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Prof. Rachel T. Uy Second Semester, SY 2012-2013 Manuel S. Enverga University Foundation College of Law Module 1: Fundamentals of Taxation I. Meaning and Nature of Tax A. “Taxation” and “tax” defined Commissioner v. Algue, 158 SCRA 9 (1988) B. Essential Characteristics of Taxes C. Taxes as distinguished from other forms of impositions i. Tax v. licence and regulatory fee Osmeña v. Orbos, 220 SCRA 703 (1993) PAL v. Edu, 164 SCRA 320 (1988) Progressive Development v. Quezon City, 172 SCRA 629 (1989) Compania de Tabacos v. City of Manila, 8 SCRA 367 (1963) Tax v. special assessment § 240, Local Government Code Republic v. Bacolod Murcia, 17 SCRA 632 (1966) Tax v. toll §155, Local Government Code Diaz v. Secretary of Finance, 654 SCRA 96 (2011) Tax v. tariff and customs duties Garcia v. Executive Secretary, 211 SCRA 21 (1992) Obligation to pay tax v. obligation to pay debt Art. 1279, Civil Code General Rule: Caltex v. COA, 208 SCRA 754 (1992) Francia v. IAC, 162 SCRA 754 (1988) Exception: Domingo v. Garlitos, 8 SCRA 443 (1963)
Purposes/Objectives of Taxation A. Revenue-raising PAL v. Edu, supra Osmeña v. Orbos, supra B. Non-revenue/special or regulatory Republic v. Bacolod Murcia, 12 SCRA 632 (1966) Tio v. Videogram Regulatory Board, 151 SCRA 208 (1987) Caltex v. Commissioner, supra
Theory and Basis of Taxation
110 Phil 331 (1960) Caltex v. 151 SCRA 208 (1987) Gaston v. Purpose must be public in nature Pascual v.R. L-22074. CIR. Levy/Imposition by the legislative body B. Posadas. supra B. No. Exclusively legislative in nature iii. Subject to inherent and constitutional limitations C.. Algue. Videogram Regulatory Board. 1968 Lorenzo v. Collection/administration/ways/methods of collection i. October 29. Ancheta. Nature and Scope of and Limitations on the Power of Taxation A. “pay as you earn” “pay as you go” withholding system “pay as you are assessed” “pay as you file” V. 237 SCRA 324 (1994) Sison v. Necessity Theory Phil. Inc. Palomar.A. 130 SCRA 654 (1984) Kapatiran v. v. Del Rosario. Commissioner.R. Benefits-Received Theory Gomez v. 64 Phil 353 (1937) IV. Aspects of Taxation A. iii. April 30. Tan 163 SCRA 372 (1988) b. Republic Planter. supra Tio v. Extent of the legislative power to tax Tan v. No. ii. CTA. G. 158 SCRA 626 (1988) ii. G. Exceptions from the prohibition Delegation to local governments 2 . Essential characteristics of taxation i. Inherent limitations i. 1965 Commissioner v. Prohibition against delegation of power a. Secretary of Public Works. 23 SCRA 276 (1968) ii. Guaranty Co. L-23645. Power to tax as differentiated from the powers of eminent domain and police power B. Inherent in sovereignty Roxas v.
