August 23, 2024 ANS: Inherent and legislative in nature

○ 2-FOLD NATURE
Basic Taxation Law
Atty. Gerald R. Yu, JD, CPA, REB, LIA, CDR
PCGA NAMO CV Police Power Power of Power of
Eminent Taxation
Book: Basic Taxation Law by Manahan Domain
Central bookstore
Differentiate according to purpose
Attendance
To regulate the Power of To raise
activities for expropriation - revenues to
Grading
welfare/ To support the
3 major exams: property acquire/take expenses of the
25% each - prelims, midterm, final private government
25% class standing - quizzes, oral, attendance, property for
activities public use
upon payment
of just
For exam purposes, utilize laptop
compensation
Try not to request for special exams
Most pervasive
Assignment Least
Three inherent powers demanding
● distinctions and similarities
● Eminent and police
● characteristics of taxation power ● Salus populi est suprema lex = The welfare of the
● 2 fold test people is the supreme law.
● Which is more powerful? Taxation or Police
September 06, 2024 Power?
GENERAL PRINCIPLES ANS:
1. SIDE 1: The power of taxation is the strongest
3 inherent powers of the State among the inherent powers of the government
● Police Power because TAXATION has been defined as the
● Power of Eminent Domain power of the sovereign to impose burdens or
● Power of Taxation charges upon persons, property or property rights
for the use and support of the government to be
● Is there a need for a constitution for a state to be able to discharge its functions.
able to exercise these powers? NOTE: Without tax (means - capacity), the other 2
ANS: NO. These are inherent powers. Hence, these inheritance powers would be rendered inutile and
powers need not be constituted. These powers exist cannot be effectively exercised.
by the state’s authority or sovereignty. What the 2. SIDE 2: Police power is the most essential
constitution provides is merely the limitations of such government powers, at times the most pervasive,
powers, otherwise, “absolute power corrupts insistent and always one of the least limitable of
absolutely.” Their existence does not depend on the the powers of the government.
constitution. These are attributes of sovereignty.
POLICE POWER
● How are these powers exercised by the State? ● Definitions:
ANS: Through legislation by enacting laws ○ the power of promoting public welfare by
● What is the nature of these powers? restraining and regulating the use of liberty and
 property. (p. 48, Outline Reviewer in Political claimed that Marcos’ act is invalid because there
Law, 2009 ed., Nachura) is an existing contract between the previous
○ Power of the state to enact such laws in relation administration which is violative of the non-
to persons and property as may promote public impairment clause.
health, public morals, public safety and the ANS: YES.
general prosperity and welfare of its inhabitant 1. Non-impairment clause will not apply because the
(US vs. Gomez, 31 Phil 218 (1915) general welfare of the people is the supreme law
● Scope Characteristic: the most pervasive, the least 2. ⭐With respect to taxation, non-impairment may
limitable, and the most demanding of the three apply to limit such power. Although the purpose of
powers. The justification is found in the Latin taxation is to raise revenue, (elements)
maxims: salus populi est suprema lex and sic utere a. There must be a contract entered between the
tuo ut alienum non laedas. (Nachura) state and the taxpayer
○ Example of least limitable: non-impairment b. That contract entered into by the taxpayer and
clause government provides for tax exemptions or tax
● Can the non-impairment clause be applied to limit incentives
police power? c. The tax exemptions or incentives are granted
○ Example: Quiboloy and Duterte made a contract in exchange for valuable consideration
not to be raided. The police came, armed with a d. The valuable consideration may be in the form
search warrant. Quiboloy demandad not to be of money or be in its beneficial equivalent
raided because he is protected by the contract. Is When you talk about valuable consideration, does it
this valid? need to be in the form of money?
ANS: NO. The freedom to contract is not absolute; ANS: NO. Consideration may be money or
all contracts and all rights are subject to the police beneficial equivalent in the form of free services
power of the State and not only may regulations
which affect them be established by the State, but all Limitation/test of Valid Exercise:
such regulations must be subject to change from time ● Lawful means
to time. The non-impairment clause must yield to the ● Lawful subject
loftier purposes targeted by the government
(Goldenway Merchanidising Corporation vs. Additional Limitations (When exercised by
Equitable PCI Bank, 2013) delegate):
1. Express grant by law (e.g., Secs. 16, 391, 447, 458
The non-impairment clause is not absolute. For and 468, RA 7160)
instance, the state can still enact laws that may affect 2. Within territorial limits (except when exercised to
contracts if such laws are reasonably designed to protect water supply)
achieve a legitimate public purpose, such as 3. Must not be contrary to law activity prohibited by
protecting public welfare. law cannot, in the guise of regulation, be allowed;
NOTE: No. Non-impairment clauses cannot limit the an activity allowed by law may be regulated, but
police power because the welfare of the people is the prohibited. (De la Cruz vs. Paras,SCRA 569)
supreme law. (apply maxim)
● Requisites for Municipal Ordinance to be VALID
● Can a non-impairment clause limit the taxation? An LGUs ordinance must conform to the following
○ Example: PH entered into a contract with LBC substantive requirements: [MEMORIZE]
whereby the contract provides that the LBC will 1. It must not contravene the constitution or any
provide free carrier services in exchange for free statute.
taxation as long as they will give free services to 2. It must not be unfair or oppressive.
the government. However, after Duterter’s term, 3. It must not be partial or discriminatory.
Marcos became President. Marcos then stated 4. It must not prohibit but may regulate trade.
that the contract caused significant revenue to the 5. It must not be unreasonable. and
State. He demanded that LBC be taxed. LBC
 6. It must be general and consistent with public
or its t or its service or
policy. political political public
subdivisions subdivision utility
POWER OF EMINENT DOMAIN s companies
● Are the 3 powers granted by the constitution?
ANS: NO. The constitution is not a grant nor a As to purpose Money is Property is Private
source for these powers. taken to taken or property is
support the destroyed taken for
● Also: Power of Expropriation (Sec. 9, Art. 3, Sec.
government to promote public use.
18, Art. 12, Secs. 4 & 9, Art. 13) general
● Definition- The power of the state or those to welfare.
whom the power has been delegated to take private
property for public use upon paying to the owner a As to The power Can be Can be
just compensation to be ascertained according to necessity of to make tax expressly expressly
delegation laws cannot delegated delegated
law.
be delegated. to the local to local
● People forgot to provide taxation power. Can governmen governmen
Congress still enact laws regarding taxation? t units by t units by
ANS: YES. It is an inherent power that is exercised the law the law
through legislation. making making
● REQUISITES: body. body
1. Necessity
As to person Operates on Operates Operates
2. Private property affected a community on a on a
3. Taking in the constitutional sense or a class of community particular
4. Public use individuals or a class private
5. Just Compensation of property of
individuals an
individual
DISTINCTIONS:
As to benefits Continuous (indirect MArket
Description Taxation Police Eminent protection benefit) value of
Power Domain and healthy the
organized economic property
As to concept Power to Power to Power to society standard of expropriate
enforce make and take society d.
contribution implement private
to raise laws for property As to amount Generally no Cost of No
government the general for public of imposition limit regulation, imposition.
