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Health Economics With Taxation and Land Reform Syllabus
Health Economics With Taxation and Land Reform Syllabus
SYLLABUS
HEALTH ECONOMICS WITH TAXATION AND LAND REFORM
COURSE DESCRIPTION:
This course is an introduction to Economics, the basic concepts of microeconomics, money and
banking, economic growth and development and international economics and its implication to
nursing. Also discussed are the basic concepts of taxation and land reform.
To introduce the students to the concepts of economics applied to health and enable them to appreciate
and apply the principles in health program decision-making and development. At the end of the
course, the student shall be able to:
1. Appreciate the basic concepts and rationale of economics
2. Discuss the concept of health with emphasis on the use of health outcomes
3. Apply the basic concepts of the Law of Supply and Demand to health related issues
4. Discuss the various roles of the different health sectors and in the provisions of health goods and
services and analyze how the government and private health sectors finance health care
5. Describe the basic principles of evaluating health programs and projects
COURSE CONTENT:
Unit II: GENERAL ECONOMIC CONCEPTS: The Law of Supply and Demand
1. Definition of Health
2. How is “health” objectively measured?
3. What determines health? The underlying and proximate determinants of health
3.1 Changes in age, health risks and health – stock and its effect on:
a. Probability of getting ill
b. The type of illnesses experienced
c. The type of health care commodities demanded
3.2 Population composition, demographic transition and its applications on Health Program Planning
1. Health Costs Concepts: Types of Costs: Direct and Indirect Costs, Recurrent and Capitalized Costs
2. Cost Minimization
3. Cost Benefit Analysis
4. Cost Utility Analysis
1. Current Trends and Growth of Alternative Moods of Healthcare Financing in the Philippines Out-
of-pocket/Fee-for-service Medical Insurance Health Maintenance Organizations and Other Managed
Care Organizations
2. Out-of-pocket Healthcare Financing: Advantages and Disadvantages
3. Concepts: Medical Insurance Costs and Pricing of Medical Insurance: Actuarial (medical) Costs
and Administrative Costs
4. Health Maintenance Organizations: an off-shoot of medical insurance and emphasis on preventive
and promotive healthcare Growth and Trends of the HMO Industry
Conceptual Framework of the Organization of HMOs
5. Other Managed-care organizations: Description and Concepts Changing Roles of Physicians,
Nurses and Allied Medical Professionals under a managed-care system Emphasis on efficiency
outcomes
http://dzayk19.blogspot.com/2012/01/health-economics-with-taxation-and-
land.html
MONDAY, JULY 13, 2009
re: lecture notes coverage PRELIMS
TAX REVIEWER
GENERAL PRINCIPLES:
Atty. S.C. Madrona, Jr.
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
> GOVERNMENTAL NECESSITY
* The existence of the government depends upon its capacity to perform its two
(2) basic functions:
A.. to serve the people
B.. to protect the people
THEORY OF TAXATION
>RECIPROCAL DUTIES OF SUPPORT AND PROTECTION
1) Support on the part of the taxpayers
2) Protection and benefits on the part of the government
*> Taxes are the lifeblood of the government and should be collected without
unnecessary hindrance. But their collection should not be tainted with
arbitrariness
NATURE OF TAXATION
1) Inherent in sovereignty
2) Legislative in character
SCOPE OF TAXATION
1) Comprehensive
2) Unlimited
3) Plenary
4) Supreme
PURPOSES OF TAXATION
PRIMARY
- To raise revenue in order to support the government
SECONDARY
1) Used to reduce social inequality
2) Utilized to implement the police power of the State
3) Used to protect our local industries against unfair competition
4) Utilized by the government to encourage the growth of local industries
LIFEBLOOD DOCTRINE
• > Taxes are the lifeblood of the nation
• > Without revenue raised from taxation, the government will not survive,
resulting in detriment to society. Without taxes, the government would be
paralyzed for lack 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
* > 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)
NOTES:
• > If the purpose of taxation is regulatory in character, taxation is used to
implement the police power of the state
• > If 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.
