AMBAGS style Notes- Law school made easy for snappy law students

Meaning of Taxation
 The Process or means by which the Sovereign, through its law making body,
raises income to defray the necessary expenses of government.
 a way of apportioning the cost of government among those who are privileged to
enjoy its benefit and therefore must bear its burden
 As a power, it is refer to the inherent power of the state to demand enforced
contributions for public purposes
Purpose of Taxation
 Main purpose, To raise revenues for public purpose
 Secondary purpose, Non- revenue
1. Promote of General Welfare
2. Regulation
3. Reduction of Social Inequality
4. Encourage Economic Growth
5. Protectionism
Elements of Taxation and Meaning of Taxes (CSS)
 Enforced Proportional Contribution from persons and properties
 Imposed by the State by virtue of its sovereignty
 It is levied for the Support of the government
Characteristics of Taxation (EC-PM-PC-LP-LS-LL-LPP)
 It is an enforced contribution
 It is generally payable in money
 It is proportionate in character
 It is levied on persons or property
 It is levied by the state which has jurisdiction over person or property
 It is levied by the law making body of the state
 It is levied for public purpose
Basis and Theories of Taxation
 Lifeblood Doctrine
- Taxes are the lifeblood of the government, for without taxes the
government can neither exist nor endure
- “Since taxes are the lifeblood of the nation, a claim of statutory
exemption from taxation should be manifest and unmistakable
from the language of the law on which it is based.” – YMCA v.CIR
298 SCRA 83
 Benefits-Received Principle
o Reciprocal duties of protection and support between the state and its
inhabitant
 Necessity Theory
o Taxation it is a power predicated upon necessity
Nature of the Power of Taxation (SL-CIL)
 It is inherent in Sovereignty
 It is Legislative in character
 It is subject to Constitutional and Inherent Limitation
“City of manila vs Hon, Angel Valera Colet G.R. No. 120051”

Aspect of Taxation
 Levying or imposition of the tax which is a legislative act
 Collection of the tax levied which is essentially
Extentof the legislative power to tax (SoPArMma
 The Subject or objects to be taxed
o Persons whether natural or juridical
o Property whether real or personal
o Tangible or intabgible
o Businesses, transactions, rights or privileges
o “a state is free to select subject of taxation, repeatedly held that the
inequalities which result from a singling out of one particular class for
taxation or exemption infringe no constitutional limitation so long as
such exemption is reasonable and not arbitrary.
 The Purpose or object of the tax so long as it is a public purpose
o “the court can inquire whether the purpose is really public or private,
the decision of the question is not a legislative but a judicial function.
But once it is settled that the purpose is public, the courts can make no
other inquiry into the objective of the legislative in imposing a tax”.
o Judicial action is limited only to a review where it involves:
o The determination of the validity of the tax in relation to
constitutional precepts or provisions; or
o The determination in an appropriate case of the application
of a tax law.
 The Amount or Rate of the tax
 The Manner, means and agencies of collection of the tax
- The administration of the tax or the implementation of tax laws
The power of tax is the power to destroy
 The power to tax includes the power to destroy if it is used validly as an
implement of the police power in discouraging and in effect, ultimately
prohibiting certain things or enterprises inimical to public welfare.
 “ the power of taxation must be exercised fairly, equally and uniformly, lest the
tax collector kill the ‘hen that lays the golden eggs’
Power of taxation used as an implement of the power of eminent domain
“Tax measures are but “enforced contributions exacted of 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 just compensation for income that is taken becomes necessary. It is in the tax
credit that our legislators find support to realize social justice, and no administrative body
can alter the fact.”– CIR v. Central Luzon Drug Corp 456 SCRA 414
Principles of a sound tax system
1. Fiscal Adequancy
 Sources of revenues must be adequate to meet government expidentures and other
public needs.
 Lifeblood Doctrine
2. Equality or Theoretical Justice

 The tax burden should in proportion to the taxpayer’s ability to pay (ability-to-pay
principle).
 The rule of taxation must be uniform and equitable, it is said to be equitable when its
burden falls on those better able to pay.
 The state must evolve a progressive system of taxation, it is progressive when its rate
goes up depending on the resources of the person affected.
3. Administrative Feasibility
 Tax laws must be capable of convenient, just and effective administration.

Will a violation of these principles invalidate a tax law?

