“ATENEO CENTRAL BAR OPERATIONS 2019 ‘TAXATION LAW BLUE TIPS eee ee PRAYER FOR THE BAR EXAMINATIONS © God, we come before You this day, 183 we are preparing/studying for the bar examinations. This is the most important event in our ives, ‘one full of consequences for our own future, ‘and for the hopes and expectations of many who love us and ‘re concemed for us: our parents and relatives, our friends, ‘our professors who have worked hard to prepare us fori. We ask for help. Make our memories ready to recall all the knowledge we have stored in thorn by our study. Help us to understand the full meaning of the questions and to see the exact answers. Give us the facility of expression to answer clearly and accurately. Give us poace of soul that we may not get upset under the pressure of the task. We do not ask this by our own merits. ‘We cannot point to our faithful service in the past as deserving of this special help. We have in fact been careless and disobedient. We ask this from Your Fatherly mercy and compassion through ‘Your Son, our Lord Jesus Christ. Listen to our prayers through the intercession of our Blessed Mother, ppatronass of our University and of St. Thomas More, patron of our Law School. ‘Amen. ‘Ano ngyayar if may assessment from the BIR? Hoart aTAX ‘Anong sasabinin mo after mong basahin itong joke na to? VAT ganun ‘Special thanks to Atty. Michael Montero, Atty. Mickey Ingles, Atty. Terence Conrad Bello, and Atty. Coby Melo. ‘THE BLUE TIPS ARE EXCLUSIVELY FOR THE USE OF ATENEO BAR TAKERS FOR THE 2019 BAR EXAMINATIONS. UNAUTHORIZED USE AND REPRODUCTION OF THIS MATERIAL IS PROHIBITED. BARE TNE 38ENEU CENIHAL, BAR OPERATIONS 2019 TAXATION LAW BLUE TIPS GENERAL PRINCIPLES Q1: What are the three elements of taxation? (CIS) 3} 18 an enforced proportional Contribution fram persons and properties. 2) itis Imposed by the State by virte ofits sovereignty 3) Itis levied for the Support of the government (PCGG v. Cojvengco, 2001) ‘Q2: What are the purposes/objectives of taxation? (Rev-Reg-PREI 1) Revenue ~ to raise revenue for public purposes; 2) Regulatory ~ may provide means for the rehabil ‘mbued with public Interest as to be within the police power of the State, 3) _Bromotion of general welfare ~ may be used as on implement of police power: ¢}_ Reduction of social inequality ~ prevents the undue concentration of wealth inthe hands ofa few individuals 5) Encourage economic growth by granting incentives and exemptions; 8) Brotectionism —to protect local industries from foreign competition tion and stabilization of a threatened industry Which is Q3: Explain the inherent limitations on the Power of Taxation. ‘The inherent limitations are those limitations that exist despite the absence of an express constitutional provision: (PINET) 1) Bublic purpose — power of taxation is exervised for a public purpose and for the general welfare. 2) Principle of Intemational comity - Comity is the raspect accorded by nations to each other as co-equals. The property of a foreign state or government may not be taxed by another foreign state or government. 3) inherently legistative or non-delegability of the taxing power - Only the legislature can exercise the power of taxes unless the same is delegated by the constitution or a law. 4) Tax exemption of the State — enlities exercising sovereign functions are tax-exempt, unless expressly taxed. However, government agencies performing proprietary functions (like GOCCs) remain subject to tax. 5) Territoriality or situs of taxation ~ power 1o taxis limited to the terntoria! jurisdiction of the taxing State. Qa: May a legislative body enact laws to raise revenues in the absence of @ constitutional provision granting sald body the power to tax? Yes. The legislative body may enact tax laws even in the absence of a constitutional provision because the power to tax is inherent in the government. The power of taxation is an essential and inherent attribute of sovereignty belonging as a matter of right to every independent government. (Pepsi-Cola Botling Company of the Philiopines, Inc. v. Municipality of Tenauan, Leyte, 1976) Q5: What are the constitutional provisions directly affecting taxation? ‘The direct constitutional provisions on taxation are: 41) Non-imprisonment for non-payment of poll tax; 2) Uniformity, equitabilty, and progressivity of taxation; 3) Grant by Congress of authority o the President to fix tarif rates, import and export quotas, ete.; 4) Tax exemption of properties actually, directly, and exclusively used for religious, charitable and educational urposes; See Gi ies a vcd smi i ind inp anal amie en grants, endowments, donations or contributions; 6) President's item-veto power on appropriation, revenue, taif