TAXATION LAW

Atty. William Podot, CPA, REB

 POWER OF TAXATION

Taxation

is an inherent of power of the sovereign exercised

through the legislative to impose burdens upon
subjects and objects within its jurisdiction for
raising revenues to carry out the legitimate
objects
 PURPOSES AND OBJECTIVES
1. Revenue – to raise funds or property to enable the
State to promote the general welfare and protection of its
citizens

2.Non – Revenue
a) Promotion of general welfare – implementation
of police power for the welfare of the people
b) Regulation
c) Reduction of social inequality – based on the
principle that those who are able to pay more should
shoulder the bigger portion of the tax burden.
d) Encourage economic growth – the grant of
incentives.

e) Protectionism – protective tarrifs and customs are

imposed for the benefit of the local industries
 BASIS OF THE THEORY OF
TAXATION
1) Necessity Theory – Existence of the Government
is a necessity. It cannot continue without a means to pay
its expenses therefore has a right to compel all citizens
and property within its power to contribute.
2) Benefits – Protection/ Reciprocity Theory –
the government for its part is expected to respond in the
form of tangible and intangible benefits intended to
improve the lives of the people and enhance their
material and moral values.
 CHARATERISTICE OF SOUND
TAX SYSTEM ( FAT )
1) Fiscal Adequacy – sources of the government
revenue must be sufficient for their expenditures and
other public needs.
2)Administrative Feasibility – tax laws must be
capable of being effectively enforced.
3)Theoretical Justice – must be based on tax payers'
ability to pay . Laws mandate that taxes must be
reasonable, fair, just and conscionable.
 NATURE OF THE TAXING
POWER
I. Inherent attribute of sovereignty
1. Basis : Taxes are the Life Blood of the nation. Without
revenue , the government will not survive resulting to
determent of the society. The government will be paralyzed
with out taxes.
2.Manifestation :
a) Imposition even in the absence of the constitutional
grant.
b) State's right to select objects and subject taxation.
c)No injunction to enjoin collection of taxes.
II. Legislative in Character
1. Basis : “ Taxes are a grant of the people who are taxed
and the grant must be made by the immediate
representatives of the people.
2.Scope of legislative power
a) Subject of taxation ( Person, Property, or occupation)
b)Amount or Rate of Tax f) Situs of Taxation
c)Purposes g) Method of collection
d)Kind of tax to be collected
e) Appointment of the tax
III. Non- delegable – As a general rule
1.President – Tariff
2.LGU
3.When merely relates to admin implementation,
enforcement of tax
IV. Subject to inherent and constitutional law.
V. Generally payable in money but maybe in kind.
III. Non- delegable – As a general rule
1.President – Tariff
2.LGU
3.When merely relates to admin implementation,
enforcement of tax
IV. Subject to inherent and constitutional law.
V. Generally payable in money but maybe in kind.
Taxation Police Power Eminent Domain

PURPOSE

To raise revenue To promote public To facilitate the taking of

welfare through private property for
regulations public use

AMOUNT OF EXACTION
No Limit Limited to the cost of No exaction but private
regulation, issuance of property is taken by the
the license or State for public
surveillance purposes.

BENEFITS RECIEVED
No special or direct A healthy economic A direct benefit results in
benefit is received by standard of society is the form of just
taxpayer. attained. compensation to the
property owner.
NON IMPAIRMENT OF CONTRACTS
Contracts may not be Contracts maybe Contracts maybe
impaired impaired impaired
 TRANSFER OF PROPERTY RIGHTS

Taxes paid become part No transfer but only Transfer is effected in

of the public funds restraint in its exercise favor of the State

SCOPE

All Persons property and All persons property , Only upon a particular
exercise rights and privilege property
 Taxes

