CONSTITUTIONAL

LAW 2
TAXATION
Based on the 2007 Edition of Constitutional Law by Isagani Cruz

NATURE High business licenses may be imposed

for those non-useful and discouraged by
Taxes are the enforced proportional the legislature.
contributions from persons and
property, for the support of government SCOPE
and for all public needs.
It is an effort to apportion the costs of Reaches the citizen abroad.
government among the people, Income earned from outside the state.
according to their ability to pay and on All income earned within the state
the basis of as scientific a classification (citizens or aliens)
as possible. All immovable and tangible personal
Importance: Derived from the properties within the territory.
unavoidable obligation of the Tangible personal property owned by
government to protect the people and persons domiciled therein.
extend them benefits in the form of Shares of stock issued by a foreign
public projects and services. corporation in action in the local
It is the duty of sharing the expenses state.
incurred through the payment by the Insurance police issued abroad.
people of taxes. The power to tax includes the power to
Obligation to pay is not based on destroy if it is an implement of police
contract. power in discouraging and in effect,
It is imposed upon the individual by the ultimately prohibiting certain things or
mere fact of: enterprises inimical to public welfare.
o His membership in the body The modern view, the power to tax does
politic and; not include the power to destroy, means
o His enjoyment of the benefits that taxes used for the sole purpose of
available from such raising revenue for the state cannot be
membership. confiscatory and used to destroy.
Nonpayment of a tax may be the o If done, it can be attacked as an
subject of criminal prosecution and inordinate and unconstitutional
punishment; Exception: Poll Tax (Poll exercise of the discretion vested
taxes are taxes for a person to be able exclusively in the legislature in
to vote). ascertaining the amount of tax.
Taxes are not debts.
EXERCISE
TAXES LICENSES
Levied to raise For regulatory
Primarily vested in the national
revenue purposes
May be used as an Justified under police legislature.
implement of police power; fees are Local legislative bodies pursuant to
power; raising revenue limited to the cost of Article X, Section 5 of the 1987
must be the main regulation Philippine Constitution.
purpose in tax.
Amount of the tax.
 CONSTITUTIONAL LAW 2
TAXATION
Based on the 2007 Edition of Constitutional Law by Isagani Cruz

Whether or not to tax. Equality in taxation means that the tax

Whom or what to tax. shall be strictly proportional to the
Purpose of the tax. relative value of the property.
Exception: If it violates due process and o There must be a valid
equal protection clause or the classification in the selection of
restrictions of taxation as prescribed in objects of taxation. (Substantial
Article VI, Section 28 of the distinctions)
Constitution. o Taxes cannot be based on
differences like race, skin color,
DUE PROCESS AND TAXATION ethnic origin, etc.
Equitable taxation means that taxes
Must not be confiscatory; Exception: If it should be apportioned among the
is an implement of police power. people according to their capacity to
Examples: Tax on knowledge (Grosjean pay.
v. American Press Co.); Retroactive
taxes to a point that the owner might DOUBLE TAXATION
not have owned such property.
Procedural Viewpoint: Due process does Double taxation happens when
not require previous notice and hearing additional taxes are laid on the same
before a law prescribing fixed or specific subject by the same taxing jurisdiction
taxes on certain articles may be during the same taxing period and for
enacted. the same purpose.
Tax is based on value of taxable
property: taxpayer is entitled to be There is no specific prohibition in the
notified of the assessment proceedings Constitution regarding double taxation.
and to be heard on the correct valuation Double taxation is not allowed if it
given on such property. violates the equal protection clause.
o Consequence: the ad valorem Punzalan v. Municipal Board of Manila
tax (a tax based on the value of (Additional taxes case): The additional
property; usually imposed at the tax of P25, aside from the P50
time of transaction) may be occupational tax, is valid because it is
increased to the prejudice of the levied by different taxing authorities
owner in ex parte appraisals. (one by the national government and
the other by the city government). Also,
EQUAL PROTECTION AND TAXATION workers in Manila could expect a more
lucrative income than those in other
The rule of taxation shall be uniform parts of the country hence, further
and equitable upholding the validity of such tax.

Uniformity in taxation means that
persons or things belonging to the same
class shall be taxed at the same rate.
 CONSTITUTIONAL LAW 2
TAXATION
Based on the 2007 Edition of Constitutional Law by Isagani Cruz

PUBLIC PURPOSE Statutory tax exemption (Article VI,

Section 28(4)):
Taxes shall not be used for purely No law granting any tax exemption
private purposes. shall be passed without the concurrence
Broad interpretation so as to include of a majority of all the Members of the
indirect public advantage or benefit. Congress.
Even if a private citizen will directly o Gratuitous tax exemption: May
enjoy the benefit of the tax, as long as be revoked at will, with or
there is some link to public welfare, the without cause.
tax is valid. o Tax exemption for valuable
Examples: Pensions to war veterans, consideration: It is in the nature
scholarships, unemployment relief, of a contract and is protected
support for the handicapped, care of against impairment. (Casanova
the aged, taxes for vital industries for v. Hord)
national economy, construction of
homesites for deserving citizens and
retirement or death gratuities to civil
servants.

TAX EXEMPTIONS
(Constitutional or Statutory)

Constitutional tax exemption (Article VI,
Section 28(3)):
Charitable institutions, churches, and
parsonages 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.
o For the improvement of the
morality of the people and care
of the indigent and handicapped.
Lladoc v. Commissioner of Internal
Revenue (Church tax case): The tax on
the donation of P10,000 accepted by
the parish priest is valid because it is not
an ad valorem tax on the church itself
but an excise tax on the privilege to
accept the donation.