THE POWER OF TAXATION
Power by which the sovereignraises revenue to defray the necessaryexpenses of the government from amongthose who in some measure are privilegedto enjoy its benefits and must bear itsburden.2.
Enforced proportional contributionfrom properties and persons levied by theState by virtue of its sovereignty for thesupport of government and for publicneeds.
Characteristics of Taxes:
1.forced charge;2.generally payable in money;3.levied by the legislature;4.assessed with some reasonable rule of apportionment;5.imposed by the State within its jurisdiction;6.levied for public purpose.
Theories or bases of taxation:
Taxes are the lifeblood of the nation.Without revenue raised from taxation, thegovernment will not survive, resulting indetriment to society. Without taxes, thegovernment would be paralyzed for lack of motive power to activate and operate it.
(CIR vs Algue, Inc., et. al.)
Illustrations of Lifeblood Theory:
a.Collection of taxes may not be enjoinedby injunction.b.Taxes could not be the subject of compensation and set-off.c.A valid tax may result in destruction of the taxpayer's property.2.
Existence of a government is anecessity and cannot continue without anymeans to pay for expenses.a.
“ Power to tax is the power todestroy”
– describes the unlimitednessof the power and the degree of vigor with which the taxing power may beemployed in order to raise revenue.b.
Oliver Wendell Holmes Dictum
“Power to tax is not the power todestroy while this court (US SupremeCourt)
– power to tax knows nolimits except those expressly stated inthe Constitution.
Marshall and Holmes Dictums Reconciled:
Although the power to tax is almostunlimited, it must not be exercised in an arbitrarymanner. We have courts to which people mayseek redress in case of irregularities.3.
There exist reciprocal duties of protection and support between State and itsinhabitants. Inhabitants pay taxes and in returnreceive benefits and protection from the State.
Importance of Taxes
Taxes are the lifeblood of thegovernment and so should be calculatedwithout unnecessary hindrance; therefore, their prompt and imperious availability is animperious need.
General Rule: Taxes are personal to thetaxpayer. Illustrations:
1.Corporation’s tax delinquency cannot beenforced against the stockholder (CorporateEntity Doctrine).
Stockholdersmay be held liable for unpaid taxes of adissolved corporation if the corporate assetshave passed into their hands.2.Transfer tax on the estate cannot beassessed against the heirs.
Heirsmay be held liable for the transfer tax on theestate, if prior to the payment of the same,the properties of the decedent have beendistributed to the heirs.
Nature of the Taxing Power
1.attribute of sovereignty and emanates fromnecessity, relinquishment of which is never presumed;2.legislative in character; and3.subject to inherent and constitutionallimitations.
Purpose and Objectives of Taxation
(still a tax but imposed under its non-revenue objective)
romotion of general welfare;c.
eduction of social inequity;d.
ncouragement of economic growth;ande.
Scope of legislative taxing power (MSSAPAK):
ubject to be taxed, provided it is within its jurisdiction;2.
mount or rate of the tax;3.
urposes for its levy, provided it be for public purpose;4.
ind of tax to be collected;5.
pportionment of the tax;6.
itus of taxation; and7.
ethod of collection.