● Enforced proportional contributions of from

persons and property levied by the law-
making body of the state by virtue of its
sovereignty for the support of the
government and public needs.
 Essential Characteristics
1.It is levied by the state which has jurisdiction.
2.Levied by the law-making body (legislative)
3.Enforced contribution not dependent on ones will,
not a contract but a positive act
4.Generally payable in money
5.Proportionate in character
6.Levied on persons property
7.Public purposes
 Classification of Taxes
I.As subject matter
1.Personal, poll, capitalization – fixed amount, imposed upon a
persons residing within a specified territory where or not citizens.
Regardless to their property, occupation or business. (Community
Tax)
2.Property – imposed on property real or personal. (Real estate
Tax)
3.Excise or Privilege – charge imposed upon the performance of
an act (Donors tax)
II. As to who bears the burden
1. Direct – extracted from the persons who are primarily
liable to pay them. Tax payer cannot shift the burden of the
payment to another. (Income Tax)
2. Indirect – liability of the payment falls on one person but
the burden can be shifted. ( VAT)
III. As to Purpose
1.General, fiscal, revenue – general or ordinary
purpose of the government to raise revenue for
needs. (Income Tax)
2.Special or regulatory – imposed for a special
purpose to achieve social or economic ends.
(Customs Duties)
IV. As to how amount determined
1. Specific – fixed amount imposed by the
head. Requires no valuation other than a
listing or classification
2.As valorem (Value) – fixed portion of the
value of the property with respect to which
tax is assessed.
V. As to taxing authority
1.National – by National Government
2.Local – Local Government
VI. As to rate
1. Progressive or graduated – rate increase as tax
base increases
2. Regressive – rate decreases as tax base increases
1. Proportionate – rate is based on fixed percentage of
the amount to be taxed.
 Distinctions of Tax from other
Impositions
I.Tax or Debt
TAXES DEBT
BASIS
Based on law Based on contract or
II. judgment
FAILURE TO PAY

Failure to pay tax may No imprisonment for

I. result in imprisonment non payment of debt
MODE OF PAYMENT
Generally payable in Payable in money
money property or service
ASSIGNABILITY
Not assignable Assignable
 PAYMENT

Not subject to compensation or set Maybe subject to compensation or set

INTEREST

Taxes does not draw interest unless Debt draws interest if stipulated or
delinquent delayed
AUTHORITY

Imposed by public authority Imposed by private individuals

 II. Tax VS Toll

Taxes Toll
Taxes are levied for the support of the Tolls are compensation for the use of
government other properties

The amount of tax is determined by Determined by the cost of the

the sovereign property or the improvement
May only be imposed by state By government or private individual
 III. Taxes VS Special Assessment
Taxes Special Assessment

SUBJECT

Levied on land, persons, property, On land

income and business, etc.
LIABILITY

Personal Liability of the tax payer Cannot be made a liability of the

person assessed
BASIS

Necessity and partially on benefits Solely on benefits

APPLICATION

general Special only to a particular time and

place
IV. Taxes
Power of taxation
Purpose is revenue
Amount is unlimited
Paid at the start of business
Cannot be surrendered except for
lawful consideration
No payment wont make it illegal but
ground for criminal prosecution
VS License fee
Power of police
Purpose is regulation
Amount is limited to cost of : issuance
of license, and inspection and
surveillance
Paid before commencement of
business
Maybe with or without consideration
No payment makes it illegal
 V. Taxes VS Penalty
Enforced proportional contributions Sanctions imposed as a punishment
from persons & property for violation of law

Raise revenue Regulate conduct

Impose only by the government Imposed by government & private

individuals
Case 1:

Distinguish direct from an indirect tax (5 pts)

Case 2:

Why is the power to tax considered inherent in a sovereign State?

(10 pts)

Case 3:

May Congress, under the 1987 Constitution, abolish the power to

tax of local governments? (15 pts)
Case 1:

X is the owner of a residential lot situated at Quirino Avenue, Pasay

City. The lot has an area of 300 square meters.

On June 1, 1994, 100 square meters of said lot owned by X was

expropriated by the government to be used in the widening of
Quirino Avenue, for P300.000.00 representing the estimated
assessed value of said portion.

