MARY JOY P.

JUNIO, CPA
Notre Dame of Midsayap College
Midsayap, Cotabato

The Concept of Taxation

INHERENT POWERS OF THE STATE
POLICE

EMINENT
DOMAIN

TAXATION

The Power to
protect citizens
and provide for
safety and
welfare society.

The power to take

private property
(with just
compensation)
for public use.

The power to
enforce
contributions to
support the
government, and
other inherent
powers of the
state.

 Power
Co-extensive with sovereignty to demand contributions for

public purposes to support the government

Process
It passes a legislative act through the enactment of tax laws
by the Congress which will be implemented by the Executive
branch through the BIR
Means
A way of collecting and apportioning the cost of government
among those who are privileged to enjoy its benefits

Inherent power of sovereignty

Essentially a legislative function
For public purpose
Territorial in operation
Tax exemption of government
The strongest among the
inherent powers
Subject to constitutional and
inherent limitations

Taxation is as old as government itself. Its

existence commences with the four
elements of a state- people, territory,
sovereignty and government.
From the moment a state is born, it
automatically possesses the power to
collect taxes from its inhabitants.
The government having sovereignty can
enforce contributions upon its citizens
even without a specific provision in the
Constitution authorizing it.

The law-making body of the

government and its political
subdivisions exercise the power of
taxation. The powers to enact laws
and ordinances, and to impose and
collect taxes are given to the
Congress.

The tax revenues are for a public

purpose if utilized for the benefit of the
community in general. An alternative
meaning is that tax proceeds should be
utilized only to attain the objectives of
government.
Public use is no longer confined
to the traditional notion of use by the
public but held synonymous with public
interest, public benefit, public welfare,
and public convenience. (Commissioner
of Internal Revenue v. Central Luzon
Drug Corporation, G.R. No. 159647,
April 16, 2005)

PUBLIC
Purpose

Territorial in
Operation

As a rule, the power to tax can only be

exercised within the territorial

jurisdiction of a taxing authority except
when there exists a privity of
relationship between the taxing State
and the object of tax.
Where privity of relationship exists, the
state can still exercise its taxing powers
over its citizens outside its territory.

The State immunity from

taxation is inherent in its
power to impose tax.
Tax exemption applies only
to government entities
through which the
government immediately and
directly exercises its
governmental functions.

Tax
Exemption
of the
Government

Taxation power is the

strongest of all inherent powers of
the government because, without
money, the government can
neither survive nor dispense any
of its other powers and functions
effectively.

Inherent
Limitations

Taxes may be levied only for

public purpose
Being inherently legislative,
taxation may not be
delegated
Tax power is limited to
territorial jurisdiction of the
State
Taxation is subject to
international comity
Government entities are
generally exempt

Subject to
Inherent
Limitations

Constitutional
Limitations
Due process of law
Equal protection of law
Rule of uniformity and equity
Presidents power to veto separate
items in revenue or tariff bill
No public money shall be
appropriated for religious purposes
Majority of all the members of the
Congress granting tax exemption
The Congress may not deprive the
Supreme Court of its jurisdiction in
all cases involving the legality of any
tax
No imprisonment for nonpayment
of poll tax
Tax collection shall be generally be
treated as general funds

Subject to
Constitutional
Limitations