WHAT IS TAXATION?

IT IS THE INHERENT POWER

OF BY WHICH THE
SOVEREIGN THROUGH ITS
LAW-MAKING BODY RAISES
REVENUE TO DEFRAY THE
NECESSARY EXPENSES OF
THE GOVERNMENT.
 CHARACTERISTICS OF
TAXATION
• INHERENT POWER OF THE
SOVEREIGN STATE
• EXCLUSIVELY LODGED WITH
THE LEGISLATURE
• SUBJECT TO INHERENT,
CONSTITUTIONAL, AND
CONTRACTUAL LIMITATIONS
PURPOSES OF TAXATION
A. RAISE REVENUE
B. NON-REVENUE
a. PROMOTION OF GENERAL WELFARE
b. PROTECTIONISM
c. REGULATION
d. REDUCTION OF SOCIAL INEQUALITY
e. ENCOURAGE ECONOMIC GROWTH
 TAX CASE
BAGATSING, ET AL. VS RAMIREZ, 74 SCRA 306
FACTS: AN ORDINANCE REGULATING THE
OPERATION OF PUBLIC MARKETS AND
PRESCRIBING FOR THE RENTAL OF STALLS WAS
ASSAILED IN THAT THE SUBJECT ORDINANCE IS
NOT A "TAX ORDINANCE" BECAUSE THE
IMPOSITION OF RENTALS, PERMIT FEES, TOLLS
AND OTHER FEW IS NOT STRICTLY A TAXING
POWER BUT A REVENUE-RAISING FUNCTION, SO
THAT THE PROCEDURE FOR PUBLICATION
UNDER THE LOCAL TAX CODE FINDS NO
APPLICATION.
Q. IS THE CONTENTION OF THE PETITIONERS
CORRECT?
 Theory of taxation
NECESSITY THEORY
THE POWER TO TAX IS AN ATTRIBUTE OF SOVEREIGNTY
EMANATING FROM NECESSITY. IT IS A NECESSARY
BURDEN TO PRESERVE THE STATE’S SOVEREIGNTY
AND A MEANS TO GIVE THE CITIZENRY AN ARMY TO
RESIST AN AGGRESSION, A NAVY TO DEFEND ITS
SHORES FROM INVASION, A CORPS OF CIVIL
SERVANTS TO SERVE, PUBLIC IMPROVEMENTS
DESIGNED FOR THE ENJOYMENT OF THE CITIZENRY
AND THOSE WHICH COME WITHIN THE STATE’S
TERRITORY, AND FACILITIES AND PROTECTION
WHICH A GOVERNMENT IS SUPPOSED TO PROVIDE.
 BASIS OF TAXATION
BENEFITS-PROTECTION THEORY

GOVERNMENT
PEOPLE
(PUBLIC
(TAXES)
SERVICES)
 IMPORTANCE OF
TAXATION
LIFEBLOOD THEORY
IT IS SAID THAT TAXES ARE WHAT WE PAY FOR
CIVILIZED SOCIETY. WITHOUT TAXES, THE
GOVERNMENT WOULD BE PARALYED FOR LACK
OF MOTIVE AND POWER TO ACTIVATE AND TO
OPERATE. 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 RUNNING OF
THE GOVERNMENT.
 THEORIES OF COST
ALLOCATION
A.BENEFITS-RECEIVED
THEORY
B.ABILITY TO PAY THEORY
a. VERTICAL EQUITY
b. HORIZONTAL EQUITY
ILLUSTRATION (ABILITY
TO PAY THEORY)
ASSUME THAT MR. A AND MR.
B ARE BOTH EMPLOYEES OF X
CORP. MR A EARNS P150,000
WHILE MR. B EARNS
P200,000. MR. A IS SINGLE
WITHOUT A CHILD BUT MR. B
IS MARRIED WITH FOUR
CHILDREN.
 THE INHERENT POWERS
OF THE STATE
• POWER TO TAX
SUBJECT TO INHERENT, CONSTITUTIONAL, AND
CONTRACTUAL LIMITATIONS. THE POWER OF
TAXATION IS REGARDED AS SUPREME, PLENARY,
UNLIMITED, AND COMPREHENSIVE. AS LONG AS THE
LEGISLATURE, IN IMPOSING A TAX, DOES NOT
VIOLATE APPLICABLE CONSTITUTIONAL LIMITATIONS
OR RESTRICTIONS, THE COURTS HAVE NO CONCERN
WITH THE WISDOM OR POLICY OF THE EXACTION,
THE POLITICAL OR OTHER COLLATERAL MOTIVES
BEHIND IT, THE AMOUNT TO BE RAISED, OR THE
PERSONS, PROPERTY, OR OTHER PRIVILEGES TO BE
TAXED.
 THE INHERENT POWERS
OF THE STATE
• POLICE POWER
POLICE POWER IS THE INHERENT POWER OF A
SOVEREIGN STATE TO LEGISLATE FOR THE
PROTECTION OF THE HEALTH, GENERAL
WELFARE, SAFETY, AND MORALS OF THE PUBLIC.
IT INVOLVES THE POWER TO REGULATE BOTH
LIBERTY AND PROPERTY FOR THE PROMOTION OF
THE PUBLIC GOOD.
THE POLICE POWER OF THE STATE MAY EXERCISED
THROUGH TAXATION BECAUSE TAXES MAY BE
LEVIED FOR THE PROMOTION OF THE WELFARE
OF THE PUBLIC.
THE INHERENT POWERS
OF THE STATE
• POWER OF EMINENT DOMAIN
THE POWER OF EMINENT DOMAIN IS THE
INHERENT POWER OF A SOVEREIGN
STATE TO TAKE PRIVATE PROPERTY FOR A
PUBLIC PUPOSE. THE CONSTITUTION
LIMITS THE EXERCISE OF THIS POWER BY
PROVIDING THAT: “PRIVATE PROPERTY
SHALL NOT BE TAKEN FOR PUBLIC USE
WITHOUT JUST COMPENSATION.”
 COMPARISON OF THE INHERENT
POWERS
• AS TO PURPOSE:
TAXATION TO RAISE REVENUES FOR THE EXPENSES OF
THE STATE.
POLICE POWER TO PROMOTE THE GENERAL WELFARE THRU
REGULATIONS.
EMINENT DOMAIN TO FACILITATE THE STATE’S NEED OF
PROPERTY FOR PUBLIC USE.

• AS TO AMOUNT OF EXACTION:
TAXATION NO LIMIT.
POLICE POWER LIMITED TO THE COST OF REGULATION,
ISSUANCE OF THE LICENSE, AND/OR
SURVEILLANCE.
EMINENT DOMAIN NO EXACTION BUT PRIVATE PROPERTY IS
TAKEN FOR PUBLIC USE.
 COMPARISON OF THE INHERENT
POWERS
• AS TO BENEFITS-RECEIVED:
TAXATION NO SPECIAL OR DIRECT BENEFIT IS
RECEIVED BY AN INDIVIDUAL TAXPAYER.
POLICE POWER NO DIRECT BENEFIT IS RECEIVED BY AN
INDIVIDUAL. A HEALTHY ECONOMIC
STANDARD OF SOCIETY IS ATTAINED.
EMINENT DOMAIN A DIRECT BENEFIT RESULTS IN THE FORM
OF JUST COMPENSATION TO THE PROPERTY
OWNER.

• AS TO SCOPE:
TAXATION ALL PERSONS, PROPERTY, RIGHTS, AND
PRIVILEGES.
POLICE POWER ALL PERSONS, PROPERTY, RIGHTS,
PRIVILEGES, AND LIBERTIES.
EMINENT DOMAIN ONLY UPON SPECIFIC PROPERTY.
 COMPARISON OF THE INHERENT
POWERS
• AS TO NON-IMPAIRMENT OF CONTRACTS:
TAXATION OBLIGATIONS OF CONTRACTS MAY NOT
BE IMPAIRED.
POLICE POWER OBLIGATIONS OF CONTRACTS MAY BE
IMPAIRED.
EMINENT DOMAIN OBLIGATIONS OF CONTRACTS MAY BE
IMPAIRED.