From 1991 to 1995, X, who is a businessman, has not been paying

his income taxes. X is now being assessed for the unpaid income
taxes in the total amount of P150,000.00.

X claims his income tax liability has already been compensated by

the amount of P300.000.00 which the government owes him for the
expropriation of his property.

Decide. (15 pts)

 Doctrine of Equitable Recoupment
VS Doctrine of Set-Off
● Doctrine of Equitable Recoupment – refund of tax
illegally or erroneously collected or overpaid by a taxpayer is
barred by prescription.
* Equitable Recoupment is only allowed in common law countries
●

not in the Philippines. *

●Compensation or Set – Off – will take place when 2 people in
their own right are creditors and debtors to each other.
●General Rule : No set off is admissible against demands for taxes
levied for general or local govt purpose
 Taxpayer's Suit
●A taxpayer has the right to file action to question
the validity, or constitutionality, of a statue or
law.
●It is only when an act complained of directly
involves the illegal disbursement of public funds.
 Requisites of Taxpayers Suit
1. Tax money is extracted and spent in violation of specific
constitutional protections against abuses of legislative
power.
2.Public money is being deflected to any improper purpose.
3.Petitioner seeks for restrain respondents from wasting
public funds.
 Limitation of Taxation
I. Inherent Limitation – proceeds from the very nature of the taxing
power itself. Characteristics of taxation (SPINE)
1.Territoriality or Situs
2.Public Purpose
3.International Comity
4.Non – delegability of taxing power
5.Exemption of government
II. Constitutional Limitations – restrictions imposed
1. General or indirect
2. Specific or Direct
 Inherent Limitation
I.Territoriality or situs of taxation
Situs of taxation – authority that has the right to impose and collect taxes
●

● General Rule : may not tax the property laying outside its borders.
Reasons for the rule :
●

1. Taxation is an act of sovereignty only exercised with in territorial limits.

2.Concept that taxes are paid for the protection and service provided by taxing
authority
Exemptions:
●

1. Laws operate outside territorial jurisdiction.

2.Tax laws do not operate within the territorial jurisdiction of the state when
exempted by treaty obligation and international comity.
 Factors that Determine Situs : (K-
PRICE)
1.Kind of the tax being levied
2. Property taxed
3.Citizenship of the taxpayer
4.Residence of the taxpayer
5.Source of income taxed
6.Exercise, privilege, business or occupation
being taxed.
 Situs of Subject of Tax
1.Persons – poll, or community taxed is based upon the residence.
2.Property -
a) Real property – lex rei situs ( where property is located)
b)Tangible personal property – physical location
c)Intangible personal property
General rule : movables follow the person. The situs is the domicile of the owner
Exemptions : property has acquired a business situs and law provides for the
situs of the subject of tax
d) Income
Rental – location of the property
Interest – residence of the debtor
Sale of Real Property – where the property is located
Sale of personal property – place of sale
 Situs of Subject of Tax
The taxable situs will depend upon the nature of income, as follows:

• Interest -- Interest income is treated as income from within the

Philippines if the debtor or lender, whether an individual or
corporation, is a resident of the Philippines.

• Dividends -- Dividends received from a domestic corporation are

treated as income from sources within the Philippines.

Dividends received from a foreign corporation are treated as income

from sources within the Philippines -- unless only 50% of the gross
income of the foreign corporation for the three-year period preceding
the declaration of such dividends was derived from sources within the
Philippines -- but only in an amount which bears the same ratio to
such dividends as the gross income of the corporation for such period
derived from sources within the Philippines against its gross income
from all sources.
 Situs of Subject of Tax
• Services -- Services performed in the Philippines shall be treated
as income from sources within the Philippines.

• Rentals and royalties -- Gain or income from property or interest

located or used in the Philippines is treated as income from sources
within the Philippines.

