LAW 413 – TAXATION TWO STAGES OF EMINENT DOMAIN:

Three Inherent Powers of the State

EXPROPRIATION PROCEEDINGS CONSISTS OF TWO
 Police Power STAGES:
 Power to Tax
 Eminent Domain 1. Condemnation of the property after it is
determined that its acquisition will be for a
1. POLICE POWER OF THE STATE public purpose or public use
- State authority to enact legislation that may interfere
with personal liberty or property in order to CONDEMNATION - the process a government uses to
promote the general welfare legally acquire property

BASIS: 2. The determination of just compensation to be paid

Salus Populi Supremo Est Lex for the taking of private property to be made
- the welfare of the people is the supreme law) by the Court with the assistance of not more than three
commissioners.
TWO REQUISITES OF A VALID POLICE POWER
JUST COMPENSATION
1. LAWFUL SUBJECT  refers to the sum equivalent to the market
The interest of the public, not mere particular class, value of the property, broadly described to be
require the exercise of police power. (police power the price fixed by the seller in open market in
must be firmly grounded on public interest and the usual and ordinary course of legal act ion
welfare) and competition, or the fair value of the
property as between one who receives and one
2. LAWFUL MEANS who desires to sell.
The means used should be reasonably necessary for the
accomplishment of purpose and not oppressive to 3- TAXATION
individuals. Taxation is the power to levy taxes to be used for
public purpose.
2. EMINENT DOMAIN
 Defined as the power of the nation or a RATIONALE FOR THE POWER TO TAX:
sovereign state to take or to authorize the Taxes are the lifeblood of the government for without
taking of, private property for a public use taxes the government can neither exist nor endure.
conditioned upon payment of just
compensation. LESSON 3
 The power of Eminent Domain is NOT INCOME TAX - GENERAL CONCEPTS
LIMITLESS (should follow procedural
requirements) INCOME TAX
 A government instrumentality that fails to  levied on the income from property or an
observe the constitutional guarantees of just occupation. It is a direct tax upon the thing
compensation and due process abuses the called income.
authority delegated to it, and is liable to the  a type of tax governments impose on income
property owner for damages. generated by businesses and individuals within
their jurisdiction
REQUISITES OF EMINENT DOMAIN  an excise tax or privilege tax, levied upon the
(1) The property taken must be private property; right of a person or entity to receive income or
(2) There must be genuine necessity to take the private profits.
property;
(3) The taking must be for public use; UNLOCKING OF TERMS
(4) There must be payment of just compensation; and Gross and Net Income differentiated:
(5) The taking must comply with due process of law.
GROSS INCOME is the total amount you earn, and NET
INCOME is actual business profit after expenses and
allowable deductions are taken out.
 4. To give effect to and administer the supervisory
PURPOSE OF INCOME TAX: and police powers conferred upon it by the Tax
a) To raise revenue for the support of the Code or other special laws
government - The Philippine government relies
on tax revenue to fund its operations and BUREAU OF INTERNAL REVENUE – shall be under the
finance its development projects. Being the supervision of the Department of Finance
lifeblood of the government, tax revenue is a
critical part of the country's economic and fiscal COURT OF TAX APPEALS - address the adjudication of
policy appeals involving internal revenue tax and customs
b) Mitigate evils of any from inequality of wealth cases of the Commissioner of Internal Revenue and the
– In the Philippines, it is imposed on the net Commissioner of Customs, respectively.
income of citizens, resident aliens, domestic
corporation and non-resident alien and foreign ~*~
corporations engaged in trade/business in the
Philippines CONCEPT OF INCOME
INCOME
WEALTH INEQUALITY  all wealth which flows into the taxpayer other
 Wealth refers to the total amount of assets of than a mere return of capital.
an individual or household. This may include  It includes gain derived from the sale or
financial assets, such as bonds and stocks, disposition of capital assets.
property and private pension rights. CAPITAL
 Wealth inequality therefore refers to the  fund appropriated in a particular undertaking
unequal distribution of assets in a group of PERSON
people.  includes natural or juridical person

How to reduce wealth/income inequality?

