'
1
-Fundamental Princjples
Taxation Defined ,
Taxatipn is the process or means by
which the sovereign (ind~pendent State),
throu·gh its law-making body (the
legislature), -l imposes _ burdens upon
subjects and objects within, its jurisdiction
for the purpose of raising revenues to carry
out the legitimate objects of government.
In simple terms, it is the .act of levying a tax
to apportion the cqst of government among
those who, in some meas.ure·, are privileged
to enjoy its benefits .and must therefore
bear its ,burdens. If is a power inherent in
every sovereign State being essential to
the .existence of every government. Hence,
even· if not mentioned in the constitutio'n,
the State can still exercise the power.
Therefore, any constitutional ·prov1s1on
regarding the State's power .to tax should
not be interpreted as a "grant of.power", but
m·erely a limitation on the State's -power to
tax. Taxes, on the qther hand, are the
enforced proportional . contributions or
charges from persons and property levied
QY the law-making body of the State by
· virtue ·of its sovereignty for the support of
_
the g_overnment and all public needs.
1
_Under American Jurisprudence,
the power to tax is considered
inherent in a sovereign State
because it is a necessary
attrib~te of sovereignty. Without
this power no sovereign State
can exist or endure. The power
to tax proceeds upon the theory
that the existence of a
govemme~t is a necessity and
this power is an essential and
inherent attribute of
sovereignty, belonging as a
matter of right to every
independent State or
government. No sovereign
State can continue to exist
without the means to pay its
expenses; ah_d that for those
means, it has the right to
compel all citizens and property
within its limits to contribute,
hence, the emergence of the
power to tax. (51 Am.
Jur.,Taxation 40).
I
I

"

RELATED Pepsi-Ct;Jla ~ott(ing Coinpany·ot the Philippines, Inc. v. .Municipality of

CASE Tanauan, Leyte, G.R. N(}. L-31156, Februa,y_21, 1916 ·

ISSUE: .
Whether a legislative bqdy may enact laws to raise revenues in _the absence of
a constitutional provision granting said bo~y the power to tax.
\

ANSWER:
. Yes, the legislativ~ body ·may enact laws even in the absence of a
... constitutional provision becfiuse the power to tax is inherent in the government
and not merely-a constitutional grant. The power of taxation is an-essential and
· inherent attribute of ·sovereignty belonging as a matter of right to evert
inde endent overnment without bein ex ressl ranted b the eo le.
\
·The .Three (3) Inherent Powers of the State
1. . Police .Powf)r. It is the' power·ofJhe State for promoting publrc welfare
' by_restraining and regulating the.use .of liberty and property. It may be
, exetcise only by·the gov~rnment. The property taken in the exercise of
this povver is .destroyed because 'it is noxious or intended for. a noxious
. purpose.
2: P9wer of Taiation. It i~ the power by wh.ich the State raises revenue
· -t<;> .defray the necessary expen~es of the government. ·
3. Power of Eminent Domain. It is the power of the State to acquire
,·private property for public purpose upon payment of just
I •

compensation . .

Meaning of "~NHERENT Powe(

• Built-in, inbpm, ingrained
• Existing in something as a p~rmanent, essential, or characteristic attribute.
■ Vested in someone {i.e., St~te or government) as a right or privilege.

Similarities among t~e three (3) Inherent powers of the State

1. They ar~ !n~~rent in the State. . .. . .I 1
1
••

2. They exist independently of the Const1tut1on although th e cond1t1ons

_for their exercise may be prescribed by the Constitution.
3~ Yyays by wh_ich the S!ate Interfere with private rights and property.
· 4. - Legislative in nature and character.
5. · Presuppose an equivalent compensation received, directly or
• I indirectly, by the persons· affected.

'}
TABLE 1-1: DISTINCTIONS AMONG THE THREE (3) INHERENT POWERS
Taxation Police Power Eminent Domain
1. Nature Power to enforce • Power , to make and Power to . take private
co,ntributions to raise implement laws for the prpperty for public -use
gov't funds. general welfare. with just compensation.
2. Authority Government only .Government only May be granted to public
service/utility companies
I . ,
3. Purpose . For the support _of the Promotion of generar The taking of private
government welfare through property for public use.,
regulation
I •

4. Persons Community or a class of Community or a class of Oh an · individual as the

affected individuals. Applies to · individuals. owner of personal
all pe~sons, property and property.
excises that may be Applies to all persons, Only_particular property
subject thereto property and excises that is comprehended:
may be ·s·ubject thereto.

4.Scope ,Plenary, comprehensive, Broader in application.· Merely a power to take

supreme General power to make private property for
and implement law. public use.

5. Effect Contribution becomes No transfer or title. There There is a transfer of title

part of public fund · may just be a restraint on to property:
the injurious use of
. property.
6..Benefits In form of protection and No direct and· immediate Market value of property
received , benefits received from benefit but only such as taken.
government ·.' may arise from the
maintenance of a healthy
economic standard of
society.
'7. Amount No limit Sufficient to cover cost of No imposition. The
of the license. ·and the owner is paid equivalent
imposition necessary expenses of to the fair value of his
police surveillance and property.
re ulation~

3
 . I

·PURPOSES OF TAXATION
-f

1. Primary: Revenue or Fisc;;il Purpose

T~e primary purpose of taxatio"n on -the part of the governme t.
to provide _funds _or prop~rty ":"i_th .which to promote the general we~a:!
and . th~, pro~e~t1.~n , of its c1t1zens and to .enable it to finance its
multifarious act1v1~1es. fo: gove~nm~~t can run its administrative set up
onl_
y through public funding which 1s collected in the form of tax.·
I

"Eifimples of taxes impo~ed for raising rev~nues· are income and

. business taxes~

2. _
S econ~a~:· Regulatory Purpose (or Sumptuary/Compensatory)
While the p_ rimary-_pu.rpose q( taxation is to raise revenue for the
support ol the government, taxation is often employed as a devise for
-regulation ·or - control (implementation . of .State's police power) by
means of which certain effects or conditions envisioned · by the ·
government may be achieved such as:

a) Promotion-of General Welfare /

b) Reduction ofSocial Jnequa_lity
c) Economic Growth

.Examples of Taxes ■ .Excise taxes :t or sin products such as

imposed for cigarettes and alcohols '-
·,egulation ■ Amusement taxes for "amusement places"
.· such as night. and day clubs, cockpits and
racetracks

. Examples·of means ■ Increasing taxes in periods_ of prosperity to

of attaining .some · curb spending power and halt inflation.
social or. economic ■ Granting - tax incentives to promote
objeqtives through new/pioneeL industries and enco_ urage growth
taxation · · of local industries. .
• : Lowering taxes in case of · economic
breakdown due to pandemic such a~ th e
.Covid19 pandemic (i.e., CREATE Law signed_
) ,• I
· by the President on March 26, 202.1 )

4
 RELATED CALTEX V. COMMISSIONER. 208 SCRA 755
CASES "Taxation is no .longer a measure merely to raise revenue to
' support the existence of the government. Taxes may be levied with a
regulatory ·purpose .to provide means for the rehabilitation· and
stabilization of a threatened industry which is affected with publi~
interest as to be within the police power of the State. The oil industry
is imbued with public interest as it vitally affects general welfare".

TIO V. VIDEOGRAM, 151 SCRA 208 '\

PD1987 which created the Videogram Regulatory Board also

imposed a 30% tax on the ·gross receipts payable to the local
__ governm·ent. The Supreme Court upheld the validity of the law ruling
·that the ~0% tax also served a 'regulatory purpose to answer the
need for regulating the video industry, particularly the rampant film
piracy, the flagrant violation of intellectual . property rights, and the
roliferation of orno ra hie video ta es.

THEORY and BASIS.OF TAXAr ·10N

1. Theory (Authority): LIFEBLOOD THEORY and/or NECESSITY THEORY

The power of taxation proceeds ·up.on the theory that the existence of
government is a necessity ("Necessity theory").· As stated in the case of
Phil. Guaranty Co., Inc. v. Commissioner [13 SCRA 775], is a power
predicated upon necessity .. It is a necessary b'urden to preserve the
State's sovereignty and a means to give the citizenry ·an army to res ist
aggression, a navy to defend- its shores from invasion, a corps of civi l
servants to serve, pubiic improvements for.the enjoyment of the citizenry 1

and those which come within the State's territory and facilities and
protection which a government is supposed to provide.
1

The power of taxation is essential because the government can

neither exist nor endure without taxation. "Taxes are the lifeblood of the
government and their prompt and certain availability is an imperious need,,
(Lifeblood Doctrine). The government cannot continue to perform its
basic functions of serving and protecting its people withou t means to pay
its expenses. Consequently, the State has the right to compel all its
citizens and property within its limits to contribute.

5
 ..RELATED COMMISSIONER v. ALGUE .
·
1
CASES r

· The Supreme Court held that taxes are the lifeblood of the
government and should be collected without unnecessary
hindrance . .They are what we pay for.,.a civilized society. Without
taxes, the government would be paralyzed for lack of motive power to
activate a~d operate it. The government, for its part, ·is .expected to ,
respond in 'the form of tangible and .intangible benefit~ intended to.
. improve the lives of the people .and enhance their moral and material
values.
I • .

PHIL. GUARANTEE co.,·1NC. v CIR, t3·SCRA 775 ·

· · , The power to tax. is an attribute of sovereignty. It is a power

emanating from necessity. _It 1s a necessary burden to preserve the
State's sovereignty ·and a me~ns _to give the citizenry an army to
resist an aggression, a navy to defend its shores from invasion, a
corps of civil servants to ·serve, public improvements designed for the
(·. enjoyment of the. citizenry and those which come within the State's
· .territory, apd facilities and protection which a government is
supposed to provide. Considering ,that the reinsurance premiums in
question were · afforded protection · by. the government and the
reqipient · foreign reinsurers exercised rights and privileges
guaranteed by our laws, such reinsurance premiums and reinsurers
should share the burden of maintainin the State . .

2. BASIS of Taxation:
"·
BENEFITS RECEIVED
.
or RECIPROCITY
.
THEORY
. - ), . . . .

. The basis is the reciprocal duties of protection and support between

the Stat~ ·-and its·ihhabitants.' The State collects taxes from the subjects of
taxation- in· order that -it may be able to perform the functions of
.. government. The-citizens, on the other hand, pay taxes in ord~r that they
·may be s~cured in the ·enjoyment of the benefits of organized society. This
theory spawned. the . Doctrine of Symbiotiq .Relationship which means,
-taxes are what we pay for a civilized soci~ty (Co_mmissioner v. Algue).

_ Taxpayers receive benefits· from taxes through the protection the_ State
affords to them. For the· protection they get arises their obligation to
support the government through payment of taxes. (CIR v. Algue, Inc.,
G.R. ·No. L-~8896, February 17, 1988, 158 SCRA 9)

6
 TABLE 1-2: ·
Doctrine of Symbiotic Relationship or Benefits-Protection Theory

· Every person who is able to, must.

contribute his share in the running of the-
government by paying taxes.

In return for the contributions made, -the

·taxpayers receive the general advantages
and protection in ·.the form of tangible or
intangible·benefits intended to improve the
. lives of the people .and enhanced their
material and moral values which the
government affords the· taxpayer and his
property.

MANIFESTATION OF THE LIFEBLOOD THEORY:

. a) Rule of "No Estoppel against the Government."
It means that in the performance of its governmental functions,
. ■ · The State cannot be _ estopped by the neglect of its agents/officers .
.■ · Erroneous application and enforcement of law by public officers do
not block the subsequent correct application of statutes.

b) Collection of taxes cannot be enjoined (stopped) by injunction.

Under section· 218 of the Tax
Code (as. amen9ed), no court, except
the Court . of Tax Appeals .(through Taxes are the lifeblood
administrative remedies when collection · of the government.
could jeopardize the interest of the , Thus, it should be
government or taxpayer - Section 11, collected wtthout
RA 1125), shall have the. authority to. unnecessary delay.
grant an injunction . to restrain the Its collection, however,
collection of any national internal should not be tainted
revenue tax, fee or charge .imposed by with arbitrariness.
the tax code.

7
 -
. -This prohibition shall apply t~ -all collection activities, insluqing
imposition arid collection of taxes, Issu~n.c~ of warrants qf ~1straint
1
• and garnishment, an_d/or levy on final dec1s_ 1ons of the BIR on disputed
assessments, cases filed before the ,CTA, and the sale of property
distrair;ied or garnished (RMO 42-20.10). . ·

c) · Taxes could not be the subject of compe_n sation or set-off.

