TAX REVIEWER property of the estate already in the hands of an heir
(Midterms) may be subject to the payment of the tax due the
 Taxation is a mode of raising revenue for public
purposes.
 Taxes are enforced proportional contributions from
persons and property, levied by the state by virtue
of its sovereignty for the support of the government
and for all its public needs.
 Taxes are proportional in character since taxes are
based on one’s ability to pay.
 The power to impose taxes is a legislative power.
 Lifeblood Doctrine: Taxes are the lifeblood of the
government, and their prompt and certain
availability is an imperious need. Taxes are the
nation’s blood through which government agencies
continue to operate and which the State discharges
its functions for the welfare of its constituents. (CIR
vs. Next Mobile, Inc.)
 Taxation should be construed: Revenue laws are
not intended to be liberally construed. Taxes are the
lifeblood of the government, hence, laws relative
thereto must be faithfully and strictly implemented.
 Re. Estoppel: In matters of taxation, the
government cannot be estopped by the mistakes,
errors or omissions of its agents for upon it depends
the ability of the government to serve the people
whose benefit taxes are collected.
 Collection of taxes cannot be curtailed by
injunction or any like action. It should be actively
pursued without unnecessary impediment.
 Tax Lien: The BIR should be given the necessary
discretion to avail itself of the most expeditious
way to collect taxes, because taxes are the lifeblood
of the government, and their prompt and certain
availability is an imperious need.
 In CIR vs. Pineda, payment of income tax shall be a
lien in favor of the government from the time the
assessment was made by the CIR until paid with
interests and penalties. By virtue of such lien, the
estate.
 Tax exemption should be construed: In the case
of YMCA vs. CIR, the Supreme Court held that
since taxes are the lifeblood of the government, a
claim of statutory exemption from taxation should
be manifest and unmistakable from the language of
the law on which it is based. The claimed
exemption must expressly be granted in a statute
stated in a language too clear to be mistaken.
 Taxes are the lifeblood of the government and so
should be collected without unnecessary hindrance.
Thus, claims for refund or tax credit should be
exercised within the time fixed by law. However,
such collection should be made in accordance with
law as any arbitrariness will negate the very reason
for government itself.
 Necessity Theory: Taxation is a power predicated
upon necessity. It is a necessary burden to preserve
the State’s sovereignty and a means for the State to
discharge its functions for the welfare of the people.
 Benefits-Protection Theory/Doctrine of
Symbiotic Relationship: The obligation to pay
taxes is involuntary and compulsory, in exchange
for the protection and benefits one receives from
the government.
 Taxes are Personal to the Taxpayer, hence, a
corporation’s tax delinquency cannot be enforced
against its stockholders unless it appears that the
corporate assets have passed into their hands.
 Taxation is an inherent attribute of sovereignty. It is
a power that is purely legislative. Essentially, the
legislative has the discretion to determine the
nature, object, extent, coverage and situs of
taxation.
 Courts have no power to inquire into or interfere in
the wisdom, objective, motive or expediency in the
passage of a tax law, as this is purely legislative in
character. However, the courts may review the levy
 of the tax to determine whether the purpose is a
public one but once that is determined, the courts
can make no other inquiry as to the purpose of the
tax, as it affects the power to impose it.
 It is settled that the legislature has the inherent
power to select the subject of taxation and to grant
exemptions.
 Power to Tax as the Power to Destroy: The
power to tax is the strongest of all the powers of
government. Thus, it is sometimes described as the
power to destroy. However, the power to tax only
includes the power to destroy if it is used validly as
an implement of the police power. But where the
power is used solely for the purpose of raising
revenues, the modern view is that it cannot be
allowed to confiscate or destroy.
 Although the power of taxation is sometimes called
also as the power to destroy, it should still be
exercised with caution to minimize injury to the
propriety rights of a taxpayer. It must be exercised
fairly, equally and uniformly, lest the tax collector
kill the hen that lays the golden egg.
 However, it has been said that the power to tax is
not the power to destroy while the Supreme Court
sits. While taxation is said to be the power to
destroy, it is by no means unlimited. Thus, when
the legislative imposes a burdensome tax and an
abuse is manifested as to destroy natural and
fundamental rights, it is the duty of the judiciary to
hold such an act as unconstitutional.
 The primary purpose of taxation is to raise funds
to enable the State to promote the general welfare
and protections of its citizens. Other than that,
taxation also seeks to: (1) reduce social inequality,
(2) encourage the growth of local industries, (3)
protect our local industries against unfair
competition, (4) implement the police power of the
state.
