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
distinction 2) apply to both present and future conditions;
3) germane to the purposes of law; 4) apply equally to all
members of the same class
- Falls equally and impartially upon the person and
properties subject to taxation
3. Uniformity in Taxation – All taxable articles or kinds of
property of the same class shall be taxed at the same
rate
4. Progressive Taxation – rate goes up depending on the
resources of persons affected; taxpayers ability to pay
5. Non-Impairment Clause
Is Tax Exemption Revocable? It depends
- If the grant of exemption does not constitute a
contrac, but is merely a spontaneous concession by
the legislature, not connected with any service or
duty imposed”, the State at its pleasure may revoke
the exemption
- If the tax exemption constitutes a binding contract
and for valuable consideration, the government
cannot unilaterally revoke such.
- A franchise partakes the nature of a grant which is
beyond the purview of the non-impairment clause
6. Non-Imprisonment for Non-Payment of a Poll Tax
7. Bills to Originate from the House of Representatives –
exclusively, but the Senate may propose or concur with
amendments
8. Veto Power of the President – items vetoed -> returned
to lower house with objections -> 2/3 consideration of the
House, if agreed to pass such, the bill will become a law
9. President’s Power to Tax – fix tariff rates, import or
export quotas, and tonnage or wharfage dues
10. Taxation and Freedom of the Press
11. Taxation and Freedom of Religion
12. Tax Exemption of Properties actually, directly and
exclusively used for religious, charitable and
educational purposes – exempt from taxation as to RPT,
provided that the land was used for the purpose it is
intended
13. Tax Exemption granted to Non-Stock Non-Profit
Educational Institutions – exempt from all taxes, import
duties, assessments and other charges imposed by the
Government on all income derived from property used
exclusively for educational activities
- Subject to donor’s tax, estate tax, VAT
14. Appropriation of Public Money –
- Gen. Rule: No public money or money shall be
appropriated, applied, paid or employed directly or
indirectly for the use, benefit or support of any sect,
church, denomination, sectarian institution, or
system of religion etc
- Exception: when said priest, minister or dignitary is
assigned to the armed forces, or to any penal
institutions or government orphanage or leposarium
15. Grant of Tax Exemption – may be created by the
Constitution or by an act of the legislature (e.g: tax
amnesties, tax condonations, tax refunds)
 Tax Amnesty: immunity from all the criminal and
civil obligations arising from non-payment of taxes;
general pardon; absolute waiver; start with a clean
slate; applies to past tax periods
 Tax Exemption: immunity from the civil liability only;
freedom from any charge or burden
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
Kinds of Taxes
1. As to Incidence
a) Direct
b) Indirect – tax is primarily paid by persons who can
shift the burden to someone else
 Forward: transferred from a factor of
production through the factors of
distribution until it finally settles on the
ultimate purchaser or consumer. Price
increases.
 Backward: transferred from the consumer
or purchaser through the factors of
distribution to the factors of production.
Price decreases.
 Onward: tax is shifted two or more times,
either forward or backward
2. As to Tax Rates
a) Specific – imposed based on weight or volume
capacity or any other physical unit of measurement
b) Ad Valorem – tax is based on GSP or other specified
value of the goods
3. As to purpose
a) General – raise revenue for the government
b) Special – to achieve a particular legitimate object of
the government
4. As to Scope or Authority Imposed
a) National
b) Local
5. As to Object
a) Personal
b) Property
6. As to Graduation
a) Progressive – rate increases as the base increases
b) Regressive – tax rate decreases as the tax base
increases
Double Taxation – means taxing the same property twice when
it should be taxed only once; that is, x x x taxing the same person
twice by the same jurisdiction for the same thing.
1. Strict Sense (Direct) – violates the uniformity and equal
protection clause, as well as the principle that tax must
not be excessive, unreasonable and inequitable
Requisites:
a) The same property is taxed twice when it should
only be taxed once
b) Both taxes are impose on the same property
c) Imposed by the same taxing authority
d) Within the same jurisdiction
e) During the same period
f) Covering the same kind or character of tax
2. Broad Sense (Indirect) – taxes are not of the same kind,
or the imposition are imposed for different taxing
authority and this involve the same subject matter
Tax Treaty as a Mode of Eliminating Double Taxation
1. Exemption Method – the income or capital which is
taxable in the State or its source or situs is exempted in
the state of residence, although in some instances it may
be taken into account in determining the rate of tax
applicable to the taxpayer’s income or capital
2. Credit Method – tax paid in the State of source is
credited against the tax levied in the state of residence
3. Reciprocity – You do not tax my citizen, I will not also
tax your citizen
4. Tax Treaty
 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