GENERAL

PRINCIPLES OF
TAXATION
TAX 1 – INCOME TAXATION
INHERENT POWERS OF THE STATE

POLICE POWER

POWER OF EMINENT DOMAIN

POWER OF TAXATION
 POLICE POWER

Power to protect citizens and


provide for safety, health, morals
and welfare of society.
POWER OF EMINENT DOMAIN

Power to take private property for

public purpose.
 POWER OF TAXATION

Power to raise revenue, through

the enactment of laws that
impose charges upon persons,
property and activity under its
jurisdiction, to defray expenses of
government
INHERENT POWERS OF THE STATE

SIMILARITIES
They are all necessary for the
existence of a sovereign state
They are all legislative in nature
They are involve, when exercised,
an interference with private rights
INHERENT POWERS OF THE STATE

 DIFFERENCES
Benefitreceived by the person
whose property is taken
Use/Purpose of the property taken
As to persons affected
Amount of imposition
Impairment Clause
 POWER OF TAXATION

Power to raise revenue, through

the enactment of laws that
impose charges upon persons,
property and activity under its
jurisdiction, to defray expenses of
government
 ESSENTIAL ELEMENTS OF
TAXATION
 NECESSARY power of the state
 INHERENT IN, OR IS AN ATTRIBUTE OF
SOVEREIGNTY
 Is essentially LEGISLATIVE
 Is intended to RAISE REVENUE
 Is effected by imposition of FORCED
CHARGES
 Is on PERSONS, PROPERTIES AND ACTIVITIES
 ESSENTIAL ELEMENTS OF
TAXATION
Is limited to territory within the
sovereign’s jurisdiction, and
Is to DEFRAY THE EXPENSES OF
GOVERNMENT
 TAXATION IS BASED ON
NECESSITY
Itis what we pay for a civilized society.
Essential to the existence of the state
LIFEBLOOD of the GOVERNMENT and
should be collected without
unnecessary hindrance (lifeblood
theory)
 PRINCIPLES: NECCESSITY OF
TAXATION
Court, as a general rule, as may not
enjoin the collection of taxes.
EXCEPT: CTA may suspend collection if
it jeopardizes the government and/or
the taxpayer
 PRINCIPLES: NECCESSITY OF
TAXATION
Tax exemption laws are strictly
construed against the taxpayer and
liberally in favor of the taxing authority.
Deductions from gross income
Tax amnesties and laws condoning taxes
EXCEPT: Tax on awards for tax
complainants
 PRINCIPLES: NECCESSITY OF
TAXATION

Tax assessments are presumed correct.

