lands especially benefited by public improvements
2. A special assessment is levied only on land.
3. A special assessment is not a personal liability of the person assessed; it is
limited to the land.
4. A special assessment is based wholly on benefits, not necessity.
5. A special assessment is exceptional both as to time and place; a tax has general
application.



Some Rules:

An exemption from taxation does not include exemption from a special
treatment.

The power to tax carries with it a power to levy a special assessment.

Toll v. tax

1. Toll is a sum of money for the use of something. It is the consideration which is
paid for the use of a road, bridge, or the like, of a public nature. Taxes, on the
other hand, are enforced proportional contributions from persons and property
levied by the State by virtue of its sovereignty for the support of the government
and all public needs.

2. Toll is a demand of proprietorship; tax is a demand of sovereignty.

3. Toll is paid for the used of anothers property; tax is paid for the support of
government.

4. The amount paid as toll depends upon the cost of construction or maintenance
of the public improvements used; while there is no limit on the amount collected
as tax as long as it is not excessive, unreasonable, or confiscatory.

5. Toll may be imposed by the government or by private individuals or entities;
tax may be imposed only by the government.

Tax v. penalty

1. Penalty is any sanction imposed as a punishment for violation of law or for acts
deemed injurious; taxes are enforced proportional contributions from persons
and property levied by the State by virtue of its sovereignty for the support of the
government and all public needs.

2. Penalty is designed to regulate conduct; taxes are generally intended to
generate revenue.

3. Penalty may be imposed by the government or by private individuals or
entities; taxes only by the government.

Obligation to pay debt v. obligation to pay tax

1. A debt is generally based on contract, express or implied, while a tax is based
on laws.

2. A debt is assignable, while a tax cannot generally be assigned.

3. A debt may be paid in kind, while a tax is generally paid in money.

4. A debt may be the subject of set off or compensation, a tax cannot.

5. A person cannot be imprisoned for non-payment of tax, except poll tax.

6. A debt is governed by the ordinary periods of prescription, while a tax is
governed by the special prescriptive periods provided for in the NIRC.

7. A debt draws interest when it is so stipulated or where there is default, while a
tax does not draw interest except only when delinquent.


Requisites of compensation

1. That each one of the obligor be bound principally, and that he be at the same
time a principal creditor of the other.

2. That both debts consist in a sum of money, or if the things due are consumable,
they be of the same kind and also of the same quality if the latter has been stated.

3. That the two (2) debts be due.

4. That they be liquidated and demandable.

5. That over neither of them there be any retention or controversy, commenced
by third persons and communicated in due time to the debtors.


Rules re: set off or compensation of debts

General rule: A tax delinquency cannot be extinguished by legal compensation.
This is so because the government and the tax delinquent are not mutually
creditors and debtors. Neither is a tax obligation an ordinary act. Moreover, the
collection of a tax cannot await the results of a lawsuit against the government.
Finally, taxes are not in the nature of contracts but grow out of the duty to, and
are the positive acts of the government to the making and enforcing of which the
personal consent of the taxpayer is not required. (Francia v. IAC, 162 SCRA 754
and Republic v. Mambulao Lumber, 4 SCRA 622)

Exception: SC allowed set off in the case of Domingo v. Garlitos [8 SCRA 443]
re: claim for payment of unpaid services of a government employee vis--vis the
estate taxes due from his estate. The fact that the court having jurisdiction of the
estate had found that the claim of the estate against the government has been
appropriated for the purpose by a corresponding law shows that both the claim of
the government for inheritance taxes and the claim of the intestate for services
rendered have already become overdue and demandable as well as fully
liquidated. Compensation therefore takes place by operation of law.




Survey of Philippine Taxes
A. Internal Revenue taxes imposed under the NIRC.
1. Income tax
2. Transfer taxes
a) Estate tax
b) Donors tax
3. Percentage taxes
a) Value Added Tax
b) Other Percentage Taxes
4. Excise taxes
5. Documentary stamp tax
B. Local/ Municipal Taxes
C. Tariff and Customs Duties
D. Taxes / Tax Incentives under special laws
CLASSIFICATION OF TAXES
AS TO SUBJECT MATTER OR OBJECT
1. Personal, poll or capitation tax
Tax of a fixed amount imposed on persons residing within a specified territory,
whether citizens or not, without regard to their property or the occupation or
business in which they may be engaged, i.e. community tax.
2. Property tax
Tax imposed on property, real or personal, in proportion to its value or in
accordance with some other reasonable method of apportionment.
3. Excise tax
A charge impose upon the performance of an act, the enjoyment of privilege, or
the engaging in an occupation.
AS TO PURPOSE
General/fiscal revenue tax is that imposed for the purpose of raising public funds
for the service of the government.
A special or regulatory tax is imposed primarily for the regulation of useful or
non-useful occupation or enterprises and secondarily only for the purpose of
raising public funds.
AS TO WHO BEARS THE BURDEN
1. Direct tax
A direct tax is demanded from the person who also shoul,ders the burden of the
tax. It is a tax which the taxpayer is directly or primarily liable and which he or
she cannot shift to another.
2. Indirect tax
An indirect tax is demanded from a person in the expectation and intention that
he or she shall indemnify himself or herself at the expense of another, falling
finally upon the ultimate purchaser or consumer. A tax which the taxpayer can
shift to another.
AS TO THE SCOPE OF THE TAX
1. National tax
A national tax is imposed by the national government.
2. Local tax
A local tax is imposed by the municipal corporations or local government units
(LGUs).
AS TO THE DETERMINATION OF AMOUNT
1. Specific tax
A specific tax is a tax of a fixed amount imposed by the head or number or by
some other standard of weight or measurement. It requires no assessment other
than the listing or classification of the objects to be taxed.
2. Ad valorem tax
An ad valorem tax is a fixed proportion of the value of the property with respect
to which the tax is assessed. It requires the intervention of assessors or appraisers
to estimate the value of such property before due from each taxpayer can be
determined.
AS TO GRADUATION OR RATE
1. Proportional tax
Tax based on a fixed percentage of the amount of the property receipts or other
basis to be taxed. Example: real estate tax.
2. Progressive or graduated tax
Tax the rate of which increases as the tax base or bracket increases.
Digressive tax rate: progressive rate stops at a certain point. Progression halts at
a particular stage.
3. Regressive tax
Tax the rate of which decreases as the tax base or bracket increases. There is no
such tax in the Philippines.


TAX SYSTEMS
Constitutional mandate
The rule of taxation shall be uniform and equitable. The Congress shall evolve a
progressive system of taxation. [Section 28 (1), Article VI, Constitution]
Regressivity is not a negative standard for courts to enforce. What Congress is
required by the Constitution to do is to evolve a progressive system of taxation.
This is a directive to Congress, just like the directive to it to give priority of the
enactment of law for the enhancement of human dignity. The provisions are put
in the Constitution as moral incentives to legislation, not as judicially enforceable
rights. (Tolentino v. Secretary of Finance.)
Progressive system of taxation v. regressive system of taxation
A progressive system of taxation means that tax laws shall place emphasis on
direct taxes rather than on indirect taxes, with ability to pay as the principal
criterion.
A regressive system of taxation exists when there are more indirect taxes
imposed than direct taxes.
No regressive taxes in the Philippine jurisdiction
CLASSIFICATION OF TAXES:
1. personal tax also known as capitalization or poll tax;
2. property tax assessed on property of a certain class;
3. direct tax incidence and impact of taxation falls on one person and cannot be
shifted to another;
4. indirect tax incidence and liability for the tax falls on one person but the
burden thereof can be passed on to another;
5. excise tax imposed on the exercise of a privilege;
6. general taxes taxes levied for ordinary or general purpose of the government;
7. special tax levied for a special purpose;
8. specific taxes imposed on a specific sum by the head or number or by some
standards of weight or measurement;
9. ad valorem tax tax imposed upon the value of the article;
10. local taxes taxes levied by local government units pursuant to validly
delegated power to tax;
11. progressive taxes rate increases as the tax base increases; and
12. regressive taxes rate increases as tax base decreases.

