TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
CABANEIRO) A2011 1
Chapter 1: GENERAL PRINCIPLES
TAXATION DEFINED
 Taxation is the inherent power of the sovereign, exercised through
the legislature, to impose burdens upon the subjects and objects
within its jurisdiction, for the purpose of raising revenues to carry
out the legitimate objects of the government.
 It is also defined as the act of levying a tax, i.e. the process or
means by which the sovereign, through its law-making body, raises
income to defray the necessary expenses of government. It is a
method of apportioning the cost of government among those who,
in some measure, are privileged to enjoy its benefits and must
therefore bear its burdens.
 It is a mode of raising revenue for public purposes, (Cooley)
 Symbiotic relationship between the government and the citizens.
RATIONALE OF TAXATION: DOCTRINE OF SYMBIOTIC
RELATIONSHIP
 This doctrine is enunciated in CIR v. Algue, Inc. [158 SCRA 9],
which states that “Taxes are what we pay for civilized society.
Without taxes, the government would be paralyzed for lack of
the motive power to activate and operate it. Hence, despite the
natural reluctance to surrender part of one’s hard-earned
income to the taxing authorities, every person who is able must
contribute his share in the burden of running the government.
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.”
TAXES DEFINED
 Taxes are the enforced proportional contributions 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 all public needs,
[Cooley]
 They are not arbitrary exactions but contributions levied by authority
of law, and by some rule of proportion which is intended to ensure
uniformity of contribution and a just apportionment of the burdens
of government.
JUICY NOTES (PROF.
Thus:
a. Taxes are enforced contributions
It operates in invitum which means that it is in no way
dependent on the will or contractual assent, express or implied,
of the person taxed. They are positive acts of the government
(Rochester vs Bloss).
b. Taxes are proportional in character, since taxes are based on
one’s ability to pay.
c. Taxes are levied by authority of law.
The power to impose taxes is a legislative power; it cannot be
imposed by the executive department nor by the courts.
d. Taxes are for the support of the government and all its public
needs.
e. Taxes are pecuniary burden payable in money, such that a tax
is not necessarily confined to those payable in money (e.g. a
backpay cert may be used to pay real estate taxes).
f. Taxes are imposed by the State on persons, property or
services within its jurisdiction.
IMPORTANCE OF TAXES
 Taxes are importants because they the lifeblood of the government
and so should be calculated without unnecessary hindrance (CIR vs
Algue).
LIFEBLOOD DOCTRINE
 The lifeblood theory constitutes the theory of taxation, which
provides that the existence of government is a necessity; that
government cannot continue without means to pay its expenses;
and that for these means it has a right to compel its citizens and
property within its limits to contribute.
 Without revenue raised from taxation, the government will not
survive, resulting in detriment to society. Without taxes, the
government would be paralyzed for lack of motive power to activate
and operate it. (CIR vs. ALGUE)
 Taxes are the lifeblood of the government and there prompt and
certain availability is an imperious need. (CIR vs Goodrich
International Rubber Co.)
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
ILLUSTRATION OF LIFEBLOOD THEORY
1. Collection of taxes cannot be enjoined by injunction.
2. Taxes could not be the subject of compensation or set off.
3. A valid tax may result in the destruction of the taxpayer’s
property.
4. Taxation is an unlimited and plenary power.
TAXES,PERSONAL TO TAXPAYER
 A corporation’s tax delinquency cannot be enforced against its
stockholders except for unpaid taxes of a dissolved corporation if it
appears that the corporate assets have passed into their hands (Tan
Tiong Bio vs CIR).
 Estate taxes accruing upon transmission of the decedent’s estate to
his heirs are not liabilities which can be enforced against heirs.
