the 
CONSTITUTIONAL LIMITATIONS - those limitations and limitations. There must be showing of an actual,
on the state's exercise of the taxing power specifically
provided by the particular provisions of the Philippine
Constitution.
a. Due process of law. , no person shall be deprived of
life, liberty or property without due process of law.
Substantive due process relates to the circumstances
and procedures in the passage of tax laws and ordinances
Procedural aspects in the implementation of the tax laws
and ordinances. Applied to taxation, due process
mandates that there should be a valid law imposing a tax
to a particular taxpayer, and should the taxpayer failed to
pay the same, it must be given each and every opportunity
to explain itself and justify. No law imposing a tax, then the
taxpayer shall not be collected such tax. On the other
hand, granting that the taxpayer failed to pay in full but
was not issued as assessment notice informing the facts
and the law of the assessment, still, the taxpayer could not
be held to pay. These are the essence of due process.
The taxing authority, while implementing the necessary
mandates of its office must give due respect to the
established procedures the way it works in an organized
society.
b. Equal protection of law. "...nor shall any person be
denied equal protection of law". Equal protection relates to
how a particular tax measure or ordinance is being applied
to persons or class of persons similarly situated. Thus, if
two entities falling on the same classification shall be
taxed similarly. Example, if an ordinance imposes a tax on
technicians and it happened that in a locality there was a
single technician, such technician cannot complain for
unequal application because the ordinance is made
applicable to all technicians belonging to the same class.
c. Non-imprisonment for non-payment of debt or poll
tax. Debt refers to a civil obligation that is payable in
money or in kind, while poll tax or community tax refers to
an charge or imposition administered by the local
government unit (LGU) where the taxpayer is located. The
prohibition admits the fact of inequality of distribution of
wealth in the society and provides for instances in extreme
poverty. This is likewise in furtherance of the basic
doctrine in civil law that civil liability does not put the
person liable behind bars. Applied to tax, while poll tax is
a basic mandate in the Local Government Code, its non-
payment does not entitle imprisonment.
d. Non-impairment of obligations of contracts. To
impair is to damage or to harm and obligation referred to is
the duty or commitment imposed upon by the valid
contract entered into by the contracting parties. Applied to
tax, a new tax law shall not be passed in such a way as to
impair or to prejudice the obligation of a contracting party
by virtue of a contract entered into with the state. This is to
give due respect to the contractual terms the state is bind
with respect to its contract with private individuals.
A theoretical example of this is, if an exemption is granted
by the state by virtue of a contract with a private entity for
which a valuable consideration is involved, then no new
law could later be passed to prejudice said exemption.
e. Rule of taxation shall be uniform and equitable. As
stated in uniform application above, uniformity relates to
classification of taxpayers to be subjected to tax. Equitable
on the other hand relates to the ability to pay the tax of
those that belong to the same class. In other words, it
refers to how much will each pay and the constitution
requires that there must be a reasonableclassification and
justification for the unequal imposition.
f. Separation of church and state. This is based on the
sad experiences during the Spanish regime where the
church had much to say about the governance of state.
Applied to tax, no public money from taxes shall be spent
for furtherance of religious activities. Thus, a municipality
cannot spend public funds for the celebration of its
municipal fiesta.
g. Exemption of educational, charitable,
and religious institutions. The state acknowledges the
valuable contribution of educating its inhabitants, benefits
brought about by charities on various programs for general
welfare, and thereligious well-being of its inhabitants to the
success and development of thesociety as a whole. Thus,
to encourage private individuals and entities for the
furtherance of this objectives, the constitution provided
certain tax exemptions from income, real property and
customs duties and taxes under specific circumstances
direct, and exclusive use and furtherance of such
objectives in order to be exempt to prevent abuse and
capitalization of such objectives to escape from tax.
h. Concurrence of the majority members of Congress
in granting tax exemption. Tax exemptions are immunity
from a particular tax that is being imposed to others
similarly situated. The more exemptions, the less
collections. Accordingly, in order to control and to see to it
that only those necessarily entitled must be provided
exemptions, the constitution require that such grant of tax
exemption shall be concurred by the vote of the majority of
the membership in the Congress. It should be noted that
Philippines is on a bicameral congress, the senate and the
lower house, thus, granting tax exemptions are not quite
easy to legislate.
i. Non-impairment of the jurisdiction of the Supreme
Court on tax cases. This is in furtherance of the
principles of check and balances. The jurisdiction of the
lower courts are based on the mercy of the laws passed
for the purpose, thus, may be modified and revised from
time to time. However, in the case of the Supreme Court,
no law can take its power to become the final arbiter of tax
cases.
j. Veto power of the President in tax bills. Generally, on
bills passed by Congress, the President is empowered to
either approve or disapprove a bill as a whole. If approved
or not acted upon within a certain period of time, it
becomes a law, and if vetoed, it does not become a law in
its entirety. Tax bills however, can be granted either fully
or partially. If a bill is granted partially, provisions which
are approved becomes part of the law while those
provisions vetoed upon becomes ineffective.
Freedom Of Speech And Of The Press (Art. III, Sec. 4,
1987 Constitution)
There is curtailment of press freedom and freedom of
thought and expression if a tax is
levied in order to suppress this basic right and impose a
prior restraint. (Tolentino vs.
Secretary of Finance, GR No. 115455, August 25, 1994)
Non-Infringement Of Religious Freedom And Worship
(Art. III, Sec. 5, 1987 Constitution)
A license tax or fee constitutes a curtailment of religious
freedom if imposed as a condition for its exercise.