• AS TO TRANSFER OF PROPERTY RIGHTS:

TAXATION TAXES PAID BECOME PART OF PUBLIC
FUNDS.
POLICE POWER NO TRANSFER, BUT ONLY RESTRAINT IN
THE EXERCISE OF PROPERTY RIGHTS.
EMINENT DOMAIN TRANSFER IS EFFECTED IN FAVOUR OF
THE STATE.
 COMPARISON OF THE INHERENT
POWERS
• AS TO AUTHORITY WHICH EXERCISES THE
POWER:
TAXATION EXERCISED BY THE GOVERNMENT OR ITS
POLITICAL SUBDIVISIONS.
POLICE POWER EXERCISED BY THE GOVERNMENT OR ITS
POLITICAL SUBDIVISIONS.
EMINENT DOMAIN MAY BE EXERCISED BY PUBLIC SERVICE
CORPORATIONS OR PRIVATE ENTITIES
OPERATING PUBLIC UTILITIES IF GRANTED
BY LAW.

• AS TO IMPORTANCE:
TAXATION MOST IMPORTANT
POLICE POWER MOST SUPERIOR
EMINENT DOMAIN IMPORTANT
 COMPARISON OF THE INHERENT
POWERS
• AS TO PERSONS AFFECTED:
TAXATION COMMUNITY OR CLASS OF INDIVIDUALS
POLICE POWER COMMUNITY OR CLASS OF INDIVIDUALS
EMINENT DOMAIN OWNER OF THE PROPERTY

• AS TO LIMITATION:
TAXATION INHERENT, CONSTITUTIONAL, AND
CONTRACTUAL LIMITATIONS
POLICE POWER PUBLIC INTEREST AND DUE PROCESS
EMINENT DOMAIN PUBLIC PURPOSE AND JUST COMPENSATION
 STAGES OR COVERAGE
OF TAXATION
1. LEVYING OR IMPOSITION OF THE TAX –
THIS INVOLVES THE PASSAGE OF TAX LAWS
WHICH IS GENERALLY A LEGISLATIVE ACT.
IN THE PHILIPPINES, THE TAXING POWER IS
EXERCISED BY THE CONGRESS.
2. ASSESSMENT – THE PROCESS OF
DETERMINING THE CORRECT AMOUNT OF
TAX DUE.
3. COLLECTION AND PAYMENT – THE ACT
OF COMPLIANCE WITH THE TAX LAW BY THE
TAXPAYER.
SCOPES OF LEGISLATIVE
TAXING POWER
A. AMOUNT OR RATE OF TAX
B. APPORTIONMENT OF THE TAX
C. KIND OF TAX TO BE IMPOSED
D. METHOD OF COLLECTION
E. PURPOSE/S OF ITS LEVY, PROVIDED ITS IS
FOR PUBLIC USE
F. SUBJECT TO BE TAXED, PROVIDED IT IS
WITHIN ITS JURISDICTION
G. SITUS OF TAXATION
 IS THE POWER TO TAX
THE POWER TO DESTROY?
“THE POWER TO TAX IS THE POWER TO
DESTROY.” (MARSHALL DOCTRINE)
REFERS TO THE UNLIMITEDNESS AND THE
DEGREE OR VIGOR WITH WHICH THE TAXING
POWER MAY BE EMPLOYED TO RAISE REVENUE.
THE FINANCIAL NEEDS OF THE STATE MAY
OUTRUN ANY HUMAN CALCULATION, SO THE
POWER TO MEET THOSE NEEDS BY TAXATION
MUST NOT BE LIMITED EVEN THOUGH TAXES
BECOME BURDENSOME OR CONFISCATORY.
 IS THE POWER TO TAX
THE POWER TO DESTROY?
“POWER TO TAX IS NOT THE
POWER TO DESTROY WHILE
THE SUPREME COURT SITS.”
(HOLME’S DOCTRINE)
THE POWER TO TAX KNOWS NO
LIMIT EXCEPT THOSE EXPRESSLY
STATED IN THE CONSTITUTION.
 IS THE POWER TO TAX
THE POWER TO DESTROY?
TWO SCHOOLS OF THOUGHT RECONCILED
ALTHOUGH THE POWER TO TAX IS UNLIMITED,
IT MUST NOT BE EXERCISED IN AN
ARBITRARY MANNER. IF THE ABUSE IS SO
GREAT SO AS TO DESTROY THE NATURAL
AND FUNDAMENTAL RIGHTS OF PEOPLE, IT IS
THE DUTY OF THE JUDICIARY TO HOLD SUCH
AN ACT UNCONSTITUTIONAL.
 WHAT IS TAX?
ENFORCED PROPORTIONAL
CONTRIBUTIONS FROM THE PERSONS
AND PROPERTY LEVIED BY THE LAW-
MAKING BODY OF THE STATE BY VIRTUE
OF ITS SOVEREIGNTY IN SUPPORT OF
GOVERNMENT AND FOR PUBLIC NEEDS.
 CHARACTERISTICS OF TAXES
• FORCED CHARGED
• PAYABLE IN MONEY
• EXCLUSIVELY LEVIED BY THE
LEGISLATURE
• ASSESSED IN ACCORDANCE WITH SOME
REASONABLE RULE OF APPORTIONMENT
• IMPOSED BY THE STATE WITHIN ITS
JURISDICTION
• LEVIED FOR A PUBLIC PURPOSE
• PERSONAL TO THE TAXPAYER
 TAX CASE
SUNIO VS. NLRC, L-57767, JANUARY 31, 1984
FACTS: PETITIONER WAS IMPLEADED IN THE
COMPLAINT IN HIS CAPACITY AS GENERAL
MANAGER OF PETITIONER CORPORATION.
THERE APPEARS TO BE NO EVIDENCE ON
RECORD THAT HE ACTED MALICIOUSLY OR
IN BAD FAITH IN TERMINATING THE
SERVICES OF PRIVATE RESPONDENTS. HIS
ACT, THEREFORE, WAS WITHIN THE SCOPE
OF HIS AUTHORITY AND WAS A CORPORATE
ACT.
Q: CAN A CORPORATION’S TAX DELINQUENCY
BE ENFORCED AGAINST ITS
STOCKHOLDERS?
CLASSIFICATION OF TAXES
• ACCORDING TO SUBJECT MATTER OR
OBJECT:
PERSONAL, PROPERTY TAX EXCISE TAX
CAPITATION, OR
POLL TAX
- FIXED AMOUNT - IMPOSED ON - IMPOSED UPON THE
IMPOSED UPON PROPERTY PERFORMANCE OF AN
PERSONS OF CERTAIN ACT; THE EXERCISE
CLASS WITHOUT OF A RIGHT; OR
REGARD TO ENGAGING IN
PROPERTY, TRADE, BUSINESS OR
BUSINESS, OR PROFESSION.
OCCUPATION.
EX: COMMUNITY TAX EX: REAL PROPERTY EX: VAT, DONOR’S
TAX TAX, INCOME TAX,
OCCUPATION TAX
CLASSIFICATION OF TAXES
• ACCORDING TO SCOPE OR EXERCISING
AUTHORITY:
NATIONAL TAX LOCAL TAX
- IMPOSED BY THE NATIONAL - IMPOSED BY LOCAL
GOVERNMENT GOVERNMENT UNITS
EX: INCOME TAX, ESTATE TAX, EX: OCCUPATION TAX, REAL
DONOR’S TAX PROPERTY TAX (RPT)

• ACCORDING TO PURPOSE:
GENERAL OR REVENUE TAX SPECIAL TAX
- LEVIED WITHOUT SPECIFIC OR -LEVIED FOR SPECIAL PURPOSE
PRE-DETERMINED PURPOSE -REGULATORY TAX AND
SUMPTUARY TAX
EX: INCOME TAX, VALUE-ADDED EX: PROTECTIVE TARIFFS
TAX
 CLASSIFICATION OF TAXES
• ACCORDING TO WHO BEARS THE BURDEN OF
THE TAX
DIRECT TAX INDIRECT TAX

- THE LIABILITY OF THE TAX - THE LIABILITY OR IMPACT FOR

(IMPACT), AND THE BURDEN THE TAX FALLS ON THE ORIGINAL
THEREOF (INCIDENCE) FALL ON TAXPAYER, BUT THE BURDEN OR
THE SAME TAXPAYER. INCIDENCE THEREOF IS SHIFTED
TO ANOTHER.

