TAXATION LAW REVIEWER

Based on the lectures of Atty. Gerald Yu

SRT Faelnar Notes
May be exercised only by the There is no transfer of rights.
government or its political At most, there is restraint on
I. June 27, 2018 subdivisions. the injurious use of property.

a. Regarding the 3 inherent powers of the 2) As to purpose: 5) As to Amount of Disposition

State enumerate:  Taxation  Taxation
The property (generally in the Generally there is no limit on
i. Similarities form of money) is taken for the amount of tax may be
the support of the imposed.
Ans: government.
 Eminent Domain
1) They are inherent in the state and  Eminent Domain No amount imposed but
maybe exercise by it without need of The property taken for public rather the owner is paid the
express constitutional grant; use; must be compensated. market value of the property
taken.
2) They are not only necessary but
 Police Power
indispensable, the state cannot continue or
The use of the property is  Police Power
be effective unless it is able to exercise
regulated for the purpose of Amount imposed should not
them;
promoting the general be more than sufficient to
3) They are methods by which the state welfare; it is not cover the cost of the license
interferes with private rights; compensable. and necessary expenses.

4) They are presupposes an equivalent 3) As to persons affected: 6) As to Relationship to Constitution

compensation for the private rights  Taxation  Taxation
interfered with; and Operates upon a (1) Is subject to certain
Community; or (2) Class of constitutional limitations.
5) They are exercise merely by the Individuals. Including the prohibition
legislators. against impairment of the
 Eminent Domain obligations of contracts.
ii. Distinctions Operates on an individual as
(Source: Mamalateo) the owner of a particular  Eminent Domain
property. Inferior to the impairment
Ans:
prohibition; government
 Police Power cannot expropriate private
1) As to the Authority who exercise the
Operates upon a (1) property which under a
power:
Community; or (2) Class of contract it had previously
 Taxation
individuals. bound itself to purchase from
May be exercised only by the
other contracting party.
government or its political
4) As to Effect:
subdivisions
 Taxation  Police Power
The money contributed Relatively free from
 Eminent Domain
becomes part of the public constitutional limitations. Is
May be: (1) Exercised by the
funds superior to the impairment of
government or its political
contract provisions.
subdivisions;
 Eminent Domain
(2) Granted to public service
There is a transfer of the b. What are the requisites for Municipal
companies or public utilities.
right to property Ordinances to be Valid?
 Police Power
 Police Power Ans: To test its validity, following requirements
must be applied for a municipal ordinance to be
TAXATION LAW REVIEWER
Based on the lectures of Atty. Gerald Yu
SRT Faelnar Notes
government is a necessity and this power is an essential BAR Q 2005
valid as laid down by the accepted principles and inherent attribute of sovereignty, belonging as a
governing Municipal Corporations: matter of right to every independent state or Q: May legislative bodies enact laws to raise
government. No sovereign state can continue to exist revenues in the absence of constitutional
1) Must not contravene the Constitution or without the means to pay its expenses; and that for provisions granting said body the power of tax?
any statute; those means, it has the right to compel all citizens and Explain. (2005 Bar)
2) Must not be unfair or oppressive; property within its limits to contribute, hence, the
3) Must not be partial or discriminatory; emergence of the power to tax (51 Am. Jur., Taxation A: YES. The constitutional provisions relating to the
4) Must not prohibit but may regulate trade; 40). power of taxation do not operate as grants of the power
5) Must be reasonable; of taxation to the government, but instead merely
2) Legislative in Character – the power to tax constitute a limitation upon a power which would
is exclusively lodged in the Congress. otherwise be practically without limit.
6) Must be general and consistent with public
policy.
Moreover, it is inherent in nature, being an attribute of
e. What does the power of tax include? sovereignty. There is, thus, no need for a constitutional
c. Define Taxation as a:
grant for the State to exercise this power.
i. Power
Refers to the inherent power of Ans: The power to tax includes the authority to
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the State, coextensive with (1) determine the (a) nature; (b) object; (c)
sovereignty to demand extent; (d) coverage; (e) apportionment of the
Q: Can police power and taxation co-exist in one
contributions for public purposes tax; (f) situs of the imposition; and (g) method
act of the government?
to support the government. of collection;
(2) grant tax exemptions or condonations; and A: YES. Taxation is no longer envisioned as a measure
ii. Process (3) specify or provide for the administrative as merely to raise revenue to support the existence of the
As a process or act of imposing a well as judicial remedies that either the government. Taxes may be levied with a regulatory
charge by governmental authority government or the taxpayers may avail purpose to provide a means for the rehabilitation and
on property, individuals or themselves in the proper implementation of stabilization of a threatened industry which is affected
transactions to raise money for the tax measure. with public interest as to be within the police power of
public purposes. the state (Caltex Philippines, Inc. v. Commission on
f. When is delegation of the Power to Tax Audit, 208 SCRA 726). Thus, the power of taxation may
iii. Means allowed? be exercised to implement police power (Tiu v.
By which the sovereign state and Videogram Regulatory Board, 151 SCRA 208).
Ans:
apportioning the costs of
GN: The power to tax is purely legislative -----
government among those who
However, delegation of the power to tax is
are privileged to enjoy its
allowed in the following cases:
benefits.
Q: Galaxia Telecommunications Company
 To local governments in constructed a telecommunications tower for the
d. Briefly explain the two fold nature of