- By taxation, decreasing the incomes of the
richest or by increasing the incomes of the
poorest. Policies focusing on the latter include
increasing employment or wages and
transferring income.

PRINCIPLES OF INCOME TAXATION:

A. Benefits – Received Theory
- payment of taxes is based upon the benefits
received from public service and to sustain said
services
B. Ability to Pay Theory
- payment of tax should be consistent in
taxpayer’s ability to pay
INCOME TAX SYSTEMS
a. GLOBAL (UNITARY)
TAXING AUTHORITY
o Total allowable deduction are deducted
(Jurisdiction, Power, and Functions of the Commissioner
of Internal Revenue) from the gross income to arrive at the next
taxable income subject to the relevant
Powers and Duties of the Bureau of Internal Revenue: income tax rate
[Sec. 2, National Internal Revenue Code-NIRC] o All items of gross income, deductions,
personal and additional exemptions are
1. To assess and collect all national internal reported in one income tax return and a
revenue taxes, fees, and charges; single tax is imposed on all income
2. To enforce all forfeitures, penalties and fines received or earned, regardless of the
connected therewith; activities which produces the income.
3. To execute judgment in all cases decided in its o ALL INCOME IN ONE BASKET = TAXING THE
favor by the Court of Tax Appeals and the ENTIRE BASKET.
ordinary courts; and
EXAMPLE FOR GLOBAL:
Effective from July 1, 2020, Philippine corporations are
taxed at a rate of 25% (reduced from 30%),

EXCEPTION
- for corporations having net income of less than
5 million PHP and total assets of less than 100
million PHP, which is taxed at a rate of 20%.

b. SCHEDULAR
o different types of income are subject to
different sets of graduated or flat
income tax rates.
o separate taxes are imposed on GRADUATED TAX RATE - income tax system consists
different categories of income. of tax brackets where tax rates increase as income
NOTE: increases.
GLOBAL is usually applied to corporations, as
corporations are taxed at a single rate, regardless of
the tax base; while the SCHEDULAR system is applied to
individuals as they are subjected to different tax rates FEATURES OF THE PHILIPPINE INCOME TAX LAW
based on their bracket.
A. DIRECT TAX
c. SEMI SCHEDULAR or SEMI GLOBAL - The tax burden is borne by the income recipient
d . All compensation income, upon whom the tax is imposed.
business or professional income, capital gain, B. PROGRESSIVE
passive - The tax rate increases as the income increases.
e. income, and other income not subject to final - It is founded on the ability to pay principle
tax are added together to arrive at
f. the gross income C. COMPREHENSIVE (as it covers persons,
g . All compensation income, businesses, activities, professions, rights, and
business or professional income, capital gain, privileges.)
passive
h. income, and other income not subject to final  The Philippines has adopted the most
tax are added together to arrive at
comprehensive system of imposing income
i. the gross income
tax by adopting the citizenship principle,
o It is the system followed in the
the residence principle, and the source
Philippines.
principle.
o STEP 1 = All compensation income,
business or professional income, capital
CITIZENSHIP PRINCIPLE (Citizenship based taxation)
gain, passive income, and other income
- refers to the process by which a nation taxes its
not subject to final tax are ADDED
citizens irrespective of their status as residents.
TOGETHER to arrive at the gross
This means that if you are a citizen of a country
income
that taxes on the basis of citizenship and choose
o After deducting the allowable
to reside in a foreign nation, you will still be
deductions and exemptions from
required to pay taxes to your native home
o the gross income, the taxable income is
subjected to one set of graduated tax RESIDENCE PRINCIPLE
o rate for individual or normal - all income derived from sources within the
corporate income tax rate for Philippines by persons residing in the
corporation Philippines whether citizen or not, or domestic
o STEP 2 = After deducting the allowable or foreign corporation, are subject to income
deductions and exemptions, the taxable tax.
income is subjected to one set of SOURCE PRINCIPLE
graduated tax rate for individual or - all income derived from sources within the
normal corporate income tax rate Philippines are subject to income tax.
for corporation