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THE AWESOME NOTES

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TAXATION

I. GENERAL PRINCIPLES

A. DEFINITION AND CONCEPT G E N E R A L LY N O T D E L E G AT E D T O



TAXATION; defined
EXECUTIVE OR JUDICIAL DEPARTMENT
as the power to tax is purely legislative, and its
is the power by which delegation may result in the infringement of the
the sovereign raises revenue
to defray the expenses of the
theory of separation of power.

H O W E V E R : I N S TA N C E S W H E N

ALSO:
govt.
DELEGATION IS ALLOWED
1. to local governments, in respect of matters
of local concerns (but cannot exceed than
• is a way of apportioning the cost of what was delegated to them)
government among those who in some
measure are privileged to enjoy its benefits 2. when allowed by the constitution.
and must bear its burden. (ie. President may fix, within the limits and
subject to such limitations and restrictions
• as a destructive power which interferes with as it may impose, tariff rates, import and
the personal and property rights of the
people and takes from them a portion of export quotas, tonnage and wharfage
their property for the support of the govt dues, and other duties or imposts within
the framework of the national development
(PRDC vs CA)
program of he Govt.)
3. when the delegation relates merely to
B. NATURE OF TAXATION administrative implementation that may
1. attribute of sovereignty call for some degree of discretionary
2. a legislative in character power, under a set of sufficient standards
generally not delegated to executive or
3.

4.
judicial department
subject to constitutional and inherent
expressed by law.

NOTE: the Congress has no power to revoke

limitations

AS ATTRIBUTE OF SOVEREIGNTY
the power of LGU to impose tax ---
• as Congress cannot abolish what is
expressly granted by the fundamental law
being an essential and inherent attribute of • furthermore, their only authority is to provide
sovereignty, belonging as a matter right to the guidelines and limitations on the local
every independent government, without being


expressly conferred by the people. government's exercise of the power to tax.

SUBJECT TO CONSTITUTIONAL AND


LIFEBLOOD THEORY INHERENT LIMITATIONS
no sovereign stat can continue to while taxation is considered to be the strongest
exist without the means to pay its of all the power of the government, being
expenses, and for those means,it unlimited, plenary, and comprehensive and
has the right to compel all citizens
and property within the limits to
supreme, but it is subject to limitations

contribute.

AS A LEGISLATIVE CHARACTER
NOTE: LEVY; defined
- is an exercise of the to tax, which is

as only the legislative has the power to


1. determine the

exclusively legislative in nature and character.

HENCE; it cannot be said that the


• nature (kind)
• object (purpose)
• extent (amount or rate)
executive may levy taxes.

• coverage (subjects and objects)


• apportionment of tax (general or limited
application)
• situs of imposition; and
• method of collection
2. grant tax exemptions or condonations; and
3. specify or provide for he administrative as
well as judicial remedies that either the
government or the taxpayer may avail
themselves in the proper implementation of the
tax measure.

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TAXATION

C. CHARACTERISTICS OF
ADMINISTRATIVE FEASIBILITY; means
TAXATION

CHARACTERISTICS
that tax laws, rules and regulations must be
capable of being administered and complied
with.
1. pecuniary in nature Citizenry must easily understand its
2. enforced charges and contribution application for its compliance.
3. imposed on persons and property within AS: No matter how willing and
the territorial jurisdiction of a state able a taxpayer in complying
4. assessed according to a reasonable rule the mandates of a tax law if he
could not comprehend, he
of apportionment
could not fully comply the
same without lapses.
- Notably, each error in
D. POWER OF TAXATION AS compliance is penalized and
DISTINGUISHED FROM good faith is not always a
EMINENT DOMAIN AND POLICE
POWER
good defense.


see: Mamalateo's Book Reviewer on Taxation
THEORETICAL JUSTICE; means
Taxes imposed should be capable of being
paid by the taxpayers;
otherwise, its imposition would not

pg. 11-12
serve the purpose because no matter
how willing they are to pay, they are
E. PURPOSE OF TAXATION

REVENUE RAISING
not capable of doing so.

to promote the general welfare and protection


of its citizens. see also; Lifeblood Theory


NON-REVENUE / REGULATORY

• REGULATORY
ie. requiring licenses for which license fees
may have to be paid, congruent with the
exercise of police power, which is
necessary for the regulation and
surveillance of useful occupations, or


discourage non-useful occupation

• REDUCTION OF SOCIAL INEQUALITY


ff the progressive system of taxation, which
prevents the undue concentration of wealth


in the hands of a few individuals.

