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
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
2
> 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
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
7- Subject 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 ($0S(T(#
3
enactment of tax laws
legislative in character
,- %SSESS$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
> The power of he !e"#s!$%re o #&pose $' #()!%*es he power
4- what to tax
,- whom to tax
7- how much to tax
BAGATSING vs. RA+IREZ
> Ahat cannot be delegated is the legislative enactment of a tax measure but
as regards to the administrative implementation of a tax law that can be
delegated.
> The collection may be entrusted to a private corporation.
> The rule that the power of taxation cannot be delegated does not apply to
the administrative implementation of a tax law
> There is no violation because what is delegated or entrusted is the
collection and not the enactment of such laws
> The issuance of regulations or circulars by the /(" or the Secretary of
3inance should not go beyond the scope of the tax measure
BASIC PRINCIPLES OF A SOUND TAX SYSTEM
4- T5E"ET('%& D2ST('E
,- 3(S'%& %1EE2%')
7- %1$(#(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
4
; !(&%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) BASIS. Tax imposed under power of taxation A5(&E license fee under police
power.
c) 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.
d) TI+E OF PAY+ENT. Taxes normally paid after commencement of business
A5(&E license fee before.
5
e) EFFECT OF PAY+ENT. 3ailure to pay a tax does not ma<e the business illegal
A5(&E failure to pay license fee ma<es business illegal.
f) SURRENDER. Taxes, being lifeblood of the state, cannot be surrendered
except for lawful consideration A5(&E a license fee may be surrendered with
or without consideration.

I+PORTANCE OF DISTINCTION BET2EEN TAXES AND LICENSE FEES.
(t is necessary to determine whether a particular imposition is a tax or a
license fee, because some limitations apply only to one and not to the other.
3urthermore, exemption from taxes does not include exemption from license
fees
TAXES DISTINGUISHED FROM OTHER IMPOSITIONS.
1) #o$$ F amount charged for the cost and maintenance of property usedG
2) %o&'(o&)!* '*+a$#, F amount collected in lieu of criminal prosecution in
cases of tax violationsG
3) !'*%)a$ a!!*!!&*+# F levied only on land based wholly on the benefit
accruing thereon as a result of improvements of public wor<s underta<en by
government within the vicinity.
4) $)%*+!* f** F regulatory imposition in the exercise of the police power of the
StateG
5) &a(-)+ f** F exaction designed to stabili6e the currency
6) %.!#o& /.#)*! a+/ f**! F duties charged upon commodities on their being
imported into or exported from a countryG
7) /*0# a tax is not a debt but is an obligation imposed by law.
S'*%)a$ a!!*!!&*+# " #a1
4. % special assessment tax is an enforced proportional contribution from
owners of lands especially benefited by public improvements
,. % special assessment is levied only on land.
7. % special assessment is not a personal liability of the person assessedG it is
limited to the land.
8. % special assessment is based wholly on benefits, not necessity.
9. % special assessment is exceptional both as to time and placeG a tax has
general application.
Rep%3!#) v. B$)o!o*4 56 SCRA 7/,
% special assessment is a levy on property which derives some special benefit
from the improvement. (ts purpose is to finance such improvement. (t is not a
tax measure intended to raise revenues for the government. The proceeds
thereof may be devoted to the specific purpose for which the assessment was
authori6ed, thus accruing only to the owners thereof who, after all, pay the
assessment.
Some "ules.
%n exemption from taxation does not include exemption from a special
treatment.
The power to tax carries with it a power to levy a special assessment.
6
To$$ " #a1
1. To!! is a sum of money for the use of something. (t is the consideration which
is paid for the use of a road, bridge, or the li<e, of a public nature. T$'es4 on
the other hand, 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.
2. To!! is a demand of proprietorshipG $' is a demand of sovereignty.
3. To!! is paid for the used of anotherBs propertyG $' is paid for the support of
government.
8. 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, unreasonable, or
confiscatory.
5. To!! may be imposed by the government or by private individuals or entitiesG
$' may be imposed only by the government.
Ta1 " '*+a$#,
1. Pe($!0 is any sanction imposed as a punishment for violation of law or
for acts deemed injuriousG $'es are enforced proportional contributions
from persons and property levied by the State by virtue of its sovereignty
for the support of the government and all public needs.
2. Pe($!0 is designed to regulate conductG $'es are generally intended to
generate revenue.
3. Pe($!0 may be imposed by the government or by private individuals or
entities8 $'es only by the government.
O0$)-a#)o+ #o 'a, /*0# " o0$)-a#)o+ #o 'a, #a1
1. % *e3 is generally based on contract, express or implied, while a $' is based
on laws.
2. % *e3 is assignable, while a $' cannot generally be assigned.
3. % *e3 may be paid in <ind, while a $' is generally paid in money.
4. % *e3 may be the subject of set off or compensation, a $' cannot.
9. % person cannot be imprisoned for non;payment of tax, except poll tax.
6. % *e3 is governed by the ordinary periods of prescription, while a $' is
governed by the special prescriptive periods provided for in the #("'.
7. % *e3 draws interest when it is so stipulated or where there is default, while
a $' does not draw interest except only when delin@uent.
R*2.)!)#*! of %o&'*+!a#)o+
4. That each one of the obligor be bound principally, and that he be at the same
time a principal creditor of the other.
,. That both debts consist in a sum of money, or if the things due are
consumable, they be of the same <ind and also of the same @uality if the
latter has been stated.
7
7. That the two +,- debts be due.
8. That they be li@uidated and demandable.
9. That over neither of them there be any retention or controversy, commenced
by third persons and communicated in due time to the debtors.
R.$*! (*: !*# off o( %o&'*+!a#)o+ of /*0#!
G*+*(a$ (.$*. % tax delin@uency cannot be extinguished by legal
compensation. This is so because the government and the tax delin@uent are
not mutually creditors and debtors. #either is a tax obligation an ordinary act.
$oreover, the collection of a tax cannot await the results of a lawsuit against
the government. 3inally, taxes are not in the nature of contracts but grow out
of the duty to, and are the positive acts of the government to the ma<ing and
enforcing of which the personal consent of the taxpayer is not re@uired.
9Fr$()#$ v. IAC4 57, SCRA 6:; $(* Rep%3!#) v. +$&3%!$o L%&3er4 ; SCRA 7,,-
E1%*'#)o+ . S' allowed set off in the case of Do&#("o v. G$r!#os <= SCRA ;;/?
re. claim for payment of unpaid services of a government employee vis;I;vis
the estate taxes due from his estate. 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. 'ompensation therefore ta<es place by
operation of law.
Philex Mining Corporation v. Commissioner, 294 SCRA 687 (998!
0hilex $ining 'orporation was to set off its claims for !%T input creditJrefund
for the excise taxes due from it. The Supreme 'ourt disallowed such set off or
compensation.
S.(*, of P3)$)'')+* Ta1*!
A. I(er($! Reve(%e $'es #&pose* %(*er he NIRC.
4. (ncome tax
,. Transfer taxes
a- Estate tax
b- 1onorBs tax
7. 0ercentage taxes
a- !alue %dded Tax
b- ther 0ercentage Taxes
8. Excise taxes
9. 1ocumentary stamp tax
B. Lo)$!> +%(#)#p$! T$'es
C. T$r#ff $(* C%so&s D%#es
D. T$'es > T$' I()e(#ves %(*er spe)#$! !$ws
CLASSIFICATION OF TAXES
AS TO SUB?ECT +ATTER OR OB?ECT
4. 0ersonal, poll or capitation tax
8
Tax of a fixed amount imposed on persons residing within a specified territory,
whether citi6ens or not, without regard to their property or the occupation or
business in which they may be engaged, i.e. community tax.
,. 0roperty tax
Tax imposed on property, real or personal, in proportion to its value or in
accordance with some other reasonable method of apportionment.
7. Excise tax
% charge impose upon the performance of an act, the enjoyment of privilege, or
the engaging in an occupation.
AS TO PURPOSE
GeneralJfiscal revenue tax is that imposed for the purpose of raising public funds
for the service of the government.
% special or regulatory tax is imposed primarily for the regulation of useful or non;
useful occupation or enterprises and secondarily only for the purpose of raising public
funds.
AS TO 2HO BEARS THE BURDEN
4. 1irect tax
% direct tax is demanded from the person who also shoul,ders the burden of the
tax. (t is a tax which the taxpayer is directly or primarily liable and which he or she
cannot shift to another.
,. (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, falling
finally upon the ultimate purchaser or consumer. % tax which the taxpayer can
shift to another.
AS TO THE SCOPE OF THE TAX
4. #ational tax
% national tax is imposed by the national government.
,. &ocal tax
% local tax is imposed by the municipal corporations or local government units
+&G2s-.
AS TO THE DETER+INATION OF A+OUNT
4. 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. (t re@uires no assessment other than
the listing or classification of the objects to be taxed.
,. %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. (t re@uires the intervention of assessors or appraisers to
estimate the value of such property before due from each taxpayer can be
determined.
AS TO GRADUATION OR RATE
9
4. 0roportional tax
Tax based on a fixed percentage of the amount of the property receipts or other
basis to be taxed. Example. real estate tax.
,. 0rogressive or graduated tax
Tax the rate of which increases as the tax base or brac<et increases.
1igressive tax rate. progressive rate stops at a certain point. 0rogression halts at
a particular stage.
7. "egressive tax
Tax the rate of which decreases as the tax base or brac<et increases. There is no
such tax in the 0hilippines.
