(reviewer)

LIT Fr:TAXES
book & ppt
DEFINED:
-
The enforced proportional contributions from
persons and property levied by the law-making
body of the State by virtue of its sovereignty for
the support of government and for public needs

BASIC PRINCIPLES OF 2-FOLD NATURE OF TAXATION

TAXATION 
It is inherent attribute of the sovereignty

 It is legislative in nature
TAXATION is the power by which the
-
sovereign through its law-making body raises SC called it an awesome power (However, no
revenue to defray the expenses of the matter how awesome it may be, it must not be
government. exercised arbitrarily)
 -
TAXES are proportional monetary contributions GR: Any claim for exemption from tax statutes
levied by the State against persons or properties should be construed strictly against the taxpayer.
to defray the expenses of the government.
-
Power to tax is not granted in the Constitution.
TAXATION DEFINED
-
-
“Symbiotic” relationship whereby in exchange Constitutional provisions relating to the power
for protection that the citizens get from the of taxation do not operate as grants of the power
Government, taxes are paid. of taxation to the Government, but instead
merely constitute limitations upon a power
Taxation is Graphically described by the which would otherwise be practically without
SUPREME COURT OF THE PHILIPPINES: limit
-
“It is said that taxes are what we pay for -
Power to tax is subject to inherent and
civilized society. Without taxes, the government
constitutional limitations.
would be paralyzed for lack of the motive power
to activate and operate it”

EXTENT OF TAXING POWER


Comprehensive

Unlimited

Plenary

Supreme

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 
SCOPE OF THE LEGISLATIVE Imposed by the state (on persons, property
or services) within its jurisdiction
NATURE OF TAX

Legislative taxing power or discretion extends to the Levied for public purpose
-
ff: Taxation involves a burden to provide revenue

for public purposes of general nature
Amount or rate of tax

Kind of tax NOTE:

Appointment of tax -

Tax creates a civil liability on the part of a
Method of payment

delinquent tax payer, although the non-payment
Purposes of levy thereof (whether it be on the account of the
taxpayer’s failure or refusal to pay) creates a
-
As further elucidated by an eminent authority, criminal liability, which could be the subject of
the purpose of the levy is exclusive with the criminal prosecution under existing laws
discretion of the legislature, but courts may
determine whether the purpose is public or not.

CHARACTERISTICS OF TAX REQUISITES OF A VALID TAX


Forced charge
LAW
-
In no way dependent on the will or contractual 
Should be for a public purpose
assent, express or implied, of the person taxed 
Uniform
(Why? Because they are not contracts, either 
Within the jurisdiction of the taxing
expressed or implied, but positive acts of authority
government) 
In compliance with the due process of law

Within the inherent and constitutional
limitations on the power of taxation

Pecuniary burden payable in money
-
Tax is not necessarily confined to those payable
in money, as in the case, for instance, of
backpay certificates which under RA 304 could
be used as payment of taxes

 THEORY AND BASIS OF

Levied by the legislature
-
Taxing power is peculiarly and exclusively TAXATION
legislative in character 
-
Lifeblood theory : without taxes, the
Taxes are obligations created by law government would be paralyzed for lack of
motive power to activate and operate it.

Assessed by some reasonable rule of
apportionment 
Necessity theory : it is a necessary burden
-
Conformably with the constitutional mandate on to preserve the State’s sovereignty and a
progressivity of a taxing system means to give the citizenry an army to resist
-
Taxes must be based on ability to pay an aggression
GOVERNMENT
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- -
Can’t continue without the means to pay its
expenses
- relation to a case where such right to tax exists.
Has right to compel all citizens and property
-
within its limits to contribute

Benefits-protection/reciprocity theory : :
taxation is described as a symbiotic
relationship whereby in exchange of the
benefits and protection that the citizens get
from the government taxes are paid.
-
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)
NOTE:”
-
Taxes are intended for general benefits, special
benefits to taxpayers are not required
- 
Tax is not imposed on the basis of a special or
particular benefit accruing to each citizen in
proportion to the tax paid.
-
-
POWER TO TAX; POWER TO
DESTROY

