Taxation vs Police Power: purpose, amount of exaction, benefits

received, superiority of contracts, transfer of property rights

DIMAAMPAO Taxation vs ED: purpose, compensation, persons affected
TAXES SPECIAL ASSESSMENTS
*is in the nature of a tax upon
Chapter 1: General Principles property levied according to
benefits conferred upon the
Taxation property
Taxes 1. Levied on property, r or p 1. Levied on land only
1. Enforced contributions 2. A is not necessarily a tax 2. Exercise of taxing power
2. Proportional in character 3. Taxed all areas 3. Exceptional both in time
3. Levied by authority of law and locality
4. For the support of the government and public needs TAXES LICENSE
Nature of Taxation 1. Exercise of Taxing power 1. Emanates from PP
1. Inherent in sovereignty 2. Generate revenues 2. Regulatory purpose
2. Legislative Power 3. Unlimited 3. Sufficient amount of LF
3. Subject to constitutional limitations 4. Primary: raise revenue, 4. Primary: regulation,
Basis of Taxation regulation is merely incidental revenue does
1. Lifeblood Doctrine incidental not make it a tax
- Lifeblood of the government and their prompt and TAXES TOLL
certain availability is an imperious need 1. Demand of sovereignty 1. Demand of proprietorship
- Taxes are what we pay for a civilized society 2. Raising of revenues 2. Charged for the cost and
- Taxes are the lifeblood of the government and maintenance of the
should be collected without unnecessary hindrance property used
Theories in Taxation TAXES PENALTY
1. Necessity Theory 1. Civil liability 1. Punishment for the
- Necessary burden to preserve State’s sovereignty commission of a crime
and as a means to give the citizenry an anc pubp TAXES DEBT
2. Benefits Protection Theory 1. Not a debt
- Bases the power of the State to demand and receive 2. Not contract between LAHAT NG NOT SA TAXES
taxes on the reciprocal duties of support and parties AY ALISIN, DEBTS NA YUN
protection 3. Cannot be assigned as
- Doctrine of Symbiotic Relationship: Taxes are debts
what we pay for a civilized society 4. Not subject of a set-off
Liabilities Involved – personal 5. Do not draw interest
a) Civil
b) Criminal Doctrine of Equitable Recoupment: not applicable in PH
Aspects, Processes and Phases of Taxation - When the refund of a tax illegally or erroneously collected
1. Levy or overpaid by a taxpayer is barred by the statute of
2. Assessment and Collection limitations, and a tax is being assessed against taxpayer,
3. Payment said present tax may be recouped or set-off against the
Is the power to tax a power to destroy? tax, the refund of which has been barred
- The power to tax is the power to destroy if it is used - TP is allowed to credit a refund to his existing tax liability
validly as implement of police power in discouraging Inherent Limitations on the Power to Tax
and in effect, ultimately prohibiting certain things or 1. Public Purpose – embraces both direct and indirect
interests inimical to the public welfare. But, if it is public benefits ; legislative prerogative
used solely for the purpose of raising revenue, the 2. International Comity – Art. 2, Art. II; Sovereign Equality
modern view is, it cannot be allowed to confiscate or Among States
destroy (J. Cruz) 3. Territoriality – jurisdiction
- The power of taxation is sometimes called the power 4. Non Delegation of Taxing Power – legislative
to destroy. Therefore, it should be exercised with Exceptions:
caution to minimize injury to the propriety rights of a a) President may impose tariff rates, import and export
taxpayer. It must be exercised fairly, equally, quotas, custom duties, as may be authorized by
uniformly, lest the collector kill the ‘hen that lays the Congress, by law
golden egg (Roxas vs CA) b) LGUs have the power to create its own sources of
Purposes of Taxation revenue, fees, charges, subject to guidelines and
1. Primary Purpose: To raise revenues limitations as Congress may provide
2. Secondary Purposes 5. Exemption from Taxation of Government
a) Reduction of Social Inequality – progressive Agencies/Instrumentalities
b) Encourage the growth of local industries – a) Agencies performing propriety functions – T
exemptions and tax reliefs b) GOCC – T
c) Protect our local industry against unfair competition c) Exempted – GSIS, SSS, PHIC, PCSO
d) As an implement power of the State (regulatory d) Exempted from RPT – MIAA, PH Reclamation
measure) Authority
Extent of Taxing Power – CUPS Constitutional Limitations
Principles of a Sound Tax System – FAT 1. Due Process of Law – confiscation, outside J, not for
- A violation hereof may or may not invalidate a law, public p, retroactively imposes unjust taxes, violation of
except when it runs counter to theoretical justice inherent limitations
2. Equal Protection – valid classification: 1) substantial Kinds of Taxes
distinction 2) apply to both present and future conditions; 1. As to Incidence
3) germane to the purposes of law; 4) apply equally to all a) Direct
members of the same class b) Indirect – tax is primarily paid by persons who can
- Falls equally and impartially upon the person and shift the burden to someone else
properties subject to taxation  Forward: transferred from a factor of
3. Uniformity in Taxation – All taxable articles or kinds of production through the factors of
property of the same class shall be taxed at the same distribution until it finally settles on the
rate ultimate purchaser or consumer. Price
4. Progressive Taxation – rate goes up depending on the increases.
resources of persons affected; taxpayers ability to pay  Backward: transferred from the consumer
5. Non-Impairment Clause or purchaser through the factors of
Is Tax Exemption Revocable? It depends distribution to the factors of production.
- If the grant of exemption does not constitute a Price decreases.
contrac, but is merely a spontaneous concession by  Onward: tax is shifted two or more times,
