1.

Taxation is the act of imposing a levy on citizens and collecting funds from them based on their
income and assets. The government is supported by tax revenue, which enables it to provide many
services like funding for the police and courts, a military, and building and maintaining roads.

2.

*Police Power

*Power of Eminent Domain or Power of Expropriation

*Power of Taxation.

3. "TAXATION IS THE POWER TO DESTROY." It is important to note, however, that while taxation is said
to be the power to destroy, it is by no means unlimited. According to an authoritative opinion, when a
legislative body having the power to tax a certain subject matter actually imposes such a burdensome
tax as effectually to destroy the right to perform the act or to use the property subject to the tax, the
validity of the enactment depends upon the nature and character of the right to destroy. If so great an
abuse is manifested as to destroy natural and fundamental rights which no free government could
consistently violate, it is the duty of the judiciary to hold such an act unconstitutional (Ibid.)..

That is why it can rightfully be said that while the power to tax is the power to destroy, it is equally
correct to postulate that the "power to tax is not the power to destroy while the Supreme Court sits,"
(1980 Bar question) because of the constitutional restraints placed on a taxing power that violates
fundamental rights.

4. The authority to impose taxes is based on idea that a government must exist in order to be able
to cover its costs, and that in order to do so, it has the power to require all of its residents and
properties to pay taxes.

The basis is the reciprocal obligations of the State and its citizens to protect and support one
another. In order to be able to carry out its governmental duties, the Government must be able to
collect taxes from those who are subject to them. On the other hand, citizens pay taxes in order to be
guaranteed access to the advantages of organized society (benefits received theory).

THEORY AND BASIS OF TAXATION. There are two reas why the exercise by the State of its
taxing power is justified. One is necessity, and the other is the grant of protection and benefits by the
State to its citizens.

(a) Necessity Theory Taxes proceed upon the theory that the existence of government is a necessity;
that it cannot continue without the means to pay its expenses; and that for those means, it has the right
to compel all citizens and property within its limits to contribute.
(b) The Benefits-Protection Theory According to this theory, the State demands and receives taxes from
the subjects of taxation within its jurisdiction so that it may be enabled to carry its mandate into effect
and perform the functions of government, and the citizen pays from his property the portion demanded
in order that he may, by means thereof, be secured in the enjoyment of the benefits of organized
society. However, the foundation of the obligation to pay taxes is not the privileges enjoyed or the
protection given to a citizen by the Government, although the payment of taxes gives a right to
protection; both are enjoyed as well by those members of a State who do not pay taxes because they
are not able to do so

5. Taxation's primary purpose is to provide money for public spending. It is used to fund
expenditures on infrastructure, armies, defenses, human resources, and the provision of services to
both individuals and companies. Taxation plays a crucial role in the social contract that unites the people
and the economy by financing public goods and services.

PURPOSES AND OBJECTIVES OF TAXATION

(a) Revenue Basically, the purpose of taxation is to provide funds or property with which the State
promotes the general welfare and protection of its citizens (51 Am. Jur. 71-73).

(b) Regulation Taxation also has a regulatory purpose as in the case of taxes levied on excises or
privileges like those imposed on tobacco and alcoholic products, or amusement places like night clubs,
cabarets, cockpits, etc.

Taxation is not merely a power that is exercised in order to raise revenue for the support of the
Government. Taxes may also be imposed for a regulatory purpose as, for instance, in the rehabilitation
and stabilization of a threatened industry which is affected with public interest, like the oil industry
(Caltex Philippines, Inc. v. Commission on Audit, et al., G.R. No. 92585, May 8, 1992).

(c) Promotion of General Welfare In one decided case, the Supreme Court ruled that taxation may be
used as an implement of the police power in order to promote the general welfare of the people. Thus,
in the case of Lutz v. Araneta (98 Phil. 148), the Supreme Court upheld the validity of the Sugar
Adjustment Act, which imposed a tax on milled sugar since the purpose of the law was to strengthen an
industry that is so undeniably vital to the economy - the sugar industry.

How the police power is enhanced through taxation is further illustrated in the existence of the Oil
Price Stabilization Fund (OPSF), a device designed to protect the public from the adverse effects of
fluctuations in the prices of imported crude oil.
 As ruled in the case of Osmeña v. Orbos, etc., et al. (G.R. No. 99886, Mar. 31, 1993), while the
funds collected under the OPSF may be referred to as taxes, they are exacted in the exercise of the
police power of the State. From such fund, amounts are drawn to reimburse oil companies when
appropriate situations arise for increases in, as well as under-recovery of, the cost of crude oil
importation.

(d) Reduction of Social Inequality-This is made possible through the progressive system of taxation
where the objective is to prevent the undue concentration of wealth in the hands of a few individuals.
Progressivity is keystoned on the principle that those who are able to pay should shoulder the bigger
portion of the tax burden. Incidentally, the present rates of income, estate and gift taxes present a good
example of progressivity.

(e) Encourage Economic Growth Taxation does not only raise public revenue, but in the realm of tax
exemptions and tax reliefs, for instance, the purpose is to grant incentives or exemptions in order to
encourage investments and thereby promote the country's economic growth.

