Similarities:

Income Taxation 1. All are necessary attibutes of sovereignty.

TAXATION may be defined:
 As a state power – inherent powert of State
 As a legislative process
 As a mode of government contribution
Theory of Taxation – the government’s
necessity for a system of funding
to exist and provide benefits.
Basis of Taxation – the mutuality of support
between the people and the
government.
Benefits in the form of public services
Government
Funding in form of taxes
2. All are inherent.
3. All are legislative in nature.
4. All are ways in which State interferes with
private rights and properties.
5. All exist independently of the Constitution
and exercisable even in the absence of
Constitutional grant. However, they are not
absolute and subject to inherent and
constitutional limitations.
6. All involve compensation from the subjected.
7. All are subject to limitations set by national
People
legislature when exercised by LGU’s.

Direct receipt or actual availment of Police Eminent

Difference Taxation
Power Domain
government services is not a precondition to
Exercising Gov’t and
taxation because receipt of benefits is Gov’t Gov’t
Authority private entities
conclusively presumed so taxpayers cannot
avoid payment under the defense of absence To protect
For the
of benefit received. Directly or indirectly, support
Purpose general For public use
everyone benefits. of the welfare of
gov’t gov’t and
Theories of Cost Allocation people
1. Benefit Received theory Persons
Persons Persons Owners of
2. Ability to Pay theory affected property
a. Vertical equity (Gross Concept)
Amount of Compensation
b. Horizontal equity (Net Concept) Unlimited Limited
Imposition only
Most Most
The Lifeblood Doctrine – taxes are the Importance
important superior
Important
lifeblood of the government Relationshi
Implications: p to the
1. Tax is imposed even in the absence of “Non- Inferior Superior Superior
Constitutional grant. Impairment
2. Tax exemption claims are construed against Clause”
taxpayers.
3. Government reserve the right to choose Public Public
C and I interest purpose and
objects of taxation. Limitation
limitations
4. Courts cannot interfere with collection of and due just
process compensation
taxes.
5. In income taxation:
a. Income received in advanced is taxable Scope of Taxation Power
upon receipt. – comprehensive, plenary, unlimited, and
b. Deductions for capital expenditures and supreme; however, not absolute and is subject
prepayments are not allowed. to inherent and constitutional limitations.
c. Lower amount of deduction is preferred
when a claimable expense is subject to Limitations
limit. 1. Inherent Limitations
d. Higher tax base is preferred when tax has a. Territoriality
multiple tax bases. Exceptions:
1. In income taxation, RC and DC are
Inherent Powers of the State taxable on income derived on within
– natural, inseparable, and inherent to every and outside the Philippines.
gov’t
2. In transfer taxation, residents or
– naturally exercisable even in the absence of
grant of power in the Constitution citizens are taxable on transfers within
1. Taxation power – to sustain itself and outside the Philippines.
2. Police power – to secure itself and well- b. International comity
being of its people by – bound to honor treaties even if the
enacting laws same conflicts with its local tax laws
3. Eminent domain – to secure its own Implications:
properties to carry out public 1. Governments cannot tax income and
services by taking private properties of other governments
property and paying
compensation
Income Taxation
 2. Governments give primacy to their
treaty obligations over their own f. Non-impairment of obligation and
domestic tax laws. contract
c. Public purpose
g. Free worship rule
d. Exemption of the government
– only the properties and income from – does not subject the exercise of religion
essential public functions are exempt to tax, except for its properties and
– income from those conducted for activities which are proprietary or
profit and GOCC’s are taxable. commercial in nature
e. Non-delegation of the taxing power h. Exemption of religious or charitable
– legislative axing power is vested entities, non-profit cemeteries,
exclusively in the Congress and is
churches, and mosques from
non-delegable
Exceptions: property taxes
1. Taxing power is delegable to LGU’s – properties must be actually, directly,
but with limitations set by the national and exclusively for charitable,
legislature (local taxation) religious, and education purposes
2. President is empowered to fix the (doctrine of use)
amount of tariffs (Tariff and Customs i. Exemptions of non-profit, non-stock
Code)
educational institutions (same w/ H)
3. Some aspects may be delegated to
other authorized persons for j. Concurrence of a majority of all
expedient and effective members of Congress for the
administration and implementation of passage of law granting tax
assessment and collection of taxes exemption
(Ex. BIR) k. Non-diversification of tax collections
l. Non-delegation of taxing power
However , the power to create tax laws
m. Non-impairment of the jurisdiction of
is exclusive and may originate only from the
House of Representatives (Congress) the Supreme Court to review tax
cases
2. Constitutional Limitations n. Bills shall originate exclusively from
a. Due process of law the House of Representatives
– assessments must be with legal basis o. Delegation of taxing power to LGU’s
and not arbitrary
– assessments shall be made within Two-Fold Obligations of Taxpayers
three years from due date of filing the – can only be demanded and enforced by PH
return or actual filing, w/e is later gov’t upon its residents and citizens within its
– collection shall be made within five territory:
years from date of assessment 1. Filing of returns and payment of taxes
b. Equal protection of the law 2. Withholding of taxes and its remittance
– same circumstances and conditions
should be taxed the same
c. Uniformity rule
– dissimilar circumstances should not be
taxed the same
– tax classifications should be based on
substantial distinction
d. Progressive system
– tax rates increase as tax base
increases (consistently with taxpayer’s
ability to pay), as opposed to
regressive system
e. Non-imprisonment for non-payment
of
debt or poll tax
– non-payment of debt does not lead to
imprisonment, but non-payment of tax
(except poll tax) leads to
imprisonment because it compromises
public interest.
– basic poll tax = non-imprisonment
– additional community tax = tax evasion
= imprisonment