The power to impose taxes is one so unlimited in force and so searching in

General Principles of Taxation 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. It reaches to every trade or occupation; to every object of industry,
A. Taxation in General
use, or enjoyment; to every species of possession; and it imposes a burden
which, in case of failure to discharge it, may be followed by seizure and sale or
a.1. Taxation concept inherent power of the State, through the legislative
confiscation of property. No attribute of sovereignty is more pervading, and at no
body, to raise revenues for the purpose of defraying the expenses of government
point does the power of the government affect more constantly and intimately all
the relations of life than through the exactions made under it." (Cooley's
Q: Does the Constitution contain a provision granting taxation power to
Constitutional Limitations, 6th Edition, p. 587.)
the State?
A: There is no provision in the Constitution granting such power. The power to
tax is inherent in the State and therefore requires no constitutional grant in order
a.3. Theory of Taxation, Basis or Rationale of Taxation
to exercise the same. What the Constitution contains are provisions limiting such
power of taxation.
THEORY:
Q: What is meant by the power to tax is the power to destroy and is it
o Necessity Theory the government is necessary since the exercise of
applicable in the Philippine jurisdiction?
A: The power to tax is the power to destroy is in reference to the fact that governmental functions redounds to the benefit of society; this can only be
taxation is plenary and therefore generally unlimited, so that it applies to achieved by raising revenues
anything that can be subjected to tax, even income arising from an illegal o Symbiotic Theory (Benefits-Protection) government needs revenues to
enterprise and even to the extent that it becomes confiscatory. However, while defray expenses; the public benefit from government
the power to tax is the power to destroy, this is not so while the Supreme Court
sits, because such power is still subject to judicial review. So that, in sum, the BASIS: Life-blood Theory (taxes are necessary)
principle that the power to tax is the power to destroy refers to the vigor with
which the power may be exercised and not to its purpose. Moreover, this theory RATIONALE:
only applies in Philippine jurisdiction on the presumption that such power is
validly exercised. Such power is validly exercised if it does not contravene the o Symbiotic relationship between State and tax-paying public
limitations imposed by the Constitution and by law. o State has jurisdiction over the taxpayer

a.2. Nature and Scope of the Power of Taxation NPC v. City of Cabanatuan, G.R. No. 149110, April 9, 2003

Art. V, Section 28(20): Legislative Powers (Plenary) Taxes are the lifeblood of the government, for without taxes, the government can
Art. X, Section 5: Taxation Power of LGU neither exist nor endure. A principal attribute of sovereignty, the exercise of
taxing power derives its source from the very existence of the state whose social
NATURE: contract with its citizens obliges it to promote public interest and common good.
The theory behind the exercise of the power to tax emanates from necessity;
an attribute of sovereignty without taxes, government cannot fulfill its mandate of promoting the general
inherent welfare and well-being of the people.
legislative in character
CIR v. Algue, G.R. No. L-28896, Feb. 17, 1988
SCOPE:
Legislative taxing power extends to the following: It is said that taxes are what we pay for civilized society. Without taxes, the
government would be paralyzed for lack of the motive power to activate and
subject of taxation (person, property or occupation, excises and operate it. Hence, despite the natural reluctance to surrender part of one's hard-
privileges) earned income to the taxing authorities, every person who is able to must
rates or amount contribute his share in the running of the government. The government for its
kinds part, is expected to respond in the form of tangible and intangible benefits
purpose (must be for a public purpose) intended to improve the lives of the people and enhance their moral and material
values. This symbiotic relationship is the rationale of taxation and should dispel
situs (jurisdiction)
the erroneous notion that it is an arbitrary method of exaction by those in the
method of collection
seat of power.
Churchill and Tait v. Concepcion, G.R. No. 11572, Sept. 22, 1916 But even as we concede the inevitability and indispensability of taxation, it is a
requirement in all democratic regimes that it be exercised reasonably and in
accordance with the prescribed procedure. If it is not, then the taxpayer has a
right to complain and the courts will then come to his succor. For all the
awesome power of the tax collector, he may still be stopped in his tracks if the
taxpayer can demonstrate, as it has here, that the law has not been observed.
Phil. Bank of Communications v. CIR, G.R. No. 112024, Jan. 28, 1999
Basic is the principle that "taxes are the lifeblood of the nation." The primary
purpose is to generate funds for the State to finance the needs of the citizenry
and to advance the common weal. [Napocor vs. Province of Albay, 186 SCRA 198
(1990), at p. 207.] Due process of law under the Constitution does not require
judicial proceedings in tax cases. This must necessarily be so because it is upon
taxation that the government chiefly relies to obtain the means to carry on its
operations and it is of utmost importance that the modes adopted to enforce the
collection of taxes levied should be summary and interfered with as little as
possible. [Teodoro and de Leon, Law on Income Taxation, 1993 ed., at 485.]
fundamental is the rule that the State cannot be put in estoppel by the
mistakes or errors of its officials or agents.
a.4. Extent of the Taxing Power
Tio v. Videogram Regulatory Board, G.R. No. L-75697, June 18, 1987
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. In imposing a tax, the legislature
acts upon its constituents. This is, in general, a sufficient security against
erroneous and oppressive taxation.