• ENCOURAGE ECONOMIC GROWTH BY


GRANTING TAX EXEMPTIONS AND
INCENTIVES

• PROTECTIONISM
to protect local industries from foreign


competition

F. PRINCIPLE OF SOUND TAX


SYSTEM

FISCAL ADEQUACY; means
that government revenues from taxation must
suffice to meet fiscal requirements.
This implies that a good tax system of
a State will not results to budget
deficit.

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TAXATION

G. THEORY AND BASIS OF H. DOCTRINES IN TAXATION


TAXATION

LIFEBLOOD THEORY
PROSPECTIVITY OF TAX LAWS

without taxes, the government would be


paralyzed for lack of motive power to activate
ONLY AS A GENERAL RULE

and operate it.


Hence, despite the natural reluctance
EXE: when the tax law provides for retroactivity

PROVIDED FURTHER:
to surrender part of one's earnest
income to taxing authorities, every that for retroactive application of a tax
person who is able must contribute his law to be valid
- it must not be so harsh and
share in running of the government.
oppressive in its application in order to
B E N E F I T- P R O T E C T I O N T H E O RY
(SYMBIOTIC RELATIONSHIP)
invalidate the law.

ie. favorable naman sa taxpayer yung


every person who is able to must contribute his
share in the running of the government.
the government, for its part, is
retroactive application.

ie, reversal of previous decision


expected to respond in the form of
tangible and intangible benefits declaring that a taxpayer is exempt
intended to improve the lives of the from paying a certain kind of tax, will
people and enhance their moral and not make him liable for the unpaid
taxes. otherwise, prejudicial to the rule
material values.

NECESSARY THEORY
of non-retroactivity of ruling which is
would result to grave injustice to the
the existence of government is a necessity; taxpayer who relied on the previous
it cannot exist nor endure without the
means to pay its expenses; decision.

and for those means, the government


has the right to compel all its citizens
and property within the limits

- to contribute in the form of taxes

JURISDICTION OVER SUBJECTS AND



IMPRESCRIPTIBILITY


OBECTS



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TAXATION


DOUBLE TAXATION

ESCAPE FROM TAXATION

IN STRICT SENSE
DIRECT DUPLICATION TAXATION
PROHIBITED

SHIFTING OF TAX BURDEN

WAYS OF SHIFTING TAX BURDEN


the ff elements must be present: by shifting the burden to someone else, not
1. the same property must be taxed
twice when it should be taxed only
as a tax, but as part of the purchase price

once
2. both taxes imposed on the same
property or subject matter

BUT: this only applies to INDIRECT TAX

FOR DIRECT TAX; it cannot be shifted to


3. for the same purpose person, other than the very person who, as
4. by the same taxing authority
5. within the same jurisdiction or
taxing district

intended, should paY the tax.

TA X E S T H AT C A N B E S H I F T E D
6. during the same taxing period; and (INDIRECT TAX)
7. m u s t b e t h e s a m e k i n d o r 1. value added tax

character of tax. 2. excise tax


3. other percentage tax; and
IN BROAD SENSE
INDIRECT DUPLICATE TAXATION
double taxation here means as an

4. documentary stamp tax

MEANING OF IMPACT AND INCIDENCE


indirect duplication of taxation.


- not prohibited
OF TAXATION

IMPACT OF TAXATION
INSTANCES - point in which tax is originally imposed or
• one is in the exercise of police the one on whom the tax is formally
power (regulatory) and the other is
imposed as tax (revenue raising).
[ie. the former is exacted as license

assessed

INCIDENCE OF TAXATION
fee and the other as tax n the - point on which tax is originally imposed or
proceeds of the sale]
• state merely imposes tax on every
the one on whom tax is formally assessed.

separate and distinct business in


which a party is engaged in.
• an article is taxed by two distinct

PLUS:

TRANSFORMATION

states.

NOTE: double taxation is not a valid


- for manufacturers or producers, upon
whom tax are imposed, fearing the loss of
his market if he should add to the price,
defense against the legality of a tax pays the tax and endeavor to recoup
measure himself by improving his process of
AS: double taxation is not entirely prohibited, production, thereby producing his units at a
only when it results to direct duplication of the


tax.
lower cost.

CAPITALIZATION
CONSTITUTIONALITY OF DOUBLE the reduction in the price of the taxed object
TAXATION equal to the capitalized value of future
- see: Villanueva vs. City of Iloilo, Dec. taxes which the purchaser expects to be


28, 1968

THE USUAL METHODS OF



called upon to pay.