funds. welfare. use with license and
just other
compensati necessary
on expenses

As to scope Plenary, Broader in Merely a As to inseperble Common

comprehensi application power to importance for the necessities
ve, and . General take existence of and
supreme. power to private nation-it interest of
make and property supports the
implement for public police power community
laws. use and eminent transcend
domain individual
As to Exercised Exercised May be rights in
authority only by only by granted to property
government governmen public
 ○ A destructive power which interferes with the
As to Subject to Inferior to
relationship to Constitution the personal and property rights of the people and
Constitution al and impairment takes from them a portion of their property for the
Inherent prohibition support of the government (Paseo Realty &
limitations. ; Development Corporation vs Court of Appeals,
Inferior to governmen G.R. No. 119286, Oct. 13 2004)
non- t cannot ● As a process or act - it passes a legislative
impairment expropriate
undertaking through the enactment of tax laws by
clause.
the Congress which will be implemented by the
As to Constraints Bounded Executive Branch of the government through its
limitation by by public Bureau of Internal Revenue (BIR) to raise revenue
Constitution purpose from inhabitants in order to pay the necessary
al and expenses of the government.
inherent
○ A process or act of imposing a charge by
limitations.
governmental authority on property individuals,
As to effect The money There is no There is a or transactions to raise money for public
contributed transfer of transfer of purposes. (Black’s Law Dictionary)
title. At the right to ● As a means it is a way of collecting and
most, there property. apportioning the cost of government among those
is restraint who are privileged to enjoy its benefits
on the
(Commissioner vs. Algue, February 17, 1988) and
injurious
use of the must bear its burden (51 Am Jur. 34)
property. ○ By which the sovereign State through its law-
making body demands for revenue in order to
SIMILARITIES support its existence and carry out its legitimate
1. They are inherent powers of the State. objectives (Valentine Tio vs. VRB, June 1987)
2. They constitute the three ways by which the state
interferes with the private rights and property Characteristics of Taxation Power
3. They are legislative in nature and character. 1. Inherent Power
4. They presuppose an equivalent compensation 2. Limitations
5. They all underlie and exist independently of the 3. Essentially legislative
Constitution 4. Public purpose - expanded power
6. They are all necessary attributes of sovereignty. 5. Territorial
7. The provisions in the Constitution are just limitations 6. Government exemption
on the exercise of these powers. 7. Strongest
8. Imperceptible
TAXATION POWER - DEFINITIONS/ 9. Prospective
CONCEPTS
● As a power- it refers to the inherent power of a Two Fold Nature
state, co-extensive with sovereignty to demand 1. Inherent
enforced contributions for public purposes to 2. Legislative
support the government.
○ By which an independent State, through its law- Power to tax
making body, raises and accumulates revenue The authority to:
from its inhabitants to pay the necessary expenses 1. Determine the
of the government. (51 Am. Jur. 341; 1 Cooley a. Nature (kind)
72-93) b. Object (purpose)
c. Extent ( amount or rate)
d. Coverage (subjects and objects)
 e. Apportionment of tax (general or limited PAMBANSANG KOALISYON NG MGA
application) SAMAHANG MAGSASAKA AT
f. Situs (place of the imposition) and MANGGAGAWA SA NIYUGAN (PKSMMN) vs.
g. Method of collection. Exec. Secretary, GR No 147036-37, April 10, 2012
2. Grant tax exemptions or cordonations, and The Court of course grants that there is no
3. Specify or provide for the administrative as well hard-and-fast rule for determining what constitutes
as judicial remedies that either the government public purpose. It is an elastic concept that could be
or the taxpayers may avail themselves in the made to fit into modern standards. Public purpose,
proper implementation of the tax measure for instance, is no longer restricted to traditional
(Petron vs. Pilila, 198 SCRA 82) government functions like building roads and school
● The power to tax is inherent in the State, such houses or safeguarding public health and safety.
power being inherently legislative, based on the Public purpose has been construed as including the
principle that taxes are a grant of the people who promotion of social justice. Thus, public funds may
are taxed, and the grant must be made by be used for relocating illegal settlers, building low-
immediate representatives of the people; and where cost housing for them, and financing both urban and
the people have laid the power, there it must agrarian reforms that benefit certain poor individuals.
remain and be exercised. Still, these uses relieve volatile iniquities in society
and, therefore, impact on public order and welfare as
1. Inherent Limitation a whole.
● Proceed from the very nature of the taxation power
itself Applied in the industry
● Examples (pg 6 book): Why is there a collection but the use of the funds
1. Public purpose generated from these transactions were used only for
2. Legislative nature the coco industry?
3. Government exemption ANS: ⭐Republic vs. Bacolod Mortia, L-19824, July
4. International comity 9, 1966: We hold that the special assessment at bar
5. Situs may be considered as similarly as the above, that is,
● SITUS: place (place of taxation) - the power to tax that the levy for the Philsugin Fund is not so much an
may be exercised only within the jurisdiction of the exercise of the power of taxation, nor the imposition
taxing authority. of a special assessment, but, the exercise of the police
● What is international comity? (pg 7 book) power for the general welfare of the entire country. It
ANS: Comity is respect accorded by the State to is, therefore, an exercise of a sovereign power which
other States due to being sovereign equals. no private citizen may lawfully resist.
Refer to Sec.2, Art. 2, Consti
Par in parem non habet imperium = equals have no NEXT MEETING:
sovereignty over each other ● UP TO PAGE 75

● Public purpose - power of taxation must be

exercise only for public purpose and not private
interest
● Example:
○ Roads
○ Schools
○ unlawful settlers’ location for condominium unit
■ Is this for a public purpose?
ANS: YES. The character of the direct object of the
expenditure is controlling and NOT the magnitude of
interests to be affected.
Public purpose is an expanded concept.
September 13, 2024 to pay the tax. Tax treaties and international comity
are other exceptions.
● Key principles when it comes to territoriality: d.
1. Territorial in operation - As a rule, the power e.
to tax can only be exercised within the
territorial jurisdiction of the taxing authority.
Taxpayer Taxable
EXPN:
a. Tax treaties Citizen Resident
b. Tax exemptions
c. There is a Privity of Relationship. Non- Taxable
Where privity of relationship exists, the state resident only on
income
can still exercise its taxing powers over its derived
citizens outside its territory because the from
personal jurisdiction of his government over sources
him still remains within PH
Case: 70 Phil. 325
69 Phil. 89 Alien Resident Taxable
only on
Example: Citizens of PH residing therein is
income
taxable in all income derived from sources derived
WITHIN and WITHOUT the Philippines. from
● What is the relationship between the taxpayer and sources
the taxing authority? within PH

Non- ETB Taxable

Extraterritoriality of taxation
resident (Engaged only on
As a rule, the power to tax is limited to the in income
State's territory because, as an inherent power of Business derived
sovereignty, it follows the rule that sovereignty in PH) from
extends not beyond the sovereign's territorial limits. sources
The national territory comprises the within PH
Philippine archipelago, with all the islands and
NETB
waters embraced therein, and all other territories over
(Non-
which the Philippines has sovereignty or jurisdiction, engaged)
consisting of its terrestrial, fluvial and aerial domains,
including its territorial sea, the seabed, the subsoil,
the insular shelves, and other submarine areas. The
waters around, between, and connecting the islands ● What’s the difference between an alien and a non-
of the archipelago, regardless of their breadth and resident citizen?
dimensions, form part of the internal waters of the ANS: Citizenship and Residence
Philippines. (Article I) ○ Privity of Relationship
However, there are exceptions. For ○ The closer the relationship, the closer to the
example, under Philippine income tax law, resident taxing authority(?)
