a ATENEO CENTRAL GENERAL PRINCIPLES Qt: What are the three elements of taxation? (C1S) 1. Enforced proportional Gontribution irom persons and properties: 2. Imposed by the State by virtue of its sovereignty; 3. Levied for the Support of the government. Q2: Explain the lifeblood theory of taxation. ‘Taxation is an inherent power of the Goverment. Taxes are the lifeblood of the goverment, for without taxes, the government can nether exist nor endure. As an example of the application of the ifeblood theory, injunction does not lie against the collection of national taxes. Q3: Explain the principles of @ sound tax system. (FAT) ‘The principles of a sound tax system are the following: 1. Eecal adequacy wich meane thatthe sources of reverue shouldbe sufcent to meat the demands 2 Eun o fore! jstice which means that he tmx bron shoud be prprtonate o the taxpayers abilty 10 is the so-called ability to pay principle); 3 raoaceatie fessby weich meone ft he tx law sous be capable of convenience, Nat and ‘effective administration. Q4: What are the inherent limitations on the power to tax? ‘The inherent imitations are those Imitations that exist despite the absence of an express constitutional provision thereon: (PINET) 1. Bublic purpose - power of taxation is exercised for @ pubic purpose and for the general welfare of the ‘State. Principle of Intemational comity - Comity is the respect accorded by nations: ta each other as co- 7 ‘equals. The property of a foreign state or government may not be taxed by another foreign state or 3. inherently legislative or Non-delegability of the taxing power — Only the legislature can exercise 4. ‘Tax Exemption of the State — entities exercising sovereign functions are tax-exempt, unless expressly ‘taxed. However, goverment agencies performing proprietary functions (like GOGCs) remain subject fotax. 5. ‘Territoriallty or situs of taxation — power to tax is limited to the territorial jurisdiction of the taxing ‘State. It is the place or authority that has the right to impose and collect taxes. QS: What are the constitutional provisions directly affecting taxation? Uniformity, equitabiity, and ‘3. Grant by Congress of authority to the President to fix tariff rates, import and export quotas, atc. 4. Tax exemption of properties actually, directly, and exclusively used for religious, charitable and ‘educational purposes . Exemption from taxes of the revenues and assets of non-stock, non-profit educational institutions. Power of local govemments to create is own sources of revenue and to levy taxes subject to Constitutional and Congressional litatons 9. Majority voting requirement in connection with the legislative grant of tax exemption 410. The provision which mandates that money collected on « tax levied for a public purpose shell be paid out for such purpose only ‘THE BLUE TIPS ARE EXCLUSIVELY FOR THE USE OF ATENEO BAR TAKERS FOR THE 2018 BAR EXAMINATIONS, UNAUTHORIZED USE AND REPRODUCTION OF THIS MATERIAL IS PROHIBITED. PAGE 3 OF 28R OPERATIONS 2018 TAXATION LAW BLUE TIPS Q6: Can Congress validly grant a discount to senior citizens from certaln sstabiishments and only allow such establishments to claim the discounts granted as « tax deduction and not ae a tax (DEL CASTILLO) Yes. The tax deduction scheme is a valid exercise of the State's police power. Trefaa that there was.no peso for peso reimbursement of the 20% discount given to senior ckizans does not the schome unconsttutiona (Mania Momoial Park v. Secretary of Department of Sociel Welfare end Development. 2013) 27; Willan erroneous interpretation of a BIR officer based on misapprehension of law put the government in estoppel? committed by its. No. The government is not estopped from collecting legitimate taxes because of the enor porte, Tho BIR is nok precked fom making a new irtrpetatin ofthe law apeoically when the ot interpretation was flawed. (Le Suerte Cigar & Cigarette Factory v. CIR, 2014) from income tax? What be the tax G8: When is & proprietary non-profit hospital exempt et Implication If they engage in for proft activities? Non-profit hospitals exert from income tax it they are organized and operated exclusively jor chartable parposes. the non-promt hospital eam income fom ls for-profit actives t wil retain 8 tox cnomption tor ta chertatie activites, but the income from for-prom activties will be subject ‘proterential rato of 10% under Section 27 (B), NIRC. (CIR v. St Luke's. 2012) What la the test to determine whether REVENUES of non-stock, non-profit educational ve arions are exempt from taxes based on the Conatitution? “The testis the actual, direct, and exclusive (ADE) usé of the revenues for educational purposes, not the Tricor ef said revonvoe. Thus, whan an NSNP eduoational institution proves that uses its revenues ADE for educational purposes, it shall be exempted from income tax, VAT. and LBT. This is known es the lization nule, (De La Salle University v. CIR, 2016) 210: What ie the test to determine whether ASSETS of non-ttock, non-profit educational Instinations are exempt from taxes based on the Constitution? ‘The test ie the ADE use of the sssets for educational purposes. Its real property ADE used for educational purposes are also exempt from RPT. (De La Sake University v. CIR, 2016) Q11: Distinguish the tax exemption granted by the Constitution to non-stock, non-profit ‘educational Institutions and proprietary educational institutions. ‘The tax