 In the case of Tio vs. Videogram Regulatory Board,
it has been held that the power of taxation may be
used as an implement of the police power of the
State through the imposition of taxes with the end
in view of regulating a particular activity.
 Taxation is said to be:
(a) Comprehensive - it covers persons, businesses,
activities, professions, rights and privileges.
(b) Unlimited
(c) Plenary - it is complete
(d) Supreme - insofar as the selection of the subject
of taxation is concerned.
 Taxation is said to be equitable when its burden
falls on those better able to pay; taxation is
progressive when its rate goes up depending on the
resources of the person affected.
 A tax law will retain its validity even if it is not in
consonance with the principles of fiscal adequacy
and administrative feasibility. However, if a tax
law runs contrary to the principle of theoretical
justice, such violation will render the law
unconstitutional considering that under the
Constitution, the rule of taxation should be uniform
and equitable.
 The imposition is a tax if its primary purpose is to
generate revenue, and regulation is merely
incidental. But if regulation is the primary purpose,
the fact that incidental revenue is also obtained does
not make the imposition a tax.
 As a rule, taxes are not subject of set off because
the government and the taxpayer are not creditors
and debtors of each other. However, in a particular
case, the SC allowed offsetting of taxes because the
determination of the taxpayer’s liability is
intertwined with the resolutions of the claim for tax
refund of erroneously or illegally collected taxes.
 There can be no off-setting of taxes against the
claims that the taxpayer may have against the
government. A person cannot refuse to pay a tax on
the ground that the government owes him an
amount equal to or greater that the tax being
collected.
 The reason why off-setting of taxes is not allowed
is that taxes are not in the nature of contracts
between the party but grow out of duty to, and are
the positive acts of the government to the making
and enforcing of which, the personal consent of
individual taxpayer is not required.
 The power of taxation is not without restrictions.
These limitations are classified as Inherent
Limitations and Constitutional Limitations.
 Inherent Limitations on the Power to Tax:
(a) Public purpose
- an inherent limitation on the power of
taxation is public purpose. They cannot be use
for purely private purpose.
- it is the purpose which determines the public
character of the tax law, not the number of
persons benefited. As long as the ultimate
result favors the welfare of the public in
general, the appropriations of a public revenue
is deemed done for a public purpose.
- the public purpose of a tax may legally exist
even if it favors one over another.
- the entrusting of the collection of the fees
does not destroy the public purpose of the
ordinance. So long as the purpose is public, it
does not matter whether the agency through
which the money is dispensed is public or
private.
- the rule is that, if the public benefit is merely
incidental in the promotion of a particular
enterprise, such defect shall render the law
invalid. On the other hand, if what is incidental
is the promotion of a private enterprise, the tax
law shall be deemed for a public purpose.
(b) International comity
- Under Sec. 2, Art. 2 of the Phil. Consti., the
PH adopts the generally accepted principles of
international law as part of the law of the land.
One principle of intl. Law which has attained
recognition is the principle of Sovereign
Equality Among States, which means that
states are judicially equal, enjoy the same
rights and have equal capacity in their exercise.
Thus, if a tax law is passed imposing real
property tax upon foreign embassies, this is
NOT a valid law because it violates the
above-mentioned principle considering that
embassies are extensions of the territoriality of
the foreign state.
(c) Territoriality
- the taxing power of a country is likewise
limited to person and property within and
subject to its jurisdiction.
(d) Non-delegation of the power to tax
- The power to tax is exclusively vested in the
legislative body. EXCEPTIONS:
a. Art. 6, Sec. 28(2) of the Constitution: The
Congress may, by law, authorize the President
to impose tariff rates, import and export
quotas, subject to the limitations and
guidelines as the Congress may impose.
b. Art. 10, Sec. 5 of the Constitution: Each
local government unit shall have the power to
create its own sources of revenue, fees,
charges, subject to such guidelines and
limitations as the Congress may provide
consistent with the basic policy of local
autonomy.
- By necessary implication, the legislative power to
create political corporations for purposes of self-
government carries with it the power to confer on such
local government agencies the power to tax, provided
that the requisites for a valid delegation of power
has been complied with.
 (e) Tax exemptions
- Properties of the national government as well as
those of the local government units are not subject
to tax, otherwise it will result in the absurd situation
of the government taking money from one pocket
and putting it in another.
- Agencies performing governmental functions are
tax-exempt unless expressly taxed. On the other
hand, agencies performing proprietary functions are
subject to tax unless expressly exempted.
GOCCs perform proprietary functions; hence, they
are subject to taxation. However, certain
corporations have been granted exemption such as:
GSIS, SSS, PHIC and PCSO.
