NATURE OF TAXATION

t i on o f
Def i ni
Taxation is a term for when a taxing
authority, usually a government, levies or imposes a
financial obligation on its citizens or residents.
Paying taxes to governments or officials has been a
mainstay of civilization since ancient times.
 Taxation is the practice of collecting taxes
(money) from citizens based on their earnings and
property. The money raised from taxation
supports the government and allows it to fund
police and courts, have a military, build and
maintain roads, along with many other services.
 Taxation the power by which the
sovereign, through its law - making body,
raises revenue to defray the necessary
expenses of the government.
 Taxation - merely a way of apportioning the cost of
the government among those who in some measure are
privileged to enjoy its benefits and must bear its burdens.

- the Supreme Court described that the taxes are what we

pay for civilized society. Without taxes, government will be
paralyzed for lack of motive power to activate andoperate it.
 Taxation - merely a way of apportioning the cost of
the government among those who in some measure are
privileged to enjoy its benefits and must bear its burdens.

- the Supreme Court described that the taxes are what we

pay for civilized society. Without taxes, government will be
paralyzed for lack of motive power to activate and operate it.
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Taxation

Inherent in sovereignty - exists apart from

constitutions and without being expressly conferred
by the people. It can perform by the government
even if the Constitution is entirely silent on the
subject.
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Taxation
Legislative in character - peculiarly and exclusively
legislative and cannot be exercised by the
executive or judicial branch of the
government. Hence, only Congress, our national
legislative body can impose taxes. The levy of a tax,
however, may also be madeby a local legislative body
subject to such limitations as may be provided by law.
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Taxation

