EH

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TAXATION I- WHERE WERE WE

Taxation (November 14, 2017)

History of Taxation

Student: The etymology of the word taxation comes from the Latin word “taxare” which means to
assess.

Atty: It has evolved to include the word “task” but there was a distinction where tax would refer to
any monetary obligation and task refer to a rendition of service. Then it evolve to a more compelling
connotation “duties” which is a sense of obligation. Tax is synonymous to duties that’s why we have
custom duties.

China does not necessarily mean that they started taxation, they happen to have the longest practice
of taxation.

Egyptians practiced taxation through their scribes to describe their tax collectors. One of the
enactments imposed by the Egyptians was the use of cooking oil. They would audit house to house
just to make sure that nobody would recycle the used cooking oil so that there will be no tax
avoidance. They also imposed another tax inferred in the Bible from the book of Genesis where it is
said that a fifth of all crops shall be given to the Pharaoh so that they can be assured of protection.

Greece imposed “eisphora” tax imposed on war. After the war, they have these practice to refund the
surplus of the collections of tax. The practice of refund of taxes. And they have tax imposed on
foreigners “meitoikion” who happen to have a parent equivalent to one drachma for male and half for
female.

Roman empire practiced the collection of custom duties called “portoria”. Caeser Augustus “most
brilliant strategist in the Roman Empire” he eliminated the publican as tax collectors of the central
government and transferred the power to tax to the cities. He started imposing the tax on 5%
inheritance tax to provide retirement funds for the military so that he can be sure that the military
would fight for him. Aside from that there’s already a practice of imposing a sales tax at the rate of
1% imposed first by the famous Roman emperor Julius Caesar. Augustus increased this to 4% in
relation to sale of slaves.

Great Britain, Leofre imposed very high taxes so Lady Godiva asked him to reduce this in return with
the condition that she would get naked. They started imposition of taxes when the Romans occupied
them. They also imposed income tax on land and properties which was termed as “danegeld”. Then
we will realize that it was GB that devised the modern income taxes we have.

GB conquered the big country US and the practice to tax trickled in the latter. During the colonial era,
there were a lot of taxes imposed but the most interesting one was that it was imposed on sugar we
call it the Molasses Act. When it was amended by what is known as the Sugar Act. But it seems that
the taxes imposed on sugar are not enough and so they started imposing taxes on all newspapers,
printed colonies, commercial and other significant documents. But after the British let go of the US
there was then a series of rebellion involving taxes, which has the interesting names. One is the
“Whiskey Rebellion” it was a rebellion on the excise tax imposed, which was very high. The other one
was “Fries Rebellion”.

Atty: We will realize class that the tax of the US is based on a very old law. Of course it has been
subject to several challenges when the US Supreme Court decided to uphold the Tax Act of 1864,
that’s how old their tax is. That’s where our tax law is based on because we just copied our tax laws
from the US. But if you have learned the tax history of other countries it may be best to learn our
history as well and how long we can trace our practice of imposing taxes. Was there a tax practice
prior to us being conquered by the Spaniards? How was it practiced?

TAX Committee: Aton, Bero, Cuadrasal, Velayo, Yanoyay


Student: it was started in the form of “mais”. They were given to the “datu”

Atty: there was this practice of giving your harvest to the datu still in exchange for the protection.
There was already a practice of imposing “buwis”. Then it evolved in Spanish era, which we give
taxes not only to the datus but also to the King of the Spain and we call it “tributes or tributo”. But it
was changed later in the form of “cedula personal” the proof of you paying taxes to Spain. Then it has
evolved to our current tax. WILL THIS COME IN THE BAR EXAM?

OF COURSE NOT! Haha. Why do we have to study?
So we can find relevance why there is this practice of imposing tax. “Ang hindi marunong lumingon sa
pinanggalingan, ay may stiffneck.”

Atty: But based on your readings there’s always a mention why taxes are imposed on certain
authorities. Why is that? What was the primary reason of imposition of taxes?
It seems that the almost always reason is to finance war-its either to protect or to extend your
territory or to protect one’s sovereignty.
After having learned the history we proceed to the general principles of taxation.

Atty: So how do we define taxation?

Student: Taxation is the process by which the sovereign through its lawmaking body raises income to
defray necessary expenses of the government.

Atty: What type of power? Who wills it? How is it created?

Student: No Atty. It is inherent. It goes along with the creation of the State so it is not created by
anyone.

Atty: Who gets to impose our taxes? Or who wills the power to tax?

Student: the Legislative body

Atty: Is this power unlimited?

Student: No. It is limited.

Atty: So that actually shows us the nature of the power to tax. First, it is inherent. Second, exercised
by the Legislative body. Third, it is subject to constitutional and inherent limitations. So that’s why it
may be best that we give a complete definition of what taxation is.
One jurisprudence would tell, taxation is a destructive power thus there has to be a constraint
(constitutional & inherent). There is an attribute of sovereignty thus there is no need of a law for it to
be created. Yes for a national govt but for local govt it’s not. The Constitution provides that local
govt’s power to tax has fiscal autonomy because the same is not inherent in the local govt.

Now the fact that the power to taxation is an inherent prerogative of the sovereignty it is derived
from a famous doctrine, the lifeblood theory. We hold taxes because it is necessary for the govt, so
that the govt can exist. Taxes happen to be the blood of the govt, so that it can continue to provide
public services.

The imposition of a tax comes to it a creation of a creation once which not necessarily written but can
infer from the acts of the govt, one w/c is a motivating factor for citizens to pay taxes. It is a social
contract that the citizens need to pay taxes and the govt will render services.
There is a case which actually mentions that, bec it is an incident of sovereignty one which comes
along the creation of State and if the State could be considered unlimited if only it is given the
 EH 407 SY 2017-2018 3
TAXATION I- WHERE WERE WE

opportunity to then the power is also unlimited. Growth of State=growth of power to tax. We
need to curtail this power so it is not abused. Limitation of that power has always take cognizance of
public interest.

Principles:
Ø It cannot be subject to set-off or compensation bec the govt needs money for its services.
Exception: one case, the SC mentioned that if both claims are due and demandable as well as
litigated then there can be compensation or set-off

Compensation is a mode of extinguishment where both parties are principal debtors and
creditors of each other, it involves a sum of a money, claims are both due and demandable.

Ø It is necessary thus, we cannot stop the govt on imposing taxes. (principle of no injunction
rule) exception: only if it will jeopardize interest of the govt and all taxpayers

Summary:
ü History of taxation
ü Nature of power of taxation


REMINDERS: Nov. 21, 2017 (Tuesday) Make up Class @4:30 to 5:30 then reg class 5:30-6:30

TAX Committee: Aton, Bero, Cuadrasal, Velayo, Yanoyay