• Sale of real property -- Gain from the sale of real property located
within the Philippines is considered as income within the Philippines.

• Sale of personal property -- Gain, profit or income from sale of

shares of stock of a domestic corporation is treated as being derived
entirely from sources within the Philippines, regardless of where the
said shares are sold. Gains from sale of other personal property can
be considered income from within or without -- or partly within or
partly without -- depending on the rules provided in Section 42 E of
the Tax Code.
II. Public Purpose
●Legislative is without power appropriate
revenues for anything but public purpose.
●Essential character of the direct object of the
expenditure which must determine its validity
●
 Test to Determine Public Purpose
●1. Duty Test – something which is the duty of
the state as a government to provide.
●2 Promotion of General Welfare Test – tax will
directly promote the welfare of the community in
equal measure
 III. International Comity
●Comity – respect accorded by nations to each
other because they are sovereign equals.
● Reasons of the rule :
1. Between equals there is no sovereign
2.Foreign government may not be sued without
its consent
3.Territorial jurisdiction
 IV. Non – Delegation of Taxing
Power
●General Rule : A delegate Power cannot be
further delegated
● Exceptions :
1. Tariff powers President
2.Emergency Powers
3.Executive Agreements
4.People at large
5.Administrative Bodies
 Stages/ Aspects of a system of
Taxation
1.Tax Legislation ( Levy) – enactment of a law
by Congress
a)Subject of Taxation
b)Purpose
c)Rate of taxation
d)Rules in general
2. Tax Administration – implementation of tax
law
3. Payment – Act of compliance by the taxpayer.
 V. Exemption of the Government
●General Rule : Property of the nation
government as well as those of the local
governments are not subject to tax otherwise it
will result in the absurd situation.
 V. Exemption of the Government
AS A MATTER OF PUBLIC POLICY, PROPERTY OF
THE STATE AND OF ITS MUNICIPAL SUBDIVISIONS
DEVOTED TO GOVERNMENT USES AND PURPOSES
IS DEEMED TO BE EXEMPT FROM TAXATION
ALTHOUGH NO EXPRESS PROVISION IN THE LAW IS
MADE THEREFOR.

GENERAL RULE: THE GOVERNMENT IS TAX

EXEMPT.

- HOWEVER, IT CAN ALSO TAX ITSELF.

 V. Exemption of the Government
RULES:
1. ADMINISTRATIVE AGENCIES
GOVERNMENTAL FUNCTION - TAX EXEMPT UNLESS WHEN
THE LAW EXPRESSLY PROVIDES FOR TAX. (SEC. 32 B7)

PROPRIETARY FUNCTION – TAXABLE UNLESS EXEMPTED

BY LAW. (SEC. 27C)

2. GOCCS
GENERAL RULE: INCOME IS TAXABLE AT THE RATE IMPOSED UPON
CORPORATIONS OR ASSOCIATIONS ENGAGED IN A SIMILAR
BUSINESS, INDUSTRY, OR ACTIVITY.

EXCEPTION: GSIS, SSS, PHIC, PCSO AND PAGCOR. (SEC.

27(C), NIRC)
V. Exemption of the Government
 V. Exemption of the Government
RULES:
3. GOVERNMENT EDUCATIONAL INSTITUTIONS
A. PROPERTY OR REAL ESTATE TAX – PROPERTY
ACTUALLY, DIRECTLY AND EXCLUSIVELY USED FOR EDUCATIONAL
PURPOSES – EXEMPT BUT INCOME OF WHATEVER KIND AND
CHARACTER FROM ANY OF THEIR PROPERTIES, REAL OR
PERSONAL, REGARDLESS OF THE DISPOSITION, IS TAXABLE. (SEC.
30, LAST PAR., NIRC)
B. INCOME RECEIVED BY THEM AS SUCH ARE EXEMPT
FROM TAXES. HOWEVER, THEIR INCOME FROM ANY OF THEIR
ACTIVITIES CONDUCTED FOR PROFIT REGARDLESS OF THE
DISPOSITION, IS TAXABLE. (SEC. 30, LAST PAR., NIRC)
 V. Exemption of the Government
RULES:
4. LOCAL GOVERNMENT UNITS ARE EXPRESSLY PROHIBITED BY
THE LGC FROM LEVYING TAX UPON NATIONAL GOVERNMENT, ITS
AGENCIES, AND INSTRUMENTALITIES, AND LOCAL GOVERNMENT
UNITS. [SEC. 133 (O), LGC]