Taxes cannot be subject to s~t-off or compensation since

claim for tax~s is ·not a debt or contract. · A distin_
guishing feature of a
tax is th_at it ;i~ compulsory rather thari _a matter of bargain. If taxes
could be a subject, of compensation ·or set off, it can easily give rise to
confusion -and abuse, depriving ·the government of authority over the
manner by which taxpayers can credi.t and offset their. tax liabilities.
- ' ' -

· In the case of Repu_blic vs. Mambula_o Lumber Co. (6 SCRA

622; Caltex" Pt,ils-. vs._COA-208' .SCRA -726), the no set-off rule also
states that taxes are not subject to set-off or legal compensation
because the government and the taxpayer are not mutual creditor and
debtor of each other. An exception to the rule is where both the
, claims -of th,e ;gov_
ernment and the taxpa·yer against e~ch . other have
- already become due, demandab!e and fully liquidated . . In this case,
... com·pens~tion takes place by operation of law and both obligations are
' extinguished to their concurrent amounts (Domingo v. ·Ga·rlitos, 8
·scRA 443). · ·

RELATED (FRANCIA VS. IAC. ~-R 76749,-June 28. 1988)

~ASE$
X is the owner/ of a residential lot situated at Q~irino Avenue '
.

Pasay qity. The lot has an area of 300 square meters. On June 1,
1994, 100 square meters of said lot owned by Xwas expropriated
by the government to be "used in the widening of Quirino Avenue,
for P300.000.0O r~presenting {he estimated assessed value of
~-. said portion; From 1991 to 1995, X, who is a businessman, has
· -. ·not been paying his income taxes. X is now being assessed for
. .the unpaid income- taxes in the total amount of P150,000.00. X
claims his inc9me tax liability has already been compensated by
th_e amount of !2300.000 which the government owes him for the
expropriation of his property. Decide.

8
 ANSWER: The income tax liability of X cannot be compensated
with the amount owed by the Government as compensation for his
. · property ~xpropriated, taxes are of distinct kind, essence and
nature t~an ordinary·obligations. Taxes and debts ca·nnot be the
subject of compensation because the Government and X are not
mutually creditors and -debtors of each other and a claim for taxes
is not a debt, demand, contract, or judgment as is allowable to be
set off.

PHILEX MINING CORP. V. CIR, GR NO.125704, Auf. 29, 1998).

May a taxpayer who has pending claims for VAT input credit or
·refund, set-off said claims against his other tax liabilities?

ANSWER: No. Set-off is available only if both obligations are

liquidated and demandable. Liquidated debts are those where the
exact amounts have already been determined. In the instant case,
the claim of the taxpayer for VAT refund is still pending and the
amount has still to be determined. The liquidated obligation of the
taxpayer to the government cannot, therefore, be set-off against I
the unliquidated claim which the_taxpayer conceived to exist in his
favor. ·

d) Righ.t to .select objects {subjects) of taxation

The power to tax is essential.ly legislative in nature. Hence the 1

right to .select t~e objects/subjects of taxation rests with the Congress .

The matters within the competence of the legislature include the
determination of:

1). The subject or object to be taxed

2) The purpos~ of the tax as· long as it is a public purpose.
3) The amount or rate of the tax.
4) Kind of tax
5) Apportionment of th~ tax
6) Situs of taxation
7) The manner, means, and agencies of collection of the tax.

'·.
t,

9
 . e) A. valid · tax
may result in the d~struction . of : .the ':
taxpayer's
prop~rty.
. , .. . I d the "power to destroy", where the
The_ power to_ t8:x inc ~e~!use a taxpayer Could not seek the
tax is a .va~1d tax. Thi~ ~-s $O lel u . on the premise that the tax will
nullificat!on o~ the ~ahd _tax ~~e :xefcise Of the power to tax is ."not
impoverish him. Likew,ise, ert ,where it is an invalid tax, which
destnjctive ~f taxpayers p~~~tutranal limitatiohs. This is so b.ecause
violate~ the inherent t~r .co rt that· shall come to the . succor of the
.. there is a sympathe ic cou . . ..
taxpayer and declare such tax as invalid.

RELATED ROXAS vs. CTA {23 SCRA 276)

CASE
'The power to tax is viewe·d as the power to :destroy i~ the se~se
'that a lawful tax cannot be defeated just. b~cause its e~erc1se
would be destructive . or would bring about insolvency to a
taxJ)'ayer. An imposition of lawful regulatory taxes ~ould be
destructive to the taxpayers and business establishments
because the. government ·can compel payment of tax and
forfeiture of ro'-·ert throu h the exercise of olice ower".

\ In Mcculloh v. Maryland, U.S.· Chief Justice Marshall declared

that the power to tax involves the power to destroy. Th·is maxim on_ ly
means -that the power to tax includes the power to _regulate even to the
extent of prohibition or destruction of businesses. The reasqn is that
. the legislature has the inheren·t power to determine who to tax, ·W_ hat to
tax and how rnuch ·tax is · to be imposed. Pursuant to the regulatory
purpose. of- taxation, th~ legislature' ·may: impose tax in order ·to
discourage or prohibit- things or enterprises .inimical to · the p_ublic
\ '·
welf~re. For i~stance, the' legi•slatL~re's impo~itibn of prohibitive sin tax'
on c~gare~~s is_ congruent with Jts purpose ·of dis_ ¢ouraging the public
fc;>rm smokmg ·c1garettes which are hazardous to hea.lth. · - .,

.,' ' '

I .; ••

·' I,
...
•'.\

1-0· ..
-: l

. J
 SCOPE of the Power of Taxation
I

In the case of Sison vs. Ancheta (130 SCRA 654 ), the Supreme Court
· ·held that the power of taxation is the most absolute of all powers of the
government. It has the broadest scope of all the powers of the
government because in the absen,ce of limitations, it is considered as
comprehensive_' -unlimited, plenary and supreme.

a. Comprehensive - as it covers persons, businesses, activities,

' - professions, rights and privileges.

b. Unlimited - In the absence of limitations prescribed by law or the

constitution, the. power to tax is unlimited and comprehensive . · lts
force is so searching to the extent that the courts scarcely venture
to declare that It is subject to any restrictions.

c. Plenary - as it is complete; BIR may avail of certain remed ies to

ensure collection of taxes.

d. Supreme - in so far as the selection of the subject of taxaUon .

ESSENTIAL ELEMENTS of a Tax

.,

a. It is an enforced contribution. Payment of tax is not volunta ry payment

or donation, but an enforced contribution , exacted pursuant to
legislative ✓authority.
b. It is generally payable in money. It is a pecuniary burden payable in
money which must be in legal tender.
c. It is proportionate in character. Payment of taxes should be based on
the ability to pay theory or theoretical justice. The use of a graduated
tax rates is in consonance with this rule.
d. It is levied on persons, property, or the exercise of a right or privileg
(subjects or objects of taxation).
e. It is levied by the law.. making body of the State. The pow,er of
"imposing" a tax, being purely legislative function Congr ss cannot
delegate such power. This limitation ari ses from th e doctrine of
separation of powers among the three branches of the governm n .
f. It is levied for pu blic purpose

11
 ASPECTS of Tax·ation

Aspects refer to 0stages or phases" that are included or embodied in

the term ' taxation" such as:

1. Levying or imposition of the tax which is a legislative act or function.

2. Assessment or detennination of the correct amount of applicable tax.
3. Collection of the tax levied which is essentially administrative in
character. The national agency charged with the function of collecting
internal re.venue taxes is the Bureau of Internal Revenue.

TABLE 1-3: ASPECTS OF TAXATION ~- - - - - -- -

3. Collection 1. Levying
(Executive Function} (Le gislative Function)

2. Assessment .
{Executive Function)

NATURE/CHARACTERISTICS of the State's Power to Tax

1. It is inherent in sovereignty.
The State, having sovereignty, can enforce contribution (tax) even in
the absence of a constitutional provision because the State has the
supreme power to command and enforce obedience to its will from the
people within its jurisdiction. ·

2· It is legislative in character:

le . Th~ po~er to tax (levying or imposition) is peculiarly and exclusi~~ly

9t 5 lat,ve in nature. It cannot be exercise by the executive or judicial
branches of the government.

12
EXCEPTIONS to non-delegation rule:
a. Delegation as provided for in the 1987 Constitution such as
"Delegation to the President" under Section 28 Article VI stating that
the Congress may authorize by law, the President to fix, within
specified limits and subject to such limitations and restrictions as it
may impose:
• Tariff rates
• Import and export quotas
• .Tonnage and wharfage dues; and
• Other duties or impo$tS within the framework of the national
development program of the government.

b. Delegation to local government units as provided under Section 5 , Art.

X of the Constitution. The power of local government units to impose
taxes and fees is always subject to the limitations which Congress
may provide, the.Jormer having no inher.e nt power to tax.
•,

TABLE 1-4: Power to Tax - National versus Local

NATIONAL LOCAL
Authority Inherent Delegated (through
constitutional grant)
Nature Legislative 1n nature through Legislative in nature through
enactment of tax laws by the enactment of local
Congress and the Senate ordinances by the local
le islative branch

CASE to Ponder:
• Since the authority of the LGUs to tax is merely a
delegated power, may the Congress, under the 1987
Constitution, abolish the power of the former to tax?

ANSWER:
■ NO. C9ngr~ss cannot abolish what is expressly granted
by the fu'ndamental law. The only authority conferred to
Congress is to provide the guidelines and limitations on
the local government's exercise of the power to tax (Sec.
5, Art. X , 1987 Constitution),

13
 .F ~dPrwr
oeiegation to administr~tive_agencies '. . · .- .
c. . Certain aspects of the taxing process t~at are not really leg1slat1ve
in nature are vested.·in administrative· ag~ncies such .as:
■ Power to value property . _ .
■ Power to assess and collect taxes · · · ..
■ Power to perform d~tails of comp':Jtation, appraisement or
adjustment; am9ng others. ,

ILLUS_
TRATIVE The Secretary . of Finance, upon recommendation of the
CASE . Commissioner of lnternaf Revenue, issued a· Revenue Regulation
using gross income as the tax base · for corporations doing
bus.iness in the Philippines. Is the Revenue Regulation valid?
ANSWER: NO
The regulation establishing gross income as the tax base for
corporations doing business in the Philippines (domestic as well as
resident foreign) is ·not valid. This is no longer implementation of
the law· (administrative :function) : but actually it constitutes
I

legislation because among the powers that are exclusively within

.the legislative authority to_
-tax is the power to determine the amount
of the tax.

d.. . It is sub'ect to Consti-tutional ·and inherent limitations

ILLUSTRATIVE The- Congress, after much public hearing and consultations with various
CASE . · sectors of society, came to the conclusion that it will be good for the
country to hav_e only one system of taxation by centralizing the imposition
and collection of all taxes in th.e national government. Accordingly, it is
thinking of passing a law that would abolish ·the taxing power of all local
government units. Would such ·a law be valid under the present
Constitution?

_ANS~ER: NO
· _The law centralizing the imposition and collection of all taxes in the
national ·government would contravene the Constitution which mandates
that:

tach local government unit shall have the power to creo~e their own
sources of revenue and to levy taxes, fees, and charges subiecf to
such guidelines and limitations as Congress may provide consistent
wi/h the basic policy of local autonomy."

It is clear that Congress can only give the guidelines and limitations on the
exercise by the local governments of the power to tax but what was
ranted b the fundamental law cannot be withdrawn b Con ress

1A.
 I I
. I.

3. Exemption of government · entities, agencies and instrumentalities.

· Immunity 'is -ne~essary in order that governmental functions will not be
imp·ede~:L Otherwise, the government will _be taxing itself to ·raise money ·
for itself. The followin'g rµles $hail apply in 'determining whether or not
governm_ ent entities·and ,agencies are subject' to tax:
a. _Agencies performing governmental function~ . are -tax·exempt
, u.nless.expressly taxed
1 1

• •

b. ·Agencies performing proprietary functions are subject to tax

· un·less expressly exempted. 1. ; . ,

c. Go~ernment owned and controlled corporations (Gbcc·s)

·performin'g proprietary functions are ·subject to tax, hpwever~ the
following were granted tax exemptions:
■ · Gov.ernment.Service Insurance System (GSIS)
■ · · -. Social Security System (SSS) -
■ Philippine Health Insurance .Corporation (P~IC)
, ■ Local Water Di'stricts (RA 10026)
. , .■ Home Development Mutual Fund (HDMF or Pag-ibig):

NOTE: . _ , _
■ ·. HDMF or Pag-ibig is ex·empt upon the effectivity of CREATE Law on April-11, 2021.
• PGSO be0f3me taxable beginning _Jan. 1, .2018 or upon effectivity of the TRAIN Law.

4. ·International comity (Polite and friend.l_y agreement[s] among nations)

.Under international law,. property of a foreign State may. not be taxed
by another State due to: ·
• . Sovereign equality of ~tates.
■ ;. When one State enters the t~rritory of another State, there is an
implied l:fnderstanding that. the former does not inte~d to denigrate
its dignity .by placing itself under the.jurisdiction of the other State.
■ . Immunity from suit ot:a State
I ,, .