GENERAL RULE:
- Taxes are personal to the taxpayer. Corporations tax delinquency cannot be
enforced on the stockholder or transfer taxes on the estate be assessed on the
heirs.
EXCEPTIONS
1. stockholders may be held liable for unpaid taxes of a dissolved corporation if
the corporate assets have passed into their hands; and
2. heirs may be held liable for the transfer taxes on the estate, if prior to the
payment of the same, the properties of the decedent have been distributed to the
heirs.

LIMITATIONS ON THE POWER OF TAXATION
Inherent Limitations
1. It must be imposed for a public purpose.
2. If delegated either to the President or to a L.G.U., it should be validly
delegated.
3. It is limited to the territorial jurisdiction of the taxing authority.
4. Government entities are exempted.
5. International comity is recognized i.e. property of foreign sovereigns are not
subject to tax.
Constitutional limitations
Indirect
a) Due process clause
b) Equal protection clause
c) Freedom of the press
d) Religious freedom
e) Non-impairment clause
f) Law-making process
1. One-subject One-title Rule
2. 3 readings on 3 separate days Rule except when there is a Certificate of
Emergency
3. Distribution of copies 3 days before the 3rd reading.
g) Presidential power to grant reprieves, commutations and pardons, and remit
fines and forfeitures after conviction by final judgment.
Direct
a) Revenue bill must originate exclusively in H.R. but the Senate may propose
with amendments.
b) Non-imprisonment for non-payment of poll tax.
c) Taxation shall be uniform and equitable.
d) Congress shall evolve a progressive system of taxation.
e) Tax exemption of charitable institutions, churches and personages or convents
appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings
and improvements ADE (actually, directly , exclusively) used for charitable,
religious, and educational purposes.
f) Tax exemption of all revenues and assets used ADE for educational purposes of

1. Non-profit non-stock educational institutions.
2. Proprietary or cooperative educational institutions subject to limitations
provided by law including
a) restriction on dividends
b) provisions for re-investments.
g) Tax exemption of grants, endowments, donations or contributions ADE for
educational purposes, subject to conditions prescribed by law.
h) No tax exemption without the concurrence of a majority of all members of
Congress.
i) SC power to review judgments or orders of lower courts in all cases involving
Legality of any tax. Impost or toll, Legality of any penalty imposed in relation
thereto.

INHERENT LIMITATIONS
NOTES: PUBLIC PURPOSE
GOVERNMENTAL PURPOSE
RULE:
The Legislature is without the power to appropriate revenues for anything but
for public purposes.
RULE:
Public money can only be spent for a public purpose.
PUBLIC PURPOSE A purpose affecting the inhabitants of the State or taxing
district as a community and not merely as individuals
> Public purpose includes not only direct benefits or advantage, it also includes
indirect benefits or advantage
TIO vs. VIDEOGRAM
> It is not the immediate result but the ultimate result that determines, whether
the purpose is public or not
> It is not the number of persons benefited but it is the character of the purpose
that determines the public character of such tax law
> What is not allowed is that if it has no link to public welfare
> Public purpose is determined by the use to which the tax money is devoted
> If it benefits the community in general then it is for a public purpose no matter
who collects it
TEST
1. If the public advantage or benefit is merely incidental in the promotion of a
particular enterprise, that will render the law INVALID
2. If what is incidental is the promotion of a private enterprise, the tax law is still
for a public purpose(VALID)
> A tax levied for a private, not public purpose constitutes taking of property
without due process of law as it is beyond the powers of the government to
impose it.
> Although private individuals are directly benefited, the tax would still be
valid, provided such benefit is only incidental
> If what is incidental is the promotion of a private enterprise, as long as there
is a link to the public welfare, the purpose is still public
> The test is not as to who receives the money, but the character of the purpose
for which it is expended
> Not the immediate result of the expenditure, but rather the ultimate
> The test that must be applied in determining whether the purpose is public or
private
1) The character of the direct object
2) The ultimate result not the immediate result
3) The general welfare for public good
TEST OF RIGHTFUL TAXATION
- Proceeds of a tax must be used
1) for the support of the government
2) for any of the recognized objects of the government
3) to promote the welfare of the community

LEGISLATIVE PREROGATIVE
RULE: It is Congress which has the power to determine whether the purpose is
public or private
> You can always question the validity of such tax measure on the ground that it
is not for a public purpose before the courts. But once it is settled that it is for a
public purpose, you can no longer inquire on such tax measure
TAXPAYERS SUIT
- a case where the act complained of directly involves the illegal disbursement of
public funds derived from taxation
> courts discretion to allow
> Taxpayers have sufficient interest of preventing the illegal expenditures of
money raised by taxation (NOT DONATIONS AND CONTRIBUTIONS)
> A taxpayer is not relieved from the obligation of paying a tax because of his
belief that it is being misappropriated by certain officials
> A taxpayer has no legal standing to question executive acts that do not involve
the use of public funds. (GONZALES vs. MARCOS)

REQUISITES FOR A TAXPAYERS PETITION
1) That money is being extracted and spent in violation of specific constitutional
protections against abuses of legislative power
2) That public money is being deflected to any improper purpose
3) That the petitioner seeks to restrain respondents from wasting public funds
through the enforcement of an invalid or unconstitutional law.
KILOS BAYAN vs. GUINGONA
> The Supreme Court has discretion whether or not to entertain taxpayers suit
and could brush aside lack of locus standi
CONCEPTS RELATIVE TO PUBLIC PURPOSE
1) Inequalities resulting from the singling out of one particular class for taxation
or exemption infringe no constitutional limitation
It is inherent in the power to tax that the legislature is free to select the subject
of taxation
2) An individual taxpayer need not derive direct benefits from the tax
The paramount consideration is the welfare of the greater portion of the
population
3) Public purpose is continually expanding. Areas formerly left to private
initiative now loose their boundaries and may be undertaken by the government,
if it is to meet the increasing social challenges of the times
4) Public purpose is determined at the time of enactment of the tax law and not at
the time of implementation


NOTES: INTERNATIONAL COMITY
- Based on tradition, practice or custom
DOCTRINE OF INCORPORATION
> The Philippines adopts the generally accepted principles of international law
as part of the law of the land
> If a tax law violates certain principles of international law, then it is not only
invalid but also unconstitutional

GROUNDS FOR TAX EXEMPTION OF FOREIGN GOVERNMENT PROPERTY
1) Sovereign equality of States
2) Usage among States
3) Immunity from suit of a State

NOTES: NON-DELEGATION OF THE POWER TO TAX
GENERAL RULE:
- The power of taxation is peculiarly and exclusively legislative, therefore, it may
not be delegated
EXCEPTIONS:
1) Delegation to the President
2) Delegation to local government units
3) Delegation to administrative units

POWERS WHICH CANNOT BE DELEGATED
1) Determination of the subjects to be taxed
2) Purpose of the tax
3) Amount or rate of the tax
4) Manner, means and agencies of collection
5) Prescription of the necessary rules with respect thereto

DELEGATION TO THE PRESIDENT
> Congress may authorize, by law, the President to fix, within specified limits
and subject to such limitations and restrictions as it may impose
1) Tariff rates
2) Import and export quotas
3) Tonnage and wharfage dues
4) Other duties and import within the national development program of the
government
> There must be a law authorizing the President to fix tariff rates
> The delegation of power must impose limitations and restrictions and specify
the minimum as well as the maximum tariff rates.