 Consequence: Taxpayer has the burden of proving
not only that the BIR, or other tax collection agency is
wrong, but also that his position is correct.
 PRINCIPLES: NECCESSITY OF
TAXATION
Doctrine of “EQUITABLE RECOUPMENT”
is not applicable if the taxes involved
are totally unrelated
 DOCTRINE: A tax claim for refund, which is prevented
by prescription, may be allowed to be used as
payment for unsettled tax liabilities if both taxes from
the same transaction in which overpayment is made
and underpayment is due.
 PRINCIPLES: NECCESSITY OF
TAXATION
Taxes,
unlike debts, are not subject to
compensation or set-off
 EXCEPT: There is appropriation
 TAXATION IS INHERENT IN
SOVEREIGNTY
 PRINCIPLES:
A sovereign state has the power of
taxation even if there is no provision in its
Constitution explicitly authorizing its
exercise.
Refunds of taxes generally do not earn
interest.
Except: Illegal collection is attended by
arbitrariness and abuse of authority
 TAXATION IS INHERENT IN
SOVEREIGNTY
PRINCIPLES:
The right to collect taxes is generally
IMPRESCRIPTIBLE.
Constitution directly vests local
governments with power to raise their
own revenues.
 TAXATION IS LEGISLATIVE IN
NATURE
It requires laying down of rules:
Persons who will be forced to pay taxes
Objects to be subjected to tax
Amount to be collected
Time for payment
Procedure for collection
 TAXATION IS LEGISLATIVE IN
NATURE
PRINCIPLES:
Tax exemptions cannot be granted by
the executive officer.
 TAXATION IS LEGISLATIVE IN
NATURE
PRINCIPLES:
Ingeneral, Congress CANNOT
delegate its power to tax. Except:
When the Constitution itself authorizes it
Congress creates local subdivisions
Congress delegates to administrative
bodies the details of enforcing a tax law
 TAXATION IS LEGISLATIVE IN
NATURE
 PRINCIPLES:
Other Branches of the Government:
Executive – administers, collects, approve any
bill, or to veto it and pardon tax offenses.
Judiciary– adjudicates and settles conflicts
between the rights of the government and its
subjects
 STAGES, ASPECTS OR
PROCESSES OF TAXATION
IMPACT OF TAXATION
LEVY
ASSESSMENT
INCIDENCEOF TAXATION
TAX PAYMENT/COLLECTION
PRINCIPLES OF A SOUND TAX
SYSTEM
FISCALADEQUACY
EQUALITY OR THEORETICAL JUSTICE
ADMINISTRATIVE FEASIBILITY
 THE POWER TO TAX IS THE
POWER TO DESTROY
Taxation is a power that can be
exercised to any extent that is
necessary to support the government,
its exercise may sometime impair, or
even destroy, the right to engage in
certain activities.
LIMITATIONS ON THE POWER OF
TAXATION
INHERENT LIMITATIONS

CONSTITUTIONAL LIMITATIONS
 INHERENT LIMITATIONS
It must be for public purpose
It is legislative in character
It is subject to the concept of
TERRETORIALITY
It is subject to international comity
It allows exemption of government
agencies or instrumentalities
 CONSTITUTIONAL LIMITATIONS
 Provisions directly affecting taxation
 Prohibition against imprisonment for non-payment of poll tax (Art. III, Sec.
20)
 Uniformity and equality of taxation (Art. VI, Sec. 28)
 Progressive system of taxation (Art. VI, Sec. 28)
 Grant by Congress of authority to the president to impose tariff rates
(Art. VI , Sec. 28)
 Prohibition against taxation of religious, charitable entities, and
educational entities (Art. VI, Sec. 28)
 Prohibition against taxation of non-stock, non-profit educational
institutions (Art. IX , Sec. 4)
 Majority vote of Congress for grant of tax exemption (Art. VI , Sec. 28)
 CONSTITUTIONAL LIMITATIONS
 Provisions directly affecting taxation (cont’d)
 Prohibition on use of tax levied for special purpose (Art. VI, Sec. 29)
 President’s veto power on appropriation, revenue, tariff bills (Art. VI,
Sec. 27)
 Non-impairment of jurisdiction of the Supreme Court (Art. VI, Sec. 30)
 Grant of power to the LGUs to create its own sources of revenue (Art.
IX, Sec. 5)
 Origin of Revenue and Tariff Bills (Art. VI, Sec. 24)
 No appropriation or use of public money for religious purposes (Art. VI,
Sec. 28)
 CONSTITUTIONAL LIMITATIONS
 Provisions indirectly affecting taxation
 Due process (Art III, Sec. 1)
 Equal protection (Art III, Sec. 1)
 Religious freedom (Art III, Sec. 5)
 Non-impairment of obligations of contracts (Art III, Sec. 10)
CONSTITUTIONAL LIMITATIONS

PROVISIONS DIRECTLY AFFECTING

TAXATION
 NON PAYMENT OF POLL TAX
 No person shall be imprisoned for debt or nonpayment
of a poll tax. [Art. III, Sec. 20, 1987 Constitution]

 A poll tax is one levied on persons who are residents within the territory of
the taxing authority without regard to their property, business or
occupation. Thus, only the basic community tax under the Local
Government Code could qualify as a poll tax, and the non-payment of
other (additional) taxes imposed, not being in the nature of poll taxes, may
validly be subjected by law to imprisonment (Vitug, 2006).
 UNIFORMITY AND EQUALITY
 The rule of taxation shall be uniform and equitable. (Art.
VI, Sec. 28[1], 1987 Constitution).