TAX SYSTEMS
Co+!#)#.#)o+a$ &a+/a#*
The rule of taxation shall be uniform and e@uitable. The 'ongress shall evolve
a progressive system of taxation. >Se)#o( ,= 95-4 Ar#)!e @I4 Co(s#%#o(?
"egressivity is not a negative standard for courts to enforce. Ahat 'ongress is
re@uired by the 'onstitution to do is to Aevo!ve $ pro"ress#ve s0se& of
$'$#o(.B This is a directive to 'ongress, just li<e the directive to it to give
priority of the enactment of law for the enhancement of human dignity. The
provisions are put in the 'onstitution as moral incentives to legislation, not as
judicially enforceable rights. 9To!e(#(o v. Se)re$r0 of F#($()e.-
Progressive s"stem o# taxation v. regressive s"stem o# taxation
% pro"ress#ve s0se& of $'$#o( means that tax laws shall place emphasis on
direct taxes rather than on indirect taxes, with ability to pay as the principal
criterion.
% re"ress#ve s0se& of $'$#o( exists when there are more indirect taxes
imposed than direct taxes.
#o regressive taxes in the 0hilippine jurisdiction
CLASSIFICATION OF TAXES.
1. perso($! $' F also <nown as capitali6ation or poll taxG
2. proper0 $' F assessed on property of a certain classG
3. *#re) $' F incidence and impact of taxation falls on one person and cannot
be shifted to anotherG
4. #(*#re) $' F incidence and liability for the tax falls on one person but the
burden thereof can be passed on to anotherG
5. e')#se $' F imposed on the exercise of a privilegeG
6. "e(er$! $'es F taxes levied for ordinary or general purpose of the
governmentG
10
7. spe)#$! $' 1 levied for a special purposeG
8. spe)#f#) $'es F imposed on a specific sum by the head or number or by some
standards of weight or measurementG
9. $* v$!ore& $' F tax imposed upon the value of the articleG
10. !o)$! $'es F taxes levied by local government units pursuant to validly
delegated power to taxG
11. pro"ress#ve $'es F rate increases as the tax base increasesG and
12. re"ress#ve $'es F rate increases as tax base decreases.
GENERAL RULE:
; Taxes are personal to the taxpayer. 'orporationBs tax delin@uency cannot be
enforced on the stoc<holder or transfer taxes on the estate be assessed on
the heirs.
EXCEPTIONS
4. stoc<holders may be held liable for unpaid taxes of a dissolved corporation
if the corporate assets have passed into their handsG and
,. heirs may be held liable for the transfer taxes on the estate, if prior to the
payment of the same, the properties of the decedent have been
distributed to the heirs.
LIMITATIONS ON THE POWER OF TAXATION
I+3*(*+# L)&)#a#)o+!
4. (t must be imposed for a public purpose.
,. (f delegated either to the 0resident or to a &.G.2., it should be validly
delegated.
7. (t is limited to the territorial jurisdiction of the taxing authority.
8. Government entities are exempted.
9. (nternational comity is recogni6ed i.e. property of foreign sovereigns are not
subject to tax.
Co+!#)#.#)o+a$ $)&)#a#)o+! F
I(*#re) F
a- 1ue process clause
b- E@ual protection clause
c- 3reedom of the press
d- "eligious freedom
e- #on;impairment clause
f- &aw;ma<ing process F
4. ne;subject F ne;title "ule
,. 7 readings on 7 separate days "ule except when there is a
'ertificate of Emergency
11
7. 1istribution of copies 7 days before the 7
rd
reading.
g- 0residential power to grant reprieves, commutations and pardons, and remit fines
and forfeitures after conviction by final judgment.
D#re) 1
a- "evenue bill must originate exclusively in 5.". but the Senate may propose with
amendments.
b- #on;imprisonment for non;payment of poll tax.
c- Taxation shall be uniform and e@uitable.
d- 'ongress shall evolve a progressive system of taxation.
e- Tax exemption of charitable institutions, churches and personages or convents
appurtenant thereto, mos@ues, non;profit cemeteries, and all lands, buildings and
improvements %1E +actually, directly , exclusively- used for charitable, religious, and
educational purposes.
f- Tax exemption of all revenues and assets used %1E for educational purposes of F
4. #on;profit non;stoc< educational institutions.
,. 0roprietary or cooperative educational institutions subject to limitations
provided by law including F
a- restriction on dividends
b- provisions for re;investments.
g- Tax exemption of grants, endowments, donations or contributions %1E for
educational purposes, subject to conditions prescribed by law.
h- #o tax exemption without the concurrence of a majority of all members of
'ongress.
i- S' power to review judgments or orders of lower courts in all cases involving F
&egality of any tax. (mpost or toll, &egality of any penalty imposed in relation thereto.
INHERENT LIMITATIONS
#TES. PUBLIC PURPOSE F
GO@ERN+ENTAL PURPOSE
RULE.
KThe &egislature is without the power to appropriate revenues for anything but
for public purposes.L
RULE.
K0ublic money can only be spent for a public purpose.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, it also
includes indirect benefits or advantage
12
TIO vs. @IDEOGRA+
> (t is not the immediate result but the ultimate result that determines,
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. (f the public advantage or benefit is merely incidental in the promotion of a
particular enterprise, that will render the law (#!%&(1
2. (f what is incidental is the promotion of a private enterprise, the tax law is
still for a public purpose+!%&(1-
> % tax levied for a private, 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.
> %lthough private individuals are directly benefited, the tax would still be
valid, provided such benefit is only incidental
> (f what is incidental is the promotion of a private enterprise, as long as
there is a lin< to the public welfare, the purpose is still public
> The test is not as to who receives the money, but the character of the
purpose for which it is expended
> #ot the immediate result of the expenditure, but rather the ultimate
> The es h$ &%s 3e $pp!#e* #( *eer&#(#(" wheher he p%rpose #s p%3!#)
or pr#v$e
4- The character of the direct object
,- The ultimate result not the immediate result
7- The general welfare for public good
TEST OF RIGHTFUL TAXATION
; 0roceeds of a tax must be used
4- for the support of the government
,- for any of the recogni6ed objects of the government
7- to promote the welfare of the community
LEGISLATIVE PREROGATIVE
RULE. (t is 'ongress which has the power to determine whether the purpose is
public or private
13
> )ou can always @uestion the validity of such tax measure on the ground that
it is not for a public purpose before the courts. /ut once it is settled that it is
for a public purpose, you can no longer in@uire on such tax measure
TAXPAYERS SUIT
; 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. +GONZALES vs. +ARCOS-
LOZADA vs. CO+ELEC
> (t is only when an act complained of which may include a legislative
enactment of a statute, involves the illegal expenditure of public money that
the so;called taxpayers suit may be allowed.
CALTEX 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.
> % 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.
REQUISITES FOR A TAXPAYERS PETITION
4- That 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
7- That the petitioner see<s to restrain respondents from wasting public funds
through the enforcement of an invalid or unconstitutional law.
CILOS BAYAN vs. 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- (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
14
,- %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- 0ublic purpose is continually expanding. %reas formerly left to private
initiative now loose their boundaries and may be underta<en by the
government, if it is to meet the increasing social challenges of the times
8- 0ublic purpose is determined at the time of enactment of the tax law and not
at the time of implementation
#TES. INTERNATIONAL COMITY
; /ased on tradition, practice or custom
DOCTRINE OF INCORPORATION
> The Ph#!#pp#(es $*ops he "e(er$!!0 $))epe* pr#()#p!es of #(er($#o($! !$w
$s p$r of he !$w of he !$(*
> (f a tax law violates certain principles of international law, then it is not only
invalid but also unconstitutional
GROUNDS FOR TAX EXEMPTION OF FOREIGN GOVERNMENT PROPERTY
4- Sovereign e@uality of States
,- 2sage among States
7- (mmunity from suit of a State
#TES. NON4DELEGATION OF THE POWER TO TAX
GENERAL RULE.
; The power of taxation is peculiarly and exclusively legislative, therefore, it
may not be delegated
EXCEPTIONS:
4- 1elegation to the 0resident
,- 1elegation to local government units
7- 1elegation to administrative units
POWERS WHICH CANNOT BE DELEGATED
4- 1etermination of the subjects to be taxed
,- 0urpose of the tax
7- %mount or rate of the tax
15
8- $anner, means and agencies of collection
9- 0rescription of the necessary rules with respect thereto
DELEGATION TO THE PRESIDENT
> 'ongress may authori6e, by law, the 0resident to fix, within specified limits
and subject to such limitations and restrictions as it may impose
4- Tariff rates
,- (mport and export @uotas
7- 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.
FLEXIBLE TARIFF CLAUSE +SE'. 8M4 T''-
; (n the interest of national economy, general welfare andJor national security,
the 0resident upon the recommendation of the #ational Economic and
1evelopment %uthority is empowered.
1) To increase, reduce or remove existing protective rates of import duty,
prov#*e* that the increase should not be higher than 4MMN ad valorem
,- To establish import @uota or to ban imports of any commodity
7- 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, 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, because what is delegated is not the
enactment or the imposition of a tax, it is the administrative implementation
BASCO vs. PAGCOR
> The power of local government units to impose taxes and fees is always
subject to the limitations which 'ongress may provide, the former having no
inherent power to tax.