IT DEPENDS. A tax law will retain its validity even if it is not in consonance with the
principles of fiscal adequacy and administrative feasibility because the Constitution does not
expressly require so.
These principles are only designed to make our tax system sound.
The rule of taxation should be uniform and equitable (Sec.28 (1). Art. VI, 1987 Constitution)
Classifications of Taxes (So-Wbb-Da-
1.As to Subject matter or Object (PPE)
a) Personal, poll or capitation
-Tax of a fixed amount imposed on persons residing within a specified
territory, whether citizens or not without regard to their property or the
occupation or business in which they may be engaged.
Ex. (Community tax)
b) Property
-Tax imposed on property, whether real or personal, in proportion either to
its value, or in accordance with some other reasonable methods of
apportionment.
Ex. (Real estate tax)
c) Excise
-Any tax which does not fall within the classification of poll tax or a
property tax. An excise tax is a charge imposed upon the performance of
an act, the enjoyment of a privilege, or the engaging in an occupation.
Ex. (Income Tax, Value- added tax, Estate tax, Donor’s tax)
2. As to Who Bears the Burden
a) Direct
- Tax which is demanded form the person who also shoulders the burden
of tax
-Tax that can’t be shifted to others
b) Indirect
-Tax which is demanded from one person in the expectation and intention
that he shall indemnify himself at the expense of another
-Tax that can be shifted to others
-Tax of compensation income
3. As to Determination of Amount
a) Specific
-Tax of a fixed amount by numbers
- it requires no assessment(valuation) other than listing/classification
object to be taxed
b) Ad Valorem
-Tax of a fixed proportion of the value property with to which the tax is
Assessed
-Real estate tax is an Ad Valorem tax but while it is also a property tax
It is not an excise tax.
4. As to Purpose
a) General, fiscal or revenue
-Tax imposed for the general purposes of the governmental needs
b) Special or regulatory
-Tax imposed for special purpose, to achieve social or economic ends
5. As to Scope
a) National
b) Municipal or local

6. As to Graduation or Rate (PPR)

a) Proportional
-Tax based on a fixed percentage of the amount of the property, receipts
or basis to be taxed.
b) Progressive or graduated
-Tax base increases, Tax rate increases
c) Regressive
-Tax base increases, Tax rate decreases
- We have no regressive taxes.
Regressive system of Taxation
It exists when there are more indirect taxes imposed than direct taxes.
Progressive system of Taxation
It exists when there are less indirect taxes imposed than direct taxes.
Taxation Distinguished from Inherent Powers
Taxation distinguished from Police Power
 As to PURPOSE
Taxation is levied for the purpose of raising revenues; Police power is
exercised to promote public welfare through regulation.
 As to SUPERIORITY OF CONTRACTS
Taxation recognizes the obligation imposed by contracts.
(Art III, Sec 10, Constitution). This limitation does not apply to Police
Power.
 As to TRANSFER OF PROPERTY RIGHTS
In Taxation, the taxes paid form part of the public funds, whereas
Police power allows merely the restraint on the exercise of property
rights.

Taxation distinguished from Eminent Domain

 As to PURPOSE
Taxation is exercised in order to raised public revenue; Eminent domain
is the taking of property for public use.
 As to COMPENSATION
Payments of taxes accrue to the general benefit of the citizen of the taxing
state; in Eminent domain, just compensation is given the owner of the
expropriated property.
 As to PERSONS AFFECTED
Taxation applies to all persons, property and excises that may be subject
thereto; in Eminent domain, only particular property is comprehended.
Tax and Special Assessment
Special assessment is an enforced proportional contribution from owners of lands
especially or peculiarly benefitted by public improvement.
Tax Special assessment

Imposed on persons,
property and excise
A personal liability of the
person assessed
Not based on any special
or direct benefit
General application
Levied only on land
Not a personal liability of the person
assessed.
Based wholly on benefits
Exceptional both as to the time and place

Tax distinguished from license or permit fee

License or permit fee is charge imposed under the police power for purpose of regulation,
And in the nature of a special privilege.
Tax License or Permit Fee
Enforce contribution assessed by sovereign to Legal compensation or reward of an officer for
defray public expenses specific services
Levied for revenue Imposed for regulation

