TAX REVIEWER

GENERAL PRINCIPLES: BY: Rene Callanta
DEFINITION OF TAXATION Taxation is the inherent power of the sovereign, exercised through the legislature, to impose burdens upon the subjects and objects within its jurisdiction, for the purpose of raising revenues to carry out the legitimate objects of the government. TAXES Enforced proportional contributions from properties and persons levied by the State by virtue its sovereignty for the support of the government and for public needs. BASIS OF TAXATION > G !E"#$E#T%& #E'ESS(T) * The existence of the government depends upon its capacity to perform its two +,- basic functions. %.. to serve the people /.. to protect the people THEORY OF TAXATION >"E'(0" '%& 12T(ES 3 S200 "T %#1 0" TE'T( # 4- Support on the part of the taxpayers ,- 0rotection and benefits on the part of the government BENEFITS RECEIVED PRINCIPLE +CIR vs. ALGUE• 1espite the natural reluctance to surrender part of ones hard earned income to the taxing authority, every person who is able to must contribute his share in the running of the government. • The government is expected to respond in the form of tangible or intangible benefits intended to improve the lives of the people and enhanced their material and moral values. • (n return for his contribution, the taxpayer receives the general advantages and protection which the government affords the taxpayer and his property. ne is compensation or consideration for the other. 0rotection for support and support for protection. 5owever, it does not mean that only those who are able to pay taxes can enjoy the privileges and protection given to a citi6en by the government. LORENZO vs. POSADAS • > The only benefit to which the taxpayer is entitled is that derived form the enjoyment of the privileges of living in an organi6ed society established and safeguarded by the devotion of taxes to public purpose. The government promises nothing to the person taxed beyond what maybe anticipated from an administration of the laws for the general good. • > Taxes are essential to the existence of the government. The obligation to pay taxes rests not upon the privileges enjoyed by or the protection afforded to the citi6en by the government, but upon the necessity of money for the support of the State. 3or this reason, no one is allowed to object to or resist payment of taxes solely because no personal benefit to him can be pointed out as arising from the tax. ESSENTIAL ELEMENTS OF A TAX 4- (t is an enforced contribution ,- (t is generally payable in money 7- (t is proportionate in character 8- (t is levied on persons, property, or the exercise of a right or privilege

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9- (t is levied by the State which has jurisdiction over the subject or object of taxation :- (t is levied by the law;ma<ing body of the State =- (t is levied for publics purpose or purposes REQUISITES of a VALID TAX code. >P, U, J, A, N? 4- (t should be for a public purpose ,- The rule of taxation should be uniform 7- That either the person or property taxed be within the jurisdiction of the taxing authority 8- That the assessment and collection be in consonance with the due process clause 9- The tax must not infringe on the inherent and constitutional limitations of the power of taxation *> Taxes are the lifeblood of the government and should be collected without unnecessary hindrance. /ut their collection should not be tainted with arbitrariness NATURE OF TAXATION 4- (nherent in sovereignty ,- &egislative in character SCOPE OF TAXATION 4- 'omprehensive ,- 2nlimited 7- 0lenary 8- Supreme TOLENTINO vs. SEC. Of FINANCE • > (n the selection of the object or subject of taxation the courts have no power to in@uire into the wisdom, objectivity, motive, expediency or necessity of such tax law. +A $E#PURPOSES OF TAXATION 0"($%") ; To raise revenue in order to support the government SE' #1%") 4- 2sed to reduce social ine@uality ,- 2tili6ed to implement the police power of the State 7- 2sed to protect our local industries against unfair competition 8- 2tili6ed by the government to encourage the growth of local industries PAL vs. EDU • > (t is possible for an exaction to be both a tax and a regulation. &icense fees and charges, loo<ed to as a source of revenue as well as a means regulation. The fees may properly regarded as taxes even though they also serve as an instrument of regulation. (f the purpose is primarily revenue, or if revenue is at least one of the real and substantial purposes, then the exaction is properly called a tax. CALTEX vs.. CIR • > Taxation is no longer a measure merely to raise revenue to support the existence of the government. Taxes may be levied with a regulatory purpose to provide means for rehabilitation and stabili6ation of a threatened industry which is affected with public interest as to be within the police power of the State. LIFEBLOOD DOCTRINE • > Taxes are the lifeblood of the nation

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> Aithout revenue raised from taxation, the government will not survive, resulting in detriment to society. Aithout taxes, the government would be paraly6ed for lac< of motive power to activate and operate it. +CIR vs. ALGUE> Taxes are the lifeblood of the government and there prompt and certain availability is an imperious need. > Taxes are the lifeblood of the nation through which the agencies of the government continue to operate and with which the state effects its functions for the benefit of its constituents

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ILLUSTRATIONS OF THE LIFEBLOOD THEORY 4- 'ollection of the taxes may not be enjoined by injunction ,- Taxes could not be the subject of compensation or set off 7- % valid tax may result in destruction of the taxpayerBs property 8- Taxation is an unlimited and plenary power POWER TO TAX AND POWER TO DESTROY * > The power to tax includes the power to destroy if it is used as an implement of the police power +regulatory- of the State. However, it does not include the power to destroy if it is used solely for the purpose of raising revenue. +ROXAS vs. CTA# TES. • > (f the purpose of taxation is regulatory in character, taxation is used to implement the police power of the state • > (f the power of taxation is used to destroy things, businesses, or enterprises and the purpose is to raise revenue, the court will come in because there will be violation of the inherent and constitutional limitations and it will be declared invalid.

NATURE OF THE TAXING POWER 4%ttribute of sovereignty and emanates from necessity, relin@uishment of which is never presumed ,&egislative in character, and 7Subject to inherent and constitutional limitations NECESSITY THEORY • > Existence of a government is a necessity and cannot continue without any means to pay for expenses BENEFITS – PROTECTION THEORY • > "eciprocal duties of protection and support between State and inhabitants. (nhabitants pay taxes and in return receive benefits and protection from the State SCOPE OF LEGISLATIVE TAXING POWER 4- The persons, property and excises to be taxed, provided it is within its jurisdiction ,- %mount or rate of tax 7- 0urposes for its levy, provided it be for a public purpose 8- Cind of tax to be collected 9- %pportionment of the tax :- Situs of taxation =- $ethod of collection ASPECTS OF TAXATION 4- &E!) or ($0 S(T( #

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 enactment of tax laws  legislative in character ,- %SSESS$E#T  collection  administrative in character # TES. • > (t is inherent in the power to tax that the State is free to select the object of taxation

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power of he !e"#s!$ %re o #&pose $' #()!%*es he power what to tax whom to tax how much to tax

BAGATSING vs. RA+IREZ • > Ahat cannot be delegated is the legislative enactment of a tax measure but as regards to the administrative implementation of a tax law that can be delegated. > The collection may be entrusted to a private corporation. • > The rule that the power of taxation cannot be delegated does not apply to the administrative implementation of a tax law > There is no violation because what is delegated or entrusted is the collection and not the enactment of such laws • > The issuance of regulations or circulars by the /(" or the Secretary of 3inance should not go beyond the scope of the tax measure

BASIC PRINCIPLES OF A SOUND TAX SYSTEM 4- T5E "ET('%& D2ST('E ,- 3(S'%& %1EE2%') 7- %1$(#(ST"%T(!E 3E%S(/(&(T) # TES. FISCAL ADEQUACY ; !( &%T( # F !%&(1 • > Sources of revenue should be sufficient to meet the demands of public expenditure > "evenues should be elastic or capable of expanding or contracting annually in response to variations in public expenditure >Elasticity may be obtained without creating annually any new taxes or any new tax machinery but merely by changes in the rates applicable to existing taxes • > Even if a tax law violates the principle of 3iscal %de@uacy , in other words, the proceeds may not be sufficient to satisfy the needs of the government, still the tax law is valid

ADMINISTRATIVE FEASIBILITY ; !( &%T( # F !%&(1 • > The tax law must be capable of effective or efficient enforcement > Tax laws should be capable of convenient, just and effective administration • • > Tax laws should close;up the loopholes for tax evasion and deter unscrupulous officials from committing fraud > There is no law that re@uires compliance with this principle, so even if the tax law violates this principleG such tax law is valid.

THEORETICAL JUSTICE

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!( &%T( # F (#!%&(1 > This principle mandates that taxes must be just, reasonable and fair  Taxation shall be uniform and e@uitable > E@uitable taxation has been mandated by our constitution, as if taxes are unjust and unreasonable then they are not e@uitable, thus invalid. > The tax burden should be in proportion to the taxpayers ability to pay +ABILITY TO PAY PRINCIPLE-

DISTINCTIONS. TAXATION !" POLICE POWER !" EMINENT DOMAIN 1) As o p%rpose. T$'$ #o( F for the support of the government E&#(e( Do&$#(H; for public use Po!#)e Power F to promote general welfare, public health, public morals, and public safety. ,- As o )o&pe(s$ #o(. T$'$ #o( F 0rotection and benefits received from the government. E&#(e( Do&$#( F just compensation, not to exceed the mar<et value declared by the owner or administrator or anyone having legal interest in the property, or as determined by the assessor, whichever is lower. Po!#)e Power F The maintenance of a healthy economic standard of society. /- As o perso(s $ffe) e*. T$'$ #o( $(* Po!#)e Power F operate upon a community or a class of individuals E&#(e( Do&$#( F operates on the individual property owner.

4) As o $% hor# 0 wh#)h e'er)#ses he power.
T$'$ #o( $(* Po!#)e Power F Exercised only by the government or its political subdivisions. E&#(e( Do&$#( F may be exercised by public services corporation or public utilities if granted by law.

5) As o $&o%( of #&pos# #o(.
T$'$ #o( F Generally no limit to the amount of tax that may be imposed. Po!#)e Power F &imited to the cost of regulation E&#(e( Do&$#( F There is no impositionG rather, it is the owner of the property ta<en who is just paid compensation.

6) As o he re!$ #o(sh#p o he Co(s # % #o(.
T$'$ #o( $(* E&#(e( Do&$#( F Subject to certain constitutional limitations, including the prohibition against impairment of the obligation of contracts. Po!#)e Power 1 "elatively free from constitutional limitations and superior to the non;impairment provisions thereof. TAX DISTINGUISHED FROM LICENSE FEE: a) PURPOSE. Tax imposed for revenue A5(&E license fee for regulation. Tax for general purposes A5(&E license fee for regulatory purposes only.

b) c) d)

BASIS. Tax imposed under power of taxation A5(&E license fee under police power. A+OUNT. (n taxation, no limit as to amount A5(&E license fee limited to cost of the license and expenses of police surveillance and regulation. TI+E OF PAY+ENT. Taxes normally paid after commencement of business A5(&E license fee before.

3urthermore. 7. 3ailure to pay a tax does not ma<e the business illegal A5(&E failure to pay license fee ma<es business illegal.. not necessity. . % special assessment is exceptional both as to time and placeG a tax has general application. thus accruing only to the owners thereof who. . • • %n exemption from taxation does not include exemption from a special treatment. (t is not a tax measure intended to raise revenues for the government. being lifeblood of the state. because some limitations apply only to one and not to the other. 8. pay the assessment. The power to tax carries with it a power to levy a special assessment. The proceeds thereof may be devoted to the specific purpose for which the assessment was authori6ed. F amount collected in lieu of criminal prosecution in cases of tax violationsG 3) !'*%)a$ a!!*!!&*+# F levied only on land based wholly on the benefit accruing thereon as a result of improvements of public wor<s underta<en by government within the vicinity. (t is necessary to determine whether a particular imposition is a tax or a license fee. SURRENDER. Taxes.#)*! a+/ f**! F duties charged upon commodities on their being imported into or exported from a countryG 7) /*0# – a tax is not a debt but is an obligation imposed by law. B$)o!o*4 56 SCRA 7/. after all. S'*%)a$ a!!*!!&*+# " #a1 4. % special assessment is not a personal liability of the person assessedG it is limited to the land. exemption from taxes does not include exemption from license fees TAXES DISTINGUISHED FROM OTHER IMPOSITIONS.6 e) f) EFFECT OF PAY+ENT. Rep%3!#) v. 9. Some "ules.!#o& /. 1) #o$$ F amount charged for the cost and maintenance of property usedG 2) %o&'(o&)!* '*+a$#. % special assessment is based wholly on benefits. cannot be surrendered except for lawful consideration A5(&E a license fee may be surrendered with or without consideration. 4) $)%*+!* f** F regulatory imposition in the exercise of the police power of the StateG 5) &a(-)+ f** F exaction designed to stabili6e the currency 6) %. I+PORTANCE OF DISTINCTION BET2EEN TAXES AND LICENSE FEES. % special assessment tax is an enforced proportional contribution from owners of lands especially benefited by public improvements % special assessment is levied only on land. (ts purpose is to finance such improvement. • % special assessment is a levy on property which derives some special benefit from the improvement.