> $unicipal corporations are mere creatures of 'ongress which has the power
to create and abolish municipal corporations. 'ongress therefore has the
power to control over local government units. (f 'ongress can grant to a
16
municipal corporation the power to tax certain matters, it can also provide for
exemptions or even ta<e bac< the power
DELEGATION TO ADMINISTRATIVE AGENCIES
> 3or the delegation to be constitutionally valid, 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. (n these cases, there really is no
delegation, to wit.
%- power to value property
/- power to assess and collect taxes
'- power to perform details of computation, appraisement or adjustments.
#TES. EXEMPTION OF GOVERNMENT AGENCIES
4- %gencies performing governmental functions
D TAX EXE+PT
,- %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.
NDC vs. 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.
> Those with ORIGINAL CHARTERS +incorporated agencies-
> Those created by SPECIAL CHARTER +incorporated agencies- are (o
)overe* 30 he e'e&p#o(
GOVERNMENT ENTITIES EXEMPT FROM INCOMING TAX
4- GS(S
,- SSS
7- 05('
8- 0'S
9- 0%G'"
REASON FOR EXE+PTIONS
4- Government will be taxing itself to raise money for itself.
17
,- (mmunity is necessary in order that governmental functions will not be
impeded.
#TES: TERRITORIAL JURISDICTION
RULES.
> 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.
> 0roperty outside ones jurisdiction does not receive any protection of the
State
> (f a law is passed by 'ongress, '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
0lace of taxation
RULE:
; 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
E'$&p!e.
4- 0&& T%O, '%0(T%T(# T%O, '$$2#(T) T%O
> "esidence of the taxpayer
,- "E%& 0"0E"T) T%O " 0"0E"T) T%O
> &ocation of the property
D 2e )$( o(!0 #&pose proper0 $' o( he proper#es of $ perso( whose
res#*e()e #s #( he Ph#!#pp#(es.
EXCEPTIONS TO THE TERRITORIALITY RULE
A) 2here he $' !$ws oper$e o%s#*e err#or#$! E%r#s*#)#o(
4- 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$e
4- Ahen exempted by treaty obligations
,- Ahen exempted by international comity
18
SITUS OF TAX ON REAL PROPERTY
F LEX REI SITUS or where the property is located
"E%S#.
The place where the real property is located gives protection to the
real property, hence the property or its owner should support the
government of that place
SITUS OF PROPERTY TAX ON PERSONAL PROPERTY
; +OBILIA SEGUNTUR PERSONA+
P movables follow the owner
P movables follow the domicile of the owner
RULES:
5- TANGIBLE PERSONAL PROPERTY
; Ahere located, usually the owners domicile
,- INTANGIBLLE PERSONAL PROPERTY
G. ". F 1omicile of the owner
EO'E0T(#. The situs location not domicile
> Ahere the intangible personal property has ac@uired a business situs in another
jurisdiction
* > The principle of A+o3#!#$ SeH%(%r Perso($&L is only for purposes of
convenience. (t must yield to the actual situs of such property.
* > Perso($! #($("#3!e proper#es wh#)h $)H%#res 3%s#(ess s#%s here #( he
Ph#!#pp#(es
4- 3ranchise which is exercised within the 0hilippines
,- Shares, obligations, bonds issued by a domestic corporation
7- Shares, obligations, bonds issued by a foreign corporation, Q9N of its business is
conducted in the 0hilippines
8- Shares, obligations, bonds issued by a foreign corporation which shares of stoc< or
bonds ac@uire situs here
9- "ights, interest in a partnership, business or industry established in the 0hilippines
> These intangible properties ac@uire business situs here in the 0hilippines, you
cannot apply the principle of K+o3#!#$ SeH%(%r Perso($&L because the properties
have ac@uired situs here.
SITUS OF INCOME TAX
A- DO+ICILLARY THEORY
19
; The location where the income earner resides in the situs of taxation
B- NATIONALITY THEORY
; The country where the income earner is a citi6en is the situs of taxation
C- SOURCE RULE
; The country which is the source of the income or where the activity that
produced the income too< place is the situs of taxation.
SITUS OF SALE OF PERSONAL PROPERTY
> The place where the sale is consummated and perfected
SITUS OF TAX ON INTEREST INCOME
> The residence of the borrower who pays the interest irrespective of the
place where the obligation was contracted
CIR vs. BOAC
> "evenue derived by an of;line international carrier without any flight from
the 0hilippines, from tic<et sales through its local agent are subject to tax on
gross 0hilippine billings
SITUS OF EXCISE TAX
> Ahere the transaction performed
HOPE2ELL vs. CO+. OF CUSTO+S
> The power to levy an excise upon the performance of an act or the
engaging in an occupation does not depend upon the domicile of the person
subject to the exercise, nor upon the physical location of the property or in
connection with the act or occupation taxed, but depends upon the place on
which the act is performed or occupation engaged in.
Thus, the gauge of taxability does not depend on the location of the office, but
attaches upon the place where the respective transaction is perfected and
consummated
CONSTITUTIONAL LIMITATIONS
I" DUE PROCESS
> 1ue process mandates that (o perso( sh$!! 3e *epr#ve* of !#fe4 !#3er04 or
proper0 w#ho% *%e pro)ess of !$w.
PEPSI COLA vs. +UN. OF TANAUAN
; REQUIREMENTS OF DUE PROCESS IN TAXATION
20
4- Tax must be for a 0ublic purpose
,- (mposed within the Territorial jurisdiction
7- #o arbitrariness or oppression in
%- assessment, and
/- collection
DUE PROCESS IN TAXATION DOES NOT REQUIRE
1) Deer&#($#o( hro%"h E%*#)#$! #(H%#r0 of
%- property subject to tax
/- amount of tax to be imposed
,- No#)e of he$r#(" $s o.
%- amount of the tax
/- manner of apportionment
REQUISITES OF DUE PROCESS OF LAW
4- There must be a valid law
,- Tax measure should not be unconscionable and unjust as to amount to
confiscation of property
7- Tax statute must not be arbitrary as to find no support in the constitution
> $hen is %eprivation o# li#e, li&ert" or propert" %one in a''or%an'e
(ith %)e pro'ess o# la(R
4- (f done under authority of a law that is valid or of the constitution itself
,- %fter compliance with fair and reasonable methods of procedure prescribed
by law.
> (f properties are taxed on the basis of an invalid law, such deprivation is a
violation of due process
RE+EDY F as< for refund
> To justify the nullification of a tax law, there must be a clear and
une@uivocal breach of the constitution
> There must be proof of arbitrariness
INSTANCES WHEN THE TAX LAW MAYBE DECLARED AS
UNCONSTITUTIONAL 5C, O, N, U6
1) (f it amounts to )o(f#s)$#o( of proper0 without due process
2) (f the subject of taxation is o%s#*e of he E%r#s*#)#o( of the taxing
state
21
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, 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 proper0 for (o(Fp$0&e( of $'es
w#ho%
4- notice of liability
,- sale of property at public auction
> The validity of statute maybe contested only by one who will sustain a direct
injury in conse@uence of its enforcement
> % violation of the inherent limitations on taxation would contravene the
constitutional injunctions against deprivation of property without due process
of law
> There must be proof of arbitrariness, otherwise apply the presumption of
constitutionality
> 1ue process re@uires hearing before adoption of legislative rules by
administrative bodies of interpretative rulings. ++#s$&#s vs. 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. 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. +T$( vs. *e! Ros$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* $ he s$&e r$e
> prohibits class legislation
> prohibits undue discrimination
EQUALITY IN TAXATION 7UNIFORMITY8
> 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#(" 3oh o( he pr#v#!e"e
)o(ferre* $(* !#$3#!##es #&pose*
> %ll taxable articles of the same class shall be taxed at the same rate
22
> The 1octrine does not re@uire that persons or properties different in fact be
treated in law as though there were the same. Ahat it prohibits is class
legislation which discriminates against some and favors others
> %s long as there are rational or reasonable grounds for doing so, 'ongress
may group persons or properties to be taxed and it is sufficient if all members
of the same class are subject to the same rate and the tax is administered
impartially upon them.
REQUISITES OF A VALID CLASSIFICATION 7S A G E 8
4- (t must be based on s%3s$(#$! *#s#()#o(
,- (t must $pp!0 (o o(!0 o he prese( )o(*##o(, but also to future conditions
7- (t must be "er&$(e o he p%rpose of he !$w
8- (t must $pp!0 eH%$!!0 to all members of the same class
SUBSTANTIAL DISTINCTION
> (t must be real, 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, 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, as long as
there is valid classification.
TIU vs. CA
The 'onstitutional right to e@ual protection of the law is not violated by an
executive order, issued pursuant to law, 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. The 'onstitution does not re@uire the absolute e@uality among residents.
(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. (n short, a
classification based on valid and reasonable standards does not violate the e@ual
protection clause.
Ae find real and substantial distinctions between the circumstances obtaining
inside and those outside the Subic #aval /ase, thereby justifying a valid and
reasonable classification.
