TAXATION LAW I

Part I: TAXATION IN GENERAL

Chapter I: GENERAL PRINCIPLES OF TAXATION

Emilia Jourdanne S. Magbanua

2D, 2014
 TAXATION, by change of used for religious, the
defined. (71 Am sovereignty.’ charitable, or commercial or
Jur 2nd) educational use value of
-the power by which SCOPE of purposes shall be the thing
the sovereign raises TAXATION exempt from taxed, it has
revenue to defray the taxation. been said, on
necessary expenses a) Sec. 28, Art. VI, (4) No law the other
of government. 1987 granting and tax hand, that
-it is merely a way of Constitution: exemption shall even in the
apportioning the cost (1) The rule of be passed without absence of
of government among taxation shall be the concurrence constitutional
those who in some uniform and of a majority of all restrictions,
measure are equitable. The the Members of such exercise
privileged to enjoy its Congress shall Congress. must rest
benefits and must evolve a upon justice.”
bear its burdens. progressive b) 71 Am Jur 2nd  “Personal
system of 394-395 & property
NATURE of taxation. 397-398: belonging to
INTERNAL (2) The Congress,  “In the a foreign
REVENUE LAWS may, by law, absence of sovereign and
(Hilado v. CIR) authorize the constitutional temporarily
“…internal President to fix restrictions, located in a
revenue laws are not within specified and subject to particular
political in nature limits, and subject the will of the country is not
and as such were to such limitations legislative subject to
continued in force and restrictions as bodies and state taxation
during the period of it may impose, discretion of in that
enemy occupation tariff rates, import the country.”
and in effect were and export authorities  “…a sovereign
actually enforced by quotas, tonnage, which state has
the occupation and wharfage exercise it, inherent
government. As a dues, and other the power of power to
matter of fact, income duties or imposts taxation is determine the
tax returns were filed within the regarded as subjects of
during that period and framework of the unlimited, taxation for
income tax payment national plenary and general or
were effected and development supreme, particular
considered valid and program of the the principal public
legal. Such tax laws Government. check upon purposes, and
are deemed to be the (3) Charitable its abuse may take
laws of the occupied institutions, resting in the appropriate
territory and not of churches and responsibility changes in
the occupying personages or of the the selections
enemy.” convents members of and
“…excepting appurtenant the legislature classifications
that of a political thereto, mosques, to their of the
nature, ‘Law once non-profit constituents. properties
established continues cemeteries, and Although the made subject
until changed by all lands, power may be to or
some competent buildings, and exercised exempted
legislative power. It is improvements, even to the from
not changed merely actually, directly, point of taxation.”
and exclusively destroying

Emilia Jourdanne S. Magbanua

2D, 2014
c) Sison v. same rate. of the person constitutional
Ancheta: The taxing affected. inhibition.
 The power to power has the  The power to  *Re: Payment
tax is not authority to tax is an of Interest—
unconfined. make attribute of Taxes only
There are reasonable sovereignty. draw interest
restrictions and natural It is the as do sums of
set forth by classifications strongest of money when
the for purposes all powers of expressly
Constitution. of taxation. government authorized:
As it There is a but it is not Interest is not
adversely similarity to unconfined to be
affects the standard and there are awarded
property of equal restrictions. against a
rights, both protection for sovereign
the due what is e) Sarasola v. government,
process and required is Trinidad: unless its
equal that the tax  Sec. 1578 of consent has
protection applies the been
clauses may equally to all Administrative manifested by
be properly persons, firms Code: No an Act of its
invoked. and court shall legislature or
 Justice corporations have by lawful
Marshall: placed in a authority to contract of its
“The power to similar grant an executive
tax involves situation. injunction to officers. If
the power to restrain the there be
destroy.” But d) Reyes v. collection of doubt upon
Justice Almanzor: any internal the subject,
Frankfurter  Taxation is revenue tax. that doubt
disagrees, uniform  Public policy must be
“The power to when all decrees that, resolved in
tax is not the taxable since upon favor of the
power to articles or the prompt State. There
destroy while kinds of collection of is no ground
this Court property of revenue there for charging
sits.” the same depends the the Crown
According to class are very existence with interest.
C.J. taxed at the of Interest is
Fernando, so same rate. government only payable
it is in the Taxation is itself, by statute or
Philippines. equitable whatever by contract.
 Equality and when the determination The State
uniformity in burden falls shall be never pays
taxation on those arrived at by interest
means that all better able to the unless she
taxable pay. Taxation Legislature expressly
articles of is should not be engages to do
kinds of progressive interfered so. But when
property of when its rate with unless an illegal tax
the same goes up there be a has been
class shall be depending on clear violation collected, the
taxed at the the resources of some citizen who

