QUAMTO (1987-2017) ‘TAXATION QUAMTO GENERAL PRINCIPLES OF TAXATION Q Describe the power of taxation. May a legislative bedy enact laws to ralse ‘revenues in the absence of a constitutional provision granting said body the power to tax? Explain. (2005 Bar) ArThe power of tazation Is neret lathe Stat Being ‘an attrhute of sovereignty. As an Sncidont of soverelgmty, the power to tax has been deseribed as unlimited Ia les range, acknowledging in ls very nature no limits, $0 ‘hat security agalast Ks abuse ts to be found only tn the responsibility of the legiststure ‘when imposes the taxon the constituents who fare to pay it. (Mactan Cebu international ‘AlrportAuiherteyv Marcos 261 SCRA667) Being an inherent power, the legislature can enact laws to alse revenues even without the {Fant of said power inthe Constitution. t must denoted that Constitutional provisors relating to the power of tration do not operate 28 grants Of the power of taraton 1 the Goverment, but instead merely constiute Limitations "upon a power which would otherwise be practically without limi. (Coley, Constitutional Limitations, 1927 8% Ed, p. 787} Power of Taxation as distinguished fom 1989, 1991,2008) Q The City of Manila passed an ordinance ‘maposiug an annual tax of PS,000.00 to be paid by an operator of a massage elie and an annual fee of F50.00 to be paid by every ‘attendant or helper i the sald ente ts the Imposition atax or allcense fee? (1989 Bai) 4AcThe imposition on the operstor of the rmarsoge clinic Is both a tax anda licence foo, ‘The amount ef P5000.00 exceeds the coxt of rogulation, administration and control batts Ikewise impozed to regulate a nonuseful ‘business in order to protect she health, safely ‘and morals of the cidzeny in genera, The P5000 Impasitions on the helpers or attendants are license fees suffeent only for ‘egulation, administration an control ‘Thsorvand Dasis of Tacation (1994, 2016) G: Briefly explain the following doctrines: Mfeblood doctrine xe (2016 Bar) 4: Lifeblood doctrine. Taxes are the lifeblood of the government [Charaer of Real Bstece and Builders” Associations, ine. Rovruo, 614 SCRA {605 2910) for without taees the government can neither exist nor endure. (National Pirer Corporation ¥. Oy of Cabanatuar, GR. No 149110, Apri 9, 2003 ching varios cases) ANAERENT LIMITATIONS Q Enumerate the four (4) inherent limitations on taxation, Explain each item briefly, (2009 Bar) he erent lmttations on the power to tax 41, Taxation is for a pubic purpose The proceeds of the tax must be used (6) for the support of the State or (b) for some recogetzed objecive of the government oF to direcly promote the welfare of the community. 2, Taxation sinbevendy legisative- Only the TegQslacure has full diseresion as to the persons, propery, eccupaton oF business fo be taxed provided these are all within the State's territoral Jurisdiction. It can also finaly determine the amount or rate of tax, the kind of tax to be imposed and the method of collection. (1 Cooley 176188) 5 Taxition is terrgorial Taxation may be erercised ony within the temitoral Jurisdiction of the taxing authority (61 Am. ‘Jur, 88), Within the territorial jurisdiction, ‘the taxing authority may determine the place of taxation” or “tax situs.” 4, Tasation is subject to international emily This Is 4 Umitauon which is founded on reciprocity designed co maintain 2 harmonious aad productive laionstips among the various states. Under international comity, 2 state must recognize the generally-accepted tenets of Incematlonal law, among which are the principles of sovereign equality among states and of thelr freedom from suit ‘without their consent, that limit the authority of a government to effecively Impose taxes on 2 sovereign state and Iss ingtromentalites, 2s well as on is property teld, and activites undertaken in thatcapadiy. Public Purpoxe (1989, 1994) @ An ordinance of Quezon Gty on the operation of market stalls and the collection of market stall feos created a Saarket committer "to formulate, recommend and adopt subject tw the stalls” Italso entrusted the collection of the ‘market stall fees to a private corporation. Does the entrusting ofthe collection of the nrarker stall fees destroy the “public purpose" ofthe ordinance? (1989 Bar} ‘Az Yes, Decause a portion ofthe fees collected would be diverted as fees to private ‘Univansisyor Santo Tonas Gh)TAXATION LAW. ‘orperation. Enirting ofthe collection of the marlat ctl fees vielates the limitation that local governmont