It is inherent in the power to tax that a state be free to select the subjects of
taxation, and it has been repeatedly held that inequities which result from a
singling out of one particular class for taxation or exemption infringe no
constitutional limitation. Taxation has been made the implement of the states
police power.
a.5. Purpose and Objectives of Taxation
raise revenue
regulate
promote general welfare
reduce social inequality
encourage economic growth compensatory because the power to tax
necessarily includes the power to grant tax exemption, providing tax incentives
for investors
implement of eminent domain
Sumptuary Purpose of Taxation non-revenue raising purpose of taxation;
refers to regulatory purpose
Caltex Philippines, Inc. v. COA, G.R. No. 92585, May 8, 1992
POLICE POWER: Taxation is no longer envisioned as a measure merely to raise
revenue to support the existence of the government; taxes may be levied with a
regulatory purpose to provide means for the rehabilitation and stabilization of a
threatened industry which is affected with public interest as to be within the
police power of the state.
NO OFFSET: It is settled that a taxpayer may not offset taxes due from the claims
that he may have against he government. Taxes cannot be the subject of
compensation because the government and taxpayer are not mutually creditors
and debtors of each other and a claim for taxes is not such a debt, demand,
contract or judgment as is allowed to be set-off.
Batangas Power Corp. v. Batangas City, G.R. No. 152675, April 28, 2004
SOCIAL JUSTICE AND EQUITABLE DISTRIBUTION OF WEALTH: In recent years, the
increasing social challenges of the times expanded the scope of state activity,
and taxation has become a tool to realize social justice and the equitable
distribution of wealth, economic progress and the protection of local industries as
well as public welfare and similar objectives. Taxation assumes even greater
significance with the ratification of the 1987 Constitution. Thenceforth, the power
to tax is no longer vested exclusively on Congress; local legislative bodies are
now given direct authority to levy taxes, fees and other charges pursuant to
Article X, section 5 of the 1987 Constitution.
Southern Cross Cement Corp. v. Cement Manufacturers Association of the Phils.,
G.R. No. 158540, Aug. 3, 2005
(HOLY CRAP, CHECK OUT THE INTRO!!!! ^.^)
Cement is hardly an exciting subject for litigation. Still, the parties in this case
have done their best to put up a spirited advocacy of their respective positions,
throwing in everything including the proverbial kitchen sink. At present, the
burden of passion, if not proof, has shifted to public respondents Department of
Trade and Industry (DTI) and private respondent Philippine Cement
Manufacturers Corporation (Philcemcor),[1] who now seek reconsideration of our
Decision dated 8 July 2004 (Decision), which granted the petition of petitioner
Southern Cross Cement Corporation (Southern Cross).
This case, of course, is ultimately not just about cement. For respondents, it is
about love of country and the future of the domestic industry in the face of
foreign competition. For this Court, it is about elementary statutory construction,
constitutional limitations on the executive power to impose tariffs and similar
measures, and obedience to the law. Just as much was asserted in the Decision,
and the same holds true with this present Resolution.
POWER OF PRESIDENT TO IMPOSE TARIFF RATES: Without Section 28(2), Article
VI, the executive branch has no authority to impose tariffs and other similar tax
levies involving the importation of foreign goods. Assuming that Section 28(2)
Article VI did not exist, the enactment of the SMA by Congress would be voided
on the ground that it would constitute an undue delegation of the legislative
power to tax. The constitutional provision shields such delegation from
constitutional infirmity, and should be recognized as an exceptional grant of
legislative power to the President, rather than the affirmation of an inherent
executive power.

QUALIFIERS: This being the case, the qualifiers mandated by the Constitution on
this presidential authority attain primordial consideration: (1) there must be a
law; (2) there must be specified limits; and (3) Congress may impose limitations
and restrictions on this presidential authority.
POWER EXERCISED BY ALTER EGOS OF PRES: The Court recognizes that the
authority delegated to the President under Section 28(2), Article VI may be
exercised, in accordance with legislative sanction, by the alter egos of the
President, such as department secretaries. Indeed, for purposes of the
Presidents exercise of power to impose tariffs under Article VI, Section 28(2), it
is generally the Secretary of Finance who acts as alter ego of the President. The
SMA provides an exceptional instance wherein it is the DTI or Agriculture
Secretary who is tasked by Congress, in their capacities as alter egos of the
President, to impose such measures. Certainly, the DTI Secretary has no inherent
power, even as alter ego of the President, to levy tariffs and imports.
TARIFF COMMISSION AND DTI SEC ARE AGENTS: Concurrently, the tasking of the
Tariff Commission under the SMA should be likewise construed within the same
context as part and parcel of the legislative delegation of its inherent power to
impose tariffs and imposts to the executive branch, subject to limitations and
restrictions. In that regard, both the Tariff Commission and the DTI Secretary may
be regarded as agents of Congress within their limited respective spheres, as
ordained in the SMA, in the implementation of the said law which significantly
draws its strength from the plenary legislative power of taxation. Indeed, even
the President may be considered as an agent of Congress for the purpose of
imposing safeguard measures. It is Congress, not the President, which possesses
inherent powers to impose tariffs and imposts. Without legislative authorization
through statute, the President has no power, authority or right to impose such
safeguard measures because taxation is inherently legislative, not executive.
When Congress tasks the President or his/her alter egos to impose safeguard
measures under the delineated conditions, the President or the alter egos may
be properly deemed as agents of Congress to perform an act that inherently
belongs as a matter of right to the legislature. It is basic agency law that the
agent may not act beyond the specifically delegated powers or disregard the
restrictions imposed by the principal. In short, Congress may establish the
procedural framework under which such safeguard measures may be imposed,
and assign the various offices in the government bureaucracy respective tasks
pursuant to the imposition of such measures, the task assignment including the
factual determination of whether the necessary conditions exists to warrant such
impositions. Under the SMA, Congress assigned the DTI Secretary and the Tariff
Commission their respective functions in the legislatures scheme of things.