23
TWO WAYS EQUAL PROTECTION CLAUSE CAN BE VIOLATED
4- 2he( )!$ss#f#)$#o( #s &$*e where here sho%!* 3e (o(e
ex. Ahen the classification does not rest upon substantial distinctions that ma<e
for real difference
,- 2he( (o )!$ss#f#)$#o( #s &$*e where $ )!$ss#f#)$#o( #s )$!!e* for
ex. Ahen substantial distinctions exist but no corresponding classification is made
on the basis thereof
OR+OC SUGAR CENTRAL vs. CIR
> (f the ordinance is intended to supply to a specific taxpayer and to no one
else regardless of whether or not other entities belonging to the same class
are established in the future, it is a violation of the e@ual protection clause,
but if it is intended to apply also to similar establishments which maybe
established in the future, then the tax ordinance is valid even if in the
meantime, it applies to only one entity or taxpayer for the simple reason that
there is so far only one member of the class subject of the tax measure
UNIFORMITY IN TAXATION
> The concept of uniformity in taxation implies that all taxable articles or
properties of the same class shall be taxed at the same rate.
(t re@uires the uniform application and operation, without discrimination, of
the tax in every place where the subject of the tax is found. (t does not,
however, re@uire absolute identity or e@uality under all circumstances, but
subject to reasonable classification.
EQUITY IN TAXATION
> The concept of e@uity in taxation re@uires that the apportionment of the tax
burden be more or less, just in the light of the taxpayerBs ability to shoulder to
tax burden and if warranted, on the basis of the benefits received from the
government. (ts cornerstone is the taxpayers ability to pay.
CRITERIA OF EQUAL PROTECTION
4- 2he( he !$ws oper$e %(#for&!0
%- on all persons
/- under similar circumstances
,- A!! perso(s $re re$e* #( he s$&e &$((er
%- The conditions not being different
/- /oth in privileges conferred and liabilities imposed
'- 3avoritism and preference not allowed
REYES vs. AL+AZOR
24
> Taxation is e@uitable when its burden falls on those better able to pay
CAPATIRAN vs. 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, 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, that is the one which cannot be taxed.
TOLENTINO vs. SEC. 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.
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. +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. 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.
> 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 $)#v#0
> The income of the priest derived from the exercise of religious activity can
be taxed.
25
V" NON4IMPAIRMENT CLAUSE
> The parties to the contract cannot exercise the power of taxation.
> They cannot agree or stipulate that this particular transaction may be
exempt from tax; not allowed +except if government-
OPOSA vs. FACTORAN
> 0olice power prevails over the non;impairment clause
LA INSULAR vs. +ANCHUCA
> % lawful tax on a new subject or an increased tax on an old one, does not
interfere with a contract or impairs its obligation.
> *he 'onstit)tional g)arantee o# the non+impairment 'la)se 'an onl"
invo,e% in the grant o# tax exemption.
RULES:
4- (f the exemption was granted for valuable consideration and it is granted on the
basis of a contract.
> cannot be revo<ed
,- (f the exemption is granted by virtue of a contract, wherein the government enters
into a contract with a private corporation
> cannot be revo<ed unilaterally by the government
7- (f the basis of the tax exemption is a franchise granted by 'ongress and under the
franchise or the tax exemption is given to a particular holder or person
> can be unilaterally revo<ed by the government +'ongress-
> The non;impairment clause applies only to contracts and not to a franchise.
> The non;impairment clause applies to taxation but not to police power and
eminent domain. 3urthermore, it applies only where one party is the
government and the other, a private individual.
> %s a rule, the obligation to pay tax is based on law. /ut when, for instance, a
taxpayer enters into a compromise with the /(", the obligation of the taxpayer
becomes one based on contract
PRO@INCE OF +ISA+IS vs. CAGAYAN ELECTRIC
> 3ranchises with magic words, Ksh$!! 3e #( !#e% of $!! $'esB descriptive of the
payment of a franchise tax on their gross earnings are exempt from.
4- all taxes
,- the franchise tax under the #("'
7- the franchise tax under the local tax code
?UAREZ vs. CA
26
> %s long as the contract affects the public welfare one way or another so as
to re@uire the interference of the state, then must the police power be
asserted and prevail over the impairment clause
RULES ON TAX AMNESTY
> Tax amnesty, li<e tax exemption, is never favored nor presumed in law and if
granted by statute must be construed strictly against the taxpayer, who must
show compliance with the law.
>The government is not estopped from @uestioning the tax liability even if
amnesty tax payments were already received
REASON. Erroneous application and enforcement of the law by public officers
do not bloc< subse@uent correct application of the statute. The government is
never estopped by mista<es or errors by its agents.
PP vs. CASTAJEDA
> 1efense of tax amnesty, li<e amnesty, is a personal defense
REASON. (t relates to the circumstances of a particular accused and not the
character of the acts charged in the information
REPUBLIC vs. IAC
>(n case of doubt, tax amnesty is to be strictly construed against the
government
REASON. Taxes are not construed, 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). ,7 95- ART II-
/- 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, EO'E0T when the 0resident
certifies to the necessity of its immediate enactment to meet a public calamity or
emergency. +Se). ,7 9,- ART II-
PHIL. ?UDGES ASSOC. vs. PRADO
> % presidential certification dispenses with the re@uirement not only of
printing but also that of reading the bill on separate days.
>(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
27
Senate /ill, so long as such amendment is germane to the subject of the bills
before the committee. %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.
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. (n ASTORGA vs. @ILLEGAS, 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.
VII" PARDONING POWER OF THE PRESIDENT
> The 0resident has the power to grant reprieves, commutations and pardons and
remit fines and forfeitures after conviction by final judgment. +Se). 5K4 ART @II-
NATURE 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
; 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 +Se). ,L
ART III-
> The non;imprisonment rule applies to non;payment of poll tax which is
punishable only by a surcharge, but not to other violations li<e falsification of
community tax certificate or non;payment of other taxes
POLL TAX F tax of fixed amount imposed upon residents within a specific territory
regardless of citi6enship, business or profession
Ex. 'ommunity tax
IX" TAXATION SHALL BE UNIFORM AND EQUITABLE
; The rule of taxation shall be uniform and e@uitable. The 'ongress shall evolve
a progressive system of taxation. 9Se). ,= 95- ART @I-
UNIFORMITY
; 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
28
> 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- PROPORTIONAL TAXATION
; where the tax increases or decreases in relation to the tax brac<et
,- PROGRESSI@E or GRADUATED SYSTE+
; where the tax increases as the income of the taxpayer goes higher
7- REGRESSI@E SYSTE+
; where the tax decreases as the income of the taxpayer increases
PROGRESSI@ITY IS NOT REPUGNANT TO UNIFOR+ITY $(* EGUALITY
%- 2niformity does not re@uire the things which are not different be treated in the
same manner
/- 1ifferentiation, which is not arbitrary and conforms to the dictates of justice and
e@uity is allowed. 0rogressivity is one way of classification.
'- The State has the inherent right to select subjects of taxation
TOLENTINO vs. SEC. OF FINANCE
> "% ==4: +E!%T-, does not violate the constitutional mandate that 'ongress
shall Kevolve a progressive system of taxationL
> The 'onstitution does not really prohibit the imposition of indirect taxes, which
li<e the !%T, are regressive. The constitutional provision means simply that
indirect taxes shall be minimi6ed.
> The mandate to 'ongress is not to prescribe, but to evolve, a progressive
system of taxation
> "esort to indirect taxes should be minimi6ed but not to be avoided entirely
because it is difficult, if not impossible to avoid them by imposing such taxes
according to the taxpayers ability to pay.
XI" ORIGIN OF REVENUE, TARIFF o( TAX BILLS
%ll appropriation, revenue or tariff bills, bills authori6ing increase of the public
debt, bills of local application, and private bills shall originate exclusively in the
5ouse of "epresentatives, but the Senate may propose or concur with amendments.
+Se)#o( ,;4 Ar#)!e @I-
29
RULE.
; (t is not the revenue statute but the revenue bill which is re@uired by the
constitution to originate exclusively in the 5ouse of "epresentatives
REASON.
; To insist that a revenue statute and not only the bill which initiated the
legislative process culminating in the enactment of the law must substantially
be the same as the 5ouse bill would be to deny the SenateBs power not only
to Kconcur with amendmentsL but also to Kpropose amendments.L (t would be
to violate the co;e@uality of legislative power of the two houses of 'ongress
and in fact ma<e the 5ouse superior to the Senate. +To!e(#(o vs. Se). of
F#($()e-
> The 'onstitution simply re@uires that there must be that initiative coming
from the 5ouse of "epresentatives relative to appropriation, revenue and tariff
bills.
>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, as long as action by
the Senate is withheld until receipt of said bill +To!e(#(o vs. Se). of F#($()e-
XII" PRESIDENTIAL VETO
> KThe 0resident shall have the power to veto any particular item or items in
an appropriation, revenue or tariff bill, but the veto shall not affect the item or
items to which he does not objectL 9Se). ,6 9,-4 ART @I-
XIII" TARIFF POWER OF THE PRESIDENT
KThe 'ongress may, by law, authori6ing the 0resident to fix within specific
limits, and subject to such limitations and restrictions as it may impose, tariff
rates, import and export @uotas, tonnage and wharfage dues, the other duties
or imports within the framewor< of the national development program of the
GovernmentL +Se). ,= 9,-4 ART @I-
REQUISITES.
4- There must be a law passed by 'ongress authori6ing the 0resident to impose
tariff rates and other fees.
,- 2nder the law, there must be limitations and restrictions on the exercise of
such power
7- The taxes that may be imposed by the 0resident are limited to.
%- Tariff rates
/- (mport and export @uotas
'- Tonnage and wharfage dues
1- ther duties +customs duties-
8- 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, donors tax, and other taxes which are not in the nature of customs duties.