NATURE OF THE TAXING POWER
1) Inherent in sovereignty
2) Legislative in character
PURPOSES AND OBJECTIVES OF TAXATION
PRIMARY
1. To raise revenue in order to support the government (Revenue)
SECONDARY
2. Used for regulatory purposes (Regulation)
3. Used to reduce social inequality (Reduction of Social Inequality)
4. Utilized to implement the police power of the State (Promotion of
General Welfare)
5. Used to protect our local industries against unfair competition
(Protectionism)
6. Utilized by the government to encourage the growth of local
industries (Encourage Economic Growth)
THEORY AND BASIS OF TAXATION
1) NECESSITY THEORY
 Taxation as stated in the case of Phil. Guaranty Co., Inc. v.
Commissioner [13 SCRA 775], is a power predicated upon
necessity. It is a necessary burden to preserve the State’s
JUICY NOTES (PROF. CABANEIRO) A2011 2
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.
2) BENEFITS – PROTECTION THEORY
 This theory bases the power of the State to demand and receive
taxes on the reciprocal duties of support and protection. The
citizen supports the State by paying the portion from his
property that is demanded in order that he may, by means
thereof, be secured in the enjoyment of the benefits of an
organized society.
 No one is allowed to object to or resist payment of taxes solely
because no personal benefit to him can be pointed out as arising
from the tax, [Lorenzo v. Posadas].
SCOPE OF THE LEGISLATIVE TAXING POWER
1) The persons, property and excises to be taxed, provided it is within
its jurisdiction
2) Amount or rate of tax
3) Purposes for its levy, provided it be for a public purpose
4) Kind of tax to be collected
5) Apportionment of the tax
6) Situs of taxation
7) Method of collection
IS THE POWER TO TAX THE POWER TO DESTROY? /
CONSTITUTIONAL RESTRAINTS RE: TAXATION IS THE POWER TO
DESTROY
 The power to tax "is an attribute of sovereignty". In fact, it is the
strongest of all the powers of government. But for all its plenitude,
the power to tax is not unconfined as there are restrictions.
Adversely effecting as it does property rights, both the due process
and equal protection clauses of the Constitution may properly be
invoked to invalidate in appropriate cases of a revenue measure. If it
were otherwise, there would be truth to the 1903 dictum of Chief
Justice Marshall that "the power to tax involves the power to
destroy." The web or unreality spun from Marshall's famous dictum
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 3

was brushed away by one stroke of Mr. Justice Holmes' pen, thus:  The tax law must be capable of effective or efficient
"The power to tax is not the power to destroy while this Court sits." enforcement.
"So it is in the Philippines." It is because of the constitutional  There is no law that requires compliance with this principle,
restraints placed on a taxing power that violates fundamental rights. so even if the tax law violates this principle; such tax law is
 The power to tax includes the power to destroy if it is used as an valid.
implement of the police power (regulatory) of the State. However, it TAXATION DISTINGUISHED FROM POLICE POWER AND EMINENT
does not include the power to destroy if it is used solely for the DOMAIN
purpose of raising revenue. (ROXAS vs. CTA) TAXATION POLICE POWER EMINENT
 If the purpose of taxation is regulatory in character, taxation is used DOMAIN
to implement the police power of the state AS TO PURPOSE For the purpose To promote For public use
raising revenue general welfare
 If the power of taxation is used to destroy things, businesses, or through
enterprises and the purpose is to raise revenue, the court will come regulations
in because there will be violation of the inherent and constitutional AS TO Protection and The maintenance Just compensation,
limitations and it will be declared invalid. COMPENSATION benefits received of a healthy not to exceed the
from the economic standard market value by the
government. of society owner or
POWER OF JUDICIAL REVIEW IN TAXATION
(damnum absque administrator or
 Courts cannot inquire into the wisdom of a taxing act. (CIR vs injuria) anyone having legal
Lingayen Gulf Electric Power Co) interest in the
 Court’s power in taxation is limited only to the application and property, or as
interpretation of the law. determined by the
 It is not within the province of the court to inquire into the assessor, whichever
is lower.
