03 AGS General Principles of Taxation VI C PDF

AGS Presentation 2
AGS Copyright 2018
Atty. Gerry Sebastian, CPA

PRESENTATION
AGS Copyright 2018
Philippine Copyright 2018. Atty. Gerry Sebastian, CPA. All rights reserved. No part of this may be reproduced in any
form or any means, electronic or mechanical, including photocopying or xeroxing without written permission from the
author. Any copy of this without the express written consent of the author or his duly authorized representative, either
proceeds from an illegitimate source or is in the possession of one who has no authority to dispose of the same.
AGS Atty. Gerry Sebastian, CPA

AGS
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GeneralTaxPrinciples
Laws

Tax Doctrines

AGS
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(03) AGS General Principles of Taxation VI - 7 September 2018
Tax Doctrines 5
Tax Doctrines 6
General Principles of Taxation General Principles of Taxation
Aspect of Taxation Taxes Definition

Taxes are imposed burdens in the exercise of the power of taxation.
1. It should be for a public purposes.

2. The rule of taxation should be uniform.
3. The person or property taxed must be within the
jurisdiction of taxing authority.
4. Assessment and collection of certain kinds of taxes
guarantee against injustice to individuals, especially
Levy Assessment & Collection Payment by way of notice and opportunity for hearing be provided.
It is the act of imposition by
the legislature such as by
It is the act of administration
and implementation of the tax
It is the act of compliance
by the taxpayer, including 5. Tax must not violate inherent and constitutional
its enactment of the law. law by the executive through
its administrative agencies.
such options, schemes or
remedies as may be legally limitations on power of taxation.
open or available to him.

AGS
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7 8
Personal,
Capitation or Poll Excise or
Tax License Taxes Tax Doctrines
Taxes on privilege, General Principles of Taxation
Taxes of fixed occupation or
amounts upon business not falling
residents or persons
of a certain class
without regard to their
within the
classification of poll Categories of Taxes
taxes or property
property or business. taxes. (Internal
(Community Tax revenue taxes) 1
Certificate)
According to
Categories of Taxes Property Taxes
Subject Matter
or Object
Atty. Gerry Sebastian, CPA Taxes assessed on
things or property of
a certain class. (Real
Estate Taxes)

AGS
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9 10
Indirect Taxes
Taxes levied upon Tax Doctrines Ad valorem Taxes
Tax Doctrines
transactions or General Principles of Taxation General Principles of Taxation
activities before the Taxes based upon
articles subject the value of the
matter thereof reach article subject to tax.
the consumers to
whom the burden of Categories of Taxes (Certain taxes on
mineral products)
Categories of Taxes
tax ultimately be
charged or shifted.
(Value-added taxes) 2 3
According to Specific Taxes According to

Burden or Taxes imposed per Determination
Direct Taxes Incidence head, unit or number
or by weight or of Amount
Taxes which are volume and which
demanded from require no
persons who are assessment beyond
primarily burdened to a listing and
pay them. (Income, classification of the
estate and donor’s subjects or articles to
taxes) be taxed. (Certain
excise taxes)

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11 12
Special, Regulatory Tax Doctrines Municipal or Tax Doctrines

or Sumptuary Taxes General Principles of Taxation
Local Taxes General Principles of Taxation
Taxes imposed for a Taxes imposed by
particular legitimate local governments
object of government.
(Educational fund Categories of Taxes (Business taxes
imposed under the Categories of Taxes
under Real Property Local Government
Taxation) Code)
4 5
According to
According to National Taxes Scope or
General or Purpose Taxes imposed by
Authority
national gov’t.
Fiscal Taxes (Internal revenue
Taxes imposed for taxes and custom
general purpose of duties)
the gov’t. (Income
taxes)

AGS
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Tax Doctrines
Proportionate Taxes General Principles of Taxation
Progressive Taxes Tax rates are fixed (in
Tax rate increases as amounts or in
the tax base increase
(Income tax)
percentage) on a flat
tax base. Categories of Taxes
6
According to
Regressive Taxes
Subject Matter
or Object Tax Terminologies
Tax rate decreases Atty. Gerry Sebastian, CPA
as the tax base
increases.

