LAW OF BASIC

 The power by which the sovereign,

through its law-making body, raises
revenue to defray the necessary
expenses of the government.
 It is merely a way of apportioning
the cost of the government among
those who in some measure are
privileged to enjoy its benefits and
must bear its burdens.
 The Supreme Court of the
Philippines described it as a
symbiotic relationship whereby in
exchange for the protection that the
citizens get from the government,
taxes are paid.
as described by the Supreme Court
 It is said that taxes are what we pay
for civilized society. Without taxes,
the government will be paralyzed
for lack of motive power to activate
and operate it.
 Hence, despite the natural
reluctance to surrender part of one's
hard-earned income to the taxing
authorities, every person who is able
must contribute his share in the
running of the government.
 The government for its part is
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.
 The symbiotic relationship is the
rationale of taxation and should
dispel the erroneous notion that it is
an arbitrary method of exaction by
those in the seat of power
“Taxpayers owe honesty to
government just as the
government owes fairness to
taxpayer”
"If the state expects its taxpayers to
observe fairness and honesty in
paying their taxes, so must it apply
the same standard against itself...
No one, not even the State, should
enrich itself at the expense of
another..."
 Levy
 A legislative power
 The determination of the ff:
▪ Persons
▪ Property or exercises to be taxed
▪ The sum or sums to be raised
▪ The due date thereof
▪ The time and manner of levying and
collecting taxes
 Collection
 Consists of manner of enforcement of
obligation on the part of those who are
taxed
 Includes assessment
Purpose and Objectives
 Revenue
 Basically, the purpose of taxation is to
provide funds or property with which
the State promotes the General
Welfare and Protection of citizens
 Regulation
 Taxation also has a regulatory purpose
as in the case of taxes levied on
exercises or privileges like those
imposed on tobacco and alcoholic
products, or amusement places like
night clubs, cabarets, cockpits, etc.
 Regulation
A regulatory purpose in the
rehabilitation and stabilization of a
threatened industry which is affected
with public interest, like oil industry..
 Promotion of General welfare
 The Supreme Court ruled that taxation
may be used as in implement of the
police power in order to promote the
general welfare of the people.
 Promotion of General welfare
 While the funds collected under the Oil
Price Stabilization Fund (OSPF) may be
referred to as taxes, they are exacted
in the exercise of the police power of
the State.
 Promotion of General welfare
 From such fund, amounts are drawn to
reimburse oil companies when
appropriate situations arise for
increases in the cost of crude oil
importation.
 Reduction of Social Inequality
 This is made possible through the
progressive system of taxation where
the objective is to prevent the undue
concentration of wealth in the hands
of a few individuals.
 Reduction of Social Inequality
 Progressivity is key stoned on the
principle that those who are able to
pay should shoulder the bigger portion
of the tax burden.
 Reduction of Social Inequality
 Incidentally, The present rates of
income, estate and gift taxes present
a good example of progressivity.
 Encourage Economic Growth
 In the realm of tax exemptions and tax
reliefs, for instance, the purpose is to
grant incentives or exemptions in
order to encourage investments and
thereby promote the country's
economic growth
 Encourage Economic Growth
 It is also worthwhile to note that the
power to exempt from tax is inherent
in the State.
 Encourage Economic Growth
 However, It is significant to note that
with respect to real property taxes, no
such power exists, save in the case of
condonation of taxes which can be
granted only for certain justifiable
reasons which are expressly stated in
law
 Protectionism
 In some important sectors of the
economy, as in the case of foreign
importations, taxes sometimes
provides protection to local industries
like protective tariffs customs duties.
 The enforced proportional
contributions from people and
property levied by the law-
making body of the State by
virtue of its sovereignty for the
support of government and for
public needs.
Attributes and Characteristics
A. Tax is a forced charge,
imposition or contribution
and as such it operates in
invitum
 It is no way to dependent on the will or
contractual assent, express or implied,
of the person taxed.
A. Tax is a forced charge,
imposition or contribution
and as such it operates in
invitum
 They are not contracts, either
expressed or implied, but positive acts
of government.
B. It is a pecuniary burden
payable in money
 A tax is not necessarilly confined to
those payable in money, as in the case
for instance, of backpay of certificates
which under R.A. 304 could be used as
payment of taxes.