There is only one viable ground for challenging the legality of the limitations and
restrictions imposed by Congress under Section 28(2) Article VI, and that is such
limitations and restrictions are themselves violative of the Constitution. Thus, no
matter how distasteful or noxious these limitations and restrictions may seem,
the Court has no choice but to uphold their validity unless their constitutional
infirmity can be demonstrated.
What are these limitations and restrictions that are material to the present case?
The entire SMA provides for a limited framework under which the President,
through the DTI and Agriculture Secretaries, may impose safeguard measures in
the form of tariffs and similar imposts.
POWER BELONGS TO CONGRESS: the cited passage from Fr. Bernas actually
states, Since the Constitution has given the President the power of control, with
all its awesome implications, it is the Constitution alone which can curtail such
power. Does the President have such tariff powers under the Constitution in the
first place which may be curtailed by the executive power of control? At the risk
of redundancy, we quote Section 28(2), Article VI: The Congress may, by law,
authorize the President to fix within specified limits, and subject to such
limitations and restrictions as it may impose, tariff rates, import and export
quotas, tonnage and wharfage dues, and other duties or imposts within the
framework of the national development program of the Government. Clearly the
power to impose tariffs belongs to Congress and not to the President.
CIR v. Central Luzon Drug Corp., G.R. No. 159647, April 15, 2005
EMINENT DOMAIN: The concept of public use is no longer confined to the
traditional notion of use by the public, but held synonymous with public interest,
public benefit, public welfare, and public convenience. The discount privilege to
which our senior citizens are entitled is actually a benefit enjoyed by the general
public to which these citizens belong. The discounts given would have entered
the coffers and formed part of the gross sales of the private establishments
concerned, were it not for RA 7432. The permanent reduction in their total
revenues is a forced subsidy corresponding to the taking of private property for
public use or benefit.
As a result of the 20 percent discount imposed by RA 7432, respondent becomes
entitled to a just compensation. This term refers not only to the issuance of a tax
credit certificate indicating the correct amount of the discounts given, but also to
the promptness in its release. Equivalent to the payment of property taken by
the State, such issuance -- when not done within a reasonable time from the
grant of the discounts -- cannot be considered as just compensation.
Besides, the taxation power can also be used as an implement for the exercise
of the power of eminent domain. Tax measures are but enforced contributions
exacted on pain of penal sanctions and clearly imposed for a public purpose.
In recent years, the power to tax has indeed become a most effective tool to
realize social justice, public welfare, and the equitable distribution of wealth.
a.6. Characteristics of a Sound Tax System
1. Fiscal Adequacy meet requirements of government
2. Theoretical Justice progressivity; based on taxpayers ability to pay
3. Administrative Feasibility enforcement should be effective and simple
a.7. Aspects of Taxation
1. Levy determine persons, property or excises to be taxed, their amount
and due date, time and manner (taxation proper)
2. Collection manner of enforcement; includes assessment and
administration by BIR (subordinate legislation) (tax administration)
a.8. Taxation distinguished
v. POLICE POWER (code: PABAT)

As to purpose Taxation is to raise revenue; Police Power is to promote
public welfare.
As to amount Taxation has no limit; Police Power is limited to the cost of
regulation, issuance of license or surveillance
As to benefits Taxation offers no special or direct benefit other than
benefit to the general public; Police Power is to promote a healthy economic
standard.
As to applicability of non-impairment of contracts clause It applies in
taxation; It does not apply in police power, EXCEPT if the grant of franchise was
for a valuable consideration.
As to transfer of property rights Taxation involves transfer of public
funds or money; Police Power does not contemplate a transfer but merely
restraint on property taken or destroyed.
(2) Observe International Comity there must be reciprocity
Art. II, Section 2. The Philippines renounces war as an instrument of national
policy, adopts the generally accepted principles of international law as part of the
law of the land and adheres to the policy of peace, equality, justice, freedom,
cooperation, and amity with all nations.
Sec. 32(B)(7)(a), NIRC: Income Derived by Foreign Government. - Income derived
from investments in the Philippines in loans, stocks, bonds or other domestic
securities, or from interest on deposits in banks in the Philippines by (i) foreign
governments, (ii) financing institutions owned, controlled, or enjoying refinancing
from foreign governments, and (iii) international or regional financial institutions
established by foreign governments.

v. POWER OF EMINENT DOMAIN (code: NCAPA) (3) No Improper Delegation, exceptions

As to nature Taxation is the power to raise revenue; Eminent Domain is - under Flexible Tariff Clause, President may fix:
the taking of property for public use.
As to compensation Compensation for taxation takes the form of a o tariff rates
general benefit to the public; in eminent domain, there must be just o import-export quotas
compensation. o tonnage and wharfage duties
As to applicability of non-impairment of contracts clause It applies in o other duties and imposts within the framework of the national
taxation; it does not apply in eminent domain. government program
As to persons affected Taxation affects all subject to the States - LGU (General Welfare Clause)
jurisdiction; eminent domain affects only the particular property.
As to authority Taxation is exercised by the government; Eminent - administrative agencies:
Domain may be exercised by private entities exercising public functions.
o fix the value of property
B. Limitations of the Taxing Power o assess and collect taxes
o perform details of computation
b.1. Inherent Limitations
o appraisement and adjustment
(1) Public Purpose this is presumed
(4) Limited to the Territorial Jurisdiction
Gomez v. Palomar, G.R. No. L-23645, Oct. 29, 1968
SITUS (Sec. 23, NIRC)
Citizens
The eradication of a dreaded disease is a public purpose, but if by public purpose
the petitioner means benefit to a taxpayer as a return for what he pays, then it is
o Resident Citizens taxed on all sources of income inside or outside the
sufficient answer to say that the only benefit which the taxpayer is
constitutionally entitled is that derived from his enjoyment of the privileges of Philippines (based on nationality principle)
living in an organized society, established and safeguarded by the devotion of o Non-resident Citizens taxed on all sources within the Philippines
taxes to public purposes Aliens

o Resident Aliens taxed on all sources within the Philippines

Pascual v. Secretary of Public Works, G.R. No. L-10405, Dec. 29, 1960
o Non-resident Aliens (whether engaged in business or not) taxed on all
In accordance with the rule that the taxing power must be exercised for public sources within the Philippines
purposes only, money raised by taxation can be expanded only for public
purposes and not for the advantage of private individuals. NOTA BENE: Only resident citizens are taxed on all sources of income within or
without the Philippines.
