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Lesson 2

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58 views

Lesson 2

Uploaded by

Angelo De Pedro
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Lesson 2 - INHERENT LIMITATIONS ON THE POWER OF TAXATION

Limitation of the power of taxation

Inherent limitation – there is already a limitation upon the creation of the power. If the five
elements of the state are combined there will be an independent state. If the state acquires the
status of independent state, the state will automatically acquire the Inherent powers with the
Inherent limitation. It doesn’t have to be in the constitution, it can be in the constitution or not it is
always present. It is universally recognized, all the country with taxation recognizes it.

Constitutional limitation (next meeting) – it is stated in the constitution which is the fundamental
law of the land. The constitution is powerful because it is the contract between the state and its
people. A constitution is always born out in a revolution. You cannot change a constitution by a
mere congressional act it takes a revolution to change a constitution.

Six Inherent limitation

1. Taxes may be levied only for public purpose – the right of taxation can be only used in
aid of a public object, an object which is within the purpose for which government is
establish.

It cannot be exercised in aid of enterprises strictly private, benefit of individual, though in


a remote or collateral way, the public may benefit thereby.
Test to determine public purpose:
Duty test – the purpose needs to be governmental
Promotion of general welfare test- whether the tax will directly promote the welfare of the
community in equal measure.

2. The power to tax, being essentially legislative, cannot be delegated – “delegata


protestas non protest delegari” means what has been delegated cannot be redelegated.

In a democratic government the people delegate the power to the congress and the
congress cannot delegate the power to other agencies. Principle in administrative law
the congress cannot delegates it power to make laws to other agencies, but they make
laws. The congress cannot implement the law, so specific agencies need to implement it
based on what kind of law need to be implemented.
Exceptions:
a. Art. VI, section 28 (2) of the 1987 Constitution – it authorizes the President to fix
tariff rates, import and export quotas, tonnage and wharfage dues, and other duties
or imposts.
b. Art. X, section 5 – power of taxation of LGUs to create their own source of revenues,
levy taxes, fees, and charges.
c. Delegation to administrative agencies – implementation or tax revenues
d. Peoples’ initiative and referendum under RA 6735 – the people can directly propose,
enact, approve/reject, in whole/part, of the laws passed by the legislative body

3. The power to tax is limited to the territorial jurisdiction of the sovereign state – situs or
territoriality, as a rule, states that the taxing power cannot go beyond the territorial limit
of the taxing authority.

The power of taxation is limited only within the territory of the state. The state cannot
exercise its power of taxation outside its territory.
Exception states invokes personal jurisdiction, like the case of resident citizens whose
income derived abroad are taxed in the Philippines, subject to tax credit. Exception to
the exceptions are the OFWs and seamen.

4. A sovereign state cannot exercise jurisdiction over another sovereign state –


International comity – respect afforded by virtue of the principle of sovereignty (4th
inherent limitation).

“Par in parem non habet imperium” means equals has no sovereignty over each other. It
is a general principle of international law, forming the basis of state immunity. Because
of this principle, a sovereign state cannot exercise jurisdiction over another sovereign
state. The power of taxation is imposed only within the state. This is based on Act II,
section 2 of the 1987 Constitution. No law may be passed imposing tax on income of
foreign ambassador and real property on foreign embassies.
5. The government exercising governmental/sovereign function is not tax – exemption of
govt. entities, agencies, and instrumentalities. An instrumentality is an org. created by or
pursuant to state statute and operated by public purposes. It performs government
function but does not have full power of government like police authority, taxation, and
eminent domain.

Government-owned and controlled corporation or GOCC are corporations which are


generally created through legislation. It can be classified into two:
A. Corporation which are wholly owned by the government (e.g., Philippine Heart
Center and National Food Authority).
B. Operate under government control and with private sector capitalization like the
Philippine National Oil Company (PNOC).

Because of their socio-economic development objectives, GOCCs were granted tax


exemption privileges in their respective charters or through social laws.

GOCCs that have tax exemption privileges are GSIS, SSS, Philhealth, National Red
Cross

6. Prohibition against double taxation – law prohibit the imposition of two taxes on the
same subject matter, same purpose, by same taxing authority, within the same
jurisdiction, and same taxing period.

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