B. It is a pecuniary burden
payable in money
 In one case, the Supreme Court held
that back pay certificates which under
R.A. 304 may be used to pay real
estate taxes.
C. It is levied by the legislative
body of the State
 taxing power is peculiarly and
exclusively legislative in character.
Taxes are obligations created by the
law
D. It is assessed in accordance
with some reasonable rule of
apportionment
 Conformably with the constitutional
mandate on progressivity of taxing
system, taxes must be based on ability
to pay
D. It is assessed in accordance
with some reasonable rule of
apportionment
 Do regressive taxes go against the
constitutional mandate in Sec. 28(1),
Art. VI of the constitution?
 "The constitution does not really prohibit
the imposition of indirect taxes which, like
the VAT, are regressive. What it simply
provides is that Congress shall 'evolve a
progressive system of taxation.'... Resort
to indirect taxes should be minimized but
not avoided entirely because it is difficult,
if not possible, to avoid them by imposing
such taxes according to taxpayers' ability
to pay..."
E. It is imposed by the State on
persons, property or services
with in jurisdiction
F. It is assessed in accordance with
some reasonable rule of
apportionment
 A tax creates a civil liability on the part of a
delinquent taxpayer, although the non-
payment thereof creates a criminal
liability, which could be subject of criminal
prosecution under existing laws.
F. It is assessed in accordance with
some reasonable rule of
apportionment
 In short, in taxation, it is one's civil liability
to pay taxes that give rise to criminal
liability, not the other way around as in
criminal cases where criminal liability
gives rise to a civil liability.
Importance
 Taxes are important because they
are the lifeblood of the
government and so should be
calculated without necessary
hindrance.
 The legislature, in adopting
measures to implement our tax
laws, wants to be assured that
taxes are paid and collected
without delay
 Being the lifeblood of the
Government, their prompt and
certain availability is an imperious
need.
 "The primary purpose is to
generate funds for the State to
finance the need of the citizenry
and to advance the common weal.
Due process of the law under the
Constitution does not require
judicial proceedings in tax cases.
 This must necessarily be so
because it is upon taxation that the
Government chiefly relies to
obtain the means to carry on its
operations and it is of utmost
importance that the modes
adopted to interfered with as little
as possible".
Personal to Taxpayer
 A corporation's tax delinquency cannot, for
instance, be enforced against its
stockholders because not only would this run
counter to the principle that taxes are
personal, but it would also not be in accord
with the rule that a corporation is vested by
law with a personality that is separate and
distinct from those of the persons composing
it, as well as from that of any other legal
entity to which it may be related.
 But, stockholders may be held
liable for the unpaid taxes of a
dissolved corporation if it appears
that the corporate assets have
passed into their hands, or when
stockholders have unpaid
subscriptions to the capital of the
corporation
 Similarly, estate taxes accruing upon
the transmission of the decedent's
state to his heirs are not liabilities
which can be enforced against his
heirs, for estate taxes are supposed to
be obligations that must be paid by
the executor/administrator out of the
net estate, before delivery to any
beneficiary of his distributive share.
 However, if prior to the payment of the
estate tax due on the transfer of
decedent's estate, the properties of the
deceased are distributed to any
beneficiary, then such beneficiary shall
be subsidiary liable for the payment of
such proportion of the estate tax as his
distributive share bears to the total value
of the net estate.
 It is inherent in the State
 It is an attribute of sovereignty
 "unlimited in range, acknowledging in
its very nature no limits, so that
security against its abuse is to be
found only in the responsibility of the
legislature which imposes the tax on
the constituency who are to pay it"
 It is an awesome power
(Supreme Court)
 However, no matter how awesome it
may be, it must not be exercised
arbitrarily.
 It
is a power emanating from
necessity
 A necessary burden to preserve the
State's sovereignty
 A means to give the citizenry an army
to resist an aggression
 It
is a power emanating from
necessity
 A navy to defend its shores from
invasion
 A corps of civil servants to serve
 It
is a power emanating from
necessity
 Public improvement designed for the
enjoyment of the citizenry and those
which come within the State's territory
and facilities, protection which a
government is supposed to provide.