.5. Limitation .on territorial jurisdiction . .

·_ Tax laws cannot operate beyond a State's territorial limits.
Property outside one's jurisdiction d_ o es not receive any protection from
the State. ·

6. Strongest among the inherent powers of .the State (Sison v. Ancheta, 130
SCRA 654).

15
 Classification of Taxes ·
1- :s t~:i~J::, _ imposed by the National Government (e.g. income tax,
· estate tax, donor's tax, VAT other percentage taxes, documentary
stamp tax)
b. Local _ imposed by local governmentf .u~its sut ch as . mt u)nicTipal
corporations (e.g. real estate tax and pro ess,ona 1 ax r~ce_,p s . he
local government unit's power to tax is based on a const1tut1onal grant
that ·paved .the way for the enactment of the Local Government Code
of the Phi_ lippines. Hence, th_
e local government's power to tax is not
inherent. .

2~ As to subject matter or object:

a. Personal, poll or capitation - tax of a fixed amount imposed upon
-individual~ whether citizens or not,. residing within a specifi~d territory
w1tt,out regard -to their property or the occupation in which he may be
engaged (e.g. community tax)
-
b. Property .- tax imposed on property, whether real or personal , in
proportion either to its - value, or in accordance with some other
reasonable method of apportion_ ment (e.g. real estate tax)

. q. Excise - any tax which ,does not fall within the classification of a poll
tax or a p'roperty tax.. This is a tax on the exercise of certa in rights and
p·rivileges (e.g. income tax, estate tax, donor's tax). Excise tax may
also refer to the tax levied or imposed on sin products and non-
es~ential goods such as cigars and liquors (Discussed in vo lume 2 -
Transfer and Business taxes). Excise taxes of this nature are taYes
applicable to certc1in specified articles or products manufactured in the
Philippines for domestic sale or consumption or any other disposition
and to specified things or goods imported into the Phili ppines. It may
be specific or ad val ore m
3. As to who bears the burden:
a. Direct - tax which is demanded from the person who also shoulders
the burden of tax or tax which the taxpayer cannot shift to another.
~oth the incidence (liability for the payment of the tax) as well as th e
impact or burden of the tax falls on the same person (e.g. income tax,
estate tax, donor's tax) .

16
 . . . . hu~IWWlfPru~ ,
b. lndir~ct - t~x which is demanded from one person in the expectation
and intention that he shall indemnify himself at the expense of
another. These are taxes wherein the incidence of or the liability for
the payment of the tax falls on one person but the burden thereof can
be shifted or passed on to another person (e.g. VAT, percentage tax,
excise tax qn e~ciseable articles). In the case of Maceda v. Macaraig
(197 SCRA 771 ), an indirect tax is defined as one paid by a person
who is not directly liable therefor, and who may therefore shift or pass
on the tax to another person or er,tity, which ultimately assumes the
tax burden. 1
• •

4. As to determination of amount:
a. Specific - tax of fixed amount imposed by the head or number, or by
some standard of weight or measureme_ nt (e.g. excise tax on cigars
and fiquors)

b. Ad valorem - tax of fixed proportion of the value of the property with

respect to which the tax is· assessed -(e.g. vat, income tax, donor's tax
and estate tax) , ·

TABLE 1-5: SAMPLE COMPUTATION OF AD~Valorem and SI •

DISTILLED SPIRITS (based on Republic Act No.10351)

2013 2014 2015 2016 2017
AD-VALOREM TAX RATE
- Based on the Net Retail
Price (NRP) per proof
(excluding the excise and
value-added taxes) 15% · 15% 20% 20% 20%
SPECIFIC TAX - Per proofli!~r P20 P20 P20 P20.80 P21 .fi3

CIGARETTES, PER PACK (based on Republic Act No.10351)

. 2013 2014 2015 2016 _2017
SPECIFIC TAX ON
Cigarettes packed by
machine where the NRP
(excluding excise and VAT)
er ack is

17
 ·; µ 11 .50 and below P.12 8'17 µ21 P25 P30 -
• Mor th n 1=21 '1.50 P25 P27 P28 P29 P30

5. As to purpose:
a. Primary, Fiscal. or Revenue Purpose- tax imposed solely for the
general purpose of the government, i.e., to raise revenue for
govern111ent purposes (e.g. incon1e tax, donor's tax and estate tax).
b. Secondary, Regulatory, Special or Sumptuary Purpose - tax imposed
for a specific purpose, i.e., to achieve some social or economic ends
irrespective of whether revenue is actually raised or not (e.g. tariff and
certain duties on imports).

6. As to graduation or rate:
a. Proportional - tax based on a fixed percentages of amount of the
property, receipts, or other basis to be taxed [e.g. VAT, Table 1-5
above (Ad-valorem tax on distilled spirits)]
b. Progressive or graduated - tax the rate of which increases as the tax
base or bracket increases (e.g. income tax on individual taxpayers)
c. Regressive - tax the rate of which decreases as the tax base or
bracket increases

7. As to taxing authority:
a. National - taxes imposed under the National Internal Revenue
Code (commonly known as the Tax Code) collected by the
national government through the Bureau of Internal Revenue
(BIR) and other national government agencies. Other national
taxes other than those collected by the BIR as provided for under
special laws include but not limited to :
• Customs duties
• Taxes on narcotic drugs
■ Special education fund taxes
• Energy taxes on aircraft, motorized watercraft, and electric
power consumption
• Sugar adjustment taxes
■ Travel tax
• Private motor vehicle tax

b. Local - taxes Imposed by local goverrJment units

 ELEMENTS Oi= SOUND TAX SYSTEM

a. Fiscal Adequacy
The fundamental purpose of taxation is to raise the revenue
necessary to fund public services. Consequently, it is necessary that
the so~rces of revenues must be adequate to meet government
e~_pend1tures and sustain the level of public services demanded by
c1t1zens and policymakers. ·

b. Theoretical Justice or Equity ("ability to pay principle")

Taxpayer's ability to pay must be taken into consideration . The
tax burden should be proportionate to the taxpayer's ability to pay.

c. Administrative Feasibility
Tax laws must be capable of effective and efficient enforcement.
A good tax system requires informed stakeholders who understand
how taxes are assessed, collected and complied with . It should be
clear who and what is being taxed, and how tax burdens affect them.
Therefore, the tax system s~ould be as simple as possible, and should
minimize gratuitous complexity. Complicated tax rules make the tax
system difficult for citizens to understand . Complexity also makes it
harder for governments to monitor and enforce tax collections, and
makes it easier for lawmakers to -enact (and conceal) targeted tax
breaks benefitting particular groups.

LIMITATIONS ON THE STATE'S POWER TO TAX

1. Inherent Limitations
These are restrictions arising from the very nature of the
power to tax itself. Inherent limitations are those limitations which
exist despite the absence of an express constitutional provision.
a) Purpose must be public in nature
This one is synonymous to "governmental purpose." A tax
must always be imposed for a public purpose , otherwise , it will
be declared as invalid . No tax law may be en acted for the
purpose of raising revenue for private purposes. The purpose
should affect the inhabitants of the State or taxi ng district as a
community and not merely as individuals. It has been said
that the best test of rightful taxation is that the proceeds of the
tax must be used :
a. For the support of the government; or
b. For some of the recognized objects of governm,ent or

19
 A I
I ;111 . 111/ l'ltll/l lf,l1 ,1 1t:1
c. To promote the welfare of the community.

In the case of Gomez vs. Palom r (25 SCRA 827) ttnd

Philippine Guarantee Company .~s. CIR (1 3 S~ f A : 75), i.l ha•
been held that tax has been utilized for ~ubl1c ~ur pos ,r ~he
welfare of the nation or the greater portion of its population
has benefited for use.

Effect of incidental benefit to private interest

The purposes to be accomplished by taxation need not be
exclusively ·public. Although private individuals are directly
benefited, the tax would still be valid provided such benefit is only
incidental.

Legislative Prerogative
It is the Congress which has the power to determine whether
the purpose is public or private. A question on the validity of such
tax measure may be raised before the courts on the ground that it
is not for public purpose. However, once it is settled that it is for a
public purpose, it can no longer be a subject of inquiry.

RELATED TIO vs. VIDEOGRAM

CASE "It is not the immediate result but the ultimate result that
determines, whether the purpose is public or not. It is not the
number of persons benefited but it ·is the character of the
purpose that determines the public character of such law. What
is not allowed is that if it has no link tb public welfare. Public
purpose is determined by the use to which the tax money is
devoted. If it benefits the community in general, then it is for
ublic ur ose no matter who collects it".

· b) Prohibition against delegation of the taxing power

What cannot be delegated is the legislative
"enactment/imposition/levying" of tax measure. However as
regards to administrative implementation of a ta x law (i.e. ,
assessme~t, collection, .valuation of property for tax purposes),
that can be delegated.

c) Territorial limitation (Refer to page 15)

' .. ·
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20
;··;1:,~:;:: _;; . .:_. . .
2. Constitutional Limitations
a) Due process of law
Ther~ must be a valid law and the measure should not b
unconscionable and unjust as' to amount to confiscation ~
0
property: Tax statute must not be arbitrary as to find no
support in the ?onstitution . The power to tax should not be ,
harsh, oppres~1ve or confiscatory. This limitation is also
known as the nght to notice and hearing.

b) Equal protection of laws

All persons subject to legislation shall be treated alike
under similar circumstances and conditions both in the
privileges conferred and liabilities imposed. The doctrine does
not require that persons or properties different in fact be
treated in law as though they were the same. What it prohibits
is class legislation which discriminates against some and
favors others. As long as there are rational or reasonable
grounds for so doing, Congress may group persons or
properties to be taxed and it is sufficient if all members of the
same class are · subject to the same rate and the tax is
administered impartially upon them.

RELATED TIU, et al vs.CA (G.R. No. 127410, January 20, 1999)

CASE/
ILLUSTRATION · · An· Executive Order was issued pursuant to Jaw l

granting tax and duty incentives only to businesses and

residents within the "secured area" of the Subic Economic
Sp~cial Zone, and denying said incentives to those who live
within the Zone but outside such "secured area". Is the
constituti_
onal right to equal protection of the law violated by
· the Executive Order?

ANSWER:
No. Equal protection of the law clause is subject to reasonable
classification. Classification, to be valid! must
■ Rest on substantial distinctions,
■ Be germane to the purpose of the law,
■ Not be limited to existing conditions only,
■ Apply equally to all members of .the same class_.

21
 h 1u/41,u:11Ld'Pr~
-- -- - -·· - yi,ere -are substantial differences between big investors being
enticed to the "secured area" and the business operators
outside that are in accord with the equal protection clause that
does not require territorial uniformity of laws. The classification
applies equally to all the re side~t indiv~duals and _businesses
1
within the "secured area' . The residents, being in like
circumstances to contributing directly to the achievement of
the end purpose of the law, are not .cate~?rized further.
Instead, they are similarly treated, both m privileges granted
and obli ations re uired.

c) Rule of uniformity and equity in ta~ation . ,,

.
"The rule of taxation shall be umform and eq~1ta?I~. l_t requires
the -uniform application ~nd operation, without ~1scnmmat1on, of the
tax in every place where the subject of the tax 1s fou_nd. It does not,
however, require absolute identity or ~~ua!1ty under all
circumstances, but subject to reasonable class1f1cat1on.

For classification to be valid, the following must c9ncur:

• It must be based on substantial distinction
■ It must apply both to. present and future conditions
• It must be germane to the purposes of the law·
• It must apply equally to all members of the same class.

RELATED PLOT vs. GLOBE and SMART

· CASE RA 7926 provides for equality of treatment of the
telecommunications industry cannot be a valid basis for PLOT to
claim the same exemption and privilege granted to GLOBE and
SMART. PLOT is ~ot similarly situated nor.is the same as GLOBE
and SMART who provide for handheld phone communication . Being
not similarly situated, the same is. not of similar class. Hence, no
room for ~he a lication of uniformit and e ualit .

A progressive system of taxation means that tax laws shall

place emphasis on direct taxes rather than on indirect taxes, with
-ability to pay as the principal criterion. (Article VI, Section 28 of the -
Constitution). Regressive tax rates refer- to tax rates which
decreases as the tax base or bracket increases. Regressive tax
rat~s sho~/d be differentiated from .a regressive system of taxation
~hich exists when there are more indirect taxes imposed than
direct taxes. ·
. ,
' .