Taxing power Exercise police power

Generally no limit on the amount of tax that
may be imposed
Imposed on persons and property
Failure to pay tax does not necessarily make the
act of business illegal
Its amount should be limited to the necessary
expenses of inspection and regulation
Imposed on the right to exercise a privilege
Failure to pay a license fee makes the act or
business illegal
Tax distinguished from debt
Tax
An obligation imposed by law
Cannot generally be assigned
Generally payable in money
Not subject of set-off or compensation
Imprisonment is a sanction for non-payment of
tax (except if there is a violation on poll tax)
Does not draw interest except only when
delinquent
Imposed only by public authority
Debt
Created by contract
It is assignable
may be paid in kind
Subject of set-off or compensation
Cannot be imprisoned for non- payment of
debt (except when it arises from a crime)
Draws interest when it is so stipulated or when
there is default
Can be imposed by private individual

Tax distinguished from toll

Tax
Enforced proportional contributions
persons and property
A demand of sovereignty
No limit as to the tax amount
Imposed only by the State
Toll
from Sum of money for the use of something; paid
for the use of property which of a public nature
A demand of proprietorship
Amount of toll depends upon the cost of
construction of maintenance of the public
improvement used
May be imposed by the government or
private individuals or entities

Tax distinguished from penalty

Tax
Enforced proportional contributions
persons and property
Intended to raise revenue
May be imposed only by the government
Penalty
from Sanction imposed as a punishment for
violation of a law or acts deemed injurious;
violation of tax laws may give rise to
imposition of penalty
Designated to regulate conduct
May be imposed by the government or
private individuals or entities

Tax distinguished from Tariff

Tax Tariff
All embracing term to include various kinds of A kind of tax imposed on articles which are
enforced contributions upon persons for the traded internationally
attainment of public purpose

Limitation on the Power of Taxation

o Inherent limitations (PP-Nd-Eg-Ic-T)

- Basis Due Process clause “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” (Sec. 1, Art. III)
- Substantive due process – authority of a law that is valid.
Applied to taxation
A tax which is imposed for a private purpose or which is beyond
the jurisdiction of the government to levy and collect offend due
process of law. Here, the law imposing such tax is void or invalid.

- Procedural due process – after compliance with fair and reasonable

methods of procedure prescribe by law.
Applied to taxation
A tax law which denies a taxpayer a fair opportunity to assert his
substantial rights before a competent tribunal is invalid as violative of
the same constitutional guarantee. Procedural due process in judicial
proceedings requires “opportunity to be heard before judgement is
rendered affecting one’s person or property”.
  Requirement that levy must be for a public purpose;
- Test determining is whether or not it is intended for public purpose;
a) for the support of the govt
b) for any of the recognized objectives of the govt
c) for the promotion of the general welfare of the people
- If the purpose if any of these; then the purpose is public in nature
regardless of who is the dialect.
- In determining whether the nature is public or private, we do not take
into account the direct beneficiary, you look at the ultimate objection
- Although private individual are directly benefited, the tax would still
be valid provided such benefit is only incidental

