Taxation
GENERAL PRINCIPLES OF TAXATION
1. Taxation
Taxation is the power of the sovereign
government to raise revenue for the purpose of
financing its expenditures.
Theories and Basis of Taxation
3. Lifeblood Theory
The lifeblood theory of taxation expresses
the underlying basis of taxation which is
government necessity, for indeed, without taxation,
a government can neither exist nor endure.
4. Necessity Theory
The necessity theory of taxation asserts that
without taxes, the government cannot fulfill its
mandate of promoting the general welfare and
wellbeing of the people which is a true necessity.
5. Benefits-Protection Theory
Taxation involves the power of the State to
demand and receive taxes based on the reciprocal
duties of support and protection between the State
and its citizen (symbiotic relationship).
Purposes of Taxation
7. Primary or Revenue Purpose
Please refer to no. 1 (definition of taxation).
8. Promotion of General Welfare
Taxation may be used as an implement of
police power to promote the general welfare of the
people.
9. Regulation of Activities/Industries
For instance, a sin tax is an excise tax
specifically levied on certain goods deemed harmful
to society and individuals, for example alcohol and
tobacco, candies, drugs, soft drinks, etc.
10. Reduction of Social Inequality
A progressive tax system prevents undue
the concentration of wealth in the hands few
individuals by obliging those who are able to pay
more to shoulder the bigger portion of the tax
burden.
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11. Encourage Economic Growth
The grant of incentives or exemptions
encourage investment thereby stimulating
economic activity.
12. Protectionism
Protective tariffs and customs duties are
imposed as taxes in order to protect important
sectors of the economy or local industries, as in the
case of foreign importations.
Nature of Taxation
14. Inherent Attribute of Sovereignty
Taxation is an essential and inherent
attribute of sovereignty, belonging as a matter of
right to every independent government, without
being expressly conferred by the people. In other
words, it does not need constitutional conferment.
Constitutional provisions do not give rise to the
power to tax but merely impose limitations on what
would otherwise be an invincible power.
15. Legislative in Character
The power of taxation can only be exercised
through the enactment of law. The legislature
determines the coverage, object, nature, extent and
situs (CONES) of the tax to be imposed.
Scope of the Legislative Power in Taxation
17. The Determination of (ASKMAPS)
a. Amount or rate of tax
b. Subjects of taxation
(Person, property or exercise of right)
c. Kind of tax to be collected
d. Method of collection
(Not exclusive to Congress)
e. Apportionment of the tax
(General application or limited to a
particular locality, or partly general
and partly local)
f. Purposes for which the taxes shall be
levied provided they are public purposes
g. Situs of taxation
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Taxation
18. The Grant of Tax Exemptions and Condonations
a. Tax exemptions
(Complete relief from taxes, reduced
rates or tax on only a portion of
items)
b. Condonations
(Forgiveness or overlooking of a tax
liability by the government)
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It is the right of a nation or sovereign to take
(by the government itself) or authorize the taking
(by public service companies and public utilities) of
private property for public use, without the owner’s
consent, subject to payment of just compensation.
Comparison and Distinction between the Three
Inherent Powers of the State

19. The Power to Specify or Provide for 30. As to the Authority Who Exercises the Power
Administrative and Judicial Remedies
a. T – Government or its political
Characteristics of Taxation subdivision
b. PP – Government or its political
21. Comprehensive subdivision
Taxation covers persons, businesses, c. ED – Government or public service
activities, professions, rights (inherent) and companies and public utilities
privileges (granted).

22. Unlimited
It is so unlimited in force and searching to
the extent that courts scarcely venture to declare
that it is subject to any restrictions, except those
that such rests in the discretion of the authority
which exercises it.

23. Plenary
It is complete that under the NIRC, the BIR
may avail certain remedies to ensure the collection
of taxes.

24. Supreme
It is supreme insofar as the selection of the
subject of taxation is concerned, but it does not
mean that it is superior to the other inherent powers
of the State.

Inherent Powers of the State

26. Taxation
See no. 1 for definition.

27. Police Power

It is the power of promoting the public
welfare by restraining and regulating the use of both
liberty (e.g., imprisonment) and property (e.g.,
driver’s license requirement) of all the people.

28. Eminent Domain