Angeles City
deduction
Building permit fee as an implement of police power
hence the non-stock non-profit exemption cannot be
invoked;
Power of Taxation in Re Eminent Domain
Can there be an exercise of Eminent Domain through
taxation?
Q: congress enacts a law that says if you are a real
property owner you have to pay tax percentage
depending on your land holdings ie: ½ of 1% of land
holding. Valid?
A: No. Because it is an improper exercise of the Eminent
Domain. No payment of just compensation. Taking of
private property hidden in the guise of taxation is
invalid for it violates due process.
Q: Possible to achieve the goals of Eminent Domain
through Taxation?
A: CIR v Drugstore (drugstore cases)
Involves Senior citizens discount; 1st ruling: Police
power; 2nd ruling Eminent Domain through taxation
Facts: SC discount at 20%; according to drugstore
owners the government takes away property without
paying just compensation. Their profit is 10% while
discounted selling price is 20%. Lugi ng 10%, taking of
private property without just compensation. Arbitrary
daw?
Before: allowed as tax credits. The accumulated SC
discount will be allowed as tax credit. Ie. 4M tax , the
4M will not be entirely paid. Tax credit of 1M will be
recognized, hence 4M minus 1M: pay 3M tax (present
law: tax deductions no more tax credit. Tax deductions
in the nature of just compensation – Power of Taxation
as an exercise of Eminent Domain)
Eminent Domain: there is payment of just
compensation. Achieved through tax crediting
mechanism. Because the government recognizes the tax
credit hence the government shares in the burden the
taxpayers then enjoys the benefit. The Just
compensation achieved through the grant of tax credit.
Present: just compensation achieved through tax
Inherent Powers of a State
Noneed for consti provision
The consti provisions serve as mere limitations not
grant of taxation power.
Limitations in the exercise of taxation
CUPS – cmprehensice unlimited plenary supreme
Unlimited: The power of taxation knows no limits or
boundaries except the will of congress. Wisdom of
congress sets the limitation in the otherwise unlimited
power. But not absolute. There are always limitations in
the power.
Kinds; Inherent L. and Consti L.
Inherent Limitation:
1. Utitlized only for a public purpose: exercised
only in consistence with the sovereign power.
Note: the number of power benefited does not
ordinally justify the “oublic purpose” ie:
construction of road in a private property which
will benefit thousands of people. Does not
comply qith public purpose even if the
beneficiary are thousands because it is
constructed for private ourpose. Uless the road
is expropriated h=it is not for public purpose.
Ie: public road but beneficiary are only few,
complies with oublic purpose because anyone
can use the road
Ie: mere direct benefit to a few will not
necessarily negate the public purpose if the
general intent is for the benefit of the general
public. Ie: scholarship for certain students, the
diret benefit to the schoar. Public purpose? Yes,
the general intent for education which is a
public purpose
Ie: allocation of funds for free tertiary
education, senior high education: public
 purpose even the direct benefit is to the
students, the general intent is for quality educ
Ie: congress allocated funs for CHE to grant
subsidies to private educ institutions: . Public
purpose? Fr definite educ puposes and
parameters are ut to place anf dor promotion of
quality education, then valid (opinion Atty
Barlis)
Ie; Tax measure no specification of purpose:
valid? Yes bec if there is no specigic purpose, by
default the funds goes to the general fund of
the government it is understood that it will only
be used for public purpose;
Oublic purpose: From levy until spending, must
always comply with public purpose
Remedy of taxpayer: taxpayer suit: required to
identify yourself as directly and adversely
affected by the spending of the public fund
2. Inherently Legislative: all tax exemptions
granted only by law; requirement – majority of
all members of congress must be obtained not
just the majority of the quorum provided that
those who attended comprises of quorum
Tax exemption v tax assumption
Tax treaty exemption: treaty requires concurrence of
congress
Ie: Ph and Japan entered into a treaty through
exchange of notes, that japan will grant ph loan for a
specific project undertaken by japanses contractors.
Any tax obligation will be assumed by the govt of the
Philippines.Mitsubishi despite the treaty paid tax, BIR
did not want to grant refund accdg to bir mere
exchange of note not a treaty not concurred by senate.
Hence no exemtion can be granted from that.
SC: it is a case of tax assumption not a tax exemption
entered by ph anf japan.an internation agreement
hence must be respected. Because it must be
respected, the provision in the agreement referring to
the tax assumption, must also be respected. BIR is
authorized wrongly paid taxes not the NAPOCOR.
