Taxation I

AY 2010 2011
First Semester
Atty. Deborah S. Acosta-Cajustin
Textbook: Law of Basic Taxation in the Philippines (Revised Edition),
Benjamin B. Aban
I.

General Principles
Aban, pp. 1 -168
A.

Definition of Taxation

Cases:

B.

Commissioner of Internal Revenue v. Algue, Inc., G.R. No. L-28896,

17 February 1988
Nature of the Power of Taxation
1.
2.

Attribute of sovereignty
Legislative in character
a.

Scope of the legislative taxing power

i. Authority to determine the nature, object, extent,
coverage, apportionment of the tax, situs of the
imposition, and method of collection
ii. Authority to grant tax exemptions or condonations
iii. Authority to specify or provide for the
administrative as well as judicial remedies

3.

Not delegated to executive or judicial department

a.

Exceptions
i. Local governments (Sec. 5, Article X, Constitution)
ii. When allowed by the Constitution (Sec. 28(2), Art.
VI, Constitution)
iii. When delegation merely relates to administrative
implementation or implied from the policy and
purpose of the Act

4.

Subject to inherent and constitutional limitations

Cases:

C.

Aspects of Taxation
1.
2.
3.

D.

Mactan Cebu International Airport Authority v. Marcos, 261 SCRA

667 (1996)
Planters Products, Inc. v. Fertiphil Corp., G.R. No. 166006, 14
March 2008
Maceda v. Macaraig, 197 SCRA 771
Petron v. Pililla, 198 SCRA 82
Pepsi-Cola Bottling Company of the Phil. v. Mun. of Tanauan,
Leyte, 69 SCRA 460
FELS Energy, Inc. v. The Province of Batangas, G.R. No. 168557,
16 February 2007
Petron v. Tiangco, G.R. No. 158881, 16 April 2008
City Government of Quezon City v. Bayantel, Inc., G.R. No.
162015, 6 March 2006

Levy
Assessment
Collection

Theory or Underlying Basis of Taxation

1.
2.

Lifeblood Theory / Necessity Theory

Benefits-Protection Theory

Cases:

Commissioner of Internal Revenue v. Algue, supra.

Phil. Guaranty Co., Inc. v. CIR, G.R. No. L-22074, 6 September
1965
FELS Energy, Inc. v. The Province of Batangas, supra.
Commissioner of Internal Revenue v. BPI, G.R. No. 134062, 17
April 2007
Commissioner of Internal Revenue v. Pineda, 21 SCRA 105
Vera v. Fernandez, 89 SCRA 199
Commissioner v. Internal Revenue v. Court of Tax Appeals, 234
SCRA 348
YMCA v. Commissioner of Internal Revenue, 298 SCRA 83
Davao Gulf Lumber Corporation v. Commissioner of Internal
Revenue, 293 SCRA 77
Marcos II v. Court of Appeals, 273 SCRA 47
Reyes v. Almanzor, 196 SCRA 47
Philippine Bank of Communications v. Commissioner of Internal
Revenue, 302 SCRA 250

E.

Philex Mining Corp. v. Commissioner of Internal Revenue, 204

SCRA 687
North Camarines Lumber Company v. Commissioner of Internal
Revenue, 109 Phil. 511
Lutz v. Araneta, 98 Phil. 148
Gomez v. Palomar, et al., 25 SCRA 827
Punsalan v. The Municipal Board of the City of Manila, 95 Phil. 46

Purposes and Objectives of Taxation

1.
2.
3.
4.
5.
6.

Revenue
Regulatory / Sumptuary
Promotion of General Welfare
Reduction of Social Inequality
Encouragement of Economic Growth
Protectionism

Cases:

F.

Southern Cross Cement Corp. v. Cement Manufacturers

Association of the Phil., et al., G.R. No. 158540, 3 August 2005
Caltex Phils. v. COA, G.R. No. 92585, 8 May 1992
Gerochi v. DOE, G.R. No. 159796, 17 July 2007

Taxation Distinguished from Police Power and Eminent Domain

1.
2.

Taxation v. Police Power

Taxation v. Eminent Domain

Cases:

G.

Commissioner of Internal Revenue v. Central Luzon Drug Corp.,

G.R. No. 159647, 15 April 2005
Lutz v. Araneta, supra.
Planters Products v. Fertiphil, Inc., supra.
Gerochi v. DOE, supra.

Basic Principles of a Sound Tax System

1.
2.
3.

Fiscal Adequacy
Theoretical Justice
Administrative Feasibility

Cases:

Chavez v. Ongpin, G.R. No. 76778, 6 June 1990


H.

