Limitations on The Power of Taxation The power of taxation, is however, subject to constitutional and inherent limitations.

Constitutional limitations are those provided for in the constitution or implied from its provisions, while inherent limitations are restrictions to the power to tax attached to its nature. The following are the inherent limitations. 1. 2. 3. 4. 5. Purpose. Taxes may be levied only for public purpose; Territoriality. The State may tax persons and properties under its jurisdiction; International Comity. the property of a foreign State may not be taxed by another. Exemption. Government agencies performing governmental functions are exempt from taxation Non-delegation. The power to tax being legislative in nature may not be delegated. (subject to exceptions)

Constitutional limitations. 1. Observance of due process of law and equal protection of the laws. (sec, 1, Art. 3) Any deprivation of life , liberty or property is with due process if it is done under the authority of a valid law and after compliance with fair and reasonable methods or procedure prescribed. The power to tax, can be exercised only for a constitutionally valid public purpose and the subject of taxation must be within the taxing jurisdiction of the state. The government may not utilize any form of assessment or review which is arbitrary, unjust and which denies the taxpayer a fair opportunity to assert his rights before a competent tribunal. All persons subject to legislation shall be treated alike under like circumstances and conditions, both in the privileges conferred in liabilities imposed. Persons and properties to be taxed shall be group, and all the same class shall be subject to the same rate and the tax shall be administered impartially upon them. Rule of uniformity and equity in taxation (sec 28(1)Art VI) All taxable articles or properties of the same class shall be taxed at the same rate. Uniformity implies equality in burden not in amount. Equity requires that the apportionment of the tax burden be more or less just in the light of the taxpayers ability to bear the tax burden. No imprisonment for non-payment of poll tax (sec. 20, Art III) A person cannot be imprisoned for nonpayment of community tax, but may be imprisoned for other violations of the community tax law, such as falsification of the community tax certificate, or for failure to pay other taxes. Non-impairment of obligations and contracts, sec 10, Art III . the obligation of a contract is impaired when its terms and conditions are changed by law or by a party without the consent of the other, thereby weakening the position or the rights of the latter. IF a tax exemption granted by law and of the nature of a contract between the taxpayer and the government is revoked by a later taxing law, the said law shall not be valid, because it will impair the obligation of contract. Prohibition against infringement of religious freedom Sec 5, Art III, it has been said that the constitutional guarantee of the free exercise and enjoyment of religious profession and worship, which carries the right to disseminate religious belief and information, is violated by the imposition of a license fee on the distribution and sale of bibles and other religious literatures not for profit by a non-stock, non-profit religious corporation. Prohibition against appropriations for religious purposes, sec 29, (2) Art. VI, Congress cannot appropriate funds for a private purpose, or for the benefit of any priest, preacher or minister or for the support of any sect, church except when such priest, preacher, is assigned to the armed forces or to any penal institutions, orphanage or leprosarium. exemption of all revenues and assets of non-stock, non-profit educational institutions used actually, directly, and exclusively for educational purposes from income, property and donors taxes and custom duties (sec. 4 (3 and 4) art. XIV. Concurrence by a majority of all members of Congress in the passage of a law granting tax exemptions. Sec. 28 (4) Art. VI. Congress may not deprive the Supreme Court of its jurisdiction to review, revise, reverse, modify or affirm on appeal or certiorari, final judgments and orders of lower courts in all cases involving the legality of any tax, impost, assessment or any penalty imposed in the relation thereto.

2.

3.

4.

5.

6.

7.

8. 9.

While the power does not emanate from a grant, as the same is necessarily inherent upon the existence of the state, exercise of the power is subject to those limitations inherent upon it and those expressly provided for by the Constitution as follows: Inherent limitations. These limitations are those limitations that emanates from the very nature of the power of taxation. They are very basic and are built-in with the power. Some may be similar to the constitutional limitation but the constitutional limitation seems to be supreme as they are the most specific, thus, specifically intended to rule the application or exercise of the power of taxation. Hereunder are the INHERENT LIMITATIONS: Levy for public purpose. To levy a tax means to impose or to charge or to collect a tax from those to whom it is addressed. Technically however, to levy is to pass on laws or ordinances imposing a tax or duty upon specific group of taxpayers. Under this concept, the impelling reason for the imposition of the tax must be the welfare of the public, in general. This follows that the proceeds from such imposition shall inure to the benefit of the public. In one case, a certain imposition was successfully passed for the purpose of upholding the welfare of the sugar industry. It was questioned on the ground that there is no PUBLIC purpose since the sugar industry does not allegedly represent the public. The issue was resolved in favor of the validity of the imposition. While sugar industry does not represent the entire public as the proceeds would not add to the general budget of the national government, nevertheless, the industry itself admits of a public nature whose circumstances and effects directly affect the public. The requirement of direct purpose does not admit of a direct public benefit from the imposition. Non-delegation of legislative power to tax. To delegate is to pass on or to entrust to another a certain duty or obligation. Power to tax is lodged with the legislative department. To my mind, this is because the legislative branch is theoretically the representative of the people and they are directly aware and in common contact with the instances and situations of their districts making them the ones knowledgeable of how best their district could be affected by the new taxes imposed. Likewise, this is premised on the legal maxim delegate potestas, non delegari potest which means, what has been delegated cannot be re-delegated so as not to hamper the objective of the delegation. However, there are at least two (2) instances where delegation is possible (a) delegation to the President of some tariff powers, and (b) Local government units fiscal autonomy for their self serving needs. Exemption of government entities. Government is the people, by (not BUY) the people, for (not POOR) the people. Government exists for the people and whatever amount it makes, came from the people and such amount it use to finance its various activities to address the general welfare of its inhabitants. It is not constituted to engage in any trade or business but to deliver basic services and serve everyone within. Analytically, taxing the government itself will not generate more revenue. The money will only rotate and so no effect, at all, would be made. Suffice it to say however, there exist no express prohibition International comity has something to do with the friendly interaction and participation of different estates. This adheres to some amount of submission and compliance of certain international rules and covenants for mutual benefits and enjoyment of the states and its inhabitants. Bilateral agreements, conventions and international treaties fall under this category. Territorial jurisdiction relates to the area of jurisdiction and responsibility of a particular estate. Independent states power of taxation is generally confined only within its jurisdiction to give due respect and as courtesy to other states. A state, as a rule, can only impose and implement tax laws and rules within its jurisdiction in accordance with its wishes. Outside its jurisdiction, it is without power to do so. But then, it can tax on citizens or entities of other states doing a trade or business or deriving income within the jurisdiction of its state. See the case of Spratley islands for better picture. Issue on who owns spratley had long been outstanding for each party claims jurisdiction in accordance with its of the parties belief that it rightfully belongs to it.