Public funds may be used for a public purpose. The right of the legislature to
appropriate funds is correlative with its right to tax, under constitutional FACTORS AFFECTING SITUS OF TAXATION:
provisions against taxation except for public purposes and prohibiting the
collection of a tax for one purpose and the devotion thereof to another purpose, o kind or classification of tax
no appropriation of state funds can be made for other than a public purpose. o situs of the thing or property taxed
 domicile or residence of the person taxed
citizenship or nationality of the person taxed
source of the income taxed
situs of the excise, privilege, business or occupation being taxed
NOTA BENE: Situs of taxation for personal property follows the principle of
mobilia sequuntur personam (personal property follows the person), EXCEPT
shares of stock the situs of which is based on where the corporation has its
principal place of business. Situs of taxation for real property is lex rei sitae
(where the property is located).
CIR v. Japan Airlines, Inc., G.R. No. 60714, Oct. 4, 1991
The source of income is the property, activity or service that produced the
income. For the source of income to be considered as coming from the
Philippines, it is sufficient that the income is derived from activity within the
Philippines. In BOACs case, the sale of tickets in the Philippines is the activity
that produces the income. The tickets exchanged hands here and payments for
fares were also made here in the Philippine currency. The situs of the source of
payments is the Philippines. The flow of wealth proceeded from, and occurred
within, Philippine territory, enjoying the protection accorded by the Philippine
government. In consideration of such protection, the flow of wealth should share
the burden of supporting the government.
The absence of flight operations to and from the Philippines is not determinative
of the source of income or the situs of income taxation. The test of taxability is
the source; and the source of an income is that activity which produced the
income.
South African Airways v. CIR, CTA 6760, June 9, 2005
It has been consistently ruled that the source of income is the property, activity
or service that produced the income and, in order that the source of income to
be considered as coming from the Philippines, it is enough that the income is
derived from activity within the Philippines.
The absence of flight operations to and from the Philippines is not determinative
of the source of income or the situs of income taxation. Petitioner admitted that
it sells passage documents in the Philippines through its sales agent. Petitioner,
thus, is deriving revenues from the conduct of its business activity regularly
pursued within the Philippines. Petitioner is therefore a resident foreign
corporation engaged in trade or business in the country within the purview of our
tax law and is therefore subject to tax. As held in Commissioner of Internal
Revenue vs. American Airlines, Inc.:
xxx foreign airline companies which sold tickets in the Philippines through their
local agents, whether called liaison offices, agencies or branches, were
considered resident foreign corporations engaged in trade or business in the
country. Such activities show continuity of commercial dealings or arrangements
and performance of acts or works or the exercise of some functions normally
incident to and in progressive prosecution of commercial gain or for the purpose
and object of the business organization.
National Development Co. v. CIR, G.R. No. L-53961, June 30, 1987
The Japanese shipbuilders were liable to tax on the interest remitted to them.
The petitioner argues that the Japanese shipbuilders were not subject to tax
under the above provision because all the related activities the signing of the
contract, the construction of the vessels, the payment of the stipulated price,
and their delivery to the NDC were done in Tokyo. The law, however, does not
speak of activity but of source, which in this case is the NDC. This is a domestic
and resident corporation with principal offices in Manila.
The Governments right to levy and collect income tax on interest received by
foreign corporations not engaged in trade or business within the Philippine sis
not planted upon the condition that the activity or labor and the sale form
which the (interest) income flowed had its situs in the Philippines. The law
specifies: interest derived from sources within the Philippines. Nothing there
speaks of the act or activity of non-resident corporations in the Philippines, or
place where the contract is signed. The residence of the obligor who pays the
interest rather than the physical location of the securities, bonds, or notes or the
place of payment, is the determining factor of the source of interest income.
(5) Exemption of Government Entities inherent exemption, but Government
may tax itself
Sec. 27(C), NIRC: Government-owned or Controlled-Corporations, Agencies or
Instrumentalities. - The provisions of existing special or general laws to the
contrary notwithstanding, all corporations, agencies, or instrumentalities owned
or controlled by the Government, except the Government Service Insurance
System (GSIS), the Social Security System (SSS), the Philippine Health Insurance
Corporation (PHIC), the Philippine Charity Sweepstakes Office (PCSO) and the
Philippine Amusement and Gaming Corporation (PAGCOR), shall pay such rate of
tax upon their taxable income as are imposed by this Section upon corporations
or associations engaged in s similar business, industry, or activity.
Sec. 32(B)(7)(b), NIRC: Income Derived by the Government or its Political
Subdivisions. - Income derived from any public utility or from the exercise of any
essential governmental function accruing to the Government of the Philippines or
to any political subdivision thereof.