 Uniformity – all taxable articles or kinds of property of the same class shall
be taxed at the same rate. A tax is considered uniform when it operates
with the same force and effect in every place where the subject is found.
Different articles may be taxed at different amounts provided that the rate
is uniform on the same class everywhere, with all people at all times.
 Equitability – Taxation is said to be equitable when its burden falls on those
better able to pay.
 Equality – It is accomplished when the burden of the tax falls equally and
impartially upon all the persons and property subject to it.
 UNIFORMITY AND EQUALITY
 [BAR EXAM QUESTION]
A law was passed exempting doctors and lawyers from
the operation of the value-added tax. Other professionals
complained and filed a suit questioning the law for being
discriminatory and violative of the equal protection
clause of the Constitution since complainants were not
given the same exemption. Is the suit meritorious or not?
 UNIFORMITY AND EQUALITY
 SUGGESTED ANSWER:
 YES, the suit is meritorious. The VAT is designed for economic efficiency; hence,
should be neutral to those who belong to the same class.
 Professionals are a class of taxpayers by themselves who, in compliance with the
rule of equality of taxation, must be treated alike for tax purposes. Exempting
lawyers and doctors from a burden to which other professionals are subjected will
make the law discriminatory and violative of the equal protection clause of the
Constitution.
 While singling out a class for taxation purposes will not infringe upon this
constitutional limitation, singling out a taxpayer from a class will no doubt
transgress the constitutional limitation. Treating doctors and lawyers as a different
class of professionals will not comply with the requirements of a reasonable,
hence valid classification, because the classification is not based upon substantial
distinction which makes real differences.
 PROGRESSIVE SYSTEM
 The Congress shall evolve a progressive system of taxation

 Taxation is progressive when tax rate increases as the income of the

taxpayer increases. It is based on the principle that those who are able to
pay more should shoulder the bigger portion of the tax burden.

 The constitutional provision has been interpreted to mean simply that

"direct taxes are to be preferred and as much as possible, indirect taxes
should be minimized.” The mandate of Congress is not to prescribe but to
evolve a progressive tax system. This is a mere directive upon Congress, not
a justiciable right or a legally enforceable one. We cannot avoid regressive
taxes but only minimize them (Tolentino et.al. v. Secretary of Finance, G.R.
No. 115455, Oct. 30, 1995).
 PRESIDENT TO IMPOSE TARIFFS
 The Congress may, by law, authorize the President to fix within
specified limits and subject to such limitations and restrictions at
it may impose, tariff rates, import and export quotas, tonnage
and wharfage dues and other duties or imposts within the
framework of the national development program of the
Government (Art. VI, Sec. 28 [2]).

 The authority of the President to impose tariffs has the following requisites
 Authorization granted to the President must be embodied in the law
 Subject to constitutional limits and restrictions
 Within the framework of the national development program
 TAXATION OF RELIGIOUS,
CHARITABLE, 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 (Art. IV, Sec. 28 [3], 1987
Constitution).
 TAXATION OF RELIGIOUS,
CHARITABLE, EDUCATIONAL ENTITIES
SUMMARY RULES ON EXEMPTION OF PROPERTIES ACTUALLY, EXCLUSIVELY AND DIRECTLY USED
FOR RELIGIOUS, EDUCATIONAL AND CHARITABLE PURPOSES
COVERAGE OF Covers real property tax only. The income of
EXEMPTION whatever kind and nature from any of their
properties, real or personal or from any of their
activities for profit regardless of the disposition
made of such income shall be subject to tax.
REQUISITES TO AVAIL Property must be “actually, directly and
OF EXEMPTION exclusively used” by religious, charitable and
educational institutions.
TEST FOR THE GRANT Use of the property for such purposes, not the
OF THIS EXEMPTION ownership thereof
 TAXATION OF RELIGIOUS,
CHARITABLE, EDUCATIONAL ENTITIES
 [BAR EXAM QUESTION]
The Roman Catholic Church owns a 2 hectare lot in a
town in Tarlac province. The southern side and middle
part are occupied by the church and a convent, the
eastern side by the school run by the church itself. The
south eastern side by some commercial establishments,
while the rest of the property, in particular, the
northwestern side, is idle or unoccupied. May the church
claim tax exemption on the entire land?
 TAXATION OF RELIGIOUS,
CHARITABLE, EDUCATIONAL ENTITIES

