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TAXATION

I. GENERAL PRINCIPLES

A. DEFINITION AND CONCEPT G E N E R A L LY N O T D E L E G AT E D T O

TAXATION; defined
EXECUTIVE OR JUDICIAL DEPARTMENT
as the power to tax is purely legislative, and its
is the power by which delegation may result in the infringement of the
the sovereign raises revenue
to defray the expenses of the
theory of separation of power.

H O W E V E R : I N S TA N C E S W H E N

ALSO:
govt.
• is a way of apportioning the cost of
government among those who in some
measure are privileged to enjoy its benefits
and must bear its burden.
• as a destructive power which interferes with
the personal and property rights of the
people and takes from them a portion of
their property for the support of the govt
(PRDC vs CA)
B. NATURE OF TAXATION
1. attribute of sovereignty
2. a legislative in character
generally not delegated to executive or
3.
DELEGATION IS ALLOWED
1. to local governments, in respect of matters
of local concerns (but cannot exceed than
what was delegated to them)
2. when allowed by the constitution.
(ie. President may fix, within the 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 or imposts within
the framework of the national development
program of he Govt.)
3. when the delegation relates merely to
administrative implementation that may
call for some degree of discretionary
power, under a set of sufficient standards

4.
judicial department
subject to constitutional and inherent
expressed by law.

NOTE: the Congress has no power to revoke

limitations

AS ATTRIBUTE OF SOVEREIGNTY
being an essential and inherent attribute of
sovereignty, belonging as a matter right to
every independent government, without being
the power of LGU to impose tax ---
• as Congress cannot abolish what is
expressly granted by the fundamental law
• furthermore, their only authority is to provide
the guidelines and limitations on the local

expressly conferred by the people. government's exercise of the power to tax.

SUBJECT TO CONSTITUTIONAL AND

LIFEBLOOD THEORY
no sovereign stat can continue to
exist without the means to pay its
expenses, and for those means,it
has the right to compel all citizens
and property within the limits to
INHERENT LIMITATIONS
while taxation is considered to be the strongest
of all the power of the government, being
unlimited, plenary, and comprehensive and
supreme, but it is subject to limitations

contribute.

AS A LEGISLATIVE CHARACTER
NOTE: LEVY; defined
- is an exercise of the to tax, which is

as only the legislative has the power to

1. determine the

exclusively legislative in nature and character.

HENCE; it cannot be said that the

• nature (kind)
• object (purpose)
• extent (amount or rate)
executive may levy taxes.

• coverage (subjects and objects)

• apportionment of tax (general or limited
application)
• situs of imposition; and
• method of collection
2. grant tax exemptions or condonations; and
3. specify or provide for he administrative as
well as judicial remedies that either the
government or the taxpayer may avail
themselves in the proper implementation of the
tax measure.

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TAXATION

C. CHARACTERISTICS OF
ADMINISTRATIVE FEASIBILITY; means
TAXATION

CHARACTERISTICS
that tax laws, rules and regulations must be
capable of being administered and complied
with.
1. pecuniary in nature Citizenry must easily understand its
2. enforced charges and contribution application for its compliance.
3. imposed on persons and property within AS: No matter how willing and
the territorial jurisdiction of a state able a taxpayer in complying
4. assessed according to a reasonable rule the mandates of a tax law if he
could not comprehend, he
of apportionment
could not fully comply the
same without lapses.
- Notably, each error in
D. POWER OF TAXATION AS compliance is penalized and
DISTINGUISHED FROM good faith is not always a
EMINENT DOMAIN AND POLICE
POWER
good defense.

see: Mamalateo's Book Reviewer on Taxation
THEORETICAL JUSTICE; means
Taxes imposed should be capable of being
paid by the taxpayers;
otherwise, its imposition would not

pg. 11-12
serve the purpose because no matter
how willing they are to pay, they are
E. PURPOSE OF TAXATION

REVENUE RAISING
not capable of doing so.

to promote the general welfare and protection

of its citizens. see also; Lifeblood Theory

NON-REVENUE / REGULATORY

• REGULATORY
ie. requiring licenses for which license fees
may have to be paid, congruent with the
exercise of police power, which is
necessary for the regulation and
surveillance of useful occupations, or

discourage non-useful occupation

• REDUCTION OF SOCIAL INEQUALITY

ff the progressive system of taxation, which
prevents the undue concentration of wealth

in the hands of a few individuals.