 Non-delegation of the legislative power to tax

- Power to tax is already a delegated power and it could no longer be
further delegated. Exceptions:
o Delegation to the president under flexible tariff law
o Delegation to the LGU under the provision of this Constitution
o Delegation to the administrative agencies
 Exemption from taxation of government entities;
- If the govt taxes itself, It will only be taking money from one pocket
and putting it to another pocket. But there is no prohibition on govt
taxing itself example PhilHealth, SSS, GSIS etc.
 International comity; and
- Principle of equality among States
This extends to properties owned by another state in its sovereign
capacity inside the country.
- Principle of Pactasundservanda
Faithful compliance with int’l obligations
 Territorial jurisdiction
- Taxing authority can impose taxes only in persons, properties or
transactions occurring within its territorial jurisdiction.
- Mobilia Sequuntur Personam (Movables follow the person)
- Exception
a) Application of the protection benefit theory (Reciprocity)
An income earned by Filipino working abroad can be a
subject to the taxing authority because of the protection these
Filipino enjoys from the govt even though in abroad
b) Application of Principle of International Comity
The opposite of the first, which refers to object of taxation
being outside the Phil. Territorial jurisdiction and yet subject to the
taxing authority
Constitutional Limitation
DIRECT CONSTITUTIONAL LIMITATION
o Art 3, Sec 20 “No person shall be imprisoned for non-payment of poll tax”
- Poll tax – imposed on the basis of one’s residence.
- Common law of tax
- A person cannot be sent to prison for failure to pay community tax but a person is
subject to imprisonment for violation of the community tax.
- If the court provided subsidiary imprisonment, it is valid
o Art 6, Sec 28, par 1. Rule of taxation shall be uniform and equitable. Congress shall
evolve progressive system of taxation
- All taxable articles or properties of the same class shall be taxed at the same rate
- As long as there is a valid classification, there is no violation.
- Valid classification:
a) Substantial distinction
b) Germane to the purpose to the law
c) Apply to the present and future condition
d) Apply to all persons belonging to the same class
o Art 6, Sec 28, par. 2. Power of the President to change, alter or modify the existing rates
of tariffs.
- This is one of the exceptions to the rule on the non-delegability of taxing power.
- The power must base on the law granting that power to the Pres and not this
Constitution provision. The law implementing this Constitution Provision is in the Tariff
and Customs Code.
- Can the Pres impose additional duty for the purpose of raising additional revenue?
SC agreed because it is part of the general welfare.
o Art 16, Sec 28 par. 3 Churches, parsonage or convents appurtenant thereto, mosques,
non – profit cemeteries, all lands building and building and improvements actually,
directly and exclusively used for religious and charitable purposes shall be exempt from
taxation.
- Properties covered in exemption
Churches, parsonages, convents appurtenant thereto, mosques, non-profit
cemeteries, all lands, buildings and improvements actually, directly and exclusively used
religious and charitable purposes.
- What are the tax which these properties are exempt from?
It is only real property.
- The test of exemption is “use” and not ownership
- Meaning of “exclusively” – does not mean “solely” but “primarily”
- The exemption is not limited to property actually indispensable for religious, charitable,
or educational purposes. It extends to facilities which are incidental to or reasonably
necessary for the accomplishment of said purposes.
o Art VI Sec 28, par.4 – No law granting tax exemption shall be passed without the
concurrence of a majority of all the member of the congress.
- restricts the exercise of the legislative power to grant tax exemption
- the phrase “a majority of all the members of the Congress” means at least one-half plus
one of all the members thereof, voting separation,
- Is a tax exemption revocable?
IT DEPENDS. If the grant of an exemption does not constitute a contract, but is
merely “a spontaneous concession by the legislature, not connected with any service
or duty imposed”. It is REVOCABLE by the power which made the grant. A state may,
at its pleasure, withdraw an exemption which is a mere gratuity possessing no element of
a contract, even though the corporation may have incurred expense on the faith thereof.
Thus, a statute passed after a corporation has been created, and exempting it
wholly or partially from taxation, without the payment of any consideration or the
assumption of any new burden by the corporation, is a mere gratuity on the part of the
state, and the exemption may be revoked at any time.
- Constitution provides for stricter number and that is absolute majority of Congress not
relative majority.
- if the basis of the tax exemption is by virtue of a franchise granted by Congress, the
exemption may be revoked (Art. XII, Sec.11)
- Grant of tax amnesties, tax condonations and tax refunds if it is a legislative type, must also
comply with the requirement of absolute majority. It is only tax exemption that must comply with
this rule on absolute majority.

- Tax exemption and tax amnesty distinguished

Tax amnesty is an immunity from all criminal and civil obligations arising from non-
payment of taxes. It is a general pardon given to all taxpayers. It applies only to past tax periods,
hence of rectroactive application.
Tax exemption is an immunity from the civil liability only. It is an immunity or
privilege, a freedom from a charge or burden of which others are subjected. It is generally
prospective in application
o Art 6 Sec 29 par. 3- money collected for specific purpose must be spent only for that specific
purpose.

- It is only when there is balance, that the government can use the balance of general
purposes. Proceeds of the tax must only be used for that specific purpose.
o Art 6 Sec 27 par. 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”

General Rule: President if he does not concur with a portion of the bill cannot just veto
that portion to which he does not concur. He either approves the entire bill or vetoes the
entire bill and not just portions of the bill
Exception: Case of appropriation, revenue or tariff bills
 Appropriation bill - is a bill which appropriates public money
 Revenue bill – is a bill which imposes taxes
 Tariff bill – is a bill which has something to do with tariff and duties.

- If the item is subject to a condition, the President cannot veto the condition which the
item is attached

o Art 8, Sec.5, par. 2 – “ The Supreme Court shall have the following powers: x x x
Review, revise, reverse, modify or affirm on appeal or certiorari x x x final
judgements and orders of lower courts in x x x all cases involving the legality of any
tax, impost, assessment, or toll, or any penalty imposed in relation thereto”.

- Congress cannot take away from the Supreme Court the power given to it by the
Constitution as the final arbiter of tax cases.

o Art 14, Sec 4, Par 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”.
Art 14, Sec 4, Par 4 “Subject to conditions prescribed by law, all grants
endowments, donations or contributions used actually, be exempt from tax”.