- Instrumentality of the national government is
exempt from local taxation just like the Manila
International Airport Authority and PEZA.
- Real property owned by the Republic of the PH is
exempt from real property tax UNLESS the
beneficial use thereof has been granted to a taxable
person.
 Tax exemption should be construed: Exemption
from taxation is not favored and exemptions in tax
statutes are never presumed. Exemptions from
taxation are construed in strictissimi juris against
the taxpayer and liberally in favor of the taxing
authority. Where the State has granted in express
terms certain exemptions, those are the exemptions
to be considered, and no more.
 Constitutional Limitations on the Power to Tax:
(see page 74-75) *ang dami nakakatamad itype.
haha*
 Taxation in connection with Due Process:
- Due process is usually violated where the tax
imposed is for private purpose as distinguished
from a public purpose.
- The due process clause may be invoked
where a taxing statute is so arbitrary that if finds no
support in the Constitution, as where it can be
shown to amount to a confiscation of property.
 The following are illustrative of violations of the
due process clause:
a. If the tax amounts to a confiscation of property.
b. If the subject of confiscation is outside the
jurisdiction of the taxing authority;
c. If the law is imposed for a purpose other than a
public purpose;
d. If the law which is applied retroactively imposes
unjust and oppressive taxes;
e. Where the law is in violation of inherent
limitations.
 An income tax is arbitrary and confiscatory if it
taxes capital because capital is not income. In other
words, it is income, not capital, which is subject to
income tax.
 Taxation in connection with Equal Protection
Clause:
- Our Constitution requires uniformity, NOT
equality, in taxation.
- Equality of taxation is accomplished when
the burden of the tax falls equally and impartially
upon all persons and property subject to it, so that
no higher rate or greater levy in proportion to value
is imposed upon one person or species or property
than upon others similarly situated or of like
character.
- On the other hand, uniformity requires that
all taxable property subjected to the tax, shall be
alike and this requirement is violated if particular
kinds species, or items of property are selected to
bear the whole burden of the tax, while others,
which should be equally subject to it, are left
untaxed.
- Equal protection does not require equal rates
of taxation on different classes of property, nor
prohibit unequal taxation so long as the inequality
is not based upon arbitrary classification. It merely
requires that all persons subjected to such
legislation shall be treated alike, under like
circumstances and conditions, both in the privileges
 conferred and in the liabilities imposed. - The Constitution does not really prohibit the
- The power to select the subjects of taxation imposition of regressive taxes. What it simply
and apportion the public burden among them provides is that Congress shall evolve a progressive
includes he power to make classifications. The system of taxation.
inequalities which result from the singling out of Excise tax on cigarettes is a form of indirect
one particular class for taxation or exemption tax, and thus, regressive in character.
infringe no constitutional limitation.  Taxation in connection with Non-Impairment
- Equality and uniformity means that all Clause:
taxable articles or kinds of property of the same - No law shall be passed impairing the
class shall be taxed at the same rate. The taxing obligation of contracts. (Art. 3, Sec. 10,
power has the authority to make reasonable and Constitution)
natural classifications for purposes of taxation.  Is a tax exemption revocable?
- Requisites for a valid classification: - It depends. If the grant of an exemption does
a. It must be based on substantial distinction not constitute a contract but is merely a grant or
b. It must apply both to present and future concession, it is revocable by the power which
conditions made the grant. However, if the tax exemption
c. It must be germane to the purpose of the law. constitutes a binding contract and for valuable
d. It must apply equally to all members of the same consideration, the government cannot unilaterally
class. revoke the tax exemption.
 Taxation in connection with Uniformity: A franchise partakes of the nature of a grant
- A tax is considered uniform when it operates which is beyond the purview of the non-impairment
with the same force and effect in every place where clause of the Constitution. (ex. Public utility
the subject may be found. Where the statute or franchises)
ordinance in question applies equally to all persons,  Non-impairment for Non-payment of Poll Tax:
firms and corporations placed in similar situation, - No person shall be imprisoned for non-
there is no infringement of the rule on equality. payment of a debt or poll tax, as mandated by the
- Uniformity in taxation means that persons or Constitution.
things belonging to the same class shall be taxed at However, he may be imprisoned for non-
the same rate. payment of other kinds of taxes where the law so
 Progressive Taxation: expressly provides.