MARSHALL DICTUM – POWER TO
TAX INCLUDES THE POWER TO
DESTROY: It refers to the unlimitedness
and the degree or vigor with which the
taxing power may be employed to raise
revenue
-
Chief Justice Marshall of the US Supreme
Court in the case of McCulloch v. Maryland:
Laid down the rule that the power to tax
involves the power to destroy
This principle is pertinent only when there is no
power to tax a particular subject and has no
Financial needs of a state or nation may outrun
any human calculation, so the power to meet
those needs by taxation must not be limited even
though the taxes become burdensome or
confiscatory
(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. That’s why it can be said that
the “power to tax is power to destroy” is
equally correct to postulate that the “power to
tax is not the power to destroy while the
Supreme Court sits” )
HOLMES DICTUM – POWER TO TAX
NOT A POWER TO DESTROY WHILE
THE SUPREME COURT SITS: The
power to tax has inherent and constitutional
limits
Constitutional restraints placed on a taxing
power that violates fundamental rights
SC reminds us that although the power of
taxation is sometimes called power to destroy,
in order to maintain the general public’s
trust and confidence in the government, this
power must be used justly and not
treacherously
PURPOSE

REVENUE

NON REVENUE PURPOSES:
a. Promotion of general welfare
b. Regulation
c. Reduction of social inequality
d. Encourage economic growth
e. Protectionism
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POWER OF JUDICIAL REVIEW IN
TAXATION
Judicial non-interference is concerned is this:

As long as the legislature does not violate
constitutional limitations or restrictions, the
judiciary cannot intervene with the power of
BASIC PRINCIPLE OF A SOUND
the legislature
-
Court’s power in taxation is limited only to the TAX (FAT)
application and interpretation of the law. 
-
Fiscal Adequacy
Courts have no authority to pass judgement 
Admin Feasibility
upon the taxation policy of the Government. (It 
Theoretical Justice
is inherent in the power to tax that the State be
free to select the subjects of Taxation, and has
been repeatedly held that the inequalities which
1. FISCAL ADEQUACY
result from singling out of one particular class -
for taxation ) Requires that the sources of revenue must be
adequate to meet government expenditures and
their variations
-
This is essential to avoid budgetary deficits and
to minimize foreign and local borrowings

2. ADMINISTRATIVE FEASIBILITY
-
Taxes should be capable of being effectively
enforced
-
Must not lay down obstacles to business growth
and economic development
Example: Value-added tax law (VAT)

3. THEORETICAL JUSTICE
-
Good tax system must be based on the
taxpayer’s ability to pay
-
Taxation must be progressive conformably with
the constitutional mandate that congress shall
evolve a progressive system of taxation

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 TAXATION DISTINGUISHED
FROM: POLICE POWER &
EMINENT DOMAIN
A. TAXATION V. POLICE POWER

1. As to Purpose
Taxation - is levied for the purpose of raising
revenue
Police power - is exercised to promote public
welfare through regulations

2. As to Amount of Exaction
Taxation - there is no limit
Police power - should only be such as to cover the
cost of regulation, issuance of the license or
surveillance
3. As to Benefits Received
Taxation - No special benefit or direct benefit is B. TAXATION V. EMINENT POWER
received by the taxpayer
-
1. As to Nature of the Power Exercised
other than the fact that the Government only
secures to the citizen that general benefit Taxation – exercised in order to raise public
resulting from the protection of his person and revenue
property and welfare of all. Eminent domain (or expropriation) – is the taking
Police power - No direct benefit is received of private property for public use
- 2. As to Compensation Received
A healthy economic standard of society known
as “damnum absque injuria” is attained Taxation – Payment of taxes results in the general
benefit of all citizens and inhabitants of a State
4. As to Non-Impairment of Contracts
Eminent domain – Direct benefit results in the
Taxation - non-impairment of contracts rule form of just compensation to the property owner
subsists
3. As to Non-Impairment of Contracts
-
Taxing act cannot impair the obligation of
Taxation, Contract may not be impaired; this is not
contracts
so in eminent domain.
Police power – In the exercise of police power,
4. As to Persons Affected
however, this limitation does not apply
Taxation – Applies to all persons, property and
excises that may be subject thereto
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Eminent domain – Only a particular property is
comprehended

SYSTEM OF TAXATION
GLOBAL SYSTEM A system employed
where the tax system
views indifferently the
tax base and generally
treats in common all
categories of taxable
income of the
individual
SCHEDULAR A system employed
SYSTEM where the income tax
treatment varies and is
made to depend on the
kind of category of the
taxpayer

GLOBAL SYSTEM A system which taxes

all categories of income
except certain passive
incomes and capital
gains. It prescribes a
unitary but progressive
but for the taxable
aggregate incomes and
flat rates for certain
passive incomes
derived by individuals
SCHEDULAR A system which
SYSTEM itemizes the different
incomes and provides
for varies percentages
of taxes, to be applied
thereto.