• ENCOURAGE ECONOMIC GROWTH BY

GRANTING TAX EXEMPTIONS AND
INCENTIVES

• PROTECTIONISM
to protect local industries from foreign

competition

F. PRINCIPLE OF SOUND TAX

SYSTEM

FISCAL ADEQUACY; means
that government revenues from taxation must
suffice to meet fiscal requirements.
This implies that a good tax system of
a State will not results to budget
deficit.

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TAXATION

G. THEORY AND BASIS OF H. DOCTRINES IN TAXATION

TAXATION

LIFEBLOOD THEORY
PROSPECTIVITY OF TAX LAWS

without taxes, the government would be

paralyzed for lack of motive power to activate
ONLY AS A GENERAL RULE

and operate it.

Hence, despite the natural reluctance
EXE: when the tax law provides for retroactivity

PROVIDED FURTHER:
to surrender part of one's earnest
income to taxing authorities, every that for retroactive application of a tax
person who is able must contribute his law to be valid
- it must not be so harsh and
share in running of the government.
oppressive in its application in order to
B E N E F I T- P R O T E C T I O N T H E O RY
(SYMBIOTIC RELATIONSHIP)
invalidate the law.

ie. favorable naman sa taxpayer yung

every person who is able to must contribute his
share in the running of the government.
the government, for its part, is
retroactive application.

ie, reversal of previous decision

expected to respond in the form of
tangible and intangible benefits
intended to improve the lives of the
people and enhance their moral and
material values.
declaring that a taxpayer is exempt
from paying a certain kind of tax, will
not make him liable for the unpaid
taxes. otherwise, prejudicial to the rule

NECESSARY THEORY
of non-retroactivity of ruling which is
would result to grave injustice to the
the existence of government is a necessity; taxpayer who relied on the previous
it cannot exist nor endure without the
means to pay its expenses; decision.

and for those means, the government

has the right to compel all its citizens
and property within the limits

- to contribute in the form of taxes

JURISDICTION OVER SUBJECTS AND

IMPRESCRIPTIBILITY

OBECTS

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TAXATION
DOUBLE TAXATION
IN STRICT SENSE
DIRECT DUPLICATION TAXATION
PROHIBITED
the ff elements must be present:
1. the same property must be taxed
twice when it should be taxed only
once
2. both taxes imposed on the same
property or subject matter
3. for the same purpose
4. by the same taxing authority
5. within the same jurisdiction or
taxing district
6. during the same taxing period; and
7. m u s t b e t h e s a m e k i n d o r
character of tax.
IN BROAD SENSE
INDIRECT DUPLICATE TAXATION
double taxation here means as an
indirect duplication of taxation.
- not prohibited
INSTANCES
• one is in the exercise of police
power (regulatory) and the other is
imposed as tax (revenue raising).
[ie. the former is exacted as license
fee and the other as tax n the
proceeds of the sale]
• state merely imposes tax on every
separate and distinct business in
which a party is engaged in.
• an article is taxed by two distinct
states.
NOTE: double taxation is not a valid
defense against the legality of a tax
measure
AS: double taxation is not entirely prohibited,
only when it results to direct duplication of the
tax.
CONSTITUTIONALITY OF DOUBLE
TAXATION
- see: Villanueva vs. City of Iloilo, Dec.
28, 1968
THE USUAL METHODS OF
AVOIDING THE OCCURRENCE OF
DOUBLE TAXATION
1. allowing reciprocal exemption
either by law or by treaty
2. allowance of tax credit for foreign
taxes paid
3. allowance of deduction for foreign
taxes paid
4. reduction of the Philippine tax rule
 production
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ESCAPE FROM TAXATION
SHIFTING OF TAX BURDEN
WAYS OF SHIFTING TAX BURDEN
by shifting the burden to someone else, not
as a tax, but as part of the purchase price
BUT: this only applies to INDIRECT TAX
FOR DIRECT TAX; it cannot be shifted to
person, other than the very person who, as
intended, should paY the tax.
TA X E S T H AT C A N B E S H I F T E D
(INDIRECT TAX)
1. value added tax
2. excise tax
3. other percentage tax; and
4. documentary stamp tax
MEANING OF IMPACT AND INCIDENCE
OF TAXATION
IMPACT OF TAXATION
- point in which tax is originally imposed or
the one on whom the tax is formally
assessed
INCIDENCE OF TAXATION
- point on which tax is originally imposed or
the one on whom tax is formally assessed.
PLUS:
TRANSFORMATION
- for manufacturers or producers, upon
whom tax are imposed, fearing the loss of
his market if he should add to the price,
pays the tax and endeavor to recoup
himself by improving his process of
production, thereby producing his units at a
lower cost.
CAPITALIZATION
the reduction in the price of the taxed object
equal to the capitalized value of future
taxes which the purchaser expects to be
called upon to pay.
KINDS OF SHIFTING TAX BURDER
• FORWARD SHIFTING; when the burden
of the tax is transferred from a factor if
production through the factors of
distribution until it finally settles on the
ultimate purchaser or consumer
• BACKWARD SHIFTING; when the burden
is transferred from the consumer through
the factors of distribution to the factors of
• ONWARD SHIFTING; when the tax is
shifted 2 or more times wither forward or
backward
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TAXATION