une etal in na case let to any private person the collection of local tes fees, cherges ard other imposions. See. 130 (©, RA. Na 7160, The Local Government Code] AAS a resale ofthis prohibition, public Funds are therefore nized fora private purpese, which 15 to pay the private corperation for its TET (£988, 2000, 2003, 2008) @ RCis « law-abiding citizen who pays his real estate taxes promply. Due to a series of typhoons and adverse economic conditions, an ordinance Is passed by MM {ity granting 50% discount lor payment of. unpaid real estate taxes for the preceding year and the condonation of all penalties on fines resulting from the Iate payment. Arguing thst the ordinance rewards delinquent taxpayers and. discriminates against prompt ones, RC demands that he be refunded an amount equivalent to one- ‘half ofthe real taxes he paid. The municipal attorney rendered an opinion that RC cannot be reimbursed because the ordinance didnot" provide for such reimbursement. RC files suit to declare the ordinance void on the ground that itis a class legislation. Will his. suit prosper? Explain your answer briefly. (2004 Bar) A: The sut will not prosper. The remission or condoration of taxes due and payable to the exclusion of taxes already collected does not constitute unfuir disedinination. Each set of taxes is a cass by self and the law would be ‘open to attack as lass legislation oaly if all taxpayers belonging 10 one clase wers not treated alike. Juan Luna Subdivision. Ine. ¥ Scrmients, 9 Phi 374 (29529) ‘Nom impairment of Obligations of Contracts (a997,2008) Alaw was passed granting tax exemption ‘to certain Industries and investments for 2 period of ve years. But three years tater, the law was repealed. With the repeal, the © exemptions were considered revoxed by ‘the BIR, which assessed the Investing ‘companies for unpaid taxes effective on the date ofthe repeal of thelaw. NPC and KTR companies questioned the assessments on the ground that, having ‘made thelr investments in full rellance with, ‘he period cf exemption granted hy the law, its repeal violated their constitutional right ‘against the impairment of the obligations and contracts. Is the contention of the ‘companies tenable or net? Reason briefly, ‘Ar The contention ig not tenable. ‘The exemption granted is In the nature of a tunlateral tax exemption. Since the exemption given Is sponiancoas on the part of the Teglslature and no service o duty er other Femunerauve contivions have been imposed on the taxpayers receiving the exemption, it may de revoked at will by the leg[slature Manila Rolroad Company v.Irsular Colector of Customs, 12 Phil. 146 (1915), ‘Tax Exemption Granted to NanStocks Non Profit Educational Institutions (2004,2017) V2 Collager ie 3 non-etock, non-profit eduestional institution run by. the Archdiocese of BP City. 1 collected a recelved the following: ©) Tution ove () Dormitory Fees (ORemals from canteen {@ tnwerest trom money-market plcements of thetuttion fees (© Donation of Byscheolaluent Which of these abovacited income and donation would not be exempt from toaation? Explain briefly 2004 Bar) 4s The fllowing are not exempt from takation, via: (exe Rental income is considered as Unrelated to. che scocl operations, hence, ‘taxzble (DOF rer Ne. 137-87, Dec. 16,1987) (dnc The imersston the placement's taxable (DOF Order No. 137-87). If however, the said Interest. is used actually, directly and ‘exclusively for educational purposes as preven by substantial evidence, the. same will be exempt from tation (CIR. CA, 298 SCRA 83 Tissep. ‘The other Items of income which were all derived from schoci-related acuvises will be erempt from tacation in the hands of the recipient if used actually, direaly and ‘exclusively for educational purposes (Section $ pr.3, Art XIV, 1987 Constitution). The domaton to a non-stock nomprott educatioral institution willbe exempt from the donor's tax if used actually, directly and exclusivey fer educations! purposes and provided, that, not more than 30% of the onation is used for administration purposes (Gection 4 par. 4, Art XIV, 1987 Constitution, in ‘elation to Section 103(A)(3] NIRC). San juan University is a non-stock, non- profit educational institution. It owns 2 Piece of land in Caloocan City on which its and butlding ‘three 2-storey school buildings stood. Two ——————————————————QUAMTO (1987-2017) of the bulldings are devoted to classrooms, Teboratories, a canteen, a dookstore, and administrative offices. The third building ts reserved as dormitory for student athletes who are granted scholarships for a given ‘academic year. ‘m 2017, San luan University earned income from tuition fees and from leasing a portion of its premises to various concessionaires ‘ffeod, bocks. and school supplies. 