TAXATION EL

Taxation is:
1. A STATE POWER – an inherent power of the State to enforce a proportional contribution from its subjects for
public purposes.
2. A LEGISLATIVE PROCESS – a process of levying taxes by the legislature of the State to enforce proportional
contribution from its subjects for public purposes.
3. A MODE OF GOVERNMENT COST OF CONTRIBUTION – the Sate allocates its costs or burden to its subject
who are benefited by its spending.
The theory of taxation is the government’s necessity for funding.
The basis of taxation is the mutuality of support between the people and the government. The government offers public
services while the people pay taxes.

THEORIES OF ALLOCATION
1. Benefit received theory – the amount of benefit one receives form the government is proportional to the amount
he should be taxed.
2. Ability to pay theory – the capacity to pay is proportional to the amount he should be taxed.
a. Vertical Theory – proposes that the extent of one’s ability to pay is directly proportional to the level of
his tax base. (Gross Concept)
b. Horizontal Theory – proposes that the extent of one’s ability to pay is indirectly proportional to the level
of his tax base, considering particular circumstances. (Net Concept)

INHERENT POWERS OF THE STATE – powers can be exercise without the need of any law.
1. Taxation Power – power of the state to raise revenue for public purposes.
a. As to the coverage, taxation is the strongest because it covers anything.
b. As tot eh exercise of power, taxation is the weakest because it is subject to inherent and constitutional
limitation.
2. Police Power – the general power of the State to enact laws to protect the well-being of the people.
3. Eminent Domain – power of the State to take private property for public use after paying just compensation.

LIMITATIONS OF THE TAXATION POWER

A. Inherent Limitation
i. Territoriality of taxation – taxes are be imposed only within the territories of the State.
 Resident citizens and domestic corps are taxable on income derived within/outside the country.
ii. International comity – mutual courtesy or reciprocity between states.
iii. Public purpose – intended for the common good.
iv. Exemption of the government – the gov’t can exercise the power upon anything excluding itself
v. Non-delegation of taxing power
B. Constitutional Limitation
i. Due process of law
ii. Equal protection of the law
iii. Uniformity rule in taxation
iv. Progressive system of taxation
v. Non-imprisonment for non-payment of debt or poll tax
vi. Non-impairment of obligation and contract
vii. Free worship rule
viii. Exemption of religious or charitable entities, non-profit cemeteries, churches and mosque from property
tax
ix. Non-appropriation of public funds or property for the benefit of any church, sect or system of religion
x. Exemption form taxes of the revenues and assets of non-profit, non-stock educational institution
xi. Concurrence of a majority of all members of Congress for the passage of a law granting tax exemption
xii. Non-diversification of tax collections
xiii. Non-delegation of the power of taxation
xiv. Non-impairment of the jurisdiction of the Supreme Court to review tax cases
xv. The requirement that appropriations, revenue, or tariff bills shall originate exclusively in the House of
Representatives
xvi. The delegation of taxing power to local government units
TAXATION EL

STAGES OF THE EXERCISE OF TAXATION POWER

1. Levy or Imposition -
2. Assessment and collection