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 ·. .. huu/u,wwtff>rulC,l~ '

d) Proh1b1tlon against im . . . /
. N pnsonment for non-payment of "poll tax"
o person shall be impris df ·
poll tax The n . . one or debt or non-payment of
poll ta; which ~n-1mp~1~onment rule applies to non-payment of
th . . IS . purns able only by a surcharge .but not to
0
der violations hke falsification of commurlity ta~ certificate
· a~. non-payment of other ·taxes. Poll tax is a tax of fixed
, .amount impo~~d •on. residehts within a specific territory
regardless -of c1t1z~~sh1p, .business or profession.

e) Pro~ibition against impairment of ~bligatio~ of contracts

, No · law impairing the .,obligation of contracts shall be
passed. The .obligation of a contract 'is impaired when its
terms or conditions are changed by law or by a party without
,t~e consent of the other, thereby weakening the position or
nghts of the latter. An example of impairment by law is when
, a later taxing statute revokes a tax exemption based on a
contract. But this only applies when the tax exemption has
been granted for a valid consideration. ·If the tax exemption
pertains, for instance, to a franchise tax, a later statute may
revoke such exemptio·n because the constitution provides that
a franGhise tax is subject to amendment, alteration or repeal.

f) Prohibition against infringement of religious freedom .

No law _shall be made respecting an establishment of
religion,. or prohibiting . the free exercise thereof. The free
exercise and enjoyment of religious profession and worship,
without discrimination or .pceference, shall forever be allowed .
._No religious test shall be required for the exercise of civil or
political rights. The payment of 1.icense f~es for the distribution
and sale of bibles suppr~sses the constitutional right of free
exercise of reli.gi_on.

. g) ·Prohibition against appropriation of proceeds of taxation for

the use, benefit, or support of any church _
No public money or · property shall be appropriated,
applied, paid, or employed directly or -indirectly, for the u~e,
benefit, or support of any church, denomination, sectarian
. institution or system of religion, (?r of ·any priest, preacher, ·
minister or other religious teacher, or dignitary as such except
when such priest, preacher, minister or dignitary is assigned to

"
 F ~ Pri~
the armed forces, or to any penal institution, or government
orphanage or leprosarium.

h) P~ohibition against taxation of religious, charitable and

educational entities
_ Charitable institutions, churches and parsonages or
convents appurtenant thereto, mosques, . non-profit
cemeteries, and all lands, buildings and improvements,
actually, directly, and exclusively used for religious, charitable,
or educational purposes shall be exempt from taxation. This is
an exemption from real property tax only. ·The exemption in
favor of property used exclusively for charitable or educational
purposes is not limit_ed to property actually indispensable
therefore, but extends to facilities which are incidental to and -
reasonably necessary for tt,e accomplishment of said
purposes. The test of exemption refers . to actual use, not
ownership. The term "exclusively" should be interpreted as
"primarily''
-
rather
.
than "solely".

ILLUSTRATIVE Mr. Ramos is the owner of a 5,000 sq. m. parcel of land located 1

CASE in the city limits of Naga City. He leased the property for '!

P50,000 a year to a religious congregation for a period of fifteen

(15) years (2010-2025). The religious congregation built on a ;
1,000 sq. m. portion a seminary and a chapel that it used in
connection with its religious activities. It constructed a ten (10)
story building on the remaining 4,000 sq. m. which it rented out
to various commercial establishments, the proceeds of which go 1
to the support of its various seminaries located throughout the I
Philippines. These seminaries are organized as non-profit and
non-stock educational institutions.

Questions:
1. Is Mr. Ramos exempt from the payment of real property taxes?
■ Yes, Mr. Ramos is exempt from the payment of real property taxes on
the 1,000 sq. m. portion of :his 5,000 sq. m. lot, as well as on the ,
· - remaining 4,000 sq.m.

2. Is the religious congregation exempt from the payment of real property taxes?
■ The religious congregation should pay real property taxes on the ~,OOO
sq. m. parcel of land a_nd .the 10-story building be~ause the bas,~/ ~:
taxation of real property is use and not ownership. However, 1

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• :

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,' ,.
24
 . ~~a/Pr~ -
exempt from real _pro"perty taxes on the 1,000 sq. m. parcel of land as
well as on the imp~ovements the chapel and the seminary. This is so
because they are actually, ·directly and exclusively used for religious
purposes. The treatment is different with regard t6 the 4,000 sq. m. lot
and the 10 story building which . it rented out to commercial
establishments. · ·

3. Is the religious congregation exempt from the payment of income taxes on the
rental rec_eipts? · ·
• The religious congregation is, subject .to income taxation. The
constitutional tax exemptions refer only to real property that are actually,
directly and e~clusively used for religious, charitable or educational
purposes, and that the only constitutionally recog_ nized exemption from
taxation of revenues are those earned by non-profit, non-stock
educational institutions which are actually, directly and exclusively used
for educational purposes.

i) Prohibition against taxation of non-stoc~, non-profit

educational institutions.
All revenues and assets of non-
. stock, non-profit educational institutions
used actually, directly, and exclusively
for educational purposes shall be
exempt from taxes .and duties. However,
they shall be· subject to internal revenue
tax on income from trade, business or
other activity, the conduct of which is not
related to the exercise or performance
by such educational institution of its
educational purpo~es or functio~s. ,
Nonprofit non-stock
Educational Institution
This exemption covers
income, property, donor's
tax, and customs duties
(distinguish from exemption
in the preceding page which
pertains only to property
tax).

Taxation of ''proprietary" educational institutions

Proprietary educational institutions, including those
cooperatively owned, may likewise be entitled to such exemptions
subject to the limitations provided by law including restrictions on
dividends and provisions for investment. Proprietary educational
.institutions and hospitals wh_ich are non-profit shall pay a tax of ten
percent (10%) on their taxable income, except for passi~e
incomes which are subject to different tax rates as discussed m
Chapter 4.
' \.

' l' ' .. •

25
ltti);,· ,>•J •-
j) OTHERS
1_ Grant of tax exemption . .
No law granting , any tax exemption (1.e. . amnesties,
condonations and refunds) shall be passed without the
concurrence of a majority of all Members of Congress
(voting separately). ·

2. Veto of appropriation, revenue tariff bills by the President

The President shall have tt,e power to veto any
particular item or items in an appropriation , revenue, or
tariff bill, but the veto shall not affect the item or items to
which he does not object. An item in a bill refers to
particulars, details, the distinct and severable parts of a
bill. In budgetary legislation . an item is an individual sum of
money dedicated to a stated purpose.

3. Delegated authority of President to impose tariff rates,

import and export quotas, tonnage and \'.Vharfage dues as
delegated by Congress through a law (subject to
Congressional limits and restrictions) within the framework .
of national development program.

4. Non-impairment of the Supreme Court (SC) jurisdiction

Congress cannot take away from the Supreme
Court the power given to it by the Constitution as the final
arbiter of tax cases. The Supreme Court shall have the
following powers: Review, revise, reverse, modify, or
affirm on appeal or certiorari, as the law or the Rules of
Court may provide, final judgments 9 nd orders ·of lower
courts in all cases involving the legality of any tax, impost,
assessment, or toll, or any penalty imposed in relation
thereto.

5. REVENUE BILLS shall originate exclusively from the

House of Representatives
All appropriation, revenue or tariff bills, bills
authorizing an · increase of the pubiic debt, bills of local
application,and private bills shall originate ~xclusively in
the House of Representatives, but the .Senate may
P,:opose Qr concur with . amendments. The Constitution
simply means that the initiative for the filing of bills must

26
 ha~dafP r ~
come from the House of Representatives on the theo
·. !~at,Helected as they are from the districts, ihe members~
e ouse can be expect~d to be more sensitive to the
loca_ l needs and problems. Given the power of the Senate
to prop~~e.. amendments, it can propose its own version ·
even _w1~h respect_ !o bills which are required by 'the
Const~tut~on to originate in the House nor does the
Const1tut1on prohibit the filing in the Senate of a substitute
bill -in anticipation of its receipt of the bill from the House
so long as action by the Senate as a bo.dy is withheld
pending receipt of the House bill. (Tolentino v. Secretary of .
Finance, 235 SCRA 630)

· RELATEO (JOLENTINO V. SECRETARY .OF FINANCE, . GR No. 115455,.

CASE Oct. 30, 1995). .
ISSUE:
The House of Representatives introduced HB 7-000 which
envi_sioned to levy a tax on various transactions. After the bifl was
approved by the House, the bill was sent to the Senate as so
required by the C9nstitution. In the upper house, instead .of a
deliberation on the· House Bill, the Sen~lte introduced SB 8000
which ·was its own version of the same tax. The Senate
deliberated on this Senate Bill and approved the same. The
House Bill and the Senate Bill_ were then consolidated in the
Bicameral Committee. Eventually, the consolidated · bill was
approved and sent to the President who signed the same. The
. private sectors affected by the new law questioned the validity of
the enactment on the ground that the constitutional provision
requiring that all revenue _bills should originate from the House of
Representatives had been vi~lated. Resolve the issue.

ANSWER: · There is no violation of the constitutional requirement

that all revenue bills should originate from .the House of
j:

Representatives. What is ·prohibited is .for the Senate to enact

revenue measures on its own without a bill originating from the
House. But once the revenue bill was passed by the House and
sent to tt,e Senate, the latter can pass its own version ori the
. /· . .,,.

.I
same subject matter consonant with the latter's power to propose
or concur with amendments. This follows from the co-equality of
:f/,: '·-~· the two chambers of Congress.
r<:i/ ·_·,i: ·_
:~tk> ._ - . 1 .,
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~

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~~:.::-- .~ ., ,.
 /' J1-
huuift.1,w 1L-td, Prur
6. Infringement of press freedom
This limitation does not mean that the press is
exempt from taxation. Taxation constitutes an infringement
of press freedom when it operates as a prior restraint to
the exercise of this constitutional right. When the tax is
imposed on the receipts or the income of the press it is a
valid exercise of the sovereign prerogative.

7. Revocation of Tax Exemptions

· Tax exemptions, such as "grant of franchise" may
be revoked by another law as it is specifically provided in
the Constitution that the grant of any franchise is always
subject to amendment, alteration, or repeal by the
Congress when the common good so requires.

ILLUSTRATIVE "X" Corporation was the recipient of two tax exemptions both
CASE from Congress, one law exempting the company's bond issues :
from taxes and the other exempting the company from taxes in
the operation of its public utilities. The two laws extending the
tax exemptions were revoked by Congress before their expiry ,
dates. Were the revocations constitutional? '

ANSWER: YES
The exempting statutes are both granted unilaterally by
Congress in the exercise of taxing powers. Since taxation is the
rule and tax exemption, the exception, any tax exemption
unilaterally granted can be withdrawn at the pleasure of the
taxing authority without violating the Constitution. Neither of
these were issued by the taxing authority in a contract la • ully
entered by it so that their revocation would not constitute an
impairment of the obligations of contracts. (Mactan Cebu
International Airport Authority v, Marcos, G.R No, ·1200821
· Se /ember 11, 1}_'9~6_. _ _ _ __

SITUS OF TAXATION
Literally, situs of taxation means place" of taxation . It is the State
11

or political unit which has jurisdiction to impose a particul r t x. The S a e

where the subject to be taxed has a situs may rightfully levy and collect
the. tax. The situs is necessarily in the State whict1 has jurisdiction or
which exercises dominion over the subject in question .

\ • !

.i.=,.-;','
~,
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1

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i'. -

.r:· . .~
"'. 28
':... ' ,.r
~·• ~T; • t
 F~dPr~
FACTORS To· CONSIDER IN DETERMINING THE_ - SITUS OF
TAXATION:

a. Subject matter (person, property, or activity)

b. Nature of the tax . · ·
c. · Citizenship . ·
d. Residence of the.taxpayer
e. Squrce of income
f. Plac~ of excise, business or occupation being taxed

TABLE 1-6: EXAMPLES OF SITUS OF TAXATION

Persons Residence of the taxpayer
Real Property Location
Personal .. Location; Place of sale or transaction
Property
Intangible Domicile of the owner except when the intangible has a situs elsewhere
Personal such as:
Property ■ Franchise, pate·nts, copyrights, trademarks: Situs is the place or
country where such intangibles are exercised.
·• Receivables: Domicile or residence of.the debtor
■ . Bank deposits: Location of the deposi~ory bank.
**~ shares of stock in a domestic corporation· of a nonresident alien are
taxable in the Philippines because the said shares receive the
protection and benefit of the Philippine laws.
Income *** Source of income
■ Occupation - where the occupation is engaged in
■ Transaction - where the transaction took place
·ausiness Place of the business
Gratuitous Residence or citizenship of the taxpayer; or location of the property
Transfer

TAX DISTINGUISHED FROM OTHER TERMS OR IMPOSTS

1 TAX versus TOLL
· A Toll is a sum of money for the use of something , generally
applied to the consideration, which is paid of the use of a road , bridge_
or the like of a public nature. ·

29
i.

