TAXATION CHAPTER 1

1 General Principles
1.1 Definition
1.2 Nature
1.2.1 Attribute of sovereignty
1.2.2 Legislative in character
1.2.3 Not delegated to executive or judicial department
1.2.4 Subject to and constitutional inherent limitations
1.2.5 Aspects of taxation

1.3 Basis & Underlying theory

1.3.1 Lifeblood theory
1.3.2 Benefits-protection theory
1.3.2.1 Doctrine of Symbiotic Relationship
1.3.3 Cases

1.4 Power to tax includes the power to destroy

1.5 Definition of taxes
1.6 Attributes or characteristics of taxes
1.7 Purposes and Objectives of taxation
1.7.1 Revenue Raising
1.7.2 Secondary Purposes

1.7.2.1 Reduction of Social Inequality

1.7.2.2 Encourage the growth of Local Industry
1.7.2.3 Protection of local industry
1.7.2.4 As an implement of Police Power

1.8 Extent of the Taxing Power

1.8.1 Comprehensive
As it covers persons, businesses, activities, professions, rights and privileges.

1.8.2 Unlimited
The taxing power's reign is illustrated in the case of Tio v. Videogram Regulatory Board,
where the SC upheld the constitutionality of a law, ruling that a tax does not cease to be
valid merely because it regulates, discourages, or even definitely deters the activities taxed.
The power to impose taxes is one so unlimited in force and so searching in extent that the
courts scarcely venture to declare that it is subject to any restrictions whatever, except such
as rest in the discretion of the authority which exercises it.

1.8.3 Plenary
As it is complete. Under the NIRC, the BIR may avail of certain remedies to ensure the
collection of taxes. (Discussed in a chapter in Remedies)

1.8.4 Supreme
Taxation, although referred to as the strongest of all the powers of the government,, cannot
be interpreted to mean that it is superior to the other inherent powers of the government. It
is supreme insofar as the selection of the subject of taxation is concerned.

1.9 Principles of a Sound Tax System

1.9.1 Fiscal Adequacy
Sources of revenues must be adequate to meet government expenditures and other public
needs. This is in consonance with the doctrine that taxes are the lifeblood of the
government.

1.9.2 Theoretical Justice

A sound tax system must take into consideration the taxpayer's ability to pay. Our laws
mandate that taxes must be reasonable, just, fair, conscionable. Under the constitution, the

rule of taxation must be uniform and equitable. The State must evolve a progressive system
of taxation.

Taxation is said to be equitable when its burden falls on those better able to pay; taxation is
progressive when its rate goes up depending on the resources of the person affected.

1.9.3 Administrative Feasibility

Tax laws must be capable of effective and efficient enforcement. They must not obstruct
business growth and economic development.

In one case, the SC held that the law is " principally aimed to rationalize the system of taxes
on goods and services; simplify tax administration, and make the system more equitable to
enable the country to attain economic recovery."

The principle requires that each tax should be clear and plain to the taxpayers, capable of
enforcement by an adequate and well trained staff of public officials, convenient as to time
and manner of payment, and not duly burdensome upon or discouraging to business activity.

1.9.4 Note: Violation of these principles may not invalidate a tax law.
A tax law will retain its validity even if it is not in consonance with the principles of fiscal
adequacy and administrative feasibility because the Constitution does not expressly require
so. These principles are only designed to make our tax system sound. However, if a tax law
runs contrary to the principle of theoretical justice, such violation will render the law
unconstitutional considering that under the Constitution, the rule of taxation should be
uniform and equitable.

1.10 Distinction from other inherent powers

1.10.1 Distinction from other impositions
1.10.1.1 Special Assessment
1.10.1.2 License
1.10.1.3 Toll
1.10.1.4 Penalty
1.10.1.5 Debt
1.10.1.6 cases
1.10.1.6.1 Francia v. IAC
1.10.1.6.2 Domingo v. Garlitos
1.10.1.6.3 Philex Mining Copr. v. CIR

1.11 Double taxation

1.12 Exemption from taxation
1.13 Tax laws
1.13.1 statutes are construed against the government
1.13.2 construction of statute by predecessor
1.13.3 retroactive application
1.13.4 publication
1.13.5 special law prevails over general law
1.13.6 tax evasion vs. Tax avoidance

2 Limitations
2.1 inherent
2.1.1 Public Purpose
2.1.1.1 Cases
2.1.1.1.1 Gomez v. Palomar

2.1.1.1.2 Lutz v. Araneta

2.1.1.1.3 Tio v. VRB
2.1.1.1.4 City of Baguio v. De Leon
2.1.1.1.5 Bagatsing v. Ramirez
2.1.1.1.6 Pascual v. Secretary of Public works
2.1.2 International Comity
2.1.3 Territoriality
2.1.3.1 Mobilia Sequuntur Personam
2.1.3.2 Cases
2.1.3.2.1 Commissioner v. BOAC
2.1.3.2.2 Atlas Consolidated Mining and Development Corp v. CIR
2.1.4 Non-Delegation of the power to tax
2.1.4.1 cases
2.1.4.1.1 Board of Assessment Appeals of Laguna v. CTA
2.1.4.1.2 Pepsi- Cola Bottling Co. v. City of Butuan
2.1.4.1.3 Pepsi-Cola Bottling Co. v. Municipality of Tanauan
2.1.4.1.4 Osmea v. Orbos
2.1.4.1.5 Villegas v. Hiu Chiong Tsai Pao Ho
2.1.4.1.6 Gomez v. Palomar
2.1.4.1.7 Bagatsing v. Ramirez
2.1.5 Exemption from taxation of Government agencies/instrumentalities
2.1.5.1 cases
2.1.5.1.1 Standard Oil Company of New York v. Posadas
2.1.5.1.2 Board of Assessment Appeals v. CTA
2.1.5.1.3 National Development Co. v. Cebu City
2.1.5.1.4 ESSO Standard Eastern, Inc. v. Acting Commissioner of Customs
See also: cases

2.2 Constitutional
2.2.1 Due Process of Law
2.2.1.1 cases
2.2.1.1.1 Carlos Superdrug Corp. v. DSWD
2.2.1.1.2 Reyes v. Almanzor
2.2.1.1.3 CIR v. CA
2.2.2 Equal Protection
It requires that all persons subjected to such legislation shall be treated alike, under like
circumstances and conditions, both in the privileges conferred and in the liabilities imposed.