KINDS OF SHIFTING TAX BURDER


AVOIDING THE OCCURRENCE OF • FORWARD SHIFTING; when the burden
DOUBLE TAXATION of the tax is transferred from a factor if
1. allowing reciprocal exemption production through the factors of
either by law or by treaty distribution until it finally settles on the
2. allowance of tax credit for foreign ultimate purchaser or consumer
taxes paid • BACKWARD SHIFTING; when the burden
3. allowance of deduction for foreign is transferred from the consumer through
taxes paid the factors of distribution to the factors of
4. reduction of the Philippine tax rule
 production
• ONWARD SHIFTING; when the tax is
shifted 2 or more times wither forward or
backward

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TAXATION

TAX EVASION TAX AVOIDANCE


tax minimization

EXEMPTION FROM TAXATION

MEANING
is a grant of immunity, express or implied,
is a scheme used a tax saving to a particular persons or corporations or to
outside of those device within the persons or corporations of a particular
lawful means to means sanctioned class,
- from a tax upon property or an
escape tax liability
and, when availed
of, it usually

by law

PROVIDED
exercise
which persons and corporations
subjects the this should be generally within the same district are
taxpayer to further
or additional civil
used by the
taxpayer in GF
obliged to pay

and criminal
liabilities
and in arms lenght

NATURE

• STRICTLY CONSTRUED AGAINST THE


results in the minimization of TAXPAYER
absence of tax - AS: the law does not look with favor on
payment of tax tax exemptions, they being contrary to

the lifeblood theory which is the


underlying basis for taxes.


TAX EVASION vs. TAX AVOIDANCE

3 FACTORS OF TAX EVASION


- furthermore: being a derogation of the
sovereignty of the state, its
relinquishment is never presumed
1. the end to be achieved (payment - see also: lifeblood theory
of tax less than what is legally due
from him)
2. an accompanying state of mind
- strictissimi juris

which is described as being evil, in • EXEMPTION GRANTED IS PERSONAL


bf, willful, or deliberate, not merely IN NATURE AND COVERS ONLY TAXES
accidental; and FOR WHICH THE TAXPAYER-GRANTEE
3. the course of action or failure of IS DIRECTLY LIABLE


action which is unlawful. - hence; a sale to a tax exempt corp by
another corp who is not tax exempt,
IE OF VALID TAX AVOIDANCE
• donation of property to a non-stock,
cannot avail of such exemption.

non-profit educational institution


(Art. XIV, Sec. 4(3) of the Consti and
Sec. 3(b) of the NIRC)

KINDS OF TAX EXEMPTION

• EXPRESS

• deductions

PROOF OF TAX EVASION


expressly granted by organic or statute
law

• failure to declare for taxation • IMPLIED


purposes true and actual income whenever particular persons, properties
derived from business or excises are deemed exempt as they
• substantial under-declaration of fall outside the scope of the taxing
income in the tax returns of the
taxpayer for 4 consecutive years
coupled with intentional

provision itself.

• CONTRACTUAL

understatement. tax exemption in consideration of a


contractual agreement with the

government

RATION/GROUND
1. statue granting exemption provides for
liberal interpretation
2. by clear legislative intent
3. special taxes relating to special cases
and affecting only special classes of
person
4. exemptions refer to public property, or
to government,its political subdivisions
or instrumentalities

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TAXATION

5. exemptions granted to religious,


charitable and educational institutions
COMPENSATION AND SET-OFF


or their property

REVOCATION OF TAX EXEMPTION


GEN RULE: taxes cannot be the subject of set-


off or compensation.

- ff that taxation is the rule and exemption RATION:


is an exception, the exemption may thus 1. taxes are of distinct kind, essence and
be withdrawn at the pleasure of the taxing nature, and these impositions cannot

authority. be classed in merely the same


category as ordinary obligations


LIMITATIONS ON REVOCATION

• NON-IMPAIRMENT CLAUSE; when


2. the applicable laws and principles
governing each are peculiar, not
necessarily common to each; and
exemption is given based on material 3. public policy is better served, if the
consideration of a mutual nature, it is integrity and independence of taxes
then becomes contractual and is
covered by non-impairment clause of the
constitution

are maintained.

