Constitutional and Legal Basis for

Philippine Fiscal Administration

Lloyd Bautista
2009
 Elements of the State
State: community of people more or less numerous,
permanently occupying a definite territory, having a
government o which a great body of inhabitants
render obedience.
Sovereignty: supreme power of the state to command
and enforce obedience to its will from people within
its jurisdiction, and corollarily, to have freedom
from foreign control.
Government: aggregate of authorities that rule a society
Three Inherent Powers Of the State
1. Eminent domain: power to take private property
for public use upon paying just compensation
according to law.

2. Police power: to enact laws and regulations in

relation to persons and property to promote public
health, public morals, public safety, general
welfare, and convenience of the people.
 Taxation
3. Power of taxation: government is a necessity,
but government is powerless and the state
cannot exist within taxes, hence, it has right to
compel citizens to contribute to its upkeep.

The power to tax is inherently a legislative

power.
 Sources of Taxation
1. Congress
2. Laws and statutes (ex. PD 1158 as amended
or NIRC)
3. Administrative rules and regulations by the
DoF
4. Administrative rulings and opinions on tax
laws by BIR and BOC
5. Judicial decisions of the SC and CA
 Limitations on Power to tax
1. Public purpose
2. Non-delegation to a private person or entity
3. Exemptions under the laws
4. Observance of international comity
5. Territorial jurisdication
 Constitutional limitations
1. No person shall be deprived of life, liberty or property
without due process of law
2. Equal protection and impartial application of the law
prohibit class legislation. Everyone shall be treated equal
under like circumstances and conditions both in the
privileges conferred and liabilities imposed.
3. Rule of taxation shall be uniform and equitable and
Congress shall evolve a progressive system of taxation.

 Uniformity of application regardless of place and subject

 Equality results when they are similarly situated
 Equity implies reasonable classification
 Constitutional limitations
1. Non-impairment of contractual obligations (no law can alter
the relationship that results from a contract without the
consent of the contracting parties)
2. Non-imprisonment for debt or non-payment of the poll tax
3. Non-infringement of religious freedom, non-appropriation
for religious purposes, non-taxation of religious or
charitable entities and properties, and
4. Non-taxation of non-stock, non-profit educational
institutions
 Constitutional Limitations
1. Article VI, Section 28, numbers 1-4 of the 1987 Constitution
envision a tax system that is uniform and equitable
2. Section 28-2 gives authority to President, upon authority
from Congress, to fix tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties and imposts
3. Section 28-3 grants tax exemptions of charitable institutions,
churches and all lands, buildings, and improvements that are
actually, directly and exclusively used for religious,
charitable, or educational purposes. Grant of tax exemption
privilege is not without limit and may be done only with the
concurrence of Congress
 Legal Basis
4. Article X, Sections 5-6 devolved to LGUs power to
generate revenues through taxes, fees and charges.
5. Further, LGUs assured of two other revenue sources:
IRA, and equitable share in the proceeds of the utilization
of national wealth within their area
6. Others: RA 8424 (Tax Reform Act or the New National
Internal Revenue Code), PD 1464 as amended (Tariff and
Customs Code), Book II of RA 7160 (LGC) governing
LGU taxing powers, RA 1125 (creating Court of Tax
Appeals), and Omnibus Investment Code
 Constitutional and Legal Provisions
on Expenditure and Budgeting
Article VI, Sections 24, 25, 27 and 29 of 1987
Constitution: all appropriations, revenue or tariff bills
authorizing an increase in public debt must originate
exclusively from House of Representatives but the
Senate may propose or concur with amendments
General Appropriations Act: annual budget which is the
government’s financial plan
Issue of re-enacted budget
 Other Provisions:
1. Congress not allowed to raise total budget proposed by
the President
2. Congress not allowed to pass any law authorizing any
transfer of appropriation with certain exemptions
3. Offices authorized to use savings from other items: OP,
OP of the Senate, Senate, Office of HR Speaker,
Supreme Court, and the 3 constitutional commissions
4. Congress prohibited from reducing appropriations for the
Judiciary below the amount appropriated for the previous
year, but may increase such appropriations
 Other Provisions:
5. President has power to veto any particular item in
GAA, but can be overridden by a 2/3 vote of two
houses of Congress voting separately
6. Once budget is approved, money can be withdrawn
from the National Treasury
7. Programs not covered in GAA: special appropriations
law is required specifying purpose
 Other Provisions:
8. Prohibition on use, directly or indirectly, of any
public money or property for the benefit or support of
any sect, church, denomination, sectarian institution,
or system of religion, or of any priest, preacher,
minister or other religious teacher or dignitary as
such. But exempts priest or religious teacher
assigned to the armed forces, penal institution,
orphanage, etc.
9. Constitution mandates that education shall have the
highest budgetary priority14
 Constitutional and Legal Provision
on Borrowing
Two sections governing public borrowing: Section 20 of Article
VI, and Section 2 of Article XII

•The incurrence of foreign debt is an authority vested on the

President. Congress is limited to the designation of the members of
the Monetary Board who are required to report regularly to Congress
•Constitution does not prescribe a limit on foreign debt nor does it
provide for a limit on debt servicing
•PD 621 limited the total amount of loans, credits and indebtedness
to not more than $5 billion all at one time
•PD 1177 (Budget Reform Decree of 1977) automatically
appropriates debt service payments
The national government adopted laws
governing debt ceilings and debt caps.
However, the debt cap policy adopted during the
Aquino administration was short-lived, having
lasted for only three months. All attempts by
Congress to insert a debt cap provision in the
annual GAA never passed the veto power of
President Aquino.
 Constitutional Provisions on
Accounting and Auditing
1987 Constitution Article IX (D) Section 2 on COA:

COA shall be vested with the power, authority and duty to

examine, audit, and settle all accounts pertaining to the
revenues and expenditures or uses of funds and property,
owned or held in trust by the government, or any of its
subdivisions, agencies, or instrumentalities, including
GOCCs, and on a post-audit basis: a. constitutional bodies,
commissions and offices, b. autonomous SCUs, c. other
GOCCs and their subsidiaries, and d. non-governmental
entities receiving subsidy or equity from NG. In cases of
inadequate internal control system of audited agency, COA
may adopt necessary and appropriate measures such as
special pre-audit to correct deficiencies.
 Constitutional Provisions on
Accounting and Auditing
COA further authorized to have exclusive authority,
subject to certain limitations to define the scope of its
audit and examination, establish the techniques and
methods required, and promulgate accounting and
auditing rules and regulations, including those for the
prevention and disallowance of irregular, unnecessary,
excessive, extravagant, or unconscionable expenditures,
or uses of government funds and properties.