Francis Edrian B.

Cellona

febcellona@gmail.com

1.

a. Lifeblood Theory

Without taxation, a government can neither exist nor endure. Taxes are the lifeblood of the
government and so should be collected without unnecessary hindrance. It is said that taxes are what we
pay for civilized society. Without taxes, the government would be paralyzed for lack of the motive
power to activate and operate it.

b. Symbiotic relationship theory

This principle serves as the basis of taxation and is founded on the reciprocal duties of
protection and support between the State and its inhabitants. Every person who is able to, must
contribute his share in the running of 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 moral and material values.

c. Necessity theory

The government cannot continue without means to pay its expenses and that for those means it
has the right to compel all citizens and property within its limits to contribute. The power to tax is an
attribute of sovereignty. It is a power emanating from necessity. It is a necessary burden to preserve the
State's sovereignty and a means to give the citizenry protection and also to serve them. The obligation
to pay taxes rests upon the necessity of money for the support of the state. Therefore, no person is
allowed to object to or resist the payment of taxes solely because no personal benefit to him.

D. Power to destroy

The power to tax includes the power to destroy if it is used validly as an implement of the police
power in discouraging and in effect, ultimately prohibiting certain things or enterprises inimical to the
public welfare. However, if it is used solely for the purpose of raising revenues, cannot be allowed to
confiscate or destroy. If this is sought to be done, the tax may be successfully attacked as an inordinate
and unconstitutional exercise of the discretion.

2.

Progressive tax rate refers to the tax rate imposed which becomes higher as the tax base
increases. This follow the progressive system of taxation because it is based on the ability to pay of the
taxpayer. However, it must not be confused with a progressive system of taxation.
3.

The purpose of these international agreements is to reconcile the national fiscal legislations of
the contracting parties in order to help the taxpayer avoid simultaneous taxation in two different
jurisdictions. More precisely, the tax conventions are drafted with a view towards the elimination of
international juridical double taxation

The tax treaty sets out the respective rights to tax by the state of source or situs and by the state
of residence with regard to certain classes of income or capital. In some cases, an exclusive right to tax
is conferred on one of the contracting states; however, for other items of income or capital, both states
are given the right to tax, although the amount of tax that may be imposed by the state of source is
limited.

4.

No. The ordinance is in violation of the Rule of Uniformity and Equality, which requires that all
subjects or objects of taxation, similarly situated must be treated alike in equal footing and must not
classify the subjects in an arbitrary manner. In the present case, the ordinance exempts cars carrying
more than two occupants from coverage of the said ordinance. Also, the ordinance only imposes the tax
on private cars and exempts public vehicles from the imposition of the tax, although both contribute to
the traffic problem. There exists no substantial standard used in the classification by the City of Makati.

Also, one of the issues is the fact that the tax is imposed on the driver of the vehicle and not on
the registered owner of the same. The tax does not only violate the requirement of uniformity, but the
same is also unjust because it places the burden on someone who has no control over the route of the
vehicle. The ordinance is, therefore, invalid for violating the rule of uniformity and equality as well as for
being unjust.

5.

No.

In a case at bar, if real property is used for one or more commercial purposes, it is not
exclusively used for the exempted purposes but is subject to taxation. The words "dominant use" or
"principal use" cannot be substituted for the words "used exclusively" without doing violence to the
Constitution and the law. Solely is synonymous with exclusively.

In the present case, portions of land were used for commercial purposes. It did not exclusively
used the land for religious or charitable purposes.

Therefore, the church may not claim exemption on the entire land.

6.
 The DOJ is significantly involved in the implementation of the LGC sec. 187 of RA 7160 which
vests in the secretary appellate jurisdiction over the constitutionality or legality of municipal tax
ordinances and revenue measure

7.

First, Income denotes a flow of wealth during a definite period of time while Capital refers to the fund or
property existing at one distinct point in time. Second, Income is the service of wealth while Capital is
the wealth itself. Also, Income is subject to tax on the other hand Return of capital is not subject to tax.
Lastly, Income is considered the Fruit while Capital is considered the Tree.

8. Under the Tax Benefit Rule an item of expense or deduction become an item of gross income in the
following instances: Taxes, Bad Debts and Abandonment Losses. Under it, a taxpayer need not include in
his gross income amounts recovered for his loss if he did not receive a “tax benefit” for the loss in a prior
year. If it recovers the money in a subsequent year, the money must be counted as income in the
subsequent year.

9.

The underlying rules justifying the general principles of income taxation as laid down in Sec 23 of
the Philippine Tax Code are:
a. Nationality rule- is the legal basis for taxing Filipino citizen and domestic corporations for its income from
all sources i.e. from within and without the Philippines
b. Residence rule- is the legal basis for taxing Philippine residents for income earnings from within the
Philippines e.g. taxation of resident aliens of all its income from within the Philippines.
c. Source rule- enables the country to tax income earnings from within the Philippines for activities
conducted within the country.

10.

a. Transportation Allowance given by employer where employee was required to

submit receipts – INCLUSIONS TO GROSS INCOME
b. Receipt of all premium payments from insurance policy that matured –
EXCLUSIONS TO GROSS INCOME
c. House and Lot received as prize for winning the Dance King/Queen in Bicol an
event organized by the LGUs in the Bicol Region – INCLUSIONS TO GROSS
INCOME
d. Gain from disposal of condo unit in Hong Kong by a Filipino OFW in Hong Kong –
EXCLUSIONS TO GROSS INCOME
 e. Distributive share in a general partnership – INCLUSIONS TO GROSS INCOME

As a gross income, what is the difference in treatment of share in profits in a general partnership and a
general professional partnership? Why?

First a general partnership is considered as a corporation. It shall be taxed separately from its
owners. While a GPP is not taxed separately. The partners themselves, not the partnership, shall be
liable for income tax in their separate and individual capacities. Each partner shall report as gross
income his distributive share, actually or constructively received, in the net income of the partnership.

In a general partnership, a partner’s share in the partnership’s distributable net income is

deemed actually or constructively received by the partners in the same taxable year such share will be
subjected to dividend tax (10%) whether actually distributed or not. While in a GPP, a partner’s share is
included in the computation of his gross income subject to a different tax.