NATURE
 Taxation – Mode of raising revenue for public purpose.
The power by which the sovereign raises
revenue to defray the necessary expenses
of government.
 Tax – THE EIL (Enforced, Imposed, Levied)
1. Enforced proportional contribution from
persons and property;
2. Imposed by the state by virtue of its
sovereignty; and –
3. Levied for the support of the government and
for all its public needs.
(mas madaling kabisaduhin, this is only one paragraph)
INHERENT POWER OF SOVEREIGNTY
 Sovereignty – Full right and power of a governing body
over itself WITHOUT any interference
from outside sources.
 The existence of taxation commences concurrently with
the four elements of the state (people, territory,
gov, sovereignty).
 The state being born – automatically possess the power
to collect tax.
THUS EQUATES – since a government has sovereignty, it can
enforce contributions upon its citizens even without a
specific provision in the Constitution authorizing it.
The constitution is only there for the purpose of limiting the
vast power of taxation.
HOWEVER - National gov. can only use the power of taxation.
Local gov. cannot.
EXTENT OF THE TAXING POWER
 Power of Taxation reaches to
o Every trade or Occupation
o Every object of industry, use,
enjoyment.
o Every species of possession
= It imposes a burden. In case of Failure to discharge,
thus will be seizure, confiscation, or forfeiture of
property.
Absence of limitations by the constitution, the power to
tax is CUPS
o Comprehensive (Wide extent)
 Because it covers persons, businesses,
activities, professions, rights & privileges
o Unlimited
 A tax does not cease to be valid merely
because it regulates, discourages, or even
definitely deters the activity taxed. The power
to impose taxes is one so unlimited in force
and so searching in extent that the courts
scarcely venture to declare that it is subject to
any restriction whatever, except such as rest
in the discretion of the authority.
o Plenary (its complete)
 Under the NIRC, the BIR may avail certain
remedies to ensure the collection of taxes.
 Which are the government remedies
(Administrative Remedy and Judicial
Remedy)
o Supreme (highest degree)
 Referred as the strongest of all the powers of
the government. It doesn’t mean that it is the
superior to the other inherent powers, only
that it is supreme insofar as the selection of
the subject of taxation is concerned
INHERENT LIMITATIONS (PINES)
 Are the Natural restrictions to safeguard and
ensure that the power shall be exercised only
for the betterment of the people whose interest
should be served enhanced and protected.
  A violation of these inherent limitations can
amount to taking of property without due
process of law. (Pepsi-Cola Bottling Co. v.
Municipality of Tanauan) Hence, it can be said
that any tax law contravening any limitation of
taxation, will be likewise unconstitutional.
PINES
1. Public Purpose
2. International Comity
3. Non-delegability of the taxing power
4. Exemption of the Government
5. Situs or Territoriality
1. Public Purpose
The power of Taxation is only for the objective of
supporting the services of the government.
Public Taxes = Public Money, HENCE should be used to
finance ONLY for public needs.
REMEMBER that public use is no longer confined to the
traditional notion of use by the public but held
synonymous with public interest, public benefit, public
welfare, and public convenience.
The phrase has now been broadened to cover uses
which redound (greatly benefit) to their indirect
advantage. MEANING, public purpose is not merely
direct public benefit/advantage, but also indirect
advantage.
ALSO NOTE: The congress has the only power to
determine whether the purpose of taxation is private or
public. (Legislative Prerogative)
PUBLIC PURPOSE IS (PUBLIC PURPOSE)
a. Public Improvement
b. Unemployment Relief
c. Buildings and roads/infrastructure
d. Local Police Forces Subsidies
e. Industries classified as indispensable
f. Construction of home sites
g. Promotion of Science and Invention
h. Upliftment of the underprivileged.
i. Rehabilitation if the sugar industry
j. Pensions to retirees
k. Oil Industry protection
l. Socialized Housing
m. Educational Subsidy
2. International Comity
Under this limitation, a state must recognize the
generally accepted tents of international law, some of
which are those that limit the authority of the
government to effectively impose taxes on a sovereign
state and its instrumentalities.
EXAMPLES:
a. A government cannot impose income taxes on
the wages of foreign ambassadors or impose
real estate property tax upon foreign
embassies. WHY? Because it is not a valid law
due to the imposition is in violation of the
universal principles of international law.
b. Income derived from investments in the
Philippine in loans, stocks, bonds or other
domestic securities, or from interest on
deposits in banks in the Philippines by foreign
governments, financing institutions owned, and
international or regional financial institutions
established by foreign governments is exempt
from income tax.
c. Diplomatic and Consular Representatives are
exempt from paying the community tax.
BASES OF THE RULE OF INTERNATIONAL COMITY
a. Doctrine of Sovereign Equality – par in parem
non habet imperium (as between equals, there
is no sovereign)
b. Doctrine of Sovereign Immunity – The rule of
international law that a foreign government
may not be sued without its consent.
c. Concept of when a foreign sovereign enters the
territorial jurisdiction of another, it does not
subject itself to the jurisdiction of the other.
3. Non-delegation of taxing power
GENERAL RULE: Delegata Potestas non Potest Delegare
(a delegated power cannot be further delegated)
The power to tax is EXCUSIVELY vested in the
legislative body. The powers to enact laws and
ordinances, to impose and collect taxes are
given to the congress.
THE SCOPE OF LEGISLATIVE POWER:
(SPAASM)
a. Subjects of Taxation
(persons, property, rights,
transactions, occupation)
b. Purpose of tax
c. Amount or rate of tax
d. Apportionment of tax
e. Situs of taxation
f. Method of Taxation
The situs of taxation is also known as place of taxation.
It’s the place or authority that has the right to impose
and collect taxes.
GENERAL RULE: State may not tax property lying
outside its borders or lay an excise or privilege tax upon
the exercise or enjoyment of a right or privilege derived
from the laws of another state and there in exercised or
enjoyed.
Power to tax can only be exercised within the territorial
jurisdiction of a taxing authority EXCEPT if there is
“privity of relationship” between the taxing state and
the object of tax based on the tax principles of
reciprocal duties. This relationship implies contractual
support or duty of care afforded by the government to
its citizen residing outside the country.

4. Exemption of the Government

The inherent limitation of exemption of government

from tax covers:

a. Government Entities
b. Government Agencies
c. Government Instrumentalities

The state’s immunity from taxation is inherent in its

power to impose tax. The state cannot be taxed without
its consent; otherwise, such is derogation to its
sovereignty.

REASON FOR EXEMPTION:

 If government properties will be subject to tax,

it will be an absurd situation of the government
“taking money from one pocket and putting it in
another” hence, will not serve the purpose of
taxation.
 The function of the government shall not be
unduly impeded.
 To reduce the amount of money that has to be
handled by the government in the course of its
operations

5. Territoriality or Situs of Taxation