GIST:
• ADHERENCE TO FORM; if tax the liability to pay taxes are not in the
exemption is granted by the constitution, nature of contracts between the parties,
its revocation can be affected only but grow out of duty to, and are the
though amendment of the Constitution. positive acts of the government to the
• If tax exemption is granted by special making and enforcing of which, the
law, it can be revoked only by general personal consent of of the individual
law if expressly so provided,or with
manifest intent to repeal or alter the
special law, and not merely by its broad
taxpayer is not required.

EXE: set-off and compensation of taxes is

application/interpretation.

NOTE: tax refunds are in the same nature


allowed when:
- if the obligation to pay taxes and the
taxpayer's claim against the government are


as tax exemption


both overdue, demandable, as well as fully
liquidated.
Compensation here takes place by


operation of law, and both obligations are
extinguished to their contractual amount.

N O T E : D O C T R I N E O F E Q U I TA B L E
RECOUPEMENT
- where the refund of a tax illegally or
erroneously collected or overpaid by a
taxpayer is barred by prescription,
a tax presently being assessed against a
taxpayer may be recouped or set-off
against the tax whose refund is not barred


by prescription.

DOES NOT APPLY IN PHIL


- only in common law countries

RATION: as both the taxpayer and


the collecting agency might be
tempted to delay and neglect the
pursuit of their respective claims


within the period prescribed by law.

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TAXATION

COMPROMISE
the commissioner may compromise the
payment of any IR tax under 2 instances:

TAX RULES AND REGULATIONS

GEN RULE
1. when a reasonable doubt as to the validity • cannot be extended by implication
of the claim against the taxpayer exists; or • prevail over general laws
2. when financial position of the taxpayer • to receive a reasonable construction with
demonstrates a clear inability to pay the a view to carrying out their purpose and


assessed tax
intent


TAX AMNESTY

DEFINED
note: the construction of statute by a
predecessors is not binding on the
general or intentional overlooking by the successors
State of its authority to impose penalties - dito, yung previous construction ng ie.
on persons otherwise guilty of evasion or Dept. of Finance, is not binding to the
violation of the revenue or tax laws. successor of the office, as such is merely
- partake absolute forgiveness or waiver of


the government of its right to collect.
an act of administration....

D I S T I N G U I S H E D F R O M TA X


EXEMPTION PENAL PROVISION OF TAX LAWS

FIRST; SIMILARITIES
• never favored nor presumed


• construed strictly against the taxpayer
DISTINCTION; in tax amnesty
- the government is not estopped from

NON-RETROACTIVE APPLICATION TO
questioning the tax liability even if TAXPAYER
amnesty tax payments were already


received.
tax laws are prospective in application

EXE
note: actually, para syang hindi distinction, 1. expressly declared; or


hanap hanap nlng later.

CONSTRUCTION AND INTERPRETATION



2. clearly the legislative intent

NOTE: in tax rulings, it shall not be given


OF retroactive effect if the modification or


reversal is prejudicial to the taxpayer.
TAX LAWS

GEN RULE:
EXE TO EXE: WHEN
R E T R O A C T I V I T Y O F TA X
in case of doubt, construed most strongly RULING BE GIVEN EFFECT
against the government and in favor of EVEN IF PREJUDICIAL TO THE


the subjects or citizens.

RATION: burdens are not to be


TAXPAYER
1. when taxpayer deliberately
misstates or omits material
imposed, nor presumed to be facts from his return or any
imposed beyond what the statutes document required of him by


expressly and clearly import. the BIR
2. where the facts subsequently


EXE: when no doubt gathered by the BIR are
materially different from the
facts in which the ruling is

GEN RULE:

TAX EXEMPTION AND EXCLUSION based; or
3. where the tax payer acted in
bf

strongly against taxpayer, as it is a form
of derogation of sovereignty of the state


and inconsistent with the lifeblood theory.

EXE:


see discussions made on tax exemptions

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TAXATION

I. SCOPE AND LIMITATIONS OF


TAXATION

INTERNATIONAL COMITY


INHERENT LIMITATIONS
BASIS: ART. II SEC 2 CONSTI
the Philippines adopts the generally accepted
principles of international law as part of the law
1. the levy must be for public purpose
2. inherently legislative
3. territoriality

of the land.