To!! may be imposed by the government or by private individuals or entitiesG $' may be imposed only by the government. . while a $' does not draw interest except only when delin@uent. of a public nature. bridge. while a $' is based on laws. 7. 8. 5. % *e3 is assignable. 3. 2. To!! is a demand of proprietorshipG $' is a demand of sovereignty. % *e3 is governed by the ordinary periods of prescription. except poll tax. or the li<e. . while a $' cannot generally be assigned. To!! is a sum of money for the use of something. unreasonable. Pe($! 0 is designed to regulate conductG $'es are generally intended to generate revenue. % *e3 may be paid in <ind. % *e3 draws interest when it is so stipulated or where there is default. T$'es4 on the other hand. /*0# " o0$)-a#)o+ #o 'a. express or implied. % *e3 may be the subject of set off or compensation.payment of tax. That each one of the obligor be bound principally. and that he be at the same time a principal creditor of the other. while a $' is generally paid in money.7 To$$ " #a1 1. 1. while a $' is governed by the special prescriptive periods provided for in the #("'.. % *e3 is generally based on contract. #a1 1. 6. 2. To!! is paid for the used of anotherBs propertyG $' is paid for the support of government. That both debts consist in a sum of money. they be of the same <ind and also of the same @uality if the latter has been stated.)!)#*! of %o&'*+!a#)o+ 4. 2. 4. (t is the consideration which is paid for the use of a road. 3. O0$)-a#)o+ #o 'a. 9. Pe($! 0 may be imposed by the government or by private individuals or entities8 $'es only by the government. % person cannot be imprisoned for non. R*2. or if the things due are consumable. 3. a $' cannot. or confiscatory. Pe($! 0 is any sanction imposed as a punishment for violation of law or for acts deemed injuriousG $'es are enforced proportional contributions from persons and property levied by the State by virtue of its sovereignty for the support of the government and all public needs. The amount paid as toll depends upon the cost of construction or maintenance of the public improvements usedG while there is no limit on the amount collected as tax as long as it is not excessive. are enforced proportional contributions from persons and property levied by the State by virtue of its sovereignty for the support of the government and all public needs. Ta1 " '*+a$#.

S' allowed set off in the case of Do&#("o v. % tax delin@uency cannot be extinguished by legal compensation. R. 1ocumentary stamp tax B..I. I( er($! Reve(%e $'es #&pose* %(*er he NIRC.$*! (*: !*# off o( %o&'*+!a#)o+ of /*0#! • G*+*(a$ (. • Philex Mining Corporation v.debts be due. This is so because the government and the tax delin@uent are not mutually creditors and debtors. IAC4 57. #either is a tax obligation an ordinary act. The Supreme 'ourt disallowed such set off or compensation. That the two +. claim for payment of unpaid services of a government employee vis. $(* Rep%3!#) v. 8.( *. of P3)$)'')+* Ta1*! A.. 0ercentage taxes a. 9Fr$()#$ v... Transfer taxes a. and are the positive acts of the government to the ma<ing and enforcing of which the personal consent of the taxpayer is not re@uired.vis the estate taxes due from his estate. $oreover. commenced by third persons and communicated in due time to the debtors. 294 SCRA 687 ( 998! 0hilex $ining 'orporation was to set off its claims for !%T input creditJrefund for the excise taxes due from it. Excise taxes 9. That over neither of them there be any retention or controversy. 4. (ncome tax . T$r#ff $(* C%s o&s D% #es D. SCRA 6:. 9. T$'es > T$' I()e( #ves %(*er spe)#$! !$ws CLASSIFICATION OF TAXES AS TO SUB?ECT +ATTER OR OB?ECT 4. +$&3%!$o L%&3er4 ./? re. 'ompensation therefore ta<es place by operation of law. SCRA 7.Estate tax b. S. taxes are not in the nature of contracts but grow out of the duty to. That they be li@uidated and demandable. poll or capitation tax . G$r!# os <= SCRA . The fact that the court having jurisdiction of the estate had found that the claim of the estate against the government has been appropriated for the purpose by a corresponding law shows that both the claim of the government for inheritance taxes and the claim of the intestate for services rendered have already become overdue and demandable as well as fully li@uidated. the collection of a tax cannot await the results of a lawsuit against the government.1onorBs tax 7.8 7.$*. Commissioner.E1%*'#)o+. 3inally.!alue %dded Tax bther 0ercentage Taxes 8. Lo)$!> +%(#)#p$! T$'es C. 0ersonal.

. (ndirect tax %n indirect tax is demanded from a person in the expectation and intention that he or she shall indemnify himself or herself at the expense of another. whether citi6ens or not. Excise tax % charge impose upon the performance of an act. . (t re@uires the intervention of assessors or appraisers to estimate the value of such property before due from each taxpayer can be determined. #ational tax % national tax is imposed by the national government.9 Tax of a fixed amount imposed on persons residing within a specified territory. without regard to their property or the occupation or business in which they may be engaged. community tax.e. the enjoyment of privilege. falling finally upon the ultimate purchaser or consumer. AS TO 2HO BEARS THE BURDEN 4. AS TO PURPOSE GeneralJfiscal revenue tax is that imposed for the purpose of raising public funds for the service of the government. real or personal. 7... or the engaging in an occupation. in proportion to its value or in accordance with some other reasonable method of apportionment. 1irect tax % direct tax is demanded from the person who also shoul. AS TO GRADUATION OR RATE . AS TO THE SCOPE OF THE TAX 4. (t re@uires no assessment other than the listing or classification of the objects to be taxed. (t is a tax which the taxpayer is directly or primarily liable and which he or she cannot shift to another. 0roperty tax Tax imposed on property.ders the burden of the tax. &ocal tax % local tax is imposed by the municipal corporations or local government units +&G2s-. Specific tax % specific tax is a tax of a fixed amount imposed by the head or number or by some other standard of weight or measurement.. AS TO THE DETER+INATION OF A+OUNT 4. . . % tax which the taxpayer can shift to another. i. %d valorem tax %n ad valorem tax is a fixed proportion of the value of the property with respect to which the tax is assessed. useful occupation or enterprises and secondarily only for the purpose of raising public funds.. % special or regulatory tax is imposed primarily for the regulation of useful or non.

with ability to pay as the principal criterion. perso($! $' F also <nown as capitali6ation or poll taxG proper 0 $' F assessed on property of a certain classG *#re) $' F incidence and impact of taxation falls on one person and cannot be shifted to anotherG #(*#re) $' F incidence and liability for the tax falls on one person but the burden thereof can be passed on to anotherG e')#se $' F imposed on the exercise of a privilegeG "e(er$! $'es F taxes levied for ordinary or general purpose of the governmentG . TAX SYSTEMS Co+!#)#. 0roportional tax Tax based on a fixed percentage of the amount of the property receipts or other basis to be taxed.- Progressive s"stem o# taxation v. 1igressive tax rate. "egressive tax Tax the rate of which decreases as the tax base or brac<et increases. real estate tax. 4. not as judicially enforceable rights. >Se) #o( . 1. There is no such tax in the 0hilippines. regressive s"stem o# taxation • % pro"ress#ve s0s e& of $'$ #o( means that tax laws shall place emphasis on direct taxes rather than on indirect taxes. The 'ongress shall evolve a progressive system of taxation. 6. The provisions are put in the 'onstitution as moral incentives to legislation. 0rogression halts at a particular stage. 2. . 7. 3. Example. 0rogressive or graduated tax Tax the rate of which increases as the tax base or brac<et increases.B This is a directive to 'ongress.#)o+a$ &a+/a#* • • The rule of taxation shall be uniform and e@uitable. 9To!e( #(o v. #o regressive taxes in the 0hilippine jurisdiction • • CLASSIFICATION OF TAXES. progressive rate stops at a certain point. just li<e the directive to it to give priority of the enactment of law for the enhancement of human dignity. % re"ress#ve s0s e& of $'$ #o( exists when there are more indirect taxes imposed than direct taxes. Se)re $r0 of F#($()e.10 4.= 95-4 Ar #)!e @I4 Co(s # % #o(? "egressivity is not a negative standard for courts to enforce. 5. Ahat 'ongress is re@uired by the 'onstitution to do is to Aevo!ve $ pro"ress#ve s0s e& of $'$ #o(..

#on.G. property of foreign sovereigns are not subject to tax. LIMITATIONS ON THE POWER OF TAXATION I+3*(*+# L)&)#a#)o+! 4. (f delegated either to the 0resident or to a &. GENERAL RULE: . it should be validly delegated.11 7. heirs may be held liable for the transfer taxes on the estate. spe)#$! $' 1 levied for a special purposeG spe)#f#) $'es F imposed on a specific sum by the head or number or by some standards of weight or measurementG $* v$!ore& $' F tax imposed upon the value of the articleG 10.impairment clause f.#)o+a$ $)&)#a#)o+! F I(*#re) F a.subject F ne. stoc<holders may be held liable for unpaid taxes of a dissolved corporation if the corporate assets have passed into their handsG and . !o)$! $'es F taxes levied by local government units pursuant to validly delegated power to taxG 11. ne.E@ual protection clause c.ma<ing process F 4. Government entities are exempted.e. EXCEPTIONS 4. 9. (nternational comity is recogni6ed i.title "ule 7 separate days "ule except when there is a ..3reedom of the press d.1ue process clause b. 8. 7.. pro"ress#ve $'es F rate increases as the tax base increasesG and 12. .&aw. re"ress#ve $'es F rate increases as tax base decreases. 'orporationBs tax delin@uency cannot be enforced on the stoc<holder or transfer taxes on the estate be assessed on the heirs. Taxes are personal to the taxpayer. (t is limited to the territorial jurisdiction of the taxing authority. (t must be imposed for a public purpose. the properties of the decedent have been distributed to the heirs.. Co+!#)#."eligious freedom e.2. 7 readings on 'ertificate of Emergency .. 9. if prior to the payment of the same. 8.

restriction on dividends b.L PUBLIC PURPOSE F % purpose affecting the inhabitants of the State or taxing district as a community and not merely as individuals > 0ublic purpose includes not only direct benefits or advantage. &egality of any penalty imposed in relation thereto. non. endowments. commutations and pardons.S' power to review judgments or orders of lower courts in all cases involving F &egality of any tax. e.investments. buildings and improvements %1E +actually.Tax exemption of all revenues and assets used %1E for educational purposes of F 4. #on.#o tax exemption without the concurrence of a majority of all members of 'ongress.#on. directly .imprisonment for non.Taxation shall be uniform and e@uitable. D#re) 1 a. donations or contributions %1E for educational purposes.0residential power to grant reprieves. h. • RULE. mos@ues.".profit non. g."evenue bill must originate exclusively in 5. 1istribution of copies 7 days before the 7rd reading.L KThe &egislature is without the power to appropriate revenues for anything but for public purposes. religious. and remit fines and forfeitures after conviction by final judgment. b.12 7. churches and personages or convents appurtenant thereto. (mpost or toll.profit cemeteries. i.used for charitable. d. f. c. • K0ublic money can only be spent for a public purpose. .'ongress shall evolve a progressive system of taxation.payment of poll tax.provisions for re.. subject to conditions prescribed by law.Tax exemption of grants. 0roprietary or cooperative educational institutions subject to limitations provided by law including F a.Tax exemption of charitable institutions. g. it also includes indirect benefits or advantage . INHERENT LIMITATIONS # TES. and educational purposes. exclusively. and all lands. PUBLIC PURPOSE F GO@ERN+ENTAL PURPOSE RULE. but the Senate may propose with amendments.stoc< educational institutions.

the purpose is still public > The test is not as to who receives the money. but rather the ultimate 2. as long as there is a lin< to the public welfare. whether the purpose is public or not > (t is not the number of persons benefited but it is the character of the purpose that determines the public character of such tax law > Ahat is not allowed is that if it has no lin< to public welfare > 0ublic purpose is determined by the use to which the tax money is devoted > (f it benefits the community in general then it is for a public purpose no matter who collects it TEST 4.The ultimate result not the immediate result 7.for the support of the government . (t is 'ongress which has the power to determine whether the purpose is public or private . > %lthough private individuals are directly benefited.. but the character of the purpose for which it is expended > #ot the immediate result of the expenditure.13 TIO vs. the tax law is still for a public purpose+!%&(1> % tax levied for a private. the tax would still be valid. (f the public advantage or benefit is merely incidental in the promotion of a particular enterprise.The character of the direct object .for any of the recogni6ed objects of the government 7.to promote the welfare of the community LEGISLATIVE PREROGATIVE RULE. @IDEOGRA+ • • • • > (t is not the immediate result but the ultimate result that determines. 0roceeds of a tax must be used 4..The general welfare for public good TEST OF RIGHTFUL TAXATION . that will render the law (#!%&(1 (f what is incidental is the promotion of a private enterprise. • • • • • > The es or pr#v$ e h$ &%s 3e $pp!#e* #( *e er&#(#(" whe her he p%rpose #s p%3!#) 4. not public purpose constitutes ta<ing of property without due process of law as it is beyond the powers of the government to impose it. provided such benefit is only incidental > (f what is incidental is the promotion of a private enterprise.

