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Taxation+Law

Taxation+Law

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San Beda College of Law
1
 
M
EMORY 
A
ID
 
IN
T
AXATION
L
AW
TAXATION LAW
I.
GENERAL PRINCIPLES
POWER OF TAXATION
TAXATION
power by which thesovereign through its law-making bodyraises revenue to defray the necessaryexpenses of government from amongthose who in some measure areprivileged to enjoy its benefits and mustbear its burdens.
Two Fold Nature of the Power of Taxation
1. It is an inherent
attribute of sovereignty2. It is legislative in character
Extent of Taxing Power
Subject to constitutional andinherent restrictions, the power of taxation is regarded as comprehensive,unlimited, plenary and supreme.
S
COPE
 
OF
L
EGISLATIVE
T
AXING
P
OWER 
1.Amount or rate of tax2.Apportionment of the tax3.Kind of tax4.Method of collection
5.
Purpose/s of its levy,
 provided 
it isfor public purpose
6.
Subject to be taxed,
 provided 
it iswithin its jurisdiction7.Situs of taxation
TAXES
enforced proportionalcontributions from the persons andproperty levied by the law-making bodyof the State by virtue of its sovereigntyin support of government and for publicneeds.
C
HARACTERISTICS
 
OF
T
AXES
1.forced charge;2.pecuniary burden payable in money;3.levied by the legislature;4.assessed with some reasonable ruleof apportionment; (see theoreticaljustice)5.imposed by the State within itsjurisdiction;6.levied for a public purpose.
EQUISITES
 
OF
A V
ALID
T
AX
1.should be for a public purpose2.the rule of taxation shall be uniform3.that either the person or propertytaxed be within the jurisdiction of the taxing authority4.that the assessment and collectionof certain kinds of taxes guaranteesagainst injustice to individuals,especially by way of notice andopportunity for hearing be provided5.the tax must not impinge on theinherent and Constitutionallimitations on the power of taxation
T
HEORIES
 
AND
B
ASES
 
OF
T
AXATION
1.
Lifeblood Theory
Taxes are what we pay for civilizedsociety. Without taxes, the governmentwould be paralyzed for lack of themotive power to activate and operate it.Hence, despite the natural reluctance tosurrender part of one's hard-earnedincome to the taxing authorities, everyperson who is able to must contributehis share in the running of thegovernment.
(CIR v. Algue, Inc.)
2.
Necessity Theory
The power to tax is an attribute of sovereignty emanating from necessity. Itis a necessary burden to preserve theState's sovereignty and a means to givethe citizenry an army to resist anaggression, a navy to defend its shoresfrom invasion, a corps of civil servants toserve, public improvements designed forthe enjoyment of the citizenry and thosewhich come within the State's territory,and facilities and protection which agovernment is supposed to provide.
(Phil. Guaranty Co., Inc. v. CIR)
3.
Benefits-Protection / ReciprocityTheory
Taxation is described as a
symbioticrelationship
whereby in exchange of thebenefits and protection that the citizensget from the Government, taxes arepaid.
(CIR v. Algue, Inc.)
T
AXATION
L
AW
C
OMMITTEE
 
 
C
HAIRPERSON
:
Charmaine Torres
 
 
A
SST
. C
HAIRPERSON
: 
Rhohail Castro
 
 
EDP : Rachelle Saya
 
S
UBJECT
H
EADS
:JeminaSy, Casiano Ilagan, Jr., Ryan Co, Edwin Torres
 
:M
EMBERS
: Marita Lourdes Azur, Edizer Enriquez, Christian Cabrera, JhundeeGuillermo
 
San Beda College of Law
1
 
M
EMORY 
A
ID
 
IN
T
AXATION
L
AW
Note:
While taxes are intended forgeneral benefits, special benefits totaxpayers are not required. TheGovernment renders no special orcommensurate benefit to any particularperson or property.
I
S
 
THE
P
OWER 
 
TO
T
AX
 
THE
P
OWER 
 
TO
D
ESTROY
?
1.
“Power to tax is the power todestroy”
(
Marshall Dictum) –
refersto the unlimitedness and the degreeor vigor with which the taxing powermay be employed to raise revenue.- the financial needs of the State mayoutrun any human calculation, so thepower to meet those needs by taxationmust
not
be limited even though taxesbecome burdensome or confiscatory.2.
“Power to tax is not the power todestroy while the Supreme Court sits”
(Holmes Dictum)
the power to taxknows no limit except those expresslystated in the Constitution.
Marshall and Holmes Dictum Reconciled 
Although the power to tax is almostunlimited, it must not be exercised in anarbitrary manner. If the abuse is sogreat so as to destroy the natural andfundamental rights of people, it is theduty of the judiciary to hold such an actunconstitutional.
P
URPOSES
 
AND
O
BJECTIVES
 
OF
T
AXATION
1.
Revenue –
basically, the purpose of taxation is to provide funds orproperty with which the Statepromotes the general welfare andprotection of its citizens.2.
Non-Revenue (Key: PR 
2
EP)
a.
P
romotion of general welfare
 
 b.
egulation
c.
eduction of social inequality
d.
E
ncourage economic growth
e.
P
rotectionism
P
OWER 
 
OF
J
UDICIAL
EVIEW
 
IN
T
AXATION
As long as the legislature, inimposing a tax, does not violateapplicable constitutional limitations orrestrictions, it is not within the provinceof the courts to inquire into the wisdomor policy of the exaction, the motivesbehind it, the amount to be raised or thepersons, property or other privileges tobe taxed.The court’s power in taxation is
limited 
only to the application andinterpretation of the law.
Note:
The
 principle of judicial non-interference
extends to theadministrative realm.
A
SPECTS
 
