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Cruzate
1. Taxation refers to the act of a taxing authority actually levying tax. Taxation as a term
applies to all types of taxes, from income to gift to estate taxes. It is usually referred to as
an act; any revenue collected is usually called "taxes."
tax (from the Latin taxo; "rate") is a financial charge or other levy imposed upon a
taxpayer (an individual or legal entity) by a stateor the functional equivalent of a state
such that failure to pay, or evasion of or resistance to collection, is punishable by law.
Taxes are also imposed by many administrative divisions. Taxes consist
of direct or indirect taxes and may be paid in money or as its labour equivalent.
2. Nature of the Government Taxing Power
It is the power by which the sovereign raises revenue to settle the expenses of the
government. It is a way of apportioning the cost of government among those who in some
measure are privileged to enjoy its benefits and must bear its burden.
Nature of the Government taxing
i.
ability to shoulder the tax burden (usually measured in terms of the size of wealth or property
and income, gross or net) and, if warranted, on the basis of the benefits he receives from the
government. Taxation may be uniform but inequitable when the amount of tax imposed is
excessive or unreasonable. To insure and enhance the equity objective, the
Constitution enjoins Congress to evolve a progressive system of taxation. This mean
s that tax laws shall place emphasis on direct rather than indirect taxation, with ability to pay as
the principal criterion. On the basis of the foregoing discussions, it can safely be said that while
equal protection refers more to like treatment of persons in like circumstances, uniformity and
equity refers to the proper relative treatment for tax purposes of persons in unlike circumstances.
Absolute or perfect equality or uniformity and equity is, of course, hardly attainable, if not
impossible. No system has ever been devised which has produced perfect equality and
uniformity of taxation as between persons or corporations or different classes of property and
such a result cannot reasonably be expected. (FirstNat. Bank v. Holmes, 92 N.E. 893.)
Approximation to it is all that can be had.
iv.
Prohibition against impairment of obligation of contracts
The above proceeds from the constitutional provision that
No law impairing the obligation of contracts shall be passed. (Sec.
10, Art. III)The obligation of a contract is impaired when its terms or conditions are changed by
law or by a party without the consent of the other, thereby weakening the position or rights of the
latter. An exemption of impairment by law is when a tax exemption based on a contract is
revoked by a later taxing statute. Note that when the government is a party to the contract
granting exemption, it cannot be withdrawn without violating the non-impairment clause.
However, non-impairment may not be invoked in the case of a public utility franchise grantee;
the legislature can impair a
grantees franchise since a franchise is granted under the
Constitutional condition that it shall be subject to amendment, alteration or repeal by Congress
when the public interest so requires. (See Sec. 11, Art. XII)Thus in the case of PPI v. Chato, the
SC said that since the law granted the press a privilege, the law could take back the privilege
anytime without offense to the Constitution. The reason is simple: by granting exemptions, the
State does not forever waive the exercise of its sovereign prerogative. Indeed, in withdrawing the
exemption, the law merely subjects the press to the same tax burden to which other businesses
have long ago been subject. In Tolentino v. Sec. of Finance, CREBA, one of the petitioners,
alleged that the imposition of the VAT on sales and leases of real estate by virtue of contracts
entered into prior to the effectivity of the law would violate the non-impairment of contracts rule.
The Court ruled that it is not enough to say that the parties to a contract cannot, through the
exercise of prophetic discernment, fetter the exercise of the taxing power of the State. For not
only are existing laws read into contracts in order to fix obligations as between parties, but the
reservation of essential attributes of sovereign power is also read into contracts as a basic
postulate of the legal order. The policy of protecting contracts against impairment presupposes
the maintenance of a government which retains adequate authority to secure the peace and good
order of society.
v.
Prohibition against imprisonment for non-payment of poll tax
This principle is based on the provision of the Constitution
that No person shall be imprisoned for debt or non
-payment of a
poll tax. (Sec.
20, Art. III)A poll tax refers to a personal or capitation tax; it is a tax of a fixed amount on
individuals residing within a specified territory, whether citizen or not, without regard to their
property or occupation. Applying the said provision, no one may be sent to prison for failure to
pay the community tax. One should not be punished on account of his poverty. Under the LGC,
the only penalty for delinquency is the payment of a surcharge in the form of interest at the rate
of 24% per annum which shall be added to the unpaid amount, from the due date until it is paid.
vi.
And not only the bill which initiated the legislative process culminating in the enactment of the
law
To be exempt from tax or duty, the revenue, assets, property or donations must be used actually,
directly and exclusively for educational purposes. In the case of religious and charitable entities
and non-profit cemeteries, the exemption is limited to property tax. Congress is authorized to
grant similar exemption to proprietary (for profit) educational institutions subject to limitations
provided by law including restrictions on dividends and provisions for reinvestment. The
restrictions are designed to insure that the tax exemption benefits are used for educational
purposes. Lands, buildings, and improvements actually, directly, and exclusively used for
educational purposes are exempt from property tax whether the educational institution is
proprietary or non-profit. Canteens and bookstores inside schools are exempt from income tax as
long as it operates within the school and is primarily used by the school even if it caters to
outsiders.
xi.
Concurrence by a majority of all the members of Congress for the passage of a law
granting tax exemption
The requirement is obviously intended to prevent
indiscriminate grant of tax exemptions. The phrase a majority of allthe members of the
Congress means at least one-half plus one of all the members thereof voting separately. Such
rule also applies to a law authorizing refund of a tax already collected.
xii.
Power of the President to veto any particular item or items in a revenue or tariff bill
As a general rule, under the Constitution, the President may not veto a bill in part and approve it
in part. The exception lies in the case of revenue or tariff bills whereby the vetoed items shall
simply be not given effect.
xiii. Non-impairment of the jurisdiction of the Supreme Court in tax cases
The Constitution prohibits Congress from taking away the jurisdiction of the SC as the final
arbiter of tax cases.
As to police power, however, while no direct benefits are received, a healthy economic
standard of society known as
damnum absque injuria is attained.
As to Non-Impairment of Contracts. In taxation, the non-impairment of contracts rule subsist.
In the exercise of police power, however, this limitation does not apply.
As to Transfer of Property Rights. In taxation, taxes paid become part of the public funds; in
police power, no transfer, but only restraint on the exercise, of property rights exists