19 Art. VI, Sec. 29 (3).

(e) International comity.

This principle limits the authority of the government to effectively impose taxes on a sovereign state
and its instrumentalities, as well as on its property held and activities undertaken in that capacity. As
a rule, the Philippine government cannot tax foreign ambassadors nor impose real property taxes
upon foreign embassies.
(f) Double Taxation. Two types of double taxation are direct double and indirect double taxation.
Direct double taxation – Where:
(1) the same subject is taxed twice;
(2) by the same taxing authority; May 2021
6
(3) within the same jurisdiction;
(4) during the same taxing period; and
(5) covering the same kind or character of tax (Villanueva v. City of Iloilo, L-26521).
There is no constitutional prohibition against double taxation in the Philippines (Villanueva v.
City of Iloilo, L-26521, December 28, 1968), though it is not favoured.
Indirect double taxation, which lacks one or more of the elements of direct double taxation, is also
permissible.
Basic Principles of a Sound Tax System
1. Fiscal Adequacy – which means that the sources of revenue should be sufficient to meet the
demands of public expenditures;
2. Equality or Theoretical Justice – which means that the tax imposed should be proportionate to
the taxpayer’s ability to pay; and
3. Administrative Feasibility – which means that the tax laws should be capable of convenient, just,
and effective administration

Theory or Basis of Taxation

1) Life-blood Theory.
- Taxes are the lifeblood of the government. Without taxes, no government can function.
2) Benefits Protection Theory (Symbiotic Relationship)

- Taxes are what we pay for a civilized or organized society. Without taxes, the government would be
paralyzed for lack of the motive power to activate and operate it (Commissioner v. Algue, 158 SCRA
9).
Essential Elements or Characteristics of a Tax
1. Enforced contribution
2. Exacted pursuant to legislative authority
3. For raising revenue for public needs
4. Proportionate in character or uniform
5. Payable in money
6. Imposed within the state’s jurisdiction
7. Personal to the taxpayer

Classification of Taxes
a) According to scope or exercising authority
National tax Municipal or local tax

- Imposed by the National Government - Imposed by local government units

Exs. Income tax, Estate tax, Donor’s tax, Exs. Occupation tax, Real property tax (RPT)
VAT, OPT, Excise Tax, DST