1.

The theories of taxation are the necessity, benefits-protection and lifeblood theories, Necessity theory
pertains that the existence of a government is a necessity, and in order that government will exist,
taxes must be imposed on its citizens. Benefits-protection theory is a reciprocal duty of protection
between the state and its people. In exchange of the taxes, protection is provided. Lifeblood theory
refers to a theory that if there no taxes, the government would be paralyzed to activate and operate
for lack of motive power.
2. The principles of a sound tax system are fiscal adequacy, administrative feasibility and theoretical
justice. Fiscal adequacy means that the sources of revenue should be sufficient to meet the demands
of public expenditures. Administrative feasibility refers to the tax law that it should be capable for
convenience, just and effective administration. Theoretical justice refers to the tax burden that should
be proportionate to the taxpayer’s ability. If these principles would be set aside it would be unjust to
the taxpayer and more inhabitants will suffer poverty. These are created in order that it would be
manageable by the people as it would already be burdensome.
3. The LGU can exercise power of taxation when it is delegated by the law and constitution, for it is not
inherent; not absolute; and subject to limitation provided by law.
4. The power to tax involves power to destroy because of its unlimited and the degree with which the
taxing power may be employed to raise financial need of the government for public purpose.
However, it will always be restrained as long as there is Supreme Court that sits so that it will be used
justly and not treacherously.
5. There are two kinds of exception in the Doctrine of Separate Legal Entity: the statutory exception and
judicial exception. Statutory exception composes of statutory prohibition on carrying business with
members less than two; an officer signing an incomplete document on behalf of the company would
be liable on the mistake that was made and the director would be liable on the mistake on the
dividend paid not from profit. As to judicial exception, it comprises when the company has been use
to cover a wrongful act and when the Court acts on analogy and equity and when it involves group of
companies.
6. Taxes can be classified. As to subject matter, it could be personal, capitation or poll taxes which are
taxes of fixed amount upon all persons of a certain class within the jurisdiction of the taxing power
without regard to the amount of their property or occupations or businesses in which they may be
engaged in; property taxes which are taxes on things or property of a certain class within the
jurisdiction of the taxing power; and excise taxes which are charges imposed upon the performance
of an act, the enjoyment of a privilege, or the engaging in an occupation. As to burden, it could be
direct taxes which are taxes wherein both the incidence as well as the impact or burden of the tax
faces on one person and indirect taxes which taxes wherein the incidence of or the liability for the
payment of the tax falls on one person, but the burden thereof can be shifted or passed to another
person. As to purpose, it could be general/fiscal/revenue which tax is imposed for the general
purposes of the government, i.e., to raise revenues for governmental needs and special/regulatory
which tax is imposed for special purposes, i.e., to achieve some social or economic needs. As to
measure of application, it could be specific tax which tax is imposed per head, unit or number, or by
some standard of weight or measurement and which requires no assessment beyond a listing and
classification of the subjects to be taxed and ad valorem tax which tax is based on the value of the
article or thing subject to tax. As to date, it could be progressive tax which is the rate or the amount of
the tax increases as the amount of the income or earning (tax base) to be taxed increases; regressive
tax which is the tax rate decreases as the amount of income or earning (tax base) to be taxed
increases; mixed tax which is tax rates are partly progressive and partly regressive. As to scope or
authority imposing the tax, it could be national tax which tax is imposed by the National Government
and municipal/local tax which tax is imposed by Local Government units.
7. Distinction of tax from other impositions.
 Tax and Debt
Tax is based on law and cannot be subjected of set-off or legal composition, while debt is based on
express or implied contract and can be subjected of set-off or legal composition.
 Tax and Toll
Tax is for sovereignty, paid for the support of the government, generally, no limit as to amount imposed
and imposed only by the government, while toll is for proprietorship, paid for the use of another’s
property, the amount depends on the cost of construction or maintenance of the public improvement
used and imposed by the government or private individuals or entities.
 Tax and Special assessment
Tax is imposed on persons, property and excise, the personal liability of the person is assessed, and it is
based on necessity as well as on benefits received, while special assessment is levied only on land,
not a personal liability of the person assessed, i.e. his liability is limited only to the land involved and
based wholly on benefits.
 Tax and License Fee
Tax is enforced contribution assessed by sovereign authority to defray public expenses, for revenue
purposes and an exercise of the taxing power, while license fee is for legal compensation or reward
of an officer for specific purposes, for regulation purposes and an exercise of the police power.
 Tax and Penalty
Tax is generally intended to raise revenue and imposed only by the government, while penalty is
designed to regulate conduct and imposed by the government or private individuals or entities.
 Tax and Subsidy
Tax drives a wedge that increases the price consumers have to pay and decreases the price producers
receive, while subsidy is a pecuniary aid directly granted by the government to an individual or private
commercial enterprise deemed beneficial to the public.
 Tax and Revenue
Tax is a liability which a person has to pay to the government, while revenue refers to all the funds or
income derived by the government, whether from tax or from whatever source and whatever manner
8. Taxes are imprescriptible as they are the lifeblood of the government except when it is provided
otherwise by the tax law itself.
9. Tax laws are prospective in its operation and applicability. Thus, upon the commencement of its laws,
it only affects situations as to present and future, however it might consider such retroactive effect
provided that the language of the statute demands that it shall be retroact.