wisdom of the law for indeed courts are bound by the words in AS TO PERSONS Operate upon community or a class of Operates on the
the mouth of the lawmaker. “A verbo legis non est recedendum” AFFECTED individuals individual property
(Commissioner of Customs vs Manila Star Ferry inc.) owner
AS TO AUTHORITY Exercised only by the government or its May be exercised
BASIC PRINCIPLE OF A SOUND TAX SYSTEM WHICH EXERCISES political subdivisions. by public services
1) FISCAL ADEQUACY THE POWER corp or public
utilities if granted
 The sources of revenues must be adequate to meet gov’t by law
expenditures. (Chavez v. Ongpin, 186 SCRA 331). AS TO AMOUNT OF Generally no limit Limited to the cost There is no
 Even if a tax law violates the principle of Fiscal Adequacy IMPOSITION to the amount of of regulation imposition; rather,
and the proceeds may not be sufficient to satisfy the needs tax that may be it is the owner of
of the government, still the tax law is valid imposed the property taken
who is paid just
2) THEORETICAL JUSTICE
compensation.
 The tax burden should be in proportion to the taxpayers AS TO THE Subject to certain Relatively free Subject to certain
ability to pay (ABILITY TO PAY PRINCIPLE) RELATIONSHIP TO constitutional from constitutional constitutional
 Equitable taxation has been mandated by our constitution; THE CONSTITUTION limitations, limitations and limitations, NOT
as if taxes are unjust and unreasonable then they are not including the superior to the including the
equitable, thus invalid. prohibition against non-impairment prohibition against
impairment of the provisions impairment of the
3) ADMINISTRATIVE FEASIBILITY obligation of obligation of

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 4

contracts contracts of a public nature. Taxes, on the other hand, are enforced
AS TO TRANSFER Taxes paid become No transfer, but proportional contributions from persons and property levied by the
OF PROPERTY part of the public only restraint on State by virtue of its sovereignty for the support of the government
RIGHTS funds the exercise, of
property right and all public needs.
exists  Toll is a demand of proprietorship; tax is a demand of sovereignty.
ASPECTS OF TAXATION  Toll is paid for the used of another’s property; tax is paid for the
1) LEVY or IMPOSITION support of government.
 enactment of tax laws  The amount paid as toll depends upon the cost of construction or
 legislative in character maintenance of the public improvements used; while there is no
2) ASSESSMENT limit on the amount collected as tax as long as it is not excessive,
 collection unreasonable, or confiscatory.
 administrative in character  Toll may be imposed by the government or by private individuals or
entities; tax may be imposed only by the government.
TAXES DISTINGUISHED FROM OTHER IMPOSITIONS
1) toll – amount charged for the cost and maintenance of property Penalty v. Tax
used;  Penalty is any sanction imposed as a punishment for violation of law
2) penalty – punishment for the commission of a crime or for acts deemed injurious; taxes are enforced proportional
3) compromise penalty – amount collected in lieu of criminal contributions from persons and property levied by the State by
prosecution in cases of tax violations; virtue of its sovereignty for the support of the government and all
4) special assessment – levied only on land based wholly on the public needs.
benefit accruing thereon as a result of improvements of public works  Penalty is designed to regulate conduct; taxes are generally
undertaken by government within the vicinity. intended to generate revenue.
5) license fee – regulatory imposition in the exercise of the police  Penalty may be imposed by the government or by private individuals
power of the State; or entities; taxes only by the government.
6) margin fee – exaction designed to stabilize the currency
7) debt – a tax is not a debt but is an obligation imposed by law. Special assessment v. Tax
8) regulatory fees – exaction designed to regulate industries  A special assessment tax is an enforced proportional contribution
9) subsidy – legislative grant of money in aid of a private enterprise from owners of lands especially benefited by public improvements
deemed to promote the public welfare.  A special assessment is levied only on land; tax is imposed on
10)custom duties and fees – duties charged upon commodities on persons, property and excises.
their being imported into or exported from a country;  A special assessment is not a personal liability of the person
11)revenue – broad term that includes not only taxes but income from assessed; it is limited to the land.
other sources as well.  A special assessment is based wholly on benefits, not necessity.