30
> The 'onstitution allows only the imposition by the 0resident of these custom
duties
XIV" TAX EXEMPTION OF REAL PROPERTY
K'haritable institutions, churches and personages or convents appurtenant
thereto, morgues, non;profit cemeteries and all lands, buildings and
improvements, actually directly and exclusively used for religious, charitable,
or educational purposes shall be exempt from taxation.L +Se). ,= 9/- ART @I-
APPLICATION:
> The exemption only covers property taxes and not other taxes
TEST OF EXEMPTION.
> (t is the 2SE of the property and not ownership of the property
ABRA @ALLEY COLLEGE vs. AGUINO 957, 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, but the owner is subject to
income tax or rents received.
> "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; 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). ,= 9;- ART
@I-
RULES ON VOTE REQUIREMENT
4- &aw granting any tax exemption
> absolute majority
,- &aw withdrawing any tax exemption
> "elative majority

> Tax exemption, amnesties, refunds are considered in the nature of tax
exemptions
> % law granting such needs approval of the absolute majority of the 'ongress
31
XVI" NO USE OF PUBLIC MONEY OR PROPERTY FOR PUBLIC PURPOSES
> K #o public money or property shall be appropriated, applied, paid, or
employed, directly or indirectly, for the use, benefit, or support of any sect,
church, denomination, sectarian, institution or system of religion, or of any
priest, preacher, minister or other religious teacher or dignitary as such,
EO'E0T when such priest, preacher, minister or dignitary is assigned to the
armed forces, or to any penal institution, or government orphanage or
leprosarium as suchL +Se). ,K 9,- 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.
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. (f the purpose for which a special
fund was created has been fulfilled or abandoned, the balance, if any, shall be
transferred to the general funds of the Government.L +Se). ,K 9/- ART @I-
> (f a 0resident of the 0hilippines spent a special fund for a general purpose,
he can be charged with culpable violation of the 'onstitution.
XVIII" SUPREME COURT:S POWER OF REVIEW
KThe Supreme 'ourt shall have the power to review, revise, reverse, modify or affirm
on appeal or certiorari, all cases involving the legality of any tax imposed,
assessment, or toll, or any penalty imposed in relation thereto.L +Se). : 9,B- 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.
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, fees, and charges subject to such guidelines and
limitations as the 'ongress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees, charges shall have exclusivity to the local government.L
9Se). :4 ART X-
LIMITATIONS ON POWER TO TAX 7L"G"U"8
4- (t is subject to such guidelines and limitations provided by 'ongress.
,- (t must be consistent with the basic policy of local autonomy.
7- Such taxes, fees, and charges shall accrue exclusively to the local government.
32
RULES: NATIONAL GOV:T !" LGU
IMPOSITION OF TAXES
4- The #ational Government may impose local taxes on articles or subjects which are
within the territorial jurisdiction of the local government unit.
,- The &ocal Government unit cannot impose tax on the national government.
> )ou can only tax those articles, which are within your jurisdiction
SEC. 74 ART X
K local government units shall have a just share, as determined by law, in the
national taxes which shall be automatically released to them.L
XX" TAX EXEMPTIONS OF EDUCATIONAL INSTITUTIONS
K %ll revenues and assets of non;stoc<, non;profit educational institutions used
actually, directly, and exclusively for educational purposes shall be exempt from
taxes and duties.L 9Se). ; 9/- ART XI@-
REQUISITES FOR EXEMPTION:
4- (t must be a private educational institution
,- (t must be non;stoc< and non;profit
7- (tBs assets +property- and revenues +income- must be used actually, directly and
exclusively for educational purposes
RULES:
4- (f the first re@uisite is absent +meaning, itBs a government educational institution-,
it is nonetheless exempt from income tax
,- (f the second re@uirement is absent +meaning, it is stoc< and profit- as long as the
third re@uirement is present, it is nonetheless exempt from real estate tax
7- (f the third re@uirement is absent, as long as it is non;stoc< and non;profit, it is
nonetheless exempt from income tax
8- (f the third re@uirement is absent, but it is private and non;profit, it is subject to
income tax, but at the preferential rate of ten percent +4MN-
> 2nder the present tax code, for a private educational institution to be
exempt from the payment of income tax, all it has to be is non;stoc< and non;
profit. 5owever, a governmental educational institution is exempt from
income tax without any condition
EXEMPTION DOES NOT EXTEND TO:
4- (ncome derived by these educational institutions from their property, real or
personal, and
,- 3rom activities conducted by them for profit regardless of the disposition made on
such income
+ANILA POLO CLUB vs. 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. PAUL HOSPITAL of ILOILO vs. CIR
33
> (ncome derived from the hospital pharmacy, 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
- $here the e%)'ational instit)tion is private an% non+pro#it (&)t a
sto', 'orporation! it is s)&.e't to in'ome tax &)t at the pre#erential
rate o# ten per'ent (/0!
REQUISITES fo( APPLICATION of ;<= PREFERENTIAL RATE
4- (t is privateG
,- (t has permit to operate from the 1E'S, or '5E1 or TES1%G
7- (t is non;profitG
8- (ts gross income from unrelated trade or business must not exceed fifty percent
+9MN- of its total gross income from all sources.
;<= PREFERENTIAL TAX RATE DOES NOT APPLY TO THE FOLLOWING:
4- 0assive incomes derived by the educational institution +subject to final income tax-
and
,- Ahere the educational institution is engaged in unrelated trade, business or other
activity, and the gross income from such unrelated trade, business or other activities
exceeds fifty percent +9MN- of the total gross income derived by the school from all
sources
> Ahere a donation is made in favor of an educational institution pursuant to
sports competition and tournaments, the donor is exempt from the payment
of donorBs tax
CIR vs. CA 9,K= SCRA =/-
> (ncome derived by )$'% from leasing out a portion of its premises to small
shop owners, li<e restaurant and canteen operators, and from par<ing fees
collected from non;members are taxable income
)$'% is not an educational institution
XXI" TAX EXEMPTION OF DONATIONS fo( EDUCATIONAL PURPOSES
> KSubject to conditions prescribed by law, all grants endowments, donations,
or contributions used actually, directly and exclusively for educational
purposes shall be exempt from tax.L 9Se). ; 9;- ART XI@-
XXII" NO EXPOST FACTO LAW PROHIBITION IN TAXATION
FERNANDEZ vs. 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.
34
DOUBLE TAXATION
> Taxing same property twice when it should be taxed but once. Taxing the
same person twice by the same jurisdiction over the same thing.
%lso <nown as duplicate taxation
PEPSI COLA vs. CITY OF BUTUAN
> There is no constitutional prohibition against double taxation in the
0hilippines. (t is something not favored but is permissible, provided that the
other constitutional re@uirements is not thereby violated
9INDS OF DOUBLE TAXATION
4- DIRECT DOUBLE TAXATION
; 1ouble taxation in the objectionable or prohibited sense
; Same property is taxed twice
REQUISITES:
%- The same property is taxed twice when it should only be taxed onceG
/- /oth taxes are imposed on the same property or subject matter for the same
purposeG
'- (mposed by the same taxing authorityG
1- Aithin the same jurisdictionG
E- 1uring the same periodG and
3- 'overing the same <ind or character of tax
,8 INDIRECT DOUBLE TAXATION
; #ot legally objectionable
; (f taxes are not of the same <ind, or the imposition are imposed for different
taxing authority and this may involve the same subject matter
EXA+PLES.
%- The taxpayers warehousing business although carried on in relation to the
operation of its sugar central is a distinct and separate taxable business
/- % license tax may be levied upon a business or occupation although the land or
property used in connection therewith is subject to property tax
'- /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- 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
35
E- % tax imposed on both on the occupation of fishing and of the fishpond itself
3- % 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- Tax deductions
,- Tax credits
7- 0rovide for exemption
8- Enter into treatise with other states
9- %llowance on the principle of reciprocity
TAX CREDIT
; %n amount allowed as a deduction of the 0hilippine (ncome tax on account of
income taxes paid or incurred to foreign countries. (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.
2HO CAN CLAI+ TAX CREDIT
4- 'iti6ens of the 0hilippines
,- 1omestic corporations
CITY OF BAGUIO vs. 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, 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, calling
or activity by both the state and a political subdivision thereof. %nd where the
statute or ordinance in @uestion applies e@ually to all persons, firms and
corporations placed in a similar situation, there is no infringement of the rule
on e@uality.
@ILLANUE@A vs. 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 #("'. The Supreme 'ourt held that there was no double taxation.
The same tax may be imposed by the #ational Government as well as the
local government. 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. 3urther, a license tax may
be levied upon a business or occupation although the land used in connection
therewith is subject to property tax.
DOCTRINES ON DOUBLE TAXATION
4- 1irect 1ouble Taxation +11T- is not allowed because it amounts to confiscation of
property without due process of law
,- )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
36
7- %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- S5(3T(#G
,- '%0(T%&(S%T(#
7- T"%#S3"$%T(#
8- %!(1%#'E
9- EOE$0T(#
:- E!%S(#
I" SHIFTING
; 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, but the burden of the tax
> nly indirect taxes may be shiftedG direct taxes cannot be shifted
WAYS OF SHIFTING THE TAX BURDEN
4- FOR2ARD SHIFTING
; 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.
Example.
; $anufacturer or producer may shift tax assessed to wholesaler, who in turn
shifts it to the retailer, who also shifts it to the final purchaser or consumer
,- BACC2ARD SHIFTING
; Ahen the burden of the tax is transferred from the consumer or purchaser
through the factors of distribution to the factors of production
Example.