citizens are taxed on their income from outside the ○ Residents - living in the Philippines. He enjoys
Philippines. This does not mean that the government full protection of the State.
of the country where the income was derived is ○ Symbiotic relationship = give and take
obliged to collect the tax in behalf of the Philippine relationship
government. The obligation is imposed on the citizen
● When privity of relationship exists the government Laguna v. CTA, G.R. No. L- 18125, 31 May
can still exercise its taxing authority towards its 1963)
citizen. ● XPNs: (L-P-G)
● CASES: 1. Law or Charter creating the agency provides
70 Phil. 325 - Wells Fargo Bank v. CIR that they are subject to tax;
2. Performing Proprietary functions, and
69 Phil 89 - Manila Electric Co. v. Yatco 3. Government wishes to tax itself.
Since sovereignty is absolute and taxation is an act of
● Closely related to territoriality: high sovereignty, the State, if so minded, could tax
○ Situs - Only within the jurisdiction of the taxing itself, including its political subdivisions. (Maceda v.
authority Macaraig, G.R. No. 88291, 08 June 1993)
○ International comity -
■ Article 2, Sec. 2 of the 1987 Constitution 2. Strongest
○ Tax e ● Sison v. Ancheta G.R. No. L- 59431, July 25,
1984
Tax Exemption of the Government https://lawphil.net/judjuris/juri1984/jul1984/
● Exemption = IMMUNITY gr_l59431_1984.html
● Is it a right? ANS: NO. It is a privilege granted. ○ Without money, the government can neither
● State immunity - respect to sovereign equals; in survive nor dispense any of its functions
relation to tax: A state cannot be taxed without its effectively
consent.
○ Why? 3. Generally Imprescriptible
■ Based on logic and convenience since the ● Do taxes prescribe? ANS: NO.
government would just end up paying itself. GR: Taxes are imprescriptible by reason that it is
■ A state taxing itself is a derogation of its the lifeblood of the government.
sovereignty. XPN: Tax laws may provide for statute of
○ Can we say the same with government limitations. In particular, the NIRC and LGC provide
exemption? for the prescriptive periods for assessment (Section
■ ANS: 203) and collection (Section 222)
● 2 kinds of functions NOTE: Although the NIRC provides for the
○ Governmental / Public limitation in the assessment and collection of taxes
○ Proprietary / Private imposed, such prescriptive period will only be
● In relation to taxation, what is the rule if the applicable to those taxes that were returnable. The
government agency is performing governmental prescriptive period shall start from the time the
functions? taxpayer files the tax return and declares his liability.
○ ANS: GR: Exemption XP: unless otherwise (Collector of Internal Revenue v. Bisaya Land
provided by law or its charter (subjects it to tax) Transportation Co., Inc., G.R. Nos. L-12100 & L-
● In relation to taxation, what is the rule if the 11812, 29 May 1959)
government agency is performing proprietary
functions? ● Does taxation power prescribe? ANS: NO, it is an
○ ANS: GR: Subject to tax XP: Unless the law or inherent power and an attribute of sovereignty. It is
its charter provides for its exemption necessary for the support of the government.
● What prescribes is the assessment and collection of
Government Entities are Exempt from Taxation taxes.

● GR: The government is exempt from tax. 4. Generally Apply Prospectively

○ Rationale: Otherwise, we would be "taking ● Tax laws, including rules and regulations operate
money from one pocket and putting it in prospectively unless otherwise legislatively
another." (Board of Assessment Appeals of intended by express terms or by necessary
 implication. (Gulf Air Company, Philippine Branch ● ANS: Executive function
v. CIR, G.R. No. 182045, 19 Sept. 2012) ● IS BIR under the legislative branch?
GR: Tax laws must be applied prospectively. ● ANS: NO, under the executive.
XPN: If the law expressly provides for retroactive ● Does the commissioner have the authority to
application. ●
● The government exercises its taxation power ● CASE: E-VAT = alleged to be an invalid
through legislation. Hence, we’re talking about delegation of power to the President
laws. ● Are the Petitioners’ correct? Is the EVAT
● Tax laws are generally applied prospectively. unconstitutional?
Unless the law expressly provides for retroactive
application. ● CIR vs. Fortune Tobacco Corp., G.R. NO.
● If the law is silent, it should be applied 167274-75 July 21, 2008
prospectively. https://lawphil.net/judjuris/juri2008/jul2008/
● Interpretation (Verba Legis) first followed by gr_167274_2008.html
Construction (Deliberations/Intent) The power to tax is inherent in the State,
such power being inherently legislative, based on the
● Why prospectively? ANS: because taxes are principle that taxes are a grant of the people who are
burdens imposed upon the taxpayer taxed, and the grant must be made by the immediate
representatives of the people; and where the people
● 2 Fold Nature of the Taxation Power have laid the power, there it must remain and be
1. Inherent exercised.10
2. Legislative
● Abakada Guro Partylist vs. Ermita, et al, GR.
● ⭐What are included in the power to 168056 September 1, 2005
tax? https://elibrary.judiciary.gov.ph/thebookshelf/
showdocs/1/48624
● ANS:
1. Includes the authority to determine the:
● GR: The power to tax is exclusively vested in the
NOECASM (MEMORIZE)
legislative body, being inherent in nature. Hence, it
a. Nature (kind)
may not be delegated. (Delegata potestas non
b. Object (purpose)
potest delegari)
c. Extent (amount or rate - determined by
● XPNs:
legislative)
1. Delegation to Local Government – the LGUs
d. Coverage (subjects and objects)
have the power to create their own sources of
e. Apportionment of tax (general or limited
revenue and to levy taxes, fees, and charges.
application)
(Sec. 5, Art. X, 1987 Constitution)
f. Situs (place of the imposition/taxation) and
● WON the LGU can exercise the power to tax?
g. Method of collection.
ANS: YES, pursuant to Section 5. Of Article X
2. Grant tax exemptions or cordonations, and
of the 1987 Constitution, which states that:
3. Specify or provide for the administrative as well
Section 5. Each local government unit shall
as judicial remedies that either the government or
have the power to create its own sources of
the taxpayers may avail themselves in the proper
revenues and to levy taxes, fees and charges
implementation of the tax measure (Petron vs.
subject to such guidelines and limitations as the
Pilila, 198 SCRA 82)
Congress may provide, consistent with the basic
● Remedies are not only available to the taxpayers. It
policy of local autonomy. Such taxes, fees, and
also applies to the government.
charges shall accrue exclusively to the local
● VERY IMPORTANT because it is connected to
governments.
Non-delegation Rule
● What is the nature of the power to tax to the local
● Is collecting part of taxation power?
government?