COMITY; defined
4. international comity the respect accorded by nations to each other
5. exemption of Govt entities, agencies and

instrumentalities
because they are sovereign equals

in par paren non habet imperium


PUBLIC PURPOSE
the right of taxation can only be used in aid of
a public object, an object which is within the

- as between equals, there is no sovereign

FF INTERNATIONAL COMITY, NO LAW


MAY BE PASSED IMPOSING TAX ON

purpose for which government is established.
1. income of foreign ambassadors
IT CANNOT BE EXERCISED
in aid of enterprises strictly private, for
the benefit of individual, though in a
2. real property tax on foreign embassies

remote or collateral way, the public may EXEMPTION FROM TAXATION OF GOVT


be benefited thereby.

NOTE:

ENTITIES

WOULD DEPEND AS TO WHO EXERCISES


INCIDENTAL ADVANTAGE
- kasi naalala ko kay Ortega, kung di ako
nag kakamali, justifies the requirement of

THE TAXING POWER

• IF EXERCISE BY A LGU;
- cannot tax the national government, its

public purpose requirement.
agencies and instrumentalities
TESTS TO DETERMINE PUBLIC


PURPOSE
- expressly prohibited by RA 7160

EXE: may fix for the operation of


• DUTY TEST; whether the thing to be public utilities owned, operated and
furthered by the appropriation of public maintained by the LGU within their
revenue is something which is the duty
of the State as a government to provide
jurisdiction

• IF EXERCISE BY THE NATIONAL GOVT


• PROMOTION OF GENERAL
W E L FA R E T E S T; w h e t h e r t h e - pursuant to NIRC; may levy taxes upon
proceeds of the tax will directly promote
the welfare of ye community in equal
GOCC, agencies and instrumentalities.

EXE: cannot tax


measure.

NON-DELIGABILITY OF THE LEGISLATIVE


• income derived by the
government from the exercise of
POWER TO TAX public utility and those in
~ see discussion on the Legislative Character exercise of essential govt


of Taxation. pg. 1
functions

. cannot tax the municipality of


DELEGATA POTESTAS NON POTEST
pateros for donor's tax on the value
DELEGARI

GEN RULE:

of the land it subsequently donated.

WOULD ALSO DEPEND ON THE NATURE


a delegated power cannot be further OR FUNCTION OF THE GOVT BODY BEING
delegated
- since the power of taxation is a power
that is exercised by congress as delegates

TAXED

• GOVERNMENTAL FUNCTIONS; exempt


of the people, then as a general rule, the
Congress cannot re-delegate this from tax, unless expressly taxed


delegated power.

EXE: see discussion already made in pg.


• PROPRIETARY FUNCTIONS; subject to
tax unless expressly exempted.
ff are expressly exempted: GSIS, SSS,

1 PHIC, PCSO, and for property tax; MIAA
& PFDA (Phil Fishiries Dev Authority)


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TAXATION


TERRITORIALITY - movable follows the person,
the situs is the domicile of the
MEANING
the taxing authority cannot impose taxes on
subjects beyond its territorial jurisdiction.

taxpayer

EXE:
- what the taxing authority may do is to • when the property has


determine the tax situs

PLACE OF TAXATION
acquired a business situs
in another jurisdiction
• when the law provides for
it is the place or authority that has the right to the situs of the subject if
impose and collect taxes
tax


SITUS OF INCOME TAX

SITUS OF EXCISE TAX

FACTORS TO CONSIDER
1. kinds or classification of the tax being
levied

• ESTATE TAX AND DONOR's TAX

RESIDENTS- the state where


2. situs of the thing or property being taxed the transferor is a citizen or a
3. citizenship of the taxpayer
4. residence of the taxpayer
5. source of the income taxed

resident

NR- where the property is


6. situs of the excise, privilege, business or

occupation being taxed


located

WHEN SITUS DOES NOT APPLY


SITUS OF BUSINESS TAX

1. where tax laws operate outside territorial


jurisdiction (RC and DC, taxable for income
• SALE OF REAL PROPERTY

within and without)


2. when the tax laws do not operate within the
• SALE OF PERSONAL PROPERTY

territorial jurisdiction of the state


• when exempted by treaty obligation
• VAT


• when exempted by international comity.

• SOURCES WITHIN THE


INTERNATIONAL COMITY
ART. II SEC. 2
the Philippines adopts the generally-accepted


PHILIPPINES principle of international law as part of the law


of the land.

• SOURCES WITHOUT THE COMITY; defined


PHILIPPINES the respect accorded by nations to each other


because they are sovereign equals

• INCOME PARTLY WITHIN AND HENCE; by virtue of this, not taxable


PARTLY WITHOUT - income of foreign ambassadors
-imposing real property tax upon foreign


SITUS OF PROPERTY TAX
embassies

BASIS:
• REAL PROPERTY In par parem non habet imperium
lex rei sitae/ lex situs - between equals, there us no sovereign.