; 'onsumer or purchaser may shift tax imposed on him to retailer by
purchasing only after the price is reduced, and from the latter to the
wholesaler, or finally to the manufacturer or producer
/- ON2ARD SHIFTING
; Ahen the tax is shifted two or more times either forward or bac<ward
37
Example.
; Thus, a transfer from the seller to the purchaser involves one shiftG from the
producer to the wholesaler, then to retailer, we have two shiftsG and if the tax
is transferred again to the purchaser by the retailer, we have three shifts in
all.
I&'a%# a+/ I+%)/*+%* of Ta1a#)o+
I&p$) of $'$#o( is the point on which a tax is originally imposed. (n so far as
the law is concerned, the taxpayer is the person who must pay the tax to the
government. 5e is also termed as the statutory taxpayer;the one on whom the
tax is formally assessed. 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. (t ta<es place when shifting has been effected from the statutory
taxpayer to another.
S#a#.#o(, Ta1'a,*(
The Statutory taxpayer is the person re@uired by law to pay the tax or the one
on whom the tax is formally assessed. (n short, he or she is the subject of the
tax.
(n direct taxes, the statutory taxpayer is the one who shoulders the burden of
the tax while in indirect taxes, the statutory taxpayer is the one who pay the
tax to the government but the burden can be passed to another person or
entity.
R*$a#)o+!3)' 0*#>**+ )&'a%#, !3)f#)+-, a+/ )+%)/*+%* of a #a1
The #&p$) is the initial phenomenon, the sh#f#(" is the intermediate process,
and the #()#*e()e is the result. Thus, the impact in a sales tax +i.e. !%T- is on
the seller +manufacturer- who shifts the burden to the customer who finally
bears the incidence of the tax.
I&p$) is the imposition of the taxG sh#f#(" is the transfer of the taxG while
#()#*e()e is the setting or coming to rest of the tax.
II" CAPITALI?ATION
; "eduction is the price of the taxed object e@ual to the capitali6ed value of
future taxes on the property sold
> This is a special form of bac<ward shifting, where the burden of future taxes
which the buyer may have to pay is shifted bac< to the seller in the form of
reduction in the selling price
III" TRANSFORMATION
; The manufacturer in an effort to avoid losing his customers, maintains the
same selling price and margin of profit, not by shifting the tax burden to his
customers, but by improving his method of production and cutting down or
other production cost, thereby transforming the tax into or earn through the
medium of production.
IV" TAX AVOIDANCE
38
; %lso <nown as A$' &#(#&#M$#o(B
; not punished by law
; Tax avoidance is the exploitation of the taxpayer of legally permissible
alternative tax rates or methods of assessing taxable property or income in
order to avoid or reduce tax liability
DELPHERS TRADERS CORP vs. IAC 95:6 SCRA /;K-
> The Supreme 'ourt upheld the estate planning scheme resorted to by the
0acheco family in converting their property to shares of stoc< in a corporation
which they themselves owned and controlled. /y virtue of the deed of
exchange, the 0acheco co;owners saved on inheritance taxes. The Supreme
'ourt said the records do not point anything wrong and objectionable about
this estate planning scheme resorted to. The legal right of the taxpayer to
decrease the amount of what otherwise could be his taxes or altogether avoid
them by means which the law permits cannot be doubted.
E'$&p!e.
3ollowing the Kho!*#(" per#o* r%!eL in capital gains transaction, 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. (t is an
immunity or privilegeG it is freedom from a financial charge or burden to which
others are subjected.
Exemption is allowed only if there is a clear provision there for.
(t is not necessarily discriminatory as long as there is a reasonable foundation
or rational basis.
Exemptions are not presumed, but when public property is involved,
exemption is the rule and taxation is the exemption.
Ra#)o+a$* fo( -(a+#)+- #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 theory behind the grant of tax exemptions is that such act will benefit the
body of the people. (t is not based on the idea of lessening the burden of the
individual owners of property.
G(o.+/! fo( -(a+#)+- #a1 *1*&'#)o+!
4- $ay be based on contract. (n such a case, the public, which is represented by the
government is supposed to receive a full e@uivalent therefor, i.e. charter of a
corporation.
,- $ay be based on some ground of public policy, i.e., to encourage new industries or
to foster charitable institutions. 5ere, the government need not receive any
consideration in return for the tax exemption.
39
7- $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. Exemption is allowed only if there is
a clear provision therefor.
Na#.(* of #a1 *1*&'#)o+
4- (t is a mere personal privilege of the grantee.
,- (t is generally revocable by the government unless the exemption is founded on a
contract which is contract which is protected from impairment.
7- (t implies a waiver on the part of the government of its right to collect what
otherwise would be due to it, and so is prejudicial thereto.
8- (t is not necessarily discriminatory so long as the exemption has a reasonable
foundation or rational basis.
9- (t is not transferable except if the law expressly provides so.
9)+/! of #a1 *1*&'#)o+ a%%o(/)+- #o &a++*( of %(*a#)o+
4- E'press or $ff#r&$#ve e'e&p#o(
Ahen certain persons, property or transactions are, by express provision,
exempted from all certain taxes, either entirely or in part.
,- 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, properties, or transactions
without mentioning the other classes.
Ever0 $' s$%e &$Ies e'e&p#o(s 3e)$%se of o&#ss#o(s.
No #a1 *1*&'#)o+ 0, )&'$)%a#)o+
(t must be expressed in clear and unmista<able language
CALTEX vs. COA
> (n claiming tax exemption, the burden of proof lies upon the claimant
(t cannot be created by mere implication
(t cannot be presumed that you are entitled to tax exemption
)ou must prove it
RULE:
; Taxation is the rule and exemption is the exception
PR1P2R*3 *A4 5 6172R8M28* PR1P2R*3
> 0roperties owned by the government whether in their proprietary or
governmental capacity are exempt from real estate tax
TEST.
; O2NERSHIP
> nce established that it belongs to the government, the nature of the use of
the property whether proprietary or sovereign becomes immaterial.
40
> Exemption of public property from taxation does not extend to
improvements therein made by occupants or claimants at their own expense.
9INDS OF TAX EXEMPTIONS ACCORDING TO SCOPE OR EXTENT
4- TT%&
; Ahen certain persons, property or transactions are exempted, expressly or
impliedly from all taxes
,- 0%"T(%&
; Ahen certain persons, property or transactions are exempted, expressly or
impliedly from certain taxes, either entirely or in part.
7- There can be no simultaneous exemptions under two laws, when one grants partial
exemption while other grants total exemption.
Does prov#s#o( #( $ s$%e "r$(#(" e'e&p#o( fro& A$!! $'esB #()!%*e #(*#re)
$'esN
#. %s a general rule, indirect taxes are not included in the grant of such
exemption unless it is expressly stated.
Na#.(* of 'o>*( #o -(a+# #a1 *1*&'#)o+
4- N$#o($! "over(&e(
The power to grant tax exemptions is an attribute of sovereignty for the power to
prescribe who or what persons or property shall not be taxed.
(t is inherent in the exercise of the power to tax that the sovereign state be
free to select the subjects of taxation and to grant exemptions therefrom.
2nless restricted by the 'onstitution, the legislative power to exempt is as
broad as its power to tax.
,- Lo)$! "over(&e(s
$unicipal corporations are clothed with no inherent power to tax or grant tax
exemptions. /ut the moment the power to impose a particular tax is granted, they
also have the power to grant exemption therefrom unless forbidden by some
provision of the 'onstitution or the law
The legislature may delegate its power to grant tax exemptions to the same
extent that it may exercise the power to exempt.
B$s)o vs. PAGCOR 95K7 SCRA :,-. The power to tax municipal corporations must
always yield to a legislative act which is superior, having been passed by the State
itself. $unicipal corporations are mere creatures of 'ongress which has the power to
create and abolish municipal corporations due to its general legislative powers. (f
'ongress can grant the power to tax, it can also provide for exemptions or even ta<e
bac< the power.
Ch$veM v. PCGG4 G.R. No. 5/L6574 LK De)e&3er 5KK=
(n a compromise agreement between the 0hilippine Government, represented
by the 0'GG, and the $arcos heirs, the 0'GG granted tax exemptions to the
assets which will be apportioned to the $arcos heirs. The Supreme 'ourt ruled
that the 0'GG has absolutely no power to grant tax exemptions, even under
the cover of its authority to compromise ill gotten wealth cases. The grant of
tax exemptions is the exclusive prerogative of the 'ongress.
41
(n fact, 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.
I+#*('(*#a#)o+ of #3* $a>! -(a+#)+- #a1 *1*&'#)o+!
G*+*(a$ (.$*
(n the construction of tax statutes, exemptions are not favored and are construed
sr#)#ss#&# E%r#s against the taxpayer. The fundamental theory is that all taxable
property should bear its share in the cost and expense of the government.
T$'$#o( #s he r%!e $(* e'e&p#o( #s he e'e&p#o(.
5e who claims exemption must be able to justify his claim or right thereto by a
grant express in terms Aoo p!$#( o 3e &#s$Ie( $(* oo )$e"or#)$! o 3e
&#s#(erpree*.B (f not expressly mentioned in the law, it must be at least within its
purview by clear legislative intent.
E1%*'#)o+!
4- Ahen the law itself expressly provides for a liberal construction thereof.
,- (n cases of exemptions granted to religious, charitable and educational institutions
or to the government or its agencies or to public property because the general rule is
that they are exempt from tax.