NECESSITY THEORY
• > Existence of a government is a necessity and cannot continue without any
means to pay for expenses
ASPECTS OF TAXATION
1) LEVY or IMPOSITION
enactment of tax laws
legislative in character
2) ASSESSMENT
collection
administrative in character
NOTES:
• > It is inherent in the power to tax that the State is free to select the object of
taxation
• > The power of the legislature to impose tax includes the power
1) what to tax
2) whom to tax
3) how much to tax
• > The rule that the power of taxation cannot be delegated does not apply to the
administrative implementation of a tax law
• > The issuance of regulations or circulars by the BIR or the Secretary of Finance
should not go beyond the scope of the tax measure
NOTES:
FISCAL ADEQUACY
- VIOLATION – VALID
• > Sources of revenue should be sufficient to meet the demands of 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 Fiscal Adequacy , in other words, the
proceeds may not be sufficient to satisfy the needs of the government, still the tax
law is valid
ADMINISTRATIVE FEASIBILITY
- VIOLATION – VALID
• > 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 requires compliance with this principle, so even if the tax
law violates this principle; such tax law is valid.
THEORETICAL JUSTICE
- VIOLATION – INVALID
• > This principle mandates that taxes must be just, reasonable and fair
Taxation shall be uniform and equitable
• > Equitable taxation has been mandated by our constitution, as if taxes are
unjust and unreasonable then they are not equitable, thus invalid.
• > The tax burden should be in proportion to the taxpayers ability to pay
(ABILITY TO PAY PRINCIPLE)
DISTINCTIONS:
2) As to compensation:
Taxation – Protection and benefits received from the government.
Eminent Domain – just compensation, not to exceed the market value declared
by the owner or administrator or anyone having legal interest in the property, or
as determined by the assessor, whichever is lower.
Police Power – The maintenance of a healthy economic standard of society.
3) As to persons affected:
Taxation and Police Power – operate upon a community or a class of individuals
Eminent Domain – operates on the individual property owner.
5) As to amount of imposition:
Taxation – Generally no limit to the amount of tax that may be imposed.
Police Power – Limited to the cost of regulation
Eminent Domain – There is no imposition; rather, it is the owner of the property
taken who is just paid compensation.
6) As to the relationship to the Constitution:
Taxation and Eminent Domain – Subject to certain constitutional limitations,
including the prohibition against impairment of the obligation of contracts.
Police Power – Relatively free from constitutional limitations and superior to the
non-impairment provisions thereof.
b) BASIS: Tax imposed under power of taxation WHILE license fee under police
power.
e) EFFECT OF PAYMENT: Failure to pay a tax does not make the business illegal
WHILE failure to pay license fee makes business illegal.
f) SURRENDER: Taxes, being lifeblood of the state, cannot be surrendered
except for lawful consideration WHILE a license fee may be surrendered with or
without consideration.
3) special assessment – levied only on land based wholly on the benefit accruing
thereon as a result of improvements of public works undertaken by government
within the vicinity.
4) license fee – regulatory imposition in the exercise of the police power of the
State;
Some Rules:
Toll v. tax
1. Toll is a sum of money for the use of something. It is the consideration which is
paid for the use of a road, bridge, or the like, of a public nature. Taxes, 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.
3. Toll is paid for the used of another’s property; tax is paid for the support of
government.
4. The amount paid as toll depends upon the cost of construction or maintenance
of the public improvements used; while there is no limit on the amount collected
as tax as long as it is not excessive, unreasonable, or confiscatory.
Tax v. penalty
1. Penalty is any sanction imposed as a punishment for violation of law or for acts
deemed injurious; taxes 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.
Requisites of compensation
1. That each one of the obligor be bound principally, and that he be at the same
time a principal creditor of the other.
2. That both debts consist in a sum of money, or if the things due are consumable,
they be of the same kind and also of the same quality if the latter has been stated.
• Exception: SC allowed set off in the case of Domingo v. Garlitos [8 SCRA 443]
re: claim for payment of unpaid services of a government employee vis-à-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
liquidated. Compensation therefore takes place by operation of law.
GENERAL RULE:
- Taxes are personal to the taxpayer. Corporation’s tax delinquency cannot be
enforced on the stockholder or transfer taxes on the estate be assessed on the
heirs.
EXCEPTIONS
1. stockholders may be held liable for unpaid taxes of a dissolved corporation if
the corporate assets have passed into their hands; and
2. 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
Inherent Limitations
1. It must be imposed for a public purpose.
2. If delegated either to the President or to a L.G.U., it should be validly
delegated.