12)Tribute – synonymous with tax  A special assessment is exceptional both as to time and place; a tax
13)Impost – signifies any tax, tribute or duty. has general application.
Some rules:
Toll v. Tax  An exemption from taxation does not include exemption
 Toll is a sum of money for the use of something. It is the from a special assessment.
consideration which is paid for the use of a road, bridge, or the like,

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
 The power to tax carries with it the power to levy a special
assessment.
License fee v. Tax
 PURPOSE: Tax imposed for revenue WHILE license fee for
regulation. Tax for general purposes WHILE license fee for
regulatory purposes only.
 BASIS: Tax imposed under power of taxation WHILE license fee
under police power.
 AMOUNT: In taxation, no limit as to amount WHILE license fee
limited to cost of the license and expenses of police surveillance and
regulation.
 TIME OF PAYMENT: Taxes normally paid after commencement of
business WHILE LF before.
 EFFECT OF PAYMENT: Failure to pay a tax does not make the
business illegal WHILE failure to pay license fee makes business
illegal.
 SURRENDER: Taxes, being lifeblood of the state, cannot be
surrendered except for lawful consideration WHILE a license fee may
be surrendered with or without consideration.
 IMPORTANCE OF DISTINCTION BETWEEN TAXES AND LICENSE
FEES:
 It is necessary to determine whether a particular imposition is a
tax or a license fee, because some limitations apply only to one
and not to the other.
 Furthermore, exemption from taxes does not include exemption
from license fees
Obligation to pay debt v. obligation to pay tax
 A debt is generally based on contract, express or implied, while a
tax is based on laws.
 A debt is assignable, while a tax cannot generally be assigned.
 A debt may be paid in kind, while a tax is generally paid in money.
 A debt may be the subject of set off or compensation, a tax cannot.
JUICY NOTES (PROF. CABANEIRO) A2011 5
 A person cannot be imprisoned for non-payment of tax, except poll
tax.
 A debt is governed by the ordinary periods of prescription, while a
tax is governed by the special prescriptive periods provided for in
the NIRC.
 A debt draws interest when it is so stipulated or where there is
default, while a tax does not draw interest except only when
delinquent.
TAXES CLASSIFIED
AS TO SUBJECT MATTER OR OBJECT
1. Personal, poll or capitation tax
Tax of a fixed amount imposed on persons residing within a
specified territory, whether citizens or not, without regard to their
property or the occupation or business in which they may be
engaged, i.e. community tax.
2. Property tax
Tax imposed on property, real or personal, in proportion to its value
or in accordance with some other reasonable method of
apportionment.
3. Excise tax
A charge imposed upon the performance of an act, the enjoyment of
privilege, or the engaging in an occupation.
AS TO PURPOSE
4. General/fiscal revenue tax is that imposed for the purpose of
raising public funds for the service of the government.
5. Special or regulatory tax is imposed primarily for the regulation
of useful or non-useful occupation or enterprises and secondarily
only for the purpose of raising public funds.
AS TO WHO BEARS THE BURDEN
6. Direct tax
A direct tax is demanded from the person who also shoul,ders the
burden of the tax. It is a tax which the taxpayer is directly or
primarily liable and which he or she cannot shift to another.
7. Indirect tax
An indirect tax is demanded from a person in the expectation and
intention that he or she shall indemnify himself or herself at the
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
expense of another, falling finally upon the ultimate purchaser or
consumer. A tax which the taxpayer can shift to another.
AS TO THE SCOPE OF THE TAX
8. National tax
A national tax is imposed by the national government.
9. Local tax
A local tax is imposed by the municipal corporations or local
government units (LGUs).
