Tax 1801 (Basic Principles)

INHERENT POWERS &

LIMITATIONS ON THE

POWER OF TAXATION
 INHERENT POWER OF THE STATE
a. Inherent Powers
1. Taxation

The power by which the sovereign raises revenue to defray the necessary

expenses of the government.

2. Power of Eminent Domain
The power of the State or those to whom the power has been delegated to

take private property for public use upon paying the owners a just

compensation to be ascertained according to law.

3. Police Power
The power of the State to enact such laws in relation to persons and

property as may promote public health, public morals, public safety and

general welfare of the people.

SIMILARITIES AMONG THE THREE

INHERENT POWERS

They are inherent in the State

They exist independently of the Constitution
They constitute the three methods by which the

State interferes with private rights and property

They are legislative in nature and character
Each presupposes an equivalent compensation.
 act of laying a tax, i.e. the process or means by which the

TAXATION

sovereign, through its lawmaking
body, raises income to

defray the necessary expenses of government

raise revenue for governmental needs.

PURPOSE

The secondary purposes of
taxation are: Compensatory

and Sumptuary or regulatory purpose

THEORY
existence of the government is a necessity
AND
basis is the reciprocal
duties of protection and

BASIS support between the State and its inhabitants

Taxes are the lifeblood of the Government and their

LIFEBLOOD

prompt and certain availability

are imperious (expecting

THEORY obedience) need.

 SCOPE OF THE POWER OF TAXATION

The power of taxation is comprehensive, plenary, unlimited and supreme.

CHARACTERISTICS (OR NATURE) OF THE

STATE’S POWER TO TAX
1. It is inherent in sovereignty, hence, it may be exercised although not

expressly granted by the Constitution.

2. It is legislative in character, hence, only the legislature can impose taxes
3. It is subject to Constitutional and inherent limitations, hence, it is not an

absolute power than can be exercised by the legislature anyway it pleases.

PROCESSES INCLUDED OR EMBODIED IN

THE TERM TAXATION

Levying
Collection
Matters within the Competence of the Legislature to Determine

Object to be taxed
Public purpose
Rate of the tax
Collecting taxes

Basic Principles of a Sound Tax System (Canons of Taxation)

Fiscal Adequacy
Equality or Theoretical Justice
Administrative Feasibility
 as to purpose as to authority as to persons

affected

TAXATION TAXATION TAXATION

Community
or class of

Support of government Government only

individuals

POLICE POWER POLICE POWER POLICE POWER

Community
or class of

Promote general welfare Government only

individuals

EMINENT DOMAIN EMINENT DOMAIN EMINENT DOMAIN

Government, public

Public purpose

service companies and

Individual as

owner of

public utilities a particular property

 As to Benefits

As to
effect
Received

TAXATION TAXATION
Equivalent of tax
in the form
Taxes become

part of
of protection and benefit public funds

POLICE POWER POLICE POWER

No transfer of title,
there is restraint on

damage without injury

the injurious use of property

EMINENT DOMAIN EMINENT DOMAIN

Market value of the

property
There is transfer of the

right to property,

taken from him either ownership or a lesser right

 As to Amount of
As to Relationship to the Non-

Imposition Impairment of Obligations

Clause of the Constitution

TAXATION TAXATION

No limit Inferior to the clause

POLICE POWER POLICE POWER

Limited to the cost of

the license and

Superior to the clause

the necessary expenses

EMINENT DOMAIN EMINENT DOMAIN

No imposition, the owner

is paid the

Inferior to the clause

fair market value of his property
 DISTINCTION BETWEEN INHERENT AND

CONSTITUTIONAL LIMITATIONS

Inherent limitations

Constitutional

limitations

are those which restrict

are those which are

the power although they

expressly found in the

are not embodied in the

Constitution or implied

Constitution. from its provisions

 INHERENT LIMITATIONS

This is the purpose affecting the inhabitants of the

Public purpose

State as a community and not merely as individuals

The property of a foreign state or

International

comity

government may not be taxed by another.

