imitations on The Power of Taxation

The power of taxation, is however, subject to constitutional and inherent

limitations.

Constitutional limitations are those provided for in the constitution or

implied from its provisions, while inherent limitations are restrictions to the
power to tax attached to its nature.

The following are the inherent limitations.

Purpose. Taxes may be levied only for public purpose;

Territoriality. The State may tax persons and properties under its jurisdiction;

International Comity. the property of a foreign State may not be taxed by

another.

Exemption. Government agencies performing governmental functions are

exempt from taxation

Non-delegation. The power to tax being legislative in nature may not be

delegated. (subject to exceptions)

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Constitutional limitations.
1. Observance of due process of law and equal protection of the
laws. (sec, 1, Art. 3)
ARTICLE III
BILL OF RIGHTS
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.
- Any deprivation of life , liberty or property is with due process if it is
done under the authority of a valid law and after compliance with fair
and reasonable methods or procedure prescribed. The power to tax,
can be exercised only for a constitutionally valid public purpose and the
subject of taxation must be within the taxing jurisdiction of the state.
The government may not utilize any form of assessment or review
which is arbitrary, unjust and which denies the taxpayer a fair
opportunity to assert his rights before a competent tribunal. All persons
subject to legislation shall be treated alike under like circumstances and
conditions, both in the privileges conferred in liabilities imposed.
Persons and properties to be taxed shall be group, and all the same
class shall be subject to the same rate and the tax shall be administered
impartially upon them.
2. Rule of uniformity and equity in taxation (sec 28(1)Art VI)
ARTICLE 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.
- All taxable articles or properties of the same class shall be taxed at the
same rate. Uniformity implies equality in burden not in amount. Equity
requires that the apportionment of the tax burden be more or less just
in the light of the taxpayers ability to bear the tax burden.
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3. No imprisonment for non-payment of poll tax (sec. 20, Art III)
ARTICLE III, Section 20. No person shall be imprisoned for debt
or non-payment of a poll tax
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- A person cannot be imprisoned for non-payment of community tax, but
may be imprisoned for other violations of the community tax law, such
as falsification of the community tax certificate, or for failure to pay
other taxes.
4. Non-impairment of obligations and contracts, sec 10, Art III .
ARTICLE III, Section 10. No law impairing the obligation of
contracts shall be passed.
- the obligation of a contract is impaired when its terms and conditions
are changed by law or by a party without the consent of the other,
thereby weakening the position or the rights of the latter. IF a tax
exemption granted by law and of the nature of a contract between the
taxpayer and the government is revoked by a later taxing law, the said
law shall not be valid, because it will impair the obligation of contract.
5. Prohibition against infringement of religious freedom Sec 5, Art III,
ARTICLE 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.
- it has been said that the constitutional guarantee of the free exercise
and enjoyment of religious profession and worship, which carries the
right to disseminate religious belief and information, is violated by the
imposition of a license fee on the distribution and sale of bibles and
other religious literatures not for profit by a non-stock, non-profit
religious corporation.
6. Prohibition against appropriations for religious purposes, sec 29,
(2) Art. VI,
ARTICLE VI, Section 29 (2).
1. No money shall be paid out of the Treasury except in pursuance
of an appropriation made by law.
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.
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.
- Congress cannot appropriate funds for a private purpose, or for the
benefit of any priest, preacher or minister or for the support of any sect,
church except when such priest, preacher, is assigned to the armed
forces or to any penal institutions, orphanage or leprosarium.
7. exemption of all revenues and assets of non-stock, non-profit
educational institutions used actually, directly, and exclusively for
educational purposes from income, property and donors taxes
and custom duties (sec. 4 (3 and 4) art. XIV.
ARTICLE XIV, Section 4 (Par. 3 & 4).
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 (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.
4. No law granting any tax exemption shall be passed without
the concurrence of a majority of all the Members of the
Congress.
- Congress may not deprive the Supreme Court of its jurisdiction to
review, revise, reverse, modify or affirm on appeal or certiorari, final
judgments and orders of lower courts in all cases involving the legality
of any tax, impost, assessment or any penalty imposed in the relation
thereto.

(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.

8. Concurrence by a majority of all members of Congress in the

passage of a law granting tax exemptions. Sec. 28 (4) Art. VI.

ARTICLE VI -Section 28. Par.4

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.