Sec. 30(1), NIRC
b.2. Constitutional Limitations
(1) Indirect
a) Due Process and Equal Protection Clause
Art. III, Section 1. No person shall be deprived of life, liberty, or property without
due process of law, nor shall any person be denied the equal protection of the
laws.
b) Freedom of the Press
Art. III, Section 4. No law shall be passed abridging the freedom of speech, of
expression, or of the press, or the right of the people peaceably to assemble and
petition the government for redress of grievances.
c) Religious Freedom
Art. III, Section 5. No law shall be made respecting an establishment of religion,
or prohibiting the free exercise thereof. The free exercise and enjoyment of
religious profession and worship, without discrimination or preference, shall
forever be allowed. No religious test shall be required for the exercise of civil or
political rights.
d) Non-impairment Clause
Art. III, Section 10. No law impairing the obligation of contracts shall be passed.
Art. XII, Section 11. No franchise, certificate, or any other form of authorization
for the operation of a public utility shall be granted except to citizens of the
Philippines or to corporations or associations organized under the laws of the
Philippines, at least sixty per centum of whose capital is owned by such citizens;
nor shall such franchise, certificate, or authorization be exclusive in character or
for a longer period than fifty years. Neither shall any such franchise or right be
granted except under the condition that it shall be subject to amendment,
alteration, or repeal by the Congress when the common good so requires. The
State shall encourage equity participation in public utilities by the general public.
The participation of foreign investors in the governing body of any public utility
enterprise shall be limited to their proportionate share in its capital, and all the
executive and managing officers of such corporation or association must be
citizens of the Philippines.
e) Law-Making Process
Art. VI, Section 26. (1) Every bill passed by the Congress shall embrace only one
subject which shall be expressed in the title thereof.
(2) No bill passed by either House shall be come a law unless it has passed three
readings on separate days, and printed copies thereof in its final form have been
distributed to its Members three days before its passage, except when the
President certifies to the necessity of its immediate enactment to meet a public
calamity or emergency. Upon the last reading of a bill, no amendment thereto
shall be allowed, and the vote thereon shall be taken immediately thereafter, and
the yeas and nays entered in the Journal.
(2) Direct
a) Non-Imprisonment
Art. III, Section 20. No person shall be imprisoned for debt or non-payment of a
poll tax.
b) Uniform & Equitable
Art. VI, Section 28. (1) The rule of taxation shall be uniform and equitable. The
Congress shall evolve a progressive system of taxation.
(2) The Congress may, by law, authorize the President to fix within specified
limits, and subject to such limitations and restrictions as it may impose, tariff
rates, import and export quotas, tonnage and wharfage dues, and other duties or
imposts within the framework of the national development program of the
Government.
(3) Charitable institutions, churches and personages or convents appurtenant
thereto, mosques, non-profit cemeteries, and all lands, buildings, and
improvements, actually, directly, and exclusively used for religious, charitable, or
educational purposes shall be exempt from taxation.
(4) No law granting any tax exemption shall be passed without the concurrence
of a majority of all the Members of the Congress.
c) Progressive System (Sec. 28 (1), Art. VI)
d) ART Bill
Art. VI, Section 24. All appropriation, revenue or tariff bills, bills authorizing
increase of the public debt, bills of local application, and private bills, shall
originate exclusively in the House of Representatives, but the Senate may
propose or concur with amendments.
e) Presidents Power to Veto
Art. VI, Section 27 (2) The President shall have the power to veto any particular
item or items in an appropriation, revenue, or tariff bill, but the veto shall not
affect the item or items to which he does not object.
f) Delegated Authority of the President (Sec. 28 (2), Art. VI)
g) Exemption from Tax (Sec. 28 (3), Art. VI)
h) Congress concurrence (Sec. 28 (4), Art. VI)
i) No religious purpose
Art. VI, Sec. 29 (2): No public money or property shall be appropriated, applied,
paid, or employed, directly or indirectly, for the use, benefit, or support of any
sect, church, denomination, sectarian institution, or system of religion, or of any
priest, preacher, minister, other religious teacher, or dignitary as such, except
when such priest, preacher, minister, or dignitary is assigned to the armed forces,
or to any penal institution, or government orphanage or leprosarium.
j) Special purpose
Art. VI, Sec. 29 (3): All money collected on any tax levied for a special purpose
shall be treated as a special fund and paid out for such purpose only. If the
purpose for which a special fund was created has been fulfilled or abandoned, the
balance, if any, shall be transferred to the general funds of the Government.
k) Judicial Review
Art. VIII, Section 5. The Supreme Court shall have the following powers:
1) Exercise original jurisdiction over cases affecting ambassadors, other public
ministers and consuls, and over petitions for certiorari, prohibition, mandamus,
quo warranto, and habeas corpus.
(2) Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or
the Rules of Court may provide, final judgments and orders of lower courts in:

(a) All cases in which the constitutionality or validity of any treaty, international
or executive agreement, law, presidential decree, proclamation, order,
instruction, ordinance, or regulation is in question.
(b) All cases involving the legality of any tax, impost, assessment, or toll, or any
penalty imposed in relation thereto.
(c) All cases in which the jurisdiction of any lower court is in issue.
(d) All criminal cases in which the penalty imposed is reclusion perpetua or
higher.
(e) All cases in which only an error or question of law is involved.
(3) Assign temporarily judges of lower courts to other stations as public interest
may require. Such temporary assignment shall not exceed six months without the
consent of the judge concerned.
(4) Order a change of venue or place of trial to avoid a miscarriage of justice.
(5) Promulgate rules concerning the protection and enforcement of constitutional
rights, pleading, practice, and procedure in all courts, the admission to the
practice of law, the integrated bar, and legal assistance to the under-privileged.
Such rules shall provide a simplified and inexpensive procedure for the speedy
disposition of cases, shall be uniform for all courts of the same grade, and shall
not diminish, increase, or modify substantive rights. Rules of procedure of special
courts and quasi-judicial bodies shall remain effective unless disapproved by the
Supreme Court.