• REQUISITES FOR A TAXPAYERS PETITION 4. CILOS BAYAN vs.7That money is being extracted and spent in violation of specific constitutional protections against abuses of legislative power That public money is being deflected to any improper purpose That the petitioner see<s to restrain respondents from wasting public funds through the enforcement of an invalid or unconstitutional law. CALTEX vs. you can no longer in@uire on such tax measure TAXPAYERS SUIT . +GONZALES vs.14 • > )ou can always @uestion the validity of such tax measure on the ground that it is not for a public purpose before the courts.(ne@ualities resulting from the singling out of one particular class for taxation or exemption infringe no constitutional limitation  (t is inherent in the power to tax that the legislature is free to select the subject of taxation . a case where the act complained of directly involves the illegal disbursement of public funds derived from taxation > courts discretion to allow • • > Taxpayers have sufficient interest of preventing the illegal expenditures of money raised by taxation +NOT 1 #%T( #S %#1 ' #T"(/2T( #S> % taxpayer is not relieved from the obligation of paying a tax because of his belief that it is being misappropriated by certain officials > % taxpayer has no legal standing to @uestion executive acts that do not involve the use of public funds. CO+ELEC • > (t is only when an act complained of which may include a legislative enactment of a statute. +ARCOS- • LOZADA vs. COA • > Taxpayers may be levied with a regulatory purpose to provide means for the rehabilitation and stabili6ation of a threatened industry which is affected with the public interest as to be within the police power of the State. involves the illegal expenditure of public money that the so. GUINGONA • > The Supreme 'ourt has discretion whether or not to entertain taxpayers suit and could brush aside lac< of locus standi CONCEPTS RELATIVE TO PUBLIC PURPOSE 4.called taxpayers suit may be allowed. > % law imposing burdens may be both a tax measure and an exercise of the police power in which case the license fee may exceed the necessary expenses of police surveillance and regulation. /ut once it is settled that it is for a public purpose.

therefore.Sovereign e@uality of States .%n individual taxpayer need not derive direct benefits from the tax  The paramount consideration is the welfare of the greater portion of the population 7.1elegation to administrative units POWERS WHICH CANNOT BE DELEGATED 4. NON4DELEGATION OF THE POWER TO TAX GENERAL RULE.. %reas formerly left to private initiative now loose their boundaries and may be underta<en by the government.2sage among States 7. INTERNATIONAL COMITY .%mount or rate of the tax . .15 . The power of taxation is peculiarly and exclusively legislative.0ublic purpose is determined at the time of enactment of the tax law and not at the time of implementation # TES..(mmunity from suit of a State # TES.1etermination of the subjects to be taxed .0urpose of the tax 7.1elegation to local government units 7.. practice or custom DOCTRINE OF INCORPORATION • • > The Ph#!#pp#(es $*op s he "e(er$!!0 $))ep e* pr#()#p!es of #( er($ #o($! !$w $s p$r of he !$w of he !$(* > (f a tax law violates certain principles of international law. it may not be delegated EXCEPTIONS: 4.1elegation to the 0resident . then it is not only invalid but also unconstitutional GROUNDS FOR TAX EXEMPTION OF FOREIGN GOVERNMENT PROPERTY 4..0ublic purpose is continually expanding. /ased on tradition. if it is to meet the increasing social challenges of the times 8.

reduce or remove existing protective rates of import duty. FLEXIBLE TARIFF CLAUSE +SE'. (f 'ongress can grant to a • .$anner. PAGCOR • > The power of local government units to impose taxes and fees is always subject to the limitations which 'ongress may provide.. because what is delegated is not the enactment or the imposition of a tax. general welfare andJor national security.16 8.7To establish import @uota or to ban imports of any commodity To impose additional duty on all imports not exceeding 4MN ad valorem DELEGATION TO LOCAL GOVERNMENT UNITS • > Each local government unit has the power to create its own revenue and to levy taxes. > $unicipal corporations are mere creatures of 'ongress which has the power to create and abolish municipal corporations. within specified limits and subject to such limitations and restrictions as it may impose 4. it is the administrative implementation • BASCO vs.0rescription of the necessary rules with respect thereto DELEGATION TO THE PRESIDENT • > 'ongress may authori6e. means and agencies of collection 9. 'ongress therefore has the power to control over local government units.Tariff rates . by law. (n the interest of national economy. 8M4 T''.(mport and export @uotas 7. the 0resident to fix.Tonnage and wharfage dues 8• • ther duties and import within the national development program of the government > There must be a law authori6ing the 0resident to fix tariff rates > The delegation of power must impose limitations and restrictions and specify the minimum as well as the maximum tariff rates. prov#*e* that the increase should not be higher than 4MMN ad valorem . the former having no inherent power to tax. fees and charges subject to such guidelines and limitations as the 'ongress may provide +ART X Se) :> &ocal government units have no power to further delegate said constitutional grant to raise revenue. 1) To increase. the 0resident upon the recommendation of the #ational Economic and 1evelopment %uthority is empowered.

the law must be complete in itself and must set forth sufficient standards > 'ertain aspects of the taxing process that are not really legislative in nature are vested in administrative agencies.power to perform details of computation.power to value property /.%gencies performing proprietary functions > SUB?ECT TO TAX * > The exemption applies only to governmental entities through which the government immediately and directly exercises its sovereign powers. # TES.are (o )overe* 30 he e'e&p #o( GOVERNMENT ENTITIES EXEMPT FROM INCOMING TAX 4. it can also provide for exemptions or even ta<e bac< the power DELEGATION TO ADMINISTRATIVE AGENCIES • • > 3or the delegation to be constitutionally valid.power to assess and collect taxes '. (n these cases... > Those with ORIGINAL CHARTERS +incorporated agencies- • > Those created by SPECIAL CHARTER +incorporated agencies.17 municipal corporation the power to tax certain matters.%gencies performing governmental functions D TAX EXE+PT .0'S 9.Government will be taxing itself to raise money for itself. NDC vs. appraisement or adjustments.0%G' " REASON FOR EXE+PTIONS 4.SSS 7. to wit.05(' 8.GS(S . %. EXEMPTION OF GOVERNMENT AGENCIES 4. CEBU CITY • > Tax exemption of property owned by the "epublic of the 0hilippines refers to the property owned by the government and its agencies which do not have separate and distinct personality. there really is no delegation. .

4. > 0roperty outside ones jurisdiction does not receive any protection of the State > (f a law is passed by 'ongress. • • • • > Tax laws cannot operate beyond a StateBs territorial limits > The government cannot tax a particular object of taxation which is not within its territorial jurisdiction. EXCEPTIONS TO THE TERRITORIALITY RULE A) 2here he $' !$ws oper$ e o% s#*e err# or#$! E%r#s*#) #o( 4.. '%0(T%T( # T%O.T%O%T( # of resident citi6ens on their incomes derived from abroad B) 2here $' !$ws *o (o oper$ e w# h#( he err# or#$! E%r#s*#) #o( of he S $ e 4.Ahen exempted by treaty obligations . # TES: TERRITORIAL JURISDICTION RULES.."E%& 0" 0E"T) T%O " 0" 0E"T) T%O > &ocation of the property • D 2e )$( o(!0 #&pose proper 0 $' o( he proper #es of $ perso( whose res#*e()e #s #( he Ph#!#pp#(es.(mmunity is necessary in order that governmental functions will not be impeded.Ahen exempted by international comity . • The State where the subject to be taxed has a situs may rightfully levy and collect the tax > (n determining the situs of taxation. you have to consider the nature of the taxes 0lace of taxation E'$&p!e. 'ongress must always see to it that the object or subject of taxation is within the territorial jurisdiction of the taxing authority SITUS OF TAXATION  RULE: . ' $$2#(T) T%O > "esidence of the taxpayer .0 && T%O..18 .

Shares.3ranchise which is exercised within the 0hilippines .DO+ICILLARY THEORY .."ights. ". hence the property or its owner should support the government of that place SITUS OF PROPERTY TAX ON PERSONAL PROPERTY .INTANGIBLLE PERSONAL PROPERTY G.Shares. usually the owners domicile . bonds issued by a foreign corporation. bonds issued by a domestic corporation 7. F 1omicile of the owner EO'E0T( #.  The place where the real property is located gives protection to the real property. Q9N of its business is conducted in the 0hilippines 8. +OBILIA SEGUNTUR PERSONA+ P movables follow the owner P movables follow the domicile of the owner RULES: 5.Shares. SITUS OF INCOME TAX A. * > Perso($! #( $("#3!e proper #es wh#)h $)H%#res 3%s#(ess s# %s here #( he Ph#!#pp#(es 4. interest in a partnership.. The situs location not domicile > Ahere the intangible personal property has ac@uired a business situs in another jurisdiction * > The principle of A+o3#!#$ SeH%( %r Perso($&L is only for purposes of convenience. obligations. you cannot apply the principle of K+o3#!#$ SeH%( %r Perso($&L because the properties have ac@uired situs here.19 SITUS OF TAX ON REAL PROPERTY F LEX REI SITUS or where the property is located "E%S #. obligations.TANGIBLE PERSONAL PROPERTY . obligations. Ahere located. (t must yield to the actual situs of such property. bonds issued by a foreign corporation which shares of stoc< or bonds ac@uire situs here 9. business or industry established in the 0hilippines > These intangible properties ac@uire business situs here in the 0hilippines.

Thus. nor upon the physical location of the property or in connection with the act or occupation taxed. the gauge of taxability does not depend on the location of the office. The country which is the source of the income or where the activity that produced the income too< place is the situs of taxation.line international carrier without any flight from the 0hilippines. but attaches upon the place where the respective transaction is perfected and consummated CONSTITUTIONAL LIMITATIONS I" DUE PROCESS • > 1ue process mandates that (o perso( sh$!! 3e *epr#ve* of !#fe4 !#3er 04 or proper 0 w# ho% *%e pro)ess of !$w.SOURCE RULE . REQUIREMENTS OF DUE PROCESS IN TAXATION . +UN. SITUS OF SALE OF PERSONAL PROPERTY • > The place where the sale is consummated and perfected SITUS OF TAX ON INTEREST INCOME • > The residence of the borrower who pays the interest irrespective of the place where the obligation was contracted CIR vs. CO+. The country where the income earner is a citi6en is the situs of taxation C. The location where the income earner resides in the situs of taxation B.NATIONALITY THEORY . BOAC • > "evenue derived by an of. PEPSI COLA vs. but depends upon the place on which the act is performed or occupation engaged in. OF CUSTO+S • > The power to levy an excise upon the performance of an act or the engaging in an occupation does not depend upon the domicile of the person subject to the exercise.20 . OF TANAUAN . from tic<et sales through its local agent are subject to tax on gross 0hilippine billings SITUS OF EXCISE TAX > Ahere the transaction performed HOPE2ELL vs.