OF
T
AXATION
1.Levy or imposition of the tax (taxlegislation)2.Enforcement or tax administration(tax administration)
B
ASIC
P
RINCIPLES
 
OF
 
A
S
OUND
T
AX
S
YSTEM
(K 
EY
:FAT)
1.
Fiscal Adequacy
sufficiency tomeet government expenditures andother public needs.
2.
Administrative Feasibility/Convenience
capability of beingeffectively enforced.
3.
Theoretical Justice –
based on thetaxpayer’s ability to pay; must beprogressive. (Ability to Pay Theory)
TAXATIONPOLICEPOWER EMINENTDOMAIN
1. Purpose
To raiserevenueTo promotepublicpurposethroughregulationsTo facilitatethe State’sneed of property forpublic use
2.Amount of Exaction
No
limitLimited tothe cost of regulation,issuance of the license orsurveillance
No
exaction;but privateproperty istaken by theState forpublicpurpose
3.Benefits Received 
No
specialor directbenefit isreceived bythetaxpayer;merelygeneralbenefit of protection
No
directbenefit isreceived; ahealthyeconomicstandard of society isattainedA directbenefit resultsin the form of justcompensationto thepropertyowner
T
AXATION
L
AW
C
OMMITTEE
 
 
C
HAIRPERSON
:
Charmaine Torres
 
 
A
SST
. C
HAIRPERSON
:
Rhohail Castro
 
 
EDP : Rachelle Saya
 
S
UBJECT
H
EADS
:JeminaSy, Casiano Ilagan, Jr., Ryan Co, Edwin Torres
 
:M
EMBERS
: Marita Lourdes Azur, Edizer Enriquez, Christian Cabrera, JhundeeGuillermo
 
San Beda College of Law
1
 
M
EMORY 
A
ID
 
IN
T
AXATION
L
AW
4. Non-impairment of Contracts
Contractsmay
not
beimpairedContractsmay beimpairedContracts maybe impaired
5. Transfer of Property Rights
Taxes paidbecome partof publicfunds
No
transferbut onlyrestraint inits exerciseTransfer iseffected infavor of theState
6. Scope
All persons,property andexcisesAll persons,property,rights andprivileges
Only 
upon aparticularproperty
S
YSTEMS
 
OF
T
AXATION
Global SystemSchedular System
A systememployed wherethe tax systemviewsindifferently thetax base andgenerally treats incommon allcategories otaxable income of the individual.A system employedwhere the income taxtreatment varies andis made to depend onthe kind or categoryof taxable income of the taxpayer.A system whichtaxes allcategories oincome exceptcertain passiveincomes andcapital gains. Itprescribes aunitary butprogressive ratefor the taxableaggregate incomesand flat rates forcertain passiveincomes derivedby individuals.A system whichitemizes the differentincomes and providesfor varied percentagesof taxes, to beapplied thereto.
E
XAMPLES
O
F
T
AXES
L
EVIED
W
ITH
A
EGULATORY
 P
URPOSE
, O
C
OMBINED
E
XERCISE
O
F
P
OLICE
 P
OWER 
A
ND
T
HE
P
OWER 
O
F
T
AXATION
.a.
Motor vehicle registration feesare now considered revenue or taxmeasures.
(Pal v. Edu, G.R No. L-41383, August 15,1988)
This case reversed the doctrinepreviously held in Republic v. PhilippineRabbit Bus Lines, Inc., 32 SCRA 211, tothe effect that motor vehicleregistration fees are regulatoryexactions and not revenue measures. 
b.
The tax imposed on videogramestablishments is not only regulatory buta revenue measure because the earningsof such establishments have not beensubject to tax depriving the governmentof an additional source of income.
(Tiov. Videogram Regulatory Board, 151SCRA 208)
c.
The “coconut levy funds” wereall raised under the state’s taxing andpolice powers.The state’s concern to make it astrong and secure source not only in thelivelihood of the significant segment of the population, but also of exportearnings, the sustained growth of whichis one of the imperatives of theeconomic growth.”
Philippine CoconutProducers Federation, Inc. Cocofed v.Presidential Commission on GooGovernment (178 SCRA 236, 252) 
C
ONSTRUCTION
 
OF
T
AX
L
AWS
1.Public purpose is always presumed.2.If the law is clear, apply the law inaccordance to its plain and simpletenor.
3.
A statute will
not
 
be construed asimposing a tax
unless
 
it does soclearly, expressly andunambiguously.
4.
In case of doubt, it is construed moststrongly against the Government,and
liberally
in favor of thetaxpayer.
5.
Provisions of a taxing act are
not
 
tobe extended by implication.
6.
Tax laws operate prospectively
unless
the purpose of the legislatureto give retrospective effect isexpressly declared or may beimplied from the language used.
7.
Tax laws are
special laws
andprevail over a general law.
NATURE
 
OF
T
AX
L
AWS
1.Not political in character2.Civil in nature, not subject to expost facto law prohibitions3.Not penal in character
T
AXATION
L
AW
C
OMMITTEE
 
 
C
HAIRPERSON
:
Charmaine Torres
 
 
A
SST
. C
HAIRPERSON
:
Rhohail Castro
 
 
EDP : Rachelle Saya
 
S
UBJECT
H
EADS
:JeminaSy, Casiano Ilagan, Jr., Ryan Co, Edwin Torres
 
:M
EMBERS
: Marita Lourdes Azur, Edizer Enriquez, Christian Cabrera, JhundeeGuillermo

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