(6) Appoint all officials and employees of the Judiciary in accordance with the Civil
Service Law.
TAX PAYERS SUIT proper when there is illegal disbursement of public funds
derived from taxation. But note that even if the taxpayer questions the
constitutionality of the law, he is not excused from paying his taxes because of
the life-blood theory.
l) Delegated authority to LGU
Art. X, 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.
Art. X, Section 6. Local government units shall have a just share, as determined
by law, in the national taxes which shall be automatically released to them.
m) Tax exemptions
Art. XIV, Sec. 4 (3): All revenues and assets of non-stock, non-profit educational
institutions used actually, directly, and exclusively for educational purposes shall
be exempt from taxes and duties. Upon the dissolution or cessation of the
corporate existence of such institutions, their assets shall be disposed of in the
manner provided by law.
Sec. 30(H), NIRC: Exemptions from Tax on Corporations -- A nonstock and
nonprofit educational institution.
NOTA BENE: Income from school canteens and bookstores which is incidental to
the schools primary purpose is included in the exemption. But such school
canteens and bookstores must be owned by the school and located in the school
campus.
ABAKADA Guro Party List v. Ermita, G.R. No. 168056, Sept. 1, 2005
Is there undue delegation of legislative power since the law gives the
President stand-by authority to raise the VAT rate to 12%? The authority
does not refer to the power of the President to fix tariff rates. Neither is it a
delegation of legislative power. It is simply a delegation of ascertainment of facts
upon which enforcement and administration of the increase rate under the law is
contingent. The legislature has made the operation of the 12% rate effective Jan.
1, 2006, contingent upon a specified fact or condition. It leaves the entire
operation or non-operation of the 12% rate upon factual matters outside the
control of the executive. It is the ministerial duty of the President to immediately
impose the 12% rate upon the existence of any of the conditions specified by
Congress.
Is there violation of due process clause as it imposes an unfair and
additional tax burden on the people?Petitioners argue that the law imposes
an unfair and additional tax burden on the people as the law does not provide for
the rate to revert to the original 10% in case the conditions set forth are no
longer satisfied and as such, people wont know how much is the rate from year
to year. SC said that the law is clear and unambiguous. The fears of petitioner is
merely speculative as the law itself does not provide that the rate would go back
to 10%.
Does it violate the rule that ART bills should exclusively originate from
the House of Representatives? No violation. According to petitioners, the
amendments introduced to the NIRC did not come from the House, but from the
Senate. SC said that to begin with, it is not the law but the revenue bill which
is required by the Constitution to originate exclusively in the House of
Representatives. A bill originating from the House may undergo such extensive
changes in the Senate that the result may be a rewriting of the whole. At this
point, what is important to note is that, as a result of the Senate action, a distinct
bill may be produced. To a insist that a revenue statute and not only the bill
which initiated the legislative process culminating in the enactment of the law
must substantially be the same as the House bill would be to deny the Senates
power not only to concur with amendments but also to propose
amendments. It would violate the coequality of legislative power of the two
houses of Congress and in fact make the House superior to the Senate. What the
Constitution means is that the initiative for filing revenue, tariff or tax bills, bills
authorizing an increase of public debt, private bills and bills of local application
must come from the House of Representatives on the theory that, elected as
they are from the districts, the members of the House can be expected to be
more sensitive to the local needs and problems. On the other hand, the senators,
who are elected at large, are expected to approach the same problems from the
national perspective. Both views are thereby made to bear on the enactment of
such laws.
Does the imposition of limitations on the amount of input tax that may
be claimed constitute a deprivation of property without due process of
law? There is no deprivation of property because the input tax in excess of the
output tax is carried over to succeeding quarter or quarters. In addition, a tax
credit certificate may be applied for any unused input taxes, to the extent that
such input taxes have not been applied against the input taxes. Such unused
input tax may be used in payment of his other internal revenue taxes. Moreover,
input tax is not property under the purview of the Constitution. It is merely a
statutory privilege.
Does it violate the equal protection clause as the limitation on the
creditable input tax is not based on real and substantial differences to
meet a valid classification? The equal protection clause does not require the
universal application of the laws on all persons or things without distinction. This
might in fact sometimes result in unequal protection. What the clause requires is
equality among equals as determined according to a valid classification. By
classification is meant the grouping of persons or things similar to each other in
certain particulars and different from all others in these same particulars.
Does violate the progressivity of tax laws? By its very nature, the VAT is
regressive. Nevertheless, the Constitution does not really prohibit the imposition
of indirect taxes, like the VAT. What it simply provides is that Congress shall
evolve a progressive system of taxation. The constitutional provision has been
interpreted to mean simply that direct taxes are to be preferred and as much as
possible, indirect taxes should be minimized.
Does it violate the principle that tax collection and revenue should be
solely allocated for public purposes and expenditures since VAT-
registered establishments are allowed to retain a portion of the taxes
they collect? No violation. The input tax is the tax paid by a person, passed on
to him by the seller, when he buys goods. Output tax meanwhile is the tax due to
the person when he sells the goods. In computing the variables, there are three
possible scenarios: (1) if the input and output taxes charged are equal, then
there is no payment required; (2) when output taxes exceed the input taxes, the
person shall be liable for the excess; and (3) if the input taxes exceed the output
taxes, the excess shall be carried over to the succeeding quarter or quarters. The
70% limitation on input taxes does not mean that the establishments retain the
input tax in excess of 70%. It only means that they can only credit their input tax
up to the extent of 70% of their output tax.