2. Can the City Treasurer of Caloocan City collact real property taxes on the Land and building of Sem Juan University? eplain your answer. b, Is the income earned by San Juan University for the year 2017 subject te income tax? Explain your answer. (2017 BAR) ‘Asa. Yes, bur only on tne leased poruion. rice XIV, Section 4(3) of the 1987 Consuruton provides thatthe assets of a non-stock, none profit educctional insututin stall be exempt from taxes and duties only ithe same are use actualy, direct, and excusively for educational purposes. The test of exemption from taxation is the use of the propery for purposes mentioned in the Constitution. The Teased portion af the building mag be subjec: to real property tax since such lease is for ‘commercial purposts, thereby, it removes the eat from the property tax exemption granted tinder the Coastitution. (CIR w: De La Sille Universi. Ine, GR Nos. 196595, 19884 198943, November 9, 2015) 1, No, provided that the revemies are used actual, direety, and exdusively for educational purposes ac provided under Artie KIV, "Sexton 4(3)" of tho 1987 Constitution, The requisites for avaling the tax ccemption under Article XIV, Seation 4 (3) are asfollows: (2) the Taxpayer GS under the classfcation nom Stock, non-profit educational instizution; and (@) the income seeks to be exempted fom (axation is used actually, direcly and fexelisively for educatoxal pUrpases. Thus, so Tong a: the requisites are met, the revenues may be exempt from tox (CIR De Le Salle Univerign Ine, GR. Nos. 196536, 158841, 198341, November §, 2016) ‘Dirsct_and_Indirect Taxes (1994, 2000, 2001, 2006) (Distinguish “direct taxes" from “indirect taxes." Give examples. (2006 Bar) ‘Az Direct taxes are demanded trom the very person who, 25 intended, should pay the tx Which he cannot shift to another; while an indirect tax is demanded in the first instance from one person with the expectation that be can shift the burden to someone else. not as a tax, but as part ofthe purchase price (Macede vaMecerd\, jr 223 SCRA 227 [2995)) Examples fof dire aes are income tax estate tax and donor's tax. Examples of moirect taxes are valueedded tar, perventege tax and excise tax onexcisablearticles. os ION, ‘Tax Exemption and Exclusion (1996,2005, 2007) @ Why are tax exemptions strictly construed against the taxpayer? (1996 Bar) ‘A; Tax exemptions are strictly construed agalast the taxpayer because such provisions are highly distivored and may almost be salé to be ofious to the law (Mania Elect Company vs. Vera 67 SCR4351), The exception contained In the tax statutes must be strictly Construed ageinst the cne claiming the feremption because the law does not look with favor on tax exemptions they being contrary to the lifebloed theory which is the undeclying basis for taxes. @ An atten employee of me Asan Development Hank (ADB) who is redring ‘s00n has offered to sell nis car co you which he imported tax-free for his personal use. ‘The privilege of exemption from tax is ‘granted to qualifel personal use under the ‘ADB Gharter whichis recognized by the tax ‘authorities. If you decide to purchase the earth sate blo x Ea, (205 a) ‘A: Yes. The sai is subject to tax. Section 107 (@) ofthe NIRC provides that “In the case of factree importation cf ggods into. the Philippines by persors, entities or agencies etempt fem tax where such goods are subsequently sold, ransferred or exchanged in ‘the Pallppines to nor-exerpt persons or entities, the purchasers. transferees or reciente chall be considered the importer ‘horeef, who shall be liable for any intemal Tovenue taxon such importation”. Tax ‘Scemptlonsars to be construed stictly and are rot considered tranefeablein character. Differentiate between double taxation in the strict sense and in a broad sense and ‘ive an example ofeach. (2015 Bar) ‘As Double taxation in the strict sonse pertains ‘p the direct double tration, Tie means that ‘the taxpayer is taxed swice by the same tacing ‘aithorty, within ehe same taxing jurisdiction, for the same property and same purpose. Buample: Impostion of final withelding toe ‘om cash dividend and requiring the taxpayer to dedlare this tx-pald mcome in his income tax returns. Wuvansireacuinte reais >