Sr#) #(erpre$#o( *oes (o $pp!0 o he "over(&e( $(* #s $"e()#es
0etitioner cannot invo<e the rule on stritissimi juris with respect to the
interpretation of statutes granting tax exemptions to the #0'. The rule on
strict interpretation does not apply in the case of exemptions in favor of a
political subdivision or instrumentality of the government. <+$)e*$ v.
+$)$r$#"O
D$v$o G%!f v. Co&&#ss#o(er4 ,K/ SCRA 67 95KK=-
% tax cannot be imposed unless it is supported by the clear and express
language of a statuteG on the other hand, once the tax is un@uestionably
imposed, Ka claim of exemption from tax payers must be clearly shown and
based on language in the law too plain to be mista<en.L Since the partial
refund authori6ed under Section 9, "% 4879, is in the nature of a tax
exemption, it must be construed sr#)#ss#&# E%r#s against the grantee. 5ence,
petitionerBs claim of refund on the basis of the specific taxes it actually paid
must expressly be granted in a statute stated in a language too clear to be
mista<en.
> E'e&p#o( of he 3%0er *oes (o e'e(* o he se!!er
Exemption of the principal does not extend to the accessory
SURIGAO vs. COLLECTOR of CUSTO+S
42
> T$' ref%(*s4 )o(*o($#o(s $(* $&(es#es, they being in the nature of tax
exemptions must be strictly construed against the taxpayer and liberally in
favor of the government.
Ta1 (*&)!!)o+ o( #a1 %o+/o+a#)o+
The word Are&#B means to desist or refrain from exacting, inflicting or
enforcing something as well as to restore what has already been ta<en. The
remission of taxes due and payable to the exclusion of taxes already collected
does not constitute unfair discrimination. Such a set of taxes is a class by
itself and the law would be open to attac< as class legislation only if all
taxpayers belonging to one class were not treated ali<e. >?%$( L%($ S%3*. @.
S$r&#e(o4 T4 0hil 7=M?
The condition of a tax liability is e@uivalent to and is in the nature of a tax
exemption. Thus, it should be sustained only when expressly provided in the
law. >S%r#"$o Co(so!#*$e* +#(#(" v. Co&&#ss#o(er of I(er($! Reve(%e4 K
SCRA 6,=?
Ta1 a&+*!#,
Tax amnesty, 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, in this
sense, prejudicial thereto. (t is granted particularly to tax evaders who wish to
relent and are willing to reform, thus giving them a chance to do so and
thereby become a part of the new society with a clean slate. >Rep%3!#) v.
I(er&e*#$e Appe!!$e Co%r, 4T: S'"% 779?
&i<e tax exemption, tax amnesty is never favored nor presumed in law. (t is
granted by statute. The terms of the amnesty must also be construed against
the taxpayer and liberally in favor of the government.
Ta1 a&+*!#, " #a1 %o+/o+a#)o+ " #a1 *1*&'#)o+
% tax amnesty, 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, parta<es of an absolute
forgiveness or waiver by the Government of its right to collect what otherwise
would be due it and, in this sense, prejudicial thereto, 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.
&i<e a tax exemption, a tax amnesty is never favored nor presumed in law,
and is granted by statute. The terms of the amnesty must be strictly
construed against the taxpayer and literally in favor of the government. 2nli<e
a tax exemption, however, a tax amnesty has limited applicability as to cover
a particular taxing period or transaction only.
There is a tax condonation or remission when the State desists or refrains
from exacting, inflicting or enforcing something as well as to reduce what has
already been ta<en. The condonation of a tax liability is e@uivalent to and is in
the nature of a tax exemption. Thus, it should be sustained only when
expressed in the law.
Tax exemption, 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
43
pay. Tax exemptions are not favored and are construed sr#)#ss#&# E%r#s
against the taxpayer.
CIR vs. 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. 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, 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.
CONSTITUTIONAL RESTRICTION:
K#o law granting any tax exemption shall be passed without the concurrence of a
majority of all members of 'ongress.L 9Se). ,= 9;- ART @I-
PRO@. OF NUE@A ECI?A vs. I+PERIAL +INING
> /asis or test for real property taxation is use and not ownership. Thus, it
does not matter who the owner of the property is even if it is not tax exempt
entity, as long as it is being used for religious, charitable or educational
purposes, then it is tax exempt.
'onversely, even if the property taxation is owned by the government if the
beneficial use has been granted, for consideration or otherwise, to a taxable
person, then the property is subject to tax.
VI" TAX EVASION
; (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.
YUTI@O vs. 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
; Tax evasion connotes the integration of three +7- factors.
4- The end to be achieved, i.e. payment of less than that <nown by the taxpayer to
be legally due, or paying no tax when it is shown that tax is due
,- %n accompanying state of mind which is described as being KevilL, Kin bad faithL,
KwillfulL, or KdeliberateL and not KaccidentalL
44
7- % course of action +or failure of action- which is unlawful
INDICIA of FRAUD IN TAX EVASION
4- 3ailure to declare for taxation purposes true and actual income derived from
business for two +,- consecutive yearsG or
,- Substantial underdeclaration of income tax returns of the taxpayer for four +8-
consecutive years coupled with unintentional overstatement of deductions
EVIDENCE TO PROVE TAX EVASION
> Since fraud is a state of mind, it need not be proved by direct evidence but
may be proved from the circumstances of the case.
REPUBLIC vs. GONZALES 95/ SCRA 7/=-
> 3ailure of the taxpayer to declare for taxation purposes his true and actual
income derived from his business for two +,- consecutive years is an
indication of his fraudulent intent to cheat the government of its due taxes.
TAX ENFORCEMENT AND ADMINISTRATION
SOURCES OF TAX LAWS.
4- Statutes
,- 0residential decrees
7- Executive orders
8- 'onstitution
9- 'ourt decisions
:- Tax code
=- "evenue regulations
Q- %dministrative issuances
T- /(" rulings
4M- &ocal tax ordinances
44- Tax treaties and conventions with foreign countries
PROSPECTIVITY OF TAX LAWS +%00&('%T(#-
GENERAL RULE:
; Tax laws should be applied prospectively
EXCEPTION.
; (t may be applied retroactively when the law expressly provides for such
retroactive application
EXCEPTION TO THE EXCEPTION:
; (t may not be given retroactive application even if the tax law expressly so
provides if it imposes unjust and oppressive taxes.
IMPRESCRIPTIBILITY OF TAXES
GENERAL RULE:
; Taxes are imprescriptible
45
EXCEPTION:
; 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
,- T%"(33 %#1 '2ST$S '1E
; %fter the expiration of 4 year from the payment of final duties.
> )ou should impose those custom duties that are supposed to be imposed on the
imported articles within the 4 year period, except if it is in the nature of partial
li@uidation, if there is fraud or protest
7- &'%& G!E"#$E#T '1E
; 0rescriptive periods for local taxes and real property tax
> 9 years
> 4M years if fraud has been employed
INTERPRETATION AND APPLICATION OF TAX LAWS
Na#.(* of I+#*(+a$ (**+.* $a>!
4- (nternal revenue laws are not political in nature.
,- Tax laws are civil and not penal in nature.
No# 'o$)#)%a$ )+ +a#.(*
(nternal revenue laws are not political in nature. They are deemed to be laws of the
occupied territory and not of the occupying enemy.
Thus, our tax laws continued in force during the Dapanese occupation. H#!$*o v.
Co!!e)or4 5LL Ph#!. ,==-. (t is well <nown that our internal revenue laws are not
political in nature and, as such, continued in force during the period of enemy
occupation and in effect were actually enforced by the occupation government.
(ncome tax returns that were filed during that period and income tax payments made
were considered valid and legal. Such tax laws are deemed to be the laws of the
occupied territory and not of the occupying enemy.
C))$ +o# '*+a$ )+ +a#.(*
Tax laws are civil and not penal in nature, although there are penalties provided for
their violation.
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.
Rep%3!#) v. O$s$(4 KK Ph#! K/;. 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. Tax laws are
civil in nature.
Co+!#(.%#)o+ of #a1 $a>!
46
4- R%!e whe( !e"#s!$#ve #(e( #s )!e$r
Tax statutes are to receive a reasonable construction with a view to carrying
out their purpose and intent.
They should not be construed as to permit the taxpayer easily to evade the
payment of taxes.
,- R%!e whe( here #s *o%3
#o person or property is subject to taxation unless within the terms or plain
import of a taxing statute. (n every case of doubt, tax statutes are construed strictly
against the government and liberally in favor of the taxpayer.
Taxes, being burdens, are not to be presumed beyond what the statute
expressly and clearly declares.
7- Prov#s#o(s "r$(#(" $' e'e&p#o(s
Such provisions are construed strictly against the taxpayer claiming tax
exemption.
A''$)%a#)o+ of #a1 $a>!
G*+*(a$ (.$* . 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+ . Ahile it is not favored, a statute may nevertheless operate
retroactively provided it is expressly declared or is clearly the legislative
intent. /ut a tax law should not be given retroactive application when it would
be harsh and oppressive.
D)(*%#o(, a+/ &a+/a#o(, '(o)!)o+! of #a1 $a>!
D#re)or0 prov#s#o(s are those designed merely for the information or
direction of office or to secure methodical and systematic modes of
proceedings.
+$(*$or0 prov#s#o(s are those intended for the security of the citi6ens or
which are designed to ensure e@uality of taxation or certainty as to the nature
and amount of each personBs tax.