EX: INCOME TAX EX: VAT, EXCISE TAX, CUSTOM

DUTIES
CLASSIFICATION OF TAXES
• ACCORDING TO MEASUREMENT OF THE
AMOUNT DUE
SPECIFIC AD VALOREM

- MEASURED BY NUMBER, OR - BASED ON THE VALUE OF THE

BASED ON WEIGHT OR PHYSICAL PROPERTY AND MAY REQUIRE
MEASUREMENT. INTERVENTION OF ASSESSORS
AND APPRAISERS

EX: EXCISE TAX ON LUBRICATING EX: RPT, EXCISE TAX ON

OILS, WAXES, AND LUBRICANTS LIQUORS, CIGARETTES PACKED
BY MACHINE, AND AUTOMOBILES
CLASSIFICATION OF TAXES
• ACCORDING TO RATE APPLIED
PROPORTIONAL PROGRESSIVE REGRESSIVE

- BASED ON A FIXED - THE TAX RATE - THE TAX RATE

PERCENTAGE OF THE INCREASES AS THE DECREASES AS THE
TAX BASE TAX BASE INCREASES TAX BASE INCREASES

EX: RPT, VAT EX: INCOME TAX ON EX: NONE

INDIVIDUALS,
DONR’S TAX (IF THE
DONEE IS A NON-
STRANGER), ESTATE
TAX
 OTHER IMPOSITIONS THAN
TAXES
• TOLL – AMOUNT CHARGED FOR THE COST AND
MAINTENANCE OF THE PROPERTY USED.
• PENALTY – PUNISHMENT FOR THE COMMISSION
OF A CRIME.
• COMPROMISE PENALTY – AMOUNT COLLECTED
IN LIEU OF CRIMINAL PROSECUTION IN CASES
OF TAX VIOLATIONS.
• DEBT – A SUM OF MONEY DUE UPON CONTRACT
OR ONE WHICH IS EVIDENCED BY JUDGMENT.
• LICENSE OR FEE – REGULATORY IMPOSITION IN
THE EXERCISE OF THE POLICE POWER.
 OTHER IMPOSITIONS THAN
TAXES
• SPECIAL ASSESSMENT – LEVIED ONLY ON
LAND BASED WHOLLY ON BENEFIT ACCRUING
THEREON AS A RESULT OF IMPROVEMENTS
OR PUBLIC WORKS UNDERTAKEN BY
GOVERNMENT WITHIN THE VICINITY.
• MARGIN FEE – EXACTION DESIGNED TO
STABILIZE CURRENCY.
• TITHE – IMPOSED BY A CHURCH OR SECT.
• TRIBUTE – IMPOSED BY A MONARCH.
 OTHER IMPOSITIONS THAN
TAXES
• SUBSIDY – A LEGISLATIVE GRANT OF MONEY IN
AID OF A PRIVATE ENTERPRISE DEEMED TO
PROMOTE THE PUBLIC WELFARE.
• CUSTOM’S DUTIES AND FEES – DUTIES CHARGED
UPON COMMODITIES ON THEIR BEING
TRANSPORTED INTO OR EXPORTED FROM THE
COUNTRY.
• REVENUE – A BROAD TERM THAT INCLUDES TAXES
AND INCOME FROM OTHER SOURCES AS WELL.
• IMPOST – IN ITS GENERAL SENSE, IT SIGNIFIES
ANY TAX, TRIBUTE, OR DUTY. IN ITS LIMITED
SENSE, IT MEANS A DUTY ON IMPORTED GOODS
AND MERCHANDISE.
 TAX VERSUS LICENSE
TAX LICENSE
PURPOSE TO RAISE REVENUE TO REGULATE ACTION,
BUSINESSES, INDUSTRIES,
PROFESSIONS

LIMITATIONS SUBJECT TO INHERENT, NOT SUBJECT TO THE

ON TAXATION CONSTITUTIONAL, AND LIMITATIONS ON TAXATION
CONTRACTUAL
LIMITATIONS ON THE
POWER TO TAX

AMOUNT UNLIMITED LIMITED TO THE COST OF

REGULATION (LICENSING,
INSPECTION,
SURVEILLANCE)

EFFECT OF DOES NOT MAKE THE MAKES THE BUSINESS

NON-PAYMENT BUSINESS ILLEGAL ILLEGAL
 TAX VERSUS DEBT
TAX DEBT
SOURCE OF LAW CONTRACT
OBLIGATIONS
OBLIGEE DUE TO THE DUE TO THE OBLIGEE
GOVERNMENT IN ITS UNDER A CONTRACT.
SOVEREIGN CAPACITY MAY BE DUE TO THE
GOVERNMENT IN ITS
CORPORATE CAPACITY
FORM OF MONEY MONEY, PROPERTY, OR
PAYMENT SERVICES
INTEREST NO INTEREST IN CASE IF STIPULATED OR IF
OF DELINQUENCY THE PAYMENT IS IN
DELAY
 TAX VERSUS DEBT
TAX DEBT
ASSIGNABILITY NOT ASSIGNABLE GENERALLY
ASSIGNABLE

COMPENSATION NO YES
OR SET-OFF

INCARCERATION YES, EXCEPT FOR NO PERSON CAN BE

FOR NON- NON-PAYMENT OF IMPRISONED FOR NON-
PAYMENT POLL TAX PAYMENT OF DEBTS
(CONSTITUTION)
 TAX VERSUS TOLL
TAX TOLL
DEMAND FOR SOVEREIGNTY DEMAND OF OWNERSHIP OR
PROPRIETORSHIP

IMPOSED BY THE GOVERNMENT MAY BE IMPOSED BY PRIVATE

PERSONS OR ENTITIES

MAY BE BASED ON INCOME OR LARGELY BASED ON THE COST

ON THE VALUE OF THE PROPERTY OF THE PROPERTY USED, OR ON
THE COST OF THE IMPROVEMENT
USED
FORCED CONTRIBUTION COMPENSATION CHARGED BY
THE OWNER FOR THE
VOLUNTARY USE OF THE
PROPERTY OR IMPROVEMENTS.
 TAX VERSUS SPECIAL
ASSESSMENT
TAX SPECIAL ASSESSMENT
IMPOSED ON PERSONS, PROPERTY, LEVIED ONLY ON LAND
RIGHTS, AND PRIVILEGES

