TAXATION- it is the process or means by which the sovereign
(independent state), through its law making body (the
legislature), imposes burdens upon subjects and objects
within its jurisdiction for the purpose of raising revenues to
carry out the legitimate objects of government.
PURPOSES OF TAXATION
Primary Purpose
Revenue or Fiscal Purpose - To provide funds or property with
which to promote the general welfare of its citizens and to
enable it to finance its multifarious activities.
Secondary Purpose
Regulatory Purpose or Sumptuary/Compensatory- While the
primary purpose of taxation is to raise revenue for the
support of the government, taxation is often employed as a
devise for regulation or control (implementation of State’s
police power) by means of which certain effects or conditions
envisioned by the government may be achieved such as:
 Promotion of General Welfare
 Reduction of Social Inequality
 Economic Growth
THEORY AND BASIS OF TAXATION
Theory (Authority): LIFEBLOOD THEORY or NECESSITY
THEORY
 The power of taxation proceeds upon the theory
that the existence of government is necessity
(“Necessity Theory”). It is necessary burden to
preserve the State’s sovereignty and a means to give
the citizenry an army to resist aggression, a navy to
defend its shores from invasion, a corps of civil
servants to serve, public improvements for the
enjoyment of the citizenry and those which come
within the State’s territory and facilities and
protection which a government is supposed to
provide.
 The power of taxation is essential because the
government can neither exist nor endure without
taxation “Taxes are the lifeblood of the government
and their prompt and certain availability is an
imperious need” (Lifeblood Doctrine)
Manifestation of LIFEBLOOD THEORY
A. Rule of “No Estoppel against the Government”
 The state cannot be stopped by the neglect of its
agents/officers
 Erroneous application and enforcement of law by
public officers do not block the subsequent correct
application of statutes
B. Collection of taxes cannot be enjoined (stopped) by
injunction
 no court, except the Court of Tax Appeals (through
administrative remedies when collection could
jeopardize the interest of the government or
taxpayer.
C. Taxes could not be the subject of compensation or
set-off
 Taxes cannot be subject to set-off or compensation
since claim for taxes is not a debt or contract. A
distinguishing feature of a tax is that it is compulsory
rather than a matter of bargain.
D. Right to select objects (subject) of taxation
 The power to tax is essentially legislative in nature.
Hence, the right to select the objects/subjects of
taxation rests with the Congress.
Basis of Taxation: BENEFITS RECEIVED or RECIPROCITY
THEORY
 Basis is the reciprocal duties of protection and
support between the state and its inhabitants.
 The state collects taxes from the subjects of taxation
in order that it may be able to perform the functions
of government.
 The citizens, on the other hand, pay taxes in order
that they may be secured in the enjoyment of the
benefits of organized society. This theory spawned
the Doctrine of Symbolic Relationship which means,
taxes are what we pay for civilized society.
SCOPE OF THE POWER OF TAXATION- the most absolute of
all powers of the government.
 Comprehensive- as it covers persons, businesses,
activities, professions, rights and privileges.
 Unlimited- in the absence of limitation prescribed by
law of the constitution, the power to tax is unlimited
and comprehensive.
 Plenary- as it is complete; BIR may avail of the
certain remedies to ensure collection of taxes
 Supreme- in so far as the selection of the subject of
taxation
ESSENTIAL ELEMENTS OF A TAX
A. It is an enforced contribution
B. It is generally payable in money
C. It is proportionate in character
D. It is levied on persons, property, or the exercise of a
right or privilege (subjects or objects of taxation
E. It is levied by the law-making body of the state
F. It is levied for public purpose
ASPECTS OF TAXATION
2. ASSESSMENT
(Executive
function)
1. LEVYING
3. COLLECTION
(Executive
(ligislative function)
Function)

1NATURES/CHARACTERISTICS OF THE STATE’S POWER TO
TAX
1. It is inherent in sovereignty
2. It is legislative in character
3. Exemption of government entities, agencies and
instrumentalities.
4. International comity (polite and friendly agreement
among nations)
5. Limitation of territorial jurisdiction
6. Strongest among the inherent powers of the state
Exceptions to non-delegation rule:
a. Delegation as provided for in the 1987 Constitution
such as “delegation to the president” under section
28 article vi stating that the congress may authorize,
by law, the president to fix, within specified and
subject to such limitations and restrictions as it may
impose:
 Tariff rates
 Import and export quotas
 Tonnage and wharfage of dues
 Other duties and imposts within the framework of
the national development program of the
government
b. The power of local government units to impose taxes
and fees is always subject to the limitations which
congress may provide, the former having no
inherent power to tax
 Power to value property
 Power to assess and collect taxes
 Power to perform details of computation,
appraisement or adjustment, among others.
CLASSIFICATION OF TAXES
Scope
1. National- imposed by the national government
(income tac, estate tac, donor’s tac, VAT, etc)
2. Local- imposed by local government units such as
municipal corporation (real estate tax, professional
tax receipts)
OBJECT
1. PERSONAL. POLL OR CAPITATION- tax of fixed
amount imposed upon individual, whether citizens
or not, residing within a specified territory without
regard to their property or the occupation in which
he may be engaged (community tax)
2. PROPERTY- imposed on property whether real of
personal in proportion either to its value or in
accordance with some other reasonable method of
appointment (real estate tax)
3. Excise- tax which does not fall within the
classification of a poll tax or a property tax. This is a
tax on the exercise of certain rights and privileges
(income tax, estate tax, donor’s tax)
BURDEN
1. Direct- tax which is demanded from the person who
also shoulders the burden of tax or tax which the
taxpayer cannot shift to another
2. Indirect- tax which is demanded from one person in
the expectation and intention that he shall indemnify
himself at the expense of another
AMOUNT
1. Specific- tax of fixed amount imposed by the head or
number or by some standard of weight or
measurement
2. Ad valorem- tax of fixed proportion of the value of
the property with respect to which the tax is
assessed
PURPOSE
1. Primary, Fiscal, or Revenue Purpose- tax imposed
solely for the general purpose of the government
2. Secondary, Regulatory, Special or Sumptuary
Purpose- tax imposed for a specific purpose
RATE
1. Proportional- tax based on a fixed percentages of
amount of the property, receipts, or other basis to
be taxed
2. Progressive or graduated- tax the rate of which
increases as the tax base or bracket increases
3. Regressive- tax the rate of which decreases as the
tax or bracket increases
ELEMENTS OF SOUND TAX SYSTEM
A. Fiscal Adequacy- the fundamental purpose of
taxation if to raise the revenue necessary to fund
public services
B. Theoretical Justice or Equity- ability to pay principle
C. Administrative Feasibility- tax laws must be capable
of effective and efficient enforcement. A good tax
system requires informed stakeholder who
understand how taxes are assessed, collected and
complied with
LIMITATIONS ON THE STATES’S POWER TO TAX
The restriction arising from the very nature of the power to
tax itself. Inherent limitations are those limitations which
exist despite the absence of an express constitutional
provision.