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What is taxation?

Taxation is the inherent power by which the sovereign state imposes financial burden upon persons and
property as a means of raising revenue in order to defray the necessary expenses of the government.

What is the primary purpose of taxation?

The primary purpose of taxation is to raise revenue in order to satisfy government needs.

What is the basis of taxation?

The basis of taxation is two-fold:

a. Necessity, because government cannot exist and function without the means to pay its
expenditures; and
b. Reciprocal duties of protection and support between the state and its inhabitants.

What are the two aspects of taxation?

The two aspects of taxation are:

a. Levy - refers to the legislative act of imposing the tax and is exercised by Congress; and
b. Collection – refers to administrative act of collecting the tax and is exercised by the Executive
branch of government, more particularly:
1. Bureau of Internal Revenue – National taxes
2. Bureau of Customs – Customs duties; and
3. Local Government Units – Local taxes and real property taxes.

Note: Fees and charges are also collected by other appropriate governmental agencies.

Distinguish taxation from eminent domain and police power.

Taxation is the inherent power of the sovereign state to impose financial burden on persons and
property as a means of raising revenue in order to defray the necessary expenses of the government.

Eminent domain is the inherent power of the sovereign state to take private property for public use upon
payment of just compensation.

Police power is the inherent power of the sovereign state to enact laws to promote public health, public
morals, public safety and general welfare of the people.

According to US Chief Justice John Marshall, “the power to tax involves the power to destroy.” But
according to US Justice Oliver Wendell Holmes, “the power to tax is not the power to destroy while
the court sits.”

Reconcile the two statements.


The power to tax involves the power to destroy because being an enforced contribution the subject is
not at liberty to free himself from this burden. However, this power is not absolute because it is subject
to certain inherent and constitutional limitations. If the exercise of taxing power exceeds these
limitations, then the Court has the duty to declare the same as invalid or unconstitutional, thereby
preventing the destructive nature of the power of taxation.

Enumerate the inherent limitations of the power of taxation.

The inherent limitations, which are so-called because they exist without the need of any written legal
mandate, include the following:

a. Taxes may be levied only for public purpose;


b. The power to tax is limited to the territorial jurisdiction of the sovereign state;
c. The power to tax, being essentially legislative, cannot be delegated;
d. International comity (respect afforded by one state to another by virtue of the principle of
sovereignty); and
e. Exemption from taxation of governmental entities.

Enumerate the significant constitutional limitations on the power to taxation.

The significant constitutional limitations, which are so-called because they are expressly embodied in the
Philippine Constitution, include the following:

a. No person shall be deprived of life, liberty, and property without due process of law, nor shall
any person be denied of equal protection of the laws;
b. No person shall be imprisoned for debt or non-payment of poll tax;
c. No law impairing the obligation of contracts shall be passed;
d. The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive
system of taxation.
e. Charitable institutions, churches, and parsonages or convents appurtenant thereto, mosques,
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;
f.