Taxes – are enforced proportional contribution from
person and property levied by the State by virtue of its
sovereignty, for the support of govt and for all of its
public needs.
THEORIES OF TAXATION
1. LIFEBLOOD DOCTRINE – Taxes are the lifeblood
of the government and so should be collected
without unnecessary hindrance. Being such, their
prompt and certain availability is an imperious need
(CIR v. Algue; CIR v. Goodrich International Rubber
Co.)
2. NECESSITY DOCTRINE – Taxes proceed upon the
theory that the existence of government is a
necessity; that it cannot continue without the means
to pay its expenses and that for those means, it has
the right to compel all citizens and property within its
limit to contribute.
3. BENEFITS-PROTECTION THEORY (SYMBIOTIC
RELATIONSHIP DOCTRINE) – Taxes are what we
pay for a civilized society. In exchange for the
protection that the State gives to its citizens, taxes
must be correspondingly paid to it.
Jurisdiction over subjects and objects – The power to
tax can only be exercised within the territorial jurisdiction
of a taxing authority except when there exists privity of
relationship between taxing State and the object of tax.
BASIC PRINCIPLES OFA SOUND TAX
SYSTEM (FAT)
The ff principles have been suggested in order to make a
sound tax system but not necessarily to make the tax
valid:
1. Fiscal adequacy – sources of government must be
sufficient to meet government expenditures and
other public needs.
2. Administrative Feasibility – tax laws must be
capable of being effectively enforced with the least
inconvenience to the taxpayer.
3. Theoretical Justice – sound tax system must be
based on taxpayer’s ability to pay. This suggests
that taxation must be progressive in accordance with
the mandate of the Constitution.
NOTE: A law will retain its validity even if its not in
consonance with the principles of fiscal adequacy and
administrative feasibility because the Constitution
does not expressly require so. These principles are only
designed to make our tax system tax. However, if a tax
law runs contrary to the principle of theoretical justice,
such violation will render the law unconstitutional,
considering that under the Constitution, the rule of
taxation should be uniform and equitable.
STAGES OR ASPECTS OF TAXATION
1. Levy or imposition of tax (Tax legislation) –
the act of imposition by the legislature of tax on
person or property or excises. It includes the
discretion:
a. As to purposes for which it is levied,
b. As to subjects of tax
c. As to amount or rate of tax;
d. As to manner, means and agencies of
collection of taxes
2. Assessment and Collection (Tax
Administration) – the act of administration and
implementation of the tax law by the Executive
through its administrative agencies.
3. Payment – act of compliance by the taxpayer,
including such options, schemes or legal
remedies available to him.
4. Refund – recovery of any tax alleged to have
been erroneously or illegally assessed or
collected, or any penalty claimed to have been
collected without authority or of any sum alleged
to have been expressly or in any manner
wrongfully collected.
REQUISITES OF A VALID TAX
1. That either the person or property taxed be
within the JURISDICTION of taxing authority
2. Assessment and collection of certain kinds of
taxes guarantee against injustice, especially
by providing notice and opportunity for hearing
3. Should be for PUBLIC PURPOSE
4. The rule of taxation shall be UNIFORM
5. The tax must not IMPINGE on the inherent and
Consti limitations on the power of taxation.
PURPOSE OF TAXATION
REVENUE: Raise funds or property to enable the State
to promote the general welfare and protection of its
citizens.
NON-REVENUE:
1. Promotion of general welfare – implement of
police power in order to promote general welfare
(senior citizen discounts)
2. Regulation – used in the rehab and stabilization
of threatened industry which is affected w/ public
interest such as oil industry
3. Reduction of social inequality – progressive
system of tax (to prevent the undue
concentration of wealth in the hands of few
individuals)
4. Encourage economic growth – through tax
exemptions and reliefs (grant incentives to
encourage investments)
5. Protection – protective tariffs and customs are
imposed for the benefit of local industries.