AS TO THE DETERMINATION OF AMOUNT
10. Specific tax
A specific tax is a tax of a fixed amount imposed by the head or
number or by some other standard of weight or measurement. It
requires no assessment other than the listing or classification of the
objects to be taxed.
11. Ad valorem tax
An ad valorem tax is a fixed proportion of the value of the property
with respect to which the tax is assessed. It requires the
intervention of assessors or appraisers to estimate the value of such
property before due from each taxpayer can be determined.
12. Customs Duties
Duties charged upon the commodities on theor being imported into
or exported from a country.
AS TO GRADUATION OR RATE
13. Proportional tax
Tax based on a fixed percentage of the amount of the property
receipts or other basis to be taxed. Example: real estate tax.
14. Progressive or graduated tax
Tax the rate of which increases as the tax base or bracket increases.
Digressive tax rate: progressive rate stops at a certain point.
Progression halts at a particular stage.
15. Regressive tax
Tax the rate of which decreases as the tax base or bracket
increases. There is no such tax in the Philippines.
TAXPAYER’S SUIT
JUICY NOTES (PROF. CABANEIRO) A2011 6
 One where a taxpayer who feels aggrieved by the implication of a
tax law goes now via judicial review to the SC and asks for a
nullification of the law.
 In availing judicial review as a taxpayer, the only option one can
look into are the inherent and constitutional limitations on taxation.
 Taxpayers have sufficient interest of preventing the illegal
expenditures of money raised by taxation ( NOT DONATIONS AND
CONTRIBUTIONS)
 A taxpayer is not relieved from the obligation of paying a tax
because of his belief that it is being misappropriated by certain
officials
 A taxpayer has no legal standing to question executive acts that do
not involve the use of public funds. (GONZALES vs. MARCOS)
 It is only when an act complained of which may include a legislative
enactment of a statute, involves the illegal expenditure of public
money that the so-called taxpayers suit may be allowed. LOZADA
vs. COMELEC
 Taxpayers may be levied with a regulatory purpose to provide
means for the rehabilitation and stabilization of a threatened
industry which is affected with the public interest as to be within the
police power of the State. CALTEX vs. COA
 The Supreme Court has discretion whether or not to entertain
taxpayers suit and could brush aside lack of locus standi. KILOS
BAYAN vs. GUINGONA
REQUISITES FOR A TAXPAYERS PETITION
1) That money is being extracted and spent in violation of specific
constitutional protections against abuses of legislative power
2) That public money is being deflected to any improper purpose
3) That the petitioner seeks to restrain respondents from wasting
public funds through the enforcement of an invalid or
unconstitutional law.
CASES:
Commissioner vs. Algue
GRL-28890, 17 February 1988.First Division, Cruz (J); 4 concur
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
Facts: The Philippine Sugar Estate Development Company (PSEDC)
appointed Algue Inc. as its agent, authorizing it to sell its land, factories, and
oil manufacturing process. The Vegetable Oil Investment Corporation
(VOICP) purchased PSEDC properties. For the sale, Algue received a
commission of P125,000 and it was from this commission that it paid
Guevara, et. al. organizers of the VOICP, P75,000 in promotional fees. In
1965, Algue received an assessment from the Commissioner of Internal
Revenue in the amount of P83,183.85 as delinquency income tax for years
1958 amd 1959. Algue filed a protest or request for reconsideration which
was not acted upon by the Bureau of Internal Revenue (BIR). The counsel
for Algue had to accept the warrant of distrant and levy. Algue, however,
filed a petition for review with the Coourt of Tax Appeals.
Issue: Whether the assessment was reasonable.