 SUGGESTED ANSWER:
 NO. The portion of the land occupied and used by the church, convent
and school run by the church are exempt from real property taxes while
the portion of the land occupied by commercial establishments and the
portion, which is idle, are subject to real property taxes. The “usage” of the
property and not the “ownership” is the determining factor whether or not
the property is taxable
 NON-STOCK, NON-PROFIT
EDUCATIONAL INSTITUTIONS
 Allrevenues and assets of non-stock, non-profit
educational institutions used actually, directly, and
exclusively for educational purposes shall be exempt
from taxes and duties. xxx
 Subject to conditions prescribed by law, all grants,
endowments, donations, or contributions used actually,
directly, and exclusively for educational purposes shall
be exempt from tax (Sec 4 (3] and [4], Art XIV, 1987
Constitution).
 NON-STOCK, NON-PROFIT
EDUCATIONAL INSTITUTIONS
RELIGIOUS, CHARITABLE AND
EDUCATIONAL ENTITIES
Exempt from real property taxes
only on land actually, directly
and exclusively used for these
purposes.
NONSTOCK, NONPROFIT
EDUCATIONAL INSTITUTIONS
Exempt from real property taxes,
customs duties and income taxes
on all its revenues and assets
used actually, directly and
exclusively for educational
purposes.
 GRANT OF TAX EXEMPTION
 No law granting any tax exemption shall be passed without the
concurrence of a majority of all the members of Congress
(Section 28 [4], Art. VI).

 In granting tax exemptions, the absolute majority vote of all the members
of Congress is required. It means at least 50% plus 1 of all the members
voting separately

 Reason for voting separately - Because the sheer number of Congressmen

would dilute the vote of the Senators.
TAX LEVIED FOR SPECIAL PURPOSE
 All money collected on any tax levied for a special purpose
shall be treated as a special fund and paid out for such purpose
only. If the purpose for which a special fund was created has
been fulfilled or abandoned, the balance, if any, shall be
transferred to the general funds of the government (Sec. 29[3],
Art. VI, 1987 Constitution).
 VETO POWER OF THE PRESIDENT
 The President shall have the 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 which he does not object (Art.
VI, Sec. 27[2]).

 The item or items vetoed shall be returned to the Lower House of Congress
together with the objections of the President.
 If after consideration 2/3 of all the members of the Lower House shall agree
to pass the bill, it shall be sent, together with the objection, to the Upper
House by which it shall likewise be considered, and if approved by 2/3 of
all the members of that House, it shall become a law.
 JURISDICTION OF THE SC
 The Supreme Court shall have the power to review, revise,
reverse, modify or affirm on appeal on certiorari as the laws or
the Rules of Court may provide, final judgments or orders of
lower courts in:
 xxx
 all cases involving the legality of any tax, impost, assessment, or
toll or any penalty imposed in relation thereto (Art. VIII, Sec.
5[2][b]).

 Even the legislative body cannot deprive the SC of its appellate jurisdiction over
all cases coming from inferior courts where the constitutionality or validity of an
ordinance or the legality of any tax, impost, assessment, or toll is in question.
 JURISDICTION OF THE SC
 The Supreme Court shall have the power to review, revise, reverse,
modify or affirm on appeal on certiorari as the laws or the Rules of
Court may provide, final judgments or orders of lower courts in all
cases involving the legality of any tax, impost, assessment, or toll or
any penalty imposed in relation thereto (Art. VIII, Sec. 5[2][b]).