CHARACTERISTICS OF TAXING
POWER
1. COMPREHESIVE – it covers persons, business,
activities, professions, rights and privileges

2. UNLIMITED – unlimited in force and searching

in extend that courts scarcely venture to declare
that is subject to any restriction except such as
rest in the discretion of authority w/c exercises it
3. PLENARY – complete
4. SUPREME –strongest of all powers of the
government, insofar as the selection of subject
of taxation is concerned

NON-IMPAIRMENT OF CONTRACTS: it means the rule

on inviolability of contracts may be set aside if the
objective is to promote the welfare of the people. Thus,
when there is a conflict between public and private
interests, the latter has to yield even if they are covered
by written agreements.

IN TAXATION:

No law impairing the obligation of contract shall be

passed. (Sec. 10, Art. III, 1987 Constitution)

The rule, however, does not apply to public utility

franchises or right since they are subject to amendment,
alteration or repeal by the Congress when the public
interest so requires.
RULES:  If not for public purpose – confiscation of
property
a. When the exemption is bilaterally agreed upon
between the government and the taxpayer – it cannot be
2. International Comity - state recognize the
withdrawn without violating the non-impairment clause.
generally accepted principles of international law
b. When it is unilaterally granted by law, and the same is as part of the law of the land.
withdrawn by virtue of another law – no violation.  PRINCIPLE OF SOVEREIGN
EQUALITY AMONG STATES – even
c. When the exemption is granted under a franchise – it strongest state cannot assume
may be withdrawn at any time thus, not a violation of the jurisdiction over another state.
non-impairment of contracts.  DOCTRINE OF SOVEREIGN
IMMUNITY - state cannot be sued
without its consent.
TWO-FOLD NATURE OF THE POWER  Limits the authority of the State and its
instrumentalities to effectively impose
OF TAXATION taxes on a sovereign state and its
instrumentalities as well as on its
1. It is an inherent attribute of sovereignty
property held in that capacity.
2. It is legislative in character.  If state entered into valid international
obligations – ensure compliance

3. Inherently Legislative (Non-delegability of

“POWER TO TAX IS THE POWER TO taxing power)
DESTROY” GR: Power to tax is exclusively vested in
legislative body (what has been delegated
The power to tax includes the power to destroy if it is cannot be further delegated)
used as an implement of the police power (regulatory) of XPN:
the State in discouraging and in effect, ultimately i. Delegation to LGC
prohibiting certain things or enterprises inimical to the ii. Delegation to President (Flexible
public welfare. Tariff Clauses) and emergency
powers
POWER TO TAX IS NOT THE POWER iii. Delegation to Admin Agencies
TO DESTROY WHILE THE COURT (Power of Subordinate Legislation)
iv. Delegation to People at Large.
SITS”
DELEGATION ITSELF IS VALID.
Although the power to tax is almost unlimited, it is still
subject to inherent and constitutional limitation. It must TEST
not be exercised in an arbitrary manner. If the abuse is
so reat so as to destroy the natural and fundamental a. COMPLETENESS TEST – the policy to be
rights of people, it is the duty of the judiciary to hold such executed is complete in itself
an act unconstitutional.
b. SUFFICIENT STANDARD TEST – sufficiently
provides determinate and determinable
standards.
INHERENT LIMITATIONS OF
TAXATION (PINES)
4. Government agencies, instrumentalities’ and
1. Public Purpose – should be given a broad entities are EXEMPT from tax
interpretation. It does not only pertain to those
purposes’ w/c are traditionally viewed as GOVERNMENT AGENCIES (jure imperii)
essentially governmental fxs but also includes
GR: Government agencies, entities, and
those purposes designed to promote social
instrumentalities are exempt from tax.
justice.
 Public purpose is not defined. It is XPN: Expressly taxed.
elastic concept that can be hammered to
modern standards. GOVERNMENT AGENCIES performing proprietary
functions (jure gestionis)
GR: Taxable The Congress shall evolve a progressive system
of taxation - Direct taxes are to be preferred and
XPN: Exempted as much a possible indirect tax should be
GOCC minimized.