 ANS: Delegated power by Constitution the laws must be made until the Constitution itself is
● From where (delegated power) is it sourced? changed. The power to whose judgment, wisdom,
ANS: The Constitution, since the LGC is just and patriotism this high prerogative has been
the source for its limitation and guidelines. entrusted cannot relieve itself of the responsibility by
● Since it is said to be part of the LGC, can Congress choosing other agencies upon which the power shall
abolish the power to tax on the LGU? What can be devolved, nor can it substitute the judgment,
Congress do? wisdom, and patriotism of any other body for those to
ANS: NO. Congress cannot abolish such power which alone the people have seen fit to confide this
but can only provide guidelines and limitations sovereign trust."[9]
on the local government’s power to tax. Of course, the rule which forbids the
The Congress, under the 1987 Constitution, cannot delegation of the power of taxation is not absolute
abolish the power to tax of local governments; it is and inflexible. It admits of exceptions. Retired Justice
expressly granted by the fundamental law. The Jose C. Vitug enumerated such exceptions, to wit: (1)
only authority conferred to Congress is to provide delegations to local governments (to be exercised by
the guidelines and limitations on the local the local legislative bodies thereof) or political
government’s exercise of the power to tax (Sec. 5, subdivisions; (2) delegations allowed by the
Art. X, 1987 Constitution). (2003 Bar) Constitution; and (3) delegations relating merely to
● Therefore, the LGC only provides the guidelines administrative implementation that may call for some
and limitations. degree of discretionary powers under a set of
sufficient standards expressed by law.
2. Delegation to the President – the authority of
the President to fix tariff rates, import or export In the present case, the President is the delegate of
quotas, tonnage and wharfage dues or other the Legislature, endowed with the power to raise the
duties and imposts. (Sec. 28(2), Art. VI, 1987 VAT rate from 10 % to 12% if any of the following
Constitution) conditions, to reiterate, has been satisfied: (i) value-
● Where the Administrative administration… that added tax collection as a percentage of gross
may call for some degree discretionary powers set domestic product (GDP) of the previous year exceeds
by law two and four-fifths percent (2 4/5%) or (ii) National
● Cervantes vs Auditor General 91 Phil. 359 Government deficit as a percentage of GDP of the
https://lawphil.net/judjuris/juri1952/may1952/gr_l- previous year exceeds one and one-half percent (1 ½
4043_1952.html %).
● At first glance, the two conditions may
ABAKADA v Ermita appear to be definite standards sufficient to guide the
R.A. No. 9337, in granting to the President President. However, to my mind, they are ineffectual
the stand-by authority to increase the VAT rate from and malleable as they give the President ample
10% to 12%, the Legislature abdicated its power by opportunity to exercise her authority in arbitrary and
delegating it to the President. This is constitutionally discretionary fashion.
impermissible. The Legislature may not escape its The two conditions set forth by law would
duties and responsibilities by delegating its power to have been sufficient had it not been for the fact that
any other body or authority. Any attempt to abdicate the President, being at the helm of the entire
the power is unconstitutional and void, on the officialdom, has more than enough power of control
principle that potestas delegata non delegare potest. to bring about the existence of such conditions.
[8] As Judge Cooley enunciated: Obviously, R.A. No. 9337 allows the President to
"One of the settled maxims in constitutional determine for herself whether the VAT rate shall be
law is, that the power conferred upon the legislature increased or not at all. The fulfillment of the
to make laws cannot be delegated by that department conditions is entirely placed in her hands. If she
to any other body or authority. Where the sovereign wishes to increase the VAT rate, all she has to do is
power of the state has located the authority, there it to strictly enforce the VAT collection so as to exceed
must remain; and by the constitutional agency alone the 2 4/5% ceiling. The same holds true with the
national government deficit. She will just limit the boundaries of the authority of the
government expenses so as not to exceed the 1 ½% delegate. This is done by defining the
ceiling. On the other hand, if she does not wish to legislative policy and the circumstance
increase the VAT rate, she may discourage the under which it is to be pursued and
Secretary of Finance from making the implemented.
recommendation.
That the President’s exercise of an authority Scope of Taxation Power (CUPS)
is practically within her control is tantamount to ● Comprehensive
giving no conditions at all. I believe this amounts to a ○ It covers persons, businesses, activities, and
virtual surrender of legislative power to her. It must professions. rights, privileges (basically
be stressed that the validity of a law is not tested by everything)
what has been done but by what may be done under ○ EXAMPLES:
its provisions. ■ Personal: Community Tax (Sedula)
In the present case, in making his ■ Business: VAT, Business Tax, Other Added
recommendation to the President on the existence of Tax
either of the two conditions, the Secretary of Finance ■ Activities: Travel Tax, Lottery, Pacquiao Match
is not acting as the alter ego of the President or even ■ Professions: Professional Tax (Lawyers)
her subordinate. In such instance, he is not subject to ● NOTE: Paying Professional Tax in Cebu
the power of control and direction of the President. City, you are not required to pay PT in other
He is acting as the agent of the legislative jurisdictions. Once you pay PT in one city,
department, to determine and declare the event upon you can already exercise your profession
which its expressed will is to take effect. within the Philippines, pursuant to LGC.
● Professional Tax is still LOCAL tax.
● The power to determine the rate belongs to ● GPP - not subject to tax
Congress ■ Rights:
● Done by the president upon the recommendation of ■ Privileges:
the Secretary of Finance ● Unlimited
● Discretion of the President whether the two ○ A tax does not cease to be valid merely because it
conditions are met regulates, discourages, or even definitely deters
● the activities taxed.
3. Delegation to the people at large; ○ The power to tax is one so unlimited in force and
● Sec 1, 1987 Constitution so searching in extent, that the courts scarcely
● venture to declare that it is subject to any
4. Delegation to Administrative Agencies – restriction whatever, except such as resting in the
when the delegation relates merely to discretion of the authority which exercises it (Tio
administrative implementation that may call for vs. Videogram Regulatory Board, 151 SCRA
some degree of discretionary powers under 208)
sufficient standards expressed by law or implied ● Plenary
from the policy and purpose of the act ○ It is Complete.
(Cervantes v. Auditor General, G.R. No. L- ○ Under the NIRC, BIR may avail of certain
4043, 26 May 1952; Maceda v. Macaraig, G.R. remedies to ensure the collection of taxes
No. 88291, 08 June 1993) subject to the ● Supreme
following tests: ○ Supreme in the sense in so far as the selection of
a. Completeness Test – the law must be taxation is concerned.
complete in all aspects when it leaves the ○ It is supreme insofar as the selection of the
legislature for it to be valid. The only thing subject of taxation is concerned since it has been
left to do is to implement the law. repeatedly held that inequities which result from
b. Sufficiently Determinable Standards Test – a singling out of one particular class for taxation
there must be a sufficient standard to define or exemption infringe no constitutional limitation
 (Tio v. Videogram Regulatory Board, G.R. No. ● Marshall's view refers to a valid tax while Holme’s
L-75697, June 19, 1987) view refers to an invalid tax
○ Taxation, although referred to as the strongest of ●
all the powers of the government, cannot be IMPORTANCE
interpreted to mean that it is superior to the other ● Taxation power exists inseparably with the State
inherent powers of the government, only that it is because it is essential for the existence of the
supreme insofar as the selection of the subject of government. (Luzon Stevedoring Co. vs CTA, July
taxation is concerned. 29, 1988)
○ Sison v Ancheta: Taxation is supreme. Without ● Taxation is very important for a continuous
the taxes, the state will be paralyzed. The other 2 existence of a nation. It is the primary source of
powers will be rendered inutile. government revenue that is used to effectively and
permanently perform government function.
● NEXT MEETING: Without revenue, there can be no continuing
○ Continue with reading up to page 75 government. Without a government, there can be
no civilization.