 Even the legislative body cannot deprive the SC of its appellate jurisdiction over all cases
coming from inferior courts where the constitutionality or validity of an ordinance or the
legality of any tax, impost, assessment, or toll is in question.
 Scope of Judicial Review in taxation: limited only to the interpretation and application of
tax laws. Its power does not include inquiry into the policy of legislation. Neither can it
legitimately question or refuse to sanction the provisions of any law consistent with the
Constitution.
 LGU’S POWER TO TAX
 Each LGU shall have the power to create its own sources of
revenues and to levy taxes, fees and charges subject to such
guidelines and limitations as the Congress may provide,
consistent with the basic policy of local autonomy. Such taxes,
fees, and charges shall accrue exclusively to the local
governments (Art. X, Sec. 5).

 Delegation of legislative taxing power to local governments is justified by the necessary

implication that the power to create political corporations for purposes of local self-
government carries with it the power to confer on such local government agencies the
authority to tax.

 Under the 1987 Constitution, Congress cannot pass a law abolishing the power to tax of
local governments as it would be violative of the constitutional provision.
 REVENUE BILLS FROM THE LOWER HOUSE
 All appropriation, revenue or tariff bills, bills authorizing increase
of the public debt, bills of local application, and private bills
shall originate exclusively in the House of Representatives, but
the Senate may propose or concur with amendments (Art VI,
Sec. 24).

 What is required to originate in the House of Representatives is not the law but the
revenue bill which must “originate exclusively” in the lower house. The bill may undergo
such extensive changes that the result may be a rewriting of the whole. The Senate may
not only concur with amendments but also propose amendments.

 Appropriation, revenue or tariff bills should originate from the Lower House on the theory
that, elected as they are from the districts, the members of the House of Representatives
can be expected to be more sensitive to the local needs and problems.
PUBLIC MONEY FOR RELIGIOUS PURPOSES
 No public money or property shall be appropriated, applied,
paid or employed directly or indirectly for the use, benefit or
support of any sect, church, denomination, sectaraian
institution, or system of religion or of any priest, preacher,
minister, or other religious teacher or dignitary as such EXCEPT
when such priest, preacher, minister or dignitary is assigned to
the armed forces or to any penal institution or government
orphanage or leprosarium (Art. VI, Sec. 29[2])

 This is in consonance with the inviolable principle of separation of the Church and State.
CONSTITUTIONAL LIMITATIONS

PROVISIONS INDIRECTLY AFFECTING

TAXATION
 DUE PROCESS OF LAW
 No person shall be deprived of life, liberty, or property without due
process of law xxx (Art. III, Sec. 1)

 Substantive Due Process

 Tax must be for public purpose;
 It must be imposed within territorial jurisdiction;
 Procedural Due Process
 No arbitrariness or oppression either in the assessment or collection.
 When tax laws violate the due process clause?
 Tax amounting to confiscation of property
 Subject of confiscation is outside the jurisdiction of the taxing authority
 Law is imposed for a purpose other than a public purpose
 Law which is applied retroactively imposes unjust and oppressive taxes
 The law is in violation of inherent limitations
 EQUAL PROTECTION OF THE LAW
 No person shall be denied the equal protection of the laws (Art.
III, Sec. 1).

 All persons subjected to such legislation shall be treated alike, under like circumstances
and conditions, both in the privileges conferred and in the liabilities imposed.

 The doctrine does not require that persons or properties different in fact be treated in laws
as though they were the same. Indeed, to treat them the same or alike may offend the
Constitution. What the Constitution 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, therefore, group the persons or properties to be taxed and it is sufficient ―if
all of the same class are subject to the same rate and the tax is administered impartially
upon them.
 EQUAL PROTECTION OF THE LAW
 No person shall be denied the equal protection of the laws (Art.
III, Sec. 1).

 All persons subjected to such legislation shall be treated alike, under like circumstances
and conditions, both in the privileges conferred and in the liabilities imposed.