FLEXIBLE TARIFF CLAUSE (SEC. 401 TCC)
- In the interest of national economy, general welfare and/or national security,
the President upon the recommendation of the National Economic and
Development Authority is empowered:
1) To increase, reduce or remove existing protective rates of import duty,
provided that the increase should not be higher than 100% ad valorem
2) To establish import quota or to ban imports of any commodity
3) To impose additional duty on all imports not exceeding 10% ad valorem

DELEGATION TO LOCAL GOVERNMENT UNITS
> Each local government unit has the power to create its own revenue and to
levy taxes, fees and charges subject to such guidelines and limitations as the
Congress may provide (ART X Sec 5)
> Local government units have no power to further delegate said constitutional
grant to raise revenue, because what is delegated is not the enactment or the
imposition of a tax, it is the administrative implementation
BASCO vs. PAGCOR
> The power of local government units to impose taxes and fees is always
subject to the limitations which Congress may provide, the former having no
inherent power to tax.
> Municipal corporations are mere creatures of Congress which has the power
to create and abolish municipal corporations. Congress therefore has the power
to control over local government units. If Congress can grant to a municipal
corporation the power to tax certain matters, it can also provide for exemptions
or even take back the power

DELEGATION TO ADMINISTRATIVE AGENCIES
> For the delegation to be constitutionally valid, the law must be complete in
itself and must set forth sufficient standards
> Certain aspects of the taxing process that are not really legislative in nature
are vested in administrative agencies. In these cases, there really is no delegation,
to wit:
A) power to value property
B) power to assess and collect taxes
C) power to perform details of computation, appraisement or adjustments.

NOTES: EXEMPTION OF GOVERNMENT AGENCIES
1) Agencies performing governmental functions
> TAX EXEMPT
2) Agencies performing proprietary functions
> SUBJECT TO TAX
* > The exemption applies only to governmental entities through which the
government immediately and directly exercises its sovereign powers.
NDC vs. CEBU CITY
> Tax exemption of property owned by the Republic of the Philippines refers to
the property owned by the government and its agencies which do not have
separate and distinct personality.
> Those with ORIGINAL CHARTERS (incorporated agencies)
> Those created by SPECIAL CHARTER (incorporated agencies) are not
covered by the exemption

GOVERNMENT ENTITIES EXEMPT FROM INCOMING TAX
1) GSIS
2) SSS
3) PHIC
4) PCSO
5) PAGCOR
REASON FOR EXEMPTIONS
1) Government will be taxing itself to raise money for itself.
2) Immunity is necessary in order that governmental functions will not be
impeded.

NOTES: TERRITORIAL JURISDICTION
RULES:
> Tax laws cannot operate beyond a States territorial limits
> The government cannot tax a particular object of taxation which is not within
its territorial jurisdiction.
> Property outside ones jurisdiction does not receive any protection of the State
> If a law is passed by Congress, Congress must always see to it that the object
or subject of taxation is within the territorial jurisdiction of the taxing authority

SITUS OF TAXATION
Place of taxation
RULE:
- The State where the subject to be taxed has a situs may rightfully levy and
collect the tax
> In determining the situs of taxation, you have to consider the nature of the
taxes
Example:
1) POLL TAX, CAPITATION TAX, COMMUNITY TAX
> Residence of the taxpayer

2) REAL PROPERTY TAX OR PROPERTY TAX
> Location of the property
> We can only impose property tax on the properties of a person whose
residence is in the Philippines.

EXCEPTIONS TO THE TERRITORIALITY RULE
A) Where the tax laws operate outside territorial jurisdiction
1) TAXATION of resident citizens on their incomes derived from abroad
B) Where tax laws do not operate within the territorial jurisdiction of the State
1) When exempted by treaty obligations
2) When exempted by international comity

SITUS OF TAX ON REAL PROPERTY
- LEX REI SITUS or where the property is located
REASON:
The place where the real property is located gives protection to the real
property, hence the property or its owner should support the government of that
place

SITUS OF PROPERTY TAX ON PERSONAL PROPERTY
- MOBILIA SEQUNTUR PERSONAM
= movables follow the owner
= movables follow the domicile of the owner
RULES:
1) TANGIBLE PERSONAL PROPERTY
- Where located, usually the owners domicile
2) INTANGIBLLE PERSONAL PROPERTY
G. R. Domicile of the owner
EXCEPTION: The situs location not domicile
> Where the intangible personal property has acquired a business situs in
another jurisdiction
* > The principle of Mobilia Sequntur Personam is only for purposes of
convenience. It must yield to the actual situs of such property.
* > Personal intangible properties which acquires business situs here in the
Philippines
1) Franchise which is exercised within the Philippines
2) Shares, obligations, bonds issued by a domestic corporation
3) Shares, obligations, bonds issued by a foreign corporation, 85% of its business
is conducted in the Philippines
4) Shares, obligations, bonds issued by a foreign corporation which shares of
stock or bonds acquire situs here
5) Rights, interest in a partnership, business or industry established in the
Philippines
> These intangible properties acquire business situs here in the Philippines, you
cannot apply the principle of Mobilia Sequntur Personam because the
properties have acquired situs here.

SITUS OF INCOME TAX
A) DOMICILLARY THEORY
- The location where the income earner resides in the situs of taxation
B) NATIONALITY THEORY
- The country where the income earner is a citizen is the situs of taxation
C) SOURCE RULE
- The country which is the source of the income or where the activity that
produced the income took place is the situs of taxation.

SITUS OF SALE OF PERSONAL PROPERTY
> The place where the sale is consummated and perfected

SITUS OF TAX ON INTEREST INCOME
> The residence of the borrower who pays the interest irrespective of the place
where the obligation was contracted
CIR vs. BOAC
> Revenue derived by an of-line international carrier without any flight from the
Philippines, from ticket sales through its local agent are subject to tax on gross
Philippine billings

SITUS OF EXCISE TAX
> Where the transaction performed
HOPEWELL vs. COM. OF CUSTOMS
> The power to levy an excise upon the performance of an act or the engaging in
an occupation does not depend upon the domicile of the person subject to the
exercise, nor upon the physical location of the property or in connection with the
act or occupation taxed, but depends upon the place on which the act is
performed or occupation engaged in.
Thus, the gauge of taxability does not depend on the location of the office, but
attaches upon the place where the respective transaction is perfected and
consummated


CONSTITUTIONAL LIMITATIONS
I. DUE PROCESS
> Due process mandates that no person shall be deprived of life, liberty, or
property without due process of law.
PEPSI COLA vs. MUN. OF TANAUAN
- REQUIREMENTS OF DUE PROCESS IN TAXATION
1) Tax must be for a Public purpose
2) Imposed within the Territorial jurisdiction
3) No arbitrariness or oppression in
A) assessment, and
B) collection

DUE PROCESS IN TAXATION DOES NOT REQUIRE
1) Determination through judicial inquiry of
A) property subject to tax
B) amount of tax to be imposed
2) Notice of hearing as to:
A) amount of the tax
B) manner of apportionment

REQUISITES OF DUE PROCESS OF LAW
1) There must be a valid law
2) Tax measure should not be unconscionable and unjust as to amount to
confiscation of property
3) Tax statute must not be arbitrary as to find no support in the constitution

> When is deprivation of life, liberty or property done in accordance with due
process of law?
1) If done under authority of a law that is valid or of the constitution itself
2) After compliance with fair and reasonable methods of procedure prescribed by
law.
> If properties are taxed on the basis of an invalid law, such deprivation is a
violation of due process
REMEDY ask for refund
> To justify the nullification of a tax law, there must be a clear and unequivocal
breach of the constitution
> There must be proof of arbitrariness
INSTANCES WHEN THE TAX LAW MAYBE DECLARED AS
UNCONSTITUTIONAL [C, O, N, U]
1) If it amounts to confiscation of property without due process
2) If the subject of taxation is outside of the jurisdiction of the taxing state
3) The law maybe declared as unconstitutional if it is imposed not for a public
purpose
4) If a tax law which is applied retroactively, imposes unjust and oppressive
taxes.
A tax law which denies a taxpayer a fair opportunity to assert his substantial
rights before a competent tribunal is invalid
A taxpayer must not be deprived of his property for non-payment of taxes
without
1) notice of liability
2) sale of property at public auction
The validity of statute maybe contested only by one who will sustain a direct
injury in consequence of its enforcement
A violation of the inherent limitations on taxation would contravene the
constitutional injunctions against deprivation of property without due process of
law
There must be proof of arbitrariness, otherwise apply the presumption of
constitutionality
Due process requires hearing before adoption of legislative rules by
administrative bodies of interpretative rulings. (Misamis vs. DFA)
Compliance with strict procedural requirements must be followed effectively
to avoid a collision course between the states power to tax and the individual
recognized rights (CIR vs. Algue)
The due process clause may correctly be invoked only when there is a clear
contravention of inherent or constitutional limitations in the exercise of tax
power. (Tan vs. del Rosario)
SUBSTATNTIVE DUE PROCESS requires that a tax statute must be within
the constitutional authority of Congress to pass and that it be reasonable, fair and
just
PROCEDURAL DUE PROCESS requires notice and hearing or at least an
opportunity to be heard