TAX EVASION TAX AVOIDANCE

tax minimization

EXEMPTION FROM TAXATION

MEANING
is a grant of immunity, express or implied,
is a scheme used a tax saving to a particular persons or corporations or to
outside of those device within the persons or corporations of a particular
lawful means to means sanctioned class,
- from a tax upon property or an
escape tax liability
and, when availed
of, it usually

by law

PROVIDED
exercise
which persons and corporations
subjects the this should be generally within the same district are
taxpayer to further
or additional civil
used by the
taxpayer in GF
obliged to pay

and criminal
liabilities
and in arms lenght

NATURE

• STRICTLY CONSTRUED AGAINST THE

results in the minimization of TAXPAYER
absence of tax - AS: the law does not look with favor on
payment of tax tax exemptions, they being contrary to

the lifeblood theory which is the

underlying basis for taxes.

TAX EVASION vs. TAX AVOIDANCE

3 FACTORS OF TAX EVASION

1. the end to be achieved (payment
of tax less than what is legally due
from him)
2. an accompanying state of mind
- furthermore: being a derogation of the
sovereignty of the state, its
relinquishment is never presumed
- see also: lifeblood theory
- strictissimi juris

which is described as being evil, in • EXEMPTION GRANTED IS PERSONAL

bf, willful, or deliberate, not merely IN NATURE AND COVERS ONLY TAXES
accidental; and FOR WHICH THE TAXPAYER-GRANTEE
3. the course of action or failure of IS DIRECTLY LIABLE

action which is unlawful. - hence; a sale to a tax exempt corp by
another corp who is not tax exempt,
IE OF VALID TAX AVOIDANCE
• donation of property to a non-stock,
cannot avail of such exemption.

non-profit educational institution

(Art. XIV, Sec. 4(3) of the Consti and
Sec. 3(b) of the NIRC)

KINDS OF TAX EXEMPTION

• EXPRESS

• deductions

PROOF OF TAX EVASION

expressly granted by organic or statute
law

• failure to declare for taxation • IMPLIED

purposes true and actual income whenever particular persons, properties
derived from business or excises are deemed exempt as they
• substantial under-declaration of fall outside the scope of the taxing
income in the tax returns of the
taxpayer for 4 consecutive years
coupled with intentional

provision itself.

• CONTRACTUAL

understatement. tax exemption in consideration of a

contractual agreement with the

government

RATION/GROUND
1. statue granting exemption provides for
liberal interpretation
2. by clear legislative intent
3. special taxes relating to special cases
and affecting only special classes of
person
4. exemptions refer to public property, or
to government,its political subdivisions
or instrumentalities

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TAXATION

5. exemptions granted to religious,

charitable and educational institutions
COMPENSATION AND SET-OFF

or their property

REVOCATION OF TAX EXEMPTION

GEN RULE: taxes cannot be the subject of set-

off or compensation.

- ff that taxation is the rule and exemption RATION:

is an exception, the exemption may thus 1. taxes are of distinct kind, essence and
be withdrawn at the pleasure of the taxing nature, and these impositions cannot

authority. be classed in merely the same

category as ordinary obligations

LIMITATIONS ON REVOCATION

• NON-IMPAIRMENT CLAUSE; when

exemption is given based on material
consideration of a mutual nature, it is
then becomes contractual and is
covered by non-impairment clause of the
constitution
2. the applicable laws and principles
governing each are peculiar, not
necessarily common to each; and
3. public policy is better served, if the
integrity and independence of taxes
are maintained.