Held: Taxes are the lifeblood of the government and so should be collected
without unnecessary hindrance. Every person who is able to pay must
contribute his share in the running of the government. The Government, for
his part, is expected to respond in the form of tangible and intangible
benefits intended to improve the lives of the people and enhance their moral
and material values. This symbiotic relationship is the rationale of taxation
and should dispel the erroneous notion that is an arbitrary method of
exaction by those in the seat of power. Tax collection, however, should be
made in accordance with law as any arbitrariness will negate the very reason
for government itself. For all the awesome power of the tax collector, he
may still be stopped in his tracks if the taxpayer can demonstrate that the
law has not been observed. Herein, the claimed deduction (pursuant to
Section 30 [a] [1] of the Tax Code and Section 70 [1] of Revenue Regulation
2: as to compensation for personal services) had been legitimately by Algue
Inc. It has further proven that the payment of fees was reasonable and
necessary in light of the efforts exerted by the payees in inducing investors
(in VOICP) to involve themselves in an experimental enterprise or a business
requiring millions of pesos. The assessment was not reasonable.
Tolentino vs. Secetary of Finance
GR No. 115455. August 25, 1994
Facts: The value-added tax (VAT) is levied on the sale, barter or exchange
of goods and properties as well as on the sale or exchange of services. RA
7716 seeks to widen the tax base of the existing VAT system and enhance
its administration by amending the NationalInternal Revenue Code. There
JUICY NOTES (PROF. CABANEIRO) A2011 7
are various suits challenging the constitutionality of RA 7716 on various
grounds.
One contention is that RA 7716 did not originate exclusively in the House of
Representatives as required by Art. VI, Sec. 24 of the Constitution, because
it is in fact the result of the consolidation of 2distinct bills, H. No. 11197 and
S. No. 1630. There is also a contention that S. No. 1630 did not pass
3 readings as required by the Constitution.
Issue: Whether or not RA 7716 violates Art. VI, Secs. 24 and 26(2) of the
Constitution 
Held: The argument that RA 7716 did not originate exclusively in the House
of Representatives as required by Art. VI, Sec. 24 of the Constitution will not
bear analysis. To begin with, it is not the law but the revenue bill which is
required by the Constitution to originate exclusively in the House of
Representatives. To insist that a revenuestatute and not only the bill which
initiated the legislative process culminating in the enactment of the law must
substantially be the same as the House bill would be to deny the Senate’s
power not only to concur with amendments but also to propose
amendments. Indeed, what the Constitution simply means is that the
initiative for filingrevenue, tariff or tax bills, bills authorizing an increase of
the public debt, private bills and bills of local application must come from the
House of Representatives on the theory that, elected as they are from
the districts, the members of the House can be expected to be more
sensitive to the local needs and problems. Nor does the Constitution
prohibit the filing in the Senate of a substitute bill in anticipation of its
receipt of the bill from the House, so long as action by the Senate as a body
is withheld pending receipt of the House bill. 
The next argument of the petitioners was that S. No. 1630 did not pass
3 readings on separate days as required by the Constitution because the
second and third readings were done on the same day. But this was because
the President had certified S. No. 1630 as urgent. The presidential
certification dispensed with the requirement not only of printing but also that
of reading the bill on separate days. That upon the certification of a bill by
the President the requirement of 3 readings on separate days and of printing
and distribution can be dispensed with is supported by the weight of
legislative practice.
EXERCISES:
Discuss the importance of taxes
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
SUGGESTED ANSWER:
Taxes are the lifeblood of the government, for without taxes, the
government can neither exist nor endure. A principal attribute of
sovereignty, the exercise of taxing power derives its source from the
very existence of the state whose social contract with its citizens
obliges it to promote public interest and common good. The theory
behind the exercise of the power to tax emanates from necessity;
without taxes, government cannot fulfill its mandate of promoting the
general welfare and well-being of the people. (NAPOCOR v. City of
Cabanatuan, G.R. No. 149110, April 9, 2003).
Nature of the Power of Taxation (#1, 2000 Bar Exams)
Justice Holmes once said: “The power to tax is not the power to
destroy while this Court (the SC) sits.” Describe the power to tax and its
limitations.