Does it violate uniformity and equitable taxation? Uniformity in taxation
means that all taxable articles or kinds of property of the same class shall be
taxed at the same rate. Different articles may be taxed different amounts
provided that the rate is uniform on the same class everywhere with all people at
all times. The law is uniform as it provides a standard rate of 0% or 10% (or 12%)
on all goods and services. The law is also equitable as it is equipped with a
threshold margin. Thus the VAT rate of 0% or 10% (or 12%) does not apply to
sales of goods or services with gross annual sales or receipts not exceeding
P1,500,000.00.
C. Tax
c.1. Tax Defined, Characteristics
Tax enforced proportional contributions, generally payable in money, from
persons, property, rights and privileges levied by the legislative body of the State
by virtue of its sovereignty for the support of government and for public needs.
c.2. Kinds of Taxes
As to subject or object
personal>
propertyAs to who bears the burden
o direct
o indirect
CIR v. PLDT, G.R. No. 140230, Dec. 15, 2005
DIRECT v. INDIRECT TAX: based on the possibility of shifting the incidence of
taxation. Direct taxes are those that are exacted from the very person who, it is
intended or desired, should pay them; impositions for which a taxpayer is directly
liable on the transaction or business he is engaged in. Indirect taxes are those
that are demanded, in the first instance, from, or are paid by, one person in the
expectation and intention that he can shift the burden to someone else; liability
for the payment falls on one person but the burden can be shifted or passed on
to another person, such as when the tax is imposed ex. VAT, advance sales tax,
compensating tax upon goods before reaching the consumer who ultimately
pays for it. When the seller passes on the tax to his buyer, he, in effect, shifts the
tax burden, not the liability to pay it, to the purchaser as part of the price of
goods sold or services rendered.
By tacking the VAT due to the selling price, the seller remains the person
primarily and legally liable for the payment of the tax. What is shifted only to the
intermediate buyer and ultimately to the final purchaser is the burden of the tax.
Stated differently, a seller who is directly and legally liable for payment of an
indirect tax, such as VAT on goods and services, is not necessarily the person
who ultimately bears the burden of the same tax. It is the final purchaser or end-
user of such goods or services who, although not directly and legally liable for
the payment thereof, ultimately bears the burden of the tax.
As to determination of amount
o specific
o ad valorem
As to purpose
o general
o special
As to rate
o progressive
o regressive
o proportional
As to imposing authority
o national
o local
c.3. Tax distinguished from other impositions

v. SPECIAL ASSESSMENT
As to subject matter Tax is imposed on persons, property and excises;
Special Assessment is levied only on land
As to liability imposed upon taxpayer Tax can be a personal liability or
liability on property of the taxpayer; Special Assessment cannot be made a
personal liability of the person assessed
As to purpose Tax is to generate revenue; Special Assessment is based
wholly on benefit.
As to application Tax is of general and uniform application; Special
Assessment is exceptional both as to time and locality.
v. LICENSE
As to power Tax is levied in the exercise of taxation power; License Fee
emanates from police power.
As to purpose Tax is to generate revenue; License Fee is regulatory.>
As to amount to be charged Tax is unlimited; License Fee must be of an
amount sufficient to cover the expenses of: a) issuing the license; and b) cost of
necessary inspection or police surveillance
v. TOLL
As to nature - Tax is a demand of sovereignty for the purpose of raising
public revenue; Toll is a demand of ownership to defray the cost and maintenance
of the property.
v. PENALTY
As to kind of liability Tax is a civil liability; Penalty is a punishment for
the commission of a crime.
v. DEBT
As to source Tax is imposed by law; Debt is imposed by obligation
created by contract.
As to penalty for non-payment Non-payment of tax may cause a person
to be criminally prosecuted; Non-payment of debt does not generally give rise to
criminal action or cause a person to be imprisoned.
In Tax there is generally no compensation because the government and
the taxpayer are not creditors and debtors as to each other. BUT if both the tax
and the tax refund due to the taxpayer are due and demandable, compensation
may be proper. In Debt, compensation may be proper.
DOCTRINE OF EQUITABLE RECOUPMENT
c.4. Sources of Tax Laws, Nature of Tax Laws
NIRC
2. Constitution
3. Tariff and Tax Code
4. Local Government Code
NOTA BENE: Tax laws are civil in nature, therefore, the rule on ex post facto law
prohibition does not apply. Tax laws may not be given retroactive effect, even if
they are favorable to the taxpayers. Tax laws are likewise not political, therefore,
they still apply even if there is a change in government to a belligerent.
c.5. Interpretation of Tax Laws
Strictissimi juris strictly interpreted against the government and liberally in
favor of the taxpayer because it involves the imposition of a tax burden
- EXCEPTION: Tax exemptions are strictly interpreted against the taxpayer and
liberally in favor of the government because of the life-blood theory and the
equal protection clause (exemptions are privileges, therefore, encourages
inequality among taxpayers)
Sea Land Service v. CA, G.R. No. 122605, April 30, 2001
STRICTISSIMI JURIS in TAX EXEMPTION: Laws granting exemption from tax are
construed strictissimi juris against the taxpayer and liberally in favor of the
taxing power. Taxation is the rule and exemption is the exception. The law does
not look in favor on tax exemptions and that he who would seek to be thus
privileged must justify it by words too plain to be mistaken and to categorical to
be misinterpreted.
PURPOSE OF TAX EXEMPTION: Some public benefit or interest, which the
lawmaking body considers sufficient to affect the monetary loss entailed in the
grant of the exemption.
CIR v. CA, G.R. No. 107135, Feb. 23, 1999
RULE ON EXCEPTIONS: Exceptions, as a general rule, should be strictly but
reasonably construed. They extend only so far as their language fairly warrants,
and all doubts should be resolved in favor of the general provisions rather than
the exception. Where the general rule is established by statute with exceptions,
the court will not curtail the former nor add to the latter by implication.