#o arbitrariness or oppression in %. N.21 4.Tax measure should not be unconscionable and unjust as to amount to confiscation of property 7.amount of tax to be imposed ..• > $hen is %eprivation o# li#e.No #)e of he$r#(" $s o. > (f properties are taxed on the basis of an invalid law.There must be a valid law .(mposed within the Territorial jurisdiction 7. li&ert" or propert" %one in a''or%an'e (ith %)e pro'ess o# la(R (f done under authority of a law that is valid or of the constitution itself %fter compliance with fair and reasonable methods of procedure prescribed by law.Tax statute must not be arbitrary as to find no support in the constitution • 4.amount of the tax /.Tax must be for a 0ublic purpose .collection DUE PROCESS IN TAXATION DOES NOT REQUIRE 1) De er&#($ #o( hro%"h E%*#)#$! #(H%#r0 of %.assessment. there must be a clear and une@uivocal breach of the constitution > There must be proof of arbitrariness INSTANCES WHEN UNCONSTITUTIONAL THE TAX 5C. U6 LAW MAYBE DECLARED AS 1) (f it amounts to )o(f#s)$ #o( of proper 0 without due process 2) (f the subject of taxation is o% s#*e of he E%r#s*#) #o( of the taxing state .property subject to tax /.. such deprivation is a violation of due process RE+EDY F as< for refund • > To justify the nullification of a tax law. O. %. and /.manner of apportionment REQUISITES OF DUE PROCESS OF LAW 4..

. +T$( vs.sale of property at public auction • • > The validity of statute maybe contested only by one who will sustain a direct injury in conse@uence of its enforcement > % violation of the inherent limitations on taxation would contravene the constitutional injunctions against deprivation of property without due process of law > There must be proof of arbitrariness. otherwise apply the presumption of constitutionality > 1ue process re@uires hearing before adoption of legislative rules by administrative bodies of interpretative rulings. ++#s$&#s vs. imposes %(E%s oppress#ve $'es. $(* • • > % tax law which denies a taxpayer a fair opportunity to assert his substantial rights before a competent tribunal is invalid > A $'p$0er &%s (o 3e *epr#ve* of h#s proper 0 for (o(Fp$0&e( of $'es w# ho% 4. *e! Ros$r#o> SUBSTATNTI@E DUE PROCESS re@uires that a tax statute must be within the constitutional authority of 'ongress to pass and that it be reasonable. fair and just > PROCEDURAL DUE PROCESS re@uires notice and hearing or at least an opportunity to be heard • • • • • • ((" EQUAL PROTECTION CLAUSE > A!! perso(s4 $!! proper #es4 $!! 3%s#(esses sho%!* 3e $'e* $ > prohibits class legislation > prohibits undue discrimination EQUALITY IN TAXATION 7UNIFORMITY8 he s$&e r$ e > EH%$!# 0 #( $'$ #o( reH%#res h$ $!! s%3Ee) s or o3Ee) s of $'$ #o( s#&#!$r!0 s# %$ e* sho%!* 3e re$ e* $!#Ie or p% o( eH%$! foo #(" 3o h o( he pr#v#!e"e )o(ferre* $(* !#$3#!# #es #&pose* > %ll taxable articles of the same class shall be taxed at the same rate . DFA> 'ompliance with strict procedural re@uirements must be followed effectively to avoid a collision course between the states power to tax and the individual recogni6ed rights +CIR vs.22 3) The law maybe declared as unconstitutional if it is imposed (o for $ p%3!#) p%rpose 4) (f a tax law which is applied retroactively.notice of liability . A!"%e> The due process clause may correctly be invo<ed only when there is a clear contravention of inherent or constitutional limitations in the exercise of tax power.

'ongress may group persons or properties to be taxed and it is sufficient if all members of the same class are subject to the same rate and the tax is administered impartially upon them.(t must be based on s%3s $( #$! *#s #() #o( . (n short. • REQUISITES OF A VALID CLASSIFICATION 7S A G E 8 4. it is imperative that the substantial differences having a reasonable relation to the subject of the particular legislation > Taxes are uniform and e@ual when imposed upon all property of the same class or character within the taxing authority > Tax exemptions are not violative of the e@ual protection clause. The 'onstitution does not re@uire the absolute e@uality among residents.(t must $pp!0 eH%$!!0 to all members of the same class SUBSTANTIAL DISTINCTION > (t must be real.23 • > The 1octrine does not re@uire that persons or properties different in fact be treated in law as though there were the same. granting tax and duty incentives only to business within the Ksecured areaL of the Subic Special Economic SoneL and denying them to those who live within the 6one but outside such Kfenced inL territory.. CA The 'onstitutional right to e@ual protection of the law is not violated by an executive order. thereby justifying a valid and reasonable classification. (t is enough that all persons under li<e circumstances or conditions are given the same privileges and re@uired to follow the same obligations. as long as there is valid classification. Ae find real and substantial distinctions between the circumstances obtaining inside and those outside the Subic #aval /ase. Ahat it prohibits is class legislation which discriminates against some and favors others > %s long as there are rational or reasonable grounds for doing so.(t must be "er&$(e o he p%rpose of he !$w 8. material and not superficial distinction • • > Ahat is not allowed is ine@uality resulting from singling out of a particular class which violates the re@uisites of a valid classification > There maybe ine@uality but as long as it does not violate the re@uisites of a valid classification that such mere ine@uality is not enough to justify the nullification of a tax law or tax ordinance > Taxation is e@uitable when its burden falls on those better able to pay >%lthough the e@ual protection clause does not forbid classification. • • • • TIU vs. issued pursuant to law. but also to future conditions 7. a classification based on valid and reasonable standards does not violate the e@ual protection clause.(t must $pp!0 (o o(!0 o he prese( )o(*# #o(. .

of the tax in every place where the subject of the tax is found. (t re@uires the uniform application and operation./oth in privileges conferred and liabilities imposed '. AL+AZOR . on the basis of the benefits received from the government.24 TWO WAYS EQUAL PROTECTION CLAUSE CAN BE VIOLATED 4. (t does not. just in the light of the taxpayerBs ability to shoulder to tax burden and if warranted.on all persons /. CIR • > (f the ordinance is intended to supply to a specific taxpayer and to no one else regardless of whether or not other entities belonging to the same class are established in the future. without discrimination. but if it is intended to apply also to similar establishments which maybe established in the future.The conditions not being different /.under similar circumstances . Ahen the classification does not rest upon substantial distinctions that ma<e for real difference . but subject to reasonable classification.3avoritism and preference not allowed REYES vs.2he( )!$ss#f#)$ #o( #s &$*e where here sho%!* 3e (o(e ex. (ts cornerstone is the taxpayers ability to pay. CRITERIA OF EQUAL PROTECTION 4.2he( he !$ws oper$ e %(#for&!0 %. Ahen substantial distinctions exist but no corresponding classification is made on the basis thereof OR+OC SUGAR CENTRAL vs. re@uire absolute identity or e@uality under all circumstances.2he( (o )!$ss#f#)$ #o( #s &$*e where $ )!$ss#f#)$ #o( #s )$!!e* for ex. it applies to only one entity or taxpayer for the simple reason that there is so far only one member of the class subject of the tax measure UNIFORMITY IN TAXATION • > The concept of uniformity in taxation implies that all taxable articles or properties of the same class shall be taxed at the same rate. however.. EQUITY IN TAXATION • > The concept of e@uity in taxation re@uires that the apportionment of the tax burden be more or less. it is a violation of the e@ual protection clause.. then the tax ordinance is valid even if in the meantime.A!! perso(s $re re$ e* #( he s$&e &$((er %.

OF FINANCE • > Ahat is prohibited by the constitutional guarantee of free press are laws which single out the press or target a group belonging to the press for special treatment or which in any way discriminates against the press on the basis of the content of the publication. that is the one which cannot be taxed. +ANILA • > The payment of license fees for the distribution and sale of bibles suppresses the constitutional right of free exercise of religion. ?I++Y S2AGGART vs. SEC. maybe the subject of taxation > Ahat is not allowed is to impose tax on the exercise of an activity which has a connection with freedom of the press +license fee- > (f we impose tax on persons before they can deliver or broadcast a particular news or information. TAN • > (t is inherent in the power to tax that the state be free to select the subjects of taxation and it has been repeatedly held that ine@ualities which result from a singling out of one particular class of taxation or exemption infringe no constitutional limitation III" FREEDOM OF THE PRESS • • • > The press is not exempt from taxation > The sale of maga6ines or newspapers. > The Sale of religious articles can be the subject of the !%T > 2h$ )$((o 3e $'e* #s he e'er)#se of re!#"#o%s worsh#p or $) #v# 0 > The income of the priest derived from the exercise of religious activity can be taxed. TOLENTINO vs. • • • .25 • > Taxation is e@uitable when its burden falls on those better able to pay CAPATIRAN vs. BOARD OF EGUALIZATION • > The 3ree Exercise of "eligion 'lause does not prohibit imposing a generally applicable sales and use tax on the sale of religious materials by a religious organi6ation. IV" FREEDOM OF RELIGION • • > (t is the activity which cannot be taxed > activities which have connection with the exercise of religion A+ERICAN BIBLE SOCIETY vs.

> *he 'onstit)tional g)arantee o# the non+impairment 'la)se 'an onl" invo. FACTORAN • > 0olice power prevails over the non.impairment clause applies only to contracts and not to a franchise.26 V" NON4IMPAIRMENT CLAUSE • • > The parties to the contract cannot exercise the power of taxation.(f the basis of the tax exemption is a franchise granted by 'ongress and under the franchise or the tax exemption is given to a particular holder or person > can be unilaterally revo<ed by the government +'ongress- • • > The non.impairment clause applies to taxation but not to police power and eminent domain. a private individual. 4. the obligation of the taxpayer becomes one based on contract • PRO@INCE OF +ISA+IS vs.the franchise tax under the #("' 7.all taxes ..the franchise tax under the local tax code ?UAREZ vs. RULES: 4. CAGAYAN ELECTRIC • > 3ranchises with magic words. > They cannot agree or stipulate that this particular transaction may be exempt from tax. wherein the government enters into a contract with a private corporation > cannot be revo<ed unilaterally by the government 7.(f the exemption was granted for valuable consideration and it is granted on the basis of a contract. +ANCHUCA • • > % lawful tax on a new subject or an increased tax on an old one. Ksh$!! 3e #( !#e% of $!! $'esB descriptive of the payment of a franchise tax on their gross earnings are exempt from. not allowed +except if government- OPOSA vs. does not interfere with a contract or impairs its obligation. it applies only where one party is the government and the other. 3urthermore. /ut when.e% in the grant o# tax exemption. a taxpayer enters into a compromise with the /(".impairment clause LA INSULAR vs. CA . for instance. the obligation to pay tax is based on law..(f the exemption is granted by virtue of a contract. > The non. > cannot be revo<ed . > %s a rule.

tax amnesty is to be strictly construed against the government REASON. . PRADO • • > % presidential certification dispenses with the re@uirement not only of printing but also that of reading the bill on separate days.27 • > %s long as the contract affects the public welfare one way or another so as to re@uire the interference of the state. is a personal defense REASON. for taxes being burdens are not to be presumed beyond what the tax amnesty expressly and clearly declares VI" LAW MA9ING PROCESS %8 ONE SUBJECT – ONE TITLE RULE > Every bill passed by the 'ongress shall embrace only one subject which shall be expressed in the title thereof +Se). li<e amnesty. who must show compliance with the law.ART II- PHIL.7 95. EO'E0T when the 0resident certifies to the necessity of its immediate enactment to meet a public calamity or emergency.ART II/. CASTAJEDA • > 1efense of tax amnesty. then must the police power be asserted and prevail over the impairment clause RULES ON TAX AMNESTY • > Tax amnesty. • PP vs. >The government is not estopped from @uestioning the tax liability even if amnesty tax payments were already received REASON. ?UDGES ASSOC. +Se). The government is never estopped by mista<es or errors by its agents. Taxes are not construed. . is never favored nor presumed in law and if granted by statute must be construed strictly against the taxpayer. vs.7 9. (t relates to the circumstances of a particular accused and not the character of the acts charged in the information REPUBLIC vs. >(t is within the power of a /icameral 'onference 'ommittee to include in its report an entirely new provision that is not found either in the 5ouse /ill or .THREE READING RULE > #o bill passed by either 5ouse shall become a law unless it has passed three readings on separate days and printed copies thereof in its final form have been distributed to its members three days before its passage. li<e tax exemption. Erroneous application and enforcement of the law by public officers do not bloc< subse@uent correct application of the statute.. IAC • >(n case of doubt.