PERSONAL LIABILITY ATTACHES ON CANNOT BE MADE A PERSONAL

THE PERSON ASSESSED IN THE CASE LIABILITY OF THE PERSON ASSESSED
OF NON-PAYMENT
NOT BASED ON ANY SPECIAL OR BASED WHOLLY ON BENEFIT
DIRECT BENEFIT
LEVIED AND PAID ANNUALLY EXCEPTIONAL BOTH AS TO TIME AND
LOCALITY
EXEMPTION GRANTED IS APPLICABLE EXEMPTION DOES NOT APPLY. IF
PROPERTY IS EXEMPT FROM REAL
PROPERTY TAX, IT IS ALSO EXEMPT
FROM SPECIAL ASSESSMENT
 OTHERS
• TAX VERSUS REVENUE
TAX REFERS TO THE AMOUNT COLLECTED BY
THE GOVERNMENT FOR PUBLIC PURPOSE.
REVENUE REFERS TO ALL INCOME
COLLECTIONS OF THE GOVERNMENT WHICH
INCLUDES TAXES, TARIFF, LICENSES, TOLL,
PENALTIES, AND OTHERS. THE AMOUNT
IMPOSED IS TAX BUT THE AMOUNT
COLLECTED IS REVENUE.
 OTHERS
• TAX VERSUS PENALTY
TAX IS AN AMOUNT IMPOSED FOR THE
SUPPORT OF THE GOVERNMENT. PENALTY IS
AN AMOUNT IMPOSED TO DISCOURAGE AN
ACT. PENALTY MAY BE IMPOSED BY BOTH THE
GOVERNMENT AND PRIVATE INDIVIDUALS. IT
MAY ARISE BOTH FROM LAW OR CONTRACT
WHEREAS TAX ARISES FROM LAW.
 OTHERS
• TAX VERSUS TARIFF
TAX IS BROADER THAN TARIFF. TAX IS AN
AMOUNT IMPOSED UPON PERSONS, PRIVILEGE,
TRANSACTIONS, OR PROPERTIES. TARIFF IS
THE AMOUNT IMPOSED ON IMPORTED OR
EXPORTED COMMODITIES.
 ESCAPES FROM TAXATION
• RESULT TO LOSS OF GOVERNMENT REVENUE:
1. TAX EVASION (TAX DODGING) – THE USE BY
THE TAXPAYER OF ILLEGAL OR FRAUDULENT MEANS
TO DEFEAT OR LESSEN THE PAYMENT OF THE TAX.
2. TAX AVOIDANCE (TAX MINIMIZATION) – THE
EXPLOITATION BY THE TAXPAYER OF LEGALLY
PERMISSIBLE ALTERNATIVE TAX RATES OR
METHODS OF ASSESSING TAXABLE PROPERTY OR
INCOME, IN ORDER TO AVOID OR REDUCE TAX
LIABILITY.
3. TAX EXEMPTION (TAX IMMUNITY) – A GRANT
OF IMMUNITY TO PARTICULAR PERSONS OR
CORPORATIONS FROM OBLIGATION TO PAY TAXES.
 ESCAPES FROM TAXATION
• DO NOT RESULT TO LOSS OF GOVERNMENT REVENUE:
1. SHIFTING – THE PROCESS BY WHICH THE TAX BURDEN
IS TRANSFERRED FROM THE STATUTORY TAXPAYER TO
ANOTHER WITHOUT VIOLATING THE LAW.
2. CAPITALIZATION – A MERE INCREASE IN THE VALUE
OF THE PROPERTY IS NOT INCOME BUT MERELY AN
UNREALIZAED INCREASE IN CAPITAL.
3. TRANSFORMATION – THE MANUFACTURER OR
PRODUCER UPON WHOM THE TAX HAS BEEN IMPOSED,
FEARING THE LOSS OF HIS MARKET IF HE SHOULD ADD
THE TAX TO THE PRICE, PAYS THE TAX AND ENDEAVORS
TO RECOUP HIMSELF BY IMPROVING HIS PROCESS OF
PRODUCTION, THEREBY TURNING OUT HIS UNITS AT A
LOWER COST.
 MAY A TAX BE SUBJECT OF
COMPENSATION OR SET-OFF?
NO. TAXES CANNOT BE THE
SUBJECT OF COMPENSATION OR
SET-OFF. TAXES ARE NOT
CONTRACTUAL OBLIGATIONS BUT
ARISE OUT OF DUTY TO THE
GOVERNMENT WHICH DOES NOT
REQUIRE THE PERSONAL CONSENT
OF TAXPAYER.
 LIMITATIONS OF TAXING
POWER
A. INHERENT LIMITATIONS – NOT EMBODIED IN
THE CONSTITUTION, THESE ARE LIMITATION
BASE ON THE VERY NATURE OF THE POWER OF
TAXATION.
B. CONSTITUTIONAL LIMITATIONS – THOSE
EXPRESSLY FOUND IN THE CONSTITUTION OR
IMPLIED FROM ITS PROVISIONS.
C. CONTRACTUAL LIMITATIONS – LIMITATIONS
BASED ON CONTRACT ENTERED BETWEEN THE
STATE AND ANOTHER.
INHERENT LIMITATIONS
• PUBLIC PURPOSE OF TAXES
1. DUTY TEST – WHETHER THE THING TO BE
FURTHERED BY THE APPROPRIATION OF
PUBLIC REVENUE IS SOMETHING WHICH IS
THE DUTY OF THE STATE, AS A
GOVERNMENT, TO PROVIDE.
2. PROMOTION OF GENERAL WELFARE
TEST – WHETHER THE PROCEEDS OF THE
TAX WILL DIRECTLY OR INDIRECTLY
PROMOTE THE WELFARE OF THE
COMMUNITY IN EQUAL MEASURE.
INHERENT LIMITATIONS
• NON-DELEGABILITY OF THE TAXING
POWER
GENERAL RULE: THE POWER OF TAXATION IS
PECULIARLY AND EXCLUSIVELY EXERCISED
BY THE LEGISLATURE. FOR THE POWER
EMANATES FROM, THROUGH, AND BY THE
PEOPLE. HENCE, A DELEGATED AUTHORITY
COULD NO LONGER BE FURTHER DELEGATED.
INHERENT LIMITATIONS
EXCEPTIONS TO NON-DELEGABILITY:
1. AUTHORITY OF THE PRESIDENT TO FIX TARIFF
RATES, IMPORT AND EXPORT QUOTAS,
TONNAGE AND WHARFAGE DUES, AND OTHER
DUTIES OR IMPOSTS. (ART. VI, SEC. 28 (2),
1987 CONSTITUTION)
2. POWER OF LOCAL GOVERNMENT UNITS TO
LEVY TAXES, FEES, AND CHARGES. (ART. X,
SEC. 5, 1987 CONSTITUTION) EX. REAL
PROPERTY TAX
3. DELEGATION TO ADMINISTRATIVE AGENCIES
FOR IMPLEMENTATION AND COLLECTION.
INHERENT LIMITATIONS
• TERRITORIALITY OR SITUS OF
TAXATION
THE POWER TO TAX IS LIMITED
ONLY TO PERSONS, PROPERTY,
OR BUSINESSES WITHIN THE
JURISDICTION OR TERRITORY
OF THE TAXING POWER.
INHERENT LIMITATIONS
FACTORS THAT DETERMINE THE SITUS OF
TAXATION:
1. KIND OR CLASSIFICATION OF THE TAX
BEING LEVIED
2. SITUS OF THE THING OR PROPERTY TAXED
3. CITIZENSHIP OF THE TAXPAYER
4. RESIDENCE OF THE TAXPAYER
5. SOURCE OF THE INCOME
6. SITUS OF THE EXCISE, PRIVILEGE,
BUSINESS, OR OCCUPATION BEING TAXED
 INHERENT LIMITATIONS
KIND OF TAX
PERSONAL OR COMMUNITY TAX
SITUS
RESIDENCE OR DOMICILE OF THE
TAXPAYER
REAL PROPERTY TAX LOCATION OF PROPERTY (LEX REI
SITAE)
PERSONAL PROPERTY TAX - TANGIBLE; WHERE IT IS
PHYSICALLY LOCATED OR
PERMANENTLY KEPT (LEX REI
SITAE)
- INTAGIBLE; SUBJECT TO SEC.
104 OF THE NIRC AND THE
PRINCIPLE OF MOBILIA
SEQUUNTUR PERSONAM
BUSINESS TAX PLACE OF BUSINESS
EXCISE OR PRIVILEGE TAX WHERE THE ACT IS PERFORMED
OR WHERE THE OCCUPATION IS
PURSUED
INHERENT LIMITATIONS
KIND OF TAX SITUS