II. EQUAL PROTECTION CLAUSE
> All persons, all properties, all businesses should be taxed at the same rate
> prohibits class legislation
> prohibits undue discrimination
EQUALITY IN TAXATION (UNIFORMITY)
> Equality in taxation requires that all subjects or objects of taxation similarly
situated should be treated alike or put on equal footing both on the privilege
conferred and liabilities imposed
> All taxable articles of the same class shall be taxed at the same rate
> The Doctrine does not require that persons or properties different in fact be
treated in law as though there were the same. What it prohibits is class legislation
which discriminates against some and favors others
> As long as there are rational or reasonable grounds for doing so, Congress
may group persons or properties to be taxed and it is sufficient if all members of
the same class are subject to the same rate and the tax is administered impartially
upon them.

REQUISITES OF A VALID CLASSIFICATION (S A G E )
1) It must be based on substantial distinction
2) It must apply not only to the present condition, but also to future conditions
3) It must be germane to the purpose of the law
4) It must apply equally to all members of the same class

SUBSTANTIAL DISTINCTION
> It must be real, material and not superficial distinction
> What is not allowed is inequality resulting from singling out of a particular
class which violates the requisites of a valid classification
> There maybe inequality but as long as it does not violate the requisites of a
valid classification that such mere inequality is not enough to justify the
nullification of a tax law or tax ordinance
> Taxation is equitable when its burden falls on those better able to pay
>Although the equal protection clause does not forbid classification, it is
imperative that the substantial differences having a reasonable relation to the
subject of the particular legislation
> Taxes are uniform and equal when imposed upon all property of the same
class or character within the taxing authority
> Tax exemptions are not violative of the equal protection clause, as long as
there is valid classification.
TIU vs. CA
The Constitutional right to equal protection of the law is not violated by an
executive order, issued pursuant to law, granting tax and duty incentives only to
business within the secured area of the Subic Special Economic Zone and
denying them to those who live within the zone but outside such fenced in
territory. The Constitution does not require the absolute equality among
residents. It is enough that all persons under like circumstances or conditions are
given the same privileges and required to follow the same obligations. In short, a
classification based on valid and reasonable standards does not violate the equal
protection clause.
We find real and substantial distinctions between the circumstances obtaining
inside and those outside the Subic Naval Base, thereby justifying a valid and
reasonable classification.
TWO WAYS EQUAL PROTECTION CLAUSE CAN BE VIOLATED
1) When classification is made where there should be none
ex. When the classification does not rest upon substantial distinctions that make
for real difference
2) When no classification is made where a classification is called for
ex. When substantial distinctions exist but no corresponding classification is
made on the basis thereof

ORMOC SUGAR CENTRAL vs. CIR
> If the ordinance is intended to supply to a specific taxpayer and to no one else
regardless of whether or not other entities belonging to the same class are
established in the future, it is a violation of the equal protection clause, but if it is
intended to apply also to similar establishments which maybe established in the
future, then the tax ordinance is valid even if in the meantime, it applies to only
one entity or taxpayer for the simple reason that there is so far only one member
of the class subject of the tax measure

UNIFORMITY IN TAXATION
> The concept of uniformity in taxation implies that all taxable articles or
properties of the same class shall be taxed at the same rate.
It requires the uniform application and operation, without discrimination, of the
tax in every place where the subject of the tax is found. It does not, however,
require absolute identity or equality under all circumstances, but subject to
reasonable classification.
EQUITY IN TAXATION
> The concept of equity in taxation requires that the apportionment of the tax
burden be more or less, just in the light of the taxpayers ability to shoulder to tax
burden and if warranted, on the basis of the benefits received from the
government. Its cornerstone is the taxpayers ability to pay.


CRITERIA OF EQUAL PROTECTION
1) When the laws operate uniformly
A) on all persons
B) under similar circumstances
2) All persons are treated in the same manner
A) The conditions not being different
B) Both in privileges conferred and liabilities imposed
C) Favoritism and preference not allowed
REYES vs. ALMAZOR
> Taxation is equitable when its burden falls on those better able to pay
KAPATIRAN vs. TAN
> It is inherent in the power to tax that the state be free to select the subjects of
taxation and it has been repeatedly held that inequalities which result from a
singling out of one particular class of taxation or exemption infringe no
constitutional limitation

III. FREEDOM OF THE PRESS
> The press is not exempt from taxation
> The sale of magazines or newspapers, maybe the subject of taxation
> What is not allowed is to impose tax on the exercise of an activity which has a
connection with freedom of the press (license fee)
> If we impose tax on persons before they can deliver or broadcast a particular
news or information, that is the one which cannot be taxed.
TOLENTINO vs. SEC. OF FINANCE
> What is prohibited by the constitutional guarantee of free press are laws
which single out the press or target a group belonging to the press for special
treatment or which in any way discriminates against the press on the basis of the
content of the publication.

IV. FREEDOM OF RELIGION
> It is the activity which cannot be taxed
> activities which have connection with the exercise of religion

AMERICAN BIBLE SOCIETY vs. MANILA
> The payment of license fees for the distribution and sale of bibles suppresses
the constitutional right of free exercise of religion.

JIMMY SWAGGART vs. BOARD OF EQUALIZATION
> The Free Exercise of Religion Clause does not prohibit imposing a generally
applicable sales and use tax on the sale of religious materials by a religious
organization.
> The Sale of religious articles can be the subject of the VAT
> What cannot be taxed is the exercise of religious worship or activity
> The income of the priest derived from the exercise of religious activity can be
taxed.

V. NON-IMPAIRMENT CLAUSE
> The parties to the contract cannot exercise the power of taxation.
> They cannot agree or stipulate that this particular transaction may be exempt
from tax- not allowed (except if government)
OPOSA vs. FACTORAN
> Police power prevails over the non-impairment clause
LA INSULAR vs. MANCHUCA
> A lawful tax on a new subject or an increased tax on an old one, does not
interfere with a contract or impairs its obligation.
> The constitutional guarantee of the non-impairment clause can only invoked
in the grant of tax exemption.
RULES:
1) If the exemption was granted for valuable consideration and it is granted on
the basis of a contract.
> cannot be revoked
2) If the exemption is granted by virtue of a contract, wherein the government
enters into a contract with a private corporation
> cannot be revoked unilaterally by the government
3) If the basis of the tax exemption is a franchise granted by Congress and under
the franchise or the tax exemption is given to a particular holder or person
> can be unilaterally revoked by the government (Congress)
> The non-impairment clause applies only to contracts and not to a franchise.
> The non-impairment clause applies to taxation but not to police power and
eminent domain. Furthermore, it applies only where one party is the government
and the other, a private individual.
> As a rule, the obligation to pay tax is based on law. But when, for instance, a
taxpayer enters into a compromise with the BIR, the obligation of the taxpayer
becomes one based on contract


PROVINCE OF MISAMIS vs. CAGAYAN ELECTRIC

> Franchises with magic words, shall be in lieu of all taxes descriptive of the
payment of a franchise tax on their gross earnings are exempt from:
1) all taxes
2) the franchise tax under the NIRC
3) the franchise tax under the local tax code

