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Syllabus AY 2014-2015


Taxation is the power by which the sovereign raises revenue to defray the
expenses of the government. It is a way of apportioning the cost of the government
among those in some measure are privileged to enjoy the benefits and must bear the
burden. (51 Am. Jur. 34; Mamalateo)
Taxes are the enforced proportional contributions from persons and property
levied by the lawmaking body of the State by virtue of its sovereignty for the support of
government and for all public needs. (1 Cooley 62; Mamalateo)
i. Taxation vis--vis Tax
(Paseo Realty and Development Corporation v CA)
Taxation is a destructive power which interferes with the personal and property
rights of the people and takes from them a portion of their property for the support of the
government. And since taxes are what we pay for civilized society, or are the lifeblood of
the nation, the law frowns against exemptions from taxation and statutes granting tax
exemptions are thus construed strictissimi juris against the taxpayer and liberally in favor
of the taxing authority. A claim of refund or exemption from tax payments must be
clearly shown and be based on language in the law too plain to be mistaken. Elsewise
stated, taxation is the rule, exemption therefrom is the exception.[32]
(Pelizloy Realty Corporation v Province of Benguet)
The power to tax "is an attribute of sovereignty,"7 and as such, inheres in the State.
Such, however, is not true for provinces, cities, municipalities and barangays as they are
not the sovereign;8 rather, they are mere "territorial and political subdivisions of the
Republic of the Philippines".9
The power of a province to tax is limited to the extent that such power is delegated to it
either by the Constitution or by statute. Book II of the Local Government Code
establishes the parameters of the taxing powers of local government units.

Syllabus AY 2014-2015
i. Inherent prerogative of the sovereignty- The power of taxation may be exercised by the
State although not expressly granted by the constitution.
a. Basis
Lifeblood Theory
b. Manifestations
1. Imposed even without constitutional grant
2. State can select the object and the subject
3. No injunction in the collection of taxes as a general rule.
Exception: CTA (Court of Tax Appeals)
4. Could not be subject to set-off.
Exception: When both claims are due, demandable and fully liquidated.
5. Taxation is Unlimited and Plenary power
ii. Legislative in character- It is only the legislature that can enact tax laws.
a. Basis
b. Scope: To determine
i. Purpose(s)
ii. Subjects and objects of taxation (within its jurisdiction)
iii. Amount and the rate of tax
iv. Kind of tax to be collected
v. Apportionment of the tax
vi. Manner and mode of enforcement and collection
vii. Situs of taxation

Syllabus AY 2014-2015
viii. Grant tax exemption or condonation
ix. Provision of administrative and judicial remedies that may be availed
by the taxpayers and government
iii. Subject to constitutional and inherent limitations- Taxation is not an absolute power
that can be exercised by the legislature anyway it pleases.

IV. BASIS OF TAXATION (Necessity Theory)

The basis of taxation is found on the reciprocal duties of protection and support between
the State and its inhabitants. The state receives taxes that it may be enabled to carry out
its mandates into effect, and perform functions of the government and the citizen pays
the portion of the taxes demanded in order that he may, by means thereof, be secured in
the enjoyment of benefits of an organized society. This is otherwise known as benefitreceived principle. (Ampongan)
i. Necessity to serve the people
ii. Necessity to protect the people
The power of taxation proceeds upon the theory that the existence of the
government is a necessity; that it cannot continue without the means to pay its expenses;
and that it has a right to compel all its citizens and property within its limits to contribute.
i. Lifeblood Theory
(CIR v Metro Star Superama Inc.)