Philippine Taxation Stages and Powers

• Taxation: Exercising sovereign power to generate revenue for government expenses.

Stages of Taxation

• Levying/imposition involves creating tax laws, a legislative act generally done by Congress in the Philippines.
• Assessment is determining the correct tax amount due.
• Collection and payment involve adhering to tax law by the taxpayer.
• Executive/administrative collection and payment are handled by the Bureau of Internal Revenue (BIR).

Three Inherent Powers of a State

• Power to Tax
• Police Power
• Power of Eminent Domain

The Power to Tax

• It is plenary, unlimited, supreme, and comprehensive, subject to constitutional and inherent limits.
• Courts don't interfere with tax wisdom/policy as long as legislatures don't violate constitutional limits.

Police Power

• A sovereign state's inherent power regulates for public health, welfare, safety, and morals.

• It Governs liberty/property for public benefit.

• Police power is executed via taxation, levying taxes for public welfare promotion.

• The phrase "the power to tax is the power to destroy" describes taxation's vigor to raise revenue.

Power of Eminent Domain

• It is the inherent right to take private property for public use.
• The Constitution mandates just compensation.

Distinctions Among the Three Inherent Powers

• Taxation aims to fund state expenses.
• Police Power aims to promote general welfare through regulations.
• Eminent Domain aims to enable the State's property acquisition for public use.
• Taxation has no limit to exaction, while Police Power is limited to regulation/license costs.
• Eminent Domain involves no exaction but takes private property for public use.
• Taxation has no special individual benefit but general public protection.
• Police Power provides no direct individual benefit, but a healthy economic standard.
• Eminent Domain provides direct benefit as property owner compensation.
• Taxation does not allow obligations in contracts to be impaired. Bilateral tax exemptions can't be withdrawn.
• Police Power allows impairing contract obligations.
• Eminent Domain allows impairing contract obligations.
• Taxation: Taxes paid become public funds.
• Police Power: Restraint in property rights only, no transfer.
• Eminent Domain: Transfers property rights to the State.
• Taxation covers all persons, property, rights, and privileges.
• Police Power: covers persons, property, rights, privileges, and freedoms.
• Eminent Domain: Applies to specific property only.
• Taxation: Exercised by government/political subdivisions.
• Police Power: Exercised by government/political subdivisions.
• Eminent Domain: Exercised by public service entities/private utilities if authorized by law

Limitations on the Power to Tax

• Constitutional limitations
• Guarantees due process and equal protection.
• Taxation must be uniform/equitable, evolving into a progressive system.
• Uniformity taxes those in the same class at the same rate.
• Equality: Methods applied impartially.
• Equal protection recognizes factual differences without denying the state's right to classify reasonably.
• Being imprisoned for debt or poll tax non-payment is prohibited.
• Charities, churches, schools, etc., are exempt from property tax for religious, charitable, or educational use.
• Tax exemptions require a majority in Congress.
• Tax exemptions can be unilaterally given, bilaterally negotiated.
• Bilateral agreements cannot be withdrawn without violating non-impairment.
• Unilateral agreements can be withdrawn without violation.
• No laws establishing/prohibiting religious exercise can be made.
• Public funds cannot benefit religious institutions.
• Bills for appropriation, revenue, or tariffs originate in the House; the Senate may amend.
• Congress can authorize the President to set tariff rates, etc., within limits for national development.
• The Supreme Court reviews tax-related judgments.
• Non-stock, non-profit educational institutions' revenues/assets are exempt from taxes/duties if used directly/exclusively for education.
• The President can veto specific appropriation, revenue, or tariff bill items.
• Taxes for special purposes are treated as dedicated funds.
• Inherent limitations

Tax Levy Requirements

• Must apply within territorial limits.
• Must be for public purpose.
• Governments/agencies performing government functions are exempt.
• Local Government Units (LGUs), government agencies, or GOCCs in proprietary activities are subject to taxes.
• It Does not include GSIS, SSS, Pag-Ibig, Philhealth, and local water districts, which are exempt from income tax.
• The power to tax is legislative and non-delegable, with exceptions. Flexible Tariff Law / Clause; Local Government code; Collection
• International comity limits government authority to tax sovereign states/instrumentalities.
• Double Taxation
• Direct double taxation is discouraged but not prohibited.
• Has the same subject taxed twice, same authority, same jurisdiction, same period, same tax.
• Indirect double taxation is permissible.

