GENERAL PRINCIPLES OF TAXATION PURPOSE OF TAXATION

THE INHERENT POWERS OF THE STATE • PRIMARY PURPOSE

ü POWER TO TAX Ø raise revenues/funds to defray the necessary expenses of the
ü POLICE POWER government
ü EMINENT DOMAIN Ø called Revenue or Fiscal Purpose

POWER TO TAX • SECONDARY PURPOSE

• Act of levying or imposing a tax a. Regulatory Purpose - Taxation is employed as a device for
• process by which the sovereign (independent state) through its regulation or control (to implement the police power of the
law-making body (legislative branch of the government) raises State for the promotion of the general welfare) by means of
income to defray the necessary expenses of the government which certain effects or conditions envisioned by the
by apportioning the cost among those who, in some measure, government may be achieved.
are privileged to enjoy its benefits, and therefore, must bear its
• COMPENSATORY PURPOSE
burdens.
ü Reduction of Social Inequality
POLICE POWER ü Economic Growth
• power of the state to promote public welfare by restraining ü Protect local industries against unfair competition
and regulating the use of liberty and property.
• exercised only by government NATURE AND CHARACTERISTICS
OF TAXATION
EMINENT DOMAIN • Inherent Power - may be exercised although not expressly
• power to take private property for public purpose upon granted by the constitution
payment of just compensation. • Essentially a legislative function - only the legislative can
impose taxes
• Subject to inherent and constitutional limitations - not an
SIMILARITIES AMONG TAXATION, absolute power
EMINENT DOMAIN AND POLICE POWER • For public purpose
ü inherent in the State. • The strongest of all the inherent powers of the State.
ü exist independently of the constitution although the
• Subject to international treaty or comity.
conditions for their exercise may be prescribed by the
• Generally payable in money
constitution.
ü Ways by which the state interfere with private rights and • Territorial in scope
property.
ü legislative in nature and character
ü presuppose an equivalent compensation received, directly or
indirectly, by the persons affected.
ABSENCE OF INHERENT AND
CONSTITUTIONAL LIMITATIONS THE BENEFITS - PROTECTION THEORY
THE POWER TO TAX IS: Ø The basis of taxation is the reciprocal duties of “protection and
C - Comprehensive support” between the State and its inhabitants.
Pl - Plenary Ø This theory spawned the Doctrine of Symbiotic Relationship which
U - Unlimited means, taxes are what we pay for a civilized society.
S – Supreme
DISTINCTIONS AMONG THE 3
INHERENT POWERS OF THE STATE
MARSHALL DOCTRINE
It is so comprehensive that in the words of Justice Marshall
(American lawyer and civil rights activist who served as Associate
Justice of the Supreme Court of the United States), the power to tax
includes the power to destroy.
TAXES DEFINED
TAXES
Ø enforced proportional contributions from persons and property,
levied by the State by virtue of its sovereignty for the support of
the government and for all its public needs.

THEORIES AND BASIS OF TAXATION

NECESSITY THEORY
Ø The power of taxation proceeds upon the theory that the existence
of the government is a necessity.
Ø It is a power predicated upon necessity
LIFEBLOOD DOCTRINE
Ø Taxes are the lifeblood of the government without which it can
neither exist nor endure.
• No Estoppel against the Government
• Collection of taxes cannot be enjoined (stopped) by injunction
• Taxes could not be the subject of compensation or set-off
• A valid tax may result in the destruction of the taxpayer’s property
• Right to select objects (subjects) of taxation

SCOPE OF THE TAXING POWER

OF THE LEGISLATIVE
§ The subject or object (person, property, and excises/privileges) to
LIMITATIONS ON THE TAXING POWER
be taxed
§ INHERENT LIMITATIONS
§ The purpose of the tax as long as it is a public purpose
v Public Purpose
§ The amount or rate of the tax
a. Support of the government
§ Kind of tax
b. Some of the recognized objects of government
§ Appointment of the tax
c. To promote the welfare of the community
§ Situs of taxation
§ The manner or method of collection v Situs of taxation or Territoriality - limited to person and
property within and subject to its jurisdiction.
STAGES/ ASPECTS OF TAXATION PLACE OF TAXATION
§ LEVYING OR IMPOSITION a. The state where the subject to be taxed has a situs may rightfully levy
Ø involves the passage of tax laws or ordinances (in the case of local and collect the tax.
government units) through the legislature b. The situs is necessarily in the State which has jurisdiction or which
exercises dominion over the subject in question.

ASSESSMENT AND COLLECTION v Situs of taxation or Territoriality - limited to person and

Ø involves the act of administration and implementation of tax laws property within and subject to its jurisdiction.
by the executive through its administrative agencies such as the
Bureau of Internal Revenue and the Bureau of Customs. FACTORS TO CONSIDER IN DETERMINING SITUS OF
v Assessment - determination by the executive branch of the correct TAXATION
amount of the tax. a. Subject matter (person, property, or activity)
v Collection of the tax levied, which is essentially administrative in b. Nature of the tax
character c. Citizenship
d. Residence of the taxpayer
PRINCIPLES/ELEMENTS OF SOUND TAX SYSTEM
• FISCAL ADEQUACY
Ø The sources of government revenue must be sufficient to meet
government
expenditures and other public needs.

• THEORETICAL JUSTICE
Ø A good tax system must be based on the taxpayer’s ability to pay.
• ADMINISTRATIVE FEASIBILITY
Ø Tax laws must be capable of convenient, just and effective
administration -
free from confusion and uncertainty.
 • PhilHealthIC
• Local Water Districts
* PCSO - tax-exempt prior to January 1, 2018
CONSTITUTIONAL LIMITATIONS
v Observance of due process of law
v Equal protection of law
v Uniformity in taxation
v Progressive scheme of taxation
v Non-imprisonment for non-payment of poll tax
v Non-impairment of the obligations of contracts
v Free-worship clause
v Exemption of charitable institutions, churches, parsonages, or
convents appurtenant thereto, mosques, and non-profit cemeteries,
and all lands, buildings and improvements actually, directly, and
INHERENT LIMITATIONS exclusively used for religious, charitable or educational purposes.
v International Comity or treaty - a State cannot tax another State
based on the principle of Sovereign Equality among States. v Exemption from taxes or the revenues and assets of non-profit, nonstock
v Non-delegability of the Taxing power (Enactment of Tax educational institutions including grants, endowments,
Laws) - Power of taxation is purely legislative, hence the power donations or contributions for educational purposes.
cannot be delegated either to the executive or judicial departments v Non-appropriation of public funds or property for the benefit of any
church, sect or system of religion.
EXCEPTIONS: v No money shall be paid out of the Treasury except in pursuance of
a. Delegation to the President an appropriation made by law.
b. Delegation to local governments v Concurrrence of a majority of ALL MEMBERS OF CONGRESS
c. Delegation to administrative agencies certain aspects of the taxing for the passage of a law granting tax exemption
process that are not legislative. v Non-diversification of tax collections
v Tax Exemptions of the government The President shall have the power to veto
a. Agencies performing governmental functions are tax - exempt unless v Non-impairment of the jurisdiction of the Supreme Court to review
expressly tax cases
taxed. v Appropriations, revenue or tariff bills shall originate exclusively in the
b. Agencies performing proprietary functions are subject to tax unless House of Representatives but the Senate may propose or concur with
expressly amendments.
exempted. v Each local government unit shall exercise the power to create its own
c. GOCCs performing proprietary functions are subject to tax, except: sources of revenue and shall have a just share in the national taxes.
• GSIS
• SSS