• ADHERENCE TO FORM; if tax
exemption is granted by the constitution,
its revocation can be affected only
though amendment of the Constitution.
• If tax exemption is granted by special
law, it can be revoked only by general
law if expressly so provided,or with
manifest intent to repeal or alter the
special law, and not merely by its broad
taxpayer is not required.
GIST:
the liability to pay taxes are not in the
nature of contracts between the parties,
but grow out of duty to, and are the
positive acts of the government to the
making and enforcing of which, the
personal consent of of the individual

EXE: set-off and compensation of taxes is

application/interpretation.

NOTE: tax refunds are in the same nature

allowed when:
- if the obligation to pay taxes and the
taxpayer's claim against the government are

as tax exemption

both overdue, demandable, as well as fully
liquidated.
Compensation here takes place by

operation of law, and both obligations are
extinguished to their contractual amount.

N O T E : D O C T R I N E O F E Q U I TA B L E
RECOUPEMENT
- where the refund of a tax illegally or
erroneously collected or overpaid by a
taxpayer is barred by prescription,
a tax presently being assessed against a
taxpayer may be recouped or set-off
against the tax whose refund is not barred

by prescription.

DOES NOT APPLY IN PHIL

- only in common law countries

RATION: as both the taxpayer and

the collecting agency might be
tempted to delay and neglect the
pursuit of their respective claims

within the period prescribed by law.

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TAXATION

COMPROMISE
the commissioner may compromise the
payment of any IR tax under 2 instances:

TAX RULES AND REGULATIONS

1. when a reasonable doubt as to the validity
of the claim against the taxpayer exists; or
2. when financial position of the taxpayer
demonstrates a clear inability to pay the
GEN RULE
• cannot be extended by implication
• prevail over general laws
• to receive a reasonable construction with
a view to carrying out their purpose and

assessed tax
intent

TAX AMNESTY

DEFINED
general or intentional overlooking by the
State of its authority to impose penalties
on persons otherwise guilty of evasion or
violation of the revenue or tax laws.
- partake absolute forgiveness or waiver of
note: the construction of statute by a
predecessors is not binding on the
successors
- dito, yung previous construction ng ie.
Dept. of Finance, is not binding to the
successor of the office, as such is merely

the government of its right to collect.
an act of administration....

D I S T I N G U I S H E D F R O M TA X

EXEMPTION PENAL PROVISION OF TAX LAWS

FIRST; SIMILARITIES
• never favored nor presumed

• construed strictly against the taxpayer
DISTINCTION; in tax amnesty
- the government is not estopped from

NON-RETROACTIVE APPLICATION TO
questioning the tax liability even if TAXPAYER
amnesty tax payments were already

received.
tax laws are prospective in application

EXE
note: actually, para syang hindi distinction, 1. expressly declared; or

hanap hanap nlng later.

CONSTRUCTION AND INTERPRETATION

2. clearly the legislative intent

NOTE: in tax rulings, it shall not be given

OF retroactive effect if the modification or

reversal is prejudicial to the taxpayer.
TAX LAWS

GEN RULE:
EXE TO EXE: WHEN
R E T R O A C T I V I T Y O F TA X
in case of doubt, construed most strongly RULING BE GIVEN EFFECT
against the government and in favor of EVEN IF PREJUDICIAL TO THE

the subjects or citizens.

RATION: burdens are not to be

TAXPAYER
1. when taxpayer deliberately
misstates or omits material
imposed, nor presumed to be facts from his return or any
imposed beyond what the statutes document required of him by

expressly and clearly import. the BIR
2. where the facts subsequently

EXE: when no doubt gathered by the BIR are
materially different from the
facts in which the ruling is

GEN RULE:

TAX EXEMPTION AND EXCLUSION based; or
3. where the tax payer acted in
bf

strongly against taxpayer, as it is a form
of derogation of sovereignty of the state

and inconsistent with the lifeblood theory.

EXE:

see discussions made on tax exemptions

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TAXATION

I. SCOPE AND LIMITATIONS OF

TAXATION

INTERNATIONAL COMITY

INHERENT LIMITATIONS
BASIS: ART. II SEC 2 CONSTI
the Philippines adopts the generally accepted
principles of international law as part of the law
1. the levy must be for public purpose
2. inherently legislative
3. territoriality

of the land.

