Administrative feasibility is one of the canons of a sound tax system.

It
simply means that the tax system should be capable of being effectively
administered and enforced with the least inconvenience to the taxpayer.
Non-observance of the canon, however, will not render a tax imposition
invalid except to the extent that specific constitutional or statutory
limitations are impaired.[34] Thus, even if the imposition of VAT on tollway
operations may seem burdensome to implement, it is not necessarily invalid
unless some aspect of it is shown to violate any law or the
Constitution. (Diaz and Timbol vs. Secretary of Finance G.R. No. 193007 July
19, 2011.)

Doctrine of Equitable Recoupment

It is a principle which allows a taxpayer, whose claim for refund has been
barred due to prescription, to recover said tax by setting off the prescribed
refund against a tax that may be due and collectible from him. Under this
doctrine, the taxpayer is allowed to credit such refund to his existing tax
liability.

Note: The Supreme Court, rejected this doctrine in Collector v. UST (G.R. No.
L-11274, Nov. 28, 1958), since it may work to tempt both parties to delay
and neglect their respective pursuits of legal action within the period set by
law.

Government may tax itself

Since sovereignty is absolute and taxation is an act of high sovereignty, the

State if so minded could tax itself, including its political subdivisions.
(Maceda v. Macaraeg, G.R. No. 88291, June 8, 1993)

State the Rules

instrumentalities

on

tax

exemptions

GR: The government is exempt from tax.

of

government

agencies

or

Reason: Otherwise, we would be taking money from one pocket and putting
it in another. (Board of Assessment Appeals of Laguna v. CTA, G.R. No. L18125, May 31, 1963)

XPN: When it chooses to tax itself. Nothing prevents Congress from

decreeing that even instrumentalities or agencies of the government
performing government functions may be subject to tax. Where it is done
precisely to fulfill a constitutional mandate and national policy, no one can
doubt its wisdom. (MCIAA v. Marcos, G.R. No. 120082, Sept. 11, 1996)

Note: If the taxing authority is the local government unit, RA 7160 expressly
prohibits local government units from levying tax on the National
Government, its agencies and instrumentalities and other LGUs.

Q: What is the rationale for government to tax itself notwithstanding that it

only incurs administrative cost in the process?

A: Taxes, even those coming from the government, are shared with the local
government units through the internal revenue allocation. On the other hand,
the increased income arising from the tax exemption translates to more
revenues or dividends to the national government. However, in case of
dividends, GOCCs are only required to remit 50% of their profits. These
revenues need not be shared with the local government units.

Q: Will the mere fact that an entity is an agency or instrumentality of the

national government make it exempt from local or national tax?

A: It depends:
1 Agencies
expressly
2 Agencies
expressly

performing governmental functions are tax exempt unless

taxed.
performing proprietary functions are subject to tax unless
exempted.

doctrine of supremacy of national government over local government units.

The national government may impose tax to local government unit. Which
may include instrumentalities of the national government.

Ways to reduce Double Taxation

Double taxation usually takes place when a person is resident of a
contracting state and derives income from, or owns capital in, the other
contracting state and both states impose tax on that income or capital. In
order to eliminate double taxation, a tax treaty resorts to several
methods. First, it sets out the respective rights to tax of the state of source
or situs and of the state of residence with regard to certain classes of income
or capital. In some cases, an exclusive right to tax is conferred on one of the
contracting states; however, for other items of income or capital, both states
are given the right to tax, although the amount of tax that may be imposed
by the state of source is limited.[14]
The second method for the elimination of double taxation applies whenever
the state of source is given a full or limited right to tax together with the
state of residence. In this case, the treaties make it incumbent upon the
state of residence to allow relief in order to avoid double taxation. There are
two methods of relief- the exemption method and the credit method. In the
exemption method, the income or capital which is taxable in the state of
source or situs is exempted in the state of residence, although in some
instances it may be taken into account in determining the rate of tax
applicable to the taxpayers remaining income or capital. On the other hand,
in the credit method, although the income or capital which is taxed in the
state of source is still taxable in the state of residence, the tax paid in the
former is credited against the tax levied in the latter. The basic difference
between the two methods is that in the exemption method, the focus is on
the income or capital itself, whereas the credit method focuses upon the tax
(CIR vs. SC Johnson and Sons G.R. No. 127105. June 25, 1999)

