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CONCEPT
A. TAXATION AND TAX DEFINED
Taxation: the process by which the sovereign, through its law making body raises income to defray the
necessary expenses of governement. It is merely a way of apportioning the cost of government among those
who in some measure are privileged to enjoy its benefits and therefore must bear its burdens.
Purposes:
to provide funds or property to promote the general welfare and protection of its citizens
to raise revenues for governmental needs
to attain various social and economic (non revenue) objectives
taxation includes every imposition of charge or burden by the sovereign power upon persons,
property, or property rights for the use and support of the government and to enable it to discharge
appropriate functions
Taxes: the enforced proportional and pecuniary CONTRIBUTIONS from persons and property levied by the law
making body of the state having jurisdiction over the subject of the burden for the support of the government
and all public needs
Essential Characteristics:
an enforced contribution
it is proportionate in character
generally payable in money
levied on persons or personal property : a tax may also be imposed on acts , transactions, rights or
privileges. In each case however it is the person who pays the tax; the property is resorted to for the
purpose of ascertaining the amount of tax that must be paid and of enforcing payment in case of default
of tax payer.
It is levied by the state which has jurisdiction over the person or property: the object of tax must be
subject to the jurisdiction of the taxing state.
It is levied by the law making body of the state: the power to tax is a legislative power which under the
Constitution only the Congress can exercise through enactment of tax statutes. The power to tax is no
longer vested exclusively with the Congress; local legislative bodies are now given direct authority to
levy taxes, fees, other charges
It is levied for public purpose or purposes support of government, administration of the law, or for the
payment of public expenses.
It is also an important characteristic of most taxes that they are commonly required to be paid at
regular intervals every year.
TOLL
TAX
Toll: a sum of
money for the use
of something;
paid for the use of
a road, bridge, of
public nature
Tax is a
demand of
sovereignty
Demand of
proprietorship
Intended to
RAISE
REVENUE
Amount depends
upon the cost of
construction or
maintenance of
the public
improvement
used
May be
imposed only
by the
government
May be imposed
by the
government or
private ind or
entities
PENALTY
TAX
SPECIAL
ASSESSMENT
Any sanction
imposed as a
punisment for
violation of law or
acts deemed
injurious
An enforced proportional
contribution from owners
of lands especially or
peculiarly benefited by
public improvements
Designed to
REGULATE
CONDUCT
Imposed by gov or
private entities
TAX
TAX
DEBT
Based on law
Tax is an enforced
contribution
assessed by
sovereign authority
to defray public
expenses.
Cannot generally be
assigned
Assignable
Generally payable in
money
Generally NOT
There is generally
no limit to on the
amount of tax that
may be imposed
Imprisonment is a
sanction for non
payment of tax
(except poll tax)
Failure to pay
Failure to pay license fee
doesnt necess.make makes act or business illegal
the act or business
illegal
TAX
SUBSIDY
REVENUE
INTERNAL
REVENUE
CUSTOMS
TARIFF
DUTIES (duties) (3 senses : )
Pecuniary aid
directly granted
by the
government to
an individual or
private
commercial
enterprise
deemed
beneficial to the
public.
Taxes imposed
by the
legislature
other than
duties on
imports and
exports
Taxes imposed
on goods
exported from or
imported into a
country. Taxes
is broader in
scope as it
includes
customs duties
Not a tax
although a tax
may have to be
imposed to pay it.
As a book of rates
drawn usually in
alphabetical order
containing the names
of several kinds of
merchandise with the
corresponding duties
to be paid for the same
Refers to
the
amount
imposed
Revenue refers to
amount collected
As the system or
principle of imposing
duties on the import or
export of goods
Examples of receipts
other than from taxes
are those derived
from grants (f.a. By
one govt to another),
donations (from a
non gov source),
loans, commercial
revenues (from gocc
enterprises like tolls
interest or funds
borrowed, water
rents etc) and
administrative
revenues (fines
penalties forfeitures)
Ferdinand Marcos II vs CA
NPC vs City of Cabanatuan
C. Benefits protection theory (Symbiotic relationship)
Commissioner vs Algue
D. Jurisdiction over Subject and Objects
III. PURPOSE / OBJECTIVES OF TAXATION
1. revenue raising
2. non-revenue / special or regulatory
Caltex vs COA:
IV. GENERAL PRNCIPLES OF A SOUND TAX SYSTEM
A. Fiscal Adequacy: it means that the sources of revenue, that is , receipts therefrom, taken as whole, should be
sufficient to meet the demands of public expenditure. It means also that revenues should be elastic or capable
of expanding or contracting annually in response to variations in public expenditures. The alternatives are:
(a) to incur the risk of a series of deficits or surpluses due to inelastic revenues; or
(b) to adjust the amount of public expenditures to fit the flow of funds probably by curtailing certain activites
so that the budget may be balanced. Elasticity may be obtained without creating annually any new taxes or any
new tax machinery but merely changes in the rates applicable to existing taxes.