- the exemption covers income, property and donor’s taxes and custom duties
- if the revenue is related for the educational purpose regardless of the disposition of
revenue is exempted.
- the word “exclusively” in the provision means “solely”
 Correlated with Sec 30 par. h of NIRCon income tax provision, where it
provides for corporations organizations or associations which are exempt for
income taxation and one the entities mentioned there is a non-stock, non-profit
educational institution not conflict with the Constitution.
 The last portion of Sec 30 par. h says that the exemption from income
taxation of these institutions will apply only with respect to income earned as
such in the pursuit of its primary purpose. That all other income earned by these
institutions from its real or personal properties regardless of the disposition will
not be exempt. There is a conflict with the Constitutional provision

How to reconcile Sec 30 h and the constitutional provision?

 Based on the compliance of condition
 If the collision is head- on, there cannot be anything done but to declare Sec
30h as unconstitional.
 Reconciliation occurs when the asset or revenue of the institution is not
actually, directly and exclusively used for educational purpose, then the
exemption will not apply as provided for in Sec 30h

o Art 10, Sec 5 and 6

Sec. 5. – Each local government unit shall have the power to create its own sources of
revenue subject to such limitation and guidelines as the Congress may provide.
Sec. 6. –LGU shall have a just share as determined by law in the national taxes which
shall be automatically released to them.
- the power of the tax of the LGU is still subject to such guidelines and limitations as
Congress may provide. While the LGU has been granted the power to tax, Congress still
remains the power to limit on the exercise of this power
 - The nature of limitation on the power to tax of LGU
 If the national government grants a franchise/entity of the grantee of the
franchise even for payment of local taxes is allowed.
 National taxes and duties already imposed by the government can no
longer be imposed by the LGU.
 Provision that taxes already imposed by provinces can no longer be
imposed by municipalities
 National government can also enact a law imposing a local tax because of
this provision saying that the power to tax of the LGU is still subject to
such limitation as Congress may provide.
o Art 16, Sec 24
- Appropriation, Revenue and Tariff bill must originate from the House of
representatives. These bills cannot be introduced from the Senate. After the House of
Reps, the bill will then go to the Senate. Once the bill reaches Senate, there is no
prohibition on the Senate from all together changing the bill. Senate can change the bill.

INDIRECT CONSTITUTIONAL LIMITATION

o Sec 1, Art 3 “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.
 Substantive due process – authority of a law that is valid.
 Procedural due process – after compliance with fair and reasonable methods of
procedure prescribe by law
 Equal protection clause - all persons belonging to the same class should be treated
alike both to the rights and privileges granted and obligations imposed.
- clauses allows classification if there is a valid basis. For a classification to be valid:
 Must be based of substantial distinction
 Must be germane to the purpose of the law
 Must apply to present and future
 Must apply to all persons belonging to the same class
- In a situation where a tax amnesty is granted, those who paid the tax cannot claim
unequal protection because there is a case where SC said that the grantees of tax
amnesties are a class by themselves. There is no unequal protection

o Art 3, Sec 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”
- serves as a limitation on the power to tax when the power to tax serves as “prior
restraint” in the free exercise of religious freedom
 it has been held that the imposition of license fees on the distribution and sale
of bibles religious literature not for purposes of profit by a non-stock, non-profit
religious corporation violates the constitutional guarantee of the free exercise and
enjoyment of religious profession and worship which carries with it the right to
disseminate religious beliefs and information
 It is a prior restraint because the payment of the fee is made a condition precedent
to the exercise of religious condition to the exercise of religious freedom because
they cannot sell without paying the fee.
 It is actually in the nature of a condition or permit for the exercise of the right –
American Bible Society vs City of Manila, 101 Phil.386
- if the payment of the tax is a condition precedent before the free exercise of religious
act then that is prior restraint and therefore will violate religious freedom.
- If presupposes that if the power to tax is exercised after the exercise of religious
freedom. Then there is no prior restraint and therefore the religious freedom will serves
as limitation on the power to tax.
- The same principle applies to press freedom
 o Art. 6 Sec. 29 par. 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 or 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”.
- Government cannot appropriate public money or property for purely religious purposes
- Exception: respect to a religious person employed by the government.

o Art. 3 Sec. 10 “No law impairing the obligation of contracts shall be passed”.
- The obligation of a contract is impaired when its terms or conditions are changed by law
or by a party without the consent of the other.
- There is only a contract if there is consent, object and consideration.
- A tax exemption based on a contract is revoked by a taxing statute.
- Exceptions (without consent of tax payer)
 If tax benefit granted a franchise
 Exercise of police power
 Benefit given in a mere privilege
- Exemption from taxation provided for in a franchise, although in a sense is an
exemption based on a contract, may be revoked because under the Constitution, a
franchise “subject to amendment, alteration or repeal by Congress”.

