Tax Doctrines:

1. The rule in the interpretation of tax laws is that a statute will not be construed as imposing a tax
unless it does so clearly, expressly, and unambiguously. A tax cannot be imposed without clear
and express words for that purpose. The general rule of requiring adherence to the letter in
construing statutes applies with peculiar strictness to tax laws and the provisions of a taxing act
are not to be extended by implication. In answering the question of who is subject to tax
statutes, it is basic that in case of doubt, such statutes are to be construed most strongly against
the government and in favor of the subjects or citizens because burdens are not to be imposed
nor presumed to be imposed beyond what statutes expressly and clearly import. As burdens,
taxes should not be unduly exacted nor assumed beyond the plain meaning of the tax laws.

2. Fiscal adequacy, which is one of the characteristics of a sound tax system, means that sources of
revenues must be adequate to meet government expenditures and their variations.

3. ADMINISTRATIVE FEASIBILITY means that the tax system should be capable of being
effectively administered and enforced with the least inconvenience to the taxpayer. Non-
observance of the canon, however, will not render a tax imposition invalid "except to the
extent that specific constitutional or statutory limitations are impaired.

4. THEORETICAL JUSTICE means that the tax burden should be proportionate to the taxpayer's
ability to pay. Taxation should be uniform as well as equitable.

5. Doctrine of Operative Fact - Acts done pursuant to a law which was subsequently declared
unconstitutional remain valid, but not when the acts are done after the declaration of
unconstitutionality.

As a general rule, an unconstitutional act is not a law; it confers no rights; it imposes no duties; it
affords no protection; it creates no office; it is inoperative as if it has not been passed at all. The
general rule is supported by Article 7 of the Civil Code.

A legislative or executive act, prior to its being declared as unconstitutional by the courts, is valid
and must be complied with

6. Doctrine of constitutional supremacy, which renders any subsequent law that is contrary to the
Constitution void and without any force and effect.

7. Cross Border Doctrine mandates that no VAT shall be imposed to form part of the cost of the
goods destined for consumption outside the territorial border of the taxing authority. Hence,
actual export of goods and services from the Philippines to a foreign country must be free of
VAT, while those destined for use or consumption within the Philippines shall be imposed with
10% VAT.

8. Doctrine that municipal corporations do not possess inherent powers of taxation.

9. It is hornbook doctrine that tax exemptions are strictly construed against the claimant.
For this reason, tax exemptions must be based on clear legal provisions. Tax exemptions
must be clear and unequivocal. A taxpayer claiming a tax exemption must point to a
specific provision of law conferring on the taxpayer, in clear and plain terms, exemption
from a common burden. Any doubt whether a tax exemption exists is resolved against the
taxpayer. Tax exemptions cannot arise by mere implication, much less by an implied re-
enactment of a repealed tax exemption clause.

10. Taxation Defined It is said that taxes are what we pay for civilization society. Without taxes, the
government would be paralyzed for lack of the motive power to activate and operate it. Hence,
despite the natural reluctance to surrender part of one's hard earned income to the taxing
authorities, 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. This symbiotic relationship is the rationale of taxation and should dispel the
erroneous notion that it is an arbitrary method of exaction by those in the seat of power . But
even as we concede the inevitability and indispensability of taxation, it is a requirement in all
democratic regimes that it be exercised reasonably and in accordance with the prescribed
procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to
his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if
the taxpayer can demonstrate, as it has here, that the law has not been observed. Taxes are the
lifeblood of the government and so should be collected without unnecessary hindrance.
However, such collection should be made in accordance with law as any arbitrariness will
negate the very reason for government itself. It is therefore necessary to reconcile the
apparently conflicting interests of the authorities and the taxpayers so that the real purpose
of taxation, which is the promotion of the common good, may be achieved.

11. Under the Tax Code, in recognition of the pervasive quasi-contract principle, a claim for tax
refund may be based on the following:

a) erroneously or illegally assessed or collected internal revenue taxes;

b) penalties imposed without authority; and
c) any sum alleged to have been excessive or in any manner wrongfully collected.