JUAREZ vs. CA
> As long as the contract affects the public welfare one way or another so as to
require the interference of the state, then must the police power be asserted and
prevail over the impairment clause

RULES ON TAX AMNESTY
> Tax amnesty, like tax exemption, is never favored nor presumed in law and if
granted by statute must be construed strictly against the taxpayer, who must
show compliance with the law.
>The government is not estopped from questioning the tax liability even if
amnesty tax payments were already received
REASON: Erroneous application and enforcement of the law by public officers do
not block subsequent correct application of the statute. The government is never
estopped by mistakes or errors by its agents.
PP vs. CASTAEDA
> Defense of tax amnesty, like amnesty, is a personal defense
REASON: It relates to the circumstances of a particular accused and not the
character of the acts charged in the information
REPUBLIC vs. IAC
>In case of doubt, tax amnesty is to be strictly construed against the
government
REASON: Taxes are not construed, for taxes being burdens are not to be
presumed beyond what the tax amnesty expressly and clearly declares

VI. LAW MAKING PROCESS
A) ONE SUBJECT ONE TITLE RULE
> Every bill passed by the Congress shall embrace only one subject which shall be
expressed in the title thereof (Sec. 26 (1) ART II)
B) THREE READING RULE
> No bill passed by either House shall become a law unless it has passed three
readings on separate days and printed copies thereof in its final form have been
distributed to its members three days before its passage, EXCEPT when the
President certifies to the necessity of its immediate enactment to meet a public
calamity or emergency. (Sec. 26 (2) ART II)


C) ENROLLED BILL DOCTRINE
G.R. An enrolled copy of a bill is conclusive not only of its provisions but also of
its due enactment


VII. PARDONING POWER OF THE PRESIDENT
> The President has the power to grant reprieves, commutations and pardons
and remit fines and forfeitures after conviction by final judgment. (Sec. 19, ART
VII)
NATURE OF TAX AMNESTY
A general pardon or intentional overlooking by the state of its authority to
impose penalties on persons otherwise guilty of evasion or violation of a revenue
or tax law
- absolute forgiveness or waiver to collect

VIII. NO IMPRISONMENT FOR NON-PAYMENT OF POLL TAX
- No person shall be imprisoned for debt or non-payment of poll tax (Sec. 20 ART
III)
> The non-imprisonment rule applies to non-payment of poll tax which is
punishable only by a surcharge, but not to other violations like falsification of
community tax certificate or non-payment of other taxes
POLL TAX tax of fixed amount imposed upon residents within a specific
territory regardless of citizenship, business or profession
Ex. Community tax

IX. TAXATION SHALL BE UNIFORM AND EQUITABLE
- The rule of taxation shall be uniform and equitable. The Congress shall evolve a
progressive system of taxation. (Sec. 28 (1) ART VI)
UNIFORMITY
- means that all taxable articles kinds of property of the same class shall be taxed
at the same rate
> A tax is uniform when it operates with the same force and effect in every place
where the subject of it is found
EQUITABILITY
> Taxation is said to be equitable when its burden falls on those better able to
pay

X. CONGRESS SHALL EVOLVE A PROGRESSIVE SYSTEM OF TAXATION
PROGRESSIVITY
> Taxation is progressive when its rate goes up depending on the sources of the
person affected
SYTEMS OF TAXATION
1) PROPORTIONAL TAXATION
- where the tax increases or decreases in relation to the tax bracket
2) PROGRESSIVE or GRADUATED SYSTEM
- where the tax increases as the income of the taxpayer goes higher
3) REGRESSIVE SYSTEM
- where the tax decreases as the income of the taxpayer increases

PROGRESSIVITY IS NOT REPUGNANT TO UNIFORMITY and EQUALITY
A) Uniformity does not require the things which are not different be treated in
the same manner
B) Differentiation, which is not arbitrary and conforms to the dictates of justice
and equity is allowed. Progressivity is one way of classification.
C) The State has the inherent right to select subjects of taxation


> The Constitution does not really prohibit the imposition of indirect taxes, which
like the VAT, are regressive. The constitutional provision means simply that
indirect taxes shall be minimized.
> The mandate to Congress is not to prescribe, but to evolve, a progressive
system of taxation
> Resort to indirect taxes should be minimized but not to be avoided entirely
because it is difficult, if not impossible to avoid them by imposing such taxes
according to the taxpayers ability to pay.

XI. ORIGIN OF REVENUE, TARIFF or TAX BILLS
All appropriation, revenue or tariff bills, bills authorizing increase of the public
debt, bills of local application, and private bills shall originate exclusively in the
House of Representatives, but the Senate may propose or concur with
amendments. (Section 24, Article VI)
RULE:
- It is not the revenue statute but the revenue bill which is required by the
constitution to originate exclusively in the House of Representatives
REASON:
- To insist that a revenue statute and not only the bill which initiated the
legislative process culminating in the enactment of the law must substantially be
the same as the House bill would be to deny the Senates power not only to
concur with amendments but also to propose amendments. It would be to
violate the co-equality of legislative power of the two houses of Congress and in
fact make the House superior to the Senate. (Tolentino vs. Sec. of Finance)
> The Constitution simply requires that there must be that initiative coming
from the House of Representatives relative to appropriation, revenue and tariff
bills.
>The Constitution does not also prohibit the filing in the Senate of a substitute
bill in anticipation of its receipt of the bill from the House, as long as action by
the Senate is withheld until receipt of said bill (Tolentino vs. Sec. of Finance)

XII. PRESIDENTIAL VETO
> The President shall have the power to veto any particular item or items in an
appropriation, revenue or tariff bill, but the veto shall not affect the item or items
to which he does not object (Sec. 27 (2), ART VI)

XIII. TARIFF POWER OF THE PRESIDENT
The Congress may, by law, authorizing the President to fix within specific
limits, and subject to such limitations and restrictions as it may impose, tariff
rates, import and export quotas, tonnage and wharfage dues, the other duties or
imports within the framework of the national development program of the
Government (Sec. 28 (2), ART VI)
REQUISITES:
1) There must be a law passed by Congress authorizing the President to impose
tariff rates and other fees.
2) Under the law, there must be limitations and restrictions on the exercise of
such power
3) The taxes that may be imposed by the President are limited to:
A) Tariff rates
B) Import and export quotas
C) Tonnage and wharfage dues
D) Other duties (customs duties)
4) The imposition of these tariff and duties must be within the framework of the
National Development program of the government
> Congress may not pass a law authorizing the President to impose income
tax, donors tax, and other taxes which are not in the nature of customs duties.
> The Constitution allows only the imposition by the President of these custom
duties

XIV. TAX EXEMPTION OF REAL PROPERTY
Charitable institutions, churches and personages or convents appurtenant
thereto, morgues, non-profit cemeteries and all lands, buildings and
improvements, actually directly and exclusively used for religious, charitable, or
educational purposes shall be exempt from taxation. (Sec. 28 (3) ART VI)

APPLICATION:
> The exemption only covers property taxes and not other taxes
TEST OF EXEMPTION:
> It is the USE of the property and not ownership of the property


XV. LAW GRANTING TAX EXEMPTIONS
No law granting any tax exemptions shall be passed without the concurrence
of a majority of all members of the Congress (Sec. 28 (4) ART VI)
RULES ON VOTE REQUIREMENT
1) Law granting any tax exemption
> absolute majority
2) Law withdrawing any tax exemption
> Relative majority

> Tax exemption, amnesties, refunds are considered in the nature of tax
exemptions
> A law granting such needs approval of the absolute majority of the Congress

XVI. NO USE OF PUBLIC MONEY OR PROPERTY FOR PUBLIC PURPOSES
> No public money or property shall be appropriated, applied, paid, or
employed, directly or indirectly, for the use, benefit, or support of any sect,
church, denomination, sectarian, institution or system of religion, or of any
priest, preacher, minister or other religious teacher or dignitary as such, EXCEPT
when such priest, preacher, minister or dignitary is assigned to the armed forces,
or to any penal institution, or government orphanage or leprosarium as such
(Sec. 29 (2) ART VI)
> Public property may be leased to a religious group provided that the lease will
be totally under the same conditions as that to private persons (amount of rent)
> Congress is without power to appropriate funds for a private purpose.

