TAX 1

OUTLINE
Atty. Percy Valsan Jun P. Donalvo, CPA

I. FUNDAMENTALS OF TAXATION
a. Definition

b. Nature and characteristics

i. Inherent
• Pepsi v. Municipality of Tanauan, 69 SCRA 460
• Tio v. Videogram Regulatory Board, GR L-75697, 18 Jun 1987
• Philippine Health Care v. CIR, GR 167330, 18 Sept 2009
• CIR v. SM Prime Holdings, GR 183505, 26 Feb 2010
• Republic v. Caguioa, GR 168584, 15 Oct 2007
• CIR v. Hon. Santos, GR 119252, 18 Aug 1997
ii. Legislative
1. Non-delegation principle
2. Exceptions
a. LGUs
b. President
c. Administrative Bodies
d. People at large
e. Cases
• ABAKADA v. Ermita, GR 168056, 1 Sept 2005
• CIR v. Fortune Tobacco, GR 167274-75, 21 Jul 2008
• Batangas Power v. Batangas City, GR 152675, 29 Apr 2004
• Manila Electric v. Province of Laguna, GR 131359, 5 May 1999
• Garcia v. Executive Secretary, GR 101273, 3 Jul 1992
• Ferrer, Jr. v. Bautista, GR 210551, 30 Jun 2015
• Film Development Council v. Colon Heritage, G.R. No. 203754, 16
Jun 2015
• Secretary of Finance v. Philippine Tobacco Institute, GR 210251, 17
Apr 2017

iii. Burden
iv. Jurisdiction
1. Territoriality
a. Exception
2. Situs of Taxation
a. Income tax
i. Within RP
ii. Without RP
iii. Partly within and without
1. CIR v. Baier-Nickle GR 153793, 29 Aug 2006
b. Property tax
c. Excise tax
d. Business tax

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 i. CIR v. Japan Airlines, GR 60714, 4 Oct 1991
ii. Iloilo Bottlers v. City of Iloilo, GR L-52019, 19 Aug
1998
iii. CIR v. BOAC, GR L-65773-74, 30 Apr 1987
v. Purpose of Taxation
1. Primary purpose
2. Secondary purpose
a. Batangas Power v. Batangas City, GR 152675, 29 April 2004
vi. Public Purpose
1. Planters Products v. Fertiphil, GR 166006, 14 Mar 2008
2. Pambansang Koalisyon v. Executive Secretary GR 147036-37, 10 Apr
2012

c. Comparison with Other Powers

i. Police Powers
1. Gerochi v. Department of Energy, GR 159796, 17 July 2007
2. Chevron v. Bases Conversion, 630 SCRA 519
3. Republic v. Bacolod-Murcia Co. GR L19824, 9 Jul 1966
4. Republic v. International Communications, GR 141667, 17 Jul 2006
5. PAL v. Edu, GR L-41383, 15 Aug 1988
6. Planters Products v. Fertiphil, GR 166006, 14 Mar 2008
7. Pambansang Koalisyon v. Executive Secretary GR 147036-37, 10 Apr
2012
8. Manila Memorial v. DSWD, et al., GR 175356, 3 Dec 2013
9. Ferrer v. Herbert Bautista, GR 210551, 30 Jun 2015
ii. Eminent Domain
1. CIR v. Central Luzon, GR 159647, 3 Dec 2013
2. Carlos Superdrug v. Velasco, Jr., GR 166494, 29 Jun 2007

d. Principles of a sound tax system

i. Fiscal adequacy
ii. Administrative feasibility
iii. Theoretical Justice
1. Chavez v. Ongpin, GR 76778, 6 June 1990
2. ABAKADA v. Ermita, GR 168056, 1 Sept 2005
3. Diaz, et al v. Secretary of Finance, GR 193007, 19 July 2011

e. Theory and Basis of Taxation

i. Necessity
ii. Ability to Pay
iii. Benefit-protection
iv. Lifeblood theory
1. No injunction rule; Exception,
a. Sec. 11, RA 1125 as amended by RA 9282
b. Angeles City v. Angeles Electric, 622 SCRA 43
2. Strict construction

f. Other Doctrines

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 i. Prospectivity
1. Commissioner v. Acosta, 529 SCRA 177
ii. Imprescriptibility
1. CIR v. Philippine Global Communications, GR 167146, 31 October
2006
iii. Double Taxation
1. Nursery Care Corporation v. Acevedo, GR 180651, 30 Jul 2014
2. City of Manila v. Coca-cola, 595 SCRA 299, GR 181845, 4 Aug 2009
3. Swedish Match v. City of Manila, GR 181277, 3 Jul 2013
4. Ericsson v. City of Pasig, 538 SCRA 99, GR 176667, 22 Nov 2007
5. CIR v. BPI, GR 147375, 26 Jun 2006
iv. Eliminating Double Taxation
1. Tax Treaties
a. CIR v. S.C. Johnson, GR 127105, 25 Jun 1999
2. Tax Credits
3. Tax Deduction
4. Tax Reduction