AGS
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Tax Doctrines 15
Tax Doctrines 16
Distinctions
Taxes License Fees
Purpose Imposed for revenue For regulation purposes

License Fees for general public purpose
Basis of Imposition Power of Taxation Police Power of the State

• A license fee is imposed for the regulation of lawful
business or occupation in the exercise of police power, Cost of License and Expenses
Tax the amount of which invariably is limited to cover expenses
Amount Unlimited for Surveillance/Regulation
Doctrines of issuing the license and cost of necessary surveillance,
inspection or supervision by the government. Subject On Persons, Properties, On exercise of a
Rights or Transactions right or privilege
Time of Payment Paid after Paid before

Commencement of Business Commencement of Business
Effect of Non-Payment Failure to pay does not Failure to pay makes

make the business illegal the business illegal
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Tax Doctrines 17
Tax Doctrines 18
Distinctions
Taxes Debt
Basis Law Contract or Judgment
Debt Failure to Pay May result in Imprisonment No Imprisonment
Mode of Payment Generally in Money Money, Property or Service
• A debt or an ordinary obligation is based upon juridical
Assignability Not assignable Assignable
Tax tie, created by law, contracts, etc. while taxes are imposed
burdens in the exercise of the power of taxation.
Doctrines Compensation or Set-off Not subject to Set-off Maybe subject to Set-off
Interest No interest unless delinquent Interest if stipulated/delayed
Authority Imposed by the Government Enforced by Creditor
Prescription Tax Code on Prescription New Civil Code on Prescription

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Tax Doctrines 19
Tax Doctrines 20
Distinctions Taxes Special Assessments

Special Assessments Levied on Land, Persons,
Subject Property, Income or Business Levied on Land
• A special assessment or levy is a demand for contribution
to help defray cost of improvement on real property Personal liability Cannot be made the personal
Tax owners of a particular locale directly benefited by such
Liability of the Taxpayer liability fo the person assessed
Doctrines improvement while taxes are imposed burdens in the
exercise of the power of taxation. Basis Based on necessity Based solely on benefits
and partially on benefits
Application General application Special application only as

to a particular time and place

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Tax Doctrines 21
Tax Doctrines 22
Distinctions Taxes Toll

Toll Levied for the support Compensation for the use
Purpose of the government of the another one’s property
• A toll is an act or demand on proprietorship or
Determined by the Determined by the cost of
Tax ownership. Its imposition is generally contractual in
nature, and it may be demanded by private persons or
Amount Sovereign Authority property/improvement
Doctrines entities while taxes are imposed burdens in the exercise of
the power of taxation. Authority Imposed by the State Imposable by the State
or Private Individual

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Tax Doctrines Prospectivity
General Principles of Taxation
of Tax Laws
Taxes may be Exception
imposed to the Rule:
retroactively by
law but, unless so Retroactivity is
expressed by such expressly provided
law, these taxes by the Tax Law.
must only be
imposed
prospectively.
Doctrines Prospectivity
of Tax Laws
Rule:
Taxes are imposed
prospectively.
AGS AGS
Atty. Gerry Sebastian, CPA Atty. Gerry Sebastian, CPA
23 24
Tax Doctrines
25
Tax Doctrines 26

Imprescriptibility Exception
of Taxes to the Rule:
Unless otherwise
provided by the tax
law itself, taxes
Prescription is
expressly provided Prescription of Tax Laws
are imprescriptible. by the Tax Law.
• Prescription, in legal terms, is the period within which to
Tax exercise a right given by law. Once the period expires,
the right cannot be availed of by the party. If it is
Imprescriptibility
of Taxes
Doctrines imprescriptible, it means the exercise of the right does not
expire. As applied to tax laws, it is a period given by law
Rule: to implement and administer the tax law concerned.
Taxes are
imprescriptible.
AGS AGS
25 26
Not subject to Ex
Tax Doctrines 27
Tax Doctrines Post Facto Law Not Penal in
28