● PRELIM EXAM: September 27, 2024 ● Without taxation, the other inherent powers would
○ MODE: Laptop be paralyzed. For this reason, even the police
○ Part of the coverage for prelim: up to page 75 + power of the government may be exercised through
whatever we discussed taxation power. (Commissioner vs. Algue, Inc. L-
28896, 17 February 1988)
September 20, 2024
MARSHALL DICTUM PURPOSE
● (Marshall in McCulloch vs. Maryland, 4 Wheat, ● REVENUE RAISING - To raise revenue (funds or
316 4 L ed. 579, 607) property) to enable the State to promote the general
● The power to tax involves the power to destroy welfare and protection of its citizens; to support
because the taxpayer has no choice except to pay existence of government.
the tax being imposed if he is covered by the ● NON REVENUE
imposition. Taxation is a destructive power which ○ Regulatory-ALSO KNOWN as SUMPTUARY,
interferes with the personal and property rights of to provide means for the rehabilitation and
the people and takes from them a portion of their stabilization of a threatened industry which is
property for the support of the government. affected with public interest as to be within the
○ When can we say that the power to tax includes power of the state.
the power to destroy? ○ Promotion of the general welfare - taxation may
ANS: When taxation is an implement to police be used as an implement of the police power to
power. It regulates. promote the general welfare of the people.
Example: alcohol, smoke - sin tax, excise tax ○ Reduction of social inequality - Progressive
○ Refers to a valid tax imposition system of taxation prevents the undue
○ Taxation can be used to implement police power concentration of wealth in the hands of a few
individuals. Progressivity is keystoned on the
HOLMES DOCTRINE principle that those who are able to pay should
● The power to tax is not the power to destroy while shoulder the bigger portion of the tax burden.
this court (the SC) sits,” (Justice Holmes in ○ Encourage economic growth by granting tax
Panhandle Oil Co. v Mississippi) exemptions, tax relief, and incentives to attract
○ HOWEVER, when there is a valid imposition, investments that will create employment.
the SC interferes. ○ An instrument to encourage foreign trade by
○ Refers to invalid tax providing tax incentives.
○ ○ Protectionism- to protect local industries from
RECONCILIATION foreign competition by imposing additional taxes,
protective tariffs and customs on imported goods.
 ○ COMPENSATORY- A tax may be used to
make up for the benefit received. Ex: Excise tax ● Can an imposition be both a license fee and a tax?
on gasoline consumed is imposed on vehicle ANS: It depends on the very purpose of the
owners using roads. In this case, the tax is imposition. If the primary purpose is to regulate
compensatory for the use of roads. and its secondary purpose is to raise revenue, then
it is a license fee. If the primary purpose is to raise
revenue and its secondary purpose is to regulate,
⭐TAXATION AS AN IMPLEMENT OF POLICE then it is a tax.
POWER (REGULATORY MEASURE) READ THE ● Planters Products vs. Fertiphil Corporation G.R.
No.166006 March 14, 2008, citing Lutz v Araneta,
CASE: PART OF PRELIM
98 Phil. 148: While it is true that the power of
● Progressive Development Corporation v. taxation can be used as an implement of police
Quezon City (G.R. No. L-36081, 24 April 1989), power, the primary purpose of the levy is revenue
the Court declared that “if the generating of generation. If the purpose is primarily revenue, or
revenue is the primary purpose and regulation is if revenue is, at least, one of the real and
merely incidental, the imposition is a tax; but if the substantial purposes, then the exaction is properly
regulation is the primary purpose, the fact that called a tax.
incidentally revenue is also obtained does not make ● The primary purpose of the levy is revenue or if
the imposition a tax.” revenue is at least one of the… The exaction is
● Victorias Milling Co., Inc. v. Municipality of properly a tax.
Victorias (134 Phil. 180 (1968), the Court
reiterated that the purpose and effect of the ● Can a license fee and a license tax be
imposition determine whether it is a tax or a free, simultaneously imposed?
and that the lack of any standards for such ANS: YES. A business may pay for a license fee to
imposition gives presumption that the same is a sell products while paying for tax based on the
tax. income to continue operating in business.
● Jose J. Ferrer v City Mayor Herbert Bautista, et ● Does it violate double taxation? ANS: NO. They
al. (GR. No. 210551, 30 June 2015; also in Smart have different purposes.
Communications, Inc. v. Mun Of Melvar, ● Compañia general de tabacos de filipinas v. City of
Batangas, G.R. No. 204429, 18 February 2014), the Manila G.R. No. L-16619, June 29, 1963: The term
Court ruled that the designation given by the "tax" applies — generally speaking — to all kinds
municipal authorities does not decide whether the of exactions which become public funds. The term
imposition is properly a license tax or a license fee. is often loosely used to include levies for revenue
The determining factors are the purpose and effect as well as levies for regulatory purposes. Thus
of the imposition as may be apparent from the license fees are commonly called taxes. Legally
provisions of the ordinance. Thus, “[w]hen no speaking, however, license fee is a legal concept
police inspection, supervision, or regulation is quite distinct from tax; the former is imposed in the
provided, nor any standard set for the applicant to exercise of police power for purposes of regulation,
establish, or that he agrees to attain or maintain, but while the latter is imposed under the taxing power
any and all persons engaged in the business for the purpose of raising revenues (MacQuillin,
designated, without qualification or hindrance, may Municipal Corporations, Vol. 9, 3rd Edition, p. 26).
come, and a license on payment of the stipulated
sum will issue, to do business, subject to no THEORY AND UNDERLYING BASIS
prescribed rule of conduct and under no guardian ● NECESSITY THEORY/PRINCIPLE OF
eye, but according to the unrestrained judgment or NECESSITY - the government has a right to
fancy of the applicant and licensee, the compel all its citizens, residents and property
presumption is strong that the power of taxation, within its territory to contribute money. It is
and not the police power, is being exercised.” because the government cannot exist without any
○ Provides for a standard
 means to pay for its existence - a necessary burden ● Jurisdiction by the state over persons and property
to preserve the State’s sovereignty. within its territory.
○ Excluded: not included (not income) at all ● According to Domondon, the basis or rationale for
○ Exempted: included but because of law, it is not taxation (a and c) is different from the theory of
subject to tax taxation which is the lifeblood doctrine (b). The
● THE LIFEBLOOD THEORY/ DOCTRINE- basis or rationale for taxation explains the reason
Without revenue raised from taxation, the why a state may impose taxes while the theory
government will not survive, resulting in detriment explains why there is a need to impose taxes. The
to society. Without taxes, the government would be basis or rationale of taxation may be used as a tool
paralyzed for lack of motive power to activate and for analysis in determining where the situs of
operate it. Hence, despite the natural reluctance to taxation lies
surrender part of the one's earned income to the
taxing authority, every person who is able, must OBJECTS OF TAXATION
contribute his share in the running of the ● Persons - natural or juridical
government. (Commissioner vs. Algue GR No. L- 1. Natural - refer to individual taxpayers
28896, Feb 17, 1988, 158 SCRA 8, 16-17) 2. Juridical - includes corporations, partnership and
any association
BENEFITS-PROTECTION/RECIPROCITY ○ Examples: Community tax
THEORY (DOCTRINE OF SYMBIOTIC ● Properties - real, personal, tangible, intangible
RELATIONSHIP) 1. Real/Immovable
● Under the "benefits-received principle, the 2. Personal/Movable
government collects taxes from the subjects of 3. Tangible - which may be felt or touch are
taxation in order that it may be able to perform as necessarily corporeal
functions 4. Intangible - rights rather than physical objects
● The government's right to tax income emanates ○ Example: Real property tax
from its being a SILENT PARTNER in the ● Excise
production of income through means of providing 1. Transaction- act of conducting activities related
protection, proper business climate, and peace and to any business or profession. May involve
order to the taxpayers in the making of earnings. selling, servicing, leasing, borrowing,
● The State demands and receive taxes from the mortgaging, or lending
subjects of taxation within its jurisdiction so that it 2. Privilege - benefit derived through gratuitous
may be enabled to carry its mandate into effect on transfer by fact of death or donation
perform the functions of government 3. Right- power, faculty or demand inherent in one
● The citizen on the other hand, pays taxes to support person and incidental to another
the government in order that he may continuously 4. Interest - an advantage accruing from anything.