It is worthwhile to note that since the power to tax is inherent in the State, the power to exempt
from tax is inherent in the State also. This is not necessarily so in the domain of local taxation. Since in
local taxation, the taxing power is only delegated, i.e., either under the Constitution or by virtue of
legislation or both, it follows that in order to grant tax exemptions, local governments must justify its
exercise under constitutional or statutory law or both, as the case may be.

In the Local Government Code (Sec. 192), local governments may grant tax exemptions. It is,
however, significant to note that with respect to real property taxes, no such power exists, save in the
case of condonation of taxes which can be granted only for certain justifiable reasons which are
expressly stated in the law (see Sec. 276, Local Government Code).

(f) Protectionism In some important sectors of the economy, as in the case of foreign importations, taxes
sometimes provide protection to local industries like protective tariffs and customs duties.

6.The principles of a sound tax system are Fiscal Adequacy, Administrative Feasibility, and Theoretical
Justice.

A. Fiscal adequacy The sources of government revenue must be sufficient to meet government
expenditures and other public needs. This is essential in order to avoid budgetary deficits and to
minimize foreign and local borrowings.
B. Theoretical Justice A good tax system must be based on the taxpayer's ability to pay. This suggests
that taxation must be progressive conformably with the constitutional mandate that Congress shall
evolve a progressive system of taxation (Sec. 28[1], Art. VI, 1987 Constitution).

C. Administrative Feasibility- Taxes should be capable of being effectively enforced. Hence, it must not
lay down obstacles to business growth and economic development. The value-added tax law (VAT) could
be cited as an example of administrative simplicity. Speaking of the VAT law, the Supreme Court said
that the law "is principally aimed to rationalize the system of taxes on goods and services, simplify tax
administration and make the system more equitable to enable the country to attain economic recovery"
(Kapatiran Ng Mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc., et al. u. Tan, etc., G.R. No. 81311, June
30, 1988 and companion cases).

7. Prospectivity means relating to or effective in the future. Prospectivity in criminal laws means that
they can only be used to penalize behavior that has already taken place. It cannot punish an act that was
not unlawful when it was committed. It cannot be used retroactively unless it is in the accused's favor,
who is not a frequent offender.

8.

9. It is considered double taxation when a taxpayer is assessed twice when only once is necessary for the
same purpose by the same taxing authority inside the same jurisdiction during the same taxing period,
and the taxes are of the same nature.

10. No, there is a legal form of Tax escape such as Tax Avoidance, on the other hand, Tax evasion is
illegal.

FORMS OF TAX ESCAPE

*Shifting

a. the original payor or one whom the tax was assessed transfers the burden of tax to someone else.

*Capitalization
the total amount of future taxes expected to be paid for the object is deducted from the purchase price
of the object. It occurs if the property is income generating.

*Transformation

the seller maintains his selling price and margin of profit not by shifting the tax to his customers but by
improving his method of production. The savings he acquires from reduced production cost is used to
cover the amount of tax.

*Evasion

the use of illegal or fraudulent means to escape or lessen the payment of tax; evasion only occurs on the
amount not paid. Evasion is a crime punishable by a fine and imprisonment.

*Avoidance

the use of tax-saving devices or means sanctioned by law to avoid or reduce tax liability. It could involve
the use of alternative tax rates or methods of tax assessment as provided by law.

*Exemption

the government grants immunity to particular persons, corporations, or a particular class of persons or
nature of business, it is privilege without which they would be taxed like others similarly situated.

11. Tax exemption, also known as exclusion, often refers to a statutory exception to a general rule rather
than the simple lack of taxation in a given situation. Rather than a deduction, tax exemption sometimes
means the removal of a specific product or service from taxation.

An organization that is exempt from federal and state taxes is known as a tax-exempt entity.
Federal income tax exemptions are available for nonprofit organizations that were created specifically
for public purposes and do not share earnings. Examples of tax-exempt organizations include religious
institutions, educational institutions, and charity organizations.

12. There are no set-off or compensation provisions for taxes. One cannot refuse to pay taxes on the
grounds that the government owes him more money than what is being collected in taxes. Taxes are
ineligible for compensation since neither the government nor the taxpayer are each other's creditors or
debtors, and a tax claim is not a debt, demand, contract, or judgment that is eligible for set-off.
13. Tax amnesty is Immunity from all criminal and civil obligations arising from non-payment of taxes.
It's a general pardon to taxpayers who want to start on a clean tax slate. It also gives the Government a
chance to collect uncollected tax from tax evaders without having to go through the tedious process of a
tax case. To avail of a tax amnesty granted by the Government, and to be immune from suit on its
delinquencies, the taxpayer must have voluntarily disclosed his previously untaxed income and must
have paid the corresponding tax on such previously untaxed income.

In some instances where the delinquencies consist only of the unpaid penalties due to late filing or
payment, and there is no basic tax assessed, the taxpayer may avail of the tax amnesty on delinquencies
without any payment due.

14. Tax statutes are construed most strongly against the Government and liberally in favor of the citizen
because burdens are not to be imposed beyond what the statutes expressly and clearly import.