5. REAL PROPERTY OWNED BY THE REPUBLIC OF THE PHILIPPINES

OR ANY OF ITS POLITICAL SUBDIVISIONS EXCEPT WHEN THE
BENEFICIAL USE THEREOF HAS BEEN GRANTED, FOR
CONSIDERATION OR OTHERWISE, TO A TAXABLE PERSON SHALL BE
EXEMPT FROM PAYMENT OF REAL PROPERTY TAX. (SEC. 234,
LGC)
 Constitutional Limitations
I.General
1. Due Process Clause
a)Substantive Due Process
b)Procedural Due Process
Due process requires:
a. Public Purpose
b. Territorial jurisdiction
c. No arbitrariness
 2. Equal Protection Clause
- Neither requires equal rates of taxation
- the equal protection clause maybe violated in :
a. classification is made where there should be none
b. when substantial distinctions exist but no corresponding
classification
 2. Equal Protection Clause
REQUISITES OF A VALID CLASSIFICATION:
1. BASED UPON SUBSTANTIAL DISTINCTIONS
2. GERMANE TO THE PURPOSES OF THE LAW
3. NOT LIMITED TO EXISTING CONDITIONS ONLY
4. APPLY EQUALLY TO ALL MEMBERS OF THE CLASS
 3. Freedom of the press
●Curtailment of press freedom and freedom of the
thought and expression if tax is levied in order to
suppress this basic right and impose a prior
restraint
●Fee imposed is not for the exercise of a
privilege but only for the purpose of defraying
part of the cost.
 4. Religious Freedom
(1) Non establishment clause
(2)Free exercise clause
(3)the latter is the basis of tax exemptions granted
to religious institutions.
●Income of such organizations from any activity
conducted for profit. Is taxable
 5. No taking of private property
without just compensation
- The government must pay just compensation
before taking private properties
 6. Non – impairment Clause
●State grants an exemption on the basis of a contract,
consideration is presumed to be paid to the state.
● Applies to the power of taxation
●Applies only where one party is the government and the
other party is a private.
●Exempted Bilaterally agreed upon between government and
tax payer
● Unilaterally granted by law and the same is withdrawn
● Exemption is granted under a franchise
 7. Law making Process
●Bill should embrace only one subject expressed
in the title thereof;
● Three readings on three separate days
● Printed copies in final form distribution
 8. Presidential power grant
reprieves, commutations and
pardons and remit fines and
forfeitures after conviction by final
judgment
II. Specific or Direct Constitutional
Limitation
1. Taxation shall be uniform and equitable
●Uniformity – articles or properties are of the same class
shall be taxed the same rate
●Equity – appointment of tax should consider the taxpayer's
ability to shoulder the tax burden
2. progressive system of Taxation - as the resources of the
taxpayer become higher his tax rate likewise increases.
●- based on the ability to pay and in implementation of the
social justice principle
●Constitution does not really prohibit regressive
taxes
● Directive upon congress, not a justifiable right
●Vat paid by the consumer or business for every
good bought or services enjoyed is the same
regardless of income.
3. Non Imprisonment for payment of
poll tax
●Poll tax -imposed on a per head basis.
“community tax”
●One cannot be imprisoned for non payment of
poll tax. Payment is not mandatory
4. Origin of Revenue or Tariff Bills
●Not the law but the revenue bill which is
required by the constitution to originate
exclusively
●Constitution simply means the the initiative for
filing the bills must be from the House.
5. Veto Power of the President
6. Delegated authority of the president to impose tariff rates.
7. Tax exemption of charitable institution, churches, convents, all
lands, building and improvements actually directly or exclusively
used.
Real estate tax
●