 Itis a high prerogative of
sovereignty the relinquishment
of which is never presumed
 Any reduction or diminution thereof
with respect to its mode or rate must
be strictly construed and the same
must be couched in clear terms
 Itis a high prerogative of
sovereignty the relinquishment
of which is never presumed
 The general rule is that any claim for
exemption from tax statutes should be
construed strictly against the taxpayer
 Itis a high prerogative of
sovereignty the relinquishment
of which is never presumed
 Incidentally, Its power is not granted in
the Constitution.
 Itis a high prerogative of
sovereignty the relinquishment
of which is never presumed
 Remains undiminished in the
legislature in the absence of an express
surrender thereof, clear and explicit in
terms.
 Itis a high prerogative of
sovereignty the relinquishment
of which is never presumed
 The power to tax is subject to inherent
and constitutional limitations.
Theory and Basis
There are two reasons
why the exercise by
the State of its taxing
power is justified.
 Necessity Theory
 Government cannot continue without
the means to pay its expense
 Government has the right to compel
all citizens and property within its
limits to contribute (eminent domain)
 Benefits-Protection Theory
 The State demands and receive taxes from
subjects of taxation within its jurisdiction
so that it may be enabled to carry its
mandate into effect and perform the
functions of government, and the citizen
pays from his property the portion
demanded that he may be secured in the
enjoyment of the benefits of organized
society)
 Benefits-Protection Theory
 It should be noted that while taxes are
intended for general benefits, special
benefits to taxpayers are not required.
Moreover, according to the Supreme
Court, a person cannot object to or resist
the payment of taxes solely because no
personal benefit to him can be pointed out
as arising from the tax.
Legislative’s scope
Scope:
 The person, property, occupation to
be taxed. Exercises or privileges
within the jurisdiction are also
included
 The amount or rate of tax
Scope:
 The purpose for which taxes shall be
levied provided are public purposes
 The kind of tax to be collected
 The situs of taxation
 The method of collection
Aspects
 TheLevy or imposition of tax
on persons, property, or
exercises

 Collection of levied taxes

Basic Principles
 Fiscal Adequacy
 The sources of government revenue
must be sufficient to meet
government expenditures and other
public needs (this is essential to avoid
budgetary deficits and to minimize
local and foreign borrowings)
 Theoretical Justice
 A good tax system must be based on
the taxpayers' ability to pay

 Administrative Feasibility
 Taxes should be capable of being
effectively enforced
Inherent Limitation
Taxation is bound in its
exercise by its own
nature, essential
characteristics and
purpose
 Public Purpose of tax
 It is important in taxation because of all
the powers of government, that taxation
is said to be the strongest as it can be
readily employed against one class of
individuals in favour of another so as to
ruin one class and give unlimited wealth
and property to another ,if there is no
implied limitation on the uses for which
such taxing power may be exercised.
 Non-delegability of the Taxing
Power
 The power of taxation is exclusively
legislative, but there are exceptions.
 Non-delegability of the Taxing Power
Exceptions:
 The power granted to the congress to
authorize the President to fix limitations
and restrictions as may impose, tariff
rates, even for revenue purposes only, and
other imposts duties
 Non-delegability of the Taxing Power
Exceptions:
 Each local government unit shall have the
power to create its own sources of
revenues and to levy taxes, fees, and
charges subject to such guidelines and
limitations as the congress may provide,
consistent with the basic policy of local
autonomy.
 Situs of Taxation
 Defined as the place of taxation, is a
limitation on the taxing power.
 Situs of Taxation
 The principle is well-recognized that,
however broad the power of taxation
may be as to its character, such power
is necessarily limited only to persons,
property or business within its
jurisdiction.
Basic Considerations:
 Protection
 One authority opines that a legal situs
cannot be given to property for the
purpose of taxation where neither the
property nor the person is within the
protection of the taxing state.
Basic Considerations:
 Double Taxation and the Situs
Limitation
 Double taxation is never invalid where
it is imposed by different states.
Basic Considerations:
 Double Taxation and the Situs
Limitation
 In determining situs, it is of no
importance that the property has
already been taxed or is subject to tax
in another state.
Basic Considerations:
 The Maxim of Mobilia Sequuntur
Personam
 The situs of personal property is the
domicile of the owner.
Basic Considerations:
 The Maxim of Mobilia Sequuntur
Personam
 The doctrine of Mobilia Sequuntur
personam is not allowed to stand in
the way of taxation of personalty in
the place where it has its actual situs
and the requisite legislative jurisdiction
exists.