XVII. TAX LEVIED FOR SPECIAL PURPOSES
All money collected or any tax levied for a special purpose shall be treated as a
special fund and paid out for such purpose only. If 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. (Sec. 29 (3) ART VI)
> If a President of the Philippines spent a special fund for a general purpose, he
can be charged with culpable violation of the Constitution.

XVIII. SUPREME COURTS POWER OF REVIEW
The Supreme Court shall have the power to review, revise, reverse, modify or
affirm on appeal or certiorari, all cases involving the legality of any tax imposed,
assessment, or toll, or any penalty imposed in relation thereto. (Sec. 5 (2B) ART
VIII)
> Congress cannot take away from the Supreme Court the power given to it by
the Constitution as the final arbiter of the tax cases.

XIX. DELEGATED AUTHORITY TO LOCAL GOVERNMENT UNITS
Each local government unit shall have the power to create its own sources of
revenues and to levy taxes, fees, and charges subject to such guidelines and
limitations as the Congress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees, charges shall have exclusivity to the local
government. (Sec. 5, ART X)
LIMITATIONS ON POWER TO TAX (L.G.U.)
1) It is subject to such guidelines and limitations provided by Congress.
2) It must be consistent with the basic policy of local autonomy.
3) Such taxes, fees, and charges shall accrue exclusively to the local government.
RULES: NATIONAL GOVT vs. LGU
IMPOSITION OF TAXES
1) The National Government may impose local taxes on articles or subjects which
are within the territorial jurisdiction of the local government unit.
2) The Local Government unit cannot impose tax on the national government.
> You can only tax those articles, which are within your jurisdiction
SEC. 6, ART X
local government units shall have a just share, as determined by law, in the
national taxes which shall be automatically released to them.

XX. TAX EXEMPTIONS OF EDUCATIONAL INSTITUTIONS
All revenues and assets of non-stock, non-profit educational institutions used
actually, directly, and exclusively for educational purposes shall be exempt from
taxes and duties. (Sec. 4 (3) ART XIV)
REQUISITES FOR EXEMPTION:
1) It must be a private educational institution
2) It must be non-stock and non-profit
3) Its assets (property) and revenues (income) must be used actually, directly
and exclusively for educational purposes
RULES:
1) If the first requisite is absent (meaning, its a government educational
institution), it is nonetheless exempt from income tax
2) If the second requirement is absent (meaning, it is stock and profit) as long as
the third requirement is present, it is nonetheless exempt from real estate tax
3) If the third requirement is absent, as long as it is non-stock and non-profit, it is
nonetheless exempt from income tax
4) If the third requirement is absent, but it is private and non-profit, it is subject
to income tax, but at the preferential rate of ten percent (10%)
> Under the present tax code, for a private educational institution to be exempt
from the payment of income tax, all it has to be is non-stock and non-profit.
However, a governmental educational institution is exempt from income tax
without any condition

EXEMPTION DOES NOT EXTEND TO:
1) Income derived by these educational institutions from their property, real or
personal, and
2) From activities conducted by them for profit regardless of the disposition
made on such income

> Where the educational institution is private and non-profit (but a stock
corporation) it is subject to income tax but at the preferential rate of ten percent
(10%)

REQUISITES for APPLICATION of 10% PREFERENTIAL RATE
1) It is private;
2) It has permit to operate from the DECS, or CHED or TESDA;
3) It is non-profit;
4) Its gross income from unrelated trade or business must not exceed fifty
percent (50%) of its total gross income from all sources.
10% PREFERENTIAL TAX RATE DOES NOT APPLY TO THE FOLLOWING:
1) Passive incomes derived by the educational institution (subject to final income
tax) and
2) Where the educational institution is engaged in unrelated trade, business or
other activity, and the gross income from such unrelated trade, business or other
activities exceeds fifty percent (50%) of the total gross income derived by the
school from all sources
> Where a donation is made in favor of an educational institution pursuant to
sports competition and tournaments, the donor is exempt from the payment of
donors tax
CIR vs. CA (298 SCRA 83)
> Income derived by YMCA from leasing out a portion of its premises to small
shop owners, like restaurant and canteen operators, and from parking fees
collected from non-members are taxable income
YMCA is not an educational institution

XXI. TAX EXEMPTION OF DONATIONS for EDUCATIONAL PURPOSES
> Subject to conditions prescribed by law, all grants endowments, donations,
or contributions used actually, directly and exclusively for educational purposes
shall be exempt from tax. (Sec. 4 (4) ART XIV)

XXII. NO EXPOST FACTO LAW PROHIBITION IN TAXATION
FERNANDEZ vs. FERNANDEZ
> The prohibition against ex post facto laws applies only to criminal laws and
not to those that concern civil matters
Our tax laws are civil in nature
> The collection of interest on taxes is not penal in nature and the ex post facto
law prohibition does not apply to it.




ESCAPE FROM TAXATION
BASIC FORMS OF ESCAPE FROM TAXATION
1) SHIFTING
2) CAPITALIZATION
3) TRANSFORMATION
4) AVOIDANCE
5) EXEMPTION
6) EVASION

I. SHIFTING
- Shifting is the transfer of the burden of a tax by the original payer or the one on
whom the tax was assessed or imposed to someone else
- Process by which such tax burden is transferred from statutory taxpayer to
another without violating the law
> It should be borne in mind that what is transferred is not the payment of the
tax, but the burden of the tax
> Only indirect taxes may be shifted; direct taxes cannot be shifted
WAYS OF SHIFTING THE TAX BURDEN
1) FORWARD SHIFTING
- When the burden of the tax is transferred from a factor of production through
the factors of distribution until it finally settles on the ultimate purchaser or
consumer.
Example:
- Manufacturer or producer may shift tax assessed to wholesaler, who in turn
shifts it to the retailer, who also shifts it to the final purchaser or consumer
2) BACKWARD SHIFTING
- When the burden of the tax is transferred from the consumer or purchaser
through the factors of distribution to the factors of production
Example:
- Consumer or purchaser may shift tax imposed on him to retailer by purchasing
only after the price is reduced, and from the latter to the wholesaler, or finally to
the manufacturer or producer
3) ONWARD SHIFTING
- When the tax is shifted two or more times either forward or backward
Example:
- Thus, a transfer from the seller to the purchaser involves one shift; from the
producer to the wholesaler, then to retailer, we have two shifts; and if the tax is
transferred again to the purchaser by the retailer, we have three shifts in all.
Impact and Incidence of Taxation
Impact of taxation is the point on which a tax is originally imposed. In so far as
the law is concerned, the taxpayer is the person who must pay the tax to the
government. He is also termed as the statutory taxpayer-the one on whom the tax
is formally assessed. He is the subject of the tax
Incidence of taxation is that point on which the tax burden finally rests or settle
down. It takes place when shifting has been effected from the statutory taxpayer
to another.
Statutory Taxpayer
The Statutory taxpayer is the person required by law to pay the tax or the one on
whom the tax is formally assessed. In short, he or she is the subject of the tax.
In direct taxes, the statutory taxpayer is the one who shoulders the burden of
the tax while in indirect taxes, the statutory taxpayer is the one who pay the tax to
the government but the burden can be passed to another person or entity.
Relationship between impact, shifting, and incidence of a tax
The impact is the initial phenomenon, the shifting is the intermediate process,
and the incidence is the result. Thus, the impact in a sales tax (i.e. VAT) is on the
seller (manufacturer) who shifts the burden to the customer who finally bears the
incidence of the tax.
Impact is the imposition of the tax; shifting is the transfer of the tax; while
incidence is the setting or coming to rest of the tax.

