TAXATION LAW COMPILATION REPORT

by: Shendy Anne L. Catulin

University of Cagayan Valley
College of Law
December, 2018

 TAXATION AND TAXES

TAXATION
 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 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. (De Leon)
 It is a mode of raising revenue for public purposes. (Cooley)
 Symbiotic relationship between the government and the citizens.

TAXES
 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.

 THEORIES AND BASIS OF TAXATION

1. NECESSITY THEORY
 Taxation is a power predicated upon necessity. It is a necessary burden to preserve the
State’s 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. (Phil. Guaranty Co.,
Inc. v, Commissioner 13 SCRA 7775)

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)

3. IMPORTANCE OF TAXES: LIFEBLOOD THEORY

 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 v. Algue)
 Taxes are the lifeblood of the government and there prompt and certain availability is an
imperious need. (CIR v. Goodrich International Rubber Co.)

 RATIONALE OF TAXATION: DOCTRINE OF SYMBIOTIC RELATIONSHIP

 This doctrine is enunciated in CIR v. Algue, Inc. (158 SCRA 9, February 17, 1988) which
states that “Taxes are what we pay for civilized society. Without taxes, the government would
be paralyzed for lack of 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.”

 BASIC PRINCIPLES OF TAXATION

1. FISCAL ADEQUACY
 The sources of revenues must be adequate to meet government expenditures. (Chavez v.
Ongpin, 186 SCRA 331)
 Even if a tax law violates the principle of Fiscal Adequacy and the proceeds may not be
sufficient to satisfy the needs of the government, still the tax law is valid.

2. THEORETICAL JUSTICE
 The tax burden should be in proportion to the taxpayer’s ability to pay. (ABILITY TO
PAY PRINCIPLE)
 Equitable Taxation has been mandated by our constitution, as if taxes are unjust and
unreasonable then they are not equitable, thus invalid.

3. ADMINISTRATIVE FEASIBILITY
 The tax law must be capable of effective or efficient enforcement.
 There is no law that requires compliance with this principle, so even if the tax law
violates this principle, such tax law is valid.

 BUREAU OF INTERNAL REVENUE

 DIFFERENT INTERNAL REVENUE TAXES (RA NO. 8424)

 COURT OF TAX APPEALS

 Law creating the CTA- Republic Act No. 1125, June 15, 1954
 The creation of the CTA is for the purpose of having a centralized body well versed in tax
matters- a regular court forming part of the judicial system which could exclusively hear and
determine tax cases; and,
  To prevent delay in the disposition of tax cases in view of backlog of civil and criminal cases
in the regular courts. (Ursal v. CA 101 Phil 209)

JURISDICTION OF THE CTA

CTA shall exercise exclusive appellate jurisdiction to review by appeal the ff:

 Decisions of the Commissioner of Internal Revenue, involving disputed

assessments; refunds of Internal revenue taxes, fees or other charges; penalties
imposed in relation thereto; or other matters arising under the NIRC or other law
or part of law administered by the BIR.
 Decisions of the Commissioner of Customs in cases involving liability for
customs duties, fees or other money charges; seizure, detention or release of
property affected; fines, forfeitures or other penalties imposed in relation thereto,
or other matters arising under the Customs law or other law or part of law
administered by the Bureau of Customs.
 Decision of the Sec. of Finance, on an assessment which the Commissioner of
Customs decided in favor of the taxpayer. (Decisions of the Commissioner of
Customs which are adverse to the government, may be raised on appeal to the
Sec. of Finance, whose decision is appealable to the CTA.)

Jurisdiction over decisions of the Local Board of Assessment Appeals is now lodged with the
Central Board of Assessment Appeals.

ANCILLARY JURISDICTION OF THE CTA

 The ancillary jurisdiction of the CTA such as the power to issue writs of prohibition and
injunction is only SUPPLEMENTARY to its appellate jurisdiction. The power to issue writs
exists only in cases appealed to it. There has to be a main action first pending before it.

NATURE OF THE CTA

 It is judicial and not an administrative body.
 It is a court of special jurisdiction, and as such can only take cognizance of such matters as
are clearly within its jurisdiction.
 It is not governed strictly by the technical rules of evidence.

ORGANIZATION OF THE CTA

 The CTA is composed of a Presiding Judge and two Associate Judges, each of whom is
appointed by the President form a list of nominees prepared by the Judicial and Bar Council.
Such appointments need no confirmation.

QUORUM
 Any two judges of the CTA shall constitute a quorum and the concurrence of two judges
shall be necessary to promulgate any decision thereof.

APPEAL FROM DECISIONS OF THE CTA

 One motion for reconsideration may be allowed for the decisions of the CTA.
 Pro Forma Request for Reconsideration- one that is submitted only for purposes of delay and
will NOT interrupt the running of the prescriptive period.
 Decisions of the CTA are appealed to the Court of Appeals through a verified petition for
review. (Sections 1 and 5, Rule 43, Rules of Court)
  Appeals period is fifteen (15) days from receipt of the decision or judgment. The Court of
Appeals may grant an additional period of fifteen (15) days only within which to file the
petition for review. No further extension shall be granted except for the most compelling
reasons and in no case to exceed fifteen (15) days. (Section 4, Rule 43, Rules of Court)

DISPOSITION OF CASES BY THE CTA

 Cases brought before the CTA shall be decided within 30 days after the submission thereof
for decision, which shall be in writing, stating clearly and distinctly the facts and the law on
which they are based, and signed by the the judges who concurred therewith.

 LOCAL GOVERNMENT TAXATION

LOCAL TAXATION AS DECENTRALIZATION

 The principles of local taxation under the 1987 Constitution simply means
“Decentralization”. It does not mean that local governments are sovereigns within the state or
“imperium in imperia”.

ASPECTS OF LOCAL TAXATION

1. Levy of taxes, fees, charges and other impositions

2. Real Property Taxation
3. Local Taxation, itself

SCOPE AND EXERCISE OF LOCAL TAXING POWER

1. Local authority shall exercise taxing power:

 The power shall be exercised by the appropriate sanggunian or the sangguniang panlalawigan
in the case of provinces, the sangguniang panglunsod in case of cities, the sangguniang bayan
in the case of municipalities or the sangguniang barangay in the case of barangays, through
an appropriate ordinance. (Section 132, Local Government Code).
 The exercise of the power to tax by the local legislative assembly is subject to the veto power
of the local chief executive; (1) Ultra Vires , and, (2) Prejudicial to the public welfare.
However, the sangguniang may override the veto by 2/3 vote of all its members.

2. Procedure for approval and effectivity of tax ordinance and revenue measures and Procedure
for Protest of tax ordinance

 The procedure for approval of local tax ordinances and revenue measures shall be in
accordance with the provisions of the Local Government Code. #