Professional Documents
Culture Documents
Taxation as a power defined 1. Enforced contribution – imposition is not dependent to our will but to the will of
Congress
Power of the state to demand from us, members of the society our contribution for 2. Proportionate in character – it is based on one’s capacity to pay or the
the maintenance and operation of the government. proportionate value of the property
Taxation as a process of raising income defined 3. Normally payable in money – if in default, there’s a chance that his property may be
levied by the state and be sold at a public auction
Means by which the sovereign, through its law-making body or Congress raises 4. Imposed/levied on persons (natural/juridical) or properties
income to defray the necessary expenses of the government and for support of all 5. Imposed/levied by the state having jurisdiction over the persons/properties
public needs. 6. Normally levied by law-making body (Congress) of the state
7. Should be utilized for public purpose/s
ATTRIBUTES of the Power of Taxation
1. Inherent in the state – goes with the very existence of the state
2. Legislative in character – primarily lodged in Congress HOW IMPORTANT IS TAX?
3. Pervasive but subject to some limitations – Either inherent or constitutional
limitations It is very important as it is regarded as the “lifeblood of the government”
Without taxes, we cannot expect our government to deliver basic services or pay
Taxes – income or revenue raised by the state the salaries of government employees, etc.
Enforced proportional and pecuniary contributions from persons or things levied by Coercive because it is an enforced contribution
the law-making body of the state having jurisdiction over the same or over the Pervasive because even income derived elsewhere or abroad by Filipino citizens
persons or things subject of some impositions to defray the expenses of the who are residents of the Philippines is subject to our taxing power (Manny
Government. Pacquiao’ case over his winnings in boxing abroad)
1. Sec. 23(a) of the NIRC – incomes derived inside or outside of the Philippines
Taxation – the process of raising revenue and product or proof of such exercise of power.
is taxable
Primary purpose of taxation Pervasive that it includes the “power to destroy” (McCulloch vs Maryland {US Case})
– Justice Marshall
to defray the expenses of the government 1. BUT in Panhandle Oil Company vs. Mississippi, US SC decreed that power to
tax does not include power to destroy – Justice Holmes
ESSENTIAL CHARACTERISTIC S OF A TAX
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WHICH IS CONTROLLING? POWER TO TAX INCLUDES THE POWER TO DESTROY OR NOT? 2. reduce social inequality
higher tax for higher income earners
IT DEPENDS 3. to spur economic growth or progress
1. If utilized as a tool or an implement of police power, POWER TO TAX MAY INCLUDE granting tax holidays
“POWER TO DESTROY” 4. to afford protection or protectionism
2. If merely used to raise revenue, it does not include the “power to destroy” higher tax is imposed on imported goods to protect local producers
PURPOSES OF THE EXERCISE OF THE POWER OF TAXATION or manufacturers
5. promotion of general welfare
Primary purpose is to raise revenue or income for the operation or maintenance of
the government
Non-revenue purpose LIMITATIONS ON THE TAXING POWER OF THE STATE
1. To regulate or Regulation
Gerochi vs. DOE Inherent limitations
if primary purpose is regulation and raising revenue is 1. Public purpose
merely incidental – collection is pursuant to the exercise of Planters Product vs Fertiphil
Police of Power (Universal charge under EPIRA) 30% tax imposition for every sale of a sack of fertilizers is
if primary purpose is to raise revenue and incidental thereto invalid for it was not for a public purpose but solely for the
is the regulation – collection is pursuant to the Taxing benefit of Planters Products which was a private
Power of the State corporation
o Police Power But, in Lutz vs. Araneta
license fee Tax imposition for the sale of sugar was declared valid for it
cost for issuance of permit and was for the rehabilitation of the failing sugar industry and
regulation not just for a particular sugar entity
payment for the exercise Cojuangco vs. Sandiganbayan
business permits Tax in the form of coconut levy was declared as invalid
building permits because it was not for public purpose because of the
o tax – power of taxation contract entered into by Danding and the Republic of the
unlimited, provided that it is not Philippines under Marcos granting Danding the power to
confiscatory administer the Coconut levy fund as if it was his.
to raise revenue 2. Potestas delegata non delegari potest
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What the people have delegated to Congress should not be further 3. Properties of the National Government or local political subdivisions are
delegated. exempt from taxation.
