F.

LIMITATIONS ON THE POWER OF TAXATION

Inherent Limitations

1. It must be imposed for a public purpose.

2. If delegated either to the President or to an L.G.U., it should be validly delegated.

3. It is limited to the territorial jurisdiction of the taxing authority.

4. Government entities are exempted.

5. International comity is recognized i.e. property of foreign sovereigns are not subject to tax.

Constitutional limitations

– Indirect –

a) Due process clause

b) Equal protection clause

c) Freedom of the press

d) Religious freedom

e) Non-impairment clause

f) Law-making process –

1) It must be a One-subject – One - Title Rule

2) The must be a 3 readings on 3 separate days Rule except when there is a Certificate
of Emergency

3)Distribution of copies must be 3 days before the 3 rd and final reading

g) Presidential power to grant reprieves, commutations and pardons, and remit fines and forfeitures
after conviction by final judgment.

- Direct –

a) Revenue bill must originate exclusively in H.R. but the Senate may propose with amendments.
b) Non-imprisonment for non-payment of poll tax.

c) Taxation shall be uniform and equitable.

d) Congress shall evolve a progressive system of taxation.

e) Tax exemption of charitable institutions, churches and personages or convents appurtenant

thereto, mosques, non-profit cemeteries, and all lands, buildings and improvements ADE
(actually, directly , exclusively) used for charitable, religious, and educational purposes.

f) Tax exemption of all revenues and assets used ADE for educational purposes of –

1. Non-profit non-stock educational institutions.

2. Proprietary or cooperative educational institutions subject to limitations provided by law

including –

a) restriction on dividends

b) provisions for re-investments.

g) Tax exemption of grants, endowments, donations or contributions ADE for educational

purposes, subject to conditions prescribed by law.

h) No tax exemption without the concurrence of a majority of all members of Congress.

i) SC power to review judgments or orders of lower courts in all cases involving – legality of any
tax. Legality of any penalty imposed in relation thereto.

G. Stages or Aspects of Taxation

1. Levy or Imposition (Tax Legislation) – This refers to the enactment of a law by Congress
authorizing the imposition of tax. It further contemplates the determination of the subject of
taxation, purpose for which the tax shall be levied, fixing the rate of taxation and the rules of
taxation in general.

2. Assessment and Collection (Tax Administration) – This is the act of administration and
implementation of the tax law by executive through its administrative agencies.

The act of assessing and collecting taxes is administrative in character, and therefore can be
delegated (J. Dimaampao, 2015,).
 NOTE: The term “assessment” which here means notice and demand for payment of a tax
liability, should not be confused with “assessment” relative to a real property taxation, which
refers to the listing and valuation of taxable real property.

3. Payment – The act of compliance by the taxpayer, including such options, schemes or
remedies as may be legally available.

GR: Tax shall be paid by the person subject thereto at the time the return is filed (Sec. 56[A]
[1], NIRC).

XPN: When the tax due is in excess of P2,000, the taxpayer other than a corporation may
elect to pay the tax in 2 equal installments in which case, the first installment shall be paid at
the time the return is filed and the second installment, on or before July 15 following the close
of the calendar year (Sec. 56[A][2], NIRC).

NOTE: If any installment is not paid on or before the date fixed for its payment, the whole amount
of the tax unpaid becomes due and payable, together with delinquency penalties.

4. Refund – The recovery of any alleged amount to have been erroneously or illegally assessed
or collected, or of any penalty claimed to have been collected without authority, or of any sum
alleged to have been excessively, or in any manner wrongfully collected.
it should be for a public purpose.

Note: Refund is one of the remedies of the taxpayer. It is not a separate stage of taxation. It is deemed
included in the stage of payment.

H. Requisites of a Valid Tax

 The tax should be within the jurisdiction of the taxing authority

 It must be for a public purpose
 The rule of taxation must be uniform
 It guarantees against injustice to individuals, especially by way of notice and opportunity to be
heard be provided.
 It must not impinge on the inherent and Constitutional limitations on the power of taxation.