Consequences:
1. Exemption granted only by law
2. Any claim for decdution must also be pursuant
only to law. The taxpayer cannot claim ules the
basis is law
3. NO OTHER DEPT AGENCY IS AUTHORIZED TO
IMPOSE TAX EXCEPT THE CONGRSS. PRESIDENT
CANNOT LEVY NOR GRANT TAX EXEMPTION
Exception (inherently leg)
1. Consti auth or allows delegationie: tariff
rate tonnage dues import and export
quotas
2. Taxing powers of local gvt units_ auth to
exercise taxing measures. Their power to
tax is not inherent nor delegated. Directly
granted and vested by the constituin.
3. Purely admin fxn: expectedthat the cogress
does exercise this powers after all the
admin of tax laws requires expertise which
may not be necessarily possessed by the
congress
3 Territorialty; tax laws cannot go beyond or
extend our territorial jurisdiction, implement
within
Ie: fil owns condo in japan residing in ph; condo
used for a fee; generates income. Q: real prop
taxes being a fil?; Q: income from the rentals in
japan subj to ph income tax?; Q:how to
harmonize?
A: since the rp is in japan, japan in the place of
taxatn when it comes to real prop taxes; if ph
imposes tax on rp located abroad, violates
territoriality because the place of taxatn of rp is
the location.
Always the situs is the place of taxation. The
situs of the place of taxatn depends on the kind
of taxaes imposed.
A: earned income, subj to ph income tax. Why?
Because income is actually an exercise of the
right. Income tax an excise tax imposed on the
privileged to earn income. The possible places
of taxation recognized are any of the ff:
citizenship, residence, place of exercise and if
any of these three will be used to justify the
imposition, then the place of taxation would still
be in the ph.
Ie: fil went to japan no longer for vacation
purposes, stayed there most of the time,
earned income abroad, subject to ph income
tax? A: may it be taxed? Yes; but is it taxed??
No. a non-resident citizen cannot be taxed from
income sourced outside the Philippines
Territoriality; applicable in the imposition of
final taxes. Final withholding tax. Transactions
sourced without ph cannot be subj of ph FWT;
FWT always subject to territoriality
Ie: fil has bank deposits in Switzerland earn
substantial income from the deposit.. may the
interest income from switz subj to income tax
FWT in the interest from bank deposits/deposit
sub? NO because FWT is subj to territoriality. If
we impose the FWT, the payor of income reqto
withhold otherwise held personally
acoountable. If payor withholds, he remits to ph
govt. In rel to territotirly if we req withholding,
who is the payor? Swiss bank, swiss bank will
withhold and req to remit. We cannot hold it
liable. No teritoirla jurisdiction over the swiss
bank. Q: the interest income, can be subject to
income tax as a resident, with or without ph.
But no FWT. But the income staxed form part of
tax payer’s gross income
Ie: royalties: wrote abook, sold abroad. Tax
liability: roylayt in ph subj to FWT; royalty from
abrod not subj to FWT but taxable as part of
gross income
4. International comity : state are equals;
Consequence: cannot impose tax laws to other
country pr pol representatives of other country;
no taxes to the ambassadors of other countries;
treaty obligations must be respected.
Case: Bir rev memo: tax peyer invoking those
treaty must secure a confirmatory ruling from
int; tax affairs division. Can still be valid even
without a confirmatory ruling as long as it
confirms to the treaty it must be respected.
5. Inherently exempt from taxes (the
governemnt)
Government inherently exempt. The polital
instrument, pol subdvison and agency; does
not include govet owned or controlled
corpo; incase of doubt: we rule that the
government is exempt from taxes.
The government tho can still tax itself ie:
imposition of import duties unless the
situation falls within the exemption under
the law: by default the govt s liable or may
impose taxes upon itself
Req: 1. There must be a clear and definitie
provision of law; 2. Show that it falls within
the exemption under the law. – if law not
clear: govtnot liable for taxes
Ie: LRTA v CPAA
Lrta operation railways subjected to
realproperty tax but is resisting that it is
gocc, function: beneficial to the public,
mass transportation
SC: mass transpo is a proprietary venture,
not part of the govt task in govt nature, it is
propritery nature hence must be subjected
to tax as if it were an ordinary tax payer.
Mere fact that lrta performs task beneficial
task does not autmocally mean it is exempt.
Must prove a clear and definite provision of
law for exemption.