A.

Concept and Purpose of Taxation

A. 1.Definition:

As a power- inherent power of the state to demand contributions for public purpose

AS a process- process by which the sovereign through its law-making body, raises
income to defray the necessary expenses of government.

A. 2.Nature:
Inherent-attribute of sovereignty
- no enabling statute for it to exists

Supreme
Plenary
unlimited
comprehensive

bound by limitations- rest on the discretion on the authority exercising it

-may be legal or constitutional limitations

power to destroy- when used as an implement of police power

-must be within the bounds of the law

A. 3. Purpose
-Revenue purpose- raise revenue in order to defray the expenses of the government

- Non-revenue purpose
a. implement of police power
- shall be exercised in order to regulate activities or to promote the general
welfare. i.e. price control measures, senior citizen's discount(RA 9994)

b. tool for the reduction of social inequality

- progressive system of taxation-the imposition of taxes with due regard to the
taxpayer's ability to pay. i.e. income tax
- regressive system- without regard to the taxpayer's ability to pay. i.e. VAT- not
unconstitutional -Under the Consti "congress shall evolve" - merely frowned upon
c. method to implement protectionist policies
d. implement of the power of eminent domain
e. tool to encourage economic growth- i.e. tax exemptions

A. 4. Tax v. other forms of exactions

-Tax v. License Fees

Purpose:
T- revenue
L- for regulation and inspection

Amount to be collected:
T- an amount in excess of the cost of the services and inspection
L- limited ti the amount necessary to cover the cost of the services rendered in
that connection

Tests:
1. Primary purpose- when the primary purpose is to generate revenue-tax
when the primary purpose is regulation- license fee
2. Effect of imposition - is the effect the accumulation of an income in order to
defray the expenses of the government, if yes, tax. if the effect is the regulation
of activities, if yes,license fee.
3. lack of any standards for such imposition- if yes, tax

Purpose of distinction
1. to determine whether an entity is exempt from payment of such exaction
2. determines the applicability of the tests of validity
3. determines the existence of double taxation
direct- imposition of taxes upon the same subject matter, for the same purpose
within the same taxing jurisdiction, of the same kind, within the same taxing
period.

Legitimate enterprises enjoy the constitutional protection not to be taxed out of

existence. Incurring losses because of a tax imposition may be an acceptable
consequence, but killing the business of an entity is another matter, which should
not be allowed.Applies only if the exaction is a tax.

the determining factors to decide whether the imposition is a tax or license fee
are the purpose and effect of the imposition

TAX v. Assessment
Purpose:
T-revenue
SA- levied on property owners to pay a specific local infrastructure project i.e
construction/maintenance of roads

Amount to be collected
T- charged to property owners or income earners without regard to any direct
benefit
SA= charged only to the owners of the property in the neighborhood that will
benefit from the project.

TAX v. Debt
Source of obligation
T- Law
D- Generally, contract

Capacity of the government to collect

T- due to the Government in its sovereign capacity
D- due to the government in its corporate capacity

TAX v. TARRIF
Subject of imposition
T- on persons, properties, transactions, right, or interests.
Tff- goods which are imported from another country

TAX v. Toll
Nature
T- government exaction
Toll- not a govenment exaction

Purpose
T- principally for the purpose of raising revenue to fund public expenditures
Toll- reimbursement for the costs and expenses incurred in the construction,
maintenance, and operation of the tollways, as well as to ensure a reasonable
margin of income

person to collect
T-imposed only by the government under its sovereign authority
Toll- may be demanded by either the government or private individuals or entities,
as an attribute of ownership

5. Inherent Powers of the State

Similarities
- inherent
- methods by which the state interferes with private rights
-legilative in character
- not only necessary but indispensable

Differences

Implementing authority
T- government
P- Government
ED- Government and GOCCs

Purpose
T- raise revenue
P- promote genral welfare
ED0 facilitate the State's need of property for public purpose

Amount of exaction
T- no limit, as long as it is not confiscatory
P- limited to the cost of regulation
ED- no exaction

A. 5. Theory and Basis of Taxation

Lifeblood Doctrine - taxes are the lifeblood of the government, for without taxes,
the government can neither exist nor endure

Justification for the exercise of the power of taxation

Benefits received theory- taxpayers should pay taxes to the government because of
the benefits that are derived by the taxpayer from the government.

necessity theory- exercise of the power to tax emanates from necessity, without
taxes, the government cannot fulfill its mandate of promoting the general welfare
and well-being of the people

Symbiotic Relationship Theory-

Taxes are what we pay for a civilized society, Despite the natural reluctance to
surrender part of one's hard-earned income to the taxing authorities, every person
who is able to pay must contribute his share in the running of the government.
Reciprocally, 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 values.