II. CAPITALIZATION
- Reduction is the price of the taxed object equal to the capitalized value of future
taxes on the property sold
> This is a special form of backward shifting, where the burden of future taxes
which the buyer may have to pay is shifted back to the seller in the form of
reduction in the selling price

III. TRANSFORMATION
- The manufacturer in an effort to avoid losing his customers, maintains the same
selling price and margin of profit, not by shifting the tax burden to his customers,
but by improving his method of production and cutting down or other production
cost, thereby transforming the tax into or earn through the medium of
production.

IV. TAX AVOIDANCE
- Also known as tax minimization
- not punished by law
- Tax avoidance is the exploitation of the taxpayer of legally permissible
alternative tax rates or methods of assessing taxable property or income in order
to avoid or reduce tax liability
DELPHERS TRADERS CORP vs. IAC (157 SCRA 349)
> The Supreme Court upheld the estate planning scheme resorted to by the
Pacheco family in converting their property to shares of stock in a corporation
which they themselves owned and controlled. By virtue of the deed of exchange,
the Pacheco co-owners saved on inheritance taxes. The Supreme Court said the
records do not point anything wrong and objectionable about this estate planning
scheme resorted to. The legal right of the taxpayer to decrease the amount of
what otherwise could be his taxes or altogether avoid them by means which the
law permits cannot be doubted.
Example:
Following the holding period rule in capital gains transaction, by postponing
the sale of the capital asset until after twelve months from date of acquisition you
can reduce the tax on the capital gains by 50%

V. TAX EXEMPTION
Tax Exemption
It is the grant of immunity to particular persons or corporations or to persons or
corporations of a particular class from a tax which persons and corporations
generally within the same state or taxing district are obliged to pay. It is an
immunity or privilege; it is freedom from a financial charge or burden to which
others are subjected.
Exemption is allowed only if there is a clear provision there for.
It is not necessarily discriminatory as long as there is a reasonable foundation
or rational basis.
Exemptions are not presumed, but when public property is involved, exemption
is the rule and taxation is the exemption.
Rationale for granting tax exemptions
Its avowed purpose is some public benefit or interests which the lawmaking
body considers sufficient to offset the monetary loss entailed in the grant of the
exemption.
The theory behind the grant of tax exemptions is that such act will benefit the
body of the people. It is not based on the idea of lessening the burden of the
individual owners of property.
Grounds for granting tax exemptions

1) May be based on contract. In such a case, the public, which is represented by
the government is supposed to receive a full equivalent therefor, i.e. charter of a
corporation.

2) May be based on some ground of public policy, i.e., to encourage new
industries or to foster charitable institutions. Here, the government need not
receive any consideration in return for the tax exemption.

3) May be based on grounds of reciprocity or to lessen the rigors of international
double or multiple taxation

Note: Equity is not a ground for tax exemption. Exemption is allowed only if
there is a clear provision therefor.

Nature of tax exemption
1) It is a mere personal privilege of the grantee.
2) It is generally revocable by the government unless the exemption is founded
on a contract which is contract which is protected from impairment.
3) It implies a waiver on the part of the government of its right to collect what
otherwise would be due to it, and so is prejudicial thereto.
4) It is not necessarily discriminatory so long as the exemption has a reasonable
foundation or rational basis.
5) It is not transferable except if the law expressly provides so.
Kinds of tax exemption according to manner of creation

1) Express or affirmative exemption
When certain persons, property or transactions are, by express provision,
exempted from all certain taxes, either entirely or in part.

2) Implied exemption or exemption by omission
When a tax is levied on certain classes of persons, properties, or transactions
without mentioning the other classes.

Every tax statute makes exemptions because of omissions.
No tax exemption by implication
It must be expressed in clear and unmistakable language
CALTEX vs. COA
> In claiming tax exemption, the burden of proof lies upon the claimant
It cannot be created by mere implication
It cannot be presumed that you are entitled to tax exemption
You must prove it
RULE:
- Taxation is the rule and exemption is the exception
PROPERTY TAX GOVERNMENT PROPERTY
> Properties owned by the government whether in their proprietary or
governmental capacity are exempt from real estate tax
TEST:
- OWNERSHIP
> Once established that it belongs to the government, the nature of the use of
the property whether proprietary or sovereign becomes immaterial.
> Exemption of public property from taxation does not extend to improvements
therein made by occupants or claimants at their own expense.
KINDS OF TAX EXEMPTIONS ACCORDING TO SCOPE OR EXTENT
1) TOTAL
- When certain persons, property or transactions are exempted, expressly or
impliedly from all taxes
2) PARTIAL
- When certain persons, property or transactions are exempted, expressly or
impliedly from certain taxes, either entirely or in part.
3) There can be no simultaneous exemptions under two laws, when one grants
partial exemption while other grants total exemption.

Does provision in a statute granting exemption from all taxes include indirect
taxes?
NO. As a general rule, indirect taxes are not included in the grant of such
exemption unless it is expressly stated.

Nature of power to grant tax exemption

1) National government

The power to grant tax exemptions is an attribute of sovereignty for the power to
prescribe who or what persons or property shall not be taxed.
It is inherent in the exercise of the power to tax that the sovereign state be free to
select the subjects of taxation and to grant exemptions therefrom.
Unless restricted by the Constitution, the legislative power to exempt is as broad
as its power to tax.

2) Local governments

Municipal corporations are clothed with no inherent power to tax or grant tax
exemptions. But the moment the power to impose a particular tax is granted, they
also have the power to grant exemption therefrom unless forbidden by some
provision of the Constitution or the law
The legislature may delegate its power to grant tax exemptions to the same extent
that it may exercise the power to exempt.

Basco vs. PAGCOR (196 SCRA 52): The power to tax municipal corporations
must always yield to a legislative act which is superior, having been passed by the
State itself. Municipal corporations are mere creatures of Congress which has the
power to create and abolish municipal corporations due to its general legislative
powers. If Congress can grant the power to tax, it can also provide for exemptions
or even take back the power.

Chavez v. PCGG, G.R. No. 130716, 09 December 1998
In a compromise agreement between the Philippine Government, represented
by the PCGG, and the Marcos heirs, the PCGG granted tax exemptions to the
assets which will be apportioned to the Marcos heirs. The Supreme Court ruled
that the PCGG has absolutely no power to grant tax exemptions, even under the
cover of its authority to compromise ill gotten wealth cases. The grant of tax
exemptions is the exclusive prerogative of the Congress.
In fact, the Supreme Court even stated that Congress itself cannot grant tax
exemptions in the case at bar because it will violate the equal protection clause of
the Constitution.

Interpretation of the laws granting tax exemptions
General rule
In the construction of tax statutes, exemptions are not favored and are construed
strictissimi juris against the taxpayer. The fundamental theory is that all taxable
property should bear its share in the cost and expense of the government.
Taxation is the rule and exemption is the exemption.
He who claims exemption must be able to justify his claim or right thereto by a
grant express in terms too plain to be mistaken and too categorical to be
misinterpreted. If not expressly mentioned in the law, it must be at least within
its purview by clear legislative intent.

Exceptions
1) When the law itself expressly provides for a liberal construction thereof.
2) In cases of exemptions granted to religious, charitable and educational
institutions or to the government or its agencies or to public property because the
general rule is that they are exempt from tax.