24(c).R. 28(2). X. supra Villegas v. 1. II. City of Iloilo. 197 SCRA 52 (1991) NPC v. supra iv. April 9. Uniformity and equity in taxation Sec. G. Constitution Sec.Sec. Ancheta. 202 SCRA 450 (1991) Iloilo Bottlers v.2. 1. Constitution Sison v. Art. Japan Airlines. Art. supra 3 . Constitutional Limitations i. III. 401. 28(1). VI. 5. Tax Code Maceda v. 2003 Delegation to the President Sec. supra iii. Constitution Sison v. Constitution Sec. 192 SCRA 365 (1990) iii. Macaraig. Art. Macaraig. ERB. HiuChiong Tsai Pao. 149110. 210 SCRA 219 (1992) Delegation to administrative agencies Maceda v. Local Government Code v. Art. BOAC. Tariff and Customs Code Garcia v. Of Finance. No. 86 SCRA 270 (1978) Tan v. Exemption of government entities agencies and instrumentality Sec. 164 SCRA 607 (1988) D. Executive Secretary. 149 SCRA 395 (1987) Commissioner v. Del Rosario. Local Government Code Basco v. 159. Ancheta. Art. Del Rosario. 197 SCRA 771 (1991) Maceda v. 130 SCRA 654 (1984) ii. Art. 237 SCRA 324 (1994) Sec. Constitution Adoption of a progressive system of taxation Tolentino v. Equal protection of the laws Sec. PAGCOR. Due process of law Tan v. Constitution Book II. Sec. Limitation of international comity Sec. Limitation of territorial jurisdiction/personal jurisdiction Commissioner v. III. City of Cabanatuan. VI.
VI. 24(b). City of Butuan. 28(4). 101 Phil 386 (1957) Tolentino v. Grant of tax exemption Sec.- Valid classification of taxpayers/subject or items to be taxed Pepsi Cola v. VIII. Others a. Constitution Abra Valley College v. 94 Phil 387 (1954) iv. Art. Constitution Sec. supra vi. non-profit institutions Sec. Aquino. supra vii. 4(3). Prohibition against impairment of obligation of contracts Sec. Of Finance. Prohibition re: appropriation of proceeds of taxation The use of tax levied for special purpose Sec. 83 Phil 852 (1949) Shell v. Prohibition against infringement of religious freedom Sec. Art. Art. 28(3). Prohibition against taxation of non-stock. 28(3). 10. Prohibition against imposition for non-payment of poll tax Sec. Constitution Community tax v. Art. Constitution b. 5. Quezon City. Art. 29. XIV. 88 Phil 60 (1951) Eastern Theatrical v. Poll tax Sec. XII. tariff bills by the president Gonzales v. III. Constitution viii. Macaraig. Veto of appropriation.R. June 29. 4(4). 20. No. revenue. Prohibition against taxation of religious. DelaFuente. Art. Constitution Sec. 144104. 156-164. Tax Code x. 11. XIV. VI. Municipality of Cordova. Constitution Tolentino v. III. VI.2 and 5(b). Of Finance. Art. Alfonso. Sec. Art. Constitution 4 . 2004 ix. G. Local Government Code v. Constitution Sec. City of Manila. Sec. 191 SCRA 452 (1990) c. charitable entities and educational entities Sec. III. Art. Constitution Sec. 162 SCRA 106 (1988) Lung Center v. Art. Non-impairment of the jurisdiction of the Supreme Court Secs. Constitution American Bible Society v. VI. Art. 24 SCRA 787 (1968) Manila Race Horse v.
VIII.. RA 7716 Philippine Acetylene v. As to scope of the tax: National/local taxes Benguet Corporation v. 235 SCRA 630 (1994) B. CBAA. Who may question the validity of a tax measure of expenditure of taxes— taxpayer’s suit Lozada v. Ongpin. Of Finance. Basic principles of a sound tax system Chavez v. 210 SCRA 579 (1993) B. As to who shoulders the burden of the tax: Direct/Indirect taxes Sec. Sec. 26 SCRA 578 (1968) Com v. Classification of Taxes A. 242 SCRA 289 5 . Tax Systems A. Revenue bills shall originate from the House of Representatives Sec. 120 SCRA 337 (1983) Maceda v. 1. 65 SCRA 624 (1975) VI. Art. VI. supra E. Constitution Tolentino v. Com. 197 SCRA 771 (1991) Maceda v. 11. 1995. Sec. Sec. 148 SCRA 36 (1987) C. Macaraig. supra e. City of Iloilo. No. CA. Art. 104151. Classification Sec. John Gotamco. March 10. 223 SCRA 217 (1993) Com v. Marcos. Macaraig. 186 SCRA 331 (1990) VII. 20 SCRA 1056 (1967) Maceda v. v. G. 24. supra f. Art.R. Constitution Tolentino v. Macaraig. Constitution Progressive system v. Of Finance. Sec. III. Grant of franchise Sec. Of Finance. Art. Progressive rate of tax Tolentino v. Constitution Tolentino v. Avelino 89 SCRA 70 (1979) d. 28(1). XII.San Miguel Corp. Of Finance. 4. As to the object or subject matter of the tax: Property/personal/poll or capitation/excise Villanueva v. Commissioner. Infringement of press freedom Sec. 197 SCRA 771 (1991) Gonzales v.