The omission to follow mandatory provisions renders invalid the act or
proceeding to which it relates while the omission to follow directory provisions
does not involve such conse@uence. >Ro'$s v. R$ffer04 /6 Ph#! K:=O
REQUISITES OF TAX REGULATIONS
4. reasonable
,. within the authority conferred
7. not contrary to law
8. must be published
47
EXCEPTIONS TO NON4RETROACTIVITY OF RULINGS
"evocation, modification of revenue of any rules and regulations promulgated
by the Sec. of 3inance or '(" shall not have retroactive effect if it will be prejudicial to
the taxpayer, except.
4. where the taxpayer deliberately misstates or omits material facts from his
return or in any document re@uired of him by the /("
,. where the facts subse@uently gathered by the /(" are materially different
from the facts on which the ruling is based
7. where the taxpayer acted in bad faith
AGENCIES INVOLVED IN TAX ADMINISTRATION
4. /("
,. /ureau of 'ustoms
7. 0rovincial, city, and municipal assessors and treasurers
POWERS AND DUTIES OF THE BIR
4. %ssessment and collection of all national internal revenue taxes, fees and
charges
,. Give effect to and administer the supervisory and police power conferred to it
by the Tax 'ode or other laws
7. Enforcement of all forfeitures, penalties and fines in connection therewith
8. Execution of judgments in all cases decided in its favor by the 'ourt of Tax
%ppeals and the ordinary courts
CLASSIFFICATION OF ASSESSMENTS
1. Se!fF$ssess&e( F one in which the tax is assessed by the taxpayer himself.
2. I!!e"$! $(* @o#* $ssess&e( F one wherein the tax assessor has no power to
act at all.
3. 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.
a. the amount ascertained exceeds that which is shown as the tax by the
taxpayer in his return
b. no amount of tax is shown in the return
c. the taxpayer did not file any return at all
4. Erro(eo%s $ssess&e( F one wherein the assessor has the power to assess
but errs in the exercise of the power.
PRINCIPLES GOVERNING TAX ASSESSMENTS
48
4. assessments are prima facie presumed correct and made in good faith
,. assessment should be based on actual facts
7. assessment is discretionary on the part of the 'ommissioner to assess taxes
may be delegated
8. assessments must be directed to the right party.
MEANS EMPLOYED IN THE ASSESSMENT OF TAXES
4. Examination of tax returns
,. 2se of the best evidence obtainable
7. (nventory ta<ing, surveillance and use of presumptive gross sales and receipts
8. Termination of taxable period
9. 0rescription of real property values
6. Examination of ban< deposits to determine the correct amount of the gross
estate
7. %ccreditation and registration of tax agents
Q. 0rescription of additional procedural or documentary re@uirements
GENERAL RULE:
(ncome tax returns are confidential
EXCEPTIONS:
4. when the inspection of the return is authori6ed upon written order of the
0resident of the 0hilippines
,. when inspection is authori6ed under 3inance "egulations no. 77 of the
Secretary of 3inance
3. when the production of the tax return is material evidence in a criminal case
wherein the Government is interested in the result
8. 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. in case a person fails to file a return or other document at the time prescribed
by law
,. he willfully or otherwise files a false or fraudulent return or other document
GROUNDS FOR TERMINATION OF TAXABLE PERIOD:
4. the taxpayer is retiring from business subject to tax
,. he intends to leave the 0hilippines or remove his property therefrom
7. he hides or conceals his property
8. 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:
49
4. for the purpose of determining the gross estate of a decedent
,. where a taxpayer offers to compromise his tax liability on the ground of
financial inability in which case he must submit a waiver.
INSPECTION AND EXAMINATION OF BOO9S AND RECORDS SHALL BE MADE
ONCE IN A TAXABLE YEAR,
EXCEPT:
4. in cases of fraud, irregularity, or mista<es
,. when taxpayer re@uests a reinvestigation
7. to verify compliance with withholding tax laws and regulations
8. to verify capital gains tax liabilities
9. upon order of the 'ommissioner
@A= SURCHARGE ON THE AMOUNT OF THE TAX DUE IS IMPOSED IN THE
FOLLOWING CASES.
4. failure to file any return re@uired under the provisions of the Tax 'ode or
regulations on the date prescribed
,. filing a return with an internal revenue officer other than those with whom the
return is re@uired to be filed
7. failure to pay the tax within the time prescribed for its payment
4. 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, 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, upon recommendation of the 'ommissioner of
(nternal "evenue, shall promulgate needful rules and regulations for the
effective enforcement of the provisions of the #("'.
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, including rulings on the classification
of articles for sales tax and similar purposes.
P)rpose o# r)les an% reg)lations
4. To properly enforce and execute the laws
,. To clarify and explain the law
50
7. 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. They must not be contrary to law and the 'onstitution.
,. They must be published in the fficial Ga6ette or a newspaper of general
circulation.
Co&&#ss#o(er v. Co%r of Appe$!s4 ,;L SCRA /7=
The authority of the $inister of 3inance, in conjunction with the 'ommissioner
of (nternal "evenue, to promulgate rules and regulations for the effective
enforcement of internal revenue rules cannot be converted. #either can it be
disputed that such rules and regulations, as well as administrative opinions
and rulings, ordinarily should deserve weight and respect by the courts. $uch
more fundamental than either of the above, however, is that all issuances
must not override, but must remain consistent with, the law they see< to
apply and implement. %dministrative rules and regulations are intended to
carry out, neither to supplant nor to modify, the law.
L$ S%ere v. Co%r of T$' App!e$!s4 5/; SCRA ,K
Ahen an administrative agency renders an opinion by means of a circular or
memorandum, it merely interprets existing law and no publication is therefore
necessary for its validity. 'onstruction by an executive branch of the
government of a particular law, although not binding upon courts, must be
given weight as the construction came from the branch of the government
which is called upon to implement the law.
2##e'tivit" o# reven)e r)les an% reg)lations
"evenue $emorandum 'ircular ,M;Q: was issued to govern the drafting,
issuance and implementation of revenue tax issuances including.
4. "evenue "egulationsG
,. "evenue and $emorandum rdersG and
7. "evenue $emorandum 'irculars and "evenue $emorandum rders.
Except when the law otherwise expressly provides, the aforesaid revenue tax
issuances shall not begin to be operative until after due notice thereof may be
fairly assumed.
1ue notice of said issuances may be fairly presumed only after the following
procedures have been ta<en.
4. 'opies of tax issuance have been sent through registered mail to the following
business and professional organi6ations.
a. 0hilippine (nstitute of 'ertified 0ublic %ccountantsGG
b. (ntegrated /ar of the 0hilippinesG
c. 0hilippine 'hamber of 'ommerce and (ndustryG
d. %merican 'hamber of 'ommerceG
e. 3ederation of 3ilipino;'hinese 'hamber of 'ommerceG and
51
f. Dapanese 'hamber of 'ommerce and (ndustry in the 0hilippines.
,. The /ureau of (nternal "evenue shall issue a press release covering the
highlights and features of the new tax issuance in any newspaper of general
circulation.
7. Effectivity date for enforcement of the new issuance shall ta<e place thirty
+7M- days from the date the issuance has been sent to the above;enumerated
organi6ations.
:;R r)lings
%dministrative rulings, <nown as /(" rulings, are the less general
interpretation of tax laws being issued from time to time by the 'ommissioner
of (nternal "evenue. They are usually rendered on re@uest of taxpayers to
clarify certain provisions of a tax law. These rulings may be revo<ed by the
Secretary of 3inance if the latter finds them not in accordance with the law.
The 'ommissioner may revo<e, repeal or abrogate the acts or previous rulings
of his predecessors in office because the construction of the statute by those
administering it is not binding on their successors if, thereafter, such
successors are satisfied that a different construction of the law should be
given.
"ulings in the forms of opinion are also given by the Secretary of Dustice who
is the chief legal officer of the Government.
EFFECTIVITY AND VALIDITY OF A TAX ORDINANCE
T%$Mo( v. Co%r of T$' App!e$!s4 ,5, SCRA 6/K
(f the resolution is to be considered as a tax ordinance, it must be shown to have
been enacted in accordance with the re@uirements of the &ocal Government
'ode. These would include the holding of a public hearing on the measure and its
subse@uent approval by the Secretary of 3inance, in addition to the usual
re@uisites for publication of ordinances in general.
BASIC POWERS OF THE BIR COMMISSIONER
4 CODE: 5E R A P6
4. Enforcement of forfeitures, fines, and penalties imposed in relation thereto,
including the enforcement execution of judgment rendered by the 'T% or S' in favor
of the /("
,. "ecommend needful rules and regulations to the Secretary of 3inance for the
effective implementation of the provisions of the #("' and special laws
52
7. %ssessment and collection of internal revenue taxes, fees and other taxes.
8. 0olice power, to administer or to give effect to the police power conferred upon it
by law.
CORROLARY POWERS OF THE BIR COMMISSIONER
CODE: 5S I E O T A A T 6
4. Summon persons on certain cases pending investigation
,. (n@uire into ban< deposits
; Except. Secrecy of ban< deposits law
> nly to determine the gross estate of decedent not to determine the income
7. Examine boo<s of the accounts of the taxpayer and other documents
8. btain information
9. Ta<e testimony of persons
:. %dminister oaths
=. %rrest persons who have violated the provisions of the tax code
> should have warrant of arrest
Q. Ta<e inventory

53