COMITY; defined
4. international comity the respect accorded by nations to each other
5. exemption of Govt entities, agencies and

instrumentalities
because they are sovereign equals

in par paren non habet imperium

PUBLIC PURPOSE
the right of taxation can only be used in aid of
a public object, an object which is within the

- as between equals, there is no sovereign

FF INTERNATIONAL COMITY, NO LAW

MAY BE PASSED IMPOSING TAX ON

purpose for which government is established.
1. income of foreign ambassadors
IT CANNOT BE EXERCISED
in aid of enterprises strictly private, for
the benefit of individual, though in a
2. real property tax on foreign embassies

remote or collateral way, the public may EXEMPTION FROM TAXATION OF GOVT

be benefited thereby.

NOTE:

ENTITIES

WOULD DEPEND AS TO WHO EXERCISES

INCIDENTAL ADVANTAGE
- kasi naalala ko kay Ortega, kung di ako
nag kakamali, justifies the requirement of

THE TAXING POWER

• IF EXERCISE BY A LGU;
- cannot tax the national government, its

public purpose requirement.
agencies and instrumentalities
TESTS TO DETERMINE PUBLIC

PURPOSE
- expressly prohibited by RA 7160

EXE: may fix for the operation of

• DUTY TEST; whether the thing to be
furthered by the appropriation of public
revenue is something which is the duty
of the State as a government to provide
public utilities owned, operated and
maintained by the LGU within their
jurisdiction

• IF EXERCISE BY THE NATIONAL GOVT

• PROMOTION OF GENERAL
W E L FA R E T E S T; w h e t h e r t h e - pursuant to NIRC; may levy taxes upon
proceeds of the tax will directly promote
the welfare of ye community in equal
GOCC, agencies and instrumentalities.

EXE: cannot tax

measure.

NON-DELIGABILITY OF THE LEGISLATIVE

• income derived by the
government from the exercise of
POWER TO TAX public utility and those in
~ see discussion on the Legislative Character exercise of essential govt

of Taxation. pg. 1
functions

. cannot tax the municipality of

DELEGATA POTESTAS NON POTEST
pateros for donor's tax on the value
DELEGARI

GEN RULE:

of the land it subsequently donated.

WOULD ALSO DEPEND ON THE NATURE

a delegated power cannot be further OR FUNCTION OF THE GOVT BODY BEING
delegated
- since the power of taxation is a power
that is exercised by congress as delegates

TAXED

• GOVERNMENTAL FUNCTIONS; exempt

of the people, then as a general rule, the
Congress cannot re-delegate this from tax, unless expressly taxed

delegated power.

EXE: see discussion already made in pg.

• PROPRIETARY FUNCTIONS; subject to
tax unless expressly exempted.
ff are expressly exempted: GSIS, SSS,

1 PHIC, PCSO, and for property tax; MIAA
& PFDA (Phil Fishiries Dev Authority)


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TAXATION

TERRITORIALITY - movable follows the person,
the situs is the domicile of the
MEANING
the taxing authority cannot impose taxes on
subjects beyond its territorial jurisdiction.

taxpayer

EXE:
- what the taxing authority may do is to • when the property has

determine the tax situs

PLACE OF TAXATION
acquired a business situs
in another jurisdiction
• when the law provides for
it is the place or authority that has the right to the situs of the subject if
impose and collect taxes
tax

SITUS OF INCOME TAX

SITUS OF EXCISE TAX

FACTORS TO CONSIDER
1. kinds or classification of the tax being
levied

• ESTATE TAX AND DONOR's TAX

RESIDENTS- the state where

2. situs of the thing or property being taxed the transferor is a citizen or a
3. citizenship of the taxpayer
4. residence of the taxpayer
5. source of the income taxed

resident

NR- where the property is

6. situs of the excise, privilege, business or

occupation being taxed

located

WHEN SITUS DOES NOT APPLY

SITUS OF BUSINESS TAX

1. where tax laws operate outside territorial

jurisdiction (RC and DC, taxable for income
• SALE OF REAL PROPERTY

within and without)

2. when the tax laws do not operate within the
• SALE OF PERSONAL PROPERTY

territorial jurisdiction of the state

• when exempted by treaty obligation
• VAT


• when exempted by international comity.

• SOURCES WITHIN THE

INTERNATIONAL COMITY
ART. II SEC. 2
the Philippines adopts the generally-accepted

PHILIPPINES principle of international law as part of the law

of the land.