- where the property is located

- Doctrine of Sovereign Equality


• PERSONAL PROPERTY

TA N G I B L E P E R S O N A L
also; the concept that when a foreign
sovereign enters the territorial jurisdiction of
another, it does it subject itself to the
PROPERTY
- where the property is
physically located although the

jurisdiction of the other

EXEMPTION OF GOVERNMENT ENTITIES


owner resides in another ~ see discussion on exemption pg.



jurisdiction

INTANGIBLE PERSONAL
PROPERTY
mobila sequuntur personam

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TAXATION


CONSTITUTIONAL LIMITATIONS

PROVISIONS INDIRECTLY AFFECTING


REQUISITES FOR VALID CLASSIFICATION
1. there must be a substantial distinction
2. these must be germane to the purpose of


TAXATION

1. DUE PROCESS CLAUSE


the law
3. the distinction or classification must not
only be applicable to present but also to
No person shall be deprived of life, liberty, or future conditions; and
property without due process of law, xxx 4. the distinction must apply to any persons,


ART. III SEC. 1

• enforced contribution from the people cannot


things, and transactions belonging in the
same class.

be made without a law authorizing the same, 3. FREEDOM OF RELIGION


enacted by a legitimate government No law shall be made respecting an
• SUBSTANTIAL DUE PROCESS; tax statute establishment of religion, or prohibiting the free
must be within the constitutional authority of exercise thereof. The free exercise and
Congress and that it must be fair, just and enjoyment of religious profession and worship,
reasonable (ie. concurrence of majority of all without discrimination or preference, shall
of the members of the Congress in granting forever be allowed. No religious test shall be
tax exemption) required for the exercise of civil or political
• PROCEDURAL DUE PROCESS; requires rights.
that notice and hearing, or at least an
opportunity to to be hear, [a.] before a
delinquent taxpayer can be validly

ART. III SEC. 5 CONSTI

2 ASPECTS OF SEC. 5
prosecuted, [b.] during the assessment until 1. non-establishment clause
a compromise in extra-judicial settlement of 2. the free-exercise clause (this is the basis
the taxpayer's criminal violation is reached, for granting tax exemption to religious
[c.] notified as to the process of distraint and
granishment, even when compromise is not
allowed as when the case is already filed in
institutions)

Hence: by virtue of this, no tax imposable on


court or involves fraud, [d.] during public sale of Bibles
auction, which the delinquent taxpayer must - as in doing so, would result in the impairment
be allowed to bid, [e] for Sanggunians, to of religious freedom as well as right of
conduct public hearing prior to the enactment
of tax ordinance and revenue measures
(unlike Natl Govt., which is only discretionary

dissemination of faith.

4. NON-IMPAIRMENT OF CONTRACTS

upon them) No law impairing the obligation of contracts


shall be passed.
2. EQUAL PROTECTION CLAUSE
No person xxx be denied the equal protection
of the laws.

ART. III SEC. 10 CONSTI

No franchise, certificate, or any other form of


ART. III SEC. 1 CONSTI

ESSENCE
authorization for the operation of a public utility
shall be granted except to citizens of the
Philippines or to corporations or associations
taxpayers of the same footing should be organized under the laws of the Philippines at
treated alike, both as to privileges conferred as least sixty per centum of whose capital is


well as on obligations imposed

EXE:
owned by such citizens, nor shall such
franchise, certificate, or authorization be
exclusive in character or for a longer period
when there are substantial distinctions than fifty years. Neither shall any such
among the taxpayers, difference in franchise or right be granted except under the


treatment is allowed.

W AY S I N V I O L AT I N G T H E E Q U A L
condition that it shall be subject to amendment,
alteration, or repeal by the Congress when the
common good so requires. xxx
PROTECTION CLAUSE
1. when the classification was made when
there is none (not based on substantial

ART. XII SEC. 11

NOTE: the constitutional guarantee on non-


distinction that makes real difference) impairment of contract only applies to taxation


2. when no classification is called for.

ie. made in such a way that the tax exemption


power of the state, and not to eminent domain


and police power.


only applies to a specified person. NOTE: the law only prohibits impairment of
obligations arising from contract. hence,

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TAXATION

pwede if against quasi-contract, delict, quasi- 3. GRANT BY CONGRESS OF AUTHORITY


delict or law.