Strict interpretation does not apply to the government and its agencies
Petitioner cannot invoke the rule on stritissimi juris with respect to the
interpretation of statutes granting tax exemptions to the NPC. The rule on strict
interpretation does not apply in the case of exemptions in favor of a political
subdivision or instrumentality of the government. [Maceda v. Macaraig]

Davao Gulf v. Commissioner, 293 SCRA 76 (1998)
A tax cannot be imposed unless it is supported by the clear and express
language of a statute; on the other hand, once the tax is unquestionably imposed,
a claim of exemption from tax payers must be clearly shown and based on
language in the law too plain to be mistaken. Since the partial refund authorized
under Section 5, RA 1435, is in the nature of a tax exemption, it must be
construed strictissimi juris against the grantee. Hence, petitioners claim of
refund on the basis of the specific taxes it actually paid must expressly be granted
in a statute stated in a language too clear to be mistaken.
> Exemption of the buyer does not extend to the seller
Exemption of the principal does not extend to the accessory


Tax remission or tax condonation
The word remit means to desist or refrain from exacting, inflicting or
enforcing something as well as to restore what has already been taken. The
remission of taxes due and payable to the exclusion of taxes already collected
does not constitute unfair discrimination. Such a set of taxes is a class by itself
and the law would be open to attack as class legislation only if all taxpayers
belonging to one class were not treated alike. [Juan Luna Subd. V. Sarmiento, 91
Phil 370]
The condition of a tax liability is equivalent to and is in the nature of a tax
exemption. Thus, it should be sustained only when expressly provided in the law.
[Surigao Consolidated Mining v. Commissioner of Internal Revenue, 9 SCRA
728]
Tax amnesty
Tax amnesty, being a general pardon or intentional overlooking by the State of
its authority to impose penalties on persons otherwise guilty of evasion or
violation of a revenue to collect what otherwise would be due it and, in this sense,
prejudicial thereto. It is granted particularly to tax evaders who wish to relent
and are willing to reform, thus giving them a chance to do so and thereby become
a part of the new society with a clean slate. [Republic v. Intermediate Appellate
Court, 196 SCRA 335]
Like tax exemption, tax amnesty is never favored nor presumed in law. It is
granted by statute. The terms of the amnesty must also be construed against the
taxpayer and liberally in favor of the government.

Tax amnesty v. tax condonation v. tax exemption
A tax amnesty, being a general pardon or intentional overlooking by the Statute
of its authority to impose penalties on persons otherwise guilty of evasion or
violation of a revenue or tax law, partakes of an absolute forgiveness or waiver by
the Government of its right to collect what otherwise would be due it and, in this
sense, prejudicial thereto, particularly to tax evaders who wish to relent and are
willing to reform are given a chance to do so and therefore become a part of the
society with a clean slate.
Like a tax exemption, a tax amnesty is never favored nor presumed in law, and
is granted by statute. The terms of the amnesty must be strictly construed against
the taxpayer and literally in favor of the government. Unlike a tax exemption,
however, a tax amnesty has limited applicability as to cover a particular taxing
period or transaction only.
There is a tax condonation or remission when the State desists or refrains from
exacting, inflicting or enforcing something as well as to reduce what has already
been taken. The condonation of a tax liability is equivalent to and is in the nature
of a tax exemption. Thus, it should be sustained only when expressed in the law.
Tax exemption, on the other hand, is the grant of immunity to particular
persons or corporations of a particular class from a tax of which persons and
corporations generally within the same state or taxing district are obliged to pay.
Tax exemptions are not favored and are construed strictissimi juris against the
taxpayer.


CONSTITUTIONAL RESTRICTION:
No law granting any tax exemption shall be passed without the concurrence of a
majority of all members of Congress. (Sec. 28 (4) ART VI)


VI. TAX EVASION
- It is also known as tax dodging
- It is punishable by law
- Tax evasion is the use by the taxpayer of illegal or fraudulent means to defeat or
lessen the payment of tax.
YUTIVO vs. CTA
> Tax evasion is a term that connotes fraud through the use of pretenses or
forbidden devices to lessen or defeat taxes

ELEMENTS OF TAX EVASION
- Tax evasion connotes the integration of three (3) factors:
1) The end to be achieved, i.e. payment of less than that known by the taxpayer to
be legally due, or paying no tax when it is shown that tax is due
2) An accompanying state of mind which is described as being evil, in bad
faith, willful, or deliberate and not accidental
3) A course of action (or failure of action) which is unlawful

INDICIA of FRAUD IN TAX EVASION
1) Failure to declare for taxation purposes true and actual income derived from
business for two (2) consecutive years; or
2) Substantial underdeclaration of income tax returns of the taxpayer for four (4)
consecutive years coupled with unintentional overstatement of deductions
EVIDENCE TO PROVE TAX EVASION
> Since fraud is a state of mind, it need not be proved by direct evidence but
may be proved from the circumstances of the case.
REPUBLIC vs. GONZALES (13 SCRA 638)
> Failure of the taxpayer to declare for taxation purposes his true and actual
income derived from his business for two (2) consecutive years is an indication of
his fraudulent intent to cheat the government of its due taxes.
Posted by intro to intl law second term at 11:51 PM No comments:
WEDNESDAY, JUNE 24, 2009
course syllabus
Basic Economics, Land Reform & Taxation
CLARENDON COLLEGE
1st Sem, AY 2009-2010

ATTY. S.C. MADRONA, JR.
ATTY. AIREEN DIMAPILIS SISON-MADRONA

COURSE DESCRIPTION

Introduction to economics and economic concepts in theory, policy and practice,
with particular reference to Philippine economic experience. It also includes a
general background of the laws of taxation and land reform.

COURSE OBJECTIVES

The course aims to impart to its students: first, appreciate the importance of
taxation as means of supporting the government in sustaining its programs and
projects as opposed to common notion on taxation as a burden; second, realize
the necessity for land reform program as means of states pursuit of social justice,
and; lastly, better understand basic economic principles and processes i.e.
resources, market, money etc.

COURSE OUTLINE

Introduction
I.Taxation
A.General Principles in Taxation
B.Limitations on the Power of Taxation
C.Double Taxation and Tax Exemptions
D.Income Taxation

II.Land Reform
A.Components and Aspects
B.Agrarian Reform

III.Economics
A.Basic Principles in Economics
B.Economic Activities
i.Circular Flow of Economic Activities
ii.Supply and Demand
iii.Production, Cost and Profit
iv.Monopoly and Competition
v.Philippine Financial System
vi.Money and Monetary Policy
C.International Trade

Conclusion

REQUIRED READINGS

The following books are required for this course:

TAXATION:

De Leon, Hector. 2004. Fundamentals of Taxation. Quezon City: Rex Bookstore

LAND REFORM:

De Leon, Hector. 2005. Textbook on Agrarian Reform and Taxation. Quezon
City: Rex Book Store.

ECONOMICS:

Mankiw, N. Gregory. 2007. Principles of Economics, 4th Edition. Thomson
South-Western.
Case, Karl and Ray C. Fair. 2004. Principles of Economics, 7th edition. Pearson
Prentice Hall.


COURSE REQUIREMENTS

PPrelim examination: 15% (July 18, 2009)
Midterm examination: 15% (August 29, 2009)
Semi-Final examination: 10%
Class Participation: 40%
Final Exam: 20% (October 10, 2009)
Total 100%


A. READ, TAKE NOTES AND ASK QUESTIONS. This course requires much
reading and the student is expected to have read the required materials when
coming to class.
B. EXAM. The exam will consists of problem-solving and short answer questions
based on the class lectures and the assigned reading materials.
C. FINAL EXAM. Comprehensive of all lectures and selected required reading
materials.
D. There will be GRADED RECITATION (50% of final grade) based on the
required reading materials and assigned cases.

CLASSROOM POLICIES

1. Students must submit a 3x5 index card with their names, courses, contact
numbers, 1x1 ID color or BW picture by the second-class meeting.
2. A student is considered absent from class if s/he is not present within the first
third fraction (30 minutes) of the scheduled class time. The students should be
responsible for keeping tracks of their absences.
3. As a courtesy of the entire class, smoking and eating inside the classroom shall
be strictly prohibited. All electronic devices must be either deactivated or at least
silent.

CONSULTATION HOURS

If you wish to consult with me on matters relating to the course, please set an
appointment with me.
E-mail: scmadrona@gmail.com
Website: http://beltmadrona.blogspot.com


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