• SOURCES WITHOUT THE COMITY; defined

PHILIPPINES the respect accorded by nations to each other

because they are sovereign equals

• INCOME PARTLY WITHIN AND HENCE; by virtue of this, not taxable

PARTLY WITHOUT - income of foreign ambassadors
-imposing real property tax upon foreign

SITUS OF PROPERTY TAX
embassies

BASIS:
• REAL PROPERTY In par parem non habet imperium
lex rei sitae/ lex situs - between equals, there us no sovereign.

- where the property is located

- Doctrine of Sovereign Equality

• PERSONAL PROPERTY

TA N G I B L E P E R S O N A L
also; the concept that when a foreign
sovereign enters the territorial jurisdiction of
another, it does it subject itself to the
PROPERTY
- where the property is
physically located although the

jurisdiction of the other

EXEMPTION OF GOVERNMENT ENTITIES

owner resides in another ~ see discussion on exemption pg.


jurisdiction

INTANGIBLE PERSONAL
PROPERTY
mobila sequuntur personam

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TAXATION
CONSTITUTIONAL LIMITATIONS
PROVISIONS INDIRECTLY AFFECTING
TAXATION
1. DUE PROCESS CLAUSE
No person shall be deprived of life, liberty, or
property without due process of law, xxx
ART. III SEC. 1
• enforced contribution from the people cannot
be made without a law authorizing the same,
enacted by a legitimate government
• SUBSTANTIAL DUE PROCESS; tax statute
must be within the constitutional authority of
Congress and that it must be fair, just and
reasonable (ie. concurrence of majority of all
of the members of the Congress in granting
tax exemption)
• PROCEDURAL DUE PROCESS; requires
that notice and hearing, or at least an
opportunity to to be hear, [a.] before a
delinquent taxpayer can be validly
prosecuted, [b.] during the assessment until
a compromise in extra-judicial settlement of
the taxpayer's criminal violation is reached,
[c.] notified as to the process of distraint and
granishment, even when compromise is not
allowed as when the case is already filed in
institutions)
court or involves fraud, [d.] during public
auction, which the delinquent taxpayer must
be allowed to bid, [e] for Sanggunians, to
conduct public hearing prior to the enactment
of tax ordinance and revenue measures
(unlike Natl Govt., which is only discretionary
upon them)
2. EQUAL PROTECTION CLAUSE
No person xxx be denied the equal protection
of the laws.
ART. III SEC. 1 CONSTI
ESSENCE
taxpayers of the same footing should be
treated alike, both as to privileges conferred as
well as on obligations imposed
EXE:
when there are substantial distinctions
among the taxpayers, difference in
treatment is allowed.
W AY S I N V I O L AT I N G T H E E Q U A L
PROTECTION CLAUSE
1. when the classification was made when
there is none (not based on substantial
distinction that makes real difference)
2. when no classification is called for.
ie. made in such a way that the tax exemption
only applies to a specified person.
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REQUISITES FOR VALID CLASSIFICATION
1. there must be a substantial distinction
2. these must be germane to the purpose of
the law
3. the distinction or classification must not
only be applicable to present but also to
future conditions; and
4. the distinction must apply to any persons,
things, and transactions belonging in the
same class.
3. FREEDOM OF RELIGION
No law shall be made respecting an
establishment of religion, or prohibiting the free
exercise thereof. The free exercise and
enjoyment of religious profession and worship,
without discrimination or preference, shall
forever be allowed. No religious test shall be
required for the exercise of civil or political
rights.
ART. III SEC. 5 CONSTI
2 ASPECTS OF SEC. 5
1. non-establishment clause
2. the free-exercise clause (this is the basis
for granting tax exemption to religious
Hence: by virtue of this, no tax imposable on
sale of Bibles
- as in doing so, would result in the impairment
of religious freedom as well as right of
dissemination of faith.
4. NON-IMPAIRMENT OF CONTRACTS
No law impairing the obligation of contracts
shall be passed.
ART. III SEC. 10 CONSTI
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 corporations or associations
organized under the laws of the Philippines at
least sixty per centum of whose capital is
owned by such citizens, nor shall such
franchise, certificate, or authorization be
exclusive in character or for 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,
alteration, or repeal by the Congress when the
common good so requires. xxx
ART. XII SEC. 11
NOTE: the constitutional guarantee on non-
impairment of contract only applies to taxation
power of the state, and not to eminent domain
and police power.
NOTE: the law only prohibits impairment of
obligations arising from contract. hence,
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TAXATION

pwede if against quasi-contract, delict, quasi- 3. GRANT BY CONGRESS OF AUTHORITY

delict or law.