21(a). BOAC. 149 SCRA 395 (1987) Com. Proportional Eg. ii. Tax Code Meaning of “digressive tax rate” iii. Tax Code iii. Progressive Eg. 25 SCRA 938 (1968) Pepsi Cola Bottling Co. Meaning of situs of taxation Situs of subjects of taxation Commissioner v. Japan Airlines. Regressive VIII. 99 Phil 575 (1956) E. Of Customs Brokers v. City of Iloilo. 26 SCRA 528 (1968) iii. ii. Ad valorem Specific We Wa Yu v. Constitutionality of double taxation City of Baguio v. Lara. v. Collector.Ass. Some Fundamental Doctrines in Taxation A. Meaning of double taxation in the strict sense/in the broad sense Instances of double taxation in its broad sense Villanueva v. Sec. Multiplicity of situs Collector v. v. As to the matter of computing the tax i. 233 Local Government Code ii. City of Lipa. Municipal Board. City of Butuan. Double Taxation i. 104. 202 SCRA 450 (1991) Wells Fargo v. ii. Del Rosario. Real Estate tax Sec. De Leon. 102 Phil 813 (1958) B. 24 SCRA 788 (1968) 6 . 93 Phil 106 (1953) D. Situs of Taxation i. As to the graduation or rate i. 70 Phil 325 (1940) Tan v. 237 SCRA 324 (1994) Sec.
v. Com. December 18. 143867.R. Exemption from taxation Meaning of exemption from taxation Greenfield v. i.R. March 25. Ways of shifting the tax burden b.. 166 SCRA 560 (1988) Com. 25 SCRA 913 (1968) Caltex v. CTA. Ace Line. Commissioner. Sarmiento. 2001 Zero-rating (VAT) Sec. Compared with/differentiated from other terms Tax remission/tax condonation Juan Luna Subdivision v. 196 SCRA 335 (1991) People v. Gonzales. 107 NIRC Exclusion/deduction PLDT v.. Kinds of tax exemption Atlas Fertilizer v. G. IAC. 77 Phil 394 (1946) ii. and incidence of tax ii. Meer. Com. Marubeni. 100 SCRA 556 (1980) Commissioner v. 2008 iii. Col. Tax evasion. Meaning of impact and incidence of taxation Relations among impact. 13 SCRA 633 (1965) iii. Phil. v. Shifting of tax burden a. G. Taxes that can be shifted c. 137377. 157 SCRA 349 (1988) Yutivo v. 91 Phil 370 (1952) Surigao Con. elements Republic v. Mining v. IAC. No.C. 9 SCRA 728 (1963) Tax amnesty Republic v. 208 SCRA 751 (1992) iv. City of Davao. 165 SCRA 327 (1988) Pascual v. 1 SCRA 160 (1961) iv. shifting. Escape from Taxation i. Tax Avoidance Delpher Traders Corp. M.. Castaneda. No. Nature of the power to grant tax exemption 7 .