GR: Taxable since they are performing proprietary 3. UNIFORMITY AND EQUALITY OF TAXATION
functions The rule of taxation shall be uniform and
equitable.
XPN: Expressly granted exemption

a. GSIS, SSS, PhilHealth, Local Water Districts  Uniformity in taxation means that
persons or thins belonging to same
May the government tax itself? The Constitution is class shall be taxed at same rate.
SILENT on whether Congress is prohibited from
taxing the properties of agencies of govt. Hence,  Equality – tax shall be strictly
nothing can prevent Congress from decreeing that proportional to the relative value of the
even inst. Or agencies of GOVT (acting jure imperii) property.
may be subject to tax.
4. DELEGATED AUTHORITY OF PRESIDENT TO
5. Territoriality/Situs of Tax IMPOSE TARIFF RATES, IMPORT AND
EXPORT QUOTAS, TONNAGES AND
It is the place or authority that has the right to WHARFAGE DUES (FLEXIBLE TARIFF
impose and collect taxes. Place of taxation. CLAUSE)

FROM SOURCES SOURCES W/O

WITHIN 5. ORIGIN OF ALL REVENUE AND TARIFF
ALL KINDS ONLY RESIDENT BILLS AND APPROPRIATIONS (HOR)
OFTAXPAYERS. CITIZENS AND
DOMESTIC CORPOS
6. PROHIBITION ON USE OF TAX LEVIED FOR
ARE LIABLE TO
INCOME TAX DERIVED SPECIFIC PURPOSE
FROM SOURCES W/O All money collected on any tax levied for a
special purpose shall be treated as a special
REAL PROPERTY PERSONAL PROPERTY fund and paid out for such purpose only. If
Property is located (lex Tangible – physically the purpose for which a special fund was
rei sitae) located created has been fulfilled or abandoned, the
Intangible – GR: balance, if any, shall be transferred to the
Domicile of owner general funds of the Government.
(movables follow the
person)
7. VOTESS REQUIRED TO GRANT TAX
XPN: property has EXEMPTIONS (concurrence of MAJORITY OF
acquired a business situs ALL MEMERS OF CONGRESS, voting
in another; when law separately)
provides for situs of the
subject of tax

8. TAX EXEMPTIONS OF RELIGIOUS,

CONSTITUTIONAL LIMITATIONS OF
CHARITABLE AND EDUCATIONAL ENTITIES
TAXATION
A. Provisions directly affecting taxation KINDS INCOME RPT REMARKS
TAX
1. PROHIBITION AGAINST IMPRISONMENT Charitable TAX Consti Sec Congress
FOR NON-PAYMENT OF DEBT institutions, CODE 28(3) can pass a
churches Sec 30 law
2. PROGESSIVE SYSTEM OF TAXATION and (E) LGC Sec revoking it
parsonages 234 (B) (Income
or convents tax) n of
appurtenant **USED of veterans, no
thereto, property part of its
mosque, for net income
non-profit religious, or asset
cemeteries charitable shall belong
and ALL or educ to or inures
LANDS, purposes to the
buildings NOT benefit of
and OWNERSH any
improvemen IP member,
ts organizer,
ADE used officer or
for any specific
religious, person
charitable
and educ Cooperative All All Internal
purposes s Internal revenue
Non-stock Consti Consti Art Congress revenue taxes -
non-profit Art XIV XIV Sec cannot taxes - Exempt
Educationa Sec 4(3) 4(3) pass a law Exempt under
l revoking under Coop Code
institutions Tax “All it, because Coop
used ADE Code revenues the Code
for Sec 30 and Constituti (special
educational (H) assets” on law)
purposes guarantee
d
Also exemption 9. PRESIDENT’S VETO POWER
exempt from
from income tax   The President shall have the power to veto any
Custom and real particular item or items in an appropriation, revenue, or
s Duties property tariff bill, but the veto shall not affect the item or items to
tax which he does not object.
Proprietary 10% Art VI Sec
educational corporat 28(3)
institutions e “Actual 10. NON-IMPAIRMENT OF SUPREME COURT’S
income Use” JURISDICTION (W/O ITS CONCURRENCE)
tax

