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Inherent Limitations on the Power to Tax peace, equality, justice, freedom, cooperation, and amity with

all nations."
A. public purpose,
B. international comity (par in parem non habet imperium,)- where even the strongest
C. territoriality, state cannot assume jurisdiction over another state, no matter
D. non-delegation of the power to tax, how weak, or question the validity of its acts in so far as they
E. the various tax exemptions granted government are made to take effect within its own territory.
agencies or instrumentalities.
3. TERRITORIALITY
1. PUBLIC PURPOSE
The taxing power of a country is limited to person and property
The power to tax exists for the general welfare; hence, implicit within and subject to its jurisdiction.
in its power is the limitation that it should be used only for a
public purpose. Rules Observed in Fixing Tax Situs
1. POLL/CAPITATION/COMMUNITY TAX - residence of
Who may determine 'public purpose'? the taxpayer.
- The power to determine whether the purpose of taxation is 2. PROPERTY TAX
public or private resides in Congress. Real Property, where taxable- the state or country
where it is located
However, this will not prevent the court from questioning the Personal property, where taxable- at the domicile of its
propriety of such a statute on the ground that the law enacted owner
is not for a public purpose; but once it is settled that the law is
for a public purpose, the court may no longer inquire into the Mobilia Sequuntur Personam - Movables follow the person
wisdom, expediency or necessity of such tax measure
These properties are considered as situated, thus taxed, in the
Cases of "Public Purpose" Philippines; the residence of their owners is immaterial.

a. Public Improvement a. franchise exercised in the Philippines;


b. Unemployment relief b. shares of stock, obligations, bonds issued by domestic
c. Buildings and roads / Infrastructure corporations organized and constituted in accordance with
d. Local police forces (subsidies) under R.A. 6141 Philippine laws;
e. Industries classified as indispensable under P.D. 1987 c. shares, obligations, bonds issued by a foreign corporation
f. Construction of home sites where 85% of its business is located in the Philippines. It is
g. Promotion of science and invention subject to donor's tax and estate tax;
h. Upliftment of the underprivileged d. Shares, obligations, bonds issued by foreign corporations
i. Rehabilitation of the sugar industry which has acquired business situs, when such have been used
j. Pensions to deserving retirees in the furtherance of the business of the foreign corporation;
k. Oil industry's protection e. Shares/rights in a partnership business or industry
1. Socialized housing established in the Philippines.
m. Educational subsidy
4. NON-DELEGATION OF THE POWER TO TAX
The entrusting of the collection of the fees does not - The power to tax is exclusively vested in the legislative body.
destroy the public purpose of the ordinance. So long
as the purpose is public, it does not matter whether Exceptions
the agency through which the money is dispensed is A. Article VI, Section 28(2) of the Constitution
public or private. The Congress may, by law, authorize the
President to impose tariff rates, import and
2. INTERNATIONAL COMITY export quotas, etc. [custom duties],

Under Section 2, Article II of our Constitution, the Philippines B. Article X, Section 5 of the Constitution
"adopts the generally accepted principles of international law Each local government unit shall have the
as part of the law of the land, and adheres to the policy of power to create its own sources of revenue, fees,
charges, subject to such guidelines and limitations
as the Congress may provide consistent with the
basic policy of local autonomy.

For a valid delegation of power, it is essential that the law


delegating the power must be (1) complete in itself, that is, it
must set forth the policy to be executed by the delegate and,
(2) it must fix a standard — limits of which are sufficiently
determinate or determinable to which the delegate must
conform.

5. EXEMPTION FROM TAXATION OF GOVERNMENT


AGENCIES/INSTRUMENTALITIES

Properties of the national government as well as those of the


local government units are not subject to tax, otherwise it will
result in the absurd situation of the government "taking money
from one pocket and putting it in another."

May the government tax itself?


Chief Justice Hilario G.
Davide, Jr. has stated that "nothing can prevent Congress
from decreeing that even instrumentalities or agencies of
the government performing governmental functions may be
subject to tax."'