be sustained with security and benefits of an ○ Example: estate/VAT/donor’s tax/income
organized society. (51 Am Jur 42-43) tax/other percentage tax/doc
● The symbiotic relationship and partnership stamp/excise/business tax… in short, all taxes
between the taxing authority and the subject of aside from personal and real property tax.
taxation is enough to justify the imposition of tax
power. (Commissioner vs. Algue, Inc. 158 SCRA STAGES OR PROCESS OF TAXATION
9) 1. LEVY OR IMPOSITION - involves the passage
● The payment of taxes may therefore mean helping of tax laws or ordinances through the legislature.
the government to finance its legitimate objectives. It involves the granting of tax exemptions, tax
The government revenue is used to serve the amnesties and tax remedies that the government
people for whose benefit taxes are collected. (Vera and taxpayers may avail for the proper
vs. Fernandez, 89 SCRA 199). This is an implementation of tax measures (Commissioner
indispensable partnership between the people and vs. Botelbo Shipping Corporation, 20 SCRA 487)
the government.
● TAX LEGISLATION- refers to the law of tax. It includes the options or schemes or
enactment by Congress authorizing the imposition remedies as may be legally open or available to
of tax. the taxpayer.
a. Determination of the subject of taxation
b. Determination of the purposes for which taxes 4. REFUND - is proper when there is an erroneous or
shall be levied illegal assessment or collection of taxes, by following
c. Fixing the rate of taxation the procedures and within the periods prescribed by
d. Rules of taxation in general. law.

2. ASSESSMENT /TAX ADMINISTRATION - LIMITATIONS

involves the act of administration and ● INHERENT LIMITATIONS
implementation of the tax laws by the executive ○ The tax imposed should be for a public purpose.
through its administrative agencies such as the ■ Public purpose: Promotion of social justice
BIR or Bureau of Customs. ○ There should be no improper delegation of the
a. Generally, taxes are self-assessing. It means that taxing power.
the taxpayer can compute his taxes by himself. ○ The power to tax is limited to the territorial
Technically, the word assessment as used here jurisdiction of the taxing power.
means the appraisal and valuation of the subject ■ XPN: Privity of Relationship between the
of taxation. taxing State and taxpayer
b. ASSESSMENT it is the official action of an ■ Example: Resident citizen whose income within
administrative officer in determining the amount and without is subject to PH income tax. The
of tax due from a taxpayer It may also refer to a same with Domestic Corporation.
notice to the effect that the amount therein stated ○ Exemption of government entities is recognized.
is due from the taxpayer as a tax with demand ■ Government agencies are performing
for payment of the tax or deficiency stated proprietary functions which are subject to tax,
therein. (Matic, taxation in the Philippines, nes, or performing governmental functions which
Vol. 1. p 1. p. 270) are generally exempt from tax.
■ GR: State is exempted from tax. It cannot tax
● 2 types of assessment itself nor tax foreign sovereigns.
a. Self-assessment - tax system here in the ○ Observance of international comity such that
Philippines; taxpayer can compute his taxes by property of foreign sovereigns, are not subject to
himself taxation.
b. Deficiency assessment - if the tax to be paid by ● BAR QUESTION: The Congress passed a law
the taxpayer is lower than the tax required in the imposing a tax on the manufacturer of sugar by
Philippines. sugar centrals and another tax on owners of land
■ If no tax has been paid planted to sugar cane. The collections from said
■ If no tax return filed taxes were to accrue a special fund to be used
■ BIR has the power and authority to make exclusively for the rehabilitation of the sugar
assessments based on Third Party Information industry. The constitutionality of the law is assailed
Rule and Best Evidence Obtainable Rule. on the grounds that it is discriminatory and that the
levy is not for a public purpose. Decide with
3. PAYMENT OF TAX - is a process involving the reasons.
act of compliance by the taxpayer in contributing ANS: The protection and promotion of the sugar
his share to defray the expenses of the industry is a matter of public concern. The
government, including such options, schemes or legislature may determine within reasonable
remedies as alt in abe called, TAX bounds what is necessary for its protection and
COLLECTION, the process or remedies as may expedient for its promotion. Legislative discretion
be legally open of obtaining or available to the must be allowed full play, subject only to the test
taxpayer may be legally available to him. payment of reasonableness. If objective and methods alike
 are constitutionally valid, there is no reason why VAT system minimizes the regressive effects by
the State may not levy taxes to raise funds for their providing zero-rated transactions.
prosecution and attainment. Taxation may be made ○ Tolentino v. Secretary of Finance, G.R. No.
to implement the State’s police power. (Lutz v. 115455, 30 Oct. 1995 / Philippine Airlines v
Araneta, G.R. No. L-7859, 22 Dec. 1955) Secretary of Finance, G. R. No. 115852:
We consider the sugar industry as pillar of our Meaning of “Evolve” as Used in the Constitution
economy which affects the welfare of the state. It is - The constitutional provision has been
for a public purpose. interpreted to simply mean that "direct taxes are
● Republic vs. Bacolod-Murcia, G.R. Nos. L-19824, to be preferred and as much as possible, indirect
L-19825 and 19826, July 9, 1966 taxes should be minimized.” The mandate of
Congress is not to prescribe but to evolve a
CONSTITUTIONAL LIMITATIONS progressive tax system. This is a mere directive
● Provisions of the fundamental law of the land that upon Congress, not a justiciable right or a legally
restrict the supreme, plenary, unlimited, and enforceable one. We cannot avoid regressive
comprehensive exercise by the State of its inherent taxes but only minimize them.
power to tax. As a rule, the Constitution does not ■ Evolve is not the same as prescribe. It is a
create the power to tax on the State. Instead, it process.
simply defines and regulates the exercise of tax ■ The mandate is given by the constitution to
power in order to safeguard the interest of affected Congress to evolve and not to prescribe.
taxpayers.
● All appropriation, revenue, or tariff bills shall
1. DIRECT/SPECIFIC CONSTITUTIONAL originate exclusively in the House of
LIMITATIONS Representatives, but the Senate may propose or
● No imprisonment for non-payment of poll tax concur with amendments (Section 24)
(Section 20, Article III) ○ Is it possible that the imposition is different from
● Taxation shall be uniform and equitable (Section what was proposed?