2.2.2.1 cases
2.2.2.1.1 Gomez v. Palomar
2.2.2.1.2 Eastern Theatrical Co. v. Alfonso
2.2.2.1.3 Manila Race Horse Trainers Assn., Inc. v. De La Fuente
2.2.2.1.4 Punsalan v. Mun. Board of the City of Manila
2.2.2.1.5 City of Bagiuo v. De Leon
2.2.2.1.6 Sison v. Ancheta
2.2.2.1.7 Juan Luna Subd., Inc. v. Sarmiento
2.2.2.1.8 Association of Customs brokers inc., v. Mun. Board , Manila
2.2.2.1.9 Ormoc Sugar v. Treasurer
2.2.2.1.10 Reyes v. Almanzor
2.2.2.1.11 Villegas v. Hsiu Chiong Chai Pao
2.2.2.1.12 Misamis Oriental v. Secretary
See also: cases
2.2.2.1.13 Tolentino v. Secretary
2.2.2.2 requisites of a valid classification

2.2.2.2.1 it must be based on substantial distinction

2.2.2.2.2 it must apply both to present and future conditions
2.2.2.2.3 it must be germane to the purposes of the law
2.2.2.2.4 it must apply equally to all members of the same class.
2.2.3 Uniformity
Uniformity has been defined as that principle by which all taxable articles or kinds of
property of the same class shall be taxed at the same rate.

2.2.3.1 cases
2.2.3.1.1 Kapatiran v. Tan
2.2.4 Progressive Taxation
A tax law adopting a regressive system of taxation may be valid.

The Constitution does not really prohibit the imposition of regressive taxes. What it simply
provides is that Congress shall evolve a progressive system of taxation. The Constitutional
provision should be construed to mean simply that " direct taxes are to be preferred and
indirect taxes, as much as possible, should be minimized." Indeed, the mandate to Congress
is not to prescribe, but to evolve progressive tax system. This is a mere directive upon
Congress, not a justiciable right or a legally enforceable one. We cannot avoid regressive
taxes but only to minimize them. (EVAT)

Excise tax on cigarettes which is a form of indirect tax, and thus, regressive in character.
While there was an attempt to make the imposition of the excise tax more equitable by
creating a four-tiered taxation system where higher priced cigarettes are taxed at a higher
rate, still, every consumer, whether rich or poor, of a cigarette brand within a specified tax
bracket pays the same tax rate. To this extent, the tax does not take into account the
person's ability to pay. Nevertheless, this does not mean that the assailed law may be
declared unconstitutional for being regressive in character because the Constitution does
not prohibit the imposition of indirect taxes but merely provides that Congress shall evolve a
progressive system of taxation.
Tolentino v. Secretary of Finance instructs:

"Regressive 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 to the enactment of laws for the
enhancement of human dignity and the reduction of social, economic and political
inequalities or for the promotion of the right to 'quality education'. These provisions are put
in the Constitution as moral incentives to legislation, not as judicially enforceable rights."

2.2.5 Non-Impairment Clause

2.2.5.1 cases
2.2.5.1.1 Casanovas v. Hord
2.2.5.1.2 Tolentino v. Secretary
2.2.5.1.3 Cagayan Electric v. Commissioner
2.2.5.1.4 Phil. Power v. Commissioner
2.2.6 Non-imprisonment for non payment of POLL tax
2.2.7 Bills to originate from HR
2.2.7.1 cases
2.2.7.1.1 Tolentino v. Secretary
See also: Taxation and freedom of the press

2.2.8 Veto Power of President

2.2.9 President's power to tax
2.2.10 Taxation and freedom of the press
2.2.11 Tax and freedom of religion
2.2.12 Exemption of properties used for purposes of
2.2.12.1 Religious
2.2.12.2 Charitable
2.2.12.3 Educational
2.2.12.4 Controlling Doctrine
2.2.12.4.1 cases
Abra Valley College v. Aquino
Lladoc v. CIR
YMCA v. Collector of Internal Revenue
Bishop v. Board
Herrera v. QC Board
Prov. of Abra v. Hernando
2.2.13 Exemptions granted to Non-Stock, Non-Profit Educational
institutions
2.2.14 Appropriation of Public Money
2.2.15 Grant of Tax Exemptions
2.2.15.1 cases
2.2.16 Local Taxation
2.2.17 Special fund
2.2.17.1 cases
2.2.17.1.1 Osmea v. Orbos
2.2.18 Supreme Court's Jurisdiction over Tax Cases

3 Kinds of Taxes Differentiated

3.1 Direct and Indirect
3.2 Specific and Ad Valorem
3.3 General and Special
3.4 National and Local
3.5 Progressive and Regressive

4 Concept of Double Taxation

See also: Double taxation

5 Tax Evasion and Tax Avoidance

5.1 cases
5.1.1 Ungab Doctrine
5.1.2 CIR v. Pascor

6 Doctrine of Imprescriptibility
7 Nature and Prospectivity of Tax Laws
7.1 Civil in nature

8 Requisites of Taxpayer's suit