SALES TAX WHERE THE SALE IS

CONSUMMATED
INCOME TAX CONSIDER CITIZENSHIP,
RESIDENCE, AND SOURCE OF
INCOME (SEC. 42, 1997
NIRC)
TRANSFER TAX RESIDENCE OR CITIZENSHIP
OF THE TAXPAYER OR
LOCATION OF THE PROPERTY
FRANCHISE TAX STATE WHICH GRANTED THE
FRANCHISE
CORPORATE TAX LAW ON INCORPORATION
INHERENT LIMITATIONS
• NON-TAXABILITY OF THE GOVERNMENT
AS A MATTER OF PUBLIC POLICY, PROPERTY OF
THE STATE AND OF ITS MUNICIPAL
SUBDIVISIONS DEVOTED TO GOVERNMENT USES
AND PURPOSES IS DEEMED TO BE EXEMPT FROM
TAXATION ALTOUGH NO EXPRESS PROVISION IN
THE LAW IS MADE THEREFORE.
GENERAL RULE: THE GOVERNMENT IS TAX
EXEMPT.
EXCEPTION: IT MAY TAX ITSELF BY ENACTING A
LAW.
INHERENT LIMITATIONS
RULES GOVERNING TAX IMMUNITY OF THE
GOVERNMENT:
• ADMINISTRATIVE AGENCIES
GOVERNMENT FUNCTION – TAX
EXEMPT UNLESS WHEN THE LAW
EXPRESSLY PROVIDES FOR TAX.
PROPRIETARY FUNCTION – TAXABLE
UNLESS EXEMPTED BY LAW.
INHERENT LIMITATIONS
• (GOCCs) GOVERNMENT-OWNED AND
CONTROLLED CORPORATIONS
GENERAL RULE: INCOME IS TAXABLE AT THE
RATE IMPOSED UPON CORPORATIONS OR
ASSOCIATIONS ENGAGED IN A SIMILAR
BUSINESS, INDUSTRY, OR ACTIVITY.
EXCEPTION: GSIS, SSS, PHIC, AND PCSO ARE
TAX EXEPMT (SEC. 27 (C), NIRC). HOWEVER,
PAGCOR EXEMPTION WAS LIFTED BY RA
9337.
INHERENT LIMITATIONS
• GOVERNMENT EDUCATIONAL INSTITUTIONS
PROPERTY OR REAL PROPERTY TAX –
PROPERTY ACTUALLY, DIRECTLY, AND
EXCLUSIVELY USED FOR EDUCATIONAL
PURPOSES – EXEMPT BUT INCOME OF
WHATEVER KIND AND CHARACTER FROM ANY
OF THEIR PROPERTIES, REAL OR PERSONAL,
REGARDLESS OF THE DISPOSITION,
TAXABLE.
INHERENT LIMITATIONS
• GOVERNMENT EDUCATIONAL INSTITUTIONS