Demand of proprietorship
·paid for the use of another's property Paid for the support of government
Amount is based on cost of-construction Amount is based on the necessities of
or maintenance of the public the State . ·
improvement used ·,
Maybe imposed by _the governrnent or May be imposed only by the State
rivate individuals or en~ities

·2~ TAX versus PENAL TY

Penalty is a sanction imposed as a punishment for violation of law .
· or acts deem injurious. The violation of tax may give right to imposition
of penalty. ·
-- - PENALTY--------- . - TAX -.- ----- -- - ,
. .
Designed to regulate _conduct Primarily aimed at rising revenue

May ·be imposed by the government or _May b~ imposed only by the government
rivate individuals or entities

3. TAX v~rsus SPECIAL ASSESSMENT

. Special assessment is an enforced proportional contribution from
owners of lqnds for special benefits resulting from public
improvements.. In .Republic v. ·aacolod, f7SCRA632, a special
assessment is a levy -on property which de,rives some special benefit
. from the improvement.. Its purpose is to finance such improvement,
thus accruing only to the o_wners thereof wh9, after all, pay
the assessment.

It is ·not a'. tax measure intended to raise revenues for the

government beca ·u se the proceeds thereof may be devoted to
the specific purpose f<?r which ·the assessment was authorized.

Characteristics of Special Assessment:

a. Levied only on land
· b. ~ot ? personal liability of the person assessed
c. Based wholly on benefits -(not necessary)
·d. Exceptional both as t9 time and place

30
 4. TAX Versus REVENUE
Revenue ~efers to al! the funds or income derived by the
. government, whether from tax or any other source.

- 3¥#jN•l
~d . ~

5. TAX versus SUBSIDY .

· Subsidy ·is .a pecuniary aid directly granted the government to an
indiyidual or private commercial enterprise deemed beneficial to the
public. Subsidy is not a tax although tax may have to be ·imposed to
pay it. ·

6. TAX versus PERMIT or LICENSE FEE

P~rmit or License is a charge imposed under the police power for
purposes of regulation. '. . . · . ·

PERMIT OR LICENSE FEE . · · TAX · .

For regulation
Exercise of police power
Amount is limited to the necessary
expenses of regulation
Imposed on the right of reward of an
officer for Specific services
Legal compensation or reward . of an
For revenue
Exercise of taxing power
Generally no limit
Imposed also on persons or property
An enforced contribution assesses by
I

officer for specific services sovereign authority to defray public

, '
Failure to pay license fee makes the act
· . or business illegal
expenses
An enforced contribution assesses by
sovereign authority to defray public
ex enses

TEST IN DETERMINING IF THE IMPOSITION IS A TAX OR

LICENSE FEE:

• If the purpose is primarily or if revenue is, at least, one of

the real and substantial purposes, then the exaction is a
tax. -If the purpose is re_
g ulatory in natu re, it is a license
(PAL v. Edu)
.·, /

::-'f_·' ·. : :
:~t..:. i. :~
I ,11. ''- •\ I

i:~t{,:/: /:,/ :' 31

 FtV~Pr~
PAL vs. EDU, 164 SCRA 320 (1988) " ,,
Th~ supreme Court ruled that F~es _may be regarded as
t es even though they also serve as instruments of regulation
::cause taxation may be made as an im~!em,?~tati~n
State's police power. If the purpose of the fee 1s pnmanly to
theo'.
raise revenue or if "revenue" is at least one of the real and
substantial purposes, then the exaction is properly called tax. In
the case provided, the purpose behind the law requiring owners of
vehicles to pay for their registration is mainly to· raise revenue or
funds for the construction and maintenance of highways and, to a
much lesser degree, pay the · ·operating expenses of the
administering agency. ·Hence, such exaction or fee is classified as
tax.

7. TAX versus DEBT

. DEBT . - . TAX _
• Based on contract Based on law
May oe paid in kind Generally payable in money
Assignable/May be the subject of set-off Cannot generally be ~ssignable/subject
or compensation . ~- of set-off or compensation .
A persc;m cannot be im.prisoned for non- Imprisonment is a sanction for non-
payment of debt _(except when it arises payment of tax (except poll tax)
from a crime)
Draw interest when stipulated or when of Does NOT draw interest except only
rescri tion default .when delin uent

8. TAX versus CUSTOMS DUTIES

Customs duties are taxes imposed on goods exported from or
imported into a country·.
9. TAX versus TARIFF
Tariff may be used in one of thr~e (3) senses:
a. A book of rates drawn usually in alphabetical order containing
the names of several kinds of merchandise with the
correspondin~ duties to be paid for the same; or
b. Th~ duties payable on· goods imported or exported ; or
c. The system or principle of imposing duties on the importation
(or exportation) of goods.
*The term tariff and customs duties are used interchangeably in the Tariff
and Customs "Code

32
 DOUBLE TAXATION .
In its strict- sense, double
taxation referred to is direct duplicate
taxation. In its broad sense, double Direct double
taxation is r,eferred to as indirect double taxation becomes legally
taxation. It extends to all cases. in which objectionable for being
there is a· bur.den of two or more oppressive and
impositions. . . inequi'table. It violates the
..Direct .double taxation means concept of equal
taxing twice protection, uniformity and
1. By the same taxing authority, · equitableness of taxation
jurisdiction or taxing district in the Constitution.
2. For the same purpose
3. In the same yea·r or taxing period
4. Same subject or object
5. Same kind/character oJ the tax

Tt,ere is indirect double/duplicate taxation (Broad Sense - which is

not prohibited by the constitution) if any' of the elements described above
is not present. Unlike the United States Constitution, our Constitution
does not expressly prohibit direct double taxation. However, --it is
something not favored. Such taxation should, whenever possible , be
avoided and prevented.

RELATED VILLANUEVA vs. CITY OF ILOILO (26 SCRA 578)

CASE· The Supreme Court held that there is no constitutional prohibiUon
· against. "double taxation"- in the Philippines. However, in its strict
sense, there is "direct" double taxation (strict·sense) when the same ,
property is taxed twice when it should be taxed once provided
both taxes must be imposed
■ On the same property or subject matter
• l
■ For the same purpose
■ By the same State/ Government or taxing authority
■ Within the same jurisdiction or-taxing district
■ During the same period; and ·
■ The must be the same kind or character of tax

33
 ILLUSTRATIVE CASES; · .. · . . .
· ·
Determine 1 ·t there •15 ·double taxation in the followmg mdependent cases:
. • · ·
· 1 J' m a lessor of a property,.pays the following; real estate tax on the
. ,mso , I .t d.
·premises, a real estat.e de~ler's tax b~s~d on renta re~e1p s a~ income tax
0 ~ the rentals. -Jimson cla,_ms that this 1s double taxat1on.Dec1de.
· Answer: · ·
There is ·no double taxation. DOUBLE TAXATION means taxing for the same
tax period the same thing o_ r activity twice, when.it should_ be taxed but _
once,
by the same taxing authority for the ·same purpose and with the same kind or
character of tax. The REAL ESTATE TAX is a tax on property; the REAL
ESTATE DEALER'S TAX is a tax on the privilege to engage in business;
while the INCOME TAX is· a tax on the privilege to earn an income. These
taxes are impose·d by different taxing · authorities and are essentially of
different kind and character (Villanueva vs. City of lloilo, 26 SCRA 578)

.11. , Municipality of Cordori has an ordinance which requires that all stores,
restaurants, and other establishments selling liquor should pay a fixed annual
)
· fee of PSOO. Subsequently, the municipal board proposed an ordinance
imposing a sales tax equivalent to 5% of the amount paid for the purchase or
consumption of liquor in stores, restau·rants an·d other establishments. The
municipal mayor, refused to sign the ordinance on the ground· that it would
constitute.doubte taxation. Is the refusal of the mayor justified?
Answer:.
. No. The refusal of the mayor.is not justified. The impositions are of different
nature and character. The fixed annual fee is in the nature of a license fee
; i_mposed through the exercise of police power while the 5% tax on purchase or
consumption is a local tax imposed through the exercise of taxing powers.
_Both a license fee and a tax may be imposed on the same business or
occupation, or for selling the same article and this is not in violation of the rule
against double taxation (Campania Gener~I de Tabacos de Filipinos·v. City of
Manila, 8 SCRA 367 [1963])_.

MEANS OF AVOIDING OR MINIMIZING THE BURDEN OF TAXATION

1. Shifting ·
Shifting is the transfer of the burden of a tax by th~ original payer
or the one on whom the tax was assessed or imposed to someone
else. Tra~sferred is not the payment of the tax but th e burden of the
tax. Only mdirect taxes may be shifted; direct taxes cannot be shifted.

34
 Example:
• Manufacturer or producer may shift tax assessed to
wholesaler, who in turn shifts it to the retailer, who also shifts it
to the ·final purcha~er or consumer.
Taxes that may be shifted: ·
• VAT; Percentage taxes ; Excise taxes on excisab!e articles
• Ad-valorem taxes that oil companies pay to BIR upon removal
of petroleum products from its refinery

2. Transformation
An escape from taxation where the producer or manufacturer pays
the tax and endeavor to recoup himself by improving his process of
production thereby turning out his units of products at a lower cost

3. Evasion
T~x evasion is the use by the taxpayer of illegal or fraudulent
means to defeat or lessen the payment of a tax. It is also known .as
"tax dodging." It is connotes fraud through the use of pretenses or
forbidden devices to lessen or defeat taxes.
Example:
• Deliberate failure to report a taxable income or property;
deliberate reduction

4. Tax Avoidance
Tax avoidance is the exploitation by the taxpayer .of legally
permissible alternative tax rates or methods of assessing taxable
p·roperty or income in order to avoid or reduce tax liability. It _is politely
called "tax minimization" and is not punishable by law

ILLUSTRATIVE Pedro's income from leasing his_property reaches the maximum rate
CASE of tax under the law. He donated one-half of his said p·roperty to a
non-stock, non-profit educational institution whose income · and ·
assets are actually, directly. and exclusively used for educational
purposes, and therefore qualified for tax,exemption under Article XIV,
• I •

Secti_on 4 (3) of the -Constitution and Section 30 (h) of the Tax Code.
Having thus transferred a portion ·at.his said asset, Pedro succeeded ·
in paying a lesser tax on the rental income derived from his property
under the lower ·tax bracket. Is there tax avoidance or tax
evasion?

\,

35
 ANSWER: ·. e Pedro has exploited a fully ~ermissive
The· re is tax _
avo1danc · h' . come tax by transferring part of
d t reduce 15 in t· f
alternative metho o m t entity through a d?na i_on ? o~e-
his rental income to a tax e~e P erty The donation 1s likewise
'half of the income .pro~ucing ~h~ do~ation is the legal means
exempt from the .donors !ax_d ce of income tax on the rental
employed to transfer the mc1 en .
income.

5. Exemption - t ·t . m.unity to particular persons -or corporations or

It is the gran o 1m . , rticular class from a tax -which
to persqns or corpor~t1ons of a ll~awithin the sarTle State or taxing
persons and ~orporat1ons ~~ner~ immunity or privilege; it is freedom
district are obl~ged to pay. ibs ad to which others are subjected
f m a financial charge or . ur en . I 'f th
· ro M 77 Ph'il 394) Exemption is allowed on Y I ere
Greenfield v. eer - · . . · · t
.(is a, clear prov1~1on
· · therefor · It is- not·.necessarily
.. d1scnmtna
• ory as
h
long as there is a·reason·able found~t1on or rational basis. 1n t e
construction of tax statutes, ._exemptions _a_ re not favored and are
construed against the taxpayer.

Grounds for granting tax exemptions . . .

a. - May be .based on contract. .In such a case, the public which 1s
represented· by the government is s_upposed to receive a full
equivalent therefore, i.e. c;;harter of a corporation.
b. May be based on some ground of public policy, i.e., to encourage
new industries or to foster charitable institutions. Here, the
\

government need not receive any consideration in return for the

tax exemption.
c. · ['Aay be based on grounds of reciprocity or to lessen the rigors of
international double or multiple taxation

Nature of power to grant tax exemption

a. Na~ional government. The power to grant tax exemptions is an
.attribute of. sovereignty for the power to prescribe who or hat
persons or property shall be taxed implies the power to prescribe
Y"~~ or what persons or property shall not be taxed It is inherent
;~ e txercise of the power to tax that the sovereign State be free
sef ect th e subjects of taxation and to grant exemptions
the re rom. •

36
 b. Local governments. Municipal c~rporations are clothed with no
· inherent power to tax or to grant tax exemptions·. But the moment
the' power t~ impose a particular tax is granted, they also have the
· power to grant exemption 'therefrom unless forbidden -by some
provision of the Co~nstitution or the law. The legislature may
delegate its power to grant tax exemptions to the same extent that
it may exercise the power to exempt.

