GENERAL PRINCIPLES OF TAXATION may be levied for the promotion of the

welfare of the public.

 TAXATION: The exercise of the sovereign
power to raise revenues for the expenses of the 3. POWER OF EMINENT DOMAIN
government.  The inherent power of a sovereign state to take
private property for a public purpose.
 The Constitution limits the exercise of this
STAGES OR COVERAGE OF TAXATION power by providing that: “Private property shall
Taxation covers three (3) separate areas or not be taken for public use without just
aspects of government activity, namely: compensation.”

1. LEVYING OR IMPOSITION OF THE TAX:

the passage of tax laws which is generally a
DISTINCTIONS AMONG THE THREE
legislative act. In the Philippines, the taxing
INHERENT POWERS
power is exercised by Congress.
1. POWER TO TAX
2. ASSESSMENT: process of determining the
PURPOSE:
correct amount of tax due.
- To raise revenues for the expenses of the
State.
3. COLLECTION AND PAYMENT – the act of
compliance with the tax law by the taxpayer. AMOUNT OF EXTRACTION
- No limit
2 & 3 are Executive or administrative in nature. BENEFITS RECEIVED:
Done by the Bureau of Internal Revenue (“BIR”) - No special or direct benefit is received by an
individual taxpayer. The public receives the
general benefit of protection of person,
ESSENTIAL ELEMENTS OR CHARACTERISTICS OF A TAX property and the promotion of the general
1. Enforced contribution welfare.
2. Exacted pursuant to legislative authority NON- IMPAIRMENT CONTRACT:
3. For raising revenue for public needs - Obligations in contracts may not be
4. Proportionate in character or uniform impaired by the state where tax exemptions
5. Payable in money are bilaterally agreed upon by the state and
6. Imposed within the state’s jurisdiction the taxpayer. Tax exemptions bilaterally
Personal to the taxpayer agreed upon between the government and
the taxpayer cannot be withdrawn.
TRANSFER OF PROPERTY RIGHT
3 INHERENT POWERS OF A STATE - Taxes paid become part of public funds.
SCOPE
- All persons, property, rights, and privileges.
1. THE POWER TO TAX AUTHORITY WHICH POWER IS EXERCISE:
 Subject to inherent and constitutional - Exercised by the government or its political
limitations. subdivisions.
 The power of taxation is regarded as supreme,
plenary, unlimited, and comprehensive. 2. POLICE POWER
 As long as the legislature, in imposing a tax, PURPOSE
does not violate applicable constitutional - To promote the general welfare thru
limitations or restrictions, the courts have no regulations.
concern with the wisdom or policy of the AMOUNT OF EXTRACTION
exaction, the political or other collateral - Limited to the cost of regulation, issuance of
motives behind it, the amount to be raised, or the license, and/or surveillance.
the persons, property, or other privileges to be BENEFITS RECEIVED
taxed. - No direct benefit is received by an
individual. A healthy economic standard of
2. POLICE POWER society is attained.
 The inherent power of a sovereign state to NON- IMPAIRMENT CONTRACT
legislate for the protection of the health, - Obligations in contracts may be impaired by
general welfare, safety, and morals of the the government.
public. TRANSFER OF PROPERTY RIGHT
 It involves the power to regulate both liberty - No transfer, but only restraint in the exercise
and property for the promotion of the public of property rights.
good. SCOPE
- All persons, property, rights, privileges, and
Note: The police power of the State may be liberties
exercised through taxation because taxes
AUTHORITY WHICH POWER IS EXERCISE mosques, non-profit cemeteries, and all lands,
- Exercised by the government or its political buildings, and improvements, actually, directly,
subdivisions and exclusively used for religious, charitable, or
educational purposes shall be exempt from
taxation.
3. POWER OF EMINEM DOMAIN
PURPOSE Note: The exemption referred to here is
- To facilitate the State’s need of property for exemption from the real property tax which is a
public use. local tax levied by a province or city (not by the
National Government).
AMOUNT OF EXTRACTION
- No exaction but private property is taken for
e. No law granting any tax exemption shall be
public use.
passed without the concurrence of a majority of
BENEFITS RECEIVED
all the members of Congress.
- A direct benefit results in the form of just
compensation to the property owner.
f. No law impairing the obligation of contracts
NON- IMPAIRMENT CONTRACT
shall be passed.
- Obligations in contracts may be impaired by
the government. a. When the tax exemption is bilaterally
TRANSFER OF PROPERTY RIGHT agreed upon between the government
- Transfer is effected in favor of the State. and the taxpayer, the exemption cannot
SCOPE be withdrawn without violating the non-
- Only upon specific property. impairment clause.
AUTHORITY WHICH POWER IS EXERCISE: b. However, when the tax exemption is
- May be exercised by public service unilaterally granted by law, the same
corporations or private entities operating may be withdrawn by virtue of another
public utilities if granted by law law without violating the non-
impairment clause.
Ex. When the tax exemption is granted
LIMITATIONS ON THE POWER TO TAX under a franchise embodied in a law, the
same may be withdrawn at any time.
1. CONSTITUTIONAL LIMITATIONS