Tolentino v. Secretary of Finance, G.R. No. 115455, 25 August

1994

Taxes
1.
2.

Definition
Attributes or characteristics
a.
b.
c.
d.
e.
f.
g.

Forced charge, imposition or contribution

Assessed in accordance with some reasonable rule of
apportionment (Sec. 28(a), Art. VI, Constitution)
Pecuniary burden payable in money
Imposed by the State on persons, property or services or
excises within its jurisdiction (Principle of
Territoriality)
Levied by the legislative body of the State
Levied for a public purpose
Personal to the taxpayer

Cases:

Borja v. Gella, 8 SCRA 602

Vera v. Fernandez, supra.
Republic v. Patanao, 20 SCRA 712
Sunio v. NLRC, 127 SCRA 390
Tan Tiong Bio v. CIR, G.R. No. L-15778, 23 April 1962

3.

Distinguished from other impositions

a.

Tax v. debt
i.
ii.

b.
c.
d.
e.

Set-off or compensation
Effect of non-payment

Tax v. toll
Tax v. license fee
Tax v. special assessment
Tax v. penalty

Cases:

Francia v. IAC, G.R. No. 76749, 8 June 1988

Terminal Facilities and Services Corp v. Philippine Ports
Authority, 378 SCRA 82 (2002)
Cuunjieng v. Patstone, 42 Phil. 818
Philippine Airlines, Inc. v. Edu, G.R. No. L-41383, 15 August 1988
Apostolic Prefect of the Mountain Province v. City Treasurer of
Baguio, 71 Phil 547

Esso Standard Eastern, Inc. v. CIR, G.R. Nos. L-28508-09, 7 July

1989
Caltex Phils. v. COA, supra.
Domingo v. Garlitos, 8 SCRA 443
Philex Mining Corp v. CIR, G.R. No. 125704, 28 August 1998

4.

Classification
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
n.
o.

Personal tax
Property tax
Direct tax
Indirect tax
Excise tax
General tax
Special tax
Specific tax
Ad valorem tax
Customs duties
National tax
Local tax
Progressive tax
Regressive tax
Proportional tax

Cases:

I.

Silkair (Singapore) PTE, Ltd. v. CIR, G.R. No. 173594, 6 February

2008
Abakada Guro Party List v. Ermita, G.R. No. 168056, 1 September
2005
Commissioner of Internal Revenue v. PLDT, G.R. No. 140230, 15
December 2005

Limitations on the Power of Taxation

1.

General Rule: Power to tax is unlimited

Power to tax includes the power to destroy.
Power to tax is not the power to destroy while this court sits.

Cases:

2.

Tio v. Videogram Regulatory Board, et al., 151 SCRA 213

Commissioner of Internal Revenue v. Tokyo Shipping Co. Ltd., 244
SCRA 332
Inherent Limitations
1.

They levy must be for a public purpose

2.
3.
4.
5.

Non-delegation of the legislative power to tax

Exemption from taxation of government entities
International comity
Territorial jurisdiction

Cases:

Planters Products, Inc. v. Fertiphil Corp., supra.

CIR v. Fortune Tobacco Corp., G.R. Nos. 167274-75, 21 July 2008
Commissioner v. British Overseas Airways Corporation, 149
SCRA 395
Santos & Co. v. Municipality of Meycauayan, et al., 94 Phil 1047

3.

Constitutional Limitations
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.

Sec. 1(a), Art. III, Constitution

Sec. 1(b), Art. III, Constitution
Sec. 28(1), Art. VI, Constitution
Sec. 10, Art. III, Constitution
Sec. 5, Art. III, Constitution
Sec. 4, Art. III, Constitution
Sec. 28(3), Art. III, Constitution
Sec. 24, Art. VI, Constitution
Sec. 28(4), Art. VI, Constitution
Sec. 26(1), Art. IV, Constitution
Sec. 20, Art. III, Constitution

Cases:

J.B.L. Reyes v. Almanzor, G.R. Nos. 49839046, 26 April 1991

CIR v. Lingayen Gulf Electric Power Co., Inc., H.R. No. L-23771,
4 August 1988
Philippine Press Institute, et al. v. Chato, G.R. No. 115754, 25
August 1994
Lung Center of the Philippines v. Quezon City, 433 SCRA 119
(2004)
Tolentino v. Secretary of Finance, supra.
Tolentino v. Secretary of Finance, G.R. No. 115455, 30 October
1995
John Hay Peoples Alternative Coalition, et al. v. Lim, G.R. No.
119775, 24 October 2003
Philippine Airlines v. Secretary of Finance, G.R. No. 115873, 25
August 1994
Commissioner v. Court of Appeals, G.R. No. 119761, 30 August
1996
British American Tobacco v. Camacho, G.R. No. 163583, 20
August 2008


J.