II. LIMITATIONS
a. Inherent Limitations
i. Public purpose
1. Planters Products v. Fertiphil, GR 166006, 14 Mar 2008
2. Pambansang Koalisyon v. Executive Secretary GR 147036-37, 10 Apr
2012
ii. Inherently legislative
1. Non-delegation, exceptions
iii. Territorial
1. Exception
iv. International Comity
1. Tañada v. Angara (GATT Case), GR 118295, 2 May 1997
v. Exemption of government entities
1. Mactan Cebu v. Marcos, GR 120082, 11 Sept 1996
2. Mactan Cebu v. City of Lapu-lapu, GR 181756, 15 Jun 2015

b. Constitutional
i. Due Process (Art. III, Sec. 1)
• CIR v. Metro Star, GR 185371
ii. Equal Protection (Art. III, Sec. 1)
1. Ferrer v. Bautista, GR 210551, 30 Jun 2015
iii. Uniformity and Equity in Taxation (Art. VI, Sec. 21)
• Sison v. Ancheta, 130 SCRA 654
• Tiu v. Court of Appeals, et al, GR No. 127410, 20 January 1999
• ABAKADA v. Ermita, GR 168056, 1 September 2005
• British American Tobacco v. Camacho, et al. GR 163583, 15 April
2009 (MR Resolution), also see the original decision date 20 August
2008.
• ABAKADA v. Purisima, GR 166715, 14 Aug 2008

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 • COC v. Hypermix, GR 179579, 1 Feb 2012
iv. Progressive Taxation (Art. VI, Sec. 21)
• Tolentino v. Secretary of Finance, GR 115455, 25 Aug 1994; 30 Oct
1995
• ABAKADA v. Ermita, GR 168056, 1 September 2005
v. Origin of Appropriation, Revenue, and Tariff Bills (Art. VI, Sec 24)
• Tolentino v. Secretary of Finance, GR 115455, 25 August 1994
• ABAKADA v. Ermita, GR 168056, 1 September 2005
vi. Voting Requirements for Tax Exemptions (Art. VI Sec. 28 (4))
• John Hay v. Lim, GR 119775, 14 October 2003
vii. Delegation to President to fix Tariff Rates, etc. (Art. VI, Sec. 28 (2))
viii. President’s Veto Power on Appropriation, Revenue, Tariff (Art. VI, Sec. 27
(2))
• CIR v. CTA and Manila Golf, GR L-47421, 14 May 1990
ix. Taxes Levied for Special Purpose (Art. VI, Sec. 29 (3))
• CIR v. CTA and Manila Golf, GR L-47421, 14 May 1990
x. Grant to LGUs to create its own source of revenue
xi. Flexible Tariff Clause (Art. VI, Sec. 28 (2))
• AKBAYAN v. Aquino, GR 170516, 16 July 2008
• Southern Cross Cement v. Cement Manufacturers, GR No. 158540, 3
August 2005)\
xii. Exemption from Real Property Taxes (Art. VI, Sec. 28 (3))
• Abra Valley College v. Aquino, 162 SCRA 106
• Roman Catholic Bishop v. Ilocos Norte, GR 27588, 31 December 1927.
• Lung Center v. Quezon City, GR 144104, 29 June 2004
• CIR v. St. Luke’s Medical Center, GR 195909, 26 Sept 2012
• Mactan-Cebu International Airport Authority v. City of Lapu-lapu,
GR 181756, 15 Jun 2015

xiii. Tax Exemption of Revenues, Assets, Including Donations to Educational

Institutions (Art. XIV, Sec. 4 (3) and (4))
xiv. Non-impairment of Supreme Court’s Jurisdiction in Tax Cases (Art. VIII, Sec.
5)
xv. Non-imprisonment for non-payment of poll tax (Art. III, Sec. 20)
• RA 7160 (Local Government Code), Secs. 159-164.
xvi. Freedom of Speech and of the Press
xvii. Religious Freedom
• Tolentino v. Secretary GR 115455, 30 October 1995
• American Bible v. City of Manila, GR L-9637, 30 April 1957
xviii. Non-impairment of contracts
• Manila Electric v. Province of Laguna, GR 131359, 5 May 1999