bits; 7) Non-impairment of the Supreme Court's jurisdiction in tax cases; 8) Power of local governments to create its own sources of revenue and to levy taxes subject to Constitutional and Congressional imitations; 9) Majority voting requirement in connection withthe legislative grant of tax exemption; and 10) The provision which mandates that money collected on a tax levied for a public purpose shall be paid out for such purpose only. Q6: Differentiate taxes from licenses or oe Source Taxing power Palice power of the State Purpose Raise revenue Regulation Object Persons, property and privilege Right to exercise a privilege ‘As to the amount | No limit Only necessary to carry out regulation ‘THE BLUE TIPS ARE EXCLUSIVELY FOR THE USE OF ATENEO BAR TAKERS FOR THE 2019 BAR EXAMINATIONS. UNAUTHORIZED USE AND REPRODUCTION OF THIS MATERIAL IS PROHIBITED. PAGE NF 36Evra OPERATIONS 2019 TAXATION LAW BLUE TIPS Q7: Differentiate taxes from toll fees. Imposed by State Private persons Reimbursement of costs and expenses incurred in Purpose Raise roverues the construction of toll ways, and to assure reasonable margin of income L Basis State's sovereign power Attribute of ownership QB: Quezon City (QC) enacted an ordinance called Socialized Housing Tax (SHT) which imposes a special assessment equivalent to % percent of the assessed value of land in excess of P100,000.00 which shall accrue to the socialized housing programs of the QC government. Is the SHT a tax which Is within the Power of the city to impose? Yes, SHT is a tax which QC can impose. The collections made accrue to its socialized housing programs and Drojects. The tax is not a pure exercise of taxing power or merely to raise revenue; Its levied with a regulatory Purpose. The levy is primarily in the exercise of the police power for the general welfare of the entire city. It is {greatly imbued with public interest, Removing sium areas in QC is not only beneficial to the underprivileged and ‘homeless constituents but advantageous to the real property owners as well. (Ferrer v. City Mayor Bautista, 2008) G9: What is the general rule on the statutory construction in the interpretation of tax statutes? How about the rule on exemptions? A tax cannot be imposed unless its supported by clear and express language of a statute. A tax statute is liberally construed in favor of taxpayers and striclly construed against tne government. Hence, itis the burden of the State 10 first prove that taxpayer is in fact covered by a tax stalute. (CIR v. CA and Ateneo de Manila University, 1997) On the other hand, once @ tax is found to cover the taxpayer, @ claim of exemption must be strictly construed ‘against the taxpayer. The burden then shifts tothe taxpayer to prove that he is exempt (Davao Gulf Lumber Corp. v. CIR, 1998) 10; What is the rule of non-retroactivity of Rulings and what are the exceptions? General Rule: Any revocation, modification, of reversal of rules and regulations or any of the rulings or circulars shall not be given retroactive application if prejudicial to the taxpayers. (Sec. 246, NIRC) Exceptions: (MSB) 1) Where the taxpayer deliberately msstates or omits material facts from his return or any document required of him by the BIR; 2) Where the facts subsequently gathered by the BIR are materially different from the facts on which the ruling is based: or 3) Where the taxpayer acted in bad faith. (Sec. 246, NIRC) Q11: Differentiate between double taxation in the strict sense and in the broad sense. Give an example of each. Double taxation in the strict sense pertains to direct double taxation. This means the taxpayer is taxed twice by the same taxing authority, within the same taxing jurisdiction, for the same property and same purpose. For example, the imposition of the same LGU of additional tax on persons who sold goods and services, in addition to another local business tax for distributors, dealers or retailers in the same ordinance is direct double taxation. Both taxes were being imposed for the privilege of doing business in the city. (Nursery Care Corp, et. al v. Cty (of Manila, 2014), Double taxation in the broad sense pertains to indirect double taxation. This extends to all cases in which there is a burden of two or more impositions. For example, aside from the taxes imposed by the national government, a city ordinance imposes license fee on any person. fim, entity or corporation doing business in the city. (City of Baguio v. De Leon, 1968). Q12: Distinguish tax avoldance from tax evasion. " pees eeu ‘Tax Minimization THE BLUE TIPS ARE EXCLUSIVELY FOR THE USE OF ATENEO BAR TAKERS FOR THE 2019 BAR EXAMINATIONS. UNAUTHORIZED USE AND REPRODUCTION OF THIS MATERIAL IS PROHIBITED. PARE ANE 35