STRICTISSIMI JURIS in TAX LAWS: Tax burdens are not to be imposed, nor
presumed to be imposed beyond what the statute expressly and clearly imports,
tax statutes being construed strictissimi juris against the government.
Maceda v. Macaraig, 197 SCRA 771
(Exception to the Exception) STRICTISSIMI JURIS in GOVERNMENT: It is recognized
principle that the rule on strict interpretation does not apply in the case of
exemptions in favor of government political subdivisions or instrumentalities. In
the case of property owned by the state or city or other public corporation, the
express exception should not be construed with the same degree of strictness
that applies to exemptions contrary to the policy of the state, since as to such
property exception is the rule and taxation the exception.
c.6. Tax Exemptions

KINDS
(1) express; (2) implied; (3) total; (4) partial; (5) constitutional; (6) statutory
Art. VI, Sec. 28 (3): Charitable institutions, churches and personages or convents
appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings,
and improvements, actually, directly, and exclusively used for religious,
charitable, or educational purposes shall be exempt from taxation.
Art. XIV, Sec. 4(3): All revenues and assets of non-stock, non-profit educational
institutions used actually, directly, and exclusively for educational purposes shall
be exempt from taxes and duties. Upon the dissolution or cessation of the
corporate existence of such institutions, their assets shall be disposed of in the
manner provided by law.
Proprietary educational institutions, including those cooperatively owned, may
likewise be entitled to such exemptions, subject to the limitations provided by
law, including restrictions on dividends and provisions for reinvestment.
NOTA BENE: School canteens and bookstores are considered as incidental income
and are therefore included in the exemption.
Question:
(1) Is a vacant lot adjacent to a school building owned by the non-profit, non-
stock educational institution subject to real property taxation, considering that it
is not used actually, directly and exclusively for educational purposes?
(2) Is the exemption under Art. VI, Sec. 28(3) regardless of ownership, so that if
the land used by the religious or charitable institution is owned by a private
person, it is still exempted from real property tax?
policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively
to the local governments.
REVOCATION, RESTRICTION
NOTA BENE:
o Tax pyramiding (tax on tax) is prohibited.
o Tax exemptions are mere privileges so they can be revoked at any time,
EXCEPT if there was a contract granting such tax exemption and such contract
was entered into for a valid consideration.
Coconut Oil Refiners v. Torres, G.R. No. 132527, July 29, 2005
WHO HAS AUTHORITY: It is the legislature, unless limited by a provision of a state
constitution, that has full power to exempt any person or corporation or class of
property from taxation, its power to exempt being as broad as its power to tax.
Other than Congress, the Constitution may itself provide for specific tax
exemptions, or local governments may pass ordinance on exemption only from
local taxes.
v. TAX AMNESTY
1. Tax exemption is prospective. Tax amnesty is retrospective.
2. Tax exemption is civil. Tax amnesty is civil and criminal.
3. Tax exemptions cannot be granted without the concurrence of majority of
Congress. Tax amnesty is the intentional overlooking by the government of tax
unpaid and is generally considered an executive act.
CIR v. Marubeni Corp., G.R. No. 137377, Dec. 18, 2001

Art. XIV, Sec. 4 (4): Subject to conditions prescribed by law, all grants,
endowments, donations, or contributions used actually, directly, and exclusively
for educational purposes shall be exempt from tax.
CONSTITUTIONAL RESTRICTIONS
TAX AMNESTY general pardon or intentional overlooking by the State of its
authority to impose penalties on persons otherwise guilty of evasion or violation
of a revenue or tax law; partakes of an absolute forgiveness or waiver by the
government of its right to collect what is due it and to give tax evaders a chance
to start with a clean slate; never favored nor presumed in law; construed strictly
against the taxpayer and liberally in favor of government.

Art. VI, Sec. 28(4): No law granting any tax exemption shall be passed without
the concurrence of a majority of all the Members of the Congress.
NOTA BENE: Therefore, the President cannot grant tax exemptions through
executive agreement. Tax treaties are entered into with concurrence of the
Senate.
1.
EXCEPTIONS 2.
Art. VI, Sec. 28(2): The Congress may, by law, authorize the President to fix
within specified limits, and subject to such limitations and restrictions as it may
impose, tariff rates, import and export quotas, tonnage and wharfage dues, and
other duties or imposts within the framework of the national development
program of the Government. 1.
Art. X, Section 5. Each local government unit shall have the power to create its 2.
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
NOTA BENE: In both tax exemptions and tax amnesties, the rule on strictissimi
juris is the same.
c.7. Tax Avoidance vs. Tax Evasion
Tax avoidance is the minimization of tax liabilities through legal means.
Tax evasion is the minimization of tax liabilities through illegal means
with intent in bad faith or the attendance of fraud.
Tax Credit vs. Tax Exemption
Tax credit contemplates two or more taxing authorities. Tax exemption
contemplates only one taxing authority.<
Tax credit is based on the principle of reciprocity. Tax exemption is an
inherent power of the sovereign state.
 o Direct double taxation same subject, same purpose, same taxing
c.8. Concept of Double Taxation; Kinds; Modes of Eliminating Double authority, same taxing period, same character of tax (elements of double
Taxation taxation)
o Indirect double taxation one or more of the elements of double taxation
Double Taxation (Duplicate Taxation) taxing the same property twice are absent
when it should be taxed only once.
NOTA BENE: Double taxation may be avoided through various credit schemes
KINDS: specified under the NIRC and exemptions under tax treaties entered into with
foreign governments.