INCOMES RECEIVED BY THEM AS

SUCH ARE EXEMPT FROM TAXES.
HOWEVER, THEIR INCOME FROM
ANY OF THEIR ACTIVITIES
CONDUCTED FOR PROFIT
REGARDLESS OF THE DISPOSITION
IS TAXABLE.
INHERENT LIMITATIONS
• INTERNATIONAL COMITY
UNDER ART. II, SEC. 12 OF THE 1987
CONSTITUTION, THE PHILIPPINES ADOPTS
THE GENERALLY ACCEPTED PRINCIPLES OF
INTERNATIONAL LAW AS PART OF THE LAW
OF THE LAND, AND ADHERES TO THE POLICY
OF PEACE, EQUALITY, JUSTICE, FREEDOM,
COOPERATION, AND AMITY WITH ALL
NATIONS.
INHERENT LIMITATIONS
THIS PRINCIPLE LIMITS THE AUTHORITY OF
THE 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. AS A RULE, THE PHILIPPINE
GOVERNMENT CANNOT TAX FOREIGN
AMBASSADORS NOR IMPOSE REAL
PROPERTY TAXES UPON FOREIGN
EMBASSIES.
 TAX CASE
STANDARD OIL COMPANY OF NEW YORK VS. POSADAS,
FEBRUARY 26, 1931, 55 PHIL 715
FACTS: PLAINTIFF,A FOREIGN CORPORATION DULY
AUTHORIZED TO DO BUSINESS IN THE PHILIPPINES,
SOLD TO THE US ARMY FUEL AND ASPHALTS AS WELL
AS TO THE US NAVY FUEL OIL. SAID SALES WERE FOR
THE USE OF THE SAID PRODUCTS BY THE US ARMY
AND NAVY IN THE PHILIPPINES. CIR IMPOSED TAXES
ON THE SAID MERCHANDISE. PLAINTIFF PAID THE
ASSESSED TAX UNDER PROTEST ALLEGING THAT SAID
TRANSACTIONS ARE NOT SUBJECT TO SALES TAX
BASED ON THE PRINCIPLE THAT A STATE IS
PROHIBITED FROM TAXING THE INSTRUMENTALITIES
OF THE FEDERAL GOVERNMENT.
Q. IS THE CONTENTION OF PLAINTIFF CORRECT?
INHERENT LIMITATIONS
• DOUBLE TAXATION
TAXING THE SAME PROPERTY TWICE
WHEN IT SHOULD BE TAXED BUT
ONCE.
DIRECT DOUBLE TAXATION OR
OBNOXIOUS – DOUBLE TAXATION IN
THE OBJECTIONABLE OR PROHIBITED
SENSE. THIS CONSTITUTES A
VIOLATION OF SUBSTANTIVE DUE
PROCESS.
INHERENT LIMITATIONS
ELEMENTS:
1. THE SAME PROPERTY OR SUBJECT MATTER IS
TAXED TWICE WHEN IT SHOULD BE TAXED
ONLY ONCE.
2. BOTH TAXES ARE LEVIED FOR THE SAME
PURPOSE.
3. IMPOSED BY THE SAME TAXING AUTHORITY.
4. WITHIN THE SAME JURISDICTION.
5. DURING THE SAME TAXING PERIOD.
6. COVERING THE SAME KIND OR CHARACTER OF
TAX.
INHERENT LIMITATIONS
INDIRECT DOUBLE TAXATION – LEGAL OR
PERMISSIBLE. THE ABSENCE OF ONE OR
MORE OF THE MENTIONED ELEMENTS MAKES
THE DOUBLE TAXATION INDIRECT.
THERE IS NO CONSTITUTIONAL
PROHIBITION AGAINST DOUBLE TAXATION
IN THE PHILIPPINES, (VILLANUEVA V. CITY OF
ILOILO, L-26521, DECEMBER 28, 1968)
THOUGH IT IS NOT FAVOURED.
INHERENT LIMITATIONS
REMEDIES AGAINST DOUBLE TAXATION:
1. TAX SPARING RULE (e.g. SECTION 28(B)(5)(b)
NIRC)
2. TAX DEDUCTIONS (e.g. VANISHING
DEDUCTIONS)
3. TAX CREDITS
4. EXEMPTIONS
5. TREATIES WITH OTHER STATES
6. PRINCIPLES OF RECIPROCITY (e.g.
INTANGIBLE PROPERTY OF NRA IN ESTATE AND
DONOR’S TAX)
 TAX CASE
VILLANUEVA VS. CITY OF ILOILO, 26 SCRA 578, 1968
FACTS: UPON THE PASSAGE OF THE LOCAL AUTONOMY ACT –
RA 2264, THE CITY OF ILOILO BOARD PASSED AN
ORDINANCE IMPOSING MUNICIPAL LICENSE TAX ON
PERSONS ENGAGED IN THE BUSINESS OF OPERATING
TENEMENT HOUSES. PURSUANT TO THE SAID ORDINANCE,
THE CITY OF ILOILO COLLECTED FROM VILLANUEVA
SEVERAL AMOUNTS FOR THE YEARS 1960 TO 1964.
PLAINTIFF-APPELLEES, AS OWNERS OF TENEMENT HOUSES,
QUESTION THE CONSTITUTIONALITY OF THE ORDINANCE.
THEY CONTEND THAT THEY ARE DOUBLY TAXED BECAUSE
THEY ARE PAYING BOTH THE REAL ESTATE TAX AND THE
TENEMENT TAX IMPOSED BY THE ORDINANCE IN
QUESTION.
Q: DOES THE ORDINANCE CONSTITUTE DOUBLE TAXATION?
 CONSTITUTIONAL
LIMITATIONS
• DUE PROCESS CLAUSE (ART. III, SEC. 1,
1987 CONSTITUTION)
(OPPORTUNITY TO BE HEARD, FAIR PLAY,
SUBSTANCE AND FORM)
ANY DEPRIVATION OF LIFE, LIBERTY, OR
PROPERTY IS WITH DUE PROCESS IF IT IS DONE
UNDER THE AUTHORITY OF A LAW (SUBSTANCE)
THAT IS VALID (NOT CONTRARY TO THE
CONSTITUTION) AND AFTER COMPLIANCE WITH
FAIR AND REASONABLE METHODS OR
PROCEDURES (FORM) PRESCRIBED.
 CONSTITUTIONAL
LIMITATIONS
• EQUAL PROTECTION CLAUSE (ART. III, SEC 1,
1987 CONSTITUTION)
MEANS EQUALITY BEFORE THE LAW. HOWEVER, SUCH
EQUALITY DOES NOT DENY TO THE STATE THE POWER
TO RECOGNIZE FACTUAL DIFFERENCES BETWEEN
INDIVIDUALS AND CLASSES. IT RECOGNIZES THAT
INHERENT IN THE RIGHT TO LEGISLATE IS THE RIGHT
TO CLASSIFY, PROVIDED THAT IT IS A VALID AND
REASONABLE CLASSIFICATION. IF THE GROUPINGS
ARE CHARACTERIZED BY SUBSTANTIAL DISTINCTIONS
THAT MAKE REAL DIFFERENCES, ONE CLASS MAY BE
TREATED AND REGULATED DIFFERENTLY FROM
ANOTHER. (TIU V. CA, G.R. NO. 127410)
 CONSTITUTIONAL
LIMITATIONS
• UNIFORMITY, EQUITABILITY, AND
PROGRESSIVITY OF TAXATION (ART. VI,
SEC. 28(1), 1987 CONSTITUTION)
UNIFORMITY – ALL TAXABLE ARTICLES OR
KINDS OF PROPERTY OF THE SAME CLASS
ARE TACED AT THE SAME RATE.
EQUITABILITY – ALL THE BURDEN FALLS TO
THOSE WHO ARE MORE CAPABLE TO PAY.
PROGRESSIVITY – RATE INCREASES AS THE
TAX BASE INCREASES.
 CONSTITUTIONAL
LIMITATIONS
• CHARITABLE INSTITUTIONS, CHURCHES,
AND PARSONAGES, OR CONVENT
APPURTENANT THERETO, MOSQUES, NON-
PROFIT CEMETERIES, AND ALL LANDS,
BUILDINGS, AND IMPROVEMENTS,
ACTUALLY, DIRECTLY, AND EXCLUSIVELY
USED FOR RELIGIOUS, CHARITABLE, OR
EDUCATIONAL PURPOSES SHALL BE
EXEMPT FROM PROPERTY TAXES. (ART. VI,
SEC. 10)
 TAX CASE
ABRA VALLEY COLLEGE VS. AQUINO, 162 SCRA 106, 1988
FACTS: PETITIONER, AN EDUCATIONAL CORPORATION AND
INSTITUTION OF HIGHER LEARNING DULY INCORPORATED
WITH THE SECURITIES AND EXCHANGE COMMISSION
FAILED TO PAY ITS REAL ESTATE TAXES AND PENALTIES AS
A RESULT THEREOF A NOTICE OF SEIZURE AND NOTICE OF
SALE OF THE LOT AND BUILDING WAS SERVED AGAINST
THE PETITIONER. THE SCHOOL WAS ASSESSED FOR TAXES
BECAUSE IT WAS NOT EXCLUSIVELY USED FOR
EDUCATIONAL PURPOSES. THE DIRECTOR OF THE ABRA
VALLEY COLLEGE, TOGETHER WITH HIS FAMILY, OCCUPIES
THE SECOND FLOOR OF THE SCHOOL BUILDING AS THEIR
RESIDENCE. THE GROUND FLOOR OF SAID BUILDING WAS
LEASED TO VARIOUS COMMERCIAL ESTABLISHMENTS.
Q. ARE THE PARTS OF THE SCHOOL BUILDING USED AS
RESIDENCE AND LEASED TO COMMERCIAL
ESTABLISHMENTS TAX-EXEMPT?
 CONSTITUTIONAL
LIMITATIONS
• NO LAW SHALL BE MADE RESPECTING AN
ESTABLISHMENT OF RELIGION OR PROHIBITING
THE FREE EXERCISE THEREOF. (ART. III, SEC. 5)
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 SYSYTEM 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. (ART VI, SEC. 29(2))