a. No person shall be deprived of life, liberty, or g. No law shall be made respecting an

property without due process of law, nor shall any establishment of a religion or prohibiting the
person be denied the equal protection of the laws. free exercise thereof.
No public money or property shall be
b. The rule of taxation shall be uniform and appropriated, applied, paid, or employed,
equitable. The Congress shall evolve a progressive directly or indirectly for the use, benefit, or
system of taxation. support of any sect, church, denomination,
sectarian institution, or system of religion, or of
UNIFORMITY: persons or properties falling any priest, preacher, minister, or other religious
under the same class should be taxed the same teacher or dignitary as such except when such
kind and rate of tax. priest, preacher, minister or dignitary is assigned
to the armed forces or to any penal institution,
EQUALITY: the same means and methods be or government orphanage or leprosarium.
applied impartially to all the members of each
class. h. All appropriation, revenue or tariff bills shall
originate exclusively in the House of
EQUAL PROTECTION OF THE LAW: Representatives, but the Senate may propose or
means equality before the law. However, such concur with amendments.
equality does not deny to the state the power to
recognize factual differences between i. The Congress may, by law, authorize the
individuals and classes. It recognizes that President to fix within specified limits, and
inherent in the right to legislate is the right to subject to such limitations and restrictions as it
classify, provided that it is a valid and may impose, tariff rates, import and export
reasonable classification. If the groupings are quotas, tonnage and wharfage dues, and other
characterized by substantial distinctions that duties or imposts within the framework of the
make real differences, one class may be treated national development program of the
and regulated differently from another. Government.

