Taxation Exemption for Religious, Charitable, and Educational Entities

Prohibition against Taxation

• Religious, charitable, and educational entities are exempt from taxation if they use their lands, buildings, and improvements exclusively for their respective purposes.
• Non-stock, non-profit educational institutions are exempt from taxes and duties if they use their properties directly and exclusively for educational purposes.

Inherent Limitations

• Territorial limits restrict the government's taxing power to its territorial jurisdiction.
• The government can only tax for public purposes, not for private gain.
• Governmental agencies performing purely governmental functions are exempt from taxation.
• The non-delegation doctrine limits the delegation of the taxing power of the legislature, except for the President's authority to fix tariff rates and other duties.

International Comity

• The Philippine Government generally cannot tax foreign ambassadors or impose real property taxes on foreign embassies.

Double Taxation

• There is no constitutional prohibition against double taxation, although it is not favored.
• Double taxation occurs when the same subject is taxed twice, by the same taxing authority, within the same jurisdiction, and during the same taxing period, covering the same kind or character of tax.

Classification of Taxes

• Taxes can be classified according to:
  • Scope or exercising authority (National Tax vs. Municipal or Local Tax)
  • Who bears the burden of the tax (Direct Tax vs. Indirect Tax)
  • Rate applied (Proportional, Progressive, or Regressive Tax)

Construction of Tax Laws

• Tax laws are generally prospective, but can have retrospective application.
• In case of doubt, tax laws are construed against the government and in favor of the citizen.
• Tax exemptions are construed strictly against the taxpayer, who must justify their claims.
• Revenue laws are not political in nature, and legislative intention must be considered.
• Tax laws are special laws that prevail over general laws.

Tax Avoidance and Evasion

• Shifting means transferring the burden of a tax to someone else, which is not the same as paying the tax.
• Capitalization involves increasing the value of a property without selling it.
• Tax exemption is freedom from paying tax.
• Tax avoidance involves exploiting loopholes in tax laws to minimize tax liability.