General Principles of Taxation Not Political in Tax laws can make Character
Character taxable an act
done before the Tax laws are
Tax laws are not passage of the law imposed by the
political in by retroactive government out of
Prescription of Tax Laws character. It
means that
whatever
application. sense of duty. It is
not a punishment.
The penal
government is in provisions only
• Should the taxing authority leave out any provision place, taxes will be punishes acts that
relating to when the tax statute will be extinguished or collected. violate this sense
Tax extinct in occasions where tax is not paid despite being Civil in Nature of duty.
Doctrines due, then the Government can still collect the tax due even if
over a hundred years have already lapsed, due to its
Nature of
Tax Laws
Taxes are imposed
by law. Its
obligatory nature
imprescriptible nature. However, all tax statutes right does not stop even
now have a prescriptive period. with the change in
sovereignty. Once
established, it
continues unless a
competent
authority says
otherwise.
AGS AGS
27 28
Tax Doctrines
29
Provisions must be
Tax Doctrines 30
Tax Laws General Principles of Taxation

should be clear unambiguous
The imposition of The Legislature
taxes should not should strive to
enact laws that are
Rules of Interpretation
be done clear and not
haphazardly. This susceptible to
is about taking several
hard-earned
money from a less interpretations.
than reluctant • Rule 1. Absolute Sentencia Expositore Non Indiget. When
taxpayer.
Legislature should
be very precise
Tax the language of the law is clear, no explanation of it is
required. (Barcellano v. Bañas, GR 165287, 14 September 2011, citing Rolando A.
Interpretation of
Tax Laws Crafting tax laws Doctrines Suarez, Statutory Construction, p. 171, 2007)
require expertise
as the imposition
must be provided
in a precise
manner.
Otherwise, the
execution may be
fraught with a lot of
AGS obstacles.
AGS
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Tax Doctrines 31
Tax Doctrines 32
Rules of Interpretation Rules of Interpretation

• Rule 2. Tax laws are liberally interpreted in favor of the • Rule 4. Tax Exemptions are construed liberally in favor
taxpayer and strictly construed against the government. of the following grantees:
Tax (MRR vs. Collector of Customs, 52 Phil 950, Mactan Cebu vs. Marcos, 261 SCRA 667) Tax • When the law provides liberal constructions.
Doctrines • Rule 3. Liberality of interpretation does not apply to tax
exemptions and claims for refund. Liberality of Doctrines • Exemptions from taxes granted under special
circumstances to special classes of persons.
interpretation does not apply to tax exemptions. In this case, • Exemptions in favor of the government, its political
any claim for tax exemption should be construed against subdivisions or instrumentalities.
the taxpayer under the principle of strictissimi juris. • Exemptions to traditional exemptees, such as in favor of
religious and charitable institutions.

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Tax Doctrines Competing
33
Tax Doctrines 34
Tax Imposition General Principles of Taxation

The imposition of Imposition
taxes, while a Double taxation
basic sovereign results in either
right, is prone to different
abuses. One of the
ways to abuse
such plenary
jurisdictional tax
imposition or tax
laws resulting in
Double Taxation
power is multiple the same
impositions on the impositions. • Direct Duplicate. It means taxing for the same tax period
same subject or
object. Legislative zeal
must be tempered
Tax the same thing or activity twice, when it should be taxed
but once, for the same purpose and with the same kind
Double Taxation The duty to Doctrines of character of tax. This is the result of a duplicate
imposition of burden on the same object or subject. This
provide much
needed revenues is prohibited.
for the • Indirect Duplicate. It is considered indirect if the second
Government may
result in iniquitous tax is imposed differently on the same object or subject.
imposition that is
not readily
addressed.
AGS AGS
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Tax Doctrines 35
Tax Doctrines 36
First Tax Second Tax

Direct Duplicate Double Taxation Indirect Duplicate International Juridical
Direct Duplicate Double Taxation Subject Matter
• The Supreme Court reiterated the ruling on direct duplicate Purpose
taxation, as it provided the test, that there is double
Tax taxation if the taxpayer is taxed twice: Taxing Authority Only one needs
to be absent Different Country
Doctrines • on the same subject matter