Judicial Review - Taxpayer’s Suit

• Anti-Graft League v. San Juan, GR 97787, 1 Aug 1996
• Landbank v. Cacurayan, GR 191667, 17 Apr 2013
• Remulla v. Maliksi, GR 171633, 18 Sept 2013

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II. ESCAPE FROM TAXATION
a. Shifting
i. Ways of shifting
ii. Taxes that can be shifted
iii. Impact v. Incidence of taxation
• Diageo Philippines v. Commissioner GR 183553, 11 November 2012
• Silkair v. Commissioner, GR 173594, 6 February 2008
b. Tax Avoidance

c. Tax Evasion
• BIR v. CA and Sps. Manly, GR 197590, 24 November 2014
• Commissioner v. Estate of Toda, Jr., GR 147188, 14 September 2004

d. Tax Exemption
i. Meaning
ii. Nature
iii. Kinds
i. Express
ii. Implied
iii. Contractual
iv. Rational/grounds for exemption
v. Revocation of tax exemption
• Film Development Council v. Colon Heritage, G.R. No. 203754 , 16
Jun 2015
e. Compensation
• South African Airways v. CIR, GR 180356, 16 February 2010
• Commissioner v. Esso Standard, 172 SCRA 364
f. Equitable Recoupment

g. Tax Amnesty
i. Definition
• CIR V. Transfield Philippines, Inc., GR 211449, 16 Jan 2019
ii. Distinguished from tax exemption
• CIR v. Philippine Aluminum Wheels, Inc., GR 216161, 9 Aug 2017
• Asia International v. CIR, GR 179115, 26 September 2012
• Philippine Banking Corporation v. CIR, 577 SCRA 366

III. CONSTRUCTION AND INTERPRETATION OF TAX LAWS

a. Tax Laws
• CIR v. Fortune Tobacco GR Nos 167274-75, 21 July 2008

b. Exemption and Exclusion

• Steag State Power, Inc. v. CIR, GR 205282, 14 Jan 2019
• Panasonic v. CIR, 612 SCRA 28
• CIR v. PAL, GR No180066,
• CIR v. SM Prime Holdings, GR 183505, 26 Feb. 2010

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 • Smart v. City of Davao, GR 155491,
• CIR v. Fortune Tobacco GR Nos 167274-75, 21 July 2008
• Commissioner v. Central Luzon, GR 159647, 16 April 2005
• Asia International Auctioneers, Inc. v. CIR, GR 179115, 26 September
2012
• CIR v. PAL, GR 188497, July 2009

c. Rules and Regulations

d. Penal provisions of tax laws

e. Non-retroactivity
i. Exceptions

f. Others
i. Mandatory and Directory Provisions
ii. Cases
• CIR v. Liquigaz, gr 215534, 18 Apr 2016
• Gulf Air Company v. CIR, GR 182045, 19 September 2012
• San Pablo v. CIR, GR 147749, 22 June 2006
• Pelizloy Realty Corporation v. Province of Benguet, GR 183137, 10
April 2013
• Alta Vista Golf v. The City of Cebu, GR 180235, 20 Jan 2016
• CIR v. Mirant Pagbilao, GR 180434, 20 Jan 2016
• Mandanas, et al. v. Executive Secretary, G.R. No. 199802, 10 Apr 2019

IV. TAXES
a. Stages of Taxation
i. Levy
ii. Assessment and collection
iii. Payment
iv. Refund
• Chavez v. Ongpin, et al. GR 76778, 6 June 1990
• ABAKADA v. Ermita, GR 168056, 1 September 2005
• Diaz, et al. v. Secretary of Finance, GR 193007, 19 July 2011

b. Definition, Nature, and Characteristics

c. Requisites of a valid tax

d. Kinds of Tax
i. As to object
i. Personal, capitation, or poll
ii. Property
iii. Privilege
ii. As to burden or incidence

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 i. Direct
ii. Indirect
• CIR v. Philippine Long Distance Telephone GR 140230, 15 December
2005
iii. As to tax rates
i. Specific
ii. Ad valorem
iii. Mixed
iv. As to purposes
i. General or fiscal
ii. Special, regulatory, or sumptuary
v. As t scope or authority
i. National – IRT
ii. Local – RPT, MT
vi. As to graduation
i. Progressive
ii. Regressive
iii. Proportionate

e. Tax v. Other Exactions

i. Tariff
ii. Toll
• Diaz v. Secretary of Finance, GR 193007, 19 July 2011
iii. License Fee
iv. Special Assessment
v. Debt
vi. Compromise/Compromise Penalty
vii. Penalty

f. Tax pyramiding
i. People v. Sandiganbayan, et al,