General Rule: Congress cannot delegate the power of MCIAA vs Marcos
taxation Properties owned by MCIAA are not exempt from the taxing
Exceptions: power of the LGUs because MCIAA is not an instrumentality
o Sec. 28(2), Article VI, 1987 Constitution – allows of the national government but a GOCC
congress to delegate the imposition of tariff rates in SC:
favor of the President o tax exemptions granted under Sec. 234 (a) of the
Article VI, Sec. 28 (2) of the 1987 Constitution LGC would only apply to the Republic of the
“(2) The Congress may, by law, authorize the President to fix within specified
Philippines or properties owned by it and/or its
limits, and subject to such limitations and restrictions as it may impose, tariff
rates, import and export quotas, tonnage and wharfage dues, and other duties political subdivisions.
or imposts within the framework of the national development program of the o “Rep. of the Phils.” Is not synonymous with the
Government.” term “national government”
MIAA vs CA
Properties owned by MIAA could not be taxed by the City of
o Delegation of taxing power to administrative bodies Paranaque because MIAA is not a GOCC but an
like BIR ( only the power to administer and/or instrumentality of the national government
enforce tax laws or regulations, but not the power SC:
to promulgate) o Article 420 of the Civil Code – real properties owned
TAXING POWER OF LGUs, is this delegated by Congress? – NO. It is by the MIAA actually belong to or owned by the
not delegated by Congress but is directly conferred upon the LGUs by Rep. of the Phil
Sec. 5, Article X, 1987 Constitution o Sec. 234 (a) of the LGC – properties under Art. 420
of the CC are beyond the ambit of the taxing of the
Article X, Sec. 5 of the 1987 Constitution LGUs
“SECTION 5. Each local government unit shall have the power to create its Except: when beneficial use of such
own sources of revenues and to levy taxes, fees, and charges subject to
property is transferred to a taxable person
such guidelines and limitations as the Congress may provide, consistent
with the basic policy of local autonomy. Such taxes, fees, and charges shall WHICH IS CONTROLLING? MIAA because MCIAA was decided by a division of the SC decided
accrue exclusively to the local governments.” in 1996, while MIAA was decided in 2006 by the SC en banc.
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o Tax privilege with a reciprocal concession – cannot LAW GIVING TAX EXEMPTION RULE
be withdrawn by the state, otherwise it would
violate Sec. 10, Art. III, 1987 Constitution General Rule: Any such law granting tax exemption should be strictly construed against
o Tax privilege given without any reciprocal the taxpayer or the grantee
concession – such tax privilege may be withdrawn Exception: when the grantee or the one given the tax privilege is an instrumentality or
by the state even without a cause. agency of the national government.
SC:
o Such withdrawal was sustained as valid because 5. Sec. 28 (1), Article VI, 1987 Constitution (uniformity of taxation)
after all it was granted by the state for free Persons belonging to the same class be subject to the same tax rate
o Sec. 11, Art. XII of the 1987 Constitution Except:
franchise granted by the state is subject to Classification is based on substantial differences
alteration, modification or even revocation Classification is germane to the purpose of the law
Classification is not limited to the present condition
Article XII, Sec. 11 of the 1987 Constitution All persons belonging to the same class shall be alike both
“No franchise, certificate, or any other form of authorization for the operation
of a public utility shall be granted except to citizens of the Philippines or to as to the rights conferred and responsibilities imposed.
corporations or associations organized under the laws of the Philippines at o Example: State would pass a law making a
least sixty per centum of whose capital is owned by such citizens, nor shall classification between imported cigarettes and
such franchise, certificate, or authorization be exclusive in character or for a
locally-manufactured cigarettes thereby imposing a
longer period than fifty years. Neither shall any such franchise or right be
granted except under the condition that it shall be subject to amendment, higher tax rate on imported cigarettes.
alteration, or repeal by the Congress when the common good so requires.
The State shall encourage equity participation in public utilities by the general
Article VI, Sec. 28 (1) of the 1987 Constitution
public. The participation of foreign investors in the governing body of any
“(1) The rule of taxation shall be uniform and equitable. The
public utility enterprise shall be limited to their proportionate share in its
Congress shall evolve a progressive system of taxation.”
capital, and all the executive and managing officers of such corporation or
association must be citizens of the Philippines.”
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7.