Differences between Tax Avoidance and Tax Evasion
Tax avoidance
 is generally the legal exploitation of the tax regime to
one's own advantage, to attempt to reduce the
amount of tax that is payable by means that are within
the law whilst making a full disclosure of the material
information to the tax authorities. Examples of tax
avoidance involve using tax deductions, changing
one's business structure through incorporation or
establishing an offshore company in a tax haven.
 may be considered as either the amoral dodging of
one's duties to society, part of a strategy of not
supporting violent government activities or just the
right of every citizen to find all the legal ways to avoid
paying too much tax
Tax evasion
 is the general term for efforts by individuals, firms,
trusts and other entities to evade the payment of
taxes by illegal means. Tax evasion usually entails
taxpayers deliberately misrepresenting or concealing
the true state of their affairs to the tax authorities to
reduce their tax liability, and includes, in particular,
dishonest tax reporting (such as underdeclaring
income, profits or gains; or overstating deductions).
 is a crime in almost all countries and subjects the
guilty party to fines or even imprisonment.
Switzerland is one notable exception: tax fraud
(forging documents, for example) is considered a
crime, tax evasion (like underdeclaring assets) is
not.
 Indicia of Fraud in Taxation
a.Failure to declare for taxation purposes
trueand actual income derived from business for
twoconsecutive years, and
b.Substantial underdeclaration of income tax
returns of the taxpayer for four consecutive
years
coupled with overstatement of deduction.
→Evasion of the tax takes place only when
there are no proceeds. Evasion of Taxation
istantamount, fiscally speaking, to the
absenceof taxation.
Doctrine of Imprescriptibility
Imprescriptibility
- That cannot be lost or impaired by non-user, or by
the claims of another founded on prescription.
Rights of mere ability which a man may use or not
at pleasure, without any person's having a right to
prescribe to me on that subject, are
imprescriptible. The rights of navigation, fishing,
and others that may be exercised on the sea,
belonging to the right of mere ability, are
imprescriptible
- level, and the local business tax and real property tax
Imprescriptibility of Taxes
General Rule: Taxes are imprescriptible
Exception: When provided otherwise by the tax law
itself.
Example: NIRC provides for statutes of
limitation in the assessment and collection of
taxes therein imposed Important Point to Consider
1.The law on prescription, being a remedial
measure, should be liberally construed to
affordprotection as a corollary, the exceptions to
thelaw on prescription be strictly construed. (CIR vs
CA. G.R. No. 104171, Feb. 24, 1999)
Taxpayer’s suit
Taxpayer’s Suit - It is only when an act
complained of, which may include legislative
enactment, directly involves the illegal disbursement
of public funds derived from taxation that the
taxpayer’s suit may be allowed.
Double Taxation
There is said to be double taxation when the same
taxable item is taxed more than once by different
government agencies. Double taxation or direct
duplicate taxation as described in Philippine
jurisprudence exists when the same property is taxed
twice when it should be taxed just once, or the same
person is taxed more than once by the same
jurisdiction for the same reason.
The Philippine government’s imposition of the value
added tax (VAT) on professionals in January 2003
has made double taxation an even more interesting
issue. Among the questions that have been raised
include the legality and fairness of subjecting a
professional employee’s gross income to two taxes.
There are two forms of double taxation --juridical and
economic.
Juridical, arises when comparable taxes are imposed
by two or more taxing jurisdictions on the same
taxpayer in respect of the same taxable income or
capital.
Economic double taxation, on the other hand,
happens when more than one person is taxed on the
same item of income. A good example of this is the
taxation of corporate income at the level of the
corporation and at the level of the shareholder when
distributed in the form of dividend.
Our fundamental law does not specifically forbid
double taxation. The 1986 Philippine Constitution,
however, implies that double taxation if allowed may
violate public policy against excessive taxes. When
double taxation is not generally applied to all subjects,
it would go against the constitutional guarantees of
uniformity of taxation and equal protection.
In the present tax system, there are a number of
instances where the national and local governments
seem to practice and tolerate double taxation,
specifically in relation to VAT, professional tax and the
local business tax. A professional is liable to pay VAT
to the national government and, at the same time,
professional tax to the province. Businesses,
meanwhile, are subjected to VAT at the national level
and to a local business tax that is payable to the
municipality or city. In these two examples, a tax is
imposed on the same taxable base, for the same
reason, and by two sovereign levels of government.
The community tax is another example of double
taxation. This type of tax is imposed on income or
property value that is also subject to other forms of
taxes such as the income tax and VAT at the national
at the sub-national level.
It is also argued that the taxes imposed on property
such as estate tax, gift tax, capital gains tax and real
property tax result in double taxation. Observers
contend that the assets belonging to an estate have
already been subject to income tax before and
therefore, should not be taxed again.
Another instance of alleged double taxation is on
dividends. The tax on dividends was reintroduced in
the 1997 income tax system after it was abolished in
1986 together with the intercorporate dividends tax. It
was earlier argued that there was only one income
stream being subjected to both the corporate tax and
the tax on dividends. The Department of Finance,
however, maintains that a tax on dividend promotes
progressivity of the tax system since individuals
belonging to the two topmost income classes receive
dividend income.
The imposition of a VAT on the sale of services by
professionals like doctors, accountants and lawyers,
is also deemed as an instance of double taxation. To
professionals, their "value-added" upon which the
VAT is levied, is measured by their gross income that
is likewise subject to the income tax. Some believe
that this practice of taxing the same income twice is
excessive and burdensome.
The 1986 Philippine Constitution requires that the rule
of taxation be uniform and equitable to prevent undue
discrimination and the imposition of excessive taxes.