 CONSTITUTIONAL
LIMITATIONS
• NO PERSON SHALL BE IMPRISONED FOR DEBT
OR NON-PAYMENT OF A POLL TAX. (ART. III,
SEC. 20)
• NO LAW GRANTING ANY TAX EXEMPTION
SHALL BE PASSED WITHOUT THE
CONCURRENCE OF A MAJORITY OF ALL THE
MEMBERS OF CONGRESS. (ART. VI, SEC. 28(4))
• ALL APPROPRIATION, REVENUE OR TARIFF
BILLS SHALL ORIGINATE EXCLUSIVELY IN THE
HOUSE OF REPRESENTATIVES, BUT THE
SENATE MAY PROPOSE OR CONCUR WITH
AMENDMENTS. (ART. VI, SEC. 24)
 TAX CASE
TOLENTINO VS. SECRETARY OF FINANCE, AUGUST 25, 1994, 235
SCRA 630
FACTS: PETITIONERS ASSAIL THE CONSTITUTIONALITY OF RA
7716 IMPOSING VALUE ADDED TAX (VAT) ON THE SALE,
BARTER OR EXCHANGE OF GOODS AND PROPERTIES AS WELL
AS ON THE SALE OR EXCHANGE OF SERVICES. IT IS
EQUIVALENT TO 10% OF GROSS SELLING PRICE OR GROSS
VALUE IN MONEY OF GOOD OR PROPERTIES SOLD, BARTERED
OR EXCHANGED OR OF THE GROSS RECEIPTS FROM THE SALE
OR EXCHANGE OF SERVICES. RA 7716 SEEKS TO WIDEN THE
TAX BASE ON EXISTING VAT SYSTEM AND ENHANCE ITS
ADMINISTRATION BY AMENDING THE NIRC. THE CONTENTION
OF PETITIONERS IS THAT IN ENACTING THE VAT LAW,
CONGRESS VIOLATED THE CONSTITUTION BECAUSE RA 7716
DID NOT ORIGINATE EXCLUSIVELY IN THE HOUSE OF
REPRESENTATIVES, BECAUSE IT IS IN FACT THE RESULT OF
THE CONSOLIDATION OF TWO DISTINCT BILLS, ONE FROM THE
HOUSE OF REPRESENTATIVES AND THE OTHER FROM THE
SENATE.
Q. IS CONTENTION OF THE PETITIONERS CORRECT?
 CONSTITUTIONAL
LIMITATIONS
• THE SUPREME COURT SHALL HAVE THE
POWER TO REVIEW, REVISE, REVERSE,
MODIFY, OR AFFIRM ON APPEAL OR
CERTIORARI AS THE LAW OR THE RULES
OF COURT MAY PROVIDE, FINAL
JUDGMENTS AND ORDERS OF LOWER
COURTS IN ALL CASES INVOLVING THE
LEGALITY OF ANY TAX, IMPOST,
ASSESSMENT, OR TOLL, OR ANY PENALTY
IMPOSED IN RELATION THERETO. (ART.
VIII, SEC. 2 AND 5(2)(b))
 CONSTITUTIONAL
LIMITATIONS
• ALL REVENUES AND ASSETS OF NON-
STOCK, NON-PROFIT EDUCATIONAL
INSTITUTIONS USED ACTUALLY,
DIRECTLY, AND EXCLUSIVELY FOR
EDUACTIONAL PURPOSES SHALL BE
EXEMPT FROM TAXES AND DUTIES.
(ART. XIV, SEC. 4(3) AND (4))
REQUISITES:
• NON-STOCK, NON-PROFIT ORGANIZATION;
• NO PROFIT WILL INURE TO THE BENEFIT OF
ANY MEMBER OF THE ORGANIZATION.
 CONSTITUTIONAL
LIMITATIONS
• 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. (ART. VI, SEC. 27 (2))
• EACH LOCAL GOVERNMENT UNIT SHALL
EXERICISE THE POWER TO CREATE ITS OWN
SOURCES OF REVENUE AND SHALL HAVE A
JUST SHARE IN THE NATIONAL TAXES. (ART.
X, SEC. 6)
 CONSTITUTIONAL
LIMITATIONS
• ALL MONEY COLLECTED OR ANY TAX LEVIED
FOR A SPECIAL PURPOSE SHALL BE TREATED
AS A SPECIAL FUND AND PAID OUT FOR SUCH
PURPOSE ONLY. IF THE PURPOSE FOR WHICH A
SPECIAL FUND WAS CREATED HAS BEEN
FULFILLED OR ABANDONED, THE BALANCE, IF
ANY, SHALL BE TRANSFERRED TO THE GENERAL
FUNDS OF THE GOVERNMENT. (ART. VI, SEC.
29(3))
• NECESSITY OF AN APPROPRIATION BEFORE
MONEY MAY BE PAID OUT OF THE PUBLIC
TREASURY. (ART. VI, SEC. 29 (1))
 CONTRACTUAL LIMITATIONS
• WHEN THE EXEMPTION IS BILATERALLY
AGREED-UPON BETWEEN THE GOVERNMENT
AND THE TAXPAYER – IT CANNOT BE
WITHDRAWN WITHOUT VIOLATING THE
NON-IMPAIRMENT CLAUSE.
• WHEN IT IS UNILATERALLY GRANTED BY
LAW, AND THE SAME IS WITHDRAWN BY
VIRTUE OF ANOTHER LAW.
• WHEN THE EXEMPTION IS GRANTED UNDER
FRANCHISE – IT MAY BE WITHDRAWN AT
ANY TIME.
HOW TO MAKE A TAX LAW?
GENERALLY, ALL REVENUE BILLS
(PROPOSAL) MUST ORIGINATE FROM
THE HOUSE OF REPRESENTATIVES.
AFTER PASSING 3 READINGS BY A
MAJORITY VOTE IN TECHNICAL
COMMITTEE, DELIBERATION, AND
JOURNALS OF CONGRESS. IT SHALL BE
ELEVATED TO SENATE, WHICH NEEDS TO
PASS THE SAME 3 READINGS.
NORMALLY, THE PRESIDENT SIGNS A
BILL INTO LAW FOR ITS
IMPLEMENTATION.
 NATURE OF INTERNAL
REVENUE LAWS
INTERNAL REVENUE LAWS ARE NOT
POLITICAL IN NATURE. IN TIMES OF
WAR, THEY ARE DEEMED TO BE THE
LAWS OF THE OCCUPIED TERRITORY
AND NOT OF THE OCCUPYING ENEMY.
TAX LAWS ARE CIVIL AND NOT PENAL IN
NATURE ALTHOUGH THERE ARE
PENALTIES PROVIDED FOR THEIR
VIOLATION.
 SOURCES OF TAX LAWS
• THE 1987 CONSTITUTION;
• TAX STATUTES SUCH AS THE NATIONAL
INTERNAL REVENUE CODE (NIRC), THE
TARIFF AND CUSTOMS CODE, THE VAT
LAW,THE REVISED DOCUMENTARY
STAMP TAX LAW, THE AMENDED EXCISE
TAX LAW, AND PORTIONS OF THE LOCAL
GOVERNMENT CODE;
• EXECUTIVE ORDERS ON TAXATION, AND
LOCAL TAX ORDINANCES;
 SOURCES OF TAX LAWS
• TAX TREATIES AND CONVENTIONS WITH
FOREIGN COUNTRIES;
• JUDICIAL DECISIONS;
• RULES AND REGULATIONS
PROMULGATED BY THE DEPARTMENT OF
FINANCE, THE BUREAU OF INTERNAL
REVENUE (BIR), BUREAU OF CUSTOMS,
ETC.
• REVENUE REGULATIONS
 WHAT ARE TAX
OR REVENUE REGULATIONS?
ARE INTERPRETATIONS OF AN
ADMINISTRATIVE BODY (BIR) INTENDED
TO CLARIFY OR EXPLAIN THE TAX LAWS
AND CARRY INTO EFFECT ITS GENERAL
PROVISIONS BY PROVIDING THE
DETAILS OF ADMINISTRATION AND
PROCEDURE. THEY ARE DEEMED
NECESSARY TO THE PROPER
ENFORCEMENT AND EXECUTION OF TAX
LAWS.
 REQUISITES OF TAX
REGULATIONS
• IT MUST BE REASONABLE – GERMANE TO
THE PURPOSE OF THE LAW;
• WITHIN THE AUTHORITY CONFERRED;
• NOT CONTRARY TO LAW;
• MUST BE PUBLISHED;
• PROSPECTIVE, UNLESS IT IS BENEFICIAL
TO THE TAXPAYER, WHICH MAY BE GIVEN
RETROACTIVE APPLICATION.
 WHO HAS THE AUTHORITY TO
PROMULGATE TAX REGULATIONS?
IT IS PROVIDED THAT THE SECRETARY OF
FINANCE, UPON THE RECOMMENDATION
OF THE COMMISIONER OF INTERNAL
REVENUE, SHALL PROMULGATE ALL
NEEDFUL RULES AND REGULATIONS OF
THE TAX CODE. (QUASI-LEGISLATIVE
FUNCTION)
WHAT ARE BIR RULINGS?
BIR ISSUES A GENERAL INTERPRETATION
OF TAX LAWS USUALLY UPON A REQUEST
OF A TAXPAYER TO CLARIFY A
PROVISION OF LAW. (QUASI-JUDICIAL
FUNCTION)
 RULES IN CONSTRUCTING
TAX IMPOSING LAWS
• PUBLIC PURPOSE IS ALWAYS PRESUMED;
• LEGISLATIVE INTENTION MUST BE CONSIDERED
(SPIRIT OF LAW);
• WHERE THE LANGUAGE IS PLAIN AND THERE IS NO
DOUBT TAX LAWS MUST BE GIVEN THEIR
ORDINARY MEANING;
• A STATUTE WILL NOT BE CONSTRUED AS IMPOSING
A TAX UNLESS IT DOES SO CLEARLY, EXPRESSLY,
AND UNAMBIGUOUSLY;
• IN CASE OF DOUBT, IT IS CONSTRUED MOST
STRONGLY AGAINST THE GOVERNMENT, AND
LIBERALLY IN FAVOR OF THE TAX PAYER;
• PROVISIONS OF A TAXING ACT ARE NOT TO BE
EXTENDED BY IMPLICATION.
 RULES IN CONSTRUCTING
TAX IMPOSING LAWS