Subject to constitutional and inherit limitations - power

of taxation is subject to certain limitations. Most of
these limitations are specifically provided in the
Constitution orimplied therefrom, while the rest are
inherent and they are those which spring from thenature
of the taxing power itself although they may or
may not be provided in the Constitution.
INHERENT POWER OF
THE STATE
1. POLICE POWER is the power of promoting the public
welfare by restraining and regulating the use of both liberty
and property of all the people. It is considered to be the
most all-encompassing of the three powers. It may be
exercised only by the government. The property taken in
the exercise of this power is destroyed because it is
noxious or intended for a noxious purpose.
It lies primarily in the discretion of the legislature. Hence, the
President, and administrative boards as well as the law making
bodies on all municipal levels, including the barangay may not
exercise it without a valid delegation of legislative power. Municipal
governments exercise this power by virtue of the general welfare
clause of the Local Government Code of 1991. Even the courts
cannot compel the exercise of this power through mandamus or
any judicial process.
Requisites of a valid police measure:
a. Lawful Subject - the activity or property sought to be
regulated affects the public welfare. It requires the primacy of
the welfare of the many over the interests of the few.
b. Lawful Means - the means employed must be reasonable and
must conform to the safeguards guaranteed by the Bill of Rights.
2. POWER OF EMINENT DOMAIN - affects
only property rights. It may be exercised by some
private entities. The property forcibly taken under
this power, upon payment of just compensation,
is needed for conversion to public use or purpose.
 Public property may be expropriated provided
there is a specific grant of authority to the
delegate. Money and a chose in action are the
only things exempt from expropriation. Although it
is also lodged primarily in the national legislature,
the courts have the power to inquire the legality
of the right of eminent domain and to determine
whether or not there is a genuine necessity
therefore.
The taking of property in law may include:
- trespass without actual eviction of the owner
material impairment of the value of the property
or prevention of the ordinary uses for which the
property was intended. The property that may be
subject for appropriation shall not be limited to
private property.
3. POWER OF TAXATION - affects only
property rights and may be exercised only bythe
government. The property taken under this power
shall likewise be intended for a public use or
purpose. It is used solely for the purpose of
raising revenues, to protect the people and extend
them benefits in the form of public projects and
services.
 Hence, it cannot be allowed to be confiscatory,
except if it is intended for destruction as an instrument
of the police power. It must conform to the
requirements of due process. Therefore, taxpayers are
entitled to be notified of the assessment proceedings
and to be heard therein on the correct valuation to be
given the property. It is also subject to the general
requirements of the equal protection clause that the
rule of taxation shall be uniform and equitable
IMPORTANCE OF
TAXATION
 Taxes are crucial because governments
collect this money and use it to finance
social projects. Without taxes, government
contributions to the health sector would be
impossible. Taxes go to funding health
services such as social healthcare, medical
research, social security, etc.
 The Philippine government relies on tax revenue to
fund its operations and finance its development
projects. Being the lifeblood of the government, tax
revenue is a critical part of the country's economic and
fiscal policy. 
Aside from the revenue that taxes generate, they
also help promote economic stability and growth. By
imposing taxes on goods and services, the government
can discourage unnecessary consumption and
production and ensure that resources are used more
efficiently. 
 The Philippines uses taxes to redistribute income and
wealth in the society. Progressive taxation system, for
instance, tax higher incomes at higher rates to reduce
inequality. 
Similarly, taxes on luxury goods or "sin" products like
tobacco and alcohol help raise revenue while also
discouraging their consumption. 
PURPOSE AND
OBJECTIVES OF
TAXATION
Purpose of Taxation
Collecting taxes and fees is a fundamental
way for countries to generate public
revenues that make it possible to finance
investments in human capital, infrastructure,
and the provision of services for citizens and
businesses.
Objectives of Taxation
1. Revenue- the purpose of taxation is to
provide funds or property with which the state
promotes the General Welfare and Protection
of citizens
2. Regulation - taxation also has a regulatory
purpose as in the case of taxes levied on
exercises or privileges like those imposed on
tobacco and alcoholic products, or amusement
places (night clubs, cabarets, cockpits, etc.).
-regulatory purpose in the rehabilitation and
stabilization of a threatenedindustry which is
affected with public interest (like oil industry).
3. Promotion of General Welfare - Supreme Court ruled
that taxation may be used as in implement of the police
power in order to promote the general welfare of the
people.
While the funds collected under the Oil Price
Stabilization Fund (OSPF) may be referred to as taxes,
they are exacted in the exercise of the police power of
the State. From such fund, amounts are drawn to
reimburse oil companies when appropriate situations
arise for increase in the cost of crude oil importation
4. Reduction of Social Inequality -this is
made possible through the progressive
system of taxation where the objective is to
prevent the undue concentration of wealth in
the hands of a few individuals. Progressivity
is key stoned on the principle that those who
are able to pay should shoulder the bigger
portion of the tax burden.
LIMITATIONS TO THE
TAXATION POWER
The power of taxation, is however, subject to
constitutional and inherent limitations.
1. Constitutional limitations are those
provided for in the constitution or implied
from its provisions, while inherent limitations
are restrictions to the power to tax attached
to its nature.
Constitutional limitations
Observance of due process of law and equal protection of the laws.
(sec, 1, Art. 3) Any deprivation of life , liberty or property is with due
process if it is done under the authority of a valid law and after
compliance with fair and reasonable methods or procedure prescribed.
The power to tax, can be exercised only for a constitutionally valid
public purpose and the subject of taxation must be within the taxing
jurisdiction of the state.
 Rule of uniformity and equity in taxation (sec
28(1)Art VI). All taxable articles or properties of
the same class shall be taxed at the same rate.
Uniformity implies equality in burden not in
amount. Equity requires that the apportionment of
the tax burden be more or less just in the light of
the taxpayers ability to bear the tax burden.
 No imprisonment for non-payment of poll tax
(sec. 20, Art III). A person cannot be imprisoned
for non-payment of community tax, but may be
imprisoned for other violations of the community
tax law, such as falsification of the community tax
certificate, or for failure to pay other taxes.
 Non-impairment of obligations and contracts, sec 10, Art III
the obligation of a contract is impaired when its terms and
conditions are changed by law or by a party without the
consent of the other, thereby weakening the position or the
rights of the latter. IF a tax exemption granted by law and of
the nature of a contract between the taxpayer and the
government is revoked by a later taxing law, the said law shall
not be valid, because it will impair the obligation of contract.
 Prohibition against infringement of religious
freedom Sec 5, Art III, it has been said that the
constitutional guarantee of the free exercise and
enjoyment of religious profession and worship, which
carries the right to disseminate religious belief and
information, is violated by the imposition of a license
fee on the distribution and sale of bibles and other
religious literatures not for profit by a non-stock, non-
profit religious corporation.
 Prohibition against appropriations for religious
purposes, sec 29, (2) Art. VI, Congress cannot
appropriate funds for a private purpose, or for the
benefit of any priest, preacher or minister or for
the support of any sect, church except when such
priest, preacher, is assigned to the armed forces
or to any penal institutions, orphanage or
leprosarium.
 Income, property and donor’s taxes
and custom duties (sec 4 (3 and 4), Art.
XIV)- exemption of all revenues and
assets of non-stock, non-profit
educational institutions used actually,
directly, and exclusively for educational
purposes.
 Concurrence by a majority of all members of
Congress in the passage of a law granting tax
exemptions (sec. 28 (4), Art. VI)
Congress may not deprive the Supreme Court
of its jurisdiction to review, revise, reverse, modify
or affirm on appeal or certiorari, final judgments
and orders of lower courts in all cases involving
the legality of any tax, impost, assessment or any
penalty imposed in the relation thereto.
The following are the inherent limitations
Purpose. Taxes may be levied only for public purpose;
Territoriality. The State may tax persons and properties under
its jurisdiction;
International Comity. the property of a foreign State may not
be taxed by another.
Exemption. Government agencies performing governmental
functions are exempt from taxation
Non-delegation. The power to tax being legislative in nature
may not be delegated. (subject to exceptions)
Thank you!