NOTE: non-impairment of contract does not


TO THE PRESIDENT TO IMPOSE TARIFF


RATES

apply to franchise ART. VI SEC. 28 PAR. 2


- as it is always burdened with condition that it The Congress may, by law,
may be altered, amended or repealed at any AUTHORIZED THE PRESIDENT


time if public interest so requires.

NOTE: contract is deemed impaired only when


1. to fix within specified limits, and
subject to such limitations and
restrictions as it may impose,
- the statute/tax alters the relative rights of the 2. tariff rates,


parties to each other

NOTE: if unilateral tax exemption is granted, it


3. import and export quotas,
4. tonnage and
5. wharfage dues, and
may be revoked at will by the legislature 6. other duties or imposts within the
- exe of course that the tax exemption granted framework of the national
by the congress is in exchange of valuable development program of the
consideration, the period stipulated from which
the exemption from tax is to run must be Government.


respected, as it takes the form of a contract.

CONSTITUTIONAL PROVISIONS DIRECTLY


4. MAJORITY VOTE OF CONGRESS FOR


GRANT OF TAX EXEMPTION


AFFECTING TAXATION

1. NON-IMPRISONMENT FOR NON-


REQ NUMBER OF VOTE OF CONGRESS
FOR GRANT OF TAX EXEMPTION

PAYMENT OF TAX MAJORITY VOTE (ABSOLUTE)
No person shall be imprisoned for debt or non- at least 1/2 plus 1 of all the members
payment of a poll tax.


ART. III SEC. 20
voting separately

RATION:
POLL TAX; defined to prevent indiscriminate grant
is a tax imposed in person without any


qualifications.
of tax exemption

RELATIVE MAJORITY
all persons are allowed to pay even if
they are not qualified to pay tax.
- hence, if based on age, property or

- for withdrawal of tax exemption

RATION:


income, not a poll tax.

ie.
taxation is the rule and
exemption is the exception.
thus, the law makes it easier,

Community Tax Certificate

NOTE: Congress cannot pass a law penalizing


by requiring a smaller number
of votes to withdraw
exemption compared to its


non-payment of poll tax.

2. UNIFORMITY AND EQUALITY OF



grant.

5 . P R E S I D E N T ' S V E TO P O W E R O N
TAXATION APPROPRIATION, REVENUES AND TARIFF
The rule of taxation shall be uniform and
equitable. The Congress shall evolve a
progressive system of taxation.

BILLS

ART. VI SEC. 27 PAR 2


ART. VI SEC. 28(1) CONSTI

UNIFORMITY; defined
VETO POWER OF THE PRESIDENT
The President shall have the power to veto any
particular item or items in an
all taxable articles or kind of property of the 1. appropriation,


same class shall be taxed at the same rate.

FOR VALID CLASSIFICATION; see discussion


2. revenue, or


3. tariff bill,


in equal protection clause

C O N G R E S S S H A L L E V O LV E A
but the veto shall not affect
the item or items to which he does not

PROGRESSIVE SYSTEM OF TAXATION


- as a moral incentive to the Congress, and not
object.

FF AKIN TO GRANT OF TAX EXEMPTION:


as a judicially enforceable rights. tax amnesties, condonations and refunds

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TAXATION

NOTE: tax exemption granted by the including sharing the same


constitution is self executing. the congress can with the inhabitants by way of
neither add nor detract from it, but it may


provide procedure for entitlement direct benefits.

8. FLEXIBLE TARIFF CLAUSE


6. NON-IMPAIRMENT OF JURISDICTION OF


SC
ART. VI SEC. 28 PAR

9. EXEMPTION FROM REAL PROPERTY


ART VIII SEC. 5(b)
the SC can review judgments or orders of
lower court in all cases involving

TAXES

ART. VI SEC. 28 PAR 3


1. the legality of any tax, impost, assessment Charitable institutions, churches and
or tolls parsonages or convents appurtenant thereto,
2. legality of any penalty imposed in relation mosques, non-profit cemeteries, and all lands,

to the above

PRINCIPLE OF JUDICIAL NON-


buildings, and improvements, actually, directly,
and exclusively used for religious, charitable,
or educational purposes shall be exempt from
INTERFERENCE
the court cannot inquire into the wisdom of a
taxing act

taxation.

TEST OF EXEMPTION:
UNLESS: there is a violation of use of the property and not the ownership.

constitutional limitations or restrictions.