c. No person shall be imprisoned for debt or non- j. The Supreme Court shall have the power to
payment of a poll tax. review, revise, reverse, modify, or affirm on
appeal or certiorari as the law or the Rules of
d. Charitable institutions, churches, and Court may provide, final judgments and orders
parsonages, or convents appurtenant thereto, of lower courts in all cases involving the legality
 of any tax, impost, assessment, or toll, or any wharfage dues, and other duties and imposts
penalty imposed in relation thereto. (Art. VI, Sec. 28 (2), 1987 Constitution).
 Each local government unit shall have the
k. All revenues and assets of non-stock, non-profit power to create its own sources of revenues
educational institutions used actually, directly, and to levy taxes, fees, and charges subject
and exclusively for educational purposes shall to such guidelines and limitations as the
be exempt from taxes and duties. Congress may provide, consistent with the
basic policy of local autonomy. Such taxes,
l. The President shall have the power to veto fees, and charges shall accrue exclusively to
any particular item or items in an appropriation, the local governments (Art. X, Sec. 5, 1987
revenue, or tariff bill, but the veto shall not Constitution). Ex. Real property taxes.
affect the item or items to which he does not
object.  Delegation to administrative agencies for
implementation of the tax laws, and
 Real properties of non-stock, non-profit educational collection of the tax to the BIR.
institutions are exempt from real property taxes which are
imposed by the local government. Provided such
properties are actually, directly, and exclusively used for
e. INTERNATIONAL COMITY: This principle
educational purposes. limits the authority of the government to
 Income of a non-stock, non-profit educational institution effectively impose taxes on a sovereign state
derived from any activity or property shall be exempt and its instrumentalities, as well as on its
from income taxation as long as such income is used property held and activities undertaken in that
actually, directly, and exclusively for educational capacity. As a rule, the Philippine government
purposes.
cannot tax foreign ambassadors nor impose real
property taxes upon foreign embassies.
m. All money collected or any tax levied for a
special purpose shall be treated as a special fund f. DOUBLE TAXATION. Two types of double
and paid out for such purpose only. If the taxation are direct double and indirect double
purpose for which a special fund was created taxation. There is no constitutional prohibition
has been fulfilled or abandoned, the balance, if against double taxation in the Philippines
any, shall be transferred to the general funds of though it is not favored.
the Government.
DIRECT DOUBLE TAXATION
2. INHERENT LIMITATIONS
(1) the same subject is taxed twice;
a. The levy must apply within territorial limits
(2) by the same taxing authority;
for the exercise of effective tax jurisdiction.
(3) within the same jurisdiction;
b. The tax must be for a public purpose.
(4) during the same taxing period; and
c. Exemption from taxation of the government,
any political subdivision thereof, or agencies (5) covering the same kind or character of tax
performing purely governmental functions.
INDIRECT DOUBLE TAXATION, which lacks one or
 However, when a local government unit more of the elements of direct double taxation, is
also permissible.
(LGU), government agency, or government
owned and controlled corporation engages in
BASIC PRINCIPLES OF A SOUND TAX SYSTEM
activities which are proprietary in character
1. FISCAL ADEQUACY: the sources of revenue
such LGU, government agency, or GOCC
should be sufficient to meet the demands of
shall be subject to both income and business
public expenditures
taxes as other private corporations. Exs.
Land Bank of the Philippines; PAGCOR.
2. EQUALITY OR THEORETICAL JUSTICE:
 The Government Service Insurance System the tax imposed should be proportionate to the
(GSIS), the Social Security System (SSS), taxpayer’s ability to pay
Home Development Mutual Fund (Pag-
Ibig), the Philippine Health Insurance 3. ADMINISTRATIVE FEASIBILITY: the tax
Corporation (PHIC or Philhealth), and local laws should be capable of convenient, just, and
water districts (LWDs); are exempt from effective administration.
the income tax imposed under Section 27 of
the National Internal Revenue Code THEORY OR BASIS OF TAXATION
(“NIRC”). 1. LIFE-BLOOD THEORY: taxes are the lifeblood
of the government. Without taxes, no government
d. As a general rule, the taxing power of the can function.
legislature may not be delegated. Exceptions 2. BENEFITS PROTECTION THEORY (SYMBIOTIC
to this non-delegability rule are: RELATIONSHIP): Taxes are what we pay for a
civilized or organized society. Without taxes, the
 The authority of the President to fix tariff government would be paralyzed for lack of the
rates, import and export quotas, tonnage and motive power to activate and operate it.
 1. Tax laws are prospective, generally, but can
CLASSIFICATION OF TAXES have retrospective application.
 The constitutional prohibition against the
According To Scope or Exercising Authority passage of laws having retrospective
1. NATIONAL TAX: Imposed by the National application (all called ex post facto
Government legislation) is limited to penal or criminal
 Income tax, Estate tax, Donor’s tax, statutes.
Value Added Tax, OPT, Excise Tax, DST  Tax laws are not penal in character.
Being civil in nature, the constitutional
prohibition against ex post facto legislation
2. MUNICIPAL OR LOCAL TAX: Imposed by
does not apply to tax laws. They can
local government units
therefore be given retrospective application
 Occupation tax, Real property tax (RPT)
if expressly declared by the tax law.
 However, tax laws, like other statutes, are to
According to subject matter or object be construed as having only a prospective
1. PERSONAL, CAPITATION, OR POLL TAX:
operation unless the purpose and intention of
Fixed amount imposed upon persons of a certain
the legislature to give retrospective effect is
class without regard to property, trade,
occupation.
expressly declared or is necessarily implied
 Community tax from the language used.
 A tax creates a civil obligation or liability on
2. PROPERTY TAX: Imposed on property the part of the taxpayer, although the
 Real Property Tax nonpayment thereof creates a criminal
liability, which could be the subject of
3. EXCISE TAX: Imposed upon the performance of criminal prosecution under existing laws. In
an act; the exercise of a right; or the engaging in short, in taxation, it is one’s civil liability to
business or profession. pay taxes that gives rise to criminal liability.
 VAT, Donor’s tax, Estate tax, Income tax,
Occupation tax, Excise tax 2.

According to who bears the burden of the tax

1. DIRECT TAX: The liability for the tax (impact),
and the burden thereof (incidence) fall on the same
taxpayer.
 Income tax

2. INDIRECT TAX: The liability or impact for the tax

falls on the original taxpayer, but the burden or
incidence thereof is shifted to another.
 VAT, excise tax, custom duties

According to purpose
1. GENERAL OR REVENUE TAX: Levied without
a specific or pre-determined purpose.
 Income tax, VAT, etc.

2. SPECIAL TAX: Levied for a special purpose.

 Protective tariffs; special assessments

According to the rate applied

1. PROPORTIONAL: Based on a fixed percentage of
the tax base.
2. PROGRESSIVE: The tax rate increases as the tax
base increases.
3. REGRESSIVE: The tax rate decreases as the tax
base increases.

According to measurement of the amount due

1. SPECIFIC: Measured by number, or based on
weight or physical measurement.
 Excise tax on lubricating oils, waxes, petroleum,
etc.
2. AD VALOREM: Based on the value of the
property and may require the intervention of
assessors and appraisers.
 RPT; excise tax on liquors, cigarettes packed by
machine, and automobiles .

NATURE OR CONSTRUCTION OF TAX LAWS