VII" PARDONING POWER OF THE PRESIDENT > The 0resident has the power to grant reprieves. .28 Senate /ill.payment of poll tax + Se). .= 95.imprisonment rule applies to non. C8 ENROLLED BILL DOCTRINE G"R" – %n enrolled copy of a bill is conclusive not only of its provisions but also of its due enactment EXCEPTION. but not to other violations li<e falsification of community tax certificate or non. 9Se). (n ASTORGA vs. so long as such amendment is germane to the subject of the bills before the committee. commutations and pardons and remit fines and forfeitures after conviction by final judgment. the Supreme 'ourt Kwent behindL the enrolled bill and consulted the journal to determine whether certain provisions of a state had been approved by the Senate 0residentBs admission of a mista<e and withdrawal of his signature. 5K4 ART @IINATURE OF TAX AMNESTY F % general pardon or intentional overloo<ing by the state of its authority to impose penalties on persons otherwise guilty of evasion or violation of a revenue or tax law . 'ommunity tax IX" TAXATION SHALL BE UNIFORM AND EQUITABLE . The rule of taxation shall be uniform and e@uitable. +Se). @ILLEGAS. %fter all its report was not final but needed the approval of both houses of 'ongress to become valid as an act of the legislative department. The 'ongress shall evolve a progressive system of taxation. business or profession Ex. • POLL TAX F tax of fixed amount imposed upon residents within a specific territory regardless of citi6enship. absolute forgiveness or waiver to collect VIII" NO IMPRISONMENT FOR NON4PAYMENT OF POLL TAX #o person shall be imprisoned for debt or non.payment of poll tax which is punishable only by a surcharge.L ART III> The non. • means that all taxable articles <inds of property of the same class shall be taxed at the same rate > % tax is uniform when it operates with the same force and effect in every place where the subject of it is found EQUITABILITY .payment of other taxes .ART @I- UNIFORMITY .

if not impossible to avoid them by imposing such taxes according to the taxpayers ability to pay. are regressive. where the tax decreases as the income of the taxpayer increases PROGRESSI@ITY IS NOT REPUGNANT TO UNIFOR+ITY $(* EGUALITY %.1ifferentiation. OF FINANCE • > "% ==4: +E!%T-. 0rogressivity is one way of classification. but to evolve. The constitutional provision means simply that indirect taxes shall be minimi6ed.4 Ar #)!e @I- . which li<e the !%T. '. but the Senate may propose or concur with amendments. where the tax increases as the income of the taxpayer goes higher 7. bills authori6ing increase of the public debt. where the tax increases or decreases in relation to the tax brac<et . revenue or tariff bills. • XI" ORIGIN OF REVENUE. a progressive system of taxation > "esort to indirect taxes should be minimi6ed but not to be avoided entirely because it is difficult.REGRESSI@E SYSTE+ .The State has the inherent right to select subjects of taxation TOLENTINO vs..29 • > Taxation is said to be e@uitable when its burden falls on those better able to pay X" CONGRESS SHALL EVOLVE A PROGRESSIVE SYSTEM OF TAXATION PROGRESSIVITY • > Taxation is progressive when its rate goes up depending on the sources of the person affected SYTEMS OF TAXATION 4.2niformity does not re@uire the things which are not different be treated in the same manner /. +Se) #o( . • > The mandate to 'ongress is not to prescribe. and private bills shall originate exclusively in the 5ouse of "epresentatives. SEC. TARIFF o( TAX BILLS %ll appropriation.PROPORTIONAL TAXATION . bills of local application. which is not arbitrary and conforms to the dictates of justice and e@uity is allowed.PROGRESSI@E or GRADUATED SYSTE+ . does not violate the constitutional mandate that 'ongress shall Kevolve a progressive system of taxationL > The 'onstitution does not really prohibit the imposition of indirect taxes..

(mport and export @uotas '. donors tax. To insist that a revenue statute and not only the bill which initiated the legislative process culminating in the enactment of the law must substantially be the same as the 5ouse bill would be to deny the SenateBs power not only to Kconcur with amendmentsL but also to Kpropose amendments.The taxes that may be imposed by the 0resident are limited to. the other duties or imports within the framewor< of the national development program of the GovernmentL +Se).2nder the law.. . revenue or tariff bill. Se). . tonnage and wharfage dues.-4 ART @I- XIII" TARIFF POWER OF THE PRESIDENT • KThe 'ongress may.e@uality of legislative power of the two houses of 'ongress and in fact ma<e the 5ouse superior to the Senate.= 9. .There must be a law passed by 'ongress authori6ing the 0resident to impose tariff rates and other fees. Se).30 RULE.The imposition of these tariff and duties must be within the framewor< of the #ational 1evelopment program of the government • > 'ongress Kmay not passL a law authori6ing the 0resident to impose income tax. of F#($()e> The 'onstitution simply re@uires that there must be that initiative coming from the 5ouse of "epresentatives relative to appropriation. by law. . import and export @uotas. . there must be limitations and restrictions on the exercise of such power 7.L (t would be to violate the co. authori6ing the 0resident to fix within specific limits. >The 'onstitution does not also prohibit the filing in the Senate of a substitute bill in anticipation of its receipt of the bill from the 5ouse.-4 ART @I- REQUISITES. as long as action by the Senate is withheld until receipt of said bill +To!e( #(o vs. and other taxes which are not in the nature of customs duties. %.Tariff rates /. revenue and tariff bills. but the veto shall not affect the item or items to which he does not objectL 9Se). tariff rates. of F#($()e- • • XII" PRESIDENTIAL VETO • > KThe 0resident shall have the power to veto any particular item or items in an appropriation. . and subject to such limitations and restrictions as it may impose.Tonnage and wharfage dues 1ther duties +customs duties- 8. (t is not the revenue statute but the revenue bill which is re@uired by the constitution to originate exclusively in the 5ouse of "epresentatives REASON. +To!e( #(o vs.6 9. 4.

> (t is the 2SE of the property and not ownership of the property ABRA @ALLEY COLLEGE vs.profit cemeteries and all lands. ..ART @I- RULES ON VOTE REQUIREMENT 4. buildings and improvements.ART @I- • APPLICATION: > The exemption only covers property taxes and not other taxes TEST OF EXEMPTION.= 9.&aw granting any tax exemption > absolute majority . donorBs tax> 0roperty held for future use is not tax exempt • • • XV" LAW GRANTING TAX EXEMPTIONS • K #o law granting any tax exemptions shall be passed without the concurrence of a majority of all members of the 'ongressL + Se). > "eal property purchased by any religious sect to be used exclusively for religious purposes are subject to the tax on the transfer of ownership or of title to real property +also if donated. but the owner is subject to income tax or rents received. non. actually directly and exclusively used for religious. charitable.. churches and personages or convents appurtenant thereto. . morgues. or educational purposes shall be exempt from taxation. AGUINO 957. refunds are considered in the nature of tax exemptions > % law granting such needs approval of the absolute majority of the 'ongress . SCRA 5L7• > The exemption does not only extend to indispensable facilities but also covers incidental facilities which are reasonably necessary to the accomplishment of said purpose > % property leased by the owner to another who uses it exclusively for religious purposes is exempt from property tax.&aw withdrawing any tax exemption > "elative majority • • > Tax exemption.= 9/.L +Se). amnesties.31 > The 'onstitution allows only the imposition by the 0resident of these custom duties XIV" TAX EXEMPTION OF REAL PROPERTY K'haritable institutions.

7. or employed.ART @I- • > (f a 0resident of the 0hilippines spent a special fund for a general purpose. XVIII" SUPREME COURT:S POWER OF REVIEW KThe Supreme 'ourt shall have the power to review. and charges shall accrue exclusively to the local government. benefit. directly or indirectly. • • • XVII" TAX LEVIED FOR SPECIAL PURPOSES K %ll money collected or any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only.L 9Se). assessment. charges shall have exclusivity to the local government. XIX" DELEGATED AUTHORITY TO LOCAL GOVERNMENT UNITS K Each local government unit shall have the power to create its own sources of revenues and to levy taxes. . consistent with the basic policy of local autonomy. EO'E0T when such priest. paid. preacher. applied. revise. or of any priest.K 9. institution or system of religion. or any penalty imposed in relation thereto. . preacher. :4 ART XLIMITATIONS ON POWER TO TAX 7L"G"U"8 4. Such taxes. denomination. shall be transferred to the general funds of the Government. and charges subject to such guidelines and limitations as the 'ongress may provide. or support of any sect. modify or affirm on appeal or certiorari. reverse. or government orphanage or leprosarium as suchL +Se). all cases involving the legality of any tax imposed. he can be charged with culpable violation of the 'onstitution. or toll. fees.L +Se).. minister or other religious teacher or dignitary as such. fees. minister or dignitary is assigned to the armed forces..L +Se).ART @I> 0ublic property may be leased to a religious group provided that the lease will be totally under the same conditions as that to private persons +amount of rent> 'ongress is without power to appropriate funds for a private purpose. fees. : 9.Such taxes. sectarian. for the use.(t is subject to such guidelines and limitations provided by 'ongress. the balance. . . or to any penal institution.ART @III- • > 'ongress cannot ta<e away from the Supreme 'ourt the power given to it by the 'onstitution as the final arbiter of the tax cases.32 XVI" NO USE OF PUBLIC MONEY OR PROPERTY FOR PUBLIC PURPOSES > K #o public money or property shall be appropriated. if any.K 9/.B. (f the purpose for which a special fund was created has been fulfilled or abandoned. church.(t must be consistent with the basic policy of local autonomy.

and revenues +income..profit educational institutions used actually. a governmental educational institution is exempt from income tax without any condition EXEMPTION DOES NOT EXTEND TO: 4. 9/. for a private educational institution to be exempt from the payment of income tax. real or personal. in the national taxes which shall be automatically released to them.L 9Se).profit 7. directly and exclusively for educational purposes RULES: 4. 5owever. it is nonetheless exempt from income tax 8. as determined by law. it is subject to income tax. PAUL HOSPITAL of ILOILO vs.stoc< and non. but at the preferential rate of ten percent +4MN• > 2nder the present tax code.as long as the third re@uirement is present.stoc<.The &ocal Government unit cannot impose tax on the national government.3rom activities conducted by them for profit regardless of the disposition made on such income +ANILA POLO CLUB vs.stoc< and non. which are within your jurisdiction SEC. as long as it is non.ART XI@REQUISITES FOR EXEMPTION: 4.... and exclusively for educational purposes shall be exempt from taxes and duties. directly. all it has to be is non.(ncome derived by these educational institutions from their property. itBs a government educational institution-. CIR . .(t must be a private educational institution .profit. it is nonetheless exempt from real estate tax 7. CTA • > 0roceeds of the sale of real property by the "oman 'atholic church is exempt from income tax because the transaction was an isolated one ST.(f the second re@uirement is absent +meaning.L XX" TAX EXEMPTIONS OF EDUCATIONAL INSTITUTIONS K %ll revenues and assets of non. .profit. non. 74 ART X K local government units shall have a just share.The #ational Government may impose local taxes on articles or subjects which are within the territorial jurisdiction of the local government unit. it is stoc< and profit. and . it is nonetheless exempt from income tax . but it is private and non.33 RULES: NATIONAL GOV:T !" LGU  IMPOSITION OF TAXES 4.(t must be non.(tBs assets +property.(f the third re@uirement is absent. profit.(f the third re@uirement is absent.stoc< and non.must be used actually.(f the first re@uisite is absent +meaning. > )ou can only tax those articles.

