Definition of taxation Inherent limitations of taxation

- Raise revenue to carry out 1. Territoriality of taxation - demand

legitimate objects of the tax obligations within its jurisdiction
government 2. International comity - all nations
1. State power - inherent power are deemed equal
2. Process - levying taxes by 3. Public purpose - common good
legislative branch 4. Exemption of government -
3. Mode of cost distribution - government does not tax itself
allocating cost and burden to the (exception: government profits and
people activities for profit)
Theory of taxation - necessity theory 5. Non-delegation of taxing power -
Necessity theory - government cannot vested exclusively to the congress
exist without a system of funding (exception: LGU, president can fix
Basis of taxation - mutuality of support tariffs)
Mutuality of support - people provide the
funds that finance the government; they Two fold obligations
support one another 1. File tax returns and pay taxes
Receipt of benefit is conclusively 2. Withholding of taxes on expenses
presumed - direct receipt of government and its remittance to the
services is not a precondition to taxation government
Exception to territoriality:
Benefit received theory - more benefit = ● Resident citizens and domestic
more tax corporations are taxed within and
Ability to pay - required to pay on their without
capacity to pay ● Transfer taxation - resident and
non resident citizen, and resident
Aspects of ability to pay theory aliens are taxed for transfer of
1. Vertical - one’s ability to pay is properties within and without
directly proportional to his tax base
2. Horizontal - consideration of Constitutional limitations
particular circumstances of the 1. Observance of due process of
taxpayers law - tax laws should neither be
Lifeblood doctrine - taxes are essential harsh nor oppressive
and indispensable to the existence of the Aspects of due process:
government ● Substantive due process
● Procedural due process
Tax code of the PH - national internal Assessments shall be made within 3 years
revenue code (R.A. 8424) of the due of the filing of the return or the
actual filing - whichever is earlier
Inherent powers of the government Collection - 5 years from the date of the
1. Taxation - enforce contribution on assessment
its subjects 2. Equal protection of the law
2. Police - enact laws to protect its 3. Uniformity - classes are taxed
subjects differently but those who fall under
3. Eminent domain - take private the same class are taxed similarly
property with just compensation 4. Progressive system - tax rate
increases as base increases
5. Non-imprisonment for bills shall originate exclusively
non-payment of debt or poll tax in the house of representatives
- Applicable to debt acquired in good 16. The delegation of taxing power
faith to local government units
6. Non-impairment of obligation
and contract Stages of the exercise of taxation
7. Free worship rule - properties and power
revenues of religious groups are 1. Levy or imposition
not subject to tax except 2. Assessment and collection
commercial in nature
8. Exemption of religious, Levy or imposition
charitable, or educational -enactment of a tax law by congress and
entities, non-profit cemeteries, is called the impact of taxation.
churches, and mosques, lands, Bodies of congress
buildings, and improvements 1. House of representatives
from property taxes 2. The senate
9. Non- appropriation of public Discretion in the exercise of taxation
funds or property for the benefit (legislative)
of any church, sect, or system of 1. Object
religion 2. Tax rate or amount to be collected
10. Exemption from taxes of 3. Purpose or public use
revenues and assets of non 4. Kind of tax
profit, non-stock educational 5. Apportionment
institutions including grants, 6. Situs
endowments, donations, or 7. Method
contributions for educational
purposes - government Assessment and collection
educational institutions are Referred to as incidence of taxation
exempted from income tax and ● Implementation of tax law
subjects private educational Situs - place of taxation
institutions to minimal tax Examples of situs rules:
11. Concurrence of majority of all 1. Business tax situs - subject to tax
members of congress for the where the business is conducted
passage of law granting tax 2. Income tax situs on services -
exemption - for the the withdrawal where they are rendered
of tax exemption, only relative 3. Sale of goods - gains on sale
majority is required subject to tax in the place of sale
12. Non- diversification of tax 4. Property - taxed on their location
collections - tax collections should 5. Personal tax - place of residence
only be used for public purpose
13. Non-delegation of the power of Other fundamental doctrines
taxation 1. Marshall doctrine - carries with it
14. Non-impairment of the the power to destroy
jurisdiction of the supreme court 2. Holmes - not the power to destroy
to review tax cases while the court sits
15. The requirement that 3. Prospectivity of tax laws - law that
appropriations, revenue, or tariff retroacts is prohibited by the
constitution
 4. Non- compensation or set off
5. Non - assignment - cannot be
assigned to another entity or
Amnesty Condonation
person
6. Imprescriptibility in taxation Civil and criminal civil
7. Doctrine of estoppel
8. Judicial non-interference retrospectively prospectively
9. Strict construction of tax laws payment No payment
Elements of double taxation
1. Primary - same object
2. Secondary elements Chapter 2
- Same type of tax
- Same purpose of tax Taxation law - refers to any law that arise
- Same taxing jurisdiction from the exercise of the taxation power
- Same tax period
Direct double taxation - all elements of 1. Tax laws
double taxation are met (discouraged) a. NIRC - national internal
Indirect double taxation - one of the revenue code
secondary elements b. Tariff and customs code
c. Local tax code
Escapes from taxation d. Real property tax code
1. Tax evasion - illegally reduce or 2. Tax exemption laws -grants immunity
avoid payment of tax, tax dogding a. Minimum wage law
2. Tax avoidance - tax minimization b. Omnibus investment code if 1987
reduce tax legally c. Barangay microbusiness
3. Tax exemption - freedom from enterprise
being subject to tax d. Cooperative development act
B. do not result to loss of government Sources of tax law:
revenue 1. Constitution
1. Shifting - transferring tax to other 2. Statutes and presidential decrees
taxpayers 3. Judicial decisions or case laws
Forms of shifting 4. Executive orders and batas
a. Forward pambansa
b. Backward 5. Executive orders
c. Onward
2. Capitalization - adjustment of the value
of an asset caused by changes in tax Classification of taxes
rates
3. Transformation - elimination of wastes A. As to purpose
or losses [Link] or revenue
2. Regulatory
3. Sumptuary
B. As to subject matter
1. Personal, poll, or capitation
2. Real property
3. Excise or privilege
C. as to incidence
1. Direct - statutory taxpayer is the
economic taxpayer
2. Indirect - economic payer is other
than statutory
D. As to amount
1. Specific - per unit basis
2. Ad valorem
E. As to rate
1. Proportional
2. Progressive
3. Regressive
4. mixed
F. Imposing authority
1. National tax
a. Income tax
b. Estate tax
c. Donor’s tax
d. Other percentage
e. Documentary stamp
f. VAT
g. excise
2. Local
a. Real property tax
b. Professional tax
c. Business tax

Income - any inflow of wealth to the

taxpayer