Territorial

The tax laws of

a State are
jurisdiction enforceable only within its territorial limits.

This means taxing a person, property or righttwice

Double taxation

within the same year by the same taxing authority

 INHERENT LIMITATIONS

Government agencies performing governmental

Exemption from functions are exempt from tax unless expressly

taxation

of taxed while those performing

proprietary

government entities functions are subject to tax unless expressly

exempted.

Non – delegation The power to tax being legislative cannot be

of the power to tax delegated to the other branches.

 INHERENT LIMITATIONS
(AMPLIFIED AND ILLUSTRATED)
Public purpose
Test of rightful taxation Tax levied for private purpose

a) for the support of the

A tax levied for a private, not

government, public, purpose constitutes

b) for any of the recognized taking of property without due

objects of government, process of law as it is beyond

c) to promote the welfare of

the power of the government

the community to impose.

 INHERENT LIMITATIONS
(AMPLIFIED AND ILLUSTRATED)
Public purpose
Instances of public purpose
a) Financing of educational activities and programs;
b) Promotion of science;
c) Erection and maintenance of roads, bridges and piers;
d) Aid for victims of a public calamity;
e) Relief of the poor and unemployed and to provide for unemployment

benefits;
f) Payment of pensions and bonuses for services rendered by public officers

and employees;
g) The construction of experimental stations to seek increases of efficiency in

sugar production and the improvement of living and working conditions in

sugar mills or plantation.

 TERRITORIAL JURISDICTION

Tax laws operate The tax laws (and this is true of all laws) do not

within territorial operate beyond a country’s

territorial limits.
limit

Property which is wholly or exclusively within the

Property wholly or

jurisdiction of another state receives none of the

exclusively
in other

protection for which a tax is supposed to be

countries compensation.

A person may be taxed where there is between

Taxability of

him and the taxing state
a privity of relationship

a person justifying the levy

 TERRITORIAL JURISDICTION

Multiplicity of situs Remedies against multiplicity

of situs
Income or intangible personal

properties may be subject to

1) Provision of exemptions;
taxation in several taxing
2) Allowance of deduction or

jurisdiction. tax credit for foreign taxes;

3) Treaties with other states.
 INTERNATIONAL COMITY

Grounds of international comity

International comity is based on any of the following grounds:
a) Sovereign equality among states under international law by virtue of which

one state cannot exercise its sovereign power over another.

b) The usage among states that when one enters the territory of another,

there is an implied understanding that the former does not intend to degrade

its dignity by placing itself under jurisdiction of the latter.

c) The rule of international law that a foreign government may not be sued

without its consent so that it is useless to assess tax since anyway it cannot

be collected
International law is part of the law of the country
Our Constitution has adopted the generally accepted principles of

international law as part of the law of our country.

 EQUAL PROTECTION OF THE LAWS

No person shall be deprived of life, liberty or

constitutional property without due process of law, nor shall any

provision person be denied equal protection of the laws.”

(Art. III Sec. 1)

All persons subject to legislation shall be treated alike

Persons subject to

under circumstances and

conditions both in the

legislation privileges conferred and liabilities imposed.

The Constitution does not require things which

Absolute equality

are different in fact to

be treated in law as

not required though they were the same.

Classification is allowed
Classification is allowed. It is valid when:
a) There is a substantial distinction;
b) The classification is germane (relevant) to the issue;
c) The classification applies not only to existing conditions but future
conditions as well;
d) The classification is applicable to all members of the same class.
Examples of denial of equal protection
There is denial of equal protection in the following cases: a) Where an

ordinance imposes a property tax on motor vehicles using the streets of

Manila, such being payable only by owners of vehicles residing in Manila but

those outside Manila who also use the streets are not made to share the

corresponding burden. b) Where a tax provisions is enforced against

manufacturers of filled milk only, but not against persons similarly situated

such as manufacturers of condensed skimmed milk.

THANK
YOU!