3. It is limited to the territorial jurisdiction of the taxing authority.
4. Government entities are exempted.
5. International comity is recognized i.e. property of foreign sovereigns are not
subject to tax.
Constitutional limitations –
Indirect –
a) Due process clause
b) Equal protection clause
c) Freedom of the press
d) Religious freedom
e) Non-impairment clause
f) Law-making process –
1. One-subject – One-title Rule
2. 3 readings on 3 separate days Rule except when there is a Certificate of
Emergency
3. Distribution of copies 3 days before the 3rd reading.
g) Presidential power to grant reprieves, commutations and pardons, and remit
fines and forfeitures after conviction by final judgment.
Direct –
a) Revenue bill must originate exclusively in H.R. but the Senate may propose
with amendments.
b) Non-imprisonment for non-payment of poll tax.
c) Taxation shall be uniform and equitable.
d) Congress shall evolve a progressive system of taxation.
e) Tax exemption of charitable institutions, churches and personages or convents
appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings
and improvements ADE (actually, directly , exclusively) used for charitable,
religious, and educational purposes.
f) Tax exemption of all revenues and assets used ADE for educational purposes of
–
1. Non-profit non-stock educational institutions.
2. Proprietary or cooperative educational institutions subject to limitations
provided by law including –
a) restriction on dividends
b) provisions for re-investments.
g) Tax exemption of grants, endowments, donations or contributions ADE for
educational purposes, subject to conditions prescribed by law.
h) No tax exemption without the concurrence of a majority of all members of
Congress.
i) SC power to review judgments or orders of lower courts in all cases involving –
Legality of any tax. Impost or toll, Legality of any penalty imposed in relation
thereto.
INHERENT LIMITATIONS
NOTES: PUBLIC PURPOSE –
GOVERNMENTAL PURPOSE
RULE:
• “The Legislature is without the power to appropriate revenues for anything but
for public purposes.”
RULE:
• “Public money can only be spent for a public purpose.”
PUBLIC PURPOSE – A purpose affecting the inhabitants of the State or taxing
district as a community and not merely as individuals
> Public purpose includes not only direct benefits or advantage, it also includes
indirect benefits or advantage
TIO vs. VIDEOGRAM
• > It is not the immediate result but the ultimate result that determines, whether
the purpose is public or not
• > It is not the number of persons benefited but it is the character of the purpose
that determines the public character of such tax law
• > What is not allowed is that if it has no link to public welfare
• > Public purpose is determined by the use to which the tax money is devoted
> If it benefits the community in general then it is for a public purpose no matter
who collects it
TEST
1. If the public advantage or benefit is merely incidental in the promotion of a
particular enterprise, that will render the law INVALID
2. If what is incidental is the promotion of a private enterprise, the tax law is still
for a public purpose(VALID)
• > A tax levied for a private, not public purpose constitutes taking of property
without due process of law as it is beyond the powers of the government to
impose it.
• > Although private individuals are directly benefited, the tax would still be
valid, provided such benefit is only incidental
• > If what is incidental is the promotion of a private enterprise, as long as there
is a link 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
> Not the immediate result of the expenditure, but rather the ultimate
• > The test that must be applied in determining whether the purpose is public or
private
1) The character of the direct object
2) The ultimate result not the immediate result
3) The general welfare for public good
TEST OF RIGHTFUL TAXATION
- Proceeds of a tax must be used
1) for the support of the government
2) for any of the recognized objects of the government
3) to promote the welfare of the community
LEGISLATIVE PREROGATIVE
RULE: It is Congress which has the power to determine whether the purpose is
public or private
• > You can always question the validity of such tax measure on the ground that it
is not for a public purpose before the courts. But once it is settled that it is for a
public purpose, you can no longer inquire 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 DONATIONS AND CONTRIBUTIONS)
• > A taxpayer is not relieved from the obligation of paying a tax because of his
belief that it is being misappropriated by certain officials
• > A taxpayer has no legal standing to question executive acts that do not involve
the use of public funds. (GONZALES vs. MARCOS)
SITUS OF TAXATION
Place of taxation
RULE:
- The State where the subject to be taxed has a situs may rightfully levy and
collect the tax
• > In determining the situs of taxation, you have to consider the nature of the
taxes
Example:
1) POLL TAX, CAPITATION TAX, COMMUNITY TAX
> Residence of the taxpayer
CONSTITUTIONAL LIMITATIONS
I. DUE PROCESS
• > Due process mandates that no person shall be deprived of life, liberty, or
property without due process of law.