Basic Principles of a Sound Tax System

• Fiscal Adequacy: Revenue must meet public expenditure demands.
• Equality/Theoretical Justice: Tax proportionate to payer ability.
• Administrative Feasibility: Laws should be convenient, just, and effective.

Theory/Basis of Taxation

• Life-blood theory: Taxes are vital for government function.
• Benefits Protection Theory: Taxes support a civilized society.
• Essential Elements/Characteristics: It is enforced, legislated, for public needs, proportionate, payable in money, jurisdiction-bound, and personal.

Classification of Taxes by Scope/Authority

• National tax imposed by the national government.
• Municipal/local tax imposed by local units.
• Tax Subject - Personal/poll tax: Fixed amount per person.
• Property tax is imposed on property.
• Excise tax imposed on acts, rights, or business.
• Responsibility for burden

Tax type distinctions

• Direct tax: Liability/burden on the same payer.
• Indirect tax: Impact on one, burden shifted to another.
• Purpose of tax - General/revenue tax: For general purposes.
• Special tax: For a determined purpose.
• Applied rate: Applied rate is proportional, progressive, regressive. It is measured amount specific, ad valorem.

Nature/Construction of Tax Laws

• Tax laws are generally prospective, but sometimes retrospective.
• Retrospective laws are limited to civil statutes, not penal/criminal ones.
• Tax laws are civil and can be applied retrospectively if stated.
• Tax laws are prospective unless legislature intends otherwise.
• Tax creates civil duty; non-payment creates criminal liability.

Taxation Statutes guidelines

• Statutes must impose taxes clearly/unambiguously.
• Doubt construed against the government if it imposes taxes.
• Tax exemptions are narrowly construed against the taxpayer.
• Grants exceptions must be anchored on law express provision.
• Revenue laws are non-political in nature.
• Legislative intent must be considered.
• Tax laws are special and superior to general laws.

Tax Laws Sources/Hierarchy

• Constitution
• Tax statutes (NIRC, tariffs, VAT, etc.)
• Executive orders/local tax ordinances.
• Tax treaties/conventions.
• Judicial decisions
• Administrative rules/regulations
• Tax official opinions/interpretations
• Forms of Escape from Taxation - Shifting the Burden, Capitalization, Transformation, Tax Exemption, Tax Avoidance, Tax Evasion, etc.

Tax vs Licenses

• Tax raises revenue; licenses regulate activities.
• Tax has constitutional limits while licenses have no limits on rates.
• Tax effect is unrelated to business legality; licenses ensure business legality.
• Tax vs Special Assessment
• Tax is applicable to all property in an area, while a special assessment applies only to property that benefits from the improvment.

Special Assessment

• A tax on property reflecting benefits conferred.
• Special assessments are based upon the doctrine that the affected property increases in value at least equal to the amount they are required to pay.
• Levied on land only

Tax and Debt Distinguished

• Tax stems from law; debt from contract.
• Tax is owed to government; debt to another party.
• Payment is money, no interest normally. Debt, the payment can be money, or property, interest is common, and it can be assigned.

Tax and Toll Distinguished

• Tax stems from sovereignty; toll stems from ownership.
• Tax imposed by the government, toll imposed by private entities.
• Taxes may be based on property, tolls are based on costs/improvements.

Tax Administration

• A system of assessing, collecting, and enforcing taxes with court judgment execution, run by Bureau of Internal Revenue (BIR).
• The BIR assesses/collects taxes, enforces forfeitures/penalties, executes judgments, and administers tax laws.
• CIR Powers include interpreting tax laws, deciding disputes, examining records, getting information, summoning persons, taking testimony, and making assessments.
• More CIR Powers include prescribing real property values, inquiring into bank deposits, accrediting tax preparers, etc.