• TAX LAWS OPERATE PROSPECTIVELY UNLESS THE
PURPOSE OF THE LEGISLATURE TO GIVE
RETROSPECTIVE EFFECT IS EXPRESSLY DECLARED
OR MAY BE IMPLIED FROM THE LANGUAGE USED;
• TAX LAWS ARE SPECIAL LAWS AND PREVAIL OVER
GENERAL LAW;
• TAX LAWS ARE CIVIL IN NATURE NOT POLITICAL;
• NEITHER TAX LAWS ARE PENAL IN NATURE.
HENCE, THE RULE ON RETROACTIVE EFFECT OF
PENAL LAWS FIND NO APPLICATION IN TAX
CASES;
• NEITHER CAN THE CONSTITUTIONAL
PROHIBITION AGAINST PASSAGE OF EX POST
FACTO LAWS BE INVOKED IN TAXATION.
 PRINCIPLES GOVERNING
TAX EXEMPTIONS
• EXEMPTIONS FROM TAXATION ARE HIGHLY
DISFAVORED IN LAW AND ARE NOT
PRESUMED;
• HE WHO CLAIMS AS EXEMPTION MUST BE ABLE
TO JUSTIFY HIS CLAIM BY THE CLEAREST
GRANT OF ORGANIC OR STATUTE LAW BY
WORDS TOO PLAIN TO BE MISTAKEN. IF
AMBIGUOUS, THERE IS NO EXEMPTION ;
• HE WHO CLAIMS EXEMPTION SHOULD PROVE
BY CONVINCING PROOF THAT HE IS
EXEMPTED;
• TAXATION IS THE RULE, TAX EXEMPTION IS
THE EXCEPTION;
 PRINCIPLES GOVERNING
TAX EXEMPTIONS
• TAX EXEMPTION MUST BE STRICTLY
CONSTRUED AGAINST THE TAXPAYER;
• TAX EXEMPTIONS ARE NOT PRESUMED;
• CONSTITUTIONAL GRANTS OF TAX
EXEMPTION ARE SELF-EXECUTING;
• TAX EXEMPTIONS ARE PERSONAL.
 BASIC PRINCIPLES OF
A SOUND TAX SYSTEM
• FISCAL ADEQUACY – WHICH MEANS THAT THE
SOURCES OF REVENUE SHOULD BE SUFFICIENT
TO MEET THE DEMANDS OF PUBLIC
EXPENDITURES;
• EQUALITY OR THEORETICAL JUSTICE –
WHICH MEANS THAT THE TAX IMPOSED SHOULD
BE PROPORTIONATE TO THE TAXPAYER’S ABILITY
TO PAY; AND
• ADMINISTRATIVE FEASIBILITY – WHICH
MEANS THAT THE TAX LAWS SHOULD BE
CAPABLE OF CONVENIENT, JUST, AND EFFECTIVE
ADMINISTRATION.
 POWERS AND DUTIES OF THE BIR
• ASSESSMENT AND COLLECTION OF ALL
NATIONAL INTERNAL REVENUE TAXES, FEES,
AND CHARGES;
• ENFORCEMENT OF ALL FORFEITURES,
PENALTIES, AND FINES CONNECTED
THEREWITH;
• EXECUTION OF JUDGMENTS IN ALL CASES
DECIDED IN ITS FAVOR BY THE COURT OF TAX
APPEALS (CTA) AND THE ORDINARY COURTS;
• GIVE EFFECT TO AND ADMINISTER THE
SUPERVISORY AND POLICE POWERS
CONFERRED TO IT BY THE CODE OR OTHER
LAWS.
 POWERS AND DUTIES
OF THE BIR COMMISSIONER
• POWER TO INTERPRET TAX LAWS SUBJECT
TO REVIEW BY THE SECRETARY OF FINANCE;
• POWER TO DECIDE DISPUTED ASSESSMENT,
REFUNDS OF INTERNAL REVENUE TAXES,
FEES, AND OTHER CHARGES, PENALTIES
IMPOSED IN RELATION THERETO, OTHER
MATTERS ARISING UNDER THE NIRC OR
OTHER LAWS OR PORTIONS THEREOF
ADMINISTERED BY THE BIR, SUBJECT TO
THE EXCLUSIVE APPELLATE JURISDICTION
OF THE CTA;
 POWERS AND DUTIES
OF THE BIR COMMISSIONER
• POWER TO EXAMINE ANY BOOK, PAPER,
RECORD, OR OTHER DATA WHICH MAY BE
RELEVANT OR MATERIAL TO A TAX
INQUIRY;
• POWER TO OBTAIN INFORMATION FROM
ANY PERSON OTHER THAN THE PERSON
WHOSE INTERNAL REVENUE TAX LIABILITY
IS SUBJECT TO AUDIT OR INVESTIGATION
OR FROM ANY OFFICE OR OFFICER OF THE
NATIONAL OR LOCAL GOVERNMENTS,
GOVERNMENT AGENCIES, AND
INSTRUMENTALITIES;
 POWERS AND DUTIES
OF THE BIR COMMISSIONER
• POWER TO SUMMON THE PERSON LIABLE
FOR TAX OR REQUIRED TO FILE A
RETURN, OR ANY OFFICER OR EMPLOYEE
OF SUCH PERSON, OR ANY PERSON
HAVING POSSESSION, CUSTODY, OR
CARE OF THE BOOKS OF ACCOUNTS AND
OTHER ACCOUNTIMG RECORDS;
• POWER TO TAKE SUCH TESTIMONY OF
THE PERSON CONCERNED, UNDER OATH,
AS MAY BE RELEVANT OR MATERIAL TO
SUCH INQUIRY;
 POWERS AND DUTIES
OF THE BIR COMMISSIONER
• POWER TO CAUSE REVENUE OFFICERS
AND EMPLOYEES TO MAKE A CANVASS OF
ANY REVENUE DISTRICT OR REGION;
• DUTY TO ENSURE THE PROVISION AND
DISTRIBUTION OF FORMS, RECEIPTS,
CERTIFICATES, AND APPLIANCES, AND
THE ACKNOWLEDGMENT OF PAYMENT OF
TAXES;
• AUTHORITY TO MAKE ARRESTS AND
SEIZURES;
 POWERS AND DUTIES
OF THE BIR COMMISSIONER
• AUTHORITY TO ADMINISTER OATHS AND TO
TAKE TESTIMONY;
• AUTHORITY TO EMPLOY, ASSIGN, OR
REASSIGN INTERNAL REVENUE OFFICERS
INVOLVED IN EXCISE TAX FUNCTIONS TO
ESTABLISHMENTS WHERE ARTICLES
SUBJECT TO EXCISE TAX ARE PRODUCED OR
KEPT;
• AUTHORITY TO ASSIGN OR REASSIGN
INTERNAL REVENUE OFFICERS AND
EMPLOYEES OF THE BIR TO OTHER OR
SPECIAL DUTIES CONNECTED WITH THE
ENFORCEMENT OR ADMINISTRATION OF THE
REVNUE LAWS;
 POWERS AND DUTIES
OF THE BIR COMMISSIONER
• POWER TO MAKE ASSESSMENT AND
PRESCRIBE ADDITIONAL REQUIREMENTS
FOR TAX ADMINISTRATION AND
ENFORCEMENT;
A. EXAMINATION OF RETURNS AND
DETERMINATION OF TAX DUE;
B. PRESCRIBE REAL PROPERTY VALUE;
C. AUTHORITY TO PRESCRIBE
ADDITIONAL REQUIREMENTS;
 POWERS AND DUTIES
OF THE BIR COMMISSIONER
D. TERMINATE TAXABLE PERIOD;
I. WHEN THE TAXPAYER IS
RETIRING FROM BUSINESS
SUBJECT TO TAX;
II. WHEN THE TAXPAYER
ABSCONDED;
III. WHEN THE TAXPAYER
REMOVES HIS PROPERTY FROM THE
PHILIPPINES;
IV. WHEN THE TAXPAYER HIDES OR
CONCEALS HIS PROPERTY;
 POWERS AND DUTIES
OF THE BIR COMMISSIONER
E. AUTHORITY TO INQUIRE INTO BANK DEPOSIT
– NOTWITHSTANDING R.A. 1405 THE
COMMISSIONER IS AUTHORIZE TO INQUIRE
INTO THE BANK DEPOSITS OF:
I. A DECEDENT TO DETERMINE HIS GROSS
ESTATE;
II. A TAXPAYER WHO HAS FILED AN
APPLICATION TO COMPROMISE PAYMENT
OF TAX LIABILTY BY REASON OF
FINANCIAL INCAPACITY;
III. A TAXPAYER WHO IS SUBJECT OF A
REQUEST FOR THE SUPPLY OF TAX
INFORMATION FROM A FOREIGN TAX
AUTHORITY PURSUANT TO AN
INTERNATIONAL AGREEMENT OR TREATY;
 POWERS AND DUTIES
OF THE BIR COMMISSIONER
F. THE COMMISSIONER HAS THE
AUTHORITY TO ACCREDIT AND REGISTER
INDIVIDUALS AND GPPs AND THEIR
REPRESENTATIVES WHO PREPARE AND
FILE TAX RETURNS, STATEMENTS,
REPORTS AND OTHER PAPERS, OR WHO
APPEAR BEFORE THE BIR, FOR
TAXPAYERS;
 POWERS AND DUTIES
OF THE BIR COMMISSIONER
• THE COMMISIONER MAY DELEGATE THE
POWERS VESTED IN HIM TO
SUBORDINATE OFFICIALS WITH RANK
EQUIVALENT TO DIVISION CHIEF OR
HIGHER, SUBJECT TO LIMITATIONS OR
RESTRICTIONS IMPOSED UNDER THE
RULES AND REGULATIONS;
 POWERS AND DUTIES
OF THE BIR COMMISSIONER
EXCEPTIONS:
A. POWER TO RECOMMEND THE PROMULGATION
OF RULES AND REGULATIONS BY THE
SECRETARY OF FINANCE;
B. POWER TO ISSUE RULINGS OF FIRST
IMPRESSION OR TO REVERSE, REVOKE, OR
MODIFY ANY EXISTING RULE OF THE BIR;
C. POWER TO COMPROMISE OR ABATE ANY TAX
LIABILITY;
D. POWER TO ASSIGN OR REASSIGN INTERNAL
REVENUE OFFICERS TO ESTABLISHMENTS
WHERE ARTICLES SUBJECT TO EXCISE TAX ARE
KEPT.