PEPSI COLA vs. MUN. OF TANAUAN
- REQUIREMENTS OF DUE PROCESS IN TAXATION
1) Tax must be for a Public purpose
2) Imposed within the Territorial jurisdiction
3) No arbitrariness or oppression in
A) assessment, and
B) collection
• > When is deprivation of life, liberty or property done in accordance with due
process of law?
1) If done under authority of a law that is valid or of the constitution itself
2) After compliance with fair and reasonable methods of procedure prescribed by
law.
• > If properties are taxed on the basis of an invalid law, such deprivation is a
violation of due process
REMEDY – ask for refund
• > To justify the nullification of a tax law, there must be a clear and unequivocal
breach of the constitution
> There must be proof of arbitrariness
INSTANCES WHEN THE TAX LAW MAYBE DECLARED AS
UNCONSTITUTIONAL [C, O, N, U]
1) If it amounts to confiscation of property without due process
2) If the subject of taxation is outside of the jurisdiction of the taxing state
3) The law maybe declared as unconstitutional if it is imposed not for a public
purpose
4) If a tax law which is applied retroactively, imposes unjust and oppressive
taxes.
• A tax law which denies a taxpayer a fair opportunity to assert his substantial
rights before a competent tribunal is invalid
• A taxpayer must not be deprived of his property for non-payment of taxes
without
1) notice of liability
2) sale of property at public auction
• The validity of statute maybe contested only by one who will sustain a direct
injury in consequence of its enforcement
• A 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
• Due process requires hearing before adoption of legislative rules by
administrative bodies of interpretative rulings. (Misamis vs. DFA)
• Compliance with strict procedural requirements must be followed effectively
to avoid a collision course between the states power to tax and the individual
recognized rights (CIR vs. Algue)
• The due process clause may correctly be invoked only when there is a clear
contravention of inherent or constitutional limitations in the exercise of tax
power. (Tan vs. del Rosario)
• SUBSTATNTIVE DUE PROCESS requires that a tax statute must be within
the constitutional authority of Congress to pass and that it be reasonable, fair and
just
• PROCEDURAL DUE PROCESS requires notice and hearing or at least an
opportunity to be heard
SUBSTANTIAL DISTINCTION
> It must be real, material and not superficial distinction
• > What is not allowed is inequality resulting from singling out of a particular
class which violates the requisites of a valid classification
• > There maybe inequality but as long as it does not violate the requisites of a
valid classification that such mere inequality is not enough to justify the
nullification of a tax law or tax ordinance
• > Taxation is equitable when its burden falls on those better able to pay
• >Although the equal 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 equal when imposed upon all property of the same
class or character within the taxing authority
• > Tax exemptions are not violative of the equal protection clause, as long as
there is valid classification.
TIU vs. CA
The Constitutional right to equal 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 “secured area” of the Subic Special Economic Zone” and
denying them to those who live within the zone but outside such “fenced in”
territory. The Constitution does not require the absolute equality among
residents. It is enough that all persons under like circumstances or conditions are
given the same privileges and required to follow the same obligations. In short, a
classification based on valid and reasonable standards does not violate the equal
protection clause.
We find real and substantial distinctions between the circumstances obtaining
inside and those outside the Subic Naval Base, thereby justifying a valid and
reasonable classification.
TWO WAYS EQUAL PROTECTION CLAUSE CAN BE VIOLATED
1) When classification is made where there should be none
ex. When the classification does not rest upon substantial distinctions that make
for real difference
2) When no classification is made where a classification is called for
ex. When substantial distinctions exist but no corresponding classification is
made on the basis thereof
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.
It requires the uniform application and operation, without discrimination, of the
tax in every place where the subject of the tax is found. It does not, however,
require absolute identity or equality under all circumstances, but subject to
reasonable classification.