Kinds of Exem'ption .
As to basis·:
■ Constitutional.. Immunities from· taxation which origi.nate from the
constitution~ · \_ .
■ Statutory Immunities from taxation w·hich emanates from
legisiation_.

As to form:
1. Express. Exemptions expressly granted by statute.
2. Implied. When particular persons, property, or rights are deemed
exe_
mpt as they fall o~tside the scqpe of the taxing provision itself.

· As to extent:
·1. Total. Connotes absolute immunity.
2. Partial. One where a collection of a part· of the tax is dispensed
with. ·

PRINCIPLES GOVERNING TAX EXEMPTIONS

Exemptions from taxation are highly disfavored in law. He who
claims an exemption must be able to justify his claim by the clearest
grant of organic or statute law because tax exemptions are not
presumed. If ambiguous, there _is no tax exemption. He who claims
exemption .should convincingly prove that he is exempted. Therefore ,
· tax exemption must b~ strictly ·construed. No law granting any tax
exemption shall be passed without the concurrence of majority of ·all
members of Congress.

ILLUSTRATIVE As an incentive for investors, a law was passed giving newly

CASE e_stablished companies in certain economic zone exemption from all
taxes, duties, fees, imposts and other charges for a period of three
years. ABC Corp. was organized and was granted such·incentive. In :
the course of business, ABC Cor . urchased mechanical :
 F~~Pr~
equipment from XYZ Inc. The latter, in its ?rdfnary busmeg---.
dealings, ;5 subject to a sales tax. XYZ Inc. ~lam~s, however, that
•nee if sold the equipment to ABC Corp. which 1s tax exempt it
!~ould not be liable to pay the sales tax. Is this claim tenabfe? '

ANSWER: ·
No. Exemption from taxes is personal i.n ~atu~e and covers only
taxes for which the taxpayer-grantee is directly hable. The sales tax .
is a tax on the seller who is not exempt from taxes. Since XYZ Inc. is
dir.ectly liable for the sales tax and no tax exemptio~ privil~ge is eve
given to him, its claim that th~ sale. i~ t~x ~~e~pt 1s n?t tenabL. A
tax exemption is construed m stnct1ss1m1 Jans and 1t cann e
ermitted to exist u on va ue im lications.

Amnesty
It is the general or intentional overlooking by the State of its
authority to impose penalties on persons otherwise guilty of evasion or
violation of a revenue or tax law. It partakes of an absolute
forgiveness or waiver of the Government of its right to collect. It is a
way to give tax evaders, who wish to relent and are willing to reform a
chance to do so. ·

Amnesty involves immunity. from all criminal, civil and administra tive
lia~ilities from non-payment of taxes.

6. Capitalization
The reduction in the selling price of income producing property by an
amount equal to the capitalized value of future taxes that may be paid
by the purchaser

7. Avoidance
Tax avoidance is the tax saving device within the means
sanctio~ed by law. This method should be used by the taxp yer in
good faith and at arm's length . Tax evasion , on th e other h nd. is a
scht:me used outside of those lawful means which is not c pt ble.

Elements of Tax Evasion

(Co~missioner of Internal Revenue, petition •r, v . Th . Est te of
Benigno P. Toda, Jr., G.R. No. 147188, S pt mb r 1 · 200 )

38
 · F~Pr~
Tax evasion connotes the .integration of three factors:
a) The end to b_e achieved, i.e:, _ the payment of less than that
known by the taxpayer to be legally due, or the non-payment
of tax when it is shown that ·a tax is due; .
b) An accompanying state of mind which ,s described ·as being
"evil,"' in "bad faith," "willful," or "deliberate and not accidental";
and
c} A course· of action or failure of action which is unlawful

SOURCES of Tax .Laws

1. Constitution
2. National -Internal Revenue Code
3. Tariff and Customs Code
4. Local -Government Code (Book II)
.5. Local Jax ordinances/ City or municipal tax codes .
6. Tax treaties and international agreements
A tax treaty is one of the sources of our law on taxation. The
Philippine Government usually enters into tax treaties in order to
ayoid or minimize the effects of double taxation. · A treaty has the
force and effect of law. · i

8. Speeial laws .
9. Decisions of the Supr~me Court and the Court of Tax Appeals
IO. R~venue rules and regulations and administrative rulings and opinions
Effectivity of revenue rules and regulations
. Except whe'n .t he law otherwise .expressly provides, the
aforesaid_revenue tax issuance~ shall not begin to be operative until
after due notice·thereof may be fairly assumed.
-
Purpose of rules and regulations
a. To properly enforce and execute the laws
b. . To clarify and explain the law
c. To carry into effect the law's general provisions by providing
details .of administration and procedure ·

· Requisites for validity of rules and regulations

a. They must not be contrary to law and the Constitution .
b. They must be published in the Official Gazette or a newspaper of
general circul~tion .

39
 . Saint Paul Col/ege of Makafi vs. Hon. Kim Jacinto s.
ILLUSTRATIVE Henares (Civil Case No. 13-1405, 25 July2014)
CASE . The Regional ·Trial Court of Makati City held that under the
constitution, all revenues and assets. of non-stock, n~n-profit
educational institutions used actually, directly and exclusively for
educational purposes shall be exempt from taxes and duties.
Upon the dissolution or cessation of th_e corporat~ existence of
such institutions, their assets shall be disposed of in the manner
provided qy law. The exempti~n,_ _whi~h is g!ven_ by the
Constitution itself, may not ~e d1mm1shed PY leg1slat1on or by
administrative regulation.

Applying . the foregoing rationale of the provision on tax-

. · exemption, the Court found Revenue Memorandum Order (RMO)
No. 20-2013 unconstitutional as it imposes as a prerequisite to
the enjoyment by ·non-stock, non:-profit educational institutions of
the privilege of ta·x exemption under the Constitution both a
registration and approval requirement particularly, that they
submit an application for tax exemption to the BIR subject to the
approv;:1I of the Commissioner of Internal Revenue in the form of
a tax exemption ruling (TER) which is valid for a period of 3 years
and subject to ~enewal. This requirement of
filing a TER is in
addition to the filing of an Annual Information Return that they are
curren~ly required to submit to the BIR pursuant to Section 4 of
DOF Order No. 137-87.

The imposition of the aforementioned requisites serves as

diminution of the Constitutional privilege, which even the
Congr~ss. cannot diminish by legislation, and thus more so by the
Comm1ss1oner of Internal Revenue who merely exercises quasi.
le islative function. ·

Nature of Internal Revenue Laws

Internal .revenue law_ s are not political in nature. Tax laws are civil
d
an not penal in n · t Ith ·
violation. The a ure, a ough . th_ere a~e penalties provided for tt~eir
is to compel th P~_rpof 9 of tax laws m imposing penalties for delinquencies
duty in respect~h~~:i. payment of taxes or to punish evasion or neglect of
, .

40
 Construction of Tax Laws
• . Public purpose is always presumed. · ,
• ff the law is clear, apply the law in accordance to its plain and
simple tenor. .
■ A statute will not be construed as imposing ·a tax unless it does so
clearly, expressly and unambiguously.
• In case of doubt, it is construed most strongly against the
Government, and liberally in favor of the -taxpayer.
■ Provisions of a taxing act are not to be extended by implication.
• Ta~ laws operate prospectively unless . the purpose of the·
legislature to give retrospectiv~ effect is expressly declared or may
be implied from the language used.
• Tax laws are special Jaws and prevail over a general law.

RULE WHEN THERE JS DOUBT IN STATUTE OR LAW

No person or property is subject to taxation ·unless within the terms or
plain · import of a taxing statute. In every case of doubt, tax statutes are
construed strict_ly · against the government and liberally in favor of the
taxpayer (Davao Gulf Lumber Corporation v. Commissioner of Internal
Revenue, et al., 293 SCRA 76, 88). Tax'es, being burdens, are not to be
presumed beyo~d what the statute expressly and clearly declares.
(Lincoln·Philippine Life Insurance Company, Inc., etc., v. Court of Appeals,
et al., 293 SCRA 92, 99). .

PROVISIONS GRANTING TAX E~EMPTION~ _

. Such provisions are construed strictly against the taxpayer claiming
tax exemption. When a tax is unquestionably · imposed, a claim of
exemption from tax payments must be clearly shown and based on
language in ·the law too plain to be mistaken. (Davao Gulf Lumber
Corporation) ,
; Manila Electric Company v. Vera, [67 SCRA351]

APPL/CATION OF TAX LAWS

General rule: Tax laws are prospective in operation because the nature
and amount of the tax could not be forese'en and understood by the
taxpayer at the time the transactions which the law seeks to tax was
completed.

41
 ' , ' ftt/1,lk n !ll &d prU'~s
Exception: While it is not favored, a statute may nevertheless operate
retroactively provided it is expressly ·deqlared or is· clearly the legis.lative
intent. But a t.ax law should •not be given retroactive application when it
would be harsh and ·oppres$ive .which violate the taxpayer's constitutional
rights regarding equity and due process .(Fernandez vs Fernandez- 99
Phil. 934; CIR vs Filipinas Gia de.Seguros - 107 Phil. 1055).. Section 246
.of the Tax Code also provides ·that ~my revocation, modification or reversal
of ·any of the rules and· ·regulations promulgated in accordance with
Sectionp 244 and 255 or any of t~e rulings ·or circulars pr_ omulg~ted by the
_
Commissioner shall not be given retroactiye application if -the revocatio~,
modification or reversal ~ill .be prejudicial to the taxpayers .
' .

t~xp.ayer's ~uit . . . . .
lt , s one brought or filed by .a taxpayer arguing the validity of a tax
statute and its enactment or the constitutionality of its alleged public
purpose. · It is a ca$.e• where the act complained of .d irectly involves th~
illegal ..disbursement of public funds derived ..frorn taxation. . Taxpayers
. have. locus $far,di ·• to question the validity of tax measures or illegal
expenditures of public rnoney-. In such cases,· they are parties .in interest
,who will be· .prejudice_d· or -benefited by the".avails :of the suit. The general
rule is that not only· persons· individually affected but al~o taxpayers have
sufficient'.irterest of prev~nting the illegal expenditures of money raised by
taxation. They may, therefore, question in .. the · proper court the
- const,tutionality -of statutes req·uiring the expenditure of public funds . But
- a taxpayer is not relie'{.ed . from the obligation of .paying a tax because of
his belief thatJt is being misappropriated by certain officials, for otherwise ,
collection . of taxes would be. hampered and this may result in the
paralyzatidh · .of .important. governmental functions. In Lozada vs.
~o~el~c, ·"It is pnly · when a~ act .complained o'f which may include a
_.leg1slat1ve .enactment of a s~atute, invo.lve~ the illegal expenditure of public
· mon~y thaJ the so-called taxpayers' suit may be. aHowed.
. ( .

;-. J '.1
 · - CHAPTER EXERCISES
TRUE_OR FALSE . . . .
1. The three .fundamental powers of the &tate may be exerds~ ·onl - b
.the government false Y Y
2. Taxation_ is a proces~ or n:,eans, by which th~ sovereign, through its ·
(aw-making body raises inc_ ome to , c;Jefray the · expenses of the ·
government. ·TRue - . .· · -
3. Eminent dom~iri may be ~xercise even by public service corporations
and public entities.- .True . · . ·-
4: Poli~e power regulates bo~h liberty and property. ·.
True • J

5. Ta?(e~ are raised to·cover the cost of governance. True

6. Toll is ·one of the_taxes collected by the government. False
.
7. Licens~ fees are .imposed i-n the exercise of police power. True
,\

8.- Ucen?e fee is-imposed to raise revenue. False ·

9. Tax is generally unlimited because it is based on the needs of the

State. True
to.· The a.mount i'mposed in the- exercise of police power depends ·on ·
yvhether the ?ctivity is useful or not. · True
11·. The distinction of a tax from .permit or li·cense fee is that a tax is one in
which there is _gen·erally no limit on the amount th.at rnay be. imposed. True
12. Debt, as distinguished from tax, may be paid in kind . True
- / .l_ , • ,' I •

. 13. Under. the equal protection clause of the constitution, all persons
subject to legislation shall be treated alike under ·. dissimirar -·
circumstances and condltions,· both in the privileges c·onferred and
liabilities imposed.- FAlse .
14. Tax ·.laws are civil and pe·nal in nature. because there _are penalties
provided iii the case of violation. FAlse· · . i
15_. Special a~sessment is a tax.- FAlse
16. Sp~cial ass~ssment is imposed on persons, . property and prop~rty_
rights. FAlse

17~·The Philippine government may subje~t. the _land where embassies of

foreign governments are located_to real property .taxes. FAlse
18._A revenue bill may originate frnm the Senate -~.md on which same bill ·
· the House of Representatives may propose amendments~· FAlse
19. A person may refuse to .pay on the ground that he will ·not receive a
. . benefit from the tax. FAlse , . 1
·