28, Article VI) ○ Philippine Airlines vs. Secretary
● The Congress shall evolve a progressive system of Finance, G.R. No. 115455⭐The result
of taxation (Section 28 (1), 2nd sentence, Article
is a third version, which is considered an
VI)
"amendment in the nature of a substitute," the
○ Progressive - the tax rate increases as the tax base
only requirement for which being that the third
increases
version be germane to the subject of the House
○ Regressive - the tax rate decreases as the tax base
and Senate bills.
increases
○ Since the origination is not exclusively vested in
■ Example: VAT
the House of Representatives of the United
○ Proportionate: The tax rate is fixed regardless of
States, the Senate's authority to propose or concur
the tax base.
with amendments is necessarily broader. That
○ Q: Does the Constitution prohibit regressive
broader authority is further confirmed by the
taxes? A: NO. The Constitution does not really
phrase "as on other Bills," i.e., its power to
prohibit the imposition of regressive taxes. What
propose or concur with amendments thereon is
it simply provides is that Congress shall evolve a
the same as in ordinary bills. The absence of this
progressive system of taxation.
phrase in our Constitution was clearly intended to
○ Abakada Guro Party List v. Ermita, G.R. No.
restrict or limit the Philippine Senate's power to
168056, 15 Sept. 2005: VAT is admittedly
propose or concur with amendments. In the light
regressive because it is imposed on persons
of the exclusivity of origination and the absence
regardless of income. However, it is still valid as
of the phrase "as on other Bills," the Philippine
the Constitution’s mandate is simply to evolve a
Senate cannot amend by substitution with an
progressive system of taxation. In any case, the
entirely new bill of its own any bill covered by
 Section 24 of Article VI which the House of ● No tax exemption without concurrence of
Representatives transmitted to it because such Congress majority (Section 28 par. 4, Article
substitution would indirectly violate Section 24. VI)
○ Mitsubishi Corporation - Manila Branch v
● The President shall have the power to veto any CIR, G.R. No. 175772, 5 June 2017: Case law
particular item or items in an appropriation, explains that an exchange of notes is considered
revenue, or tariff bill, but the veto shall not affect as an executive agreement, which is binding on
the item or items to which he does not object the State even without Senate concurrence. In
(Section 27 (2). Article VI) Abaya v. Ebdane: An "exchange of notes" is a
● Delegated authority of President to impose tariff record of a routine agreement that has many
rates, import and export quotas, tonnage and similarities with the private law contract. The
wharfage dues agreement consists of the exchange of two
● Tax exemption of charitable institutions, churches, documents, each of the parties being in the
parsonages, convents, all lands, buildings and possession of the one signed by the representative
Improvements actually, directly and exclusively of the other. Under the usual procedure, the
used. accepting State repeats the text of the offering
○ What kind of tax is being exempted here? ANS: State to record its assent. The signatories of the
Real Property Tax letters may be government Ministers, diplomats
○ What is the condition for the exemption? ANS: or departmental heads. The technique of
The property is actually, directly, and exclusively exchange of notes is frequently resorted to, either
used. because of its speedy procedure, or, sometimes,
○ What if the property, 40% commercial purpose to avoid the process of legislative approval.
and 60% charitable institution, how should it be It is stated that "treaties, agreements,
taxed? ANS:⭐Lung Center of the Phil. V. conventions, charters, protocols, declarations,
Quezon City, G.R. No. 144104, 29 June 2004 - memoranda of understanding, modus vivendi
“Exclusive” is defined as possessed and enjoyed and exchange of notes" all refer to
to the exclusion of others; debarred from "international instruments binding at
participation or enjoyment; and “exclusively” is international law." x x x x
defined, “in a manner to exclude; as enjoying a Significantly, an exchange of notes is
privilege exclusively.” If real property is used for considered a form of an executive agreement,
one or more commercial purposes, it is not which becomes binding through executive action
exclusively used for the exempted purposes but is without the need of a vote by the Senate or
subject to taxation. The words “dominant use” or Congress.
“principal use” cannot be substituted for the Paragraph 5 (2) of the Exchange of Notes
words “used exclusively” without doing violence provides for a tax assumption provision
to the Constitutions and the law. Solely is whereby:
synonymous with exclusively. (2) The Government of the Republic of the
BUT SC held that those portions of its real Philippines will, itself or through its executing
property that are leased to private entities are agencies or instrumentalities, assume all fiscal
not exempt from real property taxes as these are levies or taxes imposed in the Republic of the
not actually, directly and exclusively used for Philippines on Japanese firms and nationals
charitable purposes. operating as suppliers, contractors or consultants
on and/or in connection with any income that may
NOTE: Only those portions used for commercial accrue from the supply of products of Japan and
purposes will be taxed. services of Japanese nationals to be provided under
the Loan. (Emphases and underscoring supplied)
To "assume" means "[t]o take on, become
bound as another is bound, or put oneself in place
of another as to an obligation or liability." This
 means that the obligation or liability remains, Is this valid? ANS: NO. A resolution is not
although the same is merely passed on to a equivalent to law. Take note that the power to tax
different person. In this light, the concept of an includes the power to grant tax exemptions. The
assumption is therefore different from an power to tax is exercised through the passage of
exemption, the latter being the "[f]reedom from a law. Hence, tax exemption shall likewise be
duty, liability or other requirement" or "[a] granted through law.
privilege given to a judgment debtor by law, ○ NOTE: The President is not prohibited from
allowing the debtor to retain [a] certain property entering into treaties. However, such (1)
without liability." Thus, contrary to the CTA En Presidential prerogative is limited and (2)
Bane's opinion, the constitutional provisions on pursuant to the constitutional provision no tax
tax exemptions would not apply. exemption without concurrence of Congress
majority (Section 28 par. 4, Article VI).
○ ⭐Rene Saguisag et. al. v. Executive Secretary ○ Power to tax is exercised through legislation
Ochoa, G.R. No. 212426, January 12, 2016: This passed by Congress.
rule does not imply, though, that the President is
given carte blanche to exercise this discretion. ● No use of public money or property for religious
Although the Chief Executive wields the purposes except if priest is assigned to armed
exclusive authority to conduct our foreign forces, penal Institutions, government orphanage or
relations, this power must still be exercised leprosarium (par. 2, Section 29, ibid)
within the context and the parameters set by the ● Money collected on tax levied for special purpose
Constitution, as well as by existing domestic and to be used only for such purpose, balance if any, to
international laws. There are constitutional general funds (pac 3, Section 29, ibid)
provisions that restrict or limit the President's ● Supreme Court's power to review judgments or
prerogative in concluding international orders of lower courts in all cases involving
agreements, such as those that involve the ○ Legality of any tax, impose, assessment or toll
following: ○ Legality of any penalty imposed in relation to the
a. The policy of freedom from nuclear weapons above (Section 5, Art. VIII)
within Philippine territory ● Delegated authority to local government units
b. The fixing of tariff rates, import and export ○ To create their own sources of revenue
quotas, tonnage and wharfage dues, and other ○ To levy taxes, fees and charges subject to:
duties or imposts, which must be pursuant to the ■ Guidelines and limitations imposed by
authority granted by Congress Congress consistent with the basic policy of
c. The grant of any tax exemption, which must local autonomy
be pursuant to a law concurred in by a ■ Such fees, taxes and other charges accrue
majority of all the Members of Congress exclusively to the local governments (Section 5,
d. The contracting or guaranteeing, on behalf of Article X. ibid)
the Philippines, of foreign loans that must be ■ Automatic release of LGU's just share in
previously concurred in by the Monetary Board national taxes. (Section 6, ibid)
e. The authorization of the presence of foreign ● Tax exemption of all revenues and assets of:
military bases, troops, or facilities in the country ○ Non-profit, non-stock educational institutions
must be in the form of a treaty duly concurred in ○ Proprietary or cooperative educational
by the Senate. institutions subject to limitations provided by law
f. For agreements that do not fall under paragraph including
5, the concurrence of the Senate is required, ■ Restrictions on dividends
should the form of the government chosen be a ■ Provisions for reinvestments. (Section 4. Article
treaty. XIV, 1987 Constitution)
○ BAR QS: President grants tax exemption to BTS ○ Lasallian v CIR, G.R. No. 202792, February 27,
with a resolution in support thereof by Congress. 2019:The test to determine exemption is the use
of both the revenues and assets. Hence, when the
 revenues are actually, directly and exclusively 2. Both in privileges conferred and babilities
used for educational purposes, the non-stock, imposed
non-profit educational institution shall be exempt 3. Favoritism and preference not allowed.
from income tax, VAT, and local business tax.