EQUITY IN TAXATION
• > The concept of equity in taxation requires that the apportionment of the tax
burden be more or less, just in the light of the taxpayer’s ability to shoulder to tax
burden and if warranted, on the basis of the benefits received from the
government. Its cornerstone is the taxpayers ability to pay.
V. NON-IMPAIRMENT 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
• > Police power prevails over the non-impairment clause
LA INSULAR vs. MANCHUCA
• > A lawful tax on a new subject or an increased tax on an old one, does not
interfere with a contract or impairs its obligation.
• > The constitutional guarantee of the non-impairment clause can only invoked
in the grant of tax exemption.
RULES:
1) If the exemption was granted for valuable consideration and it is granted on
the basis of a contract.
> cannot be revoked
2) If the exemption is granted by virtue of a contract, wherein the government
enters into a contract with a private corporation
> cannot be revoked unilaterally by the government
3) If the basis of the tax exemption is a franchise granted by Congress and under
the franchise or the tax exemption is given to a particular holder or person
> can be unilaterally revoked by the government (Congress)
• > 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. Furthermore, it applies only where one party is the government
and the other, a private individual.
• > As a rule, the obligation to pay tax is based on law. But when, for instance, a
taxpayer enters into a compromise with the BIR, the obligation of the taxpayer
becomes one based on contract
• > Franchises with magic words, “shall be in lieu of all taxes” descriptive of the
payment of a franchise tax on their gross earnings are exempt from:
1) all taxes
2) the franchise tax under the NIRC
3) the franchise tax under the local tax code
JUAREZ vs. CA
• > As long as the contract affects the public welfare one way or another so as to
require the interference of the state, then must the police power be asserted and
prevail over the impairment clause
> The Constitution does not really prohibit the imposition of indirect taxes, which
like the VAT, are regressive. The constitutional provision means simply that
indirect taxes shall be minimized.
• > The mandate to Congress is not to prescribe, but to evolve, a progressive
system of taxation
• > Resort to indirect taxes should be minimized 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.
APPLICATION:
> The exemption only covers property taxes and not other taxes
TEST OF EXEMPTION:
> It is the USE of the property and not ownership of the property
• > Where the educational institution is private and non-profit (but a stock
corporation) it is subject to income tax but at the preferential rate of ten percent
(10%)
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
- Process by which such tax burden is transferred from statutory taxpayer to
another without violating the law
• > It should be borne in mind that what is transferred is not the payment of the
tax, but the burden of the tax
• > Only indirect taxes may be shifted; direct taxes cannot be shifted
WAYS OF SHIFTING THE TAX BURDEN
1) FORWARD SHIFTING
- When 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:
- Manufacturer 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
2) BACKWARD SHIFTING
- When the burden of the tax is transferred from the consumer or purchaser
through the factors of distribution to the factors of production
Example:
- Consumer 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
3) ONWARD SHIFTING
- When the tax is shifted two or more times either forward or backward
Example:
- Thus, a transfer from the seller to the purchaser involves one shift; from the
producer to the wholesaler, then to retailer, we have two shifts; and if the tax is
transferred again to the purchaser by the retailer, we have three shifts in all.
Impact and Incidence of Taxation
• Impact of taxation is the point on which a tax is originally imposed. In so far as
the law is concerned, the taxpayer is the person who must pay the tax to the
government. He is also termed as the statutory taxpayer-the one on whom the tax
is formally assessed. He is the subject of the tax
• Incidence of taxation is that point on which the tax burden finally rests or settle
down. It takes place when shifting has been effected from the statutory taxpayer
to another.
Statutory Taxpayer
• The Statutory taxpayer is the person required by law to pay the tax or the one on
whom the tax is formally assessed. In short, he or she is the subject of the tax.
• In 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.
Relationship between impact, shifting, and incidence of a tax
• The impact is the initial phenomenon, the shifting is the intermediate process,
and the incidence is the result. Thus, the impact in a sales tax (i.e. VAT) is on the
seller (manufacturer) who shifts the burden to the customer who finally bears the
incidence of the tax.
• Impact is the imposition of the tax; shifting is the transfer of the tax; while
incidence is the setting or coming to rest of the tax.