Even as we find that the petitioner is a charitable institution, we hold,

anent the second issue, that those portions of its real property that are
leased to private entities are not exempt from real property taxes as these
are not actually, directly and exclusively used for charitable purposes.
The settled rule in this jurisdiction is that laws granting exemption from tax
are construed strictissimi juris against the taxpayer and liberally in favor of
the taxing power. Taxation is the rule and exemption is the exception. The
effect of an exemption is equivalent to an appropriation. Hence, a claim for
exemption from tax payments must be clearly shown and based on language
in the law too plain to be mistaken (Lung Center of The Philippines vs.
Quezon City G.R. No. 144104. June 29, 2004)

Thus, because revenue bills are required to originate exclusively in the House
of Representatives, the Senate cannot enact revenue measures of its own
without such bills. After a revenue bill is passed and sent over to it by the
House, however, the Senate certainly can pass its own version on the same
subject matter. This follows from the coequality of the two chambers of
Congress. (Tolentino vs. Secretary of Finance G.R. No. 115455 October 30,
1995)
Thus, even if the charitable institution must be "organized and operated
exclusively" for charitable purposes, it is nevertheless allowed to engage in
"activities conducted for profit" without losing its tax exempt status for its
not-for-profit activities. The only consequence is that the "income of
whatever kind and character" of a charitable institution "from any of its
activities conducted for profit, regardless of the disposition made of such
income, shall be subject to tax." (CIR vs. St. Lukes Medical Center G.R. No.
195909 September 26, 2012)
These reveal the legislative intent not to impose VAT on persons already covered
by the amusement tax. This holds true even in the case of cinema/theater
operators taxed under the LGC of 1991 precisely because the VAT law was
intended to replace the percentage tax on certain services. The mere fact that
they are taxed by the local government unit and not by the national government
is immaterial. The Local Tax Code, in transferring the power to tax gross receipts
derived by cinema/theater operators or proprietor from admission tickets to the
local government, did not intend to treat cinema/theater houses as a separate
class. No distinction must, therefore, be made between the places of amusement
taxed by the national government and those taxed by the local government. (CIR
vs. SM Prime Holdings February 26, 2010 G.R. No. 183505)
Clearly, the operative act that constitutes entry of the imported articles at
the port of entry is the filing and acceptance of the specified entry form
together with the other documents required by law and regulations. There is
no dispute that the specified entry form refers to the IEIRD. Section 205
defines the precise moment when the imported articles are deemed
entered. (Chevron Philippines Inc. vs. Commissioner of the Bureau of
Customs G.R. No. 178759 August 11, 2008.)
Treatment of capital gains and losses
1. From Sale of Stocks of Corporations
a. Stocks Traded in the Stock Exchange subject to stock
transaction tax of of 1% on its gross selling price
b. Stocks Not Traded in the Stock Exchange subject to capital
gains tax

2. From Sale of Real Properties in the Philippines capital gain derived is

subject to capital gains tax but no loss is recognized because gain is
presumed.
3. From Sale of Other Capital Assets - the rules on capital gains and
losses apply in the determination of the amount to be included in gross
income and not subject to capital gains tax.
Tax Pyramiding
A tax should not be imposed upon another tax. This is tax pyramiding,
which has no basis either in fact or in law. Equally important, tax pyramiding
has since 1922 been rejected by this Court, the legislature, and our tax
authorities. The intent behind the law is clearly to obviate a tax imposed
upon another tax. Ratio legis est anima legis. The reason for the law is its
spirit. (People of the Philippines vs. Sandiganbayan G.R. No. 152532. August
16, 2005)
Tax Arbitrage
The practice of profiting from differences between the way transactions are
treated for tax purposes. The complexity of tax codes often allows for many
incentives which drive individuals to restructure their transactions in the
most advantageous way in order to pay the least amount of tax. Some forms
of tax arbitrage are legal while others are illegal.