NOTE: non-impairment of contract does not

TO THE PRESIDENT TO IMPOSE TARIFF

RATES

apply to franchise ART. VI SEC. 28 PAR. 2

- as it is always burdened with condition that it The Congress may, by law,
may be altered, amended or repealed at any AUTHORIZED THE PRESIDENT

time if public interest so requires.

NOTE: contract is deemed impaired only when

1. to fix within specified limits, and
subject to such limitations and
restrictions as it may impose,
- the statute/tax alters the relative rights of the 2. tariff rates,

parties to each other

NOTE: if unilateral tax exemption is granted, it

3. import and export quotas,
4. tonnage and
5. wharfage dues, and
may be revoked at will by the legislature 6. other duties or imposts within the
- exe of course that the tax exemption granted framework of the national
by the congress is in exchange of valuable development program of the
consideration, the period stipulated from which
the exemption from tax is to run must be Government.

respected, as it takes the form of a contract.

CONSTITUTIONAL PROVISIONS DIRECTLY

4. MAJORITY VOTE OF CONGRESS FOR

GRANT OF TAX EXEMPTION

AFFECTING TAXATION

1. NON-IMPRISONMENT FOR NON-

REQ NUMBER OF VOTE OF CONGRESS
FOR GRANT OF TAX EXEMPTION

PAYMENT OF TAX MAJORITY VOTE (ABSOLUTE)
No person shall be imprisoned for debt or non- at least 1/2 plus 1 of all the members
payment of a poll tax.

ART. III SEC. 20
voting separately

RATION:
POLL TAX; defined to prevent indiscriminate grant
is a tax imposed in person without any

qualifications.
of tax exemption

RELATIVE MAJORITY
all persons are allowed to pay even if
they are not qualified to pay tax.
- hence, if based on age, property or

- for withdrawal of tax exemption

RATION:

income, not a poll tax.

ie.
taxation is the rule and
exemption is the exception.
thus, the law makes it easier,

Community Tax Certificate

NOTE: Congress cannot pass a law penalizing

by requiring a smaller number
of votes to withdraw
exemption compared to its

non-payment of poll tax.

2. UNIFORMITY AND EQUALITY OF

grant.

5 . P R E S I D E N T ' S V E TO P O W E R O N
TAXATION APPROPRIATION, REVENUES AND TARIFF
The rule of taxation shall be uniform and
equitable. The Congress shall evolve a
progressive system of taxation.

BILLS

ART. VI SEC. 27 PAR 2

ART. VI SEC. 28(1) CONSTI

UNIFORMITY; defined
all taxable articles or kind of property of the
VETO POWER OF THE PRESIDENT
The President shall have the power to veto any
particular item or items in an
1. appropriation,

same class shall be taxed at the same rate.

FOR VALID CLASSIFICATION; see discussion

2. revenue, or

3. tariff bill,

in equal protection clause

C O N G R E S S S H A L L E V O LV E A
but the veto shall not affect
the item or items to which he does not

PROGRESSIVE SYSTEM OF TAXATION

- as a moral incentive to the Congress, and not
object.

FF AKIN TO GRANT OF TAX EXEMPTION:

as a judicially enforceable rights. tax amnesties, condonations and refunds

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NOTE: tax exemption granted by the including sharing the same

constitution is self executing. the congress can with the inhabitants by way of
neither add nor detract from it, but it may

provide procedure for entitlement direct benefits.

8. FLEXIBLE TARIFF CLAUSE

6. NON-IMPAIRMENT OF JURISDICTION OF

SC
ART. VI SEC. 28 PAR

9. EXEMPTION FROM REAL PROPERTY

ART VIII SEC. 5(b)
the SC can review judgments or orders of
lower court in all cases involving

TAXES

ART. VI SEC. 28 PAR 3

1. the legality of any tax, impost, assessment Charitable institutions, churches and
or tolls parsonages or convents appurtenant thereto,
2. legality of any penalty imposed in relation mosques, non-profit cemeteries, and all lands,

to the above

PRINCIPLE OF JUDICIAL NON-

buildings, and improvements, actually, directly,
and exclusively used for religious, charitable,
or educational purposes shall be exempt from
INTERFERENCE
the court cannot inquire into the wisdom of a
taxing act

taxation.

TEST OF EXEMPTION:
UNLESS: there is a violation of use of the property and not the ownership.

constitutional limitations or restrictions.