• for the same purpose
Taxing Jurisdiction
• by the same taxing authority Tax Period
• within the same taxing jurisdiction
• for the same taxing periods and Kind/Character
• of the same kind or character. (Nursery Care Corporation et al, v. Prohibited by law Not prohibited by law
Anthony Acevedo et al, GR no. 180651, 30 July 2014)

AGS
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US Internal
Tax Doctrines Revenue System Power to Tax
37
Tax Doctrines 38

General Principles of Taxation Our internal
revenue system
involves the Power
was largely a to Destroy while
product of US this Court sits
laws. That is why
US jurisprudential
rulings have a
persuasive effect
Justice Holmes of
the US Supreme
Court in the case
Power of Taxation
on Philippine tax of Panhandle Oil
laws. Often, the Co. vs. • The power to tax “is an attribute of sovereignty”. In fact,
Supreme Court Mississippi, 277
recognized
principles adapted Power to Tax US 218
Tax it is the strongest of all the powers of government. But for
all its plenitude the power to tax is not unconfined as there
involves the Power
Power to Tax
by the US courts.
to Destroy Doctrines are restrictions. Adversely effecting as it does property
rights, both the due process and equal protection clauses
Chief Justice of the Constitution may properly be invoked to invalidate
Marshall of the US
Supreme Court, in in appropriate cases a revenue measure. (Reyes et al v. Almanzor et
al, GR L-49839-46, 26 April 1991)
the case of
McCulloch vs.
Maryland, 4
Wheat, 316 4 L ed.
579
AGS AGS
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Tax Doctrines 39 40
Power of Taxation
• If it were otherwise, there would be truth to the 1903 GeneralTaxPrinciples
Laws
dictum of Chief Justice Marshall that “the power to tax
Tax involves the power to destroy.” The web or unreality spun Atty. Gerry Sebastian, CPA
Doctrines from Marshall's famous dictum was brushed away by one
stroke of Mr. Justice Holmes pen, thus: “The power to
tax is not the power to destroy while this Court sits.” So
it is in the Philippines. (Reyes et al v. Almanzor et al, GR L-49839-46, 26 April
1991, citing Sison, Jr. v. Ancheta, 130 SCRA 655 [1984], Obillos, Jr. v. Commissioner of
Internal Revenue, 139 SCRA 439 [1985])

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AGS Presentation 2

AGS Copyright 2018

Atty. Gerry Sebastian, CPA

AGS Copyright 2018

AGS Atty. Gerry Sebastian, CPA

Atty. Gerry Sebastian, CPA

Atty. Gerry Sebastian, CPA

General Principles of Taxation General Principles of Taxation

Aspect of Taxation Taxes Definition

1. It should be for a public purposes.

Atty. Gerry Sebastian, CPA

Atty. Gerry Sebastian, CPA

According to Specific Taxes According to

Atty. Gerry Sebastian, CPA

Special, Regulatory Tax Doctrines Municipal or Tax Doctrines

Atty. Gerry Sebastian, CPA

Atty. Gerry Sebastian, CPA

Purpose Imposed for revenue For regulation purposes

Basis of Imposition Power of Taxation Police Power of the State

Time of Payment Paid after Paid before

Effect of Non-Payment Failure to pay does not Failure to pay makes

Atty. Gerry Sebastian, CPA

General Principles of Taxation General Principles of Taxation

Distinctions Taxes Special Assessments

Application General application Special application only as

Atty. Gerry Sebastian, CPA

General Principles of Taxation General Principles of Taxation

Distinctions Taxes Toll

Atty. Gerry Sebastian, CPA

General Principles of Taxation

General Principles of Taxation

Tax Laws General Principles of Taxation

General Principles of Taxation General Principles of Taxation

Rules of Interpretation Rules of Interpretation

Atty. Gerry Sebastian, CPA

Tax Imposition General Principles of Taxation

General Principles of Taxation General Principles of Taxation

First Tax Second Tax

Doctrines • on the same subject matter

Atty. Gerry Sebastian, CPA

General Principles of Taxation

General Principles of Taxation

Atty. Gerry Sebastian, CPA

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