B. Theoretical Justice (equality): it means that the tax burden should be distributed in proportion to the
taxpayer's ability to pay. This is the so-called ability to pay principle. It holds that similarly situated taxpayers
should pay equal taxes, while those who have more should pay more.
The principle also connotes that the contribution of each person towards the expense of the government
should be so apportioned such that he would feel neither more or less inconvenienced from his share of payment
than every other person experiences from his. In other words taxation should be uniform as well as equitable.
C. Administrative Feasibility: it means that the laws should be capable of convenient, just and effective
adminitration or enforcement at a reasonable cost. No tax however ideally just and fair, is better than its actual
operation. Each tax in the system should be clear and plain to the taxpayer, capable of uniform enforcement by
govt officials, convenient as to time place and manner of payment, and not unduly burdensome upon or
discouraging to business activity. Tax laws should close up loopholes for tax evasion and deter the unscrupulous
officials from committing frauds in assessment and collection of taxes.
V. SCOPE AND LIMITATIONS OF TAXATION
De Leon: Nature and Power of taxation:
(1) it is inherent in sovereignty - an incident or attribute thereof, being essential to the existence of every
government. It can be exercised by the Government even if the Constitution is entirely silent on the subject.
Constitutional provisions relating to the power of taxation do not operate as grants of the power to the
government. They merely constitute limitations upon a power which would otherwise be practically without
limit.
(2) it is legislative in character: the levy of tax howecer may also be held on a local legislatigve body subject to
such limitations as may be provided by law. The constitutions expressly grants the power to tax to LGU's.
(3) it is subject to constitutional and inherent limitations. The power of taxation is not absolute.
Individual equities or inequalities are however not considered in the exercise of power and therefore the mere
fact that taxation is unjust or oppressive with respect to a particular taxpayer does not itself render a tax law
invalid where NO constitutional provision has been violated.
Extent of the legislative power to tax:
(1) the subjects or objects: persons, natural or juridical, property, real personal tangible intangible,
business transactions etc. A state is free to select the subject of taxation; INEQUALITIES which result from
the SINGLING OUT of one particular class for taxation or exemption infringe no constitutional limitation so
long as such exemption is reasonable and not arbitrary. Power to tax carries power to exempt
(2) The purpose or object of the tax so long as it is a public purpose: courts can inquire into whether the
purpose is really public or private. Once settled that the purpose is public, the courts can make no other inquiry
into the objective of the legislature, or the wisdom advisiability or expediency to tax.
Judicial determination is limited to: validity of tax in relation to constitutional provsions; and determination of
the application of a tax law (like if tax has been illegally collected or where taxpayer is entitle to exemption or
liability extinguished by prescrption.
(3) amount or rate: if oppressive, the only remedy is the ballot box and election of new reps. Even if a tax should
destroy a business, such fact alone could not invalidate the tax. Our Constitution mandates that the rule of
taxation shall be uniform and equitable.
(4) manner, means and agencies of collection of the tax: refer to the administration of the tax or the
implementation of tax laws. Having the sole power to prescribe the mode of collection, + remedies.
Non-revenue objectives of taxation:
can strengthen anemic enterprises or provide incentive to greater production through grant of tax
exemptions or the creation of conditions conducive to their growth
taxes on imports may be increased to protect local industries against foreign competition or decreased
to encourage foreign trade
taxes on imported goods may also be used as a bargaining tool by a country by setting tariff rates first at
a relatively high level before trade negotiations are entered into with another country to enhance its
bargaining power
taxes may be increased in periods of prosperity to curb spending power and halt inflation or lowered in
periods of slump to expand business and ward off depression
taxes may be levied to reduce inequalities in wealth and incomes like the estate donor and income
taxes, their payers being recipients of unearned wealth or mostly in higher income tax brackets
may be levied to promote science and invention
may be made as an implement of police power to promote general welfare
tax provisions may be enacted so that low income indiv pay little or no income taxes thru exclusions,
A. Inherent Limitations
Inherent limitations are those which restrict the power although they are not embodied in the Constitution.