7. GRANT OF POWER TO LGU TO CREATE

- the use must be actually, directly and

exclusively used for the purposes mentioned

THEIR OWN SOURCE OF REVENUE EXCLUSIVE; defined
possessed and enjoyed to the
ART. X SEC. 5
Each local government unit shall have the
power to

exclusion of others

HENCE; if used partly for commercial

• create its own sources of revenues and purpose, cannot assail tax exemption.

• to levy taxes, fees, and charges

subject to such guidelines and limitations

- the doctrine of Dominant Use does

not apply here

as the Congress may provide, BUT; if incidental to or reasonably

consistent with the basic policy necessary for the accomplishment of

of local autonomy.

IN RE: AS TO THE PROCEEDS OF TAX

the purpose, exemption will apply.

10. NON-ESTABLISHMENT CLAUSE

COLLECTED

[LOCAL TAX]
no appropriation or use public money for

religious purpose

Such taxes, fees, and charges EXE:

shall accrue exclusively If the priest is assigned to armed forced, penal

[NATIONAL TAX]

to the local governments. institutions, government orphanages or

leprosarium

ART X SEC. 6 11. PROHIBITION ON USE OF TAX LEVIED

Local government units shall have a just share, FOR SPECIAL PURPOSE
as determined by law, in the national ART. VI SEC. 29 PAR 3
taxes All money collected on any tax levied for a
which shall be automatically special purpose

released to them. shall be treated as
- a special fund and paid out for such
[PROCEEDS IN THE UTILIZATION AND
DEVELOPMENT OF NATIONAL WEALTH]
ART. X SEC. 7

purpose only.

If the purpose for which a special fund

Local governments shall be entitled to an was created has been fulfilled or
equitable share abandoned,
in the proceeds of the the balance, if any, shall be
utilization and development of transferred to the general
the national wealth
WITHIN their respective areas,
in the manner provided by law,
funds of the Government.

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12. PROHIBITION AGAINST TAXATION OF J. STAGES OF TAXATION

R E L I G I O U S , C H A R I TA B L E , A N D


EDUCATIONAL ENTITIES
1. LEVY
the enactment of law by the congress,
imposing tax

13. PROHIBITION AGAINST TAXATION OF
2. ASSESSMENT AND COLLECTION
the act of administration and
implementation of the tax law by the

NON-STOCK, NON-PROFIT INSTITUTIONS
executive department through the

administrative agencies

3. PAYMENT
the act if compliance by the taxpayer,
including such option, schemes, or
remedies as may be legally availed by

him.

4. REFUND
a claim for the payment of cash for
taxes erroneously or illegally paid by

the taxpayer to the government.

K, DEFINITION, NATURE AND

CHARACTERISTICS OF TAXES

TAXES; defined
enforced proportional contribution from
persons and property
levied by the lawmaking body of the
state by virtue of its sovereignty
for the support of government

CHARACTERISTICS
and for all public needs.

1. a forced charge, imposition or contribution.

(cannot be said as a contractual
obligation, express or implied; not in any
way dependent upon will or contractual
assent, express or implied)
2. assessment in accordance with some
reasonable rule of apportionment
(progressive tax system, taxes based on
the taxpayer capacity to pay)
3. a pecuniary burden payable in money.
(but backpay certificates may be used in
payment of tax, while transfer or property,
real or personal, cannot be used as
payment of taxes)
4. imposed by the state on persons, property,
or exercises within its jurisdiction
(following principle of territoriality)
5. levied by the legislative body of the
government
6. levied for public purpose
7. personal to the taxpayer (NOTE: the only
way SHs may be held liable for the unpaid
taxes of a corp., is when after the
dissolution of the corp. it is shown that.
[a.] corporate assets have passed into
their hands without the payment of taxes

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or [b.] SHs have unpaid subscription to the

capital of the corporation, liable to the

extent of the unpaid subscription)

L. REQUISITES OF A VALID TAX

REQUISITES OF A VALID TAX
1. that either the person or the property
taxed be within the jurisdiction of the
taxing authority
2. that the assessment and collection of
certain kinds of taxes guarantee against
injustice to individuals, especially by
providing notice and opportunity for
hearing
3. that it should be for public purpose
4. the rule of taxation shall be uniform
5. the tax must not impinge on the inherent
and constitutional limitations on the power
of taxation

M. TAX AS DISTINGUISHED
FROM OTHER FORMS OF
EXACTION

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