Taxation I

General Principles
As a process, it is a means by which the
sovereign, through its law-making body, raises
revenue to defray the necessary expenses of the
government. It is merely a way of apportioning the
costs of government among those who in some
measures are privileged to enoy its bene!ts and
must bear its burdens.
As a power, taxation refers to the inherent
power of the state to demand enforced
contributions for public purpose or purposes.
"axation is a symbiotic relationship, whereby
in exchange for the protection that the citi#ens get
from the government, taxes are paid.
$ature of "axation
%. It is an inherent attribute of sovereignty
&. It is legislative in character
'haracteristics of "axation
%. "he power of taxation is an incident of
sovereignty as it is inherent in the (tate, belonging
as a matter of right to every independent
government. It does need constitutional conferment.
'onstitutional provisions do not give rise to the
power to tax but merely impose limitations on what
would otherwise be an invincible power. $o attribute
of sovereignty is more pervading, and at no point
does the power of government a)ect more
constantly and intimately all the relations of life
than through the exactions made under it.
&. "he power to tax is inherent in the (tate,
and the (tate is free to select the obect of taxation,
such power being exclusively vested in the
legislature, except where the 'onstitution provides
otherwise.
"he 'ongress may by law authori#e the
President to !x within speci!ed limits, and subect to
such limitations and restrictions as it may impose,
tari) rates, import and export *uotas, tonnage and
wharf age dues, and other duties or imposts within
the framework of the national development program
of the Government.
+ach local government unit shall have the
power to create its own sources of revenues and to
levy taxes, fees, and charges subect to such
guidelines and limitations as the 'ongress may
provide, consistent with the basic policy of local
autonomy. (uch taxes, fees, and charges shall
accrue exclusively to the local governments.
,. It is subect to 'onstitutional and inherent
limitations- hence, it is not an absolute power that
can be exercised by the legislature anyway it
pleases.
Purpose of "axation
%. .evenue-raising
"o provide funds or property with which the
(tate promotes the general welfare and protection
of its citi#ens.
&. $on-revenue/special or regulatory
a0 Promotion of General 1elfare
b0 .egulation
c0 .eduction of (ocial Ine*uiality
d0 +ncourage +conomic Growth
e0 Protectionism
Principles of Sound Tax System
Fiscal Adequacy
"he sources of tax revenue should coincide
with, and approximate the needs of government
expenditure. $either an excess nor a de!ciency of
revenue vis-2-vis the needs of government would be
in keeping with the principle.
Administrative Feasibility
"ax laws should be capable of convenient,
ust and e)ective administration
Theoretical Justice
"he tax burden should be in proportion to
the taxpayer3s ability to pay. "he %456 'onstitution
re*uires taxation to be e*uitable and uniform.
Theory and Basis of Taxation
Lifeblood Theory
"axes are the lifeblood of the government,
being such, their prompt and certain availability is
an imperious need. 1ithout taxes, the government
would be paraly#ed for lack of motive power to
activate and operate it.
ecessity Theory
"axes proceed upon the theory that the existence of
the government is a necessity- that it cannot
continue without the means to pay its expenses-
and that for those means, it has the right to compel
all citi#ens and properties within its limits to
contribute.
Bene!ts"Protection Theory
"he basis of taxation is the reciprocal duty of
protection between the state and its inhabitants. In
return for the contributions, the taxpayer receives
the general advantages and protection which the
government a)ords the taxpayer and his property.
Jurisdiction over sub#ect and ob#ects

.ules7
a0 "ax laws cannot operate beyond a
(tate3s territorial limits.
b0 "he government cannot tax a particular
obect of taxation which is not within its territorial
urisdiction.
c0 Property outside ones urisdiction does
not receive any protection of the (tate.
d0 If a law is passed by 'ongress, it must
always see to it that the obect or subect of
taxation is within the territorial urisdiction of the
taxing authority.
$ouble taxation
Strict sense
.eferred to as direct duplicate taxation, it means7
%. "axing twice-
&. by the same taxing authority-
,. within the same urisdiction-
8. for the same purpose-
9. in the same year or taxing period-
:. some of the property in the territory
Broad sense
.eferred to as indirect double taxation, it is
taxation other than direct duplicate taxation. It
extends to all cases in which there is a burden of
two or more impositions.
Tax avoidance
Is the tax saving device within the means
sanctioned by law. "his method should be used by
the tax payer in good faith and at arms length. (CIR
v. Toda, Jr.)
Tax evasion
"he use by the taxpayer of illegal or
fraudulent means to defeat or lessen the payment
of tax.
;actors to <etermine7 =%0 end to be achieved, the
non-payment of tax when it is shown that a tax is
due- =&0 an accompanying state of mind which is
described as being >evil?- =,0 a course of action or
failure of action which is unlawful.
;raud @ is deemed to compromise anything
calculated to deceive.
- <isregards corporate personality
AAA may be assessed within %B yrs from discovery of
fraud
%xemption from taxation
It is the grant of immunity to particular
persons or corporations or to persons or
corporations of a particular class from a tax which
persons and corporations generally within the same
state or taxing district are obliged to pay. It is an
immunity or privilege- it is freedom from a !nancial
charge or burden to which others are subected.
ature of tax exemption
%0 It is a mere personal privilege of the
grantee.
&0 It is generally revocable by the
government unless the exemption is founded on a
contract which is contract which is protected from
impairment.
,0 It implies a waiver on the part of the
government of its right to collect what otherwise
would be due to it, and so is preudicial thereto.
80 It is not necessarily discriminatory so long
as the exemption has a reasonable foundation or
rational basis.
90 It is not transferable except if the law
expressly provides so.