- Congress shall evolve a progressive system  Bills to Originate from the House of
of taxation as mandated by Art. 6, Sec. 28(1) of the Representatives:
Phil. Consti. - it is not the law but the revenue bill which is
- The aforecited provision simply means that required by the Constitution to originate exclusively
direct taxes are to be preferred and indirect taxes, as in the House of Representatives. A bill originating
much as possible, should be minimized. in the House may undergo such extensive changes
- Taxation is said to be equitable when its in the Senate that the result may be a rewriting of
burden falls on those better able to pay; taxation is the whole.
progressive when its rate goes up depending on the  Veto Power of the President Regarding
resources of the person affected. Appropriation, Revenue or Tariff Bill.
 President’s Power to Tax
 Taxation and the Freedom of the Press:
- In the case of American Bible Society vs. City
of Manila, the Supreme Court ruled that a
municipal license tax on the sale of bibles and
religious articles by a non-stock, non-profit
constitutes a curtailment of religious freedom and
worship which is guaranteed by the Constitution.
However, the income of such organizations
from any activity conducted for profit or from any
of their property, regardless of the disposition made
of such income, is taxable.
 Tax Exemption of Properties Actually, Directly
and Exclusively Used for Religious, Charitable
and Educational Purposes: (Art. 6, Sec. 28(3),
PC)
- To be entitled to the exemption, lands,
buildings and improvements of religious and
charitable institutions should be actually, 
directly and exclusively used for religious,
charitable and educational purposes.
- The term “exclusively used” does not
necessarily mean total or absolute use for religious,
charitable and educational purposes. Even if the
property is incidentally used for said purpose, the
tax exemption will apply.
- What is exempted is not the institution itself;
those exempted from real estate taxes are lands,
buildings and improvements actually, directly and
exclusively used for religious, charitable and
educational purposes.
- If real property is used for one or more
commercial purposes, it is not exclusively used for
exempted purposes but is subject to taxation.
- What is meant by actual, direct and exclusice
use of the property for charitable institutions is the
direct and immediate and actual application of the
property itself to the purposes for which the
charitable institution is organized. It is not the use
of the income from the real property that is
determinative of whether the property is used for
tax-exempt purposes.
- It must be stressed, however, that the
exemption extends to facilities which are incidental
to and reasonably necessary for the accomplishment
of the main purposes.
- In the case of Bishop of Nueva Segovia vs.
Provincial Board of Ilocos Norte, it was clarified
that the term “used exclusively” considers
incidental use also.
- To be exempt fro realty taxation, there must
be proof of the actual and direct use of the lands,
buildings and improvement for religious or
charitable purposes.
 Tax Exemptions Granted to Non-Stock, Non-
Profit Educational Institutions: (Art. 14, Sec. 4(3)
and (4))
- The use of the term “actually, directly and
exclusively used” cannot be applied to this
provision.
- In this case, we should apply its literal
interpretation -”solely”-in consonance with the
principle of stictissimi juris.
 Appropriations of Public Money
 Grant of Tax Exemptions:
- The inherent power of the state to impose
taxes naturally carries with it the power to grant tax
exemptions. The power to exempt from taxation, as
well as the power to tax, is an essential attribute of
sovereignty, and may be exercised in the
constitution, or in a statute, unless the Constitution
expressly or by implication prohibits action by the
legislature on the subject.
- Exemptions from taxation may be created
directly by the Constitution or by an act of the
legislature.
 The Rule on Construction of Exemptions:
- Exemptions are never presumed, the burden
is upon the claimant to establish his right to
exemption beyond reasonable doubt.
 Since taxation is the rule and exemption is the
exception, the intention to make an exception ought
to be expressed in clear and unambiguous terms.
However, there are exceptions to the strict
construction rule. (see page 137)
 Tax Exemption vs. Tax Amnesty
- Tax amnesty is an immunity from all
criminal and civil obligations arising from non-
payment of taxes. It is a general pardon given to all
taxpayers. It partakes of an absolute waiver by the
government of its right to collect what is due it. It
applies only to past tax periods, hence of retroactive
application.
- Tax exemption is an immunity from civil
liability only. It is generally prospective in
application.
 Local Taxation:
- Each LGU shall have the power to create its
own sources of revenues and to levy taxes, fees and
charges subject to such guidelines and limitations
as the Congress may provide, consistent with the
basic policy of local autonomy.
However, a municipal corporation, unlike a
sovereign state is not clothed with inherent power
of taxation. Hence, the charter or statute must
plainly show an intent to confer that power. And the
power when granted is to be construed in
strictissimi juris. Any doubt or ambiguity arising
out of the term used in granting that power must be
resolved against the municipality.
 Doctrine of Preemption in Local Taxation:
- Preemption in the matter of taxation simple
refers to an instance where the national government
elects to tax a particular area, impliedly withholding
from the local government the delegated power to
tax the same field.
