Chapter 1
Taxation in General
A. Definitions:
Taxes – are the enforced proportional
contributions from persons, property, - 1. Necessity / Lifeblood Doctrine – It has the
levied by the State by the virtue of its
sovereignty, for the support of government
and for all public needs. - - It constitutes as the lifeblood of the nation
Taxation
Government’s Perspective: - - It should be collected without unneccesary
- is the power by which the sovereign,
through its law-making body, raises revenue-
to defray the necessary expenses of
government.
Taxpayer’s Perspective: - -Neglect or omission of government officials
-is the compulsory transfer of money (or
goods) from private individuals, institutions,
or groups to the government. (May be levied
upon wealth or income, or in the form of a-
surcharge on prices.
-It is a destructive power which interferes
with the personal and property rights of the
people and takes from them a portion of
their property for the support of the
government.
Economic’s Perspective:
It is a non-penal, yet compulsory transfer of
resources from the private to the public
sector levied on a basis predetermined
criteria and without reference to specific
benefit received.
Tax base – measure upon which the
assessment or determination of tax liability
is based or the wealth within a jurisdiction
that is liable to taxation. i.e. taxable income
is the tax base income tax and assessed
value is the tax base.
Tax Rate – is the burden ratio, usually the
percentage at which a person, property
privileges or occupation is taxed.
B. Theories
right to compel all citizens and property within
its limits to pay taxes.
and are greatly needed to support the
government.
hindrance.
- Claims for refund or tax credit should be
exercised within the time foxed by law; should
not be delayed or hampered by incidental
matters.
entrusted with the collection of taxes should
not be allowed to bring harm or detriment to
the people
-Primary purpose is to generate funds for the
State to finance the needs of citizenry and to
advance the common weal.
2. Benefits-Protection Theory/Theory of
Reciprocity/Symbiotic Relationship -It is
when a citizen pays from his property the
portion demanded in order that he may by
means be secured in the enjoyment of the
benefits of organized society.
3. Taxation as Government Violation of the
Non-aggression Principle and the Social
Contract Theory – under this view, taxation
wrongfully presumes that the government
has a higher claim on property than the
owner.
C. The 6 Rs of Purposes and Effect of
Taxation
1. Raise Revenues – The primary
purpose is revenue/ to generate
 funds or property for the Sate to
finance the needs of the citizens.
2. Regulatory Purpose – Be levied with
a regulatory purpose covering
matters which are affected with
public interest as to be within the
police power of the state.
3. Redistribution of Wealth/ Reduction
of Social Inequality - used to
redistribute resources between
individuals or classes in the
population. It is an act of
transferring wealth from the richer
sections to the poorer sections.
4. Repricing – levied to address
externalities. Externality is the cost
or benefit that is not transmitted
through prices and is incurred by a
party who was not involved either a
buyer or seller of the goods or
services causing the cost or benefit.
i.e. Pigouvan Tax
5. Resuscitate Economy – A first aid
measure to resuscitate an economy
in distress.
6. Representation – “There is no
taxation without represtation”. Shall
originate in the House of
Representatives.
D. Characteristics and Requisites of Taxes
1. An enforced contribution – it is
involuntary and does not depend on
the will or acquiescence of the
taxpayer. It is mandatory in nature.
2. Exacted pursuant to legislative
authority – power is exercised only
by the legislative department except
in case of valid delegations of the
power or when there is
constitutional grant.
3. Contribution being in the form of
money
4. Imposed, levied, and collected for
the purpose of raising revenue –
imposed primarily to generate funds
but have regulatory or economic
purpose.
5. Used for public or governmental
purposes -cannot be used for private
purposes.
6. Levied by the authority which has
jurisdiction over the person,
property, transaction, rights and
privileges – Attributes of sovereignty
and the jurisdiction to exercise the
power is coterminous with the
bounds of the sovereign jurisdiction.
Requisites of a Valid Tax:
a. The person or property taxed
should be within the jurisdiction
of the taxing authority
b. The assessment and collection of
certain kinds of taxes guarantee
against injustice
c. It should be for public purpose
d. Shall be uniform and equitable
e. Must not impinge on the
inherent and Constitutional
limitations
E. Nature of Taxing Power
Two-Fold Nature:
- Inherent Power – an essential and inherent
attribute of sovereignty, belonging as a
matter of right to every independent
government.
- Legislative
- The power is not granted in the constitution
- It is a contract between the state and its
citizens
- It is not political in nature
- Taxes are personal
- It is unlimited in range
- It is imprescriptible
F. * Aspects of Taxation:
1. Levy – determination of the persons,
property or exercise to be taxed,
amount to be raised, rate to be
imposed and the manner of
implementation. It is exercised by
the Legislature.
2. Assessment and Collection – manner
of enforcing the obligation of taxes
already levied upon taxpayer. This is
the act of administration and
implementation by the Executive
Department.
3. Payment and /or Exercise of
Remedies – It is the compliance and
resistance by the taxpayer. The
exercise of remedy is initially either
through the Executive or the
Legislature and ultimately through
the Judiciary.

 Grant of Exemption is an Exercise of

the Power of Taxation

G. Sound Tax System

1. Canons of Taxation
a. Canon of Equity
b. Canon of Certainty
c. Canon of Convenience
d. Canon of Economy
e. Canon of Productivity
f. Canon of Elasticity
g. Canon of Simplicity
h. Canon of Diversity
2. Basic Principles of Sound Tax System
a. Fiscal Adequancy – means that
sources of revenues must be
adequate to meet government
expenditures and their
variations. (Balanced budget
principle)
b. Theoretical Justice -