Test of Exemption
●

Nature of Use
●

Exclusive
●

Scope of Exemption
●
 8. Voting requirement for Tax
Exemption
●To prevent indiscriminate grant of tax
exemptions.
●Granting tax exemptions, an absolute majority of
the members of the congress is required
●Constitutional grant of exemption may be self
executing
9. no use of public money or property for religious
purposes
Except when priest is assigned to the Armed Forces
10. Special Assessments – money collected on tax levied
for special purpose to be used only for such purpose
11. Supreme Courts power to review judgement
12. Grant Authority to local government units
13. Tax exemption granted to non – stock, non profit
institutions
Case 1:
In 2018, Congressman Gloria Arroyo passed a tax law withdrawing tax
exemption of a certain Company owned by Manny Villar. There are a total 250
members of Congress. During the deliberation, only 125 are present and only
121 voted to withdraw exemption

Is there a valid tax law? Explain (10 pts)

Case 2:
An executive Order was issued pursuant to law, granting tax and duty
incentives only to businesses and residents within the "secured area" of the
Subic Economic Special Zone, and denying said incentives to those who live
within the Zone but outside such "secured area".
Is the constitutional right to equal protection of the law violated by the
Executive Order? Explain. (15 pts)
Case 2:

No. Equal protection of the law clause is subject to reasonable classification.

Classification, to be valid, must
(1) rest on substantial distinctions,
(2) be germane to the purpose of the law,
(3) not be limited to existing conditions only,
(4) apply equally to all members of the same class
There are substantial differences between big investors being enticed to the "secured
area" and the business operators outside that are in accord with the equal protection
clause that does not require territorial uniformity of laws. The classification applies
equally to all the resident individuals and businesses within the "secured area". The
residents, being in like circumstances to contributing directly to the achievement of
the end purpose of the law, are not categorized further. Instead, they are similarly
treated, both in privileges granted and obligations required.
(Tiu, et al, v. Court of 4npeals, et al, G.R. No. 127410, January 20, 1999)
Case 3:
The House of Representatives introduced HB 7000 which envisioned to levy a
tax on various transactions. After the bill was approved by the House, the bill
was sent to the Senate as so required by the Constitution. In the upper house,
instead of a deliberation on the House Bill, the Senate introduced SB 8000
which was its own version of the same tax. The Senate deliberated on this
Senate Bill and approved the same. The House Bill and the Senate Bill were
then consolidated in the Bicameral Committee.
Eventually, the consolidated bill was approved and sent to the President who
signed the same. The private sectors affected by the new law questioned the
validity of the enactment on the ground that the constitutional provision
requiring that all revenue bills should originate from the House of
Representatives had been violated.
Resolve the issue (15 pts)
 Double Taxation
●Taxing the same person twice by the same
jurisdiction over the same thing.
●There is no constitutional prohibition against
double taxation in the Philippines.
 Kinds of Double Taxation
I.Direct Duplicate Taxation
II.Elements :
1. Same property or subject matter are taxed twice when in
should be tax only once.
2.Both tax are levied for the same purpose
3.Same taxing authority
a) Within jurisdiction
b)Same taxing period
c)Covering the same kind or character of tax
 II. Indirect Duplicate Taxation
●Absence of one or more of the above mentioned
elements of direct double taxation
 Case
Campania General de Tabacos de Filipinos v. City of Manila, 8
SCRA 367 [1963]).