Emilia Jourdanne S. Magbanua

2D, 2014
 has paid and mandates into expenditure, intended to
is obliged to effect and it does not improve the
bring suit perform the mean that a lives of
against the functions of man’s people and
collector is government. property enhance their
entitled to The citizen cannot be moral and
interest from pays from his taxed unless material
the time of property the some benefit values. This
the illegal portion to him symbiotic
exaction. The demanded, in personally relationship is
difference lies order that he can be the rationale
in the fact may, by pointed out. for taxation
that the suit means and should
is against the thereof, be CIR v. Algue dispel the
collector and secured in the  Taxes are erroneous
not the State, enjoyment of what we pay notion that it
although the the benefits for civilized is an arbitrary
judgment is of organized society. method of
not be paid society. Without exaction by
by the  The general taxes, the those in seat
collector but levy of taxes government of power.
directly from is understood would be
the treasury. to exact paralyzed for
contributions lack of the PRINCIPLES OF A
UNDERLYING in return for motive power SOUND TAX
THEORY AND the general to activate SYSTEM
BASIS benefits of and operate (Chavez v. Ongpin)
71 Am Jur 2nd 346- government, it. Hence,
347 and it despite the To continue
 The existence promises natural collecting real
of nothing to the reluctance to property taxes based
government is person taxed surrender on valuations arrived
a necessity; it beyond what part of one’s at several years ago,
cannot may be hard-earned in disregard of
continue anticipated income to the increases in the value
without from an taxing of real properties that
means to pay administration authorities, have occurred since
its expenses; of the laws every person then, is not in
and for those for individual who is able to consonance with a
means it has protection must sound tax system.
the right to and the contribute his Fiscal
compel all general public share in the adequacy, which is
citizens and good. running of the one of the
property  Although the government. characteristics of a
within its duty to pay  The sound tax system,
limits to taxes by the government, requires that sources
contribute. individual is for his part, is of revenues must be
 The state founded in his expected to adequate to meet
demands and participation respond in government
receives taxes in the the form of expenditures and
so that it may benefits intangible and their variations.
be enabled to arising from tangible
carry its the benefits

Emilia Jourdanne S. Magbanua

2D, 2014
*EO No. 73: activity which is  If regulation is Matalin Coconut
Collection of Real potentially the primary Co. v. Municipal
Prop Taxes based on adverse, unless, purpose, the fact Council of
1984 values of course, the that revenue is Malabang, Lanao
COMPARISON legislature, in incidentally raised del Sur
WITH POLICE imposing such an does not make Facts:
POWER exaction, acts in the imposition a The Municipal Council
AND EMINENT an arbitrary and tax. of Malabang enacted
DOMAIN unreasonable  The taxing power an Ordinance which
manner. may be used as made it unlawful for
Am Jur: an implement of any person or
TAXATION TAXATION police power. company to ship out
Exercised for the purpose No compensation. of the municipality
of raising revenue Facts of Gerochi v. cassava, starch or
Dept of Energy: flour without paying
Petitioners to the Treasurer the
assail that the Electric fees fixed by the
Gerochi v. Power Industry ordinance. It imposed
Subject to certain
Department of Reform Act of 2001 a police inspection fee
designated constitutional
limitations Energy (EPIRA) is of P.30 per sack.
unconstitutional and
TAXATION
 The power of that the Universal Though denominated
The power of the State
taxation and the Charge imposed upon as a “police inspection
that is an incident of
police power are consumers be fee”, the purpose of
sovereignty and is
both distinct, refunded. the ordinance is to
unlimited in its range,
coexistent powers They argue raise revenue. Thus, it
has no limits so that the
of a state. that the Universal partakes of the nature
security against its abuse
 An exaction which Charge is a tax. The of a tax.
is to be found only in the
is invalid as an power to tax is a
responsibility of the
exercise of the legislative function
legislature which
taxing power may and as such, the
imposes the tax on the
not be upheld as delegation of such
constituency that is to
an exercise of power to any LUTZ v. ARANETA
pay it
police power executive or Facts:
Emanates from
where it is clear administrative agency Commonwealth Act
necessity: without taxes,
that the like the ERC is 567 provides for an
the govt cannot fulfill its
legislative body unconstitutional. increase of the
mandate of promoting
imposing it did On the other existing tax on the
the general welfare and
not intend it as hand, the government manufacture of sugar.
well-being of the people
such. claims that the The plaintiff alleges
universal charge is that the tax is
 An exaction which
levied for a specific unconstitutional and
would be invalid
regulatory purpose, void for being levied
as an exercise of
which is to ensure the for the aid and
the taxing power
viability of the support of the sugar
may be upheld as
country’s electric industry exclusively,
a regulatory  If generation of power industry. Thus, which in his opinion is
measure where revenue is the it is exacted by the not a public purpose
the primary primary purpose State in the exercise for which a tax may
purpose of the and regulation is of its inherent police be constitutionally
legislature in merely incidental power. levied.
imposing it was —the imposition
the regulation of is a tax. Held:
some calling or

Emilia Jourdanne S. Magbanua

2D, 2014
An analysis of the Act categorical and simply
will show that the tax calls for application.
is levied with
regulatory purpose, to It is not the NTC that
provide means for the imposed such a fee, it
rehabilitation and is the legislature
stabilization of the itself. Since Congress
threatened sugar has the power to
industry. The act is exercise the State’s
thus primarily an inherent powers of
exercise of police police power, eminent
power. domain and taxation,
Sugar production is the distinction
one of the great between police power
industries of our and the power to tax,
nation and a great which could be
source of our nation’s significant if the
wealth. Its promotion, exercising authority
protection and were political
advancement, subdivisions, would
therefore redounds not be of any moment
greatly to the general when, as in the case
welfare. Hence it was under consideration,
competent for Congress itself
legislature to find that exercises the power.
the general welfare All that is to be done
demanded that the would be to apply and
sugar industry should enforce the law when
be stabilized in turn. sufficiently definitive
And in the field of its and not
police power, the law constitutionally infirm.
making body could
provide that the
distribution of
benefits therefrom be
readjusted among its
components to enable
it to resist the added
strain of the increase
in taxes that it had to
sustain.

NTC v. CA
Sec 40 (e) of the
Public Service Act
states that the basis
for computing the fee
to be charged by the
NTC on PLDT is the
capital stock
subscribed or paid.
The law is clear and

Emilia Jourdanne S. Magbanua

2D, 2014