1
• 20. ·1n· the exercise of the power of taxation, the State can tax anything at
any time. TRUE . .,

· 43
 . d exemptions doubts shall be .resolved
of deductions an , '
21. In case~. f the government. True
· .
liberally in f~vor O nt taxes should be exercise only by the
. of local governme
22. Levyin~ . h Of the local government. True ..
Iegislat1~e .branc f vinces municipalities and cItIes precede frorn
23. The. taxing power o pro '
True
a.con~titu~ional gran~. e· when their rate goes up depending on the
24 Taxation is regress1v . .
. resources of the person affected. FAlse : ,

No law granting any tax exen:1ption sh_all be passed yvithout the

25
· concurrence of 2/3 of all m~mbe~s. ~f Cong~~ss. FAlse . .
26 _ There i~ no constitutional proh1b1t1on against double_ taxat,o~ 1~ the
Philippines. It is something not f?v~ red, but n_
evertheless perm1ss1ble. True
1
27. "Global system of income .taxation means separate graduated rates
are imposed on dffferent types of income. FAlse , · ..,
28. One of the schemes of shifting the incidence of tax burden is by
transferring the sales tax of a mantJfacturer to the distributor, then in
- turn to the wholesaler, to the retailer and finally to the consumer. TRue

29. Transformation is a method by which the manufacturer or producer

up.on whom the tax is imposed pays the tax and strives to recover
such expense through lower production cost without sacrificing the
quality of his product. True ·
_30. In case of ambiguity, tax laws stiall be interpreted liberally in favor of
· the government. FAlse ·

MULTIPLE CHOICE
Definition, Purpose, Theory and Basis
1. Which of the following statemehts is incorrect?
a. .Taxes are ·the revenues- raised , in the exercise of the police
power of the State.
b. One of the special characteristics of tax is it is unlimited in
amount. _
c. The three fundamental powers of the State are Inherent in the
State and may be exercised without the need of any
constitutional grant.
d. All of the above
2. · T_~e State, having sovereignty, can enforce contributions (tax) upon its
c,t,zens even without a . _specific provision in the Constitution
-authori?ing it. Which of the .following will justify the foregoing
statement?
a. It is so because the State has the supreme power to comma nd
~n? enfor<;?e obedience to its will from the people within its
Jurisdiction.

44
 • I
b. Any ·provision in the Constitution regarding taxation does not
create rights for the sovereignty to have the power to .tax but it .
merely constitutes lir;nitations upon the supremacy of tax
power.
c. Both "a!' and "b'.'
d. Neither "a" nor "b"

3: Statement 1: . T~e distinction of a tax from permit qr license fee is that

a tax is imposed for regulation.
Statement 2: Non-payment of tax . does not necessarily render a
busin,ess ill~gal.
a. . Only statement 1 is correct
b: Only statement -2 is correct ..
c. Both statements are co.rrect
d. Both statements are incorrect
I •

4; The primary purpose of taxation is to raise· revenue for the support of

the government. However, tax.ation .is often employed as a devise for
regulation by means' of which, certain effects or conditions envision~d
by the government may be achieved such as:
a. Taxation may be used·to provide incentive to greater production
through grant of tax ·exemptions. . _
b. ·Taxation can strengthen weak enterprises by creating conditions·
.conducive to their growth through _grant of tax exemptions.
c. Taxes may be increased in periods of prospe'rity to curb spending
power and halt inflation or lowered in p~riods .of slump to expand
business and .ward off depression.
d. All of the above ,

I 5. Which of the following statements is. correct?

a. The · -purpose of ta.xation may also be "compensatory",
meaning, it may be used to make up for the benefit received.
b. Taxes may be imposed for the equitable distribution of wealth
. and income in society.
c. . Both "all and "b"
d. Neither "a'.' nor "b"

, 6. · Which theory · in taxation states that without taxes, a government

would be paralyzed for lack of power to activate and operate it,
resulting in its destruction?
a. Power to destroy theory
b. Lifeblood theory
c. Sumptuary theory
d. Symbiotic doctrine

45
 7 On theoretical basis of taxation, which of the following statements is
true?
a. People pay taxes which their government uses to expand its
powers and territorial domination.
b. People demand from their governm ent certa in responsibiJities and
then provide this gdvernment with the means to carry them out.
c. State needs taxation to exist, while people must support taxation
because they need the presence of the state.
d. 'b" and ' c" I '

8. Incidence of taxation means

a. Shifting of tax c. Payment of tax
b. Refunds of tax d. Imposition of tax

9. The actual effort exerted by the government to effect the exaction of

what is due from the taxpayer is known as
a. Assessment.
b. Levy.
C. Payment.
d. Collection.

10. Statement 1: Symbiotic relation is the reason why · the govern ment
would impose taxes on the income of resident citizens derived from
sources outside the Philippines.
Statement 2: Jurisdiction is the reason why citizens must provide
support to the state so the latter could continue to give protecti on.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect

11. A law was passed by Congress which granted tax amnesty to tho
who have not paid income taxes for a certain year and at the
time providing for the refund of taxes to those who have alre d
them. The law is:
a. Valid because there is a valid classification.
b . Not valid because those who did not p . y U .·" ir t
favored over those who have paid their t e
c. Valid because if was Congr ss that p - _- d th 'I
not improp rl y d legate th _ pow , r to t , .
d. Not valid b , u-:- ly th Pr d -t 1th th -p.... ~ ··...,I o
Congress may ,g r nt · mn ty.

46
 j 2.Congress passed a new law imposing taxes .on income ~arned :out of
particular activity .that was not previously faxed. The law, however,
taxed incomes already ear.ned within the fiscal year when the law took
eff~ct. Is the law valid? · ,
I
a. No, because the laws are · intended to be prospective, not ,
l I

retroactive.
· · b. No, the. law is ·arbitrary in that it taxes income that has already. ·
.been spent. · ·· · ·
C. Yes; since the tax faws are· the lifeblood of the government. ,.
d. ·. Yes, tax laws are an exception; they can be given retroactive
effect. , ·. . '

13. Due to an . uncertainty ,whether or not a new tax •law is applicable to

' ·printing companies-, ABC Printers submitted .a legal query to the BIR
.on that is.sue. The BIR issued a ruling that printing companies are not
covered by the ·new law. ··Relying on this ruling, ABC Printers did not
_pay the said tax. SubsequentlY' however, the BIR reversed the tuling
and -issued a new one · stating that the tax covers printing ·companies .
. Could the. BIR assess ABC Printers for back taxes corresponding to
the years before .the new ruling?
a: Yes, because taxation · •is the rule and ·exemption is the
exception _. .
b. Yes, because taxes are the lifeblood of the government
c . . No, the BIR is not allowed to reverse its ruling
d. · No_, reversal of a ruling. shall not be given a retroactive
application if it wilf be prejudicial to the taxpayer

Use the following data for the next two questions:

_ The -Constitution requires that all revenue bills shall originate "exclusively"
from the House of Representatives. Assume that in 2014, Congressman
Uro propose·d an expansion ·o( the coverage of the value added tax to be
known.as .e-vat law. The proposed biff was approved by the House of
Represe·ntatives later that year. ·However, .-the · EVAT version of the
Senate b~came the EVAT law.
· 14. Which of the following statements will justify the enacted EVAT law?
I. The Constitution simply means that the initi~tive for filing revenue,
, tariff or tax bills must come from the House of Representatives on
the theory that, elected as they are from the districts, th'e Members
of the House can ·be expected to ·be more sensitive to the local
needs and problems. · ·
II.It is· not the law but the revenue bill which is required by the
-Constitution to "origin.at~ exclusively" in the House of
Representatives because a bill originating in the House may

47
 '
etrapteJt UUJtci6~ - [rwidp~

undergo ~~ch extensive changes in the Senate that the result. may
be .a rewriting of the whole, and a distinct bill may be produced.
a. I only c. Both I and 11
b. II only d. Neither I nor II

15. Assuming Senator Bobadilla filed in the Senate a substitute e-vat bill
"in anticipation" of its re~eipt of the bill from the House. The proposal
is totally different from the version of the lower house. Which of the
following statements will' justify the filing of a substitute bill by
Honorable Senator Bobadilla?
I.To insist that a revenue statute not only the bill which initiated the
legislative process culminating in the enactment of the law - must
.substantially be the same as the House bill would be to deny the
Senate's powe·r not only to "concur with amendments" but also to
"propose amendment." ·
II. It · would be to violate the coequality of legislative power of the two
houses of Congress and in fact m~ke the House superior to the
Senate.
Given the power of the Senate to propose amendments, it can
propose its own version even with respect -to bills which are
required by the Constitution to originate in the House.
Ill.Filing in the Se_nate of a substitute bill in anticipation of its receipt of
the bill from the House is not prohibited under the Constitution , so
long as the ·action by the. Senate as a body is withheld pending
' receipt of the House bill. _
a. I only c. I, Hand Ill
b. II only d. None of the -above

16. Being legislative in nature,- the power to tax may not be delegated ,
except:
a. To local governments or political subdivisions
· b. When 91lowed by the Constitution
c~ When delegation relates merely to administrative implementation
·that may call for some degree of discretionary powers under a set
of sufficient standards expressed by law or implied from the poli.cy
and purpose of the Act.
d. All of the choices

Scope and Aspect of Taxation .

17. Statement 1: The aspects of taxation are shared by the legisl ative and
executive branches of the government.
Statement 2: Taxes should be prospective and should not be given
retroactive effect because they are burdens.
a. Only statement 1 is correct

48

".
1
 b. Only statement 2 is correct
c. Botti statements are correct
d. Both statem~nts are incorrect

18. The power of taxation is basically legislative in character. Which of

the following is a legislative function? · .
A B C D
■ Fix with certainty the amount Yes No . Yes Yes
of tax
• Identify who should · collect Yes Yes No Yes
the tax -
• Determine who should be Yes Yes Yes No
subject to ta,x

19. As to· scope of legislative power to tax, which of the following is

correct?
a. The power to tax is supreme, ·plenary, comprehensive and
without any limit because the existe·nce of the government is a
I .
necessity. ·
b. The discre~ion of Congress in imposing taxes extends to the
mode, method and kind of tax, even if the constitution provides
otherwise. ,
c. Congress has. the right to levy a tax of any kind at any amount -
as it sees fit, eyen in_the absence of any constitutional
provision.
d. · The sole arbiter of the purpose for which taxes shall be levied
is Congress, provided the purpose is public and the courts
may not review the levy of the tax to determine·whether or not
the purpose is public.

_
20. ·The following are the aspects of taxation
I - Levy or imposition of the tax on persons, property or excises
11 - Collection of taxes already levied
111- Sufficiency of governments sources to satisfy its expen_
diture
a. I, II and Ill c. I and Ill o'nly
b. I and II only d. II and Ill only

21. Which of the following i.s incorrect?

Legislative Administrative
a. -Selecting the kind of tax Yes No
b. Fixing amount of tax Yes No
c. Prescribing rules of Yes No
taxation .

49
 d. Assessment of tax liability Yes No

22. Which of the following is correct? I

Legislative Administrative
a. · Fixing of tax rates Yes Yes
b. Valuation of object of ta~ Yes No
c. Collection of tax Yes No
d. Assessment of t~x liability No Yes
. \

Inherent Powers of the State

: 23 ~Statement 1: Inherent powers of the State exist independent of the
constitution. ·
Statement 2: The taxing power of the local government units precede
from a ,constitutional grant.
a. Statements 1 and. 2 ~re false
b. Statement 1 is true but statement 2 is false
-
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true

24. The following ar~. the characteristics · of the State's power to tax,
except
a. The strongest of all. inherent.powers of the State
b. Involves power to destroy
c. Both "a" and "b"
d. Neither "a" nor "b"

25 ..Levy'ing of local government taxes may be exercised by:

a. The local executive only
b.· The legislative branch of the local government only
c~ ·rhe local e?(ecutive and the· legislative branch of the local
government unit
d . . Neither· the local executive nor the ·1egislative branch of the
· local g·o vernnient can exercise the power.

26. Where does taxing, power of the · provinces; municipalities and cities
precede from?
a. Constitutional grant
b. Legislative enactment
c. Presidential decree or Executive act ,,
d. Local legislation
f

27 · Statement 1: .En:,i~ent dpmain may raise money for the gover nm-e nt.
I Statement 2: Barrios, barangays, municipalities/citie$ and provinces
may coll_ect taxes from its inhabitants.

50
 a. . Statements 1 & 2 are false
b. Statement 1° is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true

Nature, Characteristics and Construction of Tax Laws .