exemption granted by the Constitution to non-stock. nan-profit educational institutions is not subject to limitations imposed by law. The privilege granted to them is conditioned only on the ADE use of their revenues and assets for educational purposes. in dear contrast. the tax privilege granted to the proprietary educational institutions may be subject to limitations imposed by law. (De La Salle University v. CIR. 2016) G12: What ere the conditions for the granting of the reduced rate of 10% on taxable income to proprietary educational institutions? |A propriatary educational institution is entitied to the reduced rate of 10% on taxable income if: 1. the proprietary educational institution is non-profit; and 2. its gross income from unrelated trade, business or activity does not exceed 50% gross income, (De La Sele University v. CIR, 2016) ae ‘13: Clark Special Economic Zone (CSEZ) imposed fees on taxpayers as payment movement of patrolaum Riel and Wom the ecomone, Are theee fess regeistory lose we tease? Regulatory fees. Fuel is a highty combustible product which, if left unchecked, poses. serous threat rd propery. There is 8 val tation between the royty fees and te coma ofregueton, we tre Hires the volume of fuel entering CSEZ, the greater the extent and frequency of aupervalon and inaporion "adr arr he aly, seuy, nd ere within te ecazana (Chron Phones. BCA, 2019) BLUE TIPS ARE EXCLUSIVELY FOR THE USE OF ATENEO BAR TAKERS 1 EXAMINATIONS. UNAUTHORIZED USE AND REPRODUCTION OF THES MATERIAL 1S PROWEIOR PAGE 4 OF 28ATENEO CENTRAL BAR OPERATIONS 2018 ‘TAXATION LAW BLUE TIPS 14: Way a tax exemption be withdrawn atthe pleasure ofthe taxing authority? Generally, yes. However, i the : tax exemption constitutes a binding contract and was for valuable {the government cannot unilaterally revoke the tax exemption. Distinguish tax exemption from tax amnesty. ‘Tax amnesty is immunity from all criminal and civil obligations arising from non-payment of taxes. t applies ‘only to past tax periods, hence one of retroactive application. Tax exemption is an immunity or privilege. ‘2 freedom from a charge or burden of which others are subjected. ans: Q16: Differentiate between double taxation In the strict sense and in the broad sense. Give an example of each. Double taxation in the strict sense pertains to direct double taxation. This means the taxpayer is taxed twice by the same taxing authonty, within the same taxing jrtedicion, for the same property and seme purpose. Double taxation in the broad sense pertains to indirect double taxation. This extends to al cases in which there is a burden of two or more impositions. Q17: Justice Holmes once sald: “The power to tax is not the power to destroy while this Court (the Supreme Court) sits." Describe the power to tax and its limitations, “The power to taxis an inherent power of the sovereign which is exercised through the legislature, to impose ‘burdens upon subjects and objects within its jurisdiction for the purpose of raising revenues to carry out the legitimate objects of goverment. Absent any limitation, it is unlimited, plenary, comprehensive and supreme. Hence, the presence of inherent and Constitutional imitations prevents abuse on the exercise of, the otherwise plenary and unlimited power. Its the Court's role to see to it that the exercise of the power does not transgress these limitations. Q18: What Ie the Doctrine of Equitable Recoupment? It allows a taxpayer whose claim for refund has prescribed to offset that said amount against a current tax llabatty. For example, Mr. A was not able to claim refund of 75,000 within the prescribed period but he has ‘a current tax lability of 100,000. Under this Doctrine, the tax due shail be 25,000 (computed as 100,000 — 75,000). This doctrine is nat allowed applicable in the Philippines. G19; Are petroleum companies that sell petroleum products to international carriers. exempt from paying excise taxes? Hf paid by the said companies, are they entitled to refund? ‘Yes. Exemnpting aviation fuel from excise tax and other impositions prohibits the passing of the excise tax {o Intemational cariers who buy petroleum products from local manufacturers/eelers. As the statutory taxpayer who ls drecty Kable to pay the excise tax, the company is ented to a refund or credit of the ‘excise taxes I pald for petroleum products sold to international cartier, the latter having been granted ‘exemption from the payment of sald exciee tax under Sec. 135 (a), NIRC. (Commissioner of Interne! Revenue v. Piipinas Shel Petroleum Corporation, 2016) 220: te an offine: carrier (an International air carrier with no flight operations to and from the Philippines) considered = special corporation and therefore taxable based on Its Gross Philippine No, the tax attaches only when the carriage of persons, excess baggage, caryo, and mail originated from the Philippines in a continuous and uninterupted flight, regardless of where the pessage documents wore sold. (Air Canada v. CIR, 2016) G21: What are the requisites of a taxpayer's sult? 41. Public funds are disbursed by a political subdivision or instrumentality and in doing 80, « lew is violated oF some imegularty is committed, and 2. Petitioner is directly aftected iby the alleged ultra vires act. ‘THE BLUE TIPS ARE EXCLUSIVELY FOR THE USE OF ATENEO BAR TAKERS FOR THE. EXAMINATIONS, UNAUTHORIZED USE AND REPRODUCTION OF TMi9 MATERIAL Is PROVOITED. PAGE 5 OF 28