10. It provides that a claim for refund barred by prescription may be allowed to offset unsettled tax
liabilities should be pertinent only to taxes arising from the same transaction on which an
overpayment is made and underpayment is due. However, this doctrine was rejected by the
Supreme Court, saying that it was not convinced of the wisdom and proprietary, and that it may work
to tempt both the collecting agency and the taxpayer to delay and neglect their respective pursuits of
legal action within the period set by law.
11. As a general rule, taxes cannot be subjected of compensation or set-off because the inhabitants and
the government are not debtors and creditors. In fact, taxes are not contractual obligations. It only
arises out of duty to the government. However, it can be allowed only provided that the following
requisites are given: both obligations are due and demandable and liquated, and the requisites for a
valid compensation are present.
12. Taxes can be subject to compromise. The Commissioner of Internal Revenue and Regional
Evaluation which composed of:
a. The Regional Directors as Chairman
b. Assistant Regional Director, the heads of the legal assessment and collection divisions, and
c. The Revenue District Officer, having jurisdiction over the taxpayer
are the persons allowed to compromise.
13. Taxpayer’s suit is a case where the act complained of directly involves the illegal disbursement of
public funds collected through taxation. It is available only when a case is involved either the
constitutionality of a statute or the legality of the disbursement of public funds through the
enforcement of What was perceived to be an invalid or constitutional statute or legislation. The
requisites of its are:
a. The tax money is being extracted and spent in violation of specific constitutional protections against
abuses of legislative power.
b. The public money is being deflected to any improper purpose
c. That the petitioner seeks to retain respondents from wasting public funds through the enforcement of
an invalid or unconstitutional law.
Being a procedural technicality, locus standi may be waived in the public interest.
14. Transcendental importance doctrine is not relevant because even without direct injury, the claimant
party’s case may still prosper to the court. In fact, in cases of paramount importance where serious
constitutional questions are involved, locus standi may be relaxed and the suit may still prosper.
15. The government is not estopped by the mistakes or errors of its agents; erroneous application and
enforcement of law by public officers do not bar the subsequent correct application of statutes,
except, in the interest of justice and fair play as where injustice will affect the taxpayer.
16. The inherent limitations are the public purpose of taxes, non-delegability of the taxing power,
territoriality or the situs of taxation, exemption of the government from taxes and the international
comity.
17. The power to tax is limited only to persons, property or business within the jurisdiction or territory of
the taxing power. The rule of Lex Rei Sitae where in its translation is the law where the property is
situated supports the situs of taxation.
18. Tax laws can operate outside territorial jurisdiction. For instances, where the property has acquired a
business situs in another jurisdiction and when an express provision of the law provides for another
rule.
19. Situs of Taxation:
a. Persons – tax may be levied upon persons who are residents of the state.
b. Real property – subject to taxation is the state in which it is located whether the owner is a resident or
non-resident, and is taxable only there.
c. Tangible personal property – taxable in the state where it has actual situs, where it is physically
located. Although, the owner resides in another jurisdiction.
d. Intangible personal property – situs or personal property is the domicile of the owner.
e. Income – property exacted from persons who are residents or citizens in the taxing jurisdiction and
even those who are neither residents nor citizens provided the income is derived from sources within
the taxing state.
f. Excise or privilege – where the act is performed or where the occupation is pursued.
20. Public purpose is the reason in which the taxes are created. Through taxes, the state is supported in
its operation and promote welfare and protection to the inhabitants. In determining public purpose,
there are two aspects: The Duty Test and the Promotion of General Welfare Test. Duty Test refers to
whether the thing to be threatened by the appropriation of public revenue is something which is the
duty of the State, as a government. On the other hand, promotion of general welfare test refers to
whether the law providing the tax directly promotes the welfare of the community in equal measure.
21. International comity holds that between and among nations there is mutual courtesy and reciprocity. It
is a basic principle in international law that all states are equally sovereign, each state observes co-
equal sovereignty by not taxing the properties, income or effects of fellow states.
22. Generally, legislative department only has the power of taxation to exercise such power and it cannot
be delegated. However, there are exceptions:
a. The flexible tariff clause which the authority of the President to fix tariff rates, import and export
quotas, tonnage and wharfage dues, and other duties.
b. Power of local government units to levy taxes, fees and charges.
c. Delegation to administrative agencies for implementation and collection which merely refers to tax
administration or implementation.
23. Generally, government instrumentalities or agencies are deemed exempted from taxation as a matter
of public policy even though there is no express provision in the law that was created.
24. The Government is exempted for the reasons that to levy tax upon public property would render
necessary new taxes on other public property for the payment of the tax and thus, the government
would be taxing itself to raise money to pay over to itself; in order that the functions of the government
shall not be unduly impede; and to reduce the amount of money that has to be handed by the
government in the course of its operation.
25. GOCC or the Government Owned and Controlled Corporation refers to any organized agency as a
stock or non-stock corporation vested with functions relating to public needs whether governmental or
propriety in nature. It is owned by the government of the Republic of the Philippines directly or
through its instrumentalities either wholly or, where applicable as in the case of stock corporation, to
the extent of at least a majority of its out stand capital stock. It is exempted from ax based on Fiscal
Incentives Review Board on the need to assist the concerned GOCCs to undertake their respective
mandates without being unduly burdened by the obligations.