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2012 Bar Reviewer in Taxation

2012 Bar Reviewer in Taxation

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Published by Joseph Rinoza Plazo

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Published by: Joseph Rinoza Plazo on Feb 11, 2012
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11/29/2014

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I. General Principles
A.Definition and Concept of Taxation
 As a process, it is a means 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 costs of government among those who in some measures are privileged toenjoy its benefits and must bear its burdens. As a power, taxation refers to the inherent power of the state to demand enforcedcontributions for public purpose or purposes. Taxation is a symbiotic relationship, whereby in exchange for the protection that thecitizens get from the government, taxes are paid.
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B.Nature of Taxation
1. It is an inherent attribute of sovereignty 2. It is legislative in character
C.Characteristics of Taxation
1. The power of taxation is an incident of sovereignty as it isinherentin the State,belonging as a matter of right to every independent government. It does need constitutionalconferment. Constitutional provisions do not give rise to the power to tax but merely impose limitations on what would otherwise be an invincible power. No attribute of sovereignty is more pervading, and at no point does the power of government affect moreconstantly and intimately all the relations of life than through the exactions made under it.
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2. The power to tax is inherent in the State, and the State is free to select the objectoftaxation, such power being exclusively vested in the legislature, exceptwhere theConstitution provides otherwise.
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 The Congress may by law authorize the President to fix within specified limits, andsubject to such limitations and restrictions as it may impose, tariff rates, import and exportquotas, tonnage and wharfage dues, and other duties or imposts within the framework of thenational development program of the Government.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 theCongress may provide, consistent with the basic policy of local autonomy. Such taxes, fees,and charges shall accrue exclusively to the local governments.
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1
Commissioner of Internal Revenue vs.Allegre, Inc., et al 
., L-28896, Feb. 17, 1988
2
Churchill and Tait v. Concepcion
, 34 Phil 969
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Art. VI, Sec,28 (2); Art. X, Sec. 5; Art. VI, Sec. 28. par. 2.
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Art. X, Sec. 5
 
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3. It is subject to Constitutional and inherent limitations; hence, it is not an absolutepower that can be exercised by the legislature anyway it pleases.
D.Power of Taxation Compared With Other Powers
1. Police Power2. Power of Eminent Domain TaxationPolice PowerEminent DomainPurposeRaising revenuePromote public welfarethru regulations Taking of property forpublic use Amount ofexactionNo limitLimited to the cost oregulations, issuance of the licenseor surveillanceNo exaction,compensation paid by thegovernmentBenefits receivedNo special or direct benefitsreceived but the enjoyment of theprivileges of living in an organizedsociety No direct benefits but ahealthy economic standardof society or
“damnum absque injuria” 
is attainedDirect benefit results inthe form of justcompensationNon-impairment of contracts The impairment rule subsistContracts may beimpairedContracts may beimpaired Transfer of propertyrights Taxes paid become part of publicfundsNo transfer but only restraint on the exercise of property right existsProperty is taken by thegov’t upon payment of just compensationScope Affects all persons, property andexcise Affects all persons,property, privileges, andeven rights Affects only the particularproperty comprehended
 
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BasisPublic necessityPublic necessity and theright of the state and thepublic to self-protectionandself-preservationPublic necessity, privateproperty is taken forpublic use Authority which exercises the powerOnly by the government orits political subdivisionsOnly by the government orits politicalsubdivisionsMay be granted to publicservice, companies, or publicutilities
E.Purpose of Taxation
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.
Revenue-raising  To provide funds or property with which the State promotes the general welfare andprotection of its citizens.2.Non-revenue/special or regulatory Promotion of General WelfareTaxation may be used as an implement of police power inorder to promote the general welfare of the people.
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RegulationAs in the case of taxes levied on excises and privileges likethose imposed in tobacco or alcoholic products oramusement places like night clubs, cabarets, cockpits, etc.
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Reduction of Social InequalityThis is made possible through the progressive system of taxation where the objective is to prevent theunder-concentration of wealth in the hands of few individuals.Encourage Economic GrowthIn the realm of tax exemptions and tax reliefs, forinstance, the purpose is to grant incentives or exemptionsin order to encourage investments and thereby promote
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see
Lutz vs.Araneta
, 98 Phil 148 and
Osmeňa vs.Orbos
, G.R. No. 99886, Mar. 31, 1993
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In the case of 
Caltex Phils. Inc. vs.COA
(G.R. No. 92585, May 8, 1992), it was held that taxes may also beimposed for a regulatory purpose as, for instance, in the rehabilitation and stabilization of a threatenedindustry which is affected with public industry like the oil industry.

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