1994 8 . Art. 22 SCRA 122 (1972) Tam Kim Kee v. City of Cabanatuan. Sec. 7 SCRA 122 (1963) NPC v. 64 SCRA 555 (1975) vii. iii. supra Wonder Mech. No. 99 Phil 934 (1956) B. Presiding Judge. 511 and 519. Laws granting tax exemption/tax incentives Constitution Sec. v. PAGCOR. ii. Oasan. Collector. vi.R. iv. Sec.. November 10. 197 SCRA 52 (1991) See also NPC v. Nature of tax exemption Tolentino v. Com. G. Com. supra Davao Light v. supra Maceda v.. 190 SCRA 477 (1990) vi. 28(3). Constitution National Internal Revenue Code Tariff and Customs Code Local Government Code Local tax ordinance Tax treaties/ international agreements Special laws Decisions of the SC/CTA Revenue rules and regulations/ Administrative rulings and opinions Sec. Of Finance. 149110. VI. Tariff and Customs Code Misamis Oriental v. No. Philippine Tax Laws and Regulations A. supra v. supra Maceda v. April 9. 100 Phil 288 (1956) Republic v. 2003 Maceda v. 245. Nature of Tax Laws Hilado v. supra Philippine Acetylene v. G. Macaraig. 108524. Department of Finance. ix. Macaraig. Rationale/grounds for tax exemption Tolentino v. Constitution National Internal Revenue Code Special Laws Treaty/International Agreements IX. Tax Code Secs.R. vii. Sources of Tax Laws i. CTA. CTA. viii.Basco v. Macaraig. Of Finance. V.
Rule when there is doubt Collector v. 196 SCRA 771 (1991) Maceda v. Of Finance. CTA. Of Pililia.a. 223 SCRA 217 (1993) D. Posadas . 67 SCRA 352 (1975) Benguet Corporation v. Tabios. Estanislao. 108 SCRA 143 (1992) 9 . CA. General Art.v. 212 SCRA 739 (1992) Com. supra Lorenzo v. Macaraig. v. 209 SCRA 446 (1992) LaSuerte v. 164 SCRA 192 (1988) Comm. v. 202 SCRA 137 (1991) ii. Macaraig. CA. Rules when legislative intent is clear Umali v. Provisions/laws granting tax exemptions a. Application of revenue rules and regulations/rulings Tuazon v. Posadas. Estanilao. Del Rosario. Filipinas Cia de Seguros. Rio Tuba Nickel Mining. 198 SCRA 82 (1991) Umali v. Mega General. V. 2.supra ii. Acetylene Company. Interpretation/Construction of Tax Laws i. 134 SCRA 29 (1985) b. Estanislao.R. 39 SCRA 70 (1971) Manila Electric Company v. 107 Phil 1055 (1965) Cebu Portland v. supra Hijo Plantation v. Mun. CTA. Civil Code Umali v. Exceptions Maceda v. Validity of revenue rules and regulations Tan v. La Tondeña. of Customs v. 5 SCRA 665 (1962) iii. 209 SCRA 446 (1992) Lorenzo v. CBAA. 115349. CA. Dept. 1997 Misamis Oriental Asso. 210 SCRA 579 (1992) b. April 18. 237 SCRA 324 (1994) Commissioner v. General Rule Commissioner v. Phil. v. Collector. Application of Tax Laws/Revenue Regulations and Rulings i. G. CB. 166 SCRA 166 (1988) ABS-CBN v. 240 SCRA 368 (1995) Phil. No. Petroleum Corp. 25 SCRA 789 (1968) Com. BIR Rulings C. 238 SCRA 63 (1994) Co.
G. Bureau of Customs C. 37 Phil 958 (1918) Aragon v. Local Government units D. Tax Remedies A. Tax Administration and Enforcement A. Rafferty. Follosco’s outlines in Taxation) 10 . Remedies of Taxpayers (This outline was prepared based on Prof. Other Government Agencies XI. Bureau of Internal Revenue B. 222 SCRA 580 (1993) X. 85 Phil 246 (1949) Pecson v. George. Ricalde’s and Prof.R.BPI v. Remedies of the Government B. August 28. J. Mandatory and directory provisions of tax laws Roxas v. 2001 iii. 144653. R. CA. No. Effectivity and validity of tax ordinances E. Commissioner.
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