A municipality, BB, has an ordinance which requires that all stores,

restaurants, and other establishments selling liquor should pay a fixed
annual fee of P20.000. Subsequently, the municipal board proposed an
ordinance imposing a sales tax equivalent to 5% of the amount paid for
the purchase or consumption of liquor in stores, restaurants and other
establishments. The municipal mayor, CC, refused to sign the ordinance
on the ground that it would constitute double taxation.
Is the refusal of the mayor justified? Reason briefly.
 International juridical double
taxation
●Comparable taxes in 2 or more states on the
same taxpayer in respect of the same subject
matter and for identical periods.
 Methods reducing the rigors of
Double Taxation
1.Tax Credits
2.Tax deductions
3.Reduction of the Philippine income tax rate
4.Tax Exemptions
5.Tax Treaties
Tax Credits vs Tax Deductions
Tax Credits vs Tax Deductions
Tax Credits vs Tax Deductions
Forms of basic escape from taxation

I.Shifting – transfer of the burden of the tax by

the original payer or the on on whome the tax
was assessed
● Direct tax cannot be shifted
● Impact of taxation
● Incidence of taxation
 II. Tax evasion
●Connotes fraud through the use of pretenses and forbidden
devices to lessen or defeat taxes
● FACTORS OF TAX EVASION
1. End to be achieved
2.Accompanying state of mind
3.A course of action is unlawful
PROOF OF TAX EVASION
1. Failure to declare for taxation purposed true.
2. substantial under declaration of income in the tax returns
of the taxpayer for 4 consecutive years coupled with
intentional overstatement
 III. Tax Avoidance
●Exploitation by the taxpayer of legally
premissible alternative tax rates
●Tax saving device within the means sanctioned
by the law.
●Taxpayer has legal right to decrease the amount
of what would otherwise be his taxes.
 IV. TAX EXEMPTION

●The grant of immunity to particular persons or

corporations
● Revocation of Tax Exemption
●Since taxation is the rule and exemption is the
exception, thus be withdrawn at the pleasure of
the taxing authority.
 Restrictions on revocation
1.Non – impairment clause – material
consideration
2.Adherence to form – effected through
constitutional amendment only
3.In a form of special law and not by a general
law.
 Nature of Tax Amnesty
●General overlooking by the state of its authority
to impose penalties on persons otherwise guilty
of evasion
● Absolute forgiveness
●Give tax evaders who wish relent and are willing
to reform a chance to do so.
 Rules of Amnesty
1.Tax Amnesty
a) Never favored nor presumed
b)Construed strictly against the taxpayer
c)government not estopped from questioning the
tax liability
d)Defense of tax amnesty like insanity, is a
personal defense.
 Nature of Tax Laws
1. Not political in character
2.Civil in nature
3.Not penal in character
 Construction of Tax laws
1.Prospective in operation
2.Receive reasonable construction with a view to
carrying out their purpose
3.There is no doubt
4.Where language is plain
5.Where taxpayer claims exemption
6.Provisions of the taxing act are not to be
extended
7.Special laws and prevail over general laws
 Application of Law
● Tax laws are prospective in operation
●Nevertheless operate retroactively provided it is
expressly declared
 Kinds of Provisions of Tax Laws
1. Mandatory – intended for security of the
citizens
2.Directory – merely for information
 Sources of Tax Laws
1.Constitution
2.Legislation or statues
3.Contemporaneous construction
4.Administrative rules and regulations
5.Judicial Decisons
6.Tax treaties
Case 1:
When an item of income is taxed in the Philippines and the same
income is taxed in another country, is there a case of double taxation?
(10 pts)
Case 2:
Distinguish tax evasion from tax avoidance. (5 pts)
Case 3:
Due to an uncertainty whether or not a new tax law is applicable to
printing companies, DEF Printers submitted a legal query to the
Bureau of Internal Revenue on that issue. The BIR issued a ruling that
printing companies are not covered by the new law. Relying on this
ruling, DEF Printers did not pay said tax. Subsequently, however, the
BIR reversed the ruling and issued a new one stating that the tax
covers printing companies.
Could the BIR now assess DEF Printers for back taxes corresponding
to the years before the new ruling? Reason briefly. (15 pts)