The power of taxation is imprescriptible

Non-use of this power will not be extinguished its power

Doctrine of non-claim does not apply to government

Taxes are from doctrine of non-claim

No estate tax if no partition

Congress power of taxation – inherent, legislative basis, supreme, plenary, unlimited

Basis: Theory of Necessity, Benefit Received Theory

 Necessity theory - cannot continue without means to pay its expenses thus has right to
compel all citizens and property within its limits to contribute
 Benefit-protection theory - the state demands and receives taxes from the subject of taxation
within its jurisdiction so that it maybe enabled to carry its mandate into effect and perform
the functions of government, and the citizen pays from his property the portion demanded in
order that he may, by means thereof, be secured in the enjoyment of benefits of organized
society.

government and taxpayer – symbiotic, mutual, reciprocal, support, protection

Safeguard the power of taxation of Congress

 Constitutional limitation
 inherent limitations
 contracts

The income effect expresses the impact of increased purchasing power on consumption, while
the substitution effect describes how consumption is impacted by changing relative prices.

1. No injunction rule – enjoins the Congress in exercising power of taxation

BIR – judicial

NIRC – admin

2. Doctrine of Non- Judicial Interference

except: 1. to determine whether or nor correct application of taxa laws

2. to determine whether or not the interpretation of the law according to the intentions of the
Congress

3. Doctrine of Territoriality – Power of taxation can only be exercised only within the extra territorial
jurisdiction of taxing authority
exercise of right is exempt from the Doctrine of Territoriality

Righs exempt from Dotrine of Territoriality

1. Income tax

2. Estate tax ^ 200K

3. Donor’s Tax ^ 100K

4. Documentary Stamp tax – transfer of rights/ obligations/ properties/ interests must be stamped
and all supporting documents

primarily liable 1. maker, signor, transferor, assignor, issuer MSTAI

If the person primarily liable is exempt from payment of DST, the documents remain taxable

the recipient of documents will bear the burden of taxation

Congress has the residual power of taxation – outside normal scope of taxation Example: text
messages

Defined TAX EXEMPTIONS – is an immunity from payment of tax where others are obliged to pay

GOCC generally are taxable and considered as ordinary taxpayers and exempt only when the law or
charter creating them provides exemption

Doctrine of incidental taxation exemption

 when government is exercising government function

 buying and leasing is a proprietary function, therefore, taxable
 VAT for leasing and building is taxable

traditional exemptees exempt only from :

Property tax – ownership

Income tax- tax from use of properties – income incurred

Pre Dominant Test Rule -

50% of income from allied services (canteen, dorm, bookstores, parking ) – normal corporation – taxable

by more than 50% income from tuition fees – special corporation

In cases of private schools and private hospitals – medical services

allied services such as pharmacy, canteen, parking

Tax exemption applies only to direct taxes –REC –Religious activities, charitable, educational

BIR to suspend the enjoyment but cannot revoke tax exemption

tax exemption is not perpetual, not automatic, not transferrable

TO ENJOY TAX EXEMPTION PRIVILEGE

 mention presence of law granting exemptions

 possible candidate for privilege provided under the law

Special tax lien – taxes that were not collected due to tax exemptions

Franchise is a privilege “tax exemtptions”

 revocable
 not subject to non-impairment clause
bec. franchise is not a contract - no meeting of minds