SUGGESTED ANSWER:
The power to tax is an inherent power of the sovereignty which is
exercised through the legislature to impose burdens upon subjects and
objects within its jurisdiction for the purpose of raising revenues to
carry out the legitimate objects of gov’t. The underlying basis for its
exercise is governmental necessity for without it, no gov’t can exist nor
endure. Accordingly, it has the broadest scope of all the powers of
government because in the absence of limitations, it is considered an
unlimited, plenary, comprehensive and supreme. The two limitations
on the power of taxation are the inherent and constitutional
limitations which are intended to prevent abuse on the exercise of the
otherwise plenary and unlimited power. It is the Court’s role to see to it
that the exercise of the power does not transgress these limitations.
Power of Taxation: Legislative in Nature (Bar 1994)
The Secretary of Finance, upon recommendation of the
Commissioner of Internal Revenue, issued a Revenue Regulation
using gross income as the tax base for corporations doing business
in the Philippines. Is the Rev.Reg.valid?
SUGGESTED ANSWER:
The regulation establishing gross income as the tax base for
corporations doing business in the Philippines (domestic as well as
JUICY NOTES (PROF. CABANEIRO) A2011 8
resident foreign) is not valid. This is no longer implementation of the
law but actually it constitutes legislation because among the powers
that are exclusively within the legislative authority to tax is the power
to determine -the amount of the tax. (See 1 Cooley 176-184).
Certainly, if the tax is limited to gross income without deductions of
these corporations, this is changing the amount of the tax as said
amount ultimately depends on the taxable base.
Power of Taxation; Inherent in a Sovereign State (2005)Describe
the power of taxation. May a legislative body enact laws to raise
revenues in the absence of a constitutional provision granting said body
the power to tax? Explain.
SUGGESTED ANSWER:
Yes, the legislative body may enact laws even in the absence
of a constitutional provision because the power to tax is inherent in the
government and not merely a constitutional grant. The power of taxation is
an essential and inherent attribute of sovereignty belonging as a matter
of right to every independent government without being expressly granted
by the people. (Pepsi-Cola Bottling Company of the Philippines, Inc. v.
Municipality of Tanauan, Leyte, G.R. No. L-31156)
Taxation is the inherent power of a State to collect enforced proportional
contribution to support the expenses of government. Taxation is the
power vested in the legislature to impose burdens or charges upon
persons and property in order to raise revenue for public purposes.
The power to tax is so unlimited in force and so searching in extent that
courts scarcely venture to declare it is subject to any restrictions whatever,
except such as rest in the discretion of the authority which exercises it. (Tio
v. Videogram Regulatory Board, G.R. No. L-75697, June 18, 1987) So
potent is the power to tax that it was once opined that "the power to tax
involves the power to destroy."(C.J. Marshall in McCulloch v. Maryland)
Revocation of Exempting Statutes (Bar 1997)
"X" Corporation was the recipient in 1990 of two tax exemptions both from
Congress, one law exempting the company's bond issues from taxes and
the other exempting the company from taxes in the operation of its
public utilities. The two laws extending the tax exemptions were revoked
by Congress before their expiry dates. Were the revocations constitutional?
SUGGESTED ANSWER:
Chapter 1: GENERAL PRINCIPLES. Page 8 of 9
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 9

Yes. The exempting statutes are both granted unilaterally by

Congress in the exercise of taxing powers. Since taxation is the rule and
tax exemption, the exception, any tax exemption unilaterally granted can
be withdrawn at the pleasure of the taxing authority without violating the
Constitution (Mactan Cebu International Airport Authority v, Marcos,
G.R No. 120082, September 11, 1996).
Neither of these were issued by the taxing authority in a contract lawfully
entered by it so that their revocation would not constitute an
impairment of the obligations of contracts.
ALTERNATIVE ANSWER:
No. The withdrawal of the tax exemption amounts to a
deprivation of property without due process of law, hence
unconstitutional.

Chapter 1: GENERAL PRINCIPLES. Page 9 of 9