 The doctrine does not require that persons or properties different in fact be treated in laws
as though they were the same. Indeed, to treat them the same or alike may offend the
Constitution. What the Constitution 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, therefore, group the persons or properties to be taxed and it is sufficient ―if
all of the same class are subject to the same rate and the tax is administered impartially
upon them.
 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 preference, shall forever be allowed. No
religious test shall be required for the exercise of civil or political
rights (Art. III, Sec. 5)
 NON-IMPAIRMENT CLAUSE
 No law impairing the obligation of contracts shall be passed
(Art. III, Sec. 10).

 Applies only when one party to the contract is the government itself. The State
cannot change the terms of the contract by making new conditions, changing
conditions in the contract or dispensing with the conditions expressed therein.
 When the State grants an exemption on the basis of a contract, consideration is
presumed to be paid to the State and the public is supposed to receive the
whole equivalent therefore.
 Exceptions:
 if the grant of exemption is merely a spontaneous act of the legislature, the exemption may
be revoked (unilaterally granted by law)
 If it is without payment of any consideration or the assumption of any new burden by the
grantee, it is a mere gratuity and exemption may be revoked.
 DEFINITION OF TAXES
 Are enforced proportional contributions from persons and
property levied by the law-making body of the State by virtue of
its sovereignty for the support of the government and all public
needs.

 Are the enforced proportional and pecuniary contributions from

persons and property levied by the law-making body of the
state having jurisdiction over the subject of the burden for the
support of the government and public needs.

 Are what we pay for civilized society. Without taxes, the

government would be paralyzed for lack of the motive power
to activate and operate it.
 ESSENTIAL CHARACTERISTICS OF TAXES
 Levied by the State which has jurisdiction over the person or
property
 Through its Law-making body
 Enforced contribution not dependent on the will of the person
taxed
 Generally payable in money
 Proportionate in character
 On Persons and property
 For a Public purpose
 REQUISITES OF A VALID TAX
 It should be for a public purpose
 It should be uniform
 That either the person or property being taxed be within the
jurisdiction of the taxing authority
 The tax must not impinge on the inherent and constitutional
limitations on the power of taxation
 HOW TAXES ARE CLASSIFIED
GROUP CLASSIFICATION
As to subject matter? Personal
Property
Excise
As to purpose General / Revenue or Fiscal
Specific / Regulatory, Special
Compensatory
Incidence Direct
Indirect
 HOW TAXES ARE CLASSIFIED
GROUP
As to the nature of the tax base
As to structure of the tax rate
CLASSIFICATION
Ad valorem – based on selling
price or other specified value of
the article
Specific – based on weight or
value capacity or any other
physical unit of measurement
Progressive – rate increases as
base increases
Regressive – rate decreases as
base increases
Proportionate – No rate change
 DISTINGUISH TAXES FROM
LICENSE FEES
As to: Taxes Licenses
Source Taxing Power Police Power
Purpose Raise Revenues Regulate Acts
Amount Unlimited Limited to a
reasonable cost
Legality of objects Imposable on Only on Legal Acts
legal and illegal
acts
 DISTINGUISH TAXES FROM
DEBTS
As to: Taxes Debts
Source Taxing Power Contract
Susceptibility to Not subject Subject
set-off
Interest upon None, unless Earn interest if not
delinquency provided prohibited
Imprisonment as Imposable, but not Not imposable
penalty for poll tax
Prescription Governed by tax Governed by civil
itself code
 DISTINGUISH TAXES FROM
DEBTS
As to: Taxes Debts
Source Taxing Power Contract
Susceptibility to Not subject Subject
set-off
Interest upon None, unless Earn interest if not
delinquency provided prohibited
Imprisonment as Imposable, but not Not imposable
penalty for poll tax
Prescription Governed by tax Governed by civil
itself code
 DISTINGUISH TAXES FROM
SPECIAL ASSESSMENTS
As to: Taxes Special
Assessments
Property taxed All Kinds Only on Land
Nature of Liability Personal to the Not personal
one assessed
Basis Need to raise On benefits
revenue received only
Regularity Maybe imposed Exceptional as to
repeatedly time and locality
 DISTINGUISH TAXES FROM
PENALTIES
As to: Taxes Penalties
Purpose To raise revenue To punish
DISTINGUISH TAXES FROM TOLLS