respect of matters of local purpose of receiving and transmitting cellular
Taxation Power.
concern to be exercised by communications. Meanwhile, the municipal
Ans: the local legislative bodies authorities passed an ordinance entitled “An
1) Inherent in Character – that it co-exist with thereof; Ordinance Regulating the Establishment of Special
the State. It doesn’t need a law;  When allowed by the Projects” which imposed fees to regulate activities
constitution; particularly related to the construction and
BAR Q 2003  When the delegation relates maintenance of various structures, certain
merely to administrative construction activities of the identified special
Q: Why is the power to tax considered inherent in implementation that may call projects, which includes “cell sites” or
a sovereign State? (2003 Bar) for some degree of telecommunications towers. Is the imposition of
discretionary powers under a the fee an exercise of the power of taxation?
A: It is considered inherent in a sovereign State because set of sufficient standards
it is a necessary attribute of sovereignty. Without this expressed by law.
power no sovereign State can exist or endure. The
power to tax proceeds upon the theory that the
existence of a
TAXATION LAW REVIEWER
Based on the lectures of Atty. Gerald Yu
SRT Faelnar Notes
A: NO. The designation given by the municipal
authorities does not decide whether the imposition is
properly a license tax or a license fee. The determining
factors are the purpose and effect of the imposition as
may be apparent from the provisions of the ordinance. If
the generating of revenue is the primary purpose an
regulation is merely incidental, the imposition is a tax;
but if regulation is the primary purpose, the fact that
incidentally revenue is also obtained does not make the
imposition a tax (Gerochi v. Department of Energy, 527
SCRA 696, 2007).
The fees in the ordinance are not impositions on the
building or structure itself; rather, they are impositions
on the activity subject of government regulation, such
as the installation and construction of the structures. It
is primarily regulatory in nature, and not primarily
revenue- raising. While the fees may contribute to the
revenues of the municipality, this effect is merely
incidental. Thus, the fees imposed in the said ordinance
are not taxes (Smart Communications, Inc., v.
Municipality of Malvar, Batangas, G.R. No. 204429,
February 18, 2014).
g. What are the SCOPE of Taxation? Briefly
explain each. (CUPS)
Ans: The following are the charateristics:
1. Comprehensive – It covers persons,
businesses, activities, professions, rights
and privileges, it covers all (Ex.
persons,activities,business)
2. Unlimited – It is so unlimited in force and
searching in extent that courts scarcely
venture to declare that it is subject to any
restrictions, except those that such rests
in the discretion of the authority which
exercises it (Tio v. Videogram Regulatory
Board, G.R. No. 75697, June 18, 1987).
3. Phenary – it is complete. Under NIRC, the
BIR may avail of certain remedies to
ensure the collection of taxes.
Taxes, being the lifeblood of the
government, that should be collected
without unnecessary hindrance, every
precaution must be taken not to unduly
suppress it (Republic v. Caguioa, 536
SCRA 193 (2007)).
4. Supreme – It is supreme insofar as the
selection of the subject of taxation is
concerned, but it does not mean that it is
superior to the other inherent powers of
the State.
Question: Explain the concept of “wide spectrum
of taxation”.
A: It means that taxation is one that extends to every
business, trade or occupation; to every object of
industry; use or enjoyment; and to every species of
possession. It imposes a burden which, in case of failure
to discharge the same, may be followed by the seizure
and confiscation of property after the observance of due
process.
h. CHARACTERISTICS of Taxation (10)
(based on the book of Domondon)
1) Inherent in the State;
2) Subject to Constitutional and Inherent
Limitations;
3) Essentially legislative function;
4) For public purpose;
5) Territorial in operation;
6) Tax exemption by the government subject to
qualification;
7) Generally imprescriptible;
8) Applies proscriptively;
9) Maybe exercised jointly by police power;
10) Strongest among inherent powers.
i. Expound Marshall Dictum and Holmes
Doctrine.
Ans: There are two views on this:
1. US Chief Justice Marshall dictum - The power to
tax involves the power to destroy.
It is a destructive power which interferes with the
personal and property rights of the people and takes
from them a portion of their property for the support of
the government (Paseo Realty & Development
Corporation v. CA, G.R. No. 119286, October 13, 2004).
Therefore, it should be exercised with caution to
minimize injury to the proprietary rights of the taxpayer.
It must be exercised fairly, equally and uniformly, lest
the tax collector kill the ‘hen that lays the golden egg’
(McCulloch v. Maryland, 4 Wheat, 316 4 L ed. 579,
607) (Roxas v.
CTA, 23 SCRA 276).
NOTE: It is more reasonable to say that the
maxim “the power to tax is the power to destroy” is to
describe degree of vigor with which the taxingpower
may be employed in order to raise revenue, and not the
purposes for which the taxing power may be used
(Cooley, 1876).
2. Justice Holmes dictum – “The power to tax is not
the power to destroy while this Court sits.”
While taxation is said to be the power to destroy, it is by
no means unlimited. 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 destroyed. If so great
an abuse is manifested as to destroy natural and
fundamental rights which no free government
consistently violate, it is the duty of the judiciary to hold
such an act unconstitutional.
In not more than 4 sentences, harmonize/
reconcile Marshal Dictum with Holmes Doctrine.
Ans: Marshall’s view refers to a valid tax while Holmes’
view refers to an invalid tax.
The power to tax involves the power to destroy since the
power to tax includes the power to regulate even to the
extent of prohibition or destruction, when it is used
validly as an implement of police power in discouraging
and
TAXATION LAW REVIEWER
Based on the lectures of Atty. Gerald Yu
SRT Faelnar Notes