Professional Documents
Culture Documents
Basis of Taxation
1.Necessity-government cannot exist and function without the means to pay its
Expenditures.
2. Reciprocal Duties – protection and support between the state and its inhabitants.
Limitations of Taxation
1. Taxation is for public purpose- the proceeds of the tax must be used for the support
of the state or for some recognized objects of government or to directly promote the
welfare of the community.
2. Taxation is inherently legislative- inherent power of sovereignty
Aspect of Taxation
1. Levy- refers to the legislative act of imposing the tax and is exercised by congress
2. Collection – administrative act of collecting the tax and is exercised by the executive
branch of the government
2.Police power- inherent power of the sovereign state to enact laws to promote public
health, public morals.public safety and the general welfare of the people.
3.Eminent domain- inherent power of the sovereign state to take private property for
public use upon payment of just compensation.
AMOUNT:
Taxation-no limit so as long as it is not confiscatory
Police power- should only cover the cost of the regulation (issuance of a license)
Eminent domain- the amount depends on the value of property needed
COMPENSATION
T-general benefit to all inhabitants
P-intangible altruistic feeling of having done something good
E- just compensation
PROPERTY TKEN
T-generally money
P-property including money which is the source, implements, or proceeds of the danger to
health, safety or morals
E- property other than money and chooses in action
SCOPE
T & E- interfere only with property rights although violation of tax laws may result to
imprisonment
P-regulates both liberty and property.
Purpose of Taxation
1.Revenue raising-to support purposes of government, to finance the needs of the citizen
and to advance the common well
1.Fiscal Adequacy- the sources(proceeds) of tax revenue should coincide with and
approximate the needs of government expenditure. Neither an excess
or a deficiency of revenue vis-à-vis the needs of government would be in
keeping with the principle.
2. Administrative feasibility- the tax system should be capable of being properly and
efficiently administered by the government and enforced with the
least convenience to the taxpayer.
- Tax must be plain and clear to the taxpayer and should be capable
of efficient enforcement by government officials.
3. Theoretical justice – tax system should be fair to the average taxpayer and based upon
his ability to pay.
- equitable
- proportionate to the ability of taxpayer.
1.Life Blood Theory-taxes constitute the lifeblood of the nation and are greatly needed to
support the government and its widely expanding services to the people.
Application of lifeblood
-must be collected with unnecessary hindrance
-claims for refund or tax credit should be exercised within the time fixed
by law
-government agencies continue to operate and with which the state effects
functions for the welfare of its constituents
-court must be similarly sensitive of its responsibility to apply principles of
justice,equity and fairness as its guide in its difficult tasks of weighing the
evidence and of deciding cases.
2.Necessity Theory- Government has the right to compel all its citizens and property within
its limits to pay taxes since its existence is a necessity.
.Doctrines in Taxation
3.Double Taxation
-taxing for the same taxing period the same thing or activity twice
when it should be taxed but once, for the same purpose with the
same kind of character of tax.
Constitutionality
Double Taxation in its stricter sense isundoubtedly unconstitutional but that in the
broader sense is not necessarily so.
General Rule:
Our Constitution does notprohibit double taxation; hence, it may not be invoked as a defense
against the validity of taxlaws.
a.Where a tax is imposed by the NationalGovernment and another by the city for theexercise of
occupation or business as the taxesare not imposed by the same public authority(
City of Baguio vs De Leon, Oct. 31, 1968)
b.When a Real Estate dealer’s tax is imposedfor engaging in the business of leasing real estatein
addition to Real Estate Tax on the propertyleased and the tax on the income desired as theyare
different kinds of taxc.Tax on manufacturer’s products andanother tax on the privilege of storing
exportablecopra in warehouses within a municipality areimposed as first tax is different from the
secondd.Where, aside from the tax, a license fee isimposed in the exercise of police power.
Exception:
Double Taxation while not forbidden,is something not favored. Such taxation, it hasbeen held,
should, whenever possible, be avoidedand prevented.a.Doubts as to whether double taxation
hasbeen imposed should be resolved in favor of thetaxpayer. The reason is to avoid injustice
andunfairness.b.The taxpayer may seek relief under theUniformity Rule or the Equal
Protectionguarantee
Direct Double Taxation-taxing twice by the same public authority for the same
purpose during the same taxing period some of the property in the territory in which the
tax is laid without taxing all of them a second time
2)CREDIT METHOD – the tax paid in the state ofsource is credited against the tax levied
in thestate of residence
c.Onward shifting- tax is transferred two or more times through the factors
of distribution or production.(maybe forward or backward)
AS TO SOURCE:
i. constitutional
ii.statutory
AS TO MANNER OF GRANT
iii.express
iv. implied
AS TO SCOPE
v. total
vi. partial
SOURCES OF EXEMPTION
1.Constitution
2.Statutes
3.Treaties
4.Ordinances
5.Franchises
6.Contracts
6. Compensation and Set off-( taxes are not subject to set-off or legal comensation)
-there were taxes and taxpayer’s claim are fully
liquidated,due and demandable,legal compensation under
art 1279 of the Civil Code can take place by operation of law
and both debts are extinguished to the concurrent amount.
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 areconsumable, they
be of the same kind and also of the same quality if thelatter has been stated.
(Francia v. IAC, 162 SCRA 754 and Republic v. Mambulao Lumber, 4 SCRA 622)
•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-visthe estate
taxes due from his estate. The fact that the court havingjurisdiction of the estate had
found that the claim of the estate against thegovernment has been appropriated for the
purpose by a corresponding lawshows that both the claim of the government for
inheritance taxes and theclaim of the intestate for services rendered have already
become overdue anddemandable as well as fully liquidated. Compensation therefore
takes place byoperation of law.
7.Compromise-allowed and enforceable when the subject matter thereof is not prohibited
from being compromised and the person entering into it is duly
authorized to do so.
- Civil and criminal liability
8.Tax liability
A.meaning
B.Distinguished from tax exemption
EX..does not extend to cases involving the issue of the validity of the tax law itself
which is presumed valid.
-the government is not estopped from collecting taxes because of mistakes
or errors on the part of its agents.