Taxation vs.

Police Power

With regards to the effect, In taxation, the money contributed becomes part of public funds. In
Police power, there is no transfer of title. At most there is restraint on the injurious use of
property.

With regards to the benefit received, In taxation, it is assumed that the individual receives the
equivalent of the tax in the form of protection and benefits from the government. In Police
power, indirect benefits may arise from the maintenance of a healthy economic standard of
society.

With regards to imposition, in taxation, no limit as to the amount of tax that may be imposed.
Whereas in Police power, amount imposed should not be more than sufficient to cover license
and necessary expenses.

With regards to the relationship to constitution, the power of taxation is subject to

constitutional limitations including impairement of obligations and contracts. Whereas in police
power it is superior to the impairment of contract provisions.

2 General Limitations: 1.Inherent Limitation and 2. Constitutional Limitations

A. Inherent Limitations:

1. Public Purpose- revenues collected from taxation should be for a public purpose
The right of the legislature to appropriate public funds is correlative with its right to tax and
such may only be exercised for public purpose. Public use does not mean people at large .
Whatever may be beneficially employed for the general welfare satisfies the requirement.
Notion of public use includes the broader notion of indirect public advantage or benefit. The
fact that not all can recieve does not make it less public for the drift of the law is the direction
of public welfare and social justice

B. Inherently Legislative

Is a law necessary for LGU taxing power? NO

GR: Purely legislative and it cannot be delegated

Valid Delegation

ETR:
1 Flexible tarrif clause. Sec 28 (2) Art 6 of the 1987 Constitution
(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.

2. Emergency powers of the President- Sec 23 (2) Art VI 1987 Constitution

(2) In times of war or other national emergency, the Congress may, by law, authorize
the President, for a limited period and subject to such restrictions as it may
prescribe, to exercise powers necessary and proper to carry out a declared
national policy. Unless sooner withdrawn by resolution of the Congress, such powers
shall cease upon the next adjournment thereof.

3. Delegation merely relates to administrative implementation

- Rules and regulations which are a product of a delegated power to create new and
additional legal provisions have the effect of law and should be within the scope of the
statutory authority granted by the legislature to administrative authorities. It is
required that the regulation be germane to the objects and purposes of the law and that
it be not in contradiction but in conformity with the standards of the law.

In every case of permissible delegation, there must be a showing that the delegation itself is
valid. It is valid only if the law (a) is complete in itself, setting forth therein the policy to be
executed, carried out, or implemented by the delegate (COMPLETENESS TEST);41

and (b) fixes a standard — the limits of which are sufficiently determinate and determinable —
to which the delegate must conform in the performance of his functions. (SUFFICIENCY TEST)42

A sufficient standard is one which defines legislative policy, marks its limits, maps out its
boundaries and specifies the public agency to apply it. It indicates the circumstances under
which the legislative command is to be effected.43

Both tests are intended to prevent a total transference of legislative authority to the delegate,
who is not allowed to step into the shoes of the legislature and exercise a power essentially
legislative.44

4. Delegation to the President to enter into executive agreements and to ratify treaties subject
to the concurrence by the Senate

5. Delegation to the people at large

Q: Do local governments have the power to tax?

Yes. The power to tax is no longer vested exclusively on Congress. The local governments are now given direct
authority to levy taxes, fees and other charges pursuant to Section 5, Article X, of the 1987 Constitution which
provides that Each local government unit shall have the power to create its own sources
of revenues and to levy taxes, fees, and charges subject to such guidelines and
limitations as the Congress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees, and charges shall accrue exclusively to the local
governments.

Q: Does the direct grant of taxing power to the local governments mean that the
legislature may no longer provide limitations and guidelines to such power?
No. While the power to tax may be exercised by local governments, no longer merely by virtue of a valid
delegation as before, but pursuant to direct authority conferred by the Constitution, the basic doctrine on
local taxation remains the same in that the power to tax is primarily vested in Congress.
It must be noted, further, that the power is not inherent in the local government unlike in the national
government. A municipal corporation has no inherent right to impose taxes. Its power to tax must always yield
to a legislative act which is superior having been passed by the state itself which has the inherent power to tax.

Q: May Congress abolish the power to tax of local governments?

No, Congress cannot abolish what is expressly granted by the fundamental law. The only authority conferred to
Congress is to provide the guidelines and limitations on the local government’s exercise of the power to tax.

B. Territorial- the power of taxation no matter how searching it is in its extent, such power is
necessarily limited only to persons, property or businesses within its jurisidiction.

C. Principle of Comity-

This is a limitation which is founded on reciprocity designed to maintain a harmonious and productive
relationships among the various states. Under international comity, a state must recognize the generally-
accepted tenets of international law, among which are the principles of sovereign equality among states
and of their freedom from suit without their consent, that limit the authority of a government to
effectively impose taxes on a sovereign state and its instrumentalities, as well as on its property held,
and activities undertaken in that capacity

D. Tax Exemption of the state

B. Constitutional Limitations

the legal principle that estoppel generally finds no application against the State when it acts to rectify mistakes,
errors, irregularities, or illegal acts of its officials and agents irrespective of rank. The rule holds true even if the
rectification prejudices parties who had meanwhile received benefits.