 Special Fund:
- All money collected on any tax levied for a
special purpose shall be treated as as special fund
and paid out for such purpose only. If the purpose
for which a special fund was created has been
fulfilled or abandoned, the balance, if any, shall be
transferred to the general funds of the government.
 Supreme Court’s Jurisdiction Over Tax Cases:
- The SC exercises exclusive appellate
jurisdiction over certain judgements or orders of the
lower courts involving the legality of a tax, impost,
assessment, fee or penalty imposed in relation
thereto.
- Congress may not pass a law declaring that
decisions of the CTA on tax cases shall be final and
executory. The former cannot deprive the SC of its
power to review, revise, modify or affirm the
decisions of the lower courts.
 Kinds of Taxes Differentiated (see page 154-157)
 Concept of Double Taxation:
- There is double taxation where one tax is
imposed by the State and the other is imposed by
the city.
- Double Taxation becomes obnoxious only
where the taxpayer is taxed twice for the benefit of
the same governmental entity or by the same
jurisdiction for the same purpose, but not in a case
where one tax is imposed by the State and the other
by the city or municipality.
 Kinds of Double Taxation:
a. Direct - this occurs when the same property is
taxed twice when it should be taxed only once.
b. Indirect - a permissible double taxation. This is
allowed if the taxes are of different nature or
character, imposed by different taxing authorities. It
has been held that a real estate tax and the tenement
tax imposed by local ordinance although imposed
by the same taxing authority are not of the same
kind or character.
c. Domestic - this arises when the taxes are imposed
by the local or national government.
d. International - refers to the imposition of
comparable taxes in two or more states on the same
 taxpayer in respect of the same subject matter and
for identical periods.
 Test to determine the existence of double
taxation:
- The two taxes must be imposed on the same
subject matter, for the same purpose, by the same
taxing authority, within the same jurisdiction,
during the same taxing period, and the taxes must
be of the same kind or character.
 Tax Evasion vs. Tax Avoidance
- Tax evasion connotes fraud through the use
of pretenses and forbidden devices to lessen or
defeat taxes. It is a scheme used outside of the
lawful means and when availed of, it subjects the
taxpayer to further or additional civil or criminal
liabilities.
- Tax avoidance is a legal means used by the
taxpayer to reduce taxes. It is the tax saving device
within the means sanctioned by law.
- A taxpayer has the legal right to decrease the
amount of what would be his taxes or avoid them
by means which the law permits.
- Tax evasion connotes the integration of three
factors:
a. The end to be achieved
b. Bad faith
c. A course of action or failure of action which
is unlawful
 Estate Planning refers to the preparation for he
distribution and management of a person’s estate at
death through the use of wills, trusts, insurance
policies, and other arrangements, especially to
reduce administration costs and transfer-tax
liability.
The SC held that estate planning is considered as a
tax avoidance; hence, permissible.
 Ungab Doctrine:
- The SC held that before one is prosecuted for
wilful attempt to evade or defeat tax, an assessment
is not necessary.
Reasons are the ff:
a. Sec. 205 of the Tax Code clearly mandates
that the civil and criminal aspects of the case may
be pursued simultaneously.
b. A criminal complaint is instituted not to
demand payment, but to penalize the taxpayer for
violation of the Tax Code.
c. The crime is complete when the violator has
knowingly and wilfully filed a fraudulent return
with intent to evade and defeat a part of all of the
tax.
 Doctrine of Imprescriptibility:
- As a rule, taxes are imprescriptible as they
are the lifeblood of the government. However, tax
statutes may provide for statute of limitations.
 Nature and Prospectivity of Tax Laws:
- Tax laws are civil in nature.
- The general rule under the Civil Code that
laws shall have prospective application applies to
tax laws. Retroactive application of revenue laws
may be allowed if it will not amount to denial of
due process. There is violation of due process when
the tax law imposes harsh and oppressive tax.
 Strict Construction of Tax Laws:
- Statutes levying taxes or duties are to be
construed strongly against the government and in
favor oft he citizens because burdens are not to be
imposed or presumed to be imposed beyond what
statutes expressly and clearly declare. No person or
property is subject to taxation unless they fall
within the terms or plain import of a taxing statute.
 Taxpayer’s Suit:
- Taxpayer’s Suitrequires illegal expenditure of
public money.
- A taxpayer has standing to file this suit since
he would be adversely affected by the illegal use of
public money. (direct injury test)
- However, in some cases, the SC, even where
the petitioners have failed to show direct injury,
allowed them to sue under the principle of
transcendental importance.