(t is privateG . directly and exclusively for educational purposes shall be exempt from tax.e't to in'ome tax &)t at the pre#erential rate o# ten per'ent ( /0! REQUISITES fo( APPLICATION of . dormitory and canteen was exempt from income tax because the operation of those entities was merely incidental to the primary purpose of the exempt corporation • . 'orporation! it is s)&. FERNANDEZ • > The prohibition against Kex post facto lawsL applies only to criminal laws and not to those that concern civil matters  • ur tax laws are civil in nature > The collection of interest on taxes is not penal in nature and the ex post facto law prohibition does not apply to it..<= PREFERENTIAL RATE 4. business or other activities exceeds fifty percent +9MN.34 • > (ncome derived from the hospital pharmacy.(t is non. all grants endowments.profitG 8.members are taxable income  )$'% is not an educational institution XXI" TAX EXEMPTION OF DONATIONS fo( EDUCATIONAL PURPOSES > KSubject to conditions prescribed by law. or contributions used actually.Ahere the educational institution is engaged in unrelated trade. . and from par<ing fees collected from non. donations.of its total gross income from all sources. the donor is exempt from the payment of donorBs tax CIR vs.0assive incomes derived by the educational institution +subject to final income taxand .$here the e%)'ational instit)tion is private an% non+pro#it (&)t a sto'.of the total gross income derived by the school from all sources • > Ahere a donation is made in favor of an educational institution pursuant to sports competition and tournaments. and the gross income from such unrelated trade.L 9Se).ART XI@- • XXII" NO EXPOST FACTO LAW PROHIBITION IN TAXATION FERNANDEZ vs.(ts gross income from unrelated trade or business must not exceed fifty percent +9MN. business or other activity.K= SCRA =/• > (ncome derived by )$'% from leasing out a portion of its premises to small shop owners. li<e restaurant and canteen operators. CA 9. . ... 9.<= PREFERENTIAL TAX RATE DOES NOT APPLY TO THE FOLLOWING: 4.(t has permit to operate from the 1E'S. or '5E1 or TES1%G 7.

Taxing the same person twice by the same jurisdiction over the same thing.Aithin the same jurisdictionG E. #ot legally objectionable (f taxes are not of the same <ind.(mposed by the same taxing authorityG 1. 1ouble taxation in the objectionable or prohibited sense Same property is taxed twice REQUISITES: %. . provided that the other constitutional re@uirements is not thereby violated 9INDS OF DOUBLE TAXATION 4.DIRECT DOUBLE TAXATION .The taxpayers warehousing business although carried on in relation to the operation of its sugar central is a distinct and separate taxable business /. CITY OF BUTUAN • > There is no constitutional prohibition against double taxation in the 0hilippines.'overing the same <ind or character of tax .Ahen every bottle or container of intoxicating beverages is subject to local tax and at the same time the business of selling such product is also subject to li@uors license ./oth taxes are imposed on the same property or subject matter for the same purposeG '.1uring the same periodG and 3. %. (t is something not favored but is permissible. . or the imposition are imposed for different taxing authority and this may involve the same subject matter EXA+PLES.8 INDIRECT DOUBLE TAXATION .35 DOUBLE TAXATION • > Taxing same property twice when it should be taxed but once.% license tax may be levied upon a business or occupation although the land or property used in connection therewith is subject to property tax '.The same property is taxed twice when it should only be taxed onceG /.  %lso <nown as duplicate taxation PEPSI COLA vs./oth a license fee and a tax may be imposed on the same business or occupation for selling the same article and this is not in violation of the rules against double taxation 1.

(t is given to a taxpayer in order to provide a relief from too onerous a burden of taxation in case where the same income is subject to a foreign income tax and the 0hilippine (ncome tax.36 E.Tax credits 7..%llowance on the principle of reciprocity TAX CREDIT .is not allowed because it amounts to confiscation of property without due process of law . it being widely recogni6ed that there is nothing inherently obnoxious in the re@uirement that license fees or taxes be exacted with respect to the same occupation.% local ordinance imposes a tax on the storage of copra where it appears that the finished products manufactured out of the copra are subject to !%T MEANS EMPLOYED TO AVOID DOUBLE TAXATION 4.. There is nothing inherently obnoxious in the exaction of license fees or taxes with respect to the same occupation. calling or activity by both the state and a political subdivision thereof. DOCTRINES ON DOUBLE TAXATION 4.Enter into treatise with other states 9. %n amount allowed as a deduction of the 0hilippine (ncome tax on account of income taxes paid or incurred to foreign countries. 3urther.% tax imposed on both on the occupation of fishing and of the fishpond itself 3.)ou can @uestion the validity of double taxation if there is a violation of the E@ual protection clause or E@uality or 2niformity of Taxation . %nd where the statute or ordinance in @uestion applies e@ually to all persons. The same tax may be imposed by the #ational Government as well as the local government.1irect 1ouble Taxation +11T. The Supreme 'ourt held that there was no double taxation.Tax deductions . DE LEON • > The argument against double taxation may not be invo<ed where one tax is imposed by the state and the other imposed by the city. CITY OF ILOILO • > %n ordinance imposing a municipal tax on tenement houses was challenged because the owners already pay real estate taxes and also income taxes under the #("'. @ILLANUE@A vs..1omestic corporations CITY OF BAGUIO vs. firms and corporations placed in a similar situation. 2HO CAN CLAI+ TAX CREDIT 4.0rovide for exemption 8.'iti6ens of the 0hilippines . a license tax may be levied upon a business or occupation although the land used in connection therewith is subject to property tax. calling or activity by both the state and a political subdivision thereof. there is no infringement of the rule on e@uality.

Ahen the burden of the tax is transferred from a factor of production through the factors of distribution until it finally settles on the ultimate purchaser or consumer. . but the burden of the tax > nly indirect taxes may be shiftedG direct taxes cannot be shifted WAYS OF SHIFTING THE TAX BURDEN 4. and from the latter to the wholesaler. Ahen the tax is shifted two or more times either forward or bac<ward ..%ll doubts as to whether double taxation has been imposed should be resolved in favor of the taxpayer ESCAPE FROM TAXATION BASIC FORMS OF ESCAPE FROM TAXATION 4.. who also shifts it to the final purchaser or consumer . who in turn shifts it to the retailer. . 'onsumer or purchaser may shift tax imposed on him to retailer by purchasing only after the price is reduced.BACC2ARD SHIFTING .EOE$0T( # :. Ahen the burden of the tax is transferred from the consumer or purchaser through the factors of distribution to the factors of production Example.%! (1%#'E 9. .S5(3T(#G . • • Shifting is the transfer of the burden of a tax by the original payer or the one on whom the tax was assessed or imposed to someone else 0rocess by which such tax burden is transferred from statutory taxpayer to another without violating the law > (t should be borne in mind that what is transferred is not the payment of the tax.ON2ARD SHIFTING . $anufacturer or producer may shift tax assessed to wholesaler.T"%#S3 "$%T( # 8.FOR2ARD SHIFTING . or finally to the manufacturer or producer /.E!%S( # I" SHIFTING . Example.'%0(T%&(S%T( # 7.37 7.

IV" TAX AVOIDANCE . (n short. and the #()#*e()e is the result. Thus.is on the seller +manufacturer. • S#a#. the statutory taxpayer is the one who shoulders the burden of the tax while in indirect taxes. (n so far as the law is concerned. (n direct taxes. but by improving his method of production and cutting down or other production cost.#o(. thereby transforming the tax into or earn through the medium of production. I&p$) is the imposition of the taxG sh#f #(" is the transfer of the taxG while #()#*e()e is the setting or coming to rest of the tax.*( • The Statutory taxpayer is the person re@uired by law to pay the tax or the one on whom the tax is formally assessed. we have two shiftsG and if the tax is transferred again to the purchaser by the retailer. we have three shifts in all. Thus. the taxpayer is the person who must pay the tax to the government. where the burden of future taxes which the buyer may have to pay is shifted bac< to the seller in the form of reduction in the selling price • III" .38 Example. maintains the same selling price and margin of profit. !%T.the one on whom the tax is formally assessed. then to retailer. a+/ )+%)/*+%* of a #a1 • The #&p$) is the initial phenomenon. I&'a%# a+/ I+%)/*+%* of Ta1a#)o+ • I&p$) of $'$ #o( is the point on which a tax is originally imposed. . • II" . he or she is the subject of the tax. Ta1'a.who shifts the burden to the customer who finally bears the incidence of the tax.e. 5e is also termed as the statutory taxpayer. the statutory taxpayer is the one who pay the tax to the government but the burden can be passed to another person or entity. the impact in a sales tax +i. TRANSFORMATION The manufacturer in an effort to avoid losing his customers. • R*$a#)o+!3)' 0*#>**+ )&'a%#. !3)f#)+-. the sh#f #(" is the intermediate process. not by shifting the tax burden to his customers. CAPITALI?ATION "eduction is the price of the taxed object e@ual to the capitali6ed value of future taxes on the property sold > This is a special form of bac<ward shifting. (t ta<es place when shifting has been effected from the statutory taxpayer to another. 5e is the subject of the tax I()#*e()e of $'$ #o( is that point on which the tax burden finally rests or settle down. a transfer from the seller to the purchaser involves one shiftG from the producer to the wholesaler.

exemption is the rule and taxation is the exemption. • G(o.#a1 *1*&'#)o+! • (ts avowed purpose is some public benefit or interests which the lawma<ing body considers sufficient to offset the monetary loss entailed in the grant of the exemption. The legal right of the taxpayer to decrease the amount of what otherwise could be his taxes or altogether avoid them by means which the law permits cannot be doubted. • • • Ra#)o+a$* fo( -(a+#)+. i. the 0acheco co. (t is not necessarily discriminatory as long as there is a reasonable foundation or rational basis.e. The Supreme 'ourt said the records do not point anything wrong and objectionable about this estate planning scheme resorted to. (n such a case. but when public property is involved. the government need not receive any consideration in return for the tax exemption.. Exemptions are not presumed. the public.owners saved on inheritance taxes. (t is not based on the idea of lessening the burden of the individual owners of property. 5ere. %lso <nown as A $' &#(#&#M$ #o(B not punished by law Tax avoidance is the exploitation of the taxpayer of legally permissible alternative tax rates or methods of assessing taxable property or income in order to avoid or reduce tax liability DELPHERS TRADERS CORP vs. E'$&p!e. to encourage new industries or to foster charitable institutions. .+/! fo( -(a+#)+. which is represented by the government is supposed to receive a full e@uivalent therefor.K• > The Supreme 'ourt upheld the estate planning scheme resorted to by the 0acheco family in converting their property to shares of stoc< in a corporation which they themselves owned and controlled. Exemption is allowed only if there is a clear provision there for. (t is an immunity or privilegeG it is freedom from a financial charge or burden to which others are subjected. . IAC 95:6 SCRA /. .$ay be based on some ground of public policy. i..39 .#a1 *1*&'#)o+! 4. 3ollowing the Kho!*#(" per#o* r%!eL in capital gains transaction. charter of a corporation.$ay be based on contract. . The theory behind the grant of tax exemptions is that such act will benefit the body of the people. by postponing the sale of the capital asset until after twelve months from date of ac@uisition you can reduce the tax on the capital gains by 9MN V" TAX EXEMPTION Ta1 E1*&'#)o+ • (t is the grant of immunity to particular persons or corporations or to persons or corporations of a particular class from a tax which persons and corporations generally within the same state or taxing district are obliged to pay.e. /y virtue of the deed of exchange.

8. Ever0 $' s $ % e &$Ies e'e&p #o(s 3e)$%se of o&#ss#o(s..(* of #a1 *1*&'#)o+ 4. Exemption is allowed only if there is a clear provision therefor. Na#.E'press or $ff#r&$ #ve e'e&p #o( Ahen certain persons. Taxation is the rule and exemption is the exception (t cannot be created by mere implication (t cannot be presumed that you are entitled to tax exemption )ou must prove it PR1P2R*3 *A4 5 6172R8M28* PR1P2R*3 • TEST. property or transactions are.. 9)+/! of #a1 *1*&'#)o+ a%%o(/)+. or transactions without mentioning the other classes. .(t is not necessarily discriminatory so long as the exemption has a reasonable foundation or rational basis.(t is a mere personal privilege of the grantee. O2NERSHIP • > nce established that it belongs to the government. by express provision.(t implies a waiver on the part of the government of its right to collect what otherwise would be due to it. )&'$)%a#)o+  (t must be expressed in clear and unmista<able language CALTEX vs.$ay be based on grounds of reciprocity or to lessen the rigors of international double or multiple taxation No#*: E@uity is not a ground for tax exemption. exempted from all certain taxes. the burden of proof lies upon the claimant    RULE: . COA • > (n claiming tax exemption. properties.(t is not transferable except if the law expressly provides so. either entirely or in part. • No #a1 *1*&'#)o+ 0. the nature of the use of the property whether proprietary or sovereign becomes immaterial. > 0roperties owned by the government whether in their proprietary or governmental capacity are exempt from real estate tax . and so is prejudicial thereto.#o &a++*( of %(*a#)o+ 4. . 7. . 9.(t is generally revocable by the government unless the exemption is founded on a contract which is contract which is protected from impairment.I&p!#e* e'e&p #o( or e'e&p #o( 30 o&#ss#o( Ahen a tax is levied on certain classes of persons.40 7.