CONSTITTIONAL LIMITIATIONS
Due process
equal protection
INHERENT LIMITATIONS
Sec. 401. Flexible Clause. a. The President, upon investigation by the Commission and recommendation of the National Economic Council, is
hereby empowered to reduce by not more than fifty per cent or to increase by not more than five times the rates of import duty expressly fixed by
statute (including any necessary change in classification) when in his judgment such modification in the rates of import duty is necessary in the
interest of national economy, general welfare and/or national defense. chanrobles virtual law library
b. Before any recommendation is submitted to the President by the Council pursuant to the provisions of this section, the Commission shall conduct an
investigation in the course of which it shall hold public hearings wherein interested parties shall be afforded reasonable opportunity to be present, to
produce evidence and to be heard. The Commission may also request the views and recommendations of any government office, agency or
instrumentality, and such office, agency or instrumentality shall cooperate fully with the Commission.
c. The President shall have no authority to transfer articles from the duty-free list to the dutiable list nor from the dutiable list to the duty-free list of the
tariff.
d. The power of the President to increase or decrease rates of import duty within the limits fixed in subsection "a" shall include the authority to modify the
form of duty. In modifying the form of duty the corresponding ad valorem or specific equivalents of the duty with respect to imports from the principal
concerning foreign country for the most recent representation period shall be used as basis.
Code.
i. The authority herein granted to the President shall be exercised only when Congress is not in session.
1. Public Purpose - the term is synonymous with governmental purpose. It means a purpose affecting inhabitants
of the state as a community and not merely as individuals. Tax must be used:
for the support of the government
for any recognized objects of the government or
to promote welfare of the community
The reason for the rule is that a tax levied for a private purpose constitutes a taking of propety without due
process. Public money can ony be spent for a public purpose.
Examples: financing of educ activities, science promotion, erection & maintenance of roads bridges, aids for
victims of calamity, relief for poor and unemployed and to provide for unemployment benefits, payment for
public officers or employees
The purposes to be accomplished by taxation need not be inherently public. Although private individuals are
directly benefited, the tax would still be valid provided such benefit is only incidental.
De Leon: as long as tax is for a public purpose, its validity is not affected by collateral purposes or motives of
the legislature in imposing the levy or by the fact that it has a regulatory effect or it discourages or even deters
the activities taxed. The principle applies even though the revenue obtained from the tax appears very negligible
or the revenue purpose is only secondary.
Tax payers have sufficient interest of preventing the illegal expenditures of money raised by taxation and
may question the constitutionality of statutes REQUIRING THE EXPENDITURES OF PUBLIC FUNDS
(but still he is not relieved from paying tax due to belief of misappropriation). A taxpayer has no legal
standing to question executive acts that do not involve the use of public funds.
Pascual vs Public Works
PPI vs Fertiphil Corp
Tio vs Videogram regulatory Board
2. Inherently Legislative
General rule: power to tax may not be delegated
Commissioner vs Santos and Guild of philippine jewelers:
Kapatiran vs Tan
Exceptions from prohibition against delegation of power to tax:
a) Delegation to local governments
LGC Book II
1987 CONSTITUTION ARTICLE 10 Section 5. 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, and charges shall
accrue exclusively to the local governments.
LTO vs City of Butuan
Basco vs Pagcor
b) Delegation to the President
Garcia vs Executive Sec
ABAKADA vs Ermita
c) Delegation to admiin agencies
maceda vs macaraig
osmena vs orbos
commision vs ca and fortune tobacco
3. Territorial
Iloilo bottlers vs city of iloilo
Smith vs CIR
4. International Comity
Sec 2 Article 2 Phil Consti
Sec 32 (B) 7 (a) NIRC
Tanada vs Angara
5. Exemption of Govt entities , agencies and instrumentalitis
sec 32 B 7b NIRC
sec 27 C Nirc
MIAA vs CA
Philippine Fisheries vs CA