The revenues do not need to come from ○ ⭐VALID CLASSIFICATION REQUISITES: All
educational activities, as long as it used for that is required it that it be REASONABLE,
educational purposes. which means that: (1) Classification should be
○ Income from cafeterias, canteens and bookstores based on substantial distinctions which make for
located within the school premises are also REAL differences, that (2) it must be germane to
exempt if they are owned and operated by the the purpose of the law; (3) that it must not be
educational institution. (RMC 76-2003) limited to existing conditions only; and that (4) it
must apply equally to each member of the class.
● Tax exemption of grants, endowments, donations Drugstores Association of the Philippines, Inc.,
or contributions et.al v. National Council on Disability Affairs,
○ Used actually, directly and exclusively for et.al., GR No. 194561, 14 September 2016 citing
educational purposes National Development Company v. Philippine
○ Subject to conditions prescribed by law (Section Veterans Bank, et.al., 270 Phil. 349, 357 (1990);
4, Par. 4. Article XIV, 1987 Constitution in Ferrer, Jr. v. City Mayor Bautista, et.al., GR No.
relation to Section 101 [A] [3], NIRC) 210551, 30 June 2015 citing City of Manila v.
● Filipino First or Preferential Use concept "the State Hon. Laguio, Jr. 495 Phil. 289, 326 (2005).
shall promote the preferential use of Filipino labor,
domestic materials and locally produced goods, TAX FAIRNESS PRINCIPLES:
and adopt measures that help make them HORIZONTAL EQUITY V. VERTICAL EQUITY
competitive.” (Section 12. Article XII),

2. GENERAL/INDIRECT CONSTITUTIONAL Horizontal Vertical

LIMITATIONS Similarly situated Different situated
● ARTICLE III: Bill of Rights - SECTION 1. No taxpayers are taxed people should be taxed
person shall be deprived of life, liberty, or property similarly. differently.
without due process of law, nor shall any person be
denied the equal protection of the laws.
○ Due Process - 2 components:
1. Substantive
Problem
2. Procedural twin requirement: notice and
● Heeding the pronouncement of the President that
hearing (and the right to be heard of impartial
the worsening traffic conditions in the metropolis
judge) [NOTE: Ang Tibay v. CIR: Procedural
was a sign of economic progress, the Congress
Due Process]
enacted RA 10701, also known as An Act
■ Secretary of Justice v. Ralph Lantion, GR No.
Imposing a Transport Tax on the Purchase of
139465, 18 January 2000;
Private Vehicles. Under RA 10701, buyers of
■ CIR v. Avon Manufacturing, GR Nos. 201398-
private vehicles are required to pay a transport tax
99 & GR Nos. 201418-19, 3 October 2018
equivalent to 5% of the total purchase price per
○ Equality and Uniformity of taxation*** may
vehicle purchased. RA 10701 provides that the
mean the same as equal protection.
LTO shall not accept for registration any new
■ Criteria met:
vehicles without proof of payment of the 5%
A. When the laws operate uniformly
transport tax. RA 10701 further provides that
1. On all persons
existing owners of private vehicles shall be
2. Under similar circumstances
required to pay a tax equivalent to 5% of the
B. All persons are treated in the same manner
current fair market value of every vehicle
1. The conditions not being different
 registered with the LTO. However, RA 10701 OTHER GENERAL/ INDIRECT
exempts owners of public utility vehicles and the CONSTITUTIONAL LIMITATIONS
Government from the coverage of the 5% transport ● Freedom of the Press (Section 4. Art. III)
tax. ● Religious Freedom (Section 5)
● No taking of private property without just
A group of private vehicle owners sue on the ground compensation (Section 9)
that the law is unconstitutional for contravening the ● ⭐Non-impairment Clause (Section 10, Art III)
Equal Protection Clause of the Constitution. Rule on ○ No law impairing the obligation of contracts shall
the constitutionality and validity of RA 10701. be passed
○ Neither shall any such franchise or right be
ANS: R.A. NO. 10701 IS VALID AND granted except under the condition that it shall be
CONSTITUTIONAL. It is an established principle in subject to amendment, alteration.or repeal by the
equal protection clause that the guarantee is not Congress when the common good so requires
violated when the distinction is based on valid (Section 11, Article XII)
classification. All that is required it that it be ■ NOTE: Even if not stated in the franchise
REASONABLE, which means that: (1) Classification agreement, the state can still at anytime amend,
should be based on substantial distinctions which alter, or repeal such franchise.
make for REAL differences, that (2) it must be ● Presidential power to grant reprieves,
germane to the purpose of the law; (3) that it must not commutations and pardons and remit fines and
be limited to existing conditions only; and that (4) it forfeitures after conviction by final judgment
must apply equally to each member of the class. (Section 19. Article VII)
In this case, there is substantial distinction between ● In relation to the law-making process:
private and PUV. ○ Bill should embrace only one subject expressed
in the title (Section 26 [I], Article VI)
○ "All appropriation, revenue or tariff bills, bills
A levy of tax is not unconstitutional because it is not authorizing increase of the public debt, xxx shall
intrinsically equal and uniform in its operation. The originate exclusively in the House of
uniformity rule does not prohibit classification for Representatives, but the Senate may propose or
purposes of taxation. (British American Tobacco v. concur with amendments." (Section 24, Article
Camacho, G.R. No. 163583, 15 Apr. 2009) VI)
○ Three readings on three separate days (Section 26
Uniformity in taxation, like the kindred concept of [2], Article VI)
equal protection, merely requires that all subjects or ○ Printed copies in final form distributed three days
objects of taxation, similarly situated, are to be before passage.
treated alike both in privileges and liabilities. ●
Uniformity does not forfend classification as long as: ●
(1) the standards that are used therefor are substantial ●
and not arbitrary; (2) the categorization is germane to
achieve the legislative purpose; (3) the law applies, ○
all things being equal, to both present and future ○ P
conditions; and (4) the classification applies equally
well to all those belonging to the same class. (Rufino
R. Tan v. Del Rosario, Jr., G.R. No. 109289, 03 Oct.
1994) All of the foregoing requirements of a valid ⭐REVIEW⭐
classification having been met and those which are
● What is included in the power to tax?
singled out are a class in themselves, there is no
● CASES
violation of the “Equal Protection Clause” of the
○ Lung Center Case
Constitution.
○ Mitsubishi case
 ○ Jose J. Ferrer v City Mayor
○ Rene Saguisag
● Valid classification
● Non-impairment Clause (Section 10, Art III)
●

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