SITUS
Meaning of situs of taxation
Situs of taxation means place of taxation
Basic Rule
That the state where the subject to be taxed has a situs may rightfully levy and
collect the tax; and the situs is necessarily in the sate which has jurisdiction or which
exercises dominion over the subject in question
Exception
1) Protection- benefit theory applies
2) Principle of international comity applies

Situs of taxation is simply the place of taxation of which taxing authority can impose
taxes can impose taxes on the following object of taxation:
 Persons – Poll tax may properly be levied upon persons who are inhabitants or
residents of the state whether citizens or not.
 Real Property – lex rei sitae
Real estate is subject to taxation in the state in which it is located whether the
owner is a resident or non- resident and is taxable only there.
 Tangible personal property – taxable in the state where it has actual situs-
where it is located.
 Intangible personal property – Mobilia sequuntur personam
The general rule is the situs for purposes of property taxation is at the domicile
of the owner.
Exception: Sec 104, NIRC
 Income – the taxing authority is
 Place where the income earner is a citizen
 Place where the income earner is a resident
 Place where the income is earned.
 Business or occupation or transaction taxes-
Taxing authority where the place of the act is performed

Multiplicity of situs
Effect: due to the variance in the concept of “domicile” for tax purposes and
considering the multiple distinct relationships that may arise with respect to intangible
personality and the use to which the property may been devoted.
Remedy:
 Grant of tax exemption
 Tax credit method – Deduction tax liability
 Deduction Method – Reduction of Phil. Taxes to the Gross Income
Double Taxation
- No law prohibiting double taxation.
- only when double taxation in its strict sense that there can be a violation of the equal
protection clauses and it is then that double taxation become unlawful
- Requisite of double taxation in its strict sense
 There must be taxing twice
 By the same taxing authority
 Within the same jurisdiction
 For the same purpose
 Within the same year
 On the same property or subject matter
 Taxes must be of the same kind or character
FORMS OF ESCAPE FROM TAXATION
o Capitalization
- a form of escape from taxation through a reduction in the purchase price of a property
equivalent to the amount of taxes expected to be payable on the property purchased.
o Avoidance
- use of legitimate means in escaping taxation. Taxpayers make use of means allowed
under the law. Example of this is deposit of money in long term deposit with a maturity
of not less than 5 years which is exempt from tax.
o Shifting
- The burden imposed to particular tax payer transfers the burden to another tax payer.
Example is the VAT.

o Transformation
- form of escape through a reduction in the cost of production
o Evasion
- Unlawful means of escaping taxation. This is the employment of fraudulent means to
escape taxation. It is normally done through under declaration of income or over
declaration of expenses. Tax evasion involves fraud.
o Exemption
Gratuitous grant of freedom from taxation made by the govt.
 Revocable at will – does not impair contracts as there is no consideration
 Personal in nature
 Strictly construed against the grantee –burden to prove is on grantee
Exception where tax exemptions are liberally construed:
 When the law provides for liberal interpretation
 Those granted to the traditional grantees of tax exemption- those normally being
granted tax exemption such as religious entities
SOURCES OF TAX LAWS
o Legislation –Refers to enactments of the legislative boy
o Administrative rulings and regulations or opinions of tax officials including the
opinions of Sec. of justice
- Sec 246of NIRC provides that any revocation modification or reversal of any of the
rules promulgated by the CIR shall not be given retroactive application. If the revocation
modification or reversal will be prejudicial to tax payer
Except
General Rule: changes in rulings of BIR or Sec of Finance cannot be given retroactive
application if to do so will be prejudicial to tax payer.
Exceptions:
 When the taxpayer deliberately omits material facts in his return and other docs
filed with the BIR
 When the facts subsequently gathered with the bureau materially differ fro the
facts on which the rulings is based
 When the taxpayer acted in bad faith
o Judicial decision
NATURE OF TAX LAWS
o Tax laws are not political in nature
o Tax laws are civil and not penal in nature