Power of Taxation - Power of taxation although inherent and

vested in Congress are subject to

- Involves the power to destroy used as a
inherent limitations.
tool for PP. That’s why exorbitant taxes
1. Constitutional limitations (imposed
are imposed on cigarettes and liquors.
by Constitution)
- Imposition of tax as a tool for PP
2. Power of taxation must only be
- Taxation presupposes income is
utilized for public purpose. – PPI vs.
generated by state
Fertiphil: SC sustained challenge by
- PP in collection of money vs. Taxation:
FertiPhil. Power of taxation wasn’t
PP in collection of money (e.g. building
exercised or public purpose because
permit tax requirement – Angeles
tax was in favor of private
University Foundation vs. Angeles City –
corporation.
SC: Building permit is not pursuant to
3. Considering that this power is
taxation but for PP)
vested in Congress, it adheres that
1. Doctrine enunciated in Gerochi vs.
what has been delegated to
Department of Energy – where the
Congress can’t be furthermore
primary purpose is regulation so
delegated (Potestas delagata non
raising revenue is secondary (PP). To
delegari potest). As a rule, this
raise revenue and regulation is
power may not be further
secondary (taxation). In this case it is
delegated. However, there is an
PP because it is for regulation of
exception: CONGRESS MAY BE
electrical supply. Where primary
AUTHORIZED TO DELEGATE TAXING
purpose is regulation and revenue
POWERS TO PRESIDENT AND
raising is secondary (PP).
AMONG OTHERS (Sec. 28, Art. 6,
2. PP has non-revenue purposes…
par. 2): on fixing tariff rates
REGULATION.
delegated to President in
3. If taxation is exercised for PP, it is for
accordance with a law passed. Can
public welfare.
be delegated to administrative
4. Reduce social inequality (non-
bodies (BIR – to implement tax laws
revenue purpose of taxation) – done
but can’t enact tax laws but it can
through system of progressive
issue rules and regulations to guide
taxation. If income is high, you have
implementation of tax laws enacted
higher tax rate. 32% of net taxable
by Congress – power of subordinate
income. If not within the limit of
legislation). How about LGUs? Yes,
2000 per annum, you are exempt
they can enact tax ordinances. Is this
from paying income tax.
a delegated power by Congress? No.
5. Another non-revenue purpose is to
4. MIAA vs. CA – Properties owned by
spur economic development or
national government are not subject
progress. (tax incentive / tax relief)
to property taxes. Marcos vs. MCIAA
6. Non-revenue purpose of taxation:
– SC said that MCIAA is a GOCC such
tool for protection (higher tax on
that applying provisions of the local
imported cigarettes and lower rates
government code the tax exemption
for local cigarettes)
has been withdrawn. In the case of
7. Primary purpose of taxation: raise
MIAA, the SC said that MIAA is not a
revenue for government
 GOCC but an instrumentality of the
government. In the case of MIAA,
the properties registered in MIAA
are still properties of the state and
that they are still belonging to public
domain and are exempt from
property taxes. In the case of MIAA
just like MCIAA is an instrumentality
of the state. The City government of
Lapu-Lapu invoked MCIAA vs.
Marcos. MCIAA imposed MIAA vs.
CA. Did MCIAA win or the Lapu-
Lapu? Our SC upheld its ruling in
MIAA vs. CA. The MCIAA is
instrumentality for the government
hence its properties are used by
government except those leased to
private so they are exempt.
Properties owned by MCIAA to be
used by private are not exempt only
those directly utilized by
government are exempt.
5. The exercise of taxation adheres to
international committee principle.
All states are considered equal.
Under par in pari non habet
imperium, there is equality amongst
sovereigns. It is under this principle
that properties among foreign states
within our jurisdiction is beyond the
taxing power of the Philippines. Our
consular offices are exempt from
taxation in other states
6. It is exercised under the rule of the
territorial jurisdiction. It may only be
enforced within its territorial
jurisdiction - Exception:
Internal Revenue Code (Sec. 23, par.
A) – Income derived by permanent
resident Filipinos abroad are
taxable.
Constitutional limitations – imposed by our
Constitution:
1. Sec. 1 Art.3 – due process - no
deprivation of life, liberty, and property
without due process. Congress can’t
impose law that imposes 80% of income
because it is unjust. This is taking in
violation of due process. Whenever
Congress enacts law fixing tax rate,
Congress has to conduct hearing. Where
tax rate is dependent on value of
property, hearing is required in the form
of assessment. Gen. rule: Fixing of taxes
= not required to conduct hearing.
2. Sec. 1 of Art. 3 – equal protection – all
persons or things belonging to same
class are subject to same rate, same
rights or same obligations. It doesn’t
follow that law can’t make distinction…
Classification is allowed still. Any
classification is valid if founded on
substantial differences, must be
germane to purpose of law, and all
persons and things are subject to same
rights and obligations. (e.g. higher tax on
imported cigarettes than local cigarettes
– to protect local products)
3. Sec. 5 Art. 3 – no law shall be passed
respecting the establishment of religion
– no violation of religion – American
Bible vs. City of Manila – they are not
liable to payment of tax nor secure
mayor’s permit because requiring tax is
violative of freedom of religion.