it can also provide for exemptions or even ta<e bac< the power. . having been passed by the State itself.. (f 'ongress can grant the power to tax. expressly or impliedly from all taxes . PCGG4 G. (t is inherent in the exercise of the power to tax that the sovereign state be free to select the subjects of taxation and to grant exemptions therefrom. the legislative power to exempt is as broad as its power to tax.T T%& . property or transactions are exempted.. indirect taxes are not included in the grant of such exemption unless it is expressly stated. 5/L6574 LK De)e&3er 5KK= • (n a compromise agreement between the 0hilippine Government.(* of 'o>*( #o -(a+# #a1 *1*&'#)o+ 4. PAGCOR 95K7 SCRA :. either entirely or in part. $unicipal corporations are mere creatures of 'ongress which has the power to create and abolish municipal corporations due to its general legislative powers. expressly or impliedly from certain taxes. B$s)o vs. Na#. . Does prov#s#o( #( $ s $ % e "r$( #(" e'e&p #o( fro& A$!! $'esB #()!%*e #(*#re) $'esN • # .0%"T(%& .41 • > Exemption of public property from taxation does not extend to improvements therein made by occupants or claimants at their own expense. The Supreme 'ourt ruled that the 0'GG has absolutely no power to grant tax exemptions. Ch$veM v. 2nless restricted by the 'onstitution. when one grants partial exemption while other grants total exemption. represented by the 0'GG.R.N$ #o($! "over(&e( The power to grant tax exemptions is an attribute of sovereignty for the power to prescribe who or what persons or property shall not be taxed.Lo)$! "over(&e( s $unicipal corporations are clothed with no inherent power to tax or grant tax exemptions. 7. Ahen certain persons. The grant of tax exemptions is the exclusive prerogative of the 'ongress. 9INDS OF TAX EXEMPTIONS ACCORDING TO SCOPE OR EXTENT 4. even under the cover of its authority to compromise ill gotten wealth cases. Ahen certain persons. the 0'GG granted tax exemptions to the assets which will be apportioned to the $arcos heirs.-. /ut the moment the power to impose a particular tax is granted. and the $arcos heirs. they also have the power to grant exemption therefrom unless forbidden by some provision of the 'onstitution or the law The legislature may delegate its power to grant tax exemptions to the same extent that it may exercise the power to exempt. The power to tax municipal corporations must always yield to a legislative act which is superior. No. %s a general rule. property or transactions are exempted.There can be no simultaneous exemptions under two laws.

Ka claim of exemption from tax payers must be clearly shown and based on language in the law too plain to be mista<en. The rule on strict interpretation does not apply in the case of exemptions in favor of a political subdivision or instrumentality of the government. S r#) #( erpre $ #o( *oes (o $pp!0 o he "over(&e( $(* # s $"e()#es • 0etitioner cannot invo<e the rule on stritissimi juris with respect to the interpretation of statutes granting tax exemptions to the #0'. <+$)e*$ v. charitable and educational institutions or to the government or its agencies or to public property because the general rule is that they are exempt from tax. T$'$ #o( #s he r%!e $(* e'e&p #o( #s he e'e&p #o(. +$)$r$#"O D$v$o G%!f v. it must be construed s r#) #ss#&# E%r#s against the grantee. is in the nature of a tax exemption.$* (n the construction of tax statutes. I+#*('(*#a#)o+ of #3* $a>! -(a+#)+. the Supreme 'ourt even stated that 'ongress itself cannot grant tax exemptions in the case at bar because it will violate the e@ual protection clause of the 'onstitution.L Since the partial refund authori6ed under Section 9. • E1%*'#)o+! 4.. Co&&#ss#o(er4 . once the tax is un@uestionably imposed.Ahen the law itself expressly provides for a liberal construction thereof. 5ence. 5e who claims exemption must be able to justify his claim or right thereto by a grant express in terms A oo p!$#( o 3e &#s $Ie( $(* oo )$ e"or#)$! o 3e &#s#( erpre e*. it must be at least within its purview by clear legislative intent. exemptions are not favored and are construed s r#) #ss#&# E%r#s against the taxpayer. The fundamental theory is that all taxable property should bear its share in the cost and expense of the government. petitionerBs claim of refund on the basis of the specific taxes it actually paid must expressly be granted in a statute stated in a language too clear to be mista<en.K/ SCRA 67 95KK=- • % tax cannot be imposed unless it is supported by the clear and express language of a statuteG on the other hand.#a1 *1*&'#)o+! • G*+*(a$ (. .B (f not expressly mentioned in the law. COLLECTOR of CUSTO+S . > E'e&p #o( of he 3%0er *oes (o e' e(* o he se!!er  Exemption of the principal does not extend to the accessory • SURIGAO vs.42 • (n fact. "% 4879.(n cases of exemptions granted to religious.

>S%r#"$o Co(so!#*$ e* +#(#(" v. S$r&#e( o4 T4 0hil 7=M? The condition of a tax liability is e@uivalent to and is in the nature of a tax exemption. prejudicial thereto. > Rep%3!#) v. " #a1 %o+/o+a#)o+ " #a1 *1*&'#)o+ • % tax amnesty. (t is granted by statute. (t is granted particularly to tax evaders who wish to relent and are willing to reform. Co&&#ss#o(er of I( er($! Reve(%e4 K SCRA 6. being a general pardon or intentional overloo<ing by the Statute of its authority to impose penalties on persons otherwise guilty of evasion or violation of a revenue or tax law. prejudicial thereto. thus giving them a chance to do so and thereby become a part of the new society with a clean slate. 4T: S'"% 779? &i<e tax exemption. Thus. a tax amnesty is never favored nor presumed in law. however. &i<e a tax exemption. Thus. tax amnesty is never favored nor presumed in law. on the other hand. is the grant of immunity to particular persons or corporations of a particular class from a tax of which persons and corporations generally within the same state or taxing district are obliged to • • • . a tax amnesty has limited applicability as to cover a particular taxing period or transaction only. >?%$( L%($ S%3*. parta<es of an absolute forgiveness or waiver by the Government of its right to collect what otherwise would be due it and.43 • > T$' ref%(*s4 )o(*o($ #o(s $(* $&(es #es. The terms of the amnesty must be strictly construed against the taxpayer and literally in favor of the government. being a general pardon or intentional overloo<ing by the State of its authority to impose penalties on persons otherwise guilty of evasion or violation of a revenue to collect what otherwise would be due it and. it should be sustained only when expressly provided in the law. I( er&e*#$ e Appe!!$ e Co%r . particularly to tax evaders who wish to relent and are willing to reform are given a chance to do so and therefore become a part of the society with a clean slate. Such a set of taxes is a class by itself and the law would be open to attac< as class legislation only if all taxpayers belonging to one class were not treated ali<e. The terms of the amnesty must also be construed against the taxpayer and liberally in favor of the government. 2nli<e a tax exemption. There is a tax condonation or remission when the State desists or refrains from exacting. • Tax amnesty. Ta1 (*&)!!)o+ o( #a1 %o+/o+a#)o+ • The word Are&# B means to desist or refrain from exacting. Tax exemption. it should be sustained only when expressed in the law. in this sense. • Ta1 a&+*!#. in this sense. The condonation of a tax liability is e@uivalent to and is in the nature of a tax exemption. inflicting or enforcing something as well as to restore what has already been ta<en. The remission of taxes due and payable to the exclusion of taxes already collected does not constitute unfair discrimination. and is granted by statute. inflicting or enforcing something as well as to reduce what has already been ta<en.=? • Ta1 a&+*!#. @. they being in the nature of tax exemptions must be strictly construed against the taxpayer and liberally in favor of the government.

as long as it is being used for religious.. . . charitable or educational purposes.%n accompanying state of mind which is described as being KevilL. and it is not necessary that there must be a law or regulation which would exempt such monies and receipts within the meaning of gross receipts. CIR vs.The end to be achieved. to a taxable person.L 9Se).e. Tax evasion connotes the integration of three +7. (t is also <nown as A $' *o*"#("L (t is punishable by law Tax evasion is the use by the taxpayer of illegal or fraudulent means to defeat or lessen the payment of tax. VI" TAX EVASION . RIO TUBA • > &aw granting partial refund parta<es the nature of a tax exemption and therefore must be strictly construed against the taxpayer CIR vs.44 pay. for consideration or otherwise. or paying no tax when it is shown that tax is due . YUTI@O vs. even if the property taxation is owned by the government if the beneficial use has been granted.= 9. I+PERIAL +INING • > /asis or test for real property taxation is use and not ownership. payment of less than that <nown by the taxpayer to be legally due. OF NUE@A ECI?A vs. Tax exemptions are not favored and are construed s r#) #ss#&# E%r#s against the taxpayer. i. it does not matter who the owner of the property is even if it is not tax exempt entity.. KwillfulL. then the property is subject to tax. Kin bad faithL. then it is tax exempt. CTA • > Tax evasion is a term that connotes fraud through the use of pretenses or forbidden devices to lessen or defeat taxes ELEMENTS OF TAX EVASION . TOUR SPECIALIST • > Gross receipts subject to tax under the tax code do not include monies or receipts entrusted to the taxpayer which do not belong to it and does not redound to the taxpayers benefit. . CONSTITUTIONAL RESTRICTION: K#o law granting any tax exemption shall be passed without the concurrence of a majority of all members of 'ongress. 4. Thus. or KdeliberateL and not KaccidentalL .factors. 'onversely.ART @IPRO@.

4. IMPRESCRIPTIBILITY OF TAXES GENERAL RULE: .Statutes .'ourt decisions :.consecutive yearsG or ..consecutive years is an indication of his fraudulent intent to cheat the government of its due taxes.Substantial underdeclaration of income tax returns of the taxpayer for four +8consecutive years coupled with unintentional overstatement of deductions EVIDENCE TO PROVE TAX EVASION • > Since fraud is a state of mind.45 7.Tax treaties and conventions with foreign countries PROSPECTIVITY OF TAX LAWS +%00&('%T( #GENERAL RULE: ."evenue regulations Q..&ocal tax ordinances 44.Executive orders 8. Tax laws should be applied prospectively EXCEPTION.% course of action +or failure of action. Taxes are imprescriptible .Tax code =. (t may be applied retroactively when the law expressly provides for such retroactive application EXCEPTION TO THE EXCEPTION: . TAX ENFORCEMENT AND ADMINISTRATION SOURCES OF TAX LAWS.0residential decrees 7. (t may not be given retroactive application even if the tax law expressly so provides if it imposes unjust and oppressive taxes. . GONZALES 95/ SCRA 7/=- • > 3ailure of the taxpayer to declare for taxation purposes his true and actual income derived from his business for two +. REPUBLIC vs.3ailure to declare for taxation purposes true and actual income derived from business for two +. it need not be proved by direct evidence but may be proved from the circumstances of the case.which is unlawful INDICIA of FRAUD IN TAX EVASION 4../(" rulings 4M.%dministrative issuances T..'onstitution 9.