II. CAPITALIZATION
- Reduction is the price of the taxed object equal to the capitalized value of future
taxes on the property sold
• > This is a special form of backward shifting, where the burden of future taxes
which the buyer may have to pay is shifted back 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.
V. TAX EXEMPTION
Tax Exemption
• It 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. It is an
immunity or privilege; 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.
• It 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.
Rationale for granting tax exemptions
• Its avowed purpose is some public benefit or interests which the lawmaking
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. It is not based on the idea of lessening the burden of the
individual owners of property.
Grounds for granting tax exemptions
Note: Equity is not a ground for tax exemption. Exemption is allowed only if
there is a clear provision therefor.
Does provision in a statute granting exemption from “all taxes” include indirect
taxes?
• NO. As a general rule, indirect taxes are not included in the grant of such
exemption unless it is expressly stated.
1) National government
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.
It 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.
Unless restricted by the Constitution, the legislative power to exempt is as broad
as its power to tax.
2) Local governments
Municipal corporations are clothed with no inherent power to tax or grant tax
exemptions. But 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 Constitution 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.
Basco vs. PAGCOR (196 SCRA 52): The power to tax municipal corporations
must always yield to a legislative act which is superior, having been passed by the
State itself. Municipal corporations are mere creatures of Congress which has the
power to create and abolish municipal corporations due to its general legislative
powers. If Congress can grant the power to tax, it can also provide for exemptions
or even take back the power.
• Exceptions
1) When the law itself expressly provides for a liberal construction thereof.
2) In 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.
Strict interpretation does not apply to the government and its agencies
• Petitioner cannot invoke the rule on stritissimi juris with respect to the
interpretation of statutes granting tax exemptions to the NPC. The rule on strict
interpretation does not apply in the case of exemptions in favor of a political
subdivision or instrumentality of the government. [Maceda v. Macaraig]
CONSTITUTIONAL RESTRICTION:
“No law granting any tax exemption shall be passed without the concurrence of a
majority of all members of Congress.” (Sec. 28 (4) ART VI)
COURSE OBJECTIVES
The course aims to impart to its students: first, appreciate the importance of
taxation as means of supporting the government in sustaining its programs and
projects as opposed to common notion on taxation as a burden; second, realize
the necessity for land reform program as means of state’s pursuit of social justice,
and; lastly, better understand basic economic principles and processes i.e.
resources, market, money etc.
COURSE OUTLINE
Introduction
I.Taxation
A.General Principles in Taxation
B.Limitations on the Power of Taxation
C.Double Taxation and Tax Exemptions
D.Income Taxation
II.Land Reform
A.Components and Aspects
B.Agrarian Reform
III.Economics
A.Basic Principles in Economics
B.Economic Activities
i.Circular Flow of Economic Activities
ii.Supply and Demand
iii.Production, Cost and Profit
iv.Monopoly and Competition
v.Philippine Financial System
vi.Money and Monetary Policy
C.International Trade
Conclusion
REQUIRED READINGS
TAXATION:
De Leon, Hector. 2004. Fundamentals of Taxation. Quezon City: Rex Bookstore
LAND REFORM:
ECONOMICS:
COURSE REQUIREMENTS
A. READ, TAKE NOTES AND ASK QUESTIONS. This course requires much
reading and the student is expected to have read the required materials when
coming to class.
B. EXAM. The exam will consists of problem-solving and short answer questions
based on the class lectures and the assigned reading materials.
C. FINAL EXAM. Comprehensive of all lectures and selected required reading
materials.
D. There will be GRADED RECITATION (50% of final grade) based on the
required reading materials and assigned cases.
CLASSROOM POLICIES
1. Students must submit a 3x5 index card with their names, courses, contact
numbers, 1x1 ID color or BW picture by the second-class meeting.
2. A student is considered absent from class if s/he is not present within the first
third fraction (30 minutes) of the scheduled class time. The students should be
responsible for keeping tracks of their absences.
3. As a courtesy of the entire class, smoking and eating inside the classroom shall
be strictly prohibited. All electronic devices must be either deactivated or at least
silent.
CONSULTATION HOURS
If you wish to consult with me on matters relating to the course, please set an
appointment with me.
E-mail: scmadrona@gmail.com
Website: http://beltmadrona.blogspot.com
http://beltmadrona.blogspot.com/