Taxation: Principles and Concepts

Taxation Basics

• Taxation is grounded in the principle of reciprocal duties.
• Taxes are paid in exchange for general government benefits like infrastructure and defense, not direct individual benefits.
• Eminent domain involves taking private property for public use with just compensation.
• Confiscation of prohibited commodities falls under police power.
• Horizontal equity in taxation requires considering the taxpayer's circumstances.
• Taxes are essential for government operations, like the lifeblood of the government.
• Taxation is a method for allocating government costs among the people.
• Taxation is an inherent state power that exists without explicit constitutional grants; the Constitution sets limitations and guidelines, not the power itself.
• Taxation is inherent in sovereignty.
• All governmental powers, including police power, are subject to Constitutional limitations.
• Reciprocal duty of support between the government and people is the basis of taxation.
• The scope of taxation is comprehensive, plenary, unlimited, and supreme.
• Constitutional exemption of religious, charitable entities primarily applies to real property tax, unless specified for income tax.
• Equal protection requires taxing taxpayers under similar circumstances equally.
• Taxation is subject to inherent and Constitutional limits.
• International comity implies courtesy between nations.
• Tax collection without a law violates Constitutional due process.
• Imprisonment for simple non-payment of tax is generally disallowed, unless it involves fraudulent acts like tax evasion.
• The lifeblood doctrine emphasizes taxes but doesn't allow disregarding legal obligations or contracts due to Constitutional constraints.
• Tax exemption laws generally need a majority vote in Congress; revenue bills originate in the House.
• Generally, the government does not tax itself with jurisdiction over entities and individuals.
• Courts uphold the government's right to collect taxes due to the lifeblood doctrine.
• The point at which a tax is levied is called the impact of taxation.
• Taxation is inherent in sovereignty, is a legislative function, and is subject to Constitutional limitations.
• The President of the Philippines cannot change tariffs or imposts without Congressional legislation.

Taxation Theories

• The power to tax includes the power to exempt.
• International double taxation: mitigated by allowance for tax credits, reciprocity, exemptions, not regional trade blockages.
• Public properties cannot be objects of taxation.
• Taxation power enforces proportional contributions for government support.
• The lifeblood doctrine emphasizes taxes are vital for state existence.
• Erroneous, vague tax laws are not interpreted liberally in favor of the government.
• The ability to pay theory suggests some taxpayers may be exempt if they cannot afford it.
• Exemption is construed in favor of the government against the taxpayer.
• Tax laws should not apply retroactively.
• Double taxation violates equal protection or uniformity.

Limitations of Taxation

• Territoriality is the concept of taxation based on the "situs of taxation."
• Tax exemptions based on contract and the Constitution are irrevocable.
• Every person must share government costs, and governments must improve the lives of people
• Only those who can pay tax can enjoy government protection.
• Personal benefit from the government isn't required before paying taxes.
• Courts do not examine the wisdom or necessity of tax law.
• An imposition can be both a tax and a regulation like a sumptuary tax.

Administrative & Legislative Roles

• Levying on taxpayers' property for tax delinquency is administrative.
• A tax holiday is a privilege of immunity from a tax burden.
• Assessing the tax is not a legislative act.
• Taxes cannot be subject to compensation or set-off.
• Taxation is the rule, and exemption is the exception
• CIR Commissioner does not have the power to reverse rulings of the Bureau of Internal Revenue.
• Silent tax impositions are considered as taxation to commence.

Provisions of Tax Laws

• When tax laws are silent, vague tax laws are construed against the government
• Absence of benefit from the government is not legally tenable in refusing to pay taxes.
• Raising revenue is the primary goal of taxation.
• Taxable items in the same class must be taxed at the same rate for uniformity.
• Religious or charitable exemptions apply only to real property tax.
• Real property tax is not applicable to educational organizations not devoted to education.
• Tax law passage requires the majority of Congress.
• Non-appropriation for religious purposes is a constitutional limitation.
• Uniform and equitable tax laws are an inherent limitation.
• Non-appropriation for religious purpose is an exception to inherent limitations
• Agreement among nations to lessen tax burden of their respective subjects referred to as international comity.
• Non-stock, non-profit educational institutions are constitutionally exempt from real property tax.

Violations

• Secretary of Finance issuing rules beyond a tax law violates non-delegation.
• Licensing the sale of religious literature violates Constitutional provisions.
• President cannot offer tax relief for existing tax delinquency, or it violates the power of taxation.
• Imposing a coverage of transplant specialists goes against uniformity.
• Incentives provided for cane farmers without granting tax exemptions for rice farmers is valid if there is valid classification of taxpayers.
• GOCCs are commercial in nature.
• The Philippine Congress cannot require foreign banks to collect taxes earned by Filipino residents in other territories.

Key Principles in Taxation

• Property Holdings pay real property tax.
• Tax exemptions are passed by a majority in Congress.
• Non-delegation of taxing power is Constitutional.
• Exemption is due to international comity.
• State police power is superior to the Constitution's non-impairment clause.
• Uniformity means taxing similar categories at the same rate.
• Assessing taxes is not a legislative act.
• The State's inherent powers are all state entities.
• Implementing police power requires public interest.

Taxation Powers

• Due Process limits powers.
• Licensing a business is police power.
• Congress exercises taxation powers.
• All powers are inherent in creating the government.
• The power that is considered to affect the least number of people is eminent domain.

Additional Key Points

• Government cannot exploit.
• Eminent domain does not raise money in the government.
• Cannot exempt police power but can exempt taxation.
• Provisions on taxation in the Philippine Constitution are grants of the power to tax
• If a tax law destroys businesses to raise money, then it is not valid.
• The power to tax includes the power to destroy.
• A fiscal tool can be used for general and economic purposes.
• Tax laws should be uniform and equitable.
• The incorrect tax collection is for public improvement only.
• Non-Delegation of taxing power is what is constitutional.
• Police power is superior, while taxation is the most regarded.