As to: Taxes Tolls

Purpose To raise revenue To compensate for
use of property
 DISTINGUISH TAXES FROM
CUSTOMS DUTIES
As to nature: Customs duties are taxes
As to purpose Customs duties or
imposts levies on
importation or
exportation of goods
 SITUS OF TAXATION
 Itis the place or authority that has the right
to impose and collect taxes
 Factors that determine situs:
Residence of the taxpayer
Citizenship of the taxpayer
Nature of the tax
Subject matter of the tax
Source of income
 SITUS OF TAXATION
THE SITUS THAT CAN ENABLE A
IF THE TAX IS: STATE TO IMPOSE THE TAX IT CAN
BE:
A Personal, Poll or Capitation Tax The residence or the citizenship
of the taxpayer.
An excise tax The State where the right is
exercised or the activity is
conducted.
A real property tax Only the state where the
property is located.
 SITUS OF TAXATION
IF THE TAX IS:
A Tax on Tangible Personal
Property
A tax on intangible personal
property
THE SITUS THAT CAN ENABLE A
STATE TO IMPOSE THE TAX IT CAN
BE:
The jurisdiction that can tax is
where the property is located.
May be imposed by the state
where the intangible personal
property is exercised.
 DOUBLE TAXATION
 Isan act of the sovereign, thru its agent, of
taxing twice the same property of the same
taxpayer for the same purpose during the
same taxable year by the same taxing
authorities.
Same object
Same Taxing Period
Same Taxing Authority
Same Taxing Purpose
 DOUBLE TAXATION
 Thereis no constitutional prohibition against
double taxation in the Philippines. It is
something not favored, but is permissible,
provided some other constitutional
requirement is not thereby violated, such as
the requirement that taxes must be uniform.
 DOUBLE TAXATION
 Methods of eliminating double taxation
 Tax credit – an amount subtracted from taxpayer’s tax liability in order
to arrive at the net tax due.
 Tax deduction – an amount subtracted from the gross amount on
which a tax is calculated.
 Tax exemption – a grant of immunity to particular persons or entities
from the obligation to pay taxes.
 Imposition of a rate lower than the normal domestic rate
 Tax treaty - The purpose is to reconcile the national fiscal legislation of
the contracting parties in order to help the taxpayer avoid
simultaneous taxation in two different jurisdictions (international double
taxation).
 ESCAPE FROM TAXATION
 TAX EVASION – Tax dodging – ILLEGAL
 TAX AVOIDANCE – Tax minimization – LEGAL*
 Tax Option
 Shifting
 Transformation
 Exemptions
 TAX LAWS
 Body of laws which codifies all national tax
laws including income, estate, gift, excise,
stamp and other taxes.
 Republic Act 8424 – National Internal Revenue
Code, as amended.
 TAX LAWS
 The following rules shall be observed in the
interpretation and application of relevant tax
laws:
 Tax laws if clearly written must be enforced
 Tax burden imposition is not presumed
 Tax statutes must be construed strictly against the government and
liberally in favor of the taxpayer
 Statutes granting tax exemptions are construed in strictissimi juris against
the taxpayers and liberally in favor of the taxing authority
 Tax laws are applied prospectively (general rule)
 In case of conflict between the provisions of the tax code and civil laws,
the tax code being a special law shall prevail.
 TAX LAWS
 Sequence of the Interpretation of Tax Laws

 BIRCommissioner issues BIR rulings on particular tax case which

could be overruled by BIR rulings of succeeding BIR
Commissioner.
 Revenue Regulations
 TAX LAWS
 SOURCES:
 Constitution
 Statutes
 Judicial Decisions
 Executive Orders
 Tax Treaties and Conventions with foreign countries
 Revenue Regulations