Basic Considerations:
 Legislative Power to Fix Situs
 If no constitutional provisions are
violated, the power of legislature to fix
is undoubted.
 (a) franchise which must be exercised in the
Philippines;
 (b) shares, obligations or bonds issued by any
corporation or sociedad anonima organized or
constituted in the Philippines in accordance
with its laws;
 (c) shares, obligations or bonds issued by any
foreign corporation eighty-five percentum
(85%) of the business of which is located in
the Philippines
 (d) shares, obligations, or bonds issued by
any foreign corporation if such shares,
obligations or bonds have acquired a business
situs in the Philippines;and
 (e) shares or rights in any partnership,
business or industry established in the
Philippines.
Factors affecting the principle:
 Kind or classification of tax being levied
 Situs of the thing or property taxed
 Domicile of the person taxed
 Citizenship of the person taxed
 Source of the income
 Situs of excercise, privilege, business or
occupation being taxed
To define the Factors:
 Property Tax
 In considering the place at which
property is taxable and the
governmental unit which may
rightfully levy and collect the property
tax
To define the Factors:
 Property Tax
 The taxing power reaches everything
in the State which can be denominated
as property
To define the Factors:
 Tax on Persons
 A state may levy a personal tax upon
persons subject to the jurisdiction of
its sovereignty.
To define the Factors:
 IncomeTax
 The crucial factors that involves
income tax:
▪ Citizenship of the taxpayer
▪ Domicile of the taxpayer
▪ Source of income
 Exemption of Local Government
 The property of the state and
municipal subdivisions devoted to
government uses is generally deemed
to be exempt from taxation.
 International Comity
 "International obligations concomitant
with our acceptance of the principles
of international law as part of our law
demand that certain representatives of
foreign states station and property of
such foreign states found within our
territory be exempted from taxation..."
Constitutional Limitation
Provisions that are said to
be the limitations on the
Taxing Power are as
follows:
 Due Process of Law
 "No person shall be deprived of life,
liberty, or property without due
process"
 Equal Protection of Law
 "...nor shall any person be denied the
equal protection of laws"
 Freedom of Speech and of the Press
 "No law shall be passed abridging the
freedom of speech, of expression, or of
the press, or the right of the people
peaceably to assemble and petition
the government for the redress of
grievance
 Non-infringement of Religious
Freedom
 "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.
 Non-impairment of Contracts
 "No law impairing the obligations of
contracts shall be passed"
 Non-imprisonment for debt
 "No person shall be imprisoned for
debt or non-payment of poll tax"
Origin of Appropriations, Revenue and
Tariff Bills
 "All appropriations, revenue or tariff bills,
bills authorizing the increase of the public
debt, bills of local application and private
bills shall originate exclusively from the
House of the Representatives but the
senate may propose or concur with
amendments"
Uniformity, Equitability, and
Progressivity of taxation
 "The rule of taxation shall be uniform
and equitable. The congress shall
evolve a progressive system of
taxation"
Delegation of Legislative Authority to Fix
Tariff Rates, Import, Export Quotas, etc.
 "The congress may, by law, authorize the
President to fix within specified limits, and
subject to such limitations and restrictions as
it may impose tariff rates, import and export
quotas and other imposts, within the
framework of the national development
program of the Government."
Tax exemption of properties
 "Charitable institutions, Churches,
Parsonages or Convents, Mosques,
non-profit cemetery and all lands,
public schools shall be exempted to
taxations."
Voting requirement
 "No law granting any tax exemption
shall be passed without the
concurrence of a majority of all the
members of the congress."
Non-impairment of jurisdiction of the
Supreme Court
 "The Congress shall have the power to
define, prescribe, and apportion the
jurisdiction of the various courts but
may not deprive the Supreme Court of
its jurisdiction..."
Provisions that are NOT
limitations on the
Taxing Power
Provisions that are NOT limitations
on the Taxing Power:
 Constitutional requirement on the
subject and title of bills
 Power of the President to veto any
particular item/s in an appropriation
Provisions that are NOT limitations
on the Taxing Power:
 No money shall be paid out of the
Treasury except of an appropriation
made by the law
 Appropriation of public money for the
benefit of religious systems
Provisions that are NOT limitations
on the Taxing Power:
 Allotment to Local Governments