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1. Taxation v. Tax Taxation is the act of levying the tax.

It is the process or means by which the sovereign, through its law-making body, raises income to defray the necessary expenses of the government. It is merely a way of apportioning the cost of government among those who in some measure are privileged to enjoy its benefits and therefore, must bear its burdens.

Taxes are the enforced proportional and pecuniary contributions from persons and properties levied by the law-making body of the state having jurisdiction over the subject of the burden for the support of the government and all public needs.

2. Nature of Taxation v. Nature of Internal Revenue Tax Taxation is inherent in sovereignty. The power of taxation is inherent in sovereignty as an incident or attribute thereof, being essential to the existence of every government. It exists apart from the Constitution and without being expressly conferred by the people. Hence, it can be exercised by the government even if the Constitution is entirely silent on the subject.

Taxation is legislative in character. The power to tax is peculiarly and exclusively legislative and cannot be exercised by the executive or judicial branch of the government. Hence, only the Congress, our national legislative body, can impose taxes.

Taxation is subject to constitutional or inherent limitations. The power of taxation is not absolute. It is subject to certain limitations or restrictions. Most of these limitations are specifically provided for in our Constitution or implied therefrom, while the rest are inherent and they are those which spring from the nature of the taxing power itself although they may or may not be provided in the Constitution.

IRL are not political in nature. They are deemed to be the laws of the occupied territory and not of the occupying enemy.

IRL are civil and not penal in nature although there are penalties provided for their violation. The purpose of tax laws in imposing penalties for delinquencies is to compel the timely payment of taxes or to punish evasion or neglect of duty in respect thereof.

3. Power of Taxation exercised by the Pres. v. Power of Taxation exercised by the Congress The delegation to the President is only for the purposes of practicality and expediency. Our Constitution expressly allows Congress to authorize the President to fix within specified limits, subject to such limitations and restrictions as it may impose, tariff

rates, import or export quotas, tonnage and wharfage dues and other duties or imposts.

The power of taxation being purely legislative, Congress cannot delegate the powers to others. This limitation arises from the doctrine of separation of powers among the three branches of our government. Hence, it is also a limitation contained in the Constitution although not expressly provided therein.

4. Purposes of Revenue v. Purposes of Non-Revenue The primary purpose of taxation on the part of the government is to provide funds or property with which to promote the general welfare and protection of its citizens. Taxation includes every imposition of charge or burden by the sovereign power upon persons, property, or property rights for the use and support of the government and to enable it to discharge its appropriate functions.

However, taxation is also often employed as a device for regulation by means of which certain effects or conditions envisioned by governments may be achieved.

5. Direct Taxation v. Indirect Taxation Direct taxation is where a tax cannot be shifted because it is purely personal. When the tax cannot be shifted, the initial taxpayer is also the tax bearer so that the impact of the tax is at once followed by the incidence without any intermediate process of shifting. In other words, where shifting has not occurred, the tax is absorbed by the statutory taxpayer.

Indirect taxation 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 another or someone else. So, the person on whom the tax is imposed might not be the person who actually shoulders the burden of the tax. However, it should be borne in mind that in indirect taxation, what is transferred is not the payment of the tax but the burden of the tax.

6. Progressive Tax v. Progressive System of Taxation Progressive tax also known as graduated tax is where the rate of tax increases as the tax base or bracket increases. Examples are income tax, estate tax and donors tax.

Progressive system of taxation means that tax laws shall place emphasis on direct rather than indirect taxation with ability-to-pay as the principal criterion.

7. Regressive Tax v. Regressive System of Taxation

Regressive tax is tax the rate of which decreases as the tax base or bracket increase such that the tax rate and the tax base move in opposite directions. We have no regressive taxes.

In a society where the majority of the people have low incomes, this system exists when there are more indirect taxes imposed than direct taxes. Since the low-income sector of the population as a whole buys more consumption goods on which the indirect taxes are collected, the burden of indirect taxes rests more on them than on the more affluent groups.

8. Toll v. Tax Toll has been defined as a sum of money for the use of something, generally applied to the consideration which is paid for the use of a road, bridge or the like, of a public nature.

A toll is a demand of proprietorship, while a tax is a demand of sovereignty. A toll is paid for the use of anothers property, while tax is paid for the support of the government. The amount of toll depends upon the cost of construction or maintenance of the public improvement used, while there is generally no limit on the amount of tax that may be imposed. A toll may be imposed by the government or private individuals or entities, while a tax may be imposed only by the government.

9. License or Permit Fee v. Tax License or permit fee is a charge imposed under the police power for the purposes of regulation. It is in the nature of a special privilege, of permission or authority to do what is within its terms. It makes lawful an act which would otherwise be unlawful.

License fee is the legal compensation or reward of an officer for specific services, while tax is an enforced contribution assessed by sovereign authority to defray public expenses. It is imposed for regulation, while tax is levied for revenue. It involves the exercise of police power, while tax involves the exercise of taxing power. Its amount should be limited to the necessary expenses of inspection and regulation, while generally no limit on the amount of tax may be imposed. It is imposed on the right to exercise a privilege, while a tax is imposed also on persons and property.