the legislature, not connected with any service or either forward or backward
duty imposed”, the State at its pleasure may revoke 2. As to Tax Rates
the exemption a) Specific – imposed based on weight or volume
- If the tax exemption constitutes a binding contract capacity or any other physical unit of measurement
and for valuable consideration, the government b) Ad Valorem – tax is based on GSP or other specified
cannot unilaterally revoke such. value of the goods
- A franchise partakes the nature of a grant which is 3. As to purpose
beyond the purview of the non-impairment clause a) General – raise revenue for the government
6. Non-Imprisonment for Non-Payment of a Poll Tax b) Special – to achieve a particular legitimate object of
7. Bills to Originate from the House of Representatives – the government
exclusively, but the Senate may propose or concur with 4. As to Scope or Authority Imposed
amendments a) National
8. Veto Power of the President – items vetoed -> returned b) Local
to lower house with objections -> 2/3 consideration of the 5. As to Object
House, if agreed to pass such, the bill will become a law a) Personal
9. President’s Power to Tax – fix tariff rates, import or b) Property
export quotas, and tonnage or wharfage dues 6. As to Graduation
10. Taxation and Freedom of the Press a) Progressive – rate increases as the base increases
11. Taxation and Freedom of Religion b) Regressive – tax rate decreases as the tax base
12. Tax Exemption of Properties actually, directly and increases
exclusively used for religious, charitable and Double Taxation – means taxing the same property twice when
educational purposes – exempt from taxation as to RPT, it should be taxed only once; that is, x x x taxing the same person
provided that the land was used for the purpose it is twice by the same jurisdiction for the same thing.
intended 1. Strict Sense (Direct) – violates the uniformity and equal
13. Tax Exemption granted to Non-Stock Non-Profit protection clause, as well as the principle that tax must
Educational Institutions – exempt from all taxes, import not be excessive, unreasonable and inequitable
duties, assessments and other charges imposed by the Requisites:
Government on all income derived from property used a) The same property is taxed twice when it should
exclusively for educational activities only be taxed once
- Subject to donor’s tax, estate tax, VAT b) Both taxes are impose on the same property
14. Appropriation of Public Money – c) Imposed by the same taxing authority
- Gen. Rule: No public money or money shall be d) Within the same jurisdiction
appropriated, applied, paid or employed directly or e) During the same period
indirectly for the use, benefit or support of any sect, f) Covering the same kind or character of tax
church, denomination, sectarian institution, or 2. Broad Sense (Indirect) – taxes are not of the same kind,
system of religion etc or the imposition are imposed for different taxing
- Exception: when said priest, minister or dignitary is authority and this involve the same subject matter
assigned to the armed forces, or to any penal Tax Treaty as a Mode of Eliminating Double Taxation
institutions or government orphanage or leposarium 1. Exemption Method – the income or capital which is
15. Grant of Tax Exemption – may be created by the taxable in the State or its source or situs is exempted in
Constitution or by an act of the legislature (e.g: tax the state of residence, although in some instances it may
amnesties, tax condonations, tax refunds) be taken into account in determining the rate of tax
 Tax Amnesty: immunity from all the criminal and applicable to the taxpayer’s income or capital
civil obligations arising from non-payment of taxes; 2. Credit Method – tax paid in the State of source is
general pardon; absolute waiver; start with a clean credited against the tax levied in the state of residence
slate; applies to past tax periods 3. Reciprocity – You do not tax my citizen, I will not also
 Tax Exemption: immunity from the civil liability only; tax your citizen
freedom from any charge or burden 4. Tax Treaty
16. Local Taxation – LGUs; most effective instrument to
raise revenues
17. Special Fund – tax levied for special purpose shall be
treated as SF, and paid out for such purpose only
18. SC’s jurisdiction over tax cases – BIR->CTA->CA->SC
 Tax Evasion Tax Avoidance
1. Connotes fraud through 1. Legal means used by TP
the use of pretenses and to reduce taxes
forbidden devices to
lessen or defeat taxes
2. Scheme outside of lawful 2. Tax saving device
means
3. Tax Dodging – unlawful 3. Tax Minimization –
means to lessen or to get happens when TP
away with his tax minimizes his tax
liabilities by taking
Elements: advantage of legally
a) Ends to be achieved, i.e available tax planning
payment of less than that opportubities
known by the TP to be
legally due, or non-
payment of tax
b) Accompanying state of
mind which is described
as being evil, in bad faith,
wilful deliberate and not
accidental

Doctrine of Imprescriptibility
Gen. Rule: Taxes do not prescribe
Exc: Under NIRC, Tariff Codes and LGC (WAG NA TO)

Taxpayer Suit – TP is deemed to have legal standing to raise

constitutional issues when it is established that public funds from
taxation have been disbursed in alleged contravention of the law
or Constitution

Nature of Tax Laws: not political, civil, and not penal in character

Construction
1. Tax Laws – strictly against the TP, in favor of the
government
2. Tax Exemptions – strictly against the grantee
Exceptions:
a) S expressly provides for a liberal interpretation
b) Exemptions of public property
c) Those granted to traditional exemptees
d) Exemption in favour of the government
e) E by clear legislative intent
f) In case of special taxes
3. Penal Provisions of Tax Laws – strict construction