7. GRANT OF POWER TO LGU TO CREATE


- the use must be actually, directly and


exclusively used for the purposes mentioned


THEIR OWN SOURCE OF REVENUE EXCLUSIVE; defined
possessed and enjoyed to the
ART. X SEC. 5
Each local government unit shall have the
power to

exclusion of others

HENCE; if used partly for commercial


• create its own sources of revenues and purpose, cannot assail tax exemption.


• to levy taxes, fees, and charges

subject to such guidelines and limitations


- the doctrine of Dominant Use does


not apply here

as the Congress may provide, BUT; if incidental to or reasonably


consistent with the basic policy necessary for the accomplishment of


of local autonomy.

IN RE: AS TO THE PROCEEDS OF TAX


the purpose, exemption will apply.

10. NON-ESTABLISHMENT CLAUSE


COLLECTED

[LOCAL TAX]
no appropriation or use public money for


religious purpose

Such taxes, fees, and charges EXE:


shall accrue exclusively If the priest is assigned to armed forced, penal

[NATIONAL TAX]

to the local governments. institutions, government orphanages or


leprosarium

ART X SEC. 6 11. PROHIBITION ON USE OF TAX LEVIED


Local government units shall have a just share, FOR SPECIAL PURPOSE
as determined by law, in the national ART. VI SEC. 29 PAR 3
taxes All money collected on any tax levied for a
which shall be automatically special purpose


released to them. shall be treated as
- a special fund and paid out for such
[PROCEEDS IN THE UTILIZATION AND
DEVELOPMENT OF NATIONAL WEALTH]
ART. X SEC. 7

purpose only.

If the purpose for which a special fund


Local governments shall be entitled to an was created has been fulfilled or
equitable share abandoned,
in the proceeds of the the balance, if any, shall be
utilization and development of transferred to the general
the national wealth
WITHIN their respective areas,
in the manner provided by law,
funds of the Government.

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TAXATION

12. PROHIBITION AGAINST TAXATION OF J. STAGES OF TAXATION


R E L I G I O U S , C H A R I TA B L E , A N D


EDUCATIONAL ENTITIES
1. LEVY
the enactment of law by the congress,
imposing tax


13. PROHIBITION AGAINST TAXATION OF
2. ASSESSMENT AND COLLECTION
the act of administration and
implementation of the tax law by the

NON-STOCK, NON-PROFIT INSTITUTIONS
executive department through the


administrative agencies

3. PAYMENT
the act if compliance by the taxpayer,
including such option, schemes, or
remedies as may be legally availed by


him.

4. REFUND
a claim for the payment of cash for
taxes erroneously or illegally paid by


the taxpayer to the government.

K, DEFINITION, NATURE AND


CHARACTERISTICS OF TAXES

TAXES; defined
enforced proportional contribution from
persons and property
levied by the lawmaking body of the
state by virtue of its sovereignty
for the support of government


CHARACTERISTICS
and for all public needs.

1. a forced charge, imposition or contribution.


(cannot be said as a contractual
obligation, express or implied; not in any
way dependent upon will or contractual
assent, express or implied)
2. assessment in accordance with some
reasonable rule of apportionment
(progressive tax system, taxes based on
the taxpayer capacity to pay)
3. a pecuniary burden payable in money.
(but backpay certificates may be used in
payment of tax, while transfer or property,
real or personal, cannot be used as
payment of taxes)
4. imposed by the state on persons, property,
or exercises within its jurisdiction
(following principle of territoriality)
5. levied by the legislative body of the
government
6. levied for public purpose
7. personal to the taxpayer (NOTE: the only
way SHs may be held liable for the unpaid
taxes of a corp., is when after the
dissolution of the corp. it is shown that.
[a.] corporate assets have passed into
their hands without the payment of taxes

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TAXATION

or [b.] SHs have unpaid subscription to the


capital of the corporation, liable to the

extent of the unpaid subscription)

L. REQUISITES OF A VALID TAX



REQUISITES OF A VALID TAX
1. that either the person or the property
taxed be within the jurisdiction of the
taxing authority
2. that the assessment and collection of
certain kinds of taxes guarantee against
injustice to individuals, especially by
providing notice and opportunity for
hearing
3. that it should be for public purpose
4. the rule of taxation shall be uniform
5. the tax must not impinge on the inherent
and constitutional limitations on the power
of taxation

M. TAX AS DISTINGUISHED
FROM OTHER FORMS OF
EXACTION

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