4. Sec. 10, Art. 3 – no law impairing
obligation of contracts shall be passed. –
Casanova vs. Hord – mining concession
granted to Casanova. Any such
additional tax impositions are invalid
because this impairs obligations and
contracts because the tax given was
onerous. The tax imposition is violative
of this constitutional provision. If
gratuitous, it can be withdrawn by
government (PAGCOR case – it was
provided in charter but congress
 withdrew exemption. PGACOR argue
that it impairs oblicon. SC said that tax
privilege granted to them was granted
gratuitously and can be withdrawn by
state with or without any cost. It
operates under legislative franchise that
if franchise given by state b=may be
altered, modified, or taken away by
state. Tax exemption was being
construed strictly against tax payant.
The only exception is when tax
exemption is given in favor of
government instrumentality – any
exemption must be construe din favor of
the instrumentality.
5. Sec. 20 of Art. 3 – no person shall be
imprisoned for non-payment of debt or
poll tax (cedula).
6. Sec. 28 par 1. Of Art. 6 – rule of taxation
shall be uniform and equitable.
Uniform= same class, same rate.
Equitable = tax must be based on
person’s capacity to pay.
7. Sec. 8 par. 3 of Art. 6 – charitable
institutions and etc. exclusively used for
charitable purpose shall be exempt from
taxation (refer to Constitution). –
property tax exemption only. The
exemption of real property tax is
premised on the utilization of the
property. The exemption is based on
USE and UTILIZATION of the property.
8. In order that exemption is granted, the
land is directly and exclusively used for
such purposes. (refer to Lung Center
case - SC said that what should be
exempt is only that portion that are
actually, directly, and exclusively used
for said purposes. The private areas
leased will be imposed with property
taxes. Abra Valley College case also. It
doesn’t cover income tax exemption. Is
the income of the church and other
charitable institution taxable? Sec. 30 of
the NATIONAL INTERNAL REVENUE
CODE (Sec. 30) EXEMPTS THEM
PROVIDED THAT NO PART OF ITS ASSETS
OR PROFITS SHALL INURE TO ITS ANY
MEMBER, STOCKHOLDER, OR
ORGANIZER. If church owns to two
parcels, the other is leased to private
corporation then land is taxable (THE
ONE LEASED TO PRIVATE
CORPORATION). The income derived by
church from Jollibee is taxable
regardless of church or charitable use
(NIRC Art. 30). Donor’s tax? If we donate
to church, are we liable for donor’s tax?
Yes. Although donor’s tax exemption
isn’t covered but Sec. 101 of NIRC grants
donor’s tax exemption grants it to
church provided that not more than 30%
value of gift won’t be used for
administrative purposes.
9. Sec. 28, par. 4, Art. 6 – no law granting
tax exemption shall be passed without
concurrence of majority of all the
Congress members. We have to add up
members of House of Reps. And Senate
and divide it to ½.
10. Sec. 29 par. 2 of Art. 6 – No public money
or property shall be paid directly or
indirectly to support any church or sect
except priest or dignitary is assigned din
military… (Refer to Constitution). Where
there is revenue generated, the money
shall not be appropriated for sectarian
purposes. Prohibits disbursement of
public funds for sectarian purposes.
What about the Sinulog celebration?
Not prohibited. It ceases to become
purely religious but as a promotion of
Cebu for tourism purposes. If priest is
elected as mayor, can he get his salary?
What is prohibited is the disbursement
in his capacity as such. If elected as
mayor, he can receive his salary. After all
the payment is because he is elected not
 by being a priest. If priest is assigned in impositions are confiscatory and
armed forces? He can still get money violative of due process. This attacks
from government. If in penal institution? validity or acts as defense on the non-
He can still get money government. prohibition on double taxation. There is
11. Sec. 29, par. 3, Art. 6 – All money a case that was decided by SC where it
collected in tax levied for specific decided invalid the impositions of LG of
purpose shall be treated as special funds Manila that amounts to double taxation
are not that purpose only – the balance (Swedish Match and City Treasurer of
shall be transferred to national treasury. Manila – collecting taxes on petitioner
If for the rehab of the sugar plantation, based on section 14 and based on sec 41
it is only for that purpose. Excess shall be of the same tax ordinance. SC said that
transferred to general funds of the impositions to be made on the
government. petitioner amounts to double taxation.
12. Sec. 4, par. 3, Art. 14 – all revenues and Hence, SC declared ta assessment as
assets of non-stock and non-profit invalid a sit is oppressive.
organizations used directly and
exclusively for educational purposes
shall be exempt. EXEMPT FROM
CUSTOMS DUTIES AND TAXES.
13. Sec. 4, par. 4, Art. 14 – subject to
conditions prescribed by law, all grants
and donations used directly and
exclusively for education shall be
exempt. EXEMPTION OF DONOR’S TAX.
14. Sec. 27, Art. 6, par. 2 – tax law enacted
by Congress may be partially vetoed by
President.
15. Punzalan vs. City Government of Manila
– Double taxation issue. What is double
taxation? If there are additional
impositions reflected on the same
subject by the same taxing jurisdiction,
for same period and same purpose.
Impositions on Punzalan are from
different jurisdictions so not double
taxation. All descriptions must meet.
Double taxation if imposed on capital tax
on corporation and imposed on same
government owned by same
stockholders = double taxation because
it meets the descriptions. NO PROVISION
EXPRESSLY PROHIBITING DOUBLE
TAXATION. Use this as remedy: Sec. 1 of
Article – argue that additional