Failure to pay license fee makes the act or business illegal, while failure to pay a tax does not necessarily make the act or business illegal.

10.Debt v. Tax A debt is generally based on a contract, express or implied, while a tax is based on law. A debt is assignable, while a tax cannot generally be assigned. A debt may be paid in kind, while a tax is generally payable in money. A debt may be the subject of set-off or compensation, while a tax is generally not. A person cannot be imprisoned for non-payment of debt, while imprisonment is a sanction for non-payment of tax. A debt is governed by the ordinary periods of prescription, while a tax is governed by the special prescriptive periods provided for in the Tax Code. A debt draws interest when it is so stipulated or when there is default, while a tax does not draw interest except only when delinquent.

11.Similarities of Powers a. They all rest upon necessity because there can be no effective government without them; b. They all underlie and exist independently of the Constitution although the conditions for their exercise may be prescribed by the Constitution and by law; c. They are ways by which the state interferes with private rights and property; d. They are legislative in nature and character, although the actual exercise of the powers is given to the executive authorities, national and local; and e. They all presuppose an equivalent compensation received, directly or indirectly, by the persons affected by the exercise of these powers by the government.

12.Distinctions of Powers As to purpose: a. In taxation, the property is taken for the support of the government; b. In eminent domain, the property is taken for public use of benefit; hence, compensated; and c. In police power, the use of property is regulated for the purpose of promoting the general welfare; hence, it is not compensable. As to amount of imposition: a. In taxation, there is generally no limit on the amount of tax to be imposed;

b. In eminent domain, there is no amount imposed but rather the owner is paid the market value of the property taken; and c. In police power, the amount imposed should not be more than sufficient to cover the cost of the license and the necessary expenses of police surveillance and inspection, examination, or regulation as nearly as the same can be estimated. As to benefits received: a. In taxation, it is assumed that the person affected receives the equivalent of the tax in the form of protection and benefits he receives from the government as such; b. In eminent domain, the person affected receives the market value of the property taken from him; and c. In police power, the person affected receives no direct and immediate benefit but only such as may arise from the maintenance of a healthy economic standard of society and is often referred to as damage without injury.

13.Grounds for Tax Exemption a. Tax exemption may be based on contract in which case the public represented by the government is supposed to receive a full equivalent therefor. Ordinarily, the provisions of a contract of exemption from taxation are contained in the charter of the corporation to which the exemption is granted. b. It may be passed on some ground of public policy such as to encourage new and necessary industries, or to foster charitable and other benevolent institutions, etc. c. It may be created in a treaty on grounds of reciprocity or to lessen the rigors of international double or multiple taxations which occur where there are many taxing jurisdictions, as in the taxation of income and intangible personal property.

14.Tax Amnesty v. Tax Condonation Tax amnesty is a general pardon or intentional overlooking by the State of its authority to impose penalties on persons otherwise guilty of tax evasion or violation of a revenue or tax law. It partakes of an absolute forgiveness or waiver by the government of its right to collect what is due it and to give tax evaders who wish to relent a chance to start with a clean slate. As it is much like a tax exemption, it is never favored nor presumed in law. If granted by statute, the terms of the amnesty must be construed strictly against the taxpayer and liberally in favor of the government.

Tax condonation only relieves the civil liability of the tax offender but not the criminal liability unlike in tax amnesty where there is absolute forgiveness. 15.Direct Double Taxation v. Indirect Double Taxation In its strict sense, it means (a) taxing twice; (b) by the same taxing authority; (c) within the same jurisdiction or taxing district; (d) for the same purpose; (e) in the same taxable year; and (f) for some of the property in the territory.

In its broad sense, it is taxation other than DDT. It extends to all cases in which there is a burden of two or more pecuniary impositions.

16.Sources of Tax Laws a. Legislation or statutes, including PD, EO and tax ordinances; b. Administrative rules and regulations and rulings or opinions of tax officials particularly the Commissioner of Internal Revenue, including opinions of the Secretary of Justice; c. Judicial decisions; and d. Tax treaties or agreements entered into by the Philippines with other countries.

17.Mandatory Provision v. Directory Provision Mandatory provisions are those that are intended for the security of the citizens or which are designed to insure equality of taxation or certainty as to the nature and amount of each persons tax.

Directory provisions are those that are designed merely for the information or direction of officers or to secure methodical and systematic modes of proceedings.

The distinction is important because 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 consequence.

18.Requisites of validity and effectivity of regulations a. They must not be contrary to law and the Constitution; and b. They must be published in the Official Gazette.

19.Non-retroactivity of repeal of regulations or rulings. Any revocation, modification, or reversal of any of the rules and regulations or any of the rulings or circulars promulgated by the CIR cannot be given retroactive application when such revocation, modification or reversal will be prejudicial to the taxpayer.

It shall be retroactive in the following cases: a. where the taxpayer deliberately misstates or omits material facts from his return or in any document required of him by the BIR;

c. Where the fact subsequently gathered by the BIR are materially different from the facts on which the ruling is based; and d. Where the taxpayer acted in bad faith.