 Inherent power of the sovereign,

 exercised thru the legislature,

 to impose burdens upon the subject
and object within its jurisdiction,
 for the purpose of raising revenues to
carry out the legitimate objectives of
the government.
REVENUE OBJECTIVE
- primary purpose is to raise revenue
- e.g. E-VAT “ mounting budget deficit,
revenue generation, inadequate fiscal
allocation for education, increased
emoluments for health workers…”
NON-REVENUE OBJECTIVE
- taxation is employed as a device for
regulation
- e.g. Excise tax on alcohol products,
tobacco products, amusement places like
massage parlor, night clubs, cockpits
1. It is an enforced contribution
2. It is generally payable in money
3. It is proportionate in character
4. It is levied on persons or property
5. It is levied by the state which has
jurisdiction over the person or property
6. It is levied by the law-making body of
the state
7. It is levied for public purpose
THEORY OF
TAXATION

“LIFEBLOOD THEORY”

like blood which acts as a support to

every human organ so it could perform
every duty inside the body, tax acts as the
blood which supports government and
state.
BASIS OF TAXATION

“BENEFITS-RECEIVED
PRINCIPLE”

reciprocal duties of
protection and support
between the state and its
inhabitants
Some of the many functions of
the government include
expenditures on war, the
enforcement of law and
public order, protection of
property, economic
infrastructure (roads,
enforcement of contracts,
etc.), public works, social
engineering, and the
operation of government
itself.
Most modern governments
also use taxes to fund
welfare and public services.
These services can include
education systems, health
care systems, pensions for
the elderly, unemployed
benefits, and public
transportation. Energy,
water and waste
management systems are
also common public
utilities.
Commissioner vs. Algue, Inc.

It is said that taxes are what we pay for

civilized society. Without taxes, the
government would be paralyzed for lack of
motive power to activate and operate it.
Hence, despite the natural reluctance to
surrender part of one’s hard earned income to
the taxing authorities, every person who is
able to must contribute his share in the
running of the government.
 The government for its part, is expected to
respond in the form of benefits intended to
improve the lives of the people. This symbiotic
relationship is the rationale of taxation and
should dispel the erroneous notion that it is an
arbitrary method of exaction by those in the
seat of power.
But even as we concede the inevitability
and indispensability of taxation, it is a
requirement in all democratic regimes that it
be exercised reasonably and in accordance
with the prescribed procedure. If it is not, then
the taxpayer has a right to complain and the
courts will come to his succor.
1. It is inherent in
sovereignty

3. It is legislative in
character

5. It is subject to
constitutional and
inherent limitations
1. subjects/objects to be taxed
2. purpose of the tax
3. amount/rate of the tax
4. manner and means of collection of
the tax
1. FISCAL ADEQUACY
- the sources of revenue should be
sufficient to meet the demands of
public expenditures
1. EQUALITY/THEORETICAL
JUSTICE
- tax burden should be in proportion
to the taxpayer’s ability to pay
1. ADMINISTRATIVE
FEASIBILITY
- tax laws should be capable of
convenient, just and effective
administration