28. The following are 'the nature of taxation, except
a. Inherent and sovereignty
b. Essentially a legislative function
c. Subject-to inherent•and constitutional limitation
d. Subject to the approval of the people ·

29. "The power to tax involves power to destroy" means:

· a. The power to tax is viewed as the power to destroy in the
. sense .that a lawful tax· cannot be defeated just because its
exercise would be destructive or would bring about insolvency
to a taxpayer.
b. The princip·le implies that an imposition of lawful regulatory
taxes would be destructive to the taxpayers and business
est_ablishments because the government can compel payment
of tax and forfeiture of property through the exercise of police
power.
c. Both "a" and "b"
d. Neither "a" nor "b"

30. There can be no tax unless there is a law imposing the tax is
consistent with the doctrine of
a. Uniformity in taxation ·
b. Due process .of law
e,. Non-delegation of the power of tax ·
d. All of the above
11
31 : "The tax should be based on taxpayer's ability to pay • In relation to
this,. which of the following is not correct?
a. No person shall be imprisoned for non-payment of tax
.b.. A graduat~d tax table·is in consonance with this statement
c. As a theory of taxation, this is called "ability to pay theory '
d. As a basic principle of taxation, this is called ' theoretical
justice"

32. Rule of "No estoppel against the govern ment' means:

a. Rule of law that in the performance of its governmental
functions, the state cannot be estopped by the neglect of its
agents and officers .

51
 The government i.s not estopped by the mistakes or errors of ·
b.
its agents; erroneous application and enforcement of law by
public officers do not block the subsequent correct application
of statutes.
c. Both a and b
d. Neither a or b

33. Progressivity of taxation is also mandated in the Constitution.

Statement 1: Our income tax system is one good example of such
progressivity because it is built on the principle of the
taxpayer's ability to pay.
Statement 2: Taxation is progressive when their rate goes up
depending on the resources of the person affected.
a. Statements 1 & 2 are false
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d . Statements 1 and 2 are true

34. One of the characteristics of our internal revenue laws is that they are
a. Political in nature
b. Penal in nature
c. Generally prospective in operation although the tax statute
may nevertheless operate retrospectively provided it is clearly
the legislative intent
d. Criminal in nature

35. Which of the following distinguishes tax from license fee

a. Non-payment does not necessarily render the business illegal
b. A regulatory measure
c. Imposed in the exercise of police power
d. Limited to cover cost of regulation

36. The least source of tax laws:

a. Statutes c. Revenue regulations
b. Presidential decrees d. Tax treaties or conventions

37. Statement 1: A revenue regulation must not be .contrary to the

provi_
sion of the law that it implement . ·
Statement 2: A revenue regulation cannot expand th_ e provision of the
law th_at it . implements by imposing a penalty when the law that
au~honzes the revenue regulation does· not impose a penalty.
a. Statements 1 and 2 are false
b. Statement 1 is true but statement 2 is false
c. ~tatement 1 is false but statement 2 is true
 eJiapWt ~~ - ff'tincip~

· d. Statements 1 and 2 are true

38. In every case of doubt, tax statutes are construed

a. Strict!}, against the government and the taxpayer
b. Liberally in favor of the government and the taxpayer
c. Strictly against the government and· liberally in favor of the
taxpayer
d. Liberally in favor of the government and strictly against the tax
payer

39. Inevery case of doubt, tax exemptions are construed

a.Strictly against the government and the taxpayer
b.Liberally in favor of the government and the taxpayer
· c.Strictly against the government and liberally in favor of the
taxpayer
d. Liberally in favor of the government and strictly against the
taxpayer

40. Which of the following statements is correct?

I. A tax cannot be imposed without clear and express words for
that purpose.
11. The provisions of a taxing act are not to be extended by
implication.
Ill. If the law is repealed,· taxes assessed before repeal of the law
may no longer be collected.
IV. Tax law is ex post facto in application.
a. I and 11 only c. All of the above
b. Ill and IV only d. None of the above

41. Which of the following factors are determinants to the Situs" of

taxation?
I. Nature, kind, or classification of the tax being imposed.
II. Subject matter of the tax (person , property, rights or activity
Ill. Citizenship of the taxpayer
IV. Residence of the taxpayer
V. Pface of the excise, privilege, business or occupatiion
VI . Source of the income subject to tax .
a. I and II only .c. IIL IV and VI only
b. 111 , IV, V and VI only d. I, 11 lll t IV V
1 d VI

42. Tax of a fix amount impos d -mon ,II p r on r sidin ~ i hin

specified territory wi thout reg rds to th ir prop rty or occupatio t
may be engage
a. Personal, poll or capi tation tax c. Excise t

5
 b. Property d. Regressive

43. Tax of fixed proportion of the amount or value of the property , , h

respect to which the tax assessed
a. Ad-valorem c. Exci e
b. Speciflc d. R v . nue

4~. Tax base on a fix percentage of the amount of property, incom or

other basis to be taxed
a. Progressive c. Regressive
b. proportional d. Indirect

45. Which _of the following is · a characteristic of taxation vhic 1

distinguishes it from police power and eminent domain?
a. For public purposes
. b. Legislative in nature
c. Generally payable in money
d. Inferior to non-impairment clause in the Constitution

Sound Tax System

46. The following are basic principles of sound tax system
I. It shoulp be capable of being effectively enforced
11. It must be progressive ,
UL .Sources of revenue must bS" sufficient to meet gov,emmen
expenditures and other public needs
IV. It should be exercised to promote public welfare
a. I and H only c. I, II and I'll only
. b. 11'1 and IV only d. All of the above

47. The sources of revenue should be sufficient to meet the deman , o

public expendrtures. This refers to
a. Equality or th eoretical justice
b . Fiscal adequacy
c. Administrative feasibility
d~ Rule of apportionment

48. The tax should be imposed proportionate to-th

a Equality or theoretical justioe
b, Fiscal adequ -cy
c. Ad mini _tr · Uv fi · - ~ ibiU y
d. -U'I - p -rti . nm __ t
1

49. The x t w mu t j
admmi ~r -ucm
 a. E_quality or theoretical justice
b. Fiscal adequacy
c. Administrative feasibility
d. Rule of apportionment

l!Jherent and Constitutional Limitations .

1
SO. Slaf temendt · :d Inherent limitations are the natural restrictions to ·
sa eguar an ensure that th f .
the overnme t e power o taxation shall be exercised by
h 9 d b. n only for the betterment of the people whose interest
s ou 1 e served, enhanced and protected.
Sfatement 2: Constitutional limitations are· provisions of the
fun?a_mental law of the land that restrict the supreme, plenary,
. unlimited and comprehensive exercised by the State of its inherent
power to tax.
a. Statements 1 and 2 are false
I • b~ Statement 1 is true but statement 2 is false
c. Statement 1 is false but statem·ent 2 is true
d. Statements 1 and 2 are true

. 51. "Equality in taxation" means:

I. Progressive system of taxation shall be· applied.
11. The- tax laws and their application must be fair, just,
reasonable and proportionate to one's ability to pay.
111. The tax laws shall give emphasis on direct rather than indirect
taxes or on the ability-to-pay principle of taxation.
a. I only c. 111 only
b. II on.ly d. I, II and Ill

52. Which · of the following statements correctly described "Equal

protection" clause of the Constitution regarding the government's
power to tax?
.I. All persons subject to legislation shall be treated alike under
dissimilar circu·mstances and conditions, both in. the privileges
conferred and liabilities imposed.
11. The purpose is to protect persons belonging to the same class
against intentional and arbitrary discrimination.
Ill. There is denial of equal protection of laws if there is
discrimination in the implem·entation of tax laws.
a. I and II only c. II and 111 only
b. I and 111 only d. I, II and Ill

53. Which of the following restrictions on the power of taxation recognizes

that the country's tax laws shall not be applied to the property of
foreign government?

55
 a. Taxation is inherently a legislative function
b. Exercise ·of taxation is subject to international comity
c. Due process of law
d. ,Equal protection of law

54. This isari jn.herent limitation on the power of taxation.

a. The rule on .taxation s.hall be uniform and equitable .
b. No law impairing the obligations of contracts shall be enacted
c. Charitable institutions, churches, personages or convents
appurtenants thereto, mosque an~ non-profits ceme.teries and
all kinds of lands, buildings and improvements . actually,
directly and exclusively used for_ religious or charitable
purposes shall be exempt from taxation .
d. The tax l~ws cannot apply to the property of foreign
. governments

Exemption versus Amnesty '

55. Exemption from tax is a privilege, which is being looked upon by law
with disfavor because everyone should be sharing the burden of
taxation. On account of this view, exemption from tax is construed
strictly against the taxpayer, except.in certain situation like:
a. Exemption is granted to the impoverished · sector in certain
situation
b. Exemption relates to ·a public official
c. Exer,ption refers to ~ public property
d. All of the above.

56. Tax exemption is made different from tax amnesty:

a. .It is a privilege or freedom from tax burden;
b. It allows immunity from all criminal, civil and administrative
liabilities arising from non-payment of taxes;
c. Amount foregone by the government is substantial;
d. It applies to all past, present and future tax obligations .

57. Statement 1: Tax exemption applies only to government entitie

that exercise proprietary functions.
Statement 2: All government entities regardless of their fun ctions
are exempted from tax~s because it would be impractical for the
" government to be taxing itself
a. Statements 1 and 2 are fal se
b. Statement 1 is true but statement 2 is fa lse
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are tru e

56
 58
· Which · _of the following statements correctly described the tax
exemption of the government? .
I. !he State_cannot.be tax~d -without its consent, otherwise, such
is derogation to its sovereignty.
II. Ta~ exemption applies only to government entities through
which the government immediately and directly exercises its
governmental functions like the Department of Justice,
Department of Foreign Affairs Philippine National Police and
th e l'k
1. e. '· '
111 L Government agencies performing governmental . functions are .
~xempt from tax unless expressly taxed, while thos_ e
performing proprietary functions are subject to tax unless
expressly exempted.
a.· 1only · c. · Ill only
b. II only d. I, II and Ill

Tax Avoidance/ Double Taxation .

- 59. Which of the following ·is to be regarded as tax minimization through
legal means? ·
a. Not declaring all. taxable income
b. Padding of expenses for deduction from income
c. Opting to transfer the property through sale rather than
through donation where tax liability would be higher
d. All of the above

60. Which of the following is correct?

a. Tax avoidance, or tax minimization, through legal means, is
not punishable ·by ~aw.
b. Deliberate reduction of taxable income that has been received
. is an example of tax ·avoidance.
c. Evasion , of the tax takes place only when. there are no
· proceeds on the part of the government.
d. All of the above

61. Statement 1: An attempt to 'T)inimize one's tax constitute fraud,

taxpayer may diminish his liability by any means, which the law
permits. · .
Statement 2: To avoid is legal but to evade is illegal. The legal rights
of a .taxpayer to decrease the amount of what otherwise would be his
taxes, altogether avoid them, by means which the law. permits, cannot
be doubted.
a. Statements 1 and 2 are false
b. Statement 1 is true but statement 2 is false

57
 c. State.ment 1 is f.alse but state~ent 2 is true
d. Statements. 1 and 2 are true . ?
62 Which of the following is an element of double taxation .
· · 1. Same kind of tax
II. Same subject matter
111. Same taxable period
IV. Same taxing clUthority I

a. ·1 and II pnly c. All of the above

. b. I, li°and Ill only d. None of the above .

63. Double taxation in its general sense means taxing the same su?ject
twice during the same taxing period. In this sense, double taxa_
tion
a. Violates substantive due process.
b. Does not violate substantive due process. · .
c. Violates the right to equal proteqtion.. ..
d. Does not violate the right to equal protection.

64. Statement 1:-There can be double taxation where the state merely
. imposes. tax on every $eparate and distinct b.usiness in which a
person is engaged.· -
Statement -2: There is no objectionable double taxation if the
tenements in the city are subjects to real estate tax while the business
of leasing said property are also subject to real dealer's tax. ·
a. ·Statements 1 & 2 are false .
b. Statement 1 is true but statement 2 is false
c. Statement 1 is false but statement 2 is true
d. Statements 1 and 2 are true

65. Ligaya Educational Foundation, Inc., a stock educational institution

organized for profit, decided to lease for commercial use a 1,500 sq.
m. portion of its .school. The school actually, directly, and exclusively
used the rents fo'r the maintenance of its school.buildings, including
payment of janitorial services. Is the leased-portion subject to real
property tax?
a. Yes, since Ligaya i~ a stock and for profit educational institution.
b. No, since the school actually, directly, and exclusively used the
rents for educational purposes. I •

c. No,· but . it may be subject to .income taxation on .the rents it

receives. ,,,
d. Yes, si,ice th~ leased portion is\ not actually, dire_ctly, and
. exclusively used for educational purposes.

. ·,

58