People of the Philippines v. Sandiganbayan, G.R. No. 152532, 16

August 2005

Taxpayers Suit

Cases:

K.

Jumamil v. Cafe, et al., G.R. No. 144570, 21 September 2005

David, et al. v. Macapagal-Arroyo, G.R. No. 171396, 3 May 2006
Double Taxation
1.
2.

Definition / Principle
Kinds
a.
b.

3.

Direct duplicate taxation

Indirect duplicate taxation

Methods of Avoiding Occurrence of Double Taxation

a.
b.

Allowance of reciprocal exemption either by law or by

treaty;
Allowance of tax credit for foreign taxes paid;
See Sec. 34(3) and (4), Tax Code
Sec. 86(E), Tax Code

c.
d.

Allowance of deduction of foreign taxes paid; and

Reduction of the Philippine tax rate.

Cases:

K.

Villanueva v. City of Iloilo, 26 SCRA 578 (1968)

Commissioner v. Bank of Commerce, G.R. No. 149636, 8 June
2005
Commissioner v. Hawaiian-Philippine Co., 11 SCRA 256
Commissioner v. S.C. Johnson & Son, Inc., G.R. No. 127105, 25
June 1999
Commissioner v. Citytrust Investment Phils., Inc., G.R. No.
139786, 27 September 2006

Exemption from Taxation

Sec. 28(4), Article VI, Constitution
Sec. 4, Article X, Constitution
Sec. 28(2), Article VI, Constitution
Cases:

L.

Lung Center of the Phil. v. Quezon City, G.R. No. 144104, 29 June
2004
Compagnie Financiere Sucres Et Denrees v. CIR, G.R. No.
133834, 28 August 2006
CIR v. P.J. Kiener Co., Ltd., et al., G.R. No. L-24754, 18 July 1975
Maceda v. Macaraig, supra.
Bibiano V. Banas, Jr. v. Court of Appeals, G.R. No. 102967, 10
February 2000
Surigao Consolidated Mining Co., Inc. v. Collector of Customs, 9
SCRA 728
PLDT v. City of Davao, G.R. No. 143867, 25 March 2003
City of Iloilo v. Smart Communications, Inc., G.R. No. 167260, 27
February 2009

Tax Laws
1.
2.
3.
4.
5.
6.
7.

Nature
Sources
Construction
Power of the Commissioner to Interpret Tax Laws (Sec.4, Tax
Code)
Prospective Application as a General Rule (Sec. 246, Tax
Code)
Publication Requirement
Special Laws vs. General Laws

Cases:

M.

Commissioner v. Acesite Hotel Corporation, G.R. No. L-147295, 16

February 2007
CIR v. Marubeni Corp., G.R. No. 137377, 18 December 2001
CIR v. Acosta, G.R. No. 154068, 3 August 2007
Misamis Oriental Association of Coco Traders, Inc. v. Dept of Finance
Secretary, et al., G.R. No. 108524, 10 November 1994
Begosa v. Philippine Veterans Administration, G.R. No. L-25916, 30
April 1970
ABS-CBN Broadcasting Corporation v. Court of Tax Appeals and
Commissioner, 108 SCRA 142
Dizon v. Court of Tax Appeals, G.R. No. 140944, 30 April 2008
Tax Evasion; Tax Avoidance

Cases:

Commissioner v. Toda, Jr., G.R. No. 147188, 14 September 2004

International Exchange Bank v. Commissioner, G.R. No. 171266, 4 April
2007

II.

Tax Administration and Enforcement

Aban, pp. 170-230
Secs. 2 21, Tax Code
Secs. 71 and 270, Tax Code
Republic Act No. 1405
Cases:

Republic v. Hizon, G.R. No. 130430, 13 December 1999

Vera v. Fernandez, supra.
Atlas Consolidated Mining and Development Corp. v. CIR, G.R. No. L26911, 27 January 1981
Commissioner v. Court of Appeals, G.R. No. 106611, 21 July 1994
People of the Phils. V. Tan, et al., G.R. No. 144707, 13 July 2004
CIR v. General Foods (Phils.), Inc., G.R. No. 143672, 24 April 2003
Meralco Securities Corp. v. Savellano, et al., G.R. No. L-36181, 23
October 1982
Mambulao Lumber Company v. Republic of the Phil., G.R. No. L-37061, 5
September 1984