No# 'o$)#)%a$ )+ +a#.* $a>! 4.(* of I+#*(+a$ (* *+. Co!!e) or4 5LL Ph#!. Co+!#(. H#!$*o v. The purpose of tax laws in imposing penalties for delin@uencies is to compel the timely payment of taxes or to punish evasion or neglect of duty in respect thereof. %fter the expiration of 4 year from the payment of final duties. C) )$ +o# '*+a$ )+ +a#.T%"(33 %#1 '2ST $S ' 1E . although there are penalties provided for their violation. They are prescriptible if the tax laws provide for statute of limitations PRESCRIPTIVE PERIODS: 4.0rescriptive periods for the assessment and collection of taxes   4M years if return is tainted with falsity or fraud 7 years if there is no fraud .(* (nternal revenue laws are not political in nature.46 EXCEPTION: . our tax laws continued in force during the Dapanese occupation. if there is fraud or protest 7. .(nternal revenue laws are not political in nature. They are deemed to be laws of the occupied territory and not of the occupying enemy. except if it is in the nature of partial li@uidation.%#)o+ of #a1 $a>! ...& '%& G !E"#$E#T ' 1E . (t is well <nown that our internal revenue laws are not political in nature and.Tax laws are civil and not penal in nature.. > )ou should impose those custom duties that are supposed to be imposed on the imported articles within the 4 year period. 0rescriptive periods for local taxes and real property tax > 9 years > 4M years if fraud has been employed INTERPRETATION AND APPLICATION OF TAX LAWS Na#.(* Tax laws are civil and not penal in nature. O$s$(4 KK Ph#! K/. Thus. as such. . The war profits tax is not subject to the prohibition on e' pos f$) o laws as the latter applies only to criminal or penal matters. Rep%3!#) v. (ncome tax returns that were filed during that period and income tax payments made were considered valid and legal.==-. Tax laws are civil in nature. continued in force during the period of enemy occupation and in effect were actually enforced by the occupation government. Such tax laws are deemed to be the laws of the occupied territory and not of the occupying enemy.

a+/ &a+/a#o(. Tax laws are prospective in operation because the nature and amount to the tax could not be foreseen and understood by the taxpayer at the time the transactions which the law see<s to tax was completed E1%*'#)o+. reasonable . A''$)%a#)o+ of #a1 $a>! • G*+*(a$ (.Prov#s#o(s "r$( #(" $' e'e&p #o(s Such provisions are construed strictly against the taxpayer claiming tax exemption. >Ro'$s v.R%!e whe( !e"#s!$ #ve #( e( #s )!e$r Tax statutes are to receive a reasonable construction with a view to carrying out their purpose and intent.$*. '(o )!)o+! of #a1 $a>! • D#re) or0 prov#s#o(s are those designed merely for the information or direction of office or to secure methodical and systematic modes of proceedings. not contrary to law 8.R%!e whe( here #s *o%3 #o person or property is subject to taxation unless within the terms or plain import of a taxing statute. within the authority conferred 7. must be published . /ut a tax law should not be given retroactive application when it would be harsh and oppressive. tax statutes are construed strictly against the government and liberally in favor of the taxpayer. • D)(*%#o(.47 4. a statute may nevertheless operate retroactively provided it is expressly declared or is clearly the legislative intent. Taxes. Ahile it is not favored. They should not be construed as to permit the taxpayer easily to evade the payment of taxes. 7. +$(*$ or0 prov#s#o(s are those intended for the security of the citi6ens or which are designed to ensure e@uality of taxation or certainty as to the nature and amount of each personBs tax. The omission to follow mandatory provisions renders invalid the act or proceeding to which it relates while the omission to follow directory provisions does not involve such conse@uence. being burdens. are not to be presumed beyond what the statute expressly and clearly declares. . (n every case of doubt.. R$ffer 04 /6 Ph#! K:=O • • REQUISITES OF TAX REGULATIONS 4..

city. Give effect to and administer the supervisory and police power conferred to it by the Tax 'ode or other laws 7. of 3inance or '(" shall not have retroactive effect if it will be prejudicial to the taxpayer. no amount of tax is shown in the return c... modification of revenue of any rules and regulations promulgated by the Sec. %ssessment and collection of all national internal revenue taxes. and municipal assessors and treasurers POWERS AND DUTIES OF THE BIR 4. Execution of judgments in all cases decided in its favor by the 'ourt of Tax %ppeals and the ordinary courts CLASSIFFICATION OF ASSESSMENTS 1. where the taxpayer deliberately misstates or omits material facts from his return or in any document re@uired of him by the /(" . fees and charges . penalties and fines in connection therewith 8. where the facts subse@uently gathered by the /(" are materially different from the facts on which the ruling is based 7.48 EXCEPTIONS TO NON4RETROACTIVITY OF RULINGS "evocation. Se!fF$ssess&e( F one in which the tax is assessed by the taxpayer himself. 2. 4. the amount ascertained exceeds that which is shown as the tax by the taxpayer in his return b.. I!!e"$! $(* @o#* $ssess&e( F one wherein the tax assessor has no power to act at all. the taxpayer did not file any return at all 4. a. where the taxpayer acted in bad faith AGENCIES INVOLVED IN TAX ADMINISTRATION 4. 0rovincial. PRINCIPLES GOVERNING TAX ASSESSMENTS . /ureau of 'ustoms 7. 3. /(" . Erro(eo%s $ssess&e( F one wherein the assessor has the power to assess but errs in the exercise of the power. Def#)#e()0 $ssess&e( F one made by the tax assessor himself whereby the correct amount of the tax is determined by the examination or investigation is conducted. The liability is determined and is thereafter assessed for the following reasons. Enforcement of all forfeitures. except.

2se of the best evidence obtainable 7. when the inspection of the return is authori6ed upon written order of the 0resident of the 0hilippines .. he hides or conceals his property 8. Examination of ban< deposits to determine the correct amount of the gross estate 7. 77 of the Secretary of 3inance 3. when inspection is authori6ed under 3inance "egulations no. he willfully or otherwise files a false or fraudulent return or other document GROUNDS FOR TERMINATION OF TAXABLE PERIOD: 4.. 0rescription of real property values 6.. (nventory ta<ing. MEANS EMPLOYED IN THE ASSESSMENT OF TAXES 4. surveillance and use of presumptive gross sales and receipts 8. the taxpayer is retiring from business subject to tax . when the production or inspection thereof is authori6ed by the taxpayer himself CASES WHEN COMMISSIONER MAY ASSESS TAXES ON THE BASIS OF THE BEST EVIDENCE OBTAINABLE: 4.. %ccreditation and registration of tax agents Q. he performs any act tending to obstruct the proceedings for the collection of the tax for the past or current @uarter or year or renders the same totally or partly ineffective unless such proceedings are began immediately. INSTANCES WHEN THE COMMISSIONER MAY INQUIRE INTO BAN9 DEPOSITS: . assessments are prima facie presumed correct and made in good faith . when the production of the tax return is material evidence in a criminal case wherein the Government is interested in the result 8. Examination of tax returns . assessments must be directed to the right party.49 4. 0rescription of additional procedural or documentary re@uirements GENERAL RULE: (ncome tax returns are confidential EXCEPTIONS: 4. assessment is discretionary on the part of the 'ommissioner to assess taxes may be delegated 8. in case a person fails to file a return or other document at the time prescribed by law .. he intends to leave the 0hilippines or remove his property therefrom 7. assessment should be based on actual facts 7. Termination of taxable period 9.

including rulings on the classification of articles for sales tax and similar purposes. To clarify and explain the law .. failure to pay the full amount of tax shown on any return re@uired to be filed under the provisions of the Tax 'ode or regulations or the full amount of tax due for which no return is re@uired to be filed. upon recommendation of the 'ommissioner of (nternal "evenue. to verify compliance with withholding tax laws and regulations 8. failure to file any return re@uired under the provisions of the Tax 'ode or regulations on the date prescribed . for the purpose of determining the gross estate of a decedent . on or before the date prescribed for its payment REVENUE RULES AND REGULATIONS AND ADMINISTRATIVE RULINGS AND OPINIONS A)thorit" to prom)lgate r)les an% reg)lations an% r)lings an% opinions • The Secretary of 3inance. irregularity. in cases of fraud.50 4. filing a return with an internal revenue officer other than those with whom the return is re@uired to be filed 7. upon order of the 'ommissioner @A= SURCHARGE ON THE AMOUNT OF THE TAX DUE IS IMPOSED IN THE FOLLOWING CASES. • P)rpose o# r)les an% reg)lations 4.. failure to pay the tax within the time prescribed for its payment 4. INSPECTION AND EXAMINATION OF BOO9S AND RECORDS SHALL BE MADE ONCE IN A TAXABLE YEAR. or mista<es . shall promulgate needful rules and regulations for the effective enforcement of the provisions of the #("'. to verify capital gains tax liabilities 9. This is without the prejudice to the power of the 'ommissioner of (nternal "evenue to ma<e rulings or opinions in connection with the implementation of the provisions of internal revenue laws. 4.. where a taxpayer offers to compromise his tax liability on the ground of financial inability in which case he must submit a waiver. EXCEPT: 4.. when taxpayer re@uests a reinvestigation 7. To properly enforce and execute the laws .

• 4. fficial Ga6ette or a newspaper of general Co&&#ss#o(er v.M. Co%r of T$' App!e$!s4 5/.51 7.. 3ederation of 3ilipino. "evenue "egulationsG . SCRA . however. "evenue $emorandum 'irculars and "evenue $emorandum • Except when the law otherwise expressly provides. issuance and implementation of revenue tax issuances including. 0hilippine 'hamber of 'ommerce and (ndustryG d. "evenue and $emorandum rdersG and rders. . the law they see< to apply and implement. must be given weight as the construction came from the branch of the government which is called upon to implement the law. 7. although not binding upon courts. Co%r of Appe$!s4 . %merican 'hamber of 'ommerceG e. %dministrative rules and regulations are intended to carry out. They must be published in the circulation. 'opies of tax issuance have been sent through registered mail to the following business and professional organi6ations. (ntegrated /ar of the 0hilippinesG c..'hinese 'hamber of 'ommerceG and . L$ S%er e v. is that all issuances must not override. 0hilippine (nstitute of 'ertified 0ublic %ccountantsGG b. the law. to promulgate rules and regulations for the effective enforcement of internal revenue rules cannot be converted. 'onstruction by an executive branch of the government of a particular law. ordinarily should deserve weight and respect by the courts. but must remain consistent with.L SCRA /7= • The authority of the $inister of 3inance. in conjunction with the 'ommissioner of (nternal "evenue. 4. They must not be contrary to law and the 'onstitution. #either can it be disputed that such rules and regulations. To carry into effect the lawBs general provisions by providing details of administration and procedure Re9)isites #or vali%it" o# r)les an% reg)lations 4. as well as administrative opinions and rulings. $uch more fundamental than either of the above. neither to supplant nor to modify. the aforesaid revenue tax issuances shall not begin to be operative until after due notice thereof may be fairly assumed. a. 1ue notice of said issuances may be fairly presumed only after the following procedures have been ta<en.Q: was issued to govern the drafting. it merely interprets existing law and no publication is therefore necessary for its validity.K • Ahen an administrative agency renders an opinion by means of a circular or memorandum.. 2##e'tivit" o# reven)e r)les an% reg)lations • "evenue $emorandum 'ircular .

<nown as /(" rulings. repeal or abrogate the acts or previous rulings of his predecessors in office because the construction of the statute by those administering it is not binding on their successors if. Effectivity date for enforcement of the new issuance shall ta<e place thirty +7M. fines. The /ureau of (nternal "evenue shall issue a press release covering the highlights and features of the new tax issuance in any newspaper of general circulation. and penalties imposed in relation thereto. :. These rulings may be revo<ed by the Secretary of 3inance if the latter finds them not in accordance with the law. "ecommend needful rules and regulations to the Secretary of 3inance for the effective implementation of the provisions of the #("' and special laws . BASIC POWERS OF THE BIR COMMISSIONER 4 CODE: 5E R A P6 4. Dapanese 'hamber of 'ommerce and (ndustry in the 0hilippines. Co%r of T$' App!e$!s4 . including the enforcement execution of judgment rendered by the 'T% or S' in favor of the /(" .enumerated organi6ations. SCRA 6/K (f the resolution is to be considered as a tax ordinance.52 f. These would include the holding of a public hearing on the measure and its subse@uent approval by the Secretary of 3inance. such successors are satisfied that a different construction of the law should be given. . • • EFFECTIVITY AND VALIDITY OF A TAX ORDINANCE T%$Mo( v.days from the date the issuance has been sent to the above.5... The 'ommissioner may revo<e. Enforcement of forfeitures. are the less general interpretation of tax laws being issued from time to time by the 'ommissioner of (nternal "evenue. thereafter. in addition to the usual re@uisites for publication of ordinances in general. They are usually rendered on re@uest of taxpayers to clarify certain provisions of a tax law.R r)lings • %dministrative rulings. it must be shown to have been enacted in accordance with the re@uirements of the &ocal Government 'ode. 7. "ulings in the forms of opinion are also given by the Secretary of Dustice who is the chief legal officer of the Government.

0olice power. Except.53 7. %dminister oaths =. fees and other taxes. Ta<e inventory . %ssessment and collection of internal revenue taxes. to administer or to give effect to the police power conferred upon it by law. Summon persons on certain cases pending investigation . %rrest persons who have violated the provisions of the tax code > should have warrant of arrest Q. Examine boo<s of the accounts of the taxpayer and other documents 8.. Ta<e testimony of persons :. Secrecy of ban< deposits law > nly to determine the gross estate of decedent not to determine the income 7. 8. (n@uire into ban< deposits . CORROLARY POWERS OF THE BIR COMMISSIONER CODE: 5S I E O T A A T 6 4. btain information 9.

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