&inds of tax exemption
%0 +xpress
1hen certain persons, property or
transactions are, by express provision, exempted
from all certain taxes, either entirely or in part.
&0 Implied
1hen a tax is levied on certain classes of
persons, properties, or transactions without
mentioning the other classes.
$I.'
(ec. % $ational .evenue 'ode of %446
(ec. & P/< of CI.7 A'"%"%SP
- Dnder 'ontrol E (upervision <F;
- Assessment E 'ollection of $I.", ;ee E
'harges
- +nforcement of forfeitures, penalties E !nes
- +xecution of Gudgment @ '"A / F.'ourt
- (upervisory E Police power
Sec. 15. Auth of IRO to Arrest and Seize
(ec. &%. (ources of .evenue7 $()%"PI%
a0 Income "ax-
b0 +state E <onor3s taxes-
c0 Halue-added tax-
d0 Percentage taxes-
e0 +xcise taxes-
f0 <ocumentary (tamp "axes-
g0 Fthers which can be collected by CI.
(ec. ,. 'hief FIcials of CI.
- =%0 'ommissioner =80 <eputy 'ommissioner
'ommissioner of CI.
(ec. 8. Power of 'CI. to Interpret E <ecide
su!"ect to revie# of Sec. of $inance
Aexclusive appellate urisdiction @ 'TA
(ec. &B8. Auth of 'CI. to 'ompromise, Abate, and
.efund or 'redit "axes. 'A*+'
A0 'ompromise when7 *$"I
%0 Reasona!%e dou!t as to validity of
claim against "P.
&0 ;inancial position "P. @ clear ina!i%it&
to 'a& assessed tax
A ;inancial Incapacity @ %BJ of basic assessed tax
A Fther cases 8BJ of basic assessed tax
,-. subect to a''rova% of (va%uation Board
composed of (ec. ,
C0 Abate or 'ancel tax7 %+/"A
1) ()cess or un"ust
&0 Admininstation and collection costs
do not "ustif& the amt due.
A All criminal violations may be compromised
except7 a0 those !led in court, or b0 involved in
fraud
c0 'redit or refund taxes illegally received
(ec. 9. Power of 'CI. to Fbtain Info,
(ummon/+xamine, E "ake "estimony. '(ST%
a0 +xamine @ Cooks, Paper, .ecord
b0 Fbtain @ Info on regular basis from any
oIce=r.0 of $ational E Kocal Gov3t,
government agencies and instrumentalities,
Cangko (entral ng Pilipinas, gov3t
owner/controlled corp.
c0 (ummon @ Person liable for tax or re*uired
to !le a return, or any oIcer or employee @
to give testimony
d0 "ake testimony
e0 'anvass @ revenue E in*uire liable "P.
(ec. :. Power of 'CI. to make assess*ents and
+rescri!e additional re*uirements for "ax
administration and enforcement.
<0 Ter*inate Ta) +eriod @ "P. to leave PL
or remove, hide or conceal property
o (end notice of <ecision to "P.
o .e*uest for immediate payment
+0 'CI. to +rescri!e Rea% +ro'ert& ,a%ue @
determination of fair market value. ;or
purpose of computing I.", whichever is
higher of7
o ;MH by 'CI.- or
o ;MH as shown by Provincial and 'ity
Assessors.
o 0rants to 'BI* to inquire ban1 deposits
other than Sec2 34f5
%0 <ecedent to determine estate
&0 ;ailure to pay tax due to !nancial incapacity
(ec. &B8 =a0 =&0
(ec. 6. Authority of 'CI. to delegate power @ rank
e*uivalent to division chief or higher
%6'7 a0 Power to recommend to (F;
b0 Power to issue rulings of -rst i*'ression
c0 (ec. &B8 a,b provided, that assessment
issued by regional oIces involving 5../ de-cienc&
or !e%o# sha%% !e Co*'ro*ised !& Re0iona%
(va%uation Board.
d0 Power to assign or reassign oIcers to est.
where excise taxes are kept.
(ec. 5. 'CI. to +nsure the Provision and <istribution
of ;orms and Acknowledgement of Payment of
"axes.
(ec. 4. Internal .evenue <istricts. @ with approval of
(F;, 'CI. shall divide PL into no. of revenue
districts @ under the supervision of .evenue <istrict
FIcer
(ec. %B. .evenue .egional <irector PI%"PI'
8

a0 Implement laws, rules and regulations
b0 Administer and enforce collection of taxes
c0 Issue Ketters of Auth for examination of "P.
d0 Provide +co, +Icient and e)ective service
e0 'oordinate with regional oIces
f0 'oordinate with KGD
g0 'ontrol over oIcers
h0 Perform delegated functions
(ecretary of ;inance
(ec. &88. (F; to promulgate .ules/.egulations
- Dpon recommendation of 'CI.
(ec. &8:. $on-.ectroactivity of .ulings
a0 "P. misstates or omits
b0 ;acts are materially di)erent from which
ruling is based
c0 "P. in badfaith