Tax SECTION 5. The Supreme Court shall have the following

code powers:
(Sec 27
B) (2) Review, revise, reverse, modify, or affirm on appeal
Government Tax Inherent or certiorari, as the law or the Rules of Court may
educ Code Limitations provide, final judgments and orders of lower courts in:
institutions Sec 30
(I) (b) All cases involving the legality of any tax, impost,
assessment, or toll, or any penalty imposed in relation
Non-stock Tax thereto.
corp or Code Taxable
Assoc Sec 30 The courts cannot inquire into the wisdom, morality or
organized (E) expediency of policies adopted by the political
and departments of government in areas w/c fall within their
operated authority, XPN only when such policies pose a clear and
exclusively present danger to the life, liberty or property of the
for scientific, individual.
athletic or
cultural 11. NON-APPROPRIATION OR USE OF PUBLIC
purposes or MONEY FOR RELIGIOUS PURPOSES
for the
rehabilitatio
No public money or property shall be appropriated for
religious purposes XPN except when such priest,
preacher, minister, or dignitary is assigned to the
armed forces, or to any penal institution, or government
orphanage or leprosarium.
12. PROHIBITION AGAINST TAXATION OF NON-
STOCK NON-PROFIT EDU INSTITUTIONS
The rights granted under the Cert of Registration
and Tax Exemption are not absolute and conditional.
These certs are in the nature of LICENSES, which is
neither a property nor a property right. As such,
license can thus be revoked at any time since it does
not confer an absolute right.
4. RELIGIOUS FREEDOM

What is the effect to INCOME TAX AND RPT if the 5. FREEDOM OF SPEECH AND EXPRESSION
property of a NSNP educ institution is devoted to non-
educational related activity by the resulting income is use There is a curtailment of press freedom and expression
for educ purposes. of a tax is levied in order to suppress basic rights and
impose a prior restraint thereto.
a. RPT – subject to tax. It is the used of the
property that is determinative. 6. PRESIDENTIAL POWER TO GRANT
b. Income tax – exempt. (used ADE for educ REPRIEVES, COMMUTATIONS, PARDONS
purposes) AND REMIT FINES AND FORFEITURE AFTER
CONVICTION BY FINAL JUDGMENT
13. LGU’S POWER TO CREATE ITS OWN
SOURCES OF REVENUE 7. NO TAKING OF PRIVATE PROPERTY FOR
PUBLIC USE WITHOUT JUST
Each LGU shall have the power to create its own COMPENSATION
sources of revenues and to levy taxes, fees, and
charges subject to such guidelines and limitations as
the Congress may provide, consistent with the basic
policy of local autonomy.

B. Provisions indirectly affecting taxation

1. DUE PROCESS

Tax laws and enforcement must comply with

substantive (fair, just, and reasonable) and
procedural due process.

2. EQUAL PROTECTION

Requires that all persons or property of the same class

subjected to such legislation shall be treated alike under
like circumstances and conditions, both in privileges
conferred and the liabilities imposed.

a. Substantial distinction
b. Apply to both present and future conditions
c. Germane to the purpose of law
d. Apply equally to all members of same class.

3. NON-IMPAIRMENT OF OBLIGATION OF
CONTRACTS

GR: No law impairing the obligation of contracts

shall be passed applies to taxation. Applies when
the parties are government and private individual.

However, tax exemptions protected by non-

impairment clause are contractual tax exemptions,
NOT THOSE GRANTED BY FRACHISES OR
LICENSES.
OTHER DOCTRINES AVOIDANCE
A.k.a. Tax Minimization A.k.a. Tax Dodging
TAXPAYER’S CITIZEN’S
SUIT SUIT It is the exploitation by
the taxpayer of legally
It is an ILLEGAL MEANS
OF ESCAPING
Is a suit where Is a suit filed by a permissible alternative TAXATION.
taxpayers have been citizen where there is tax rates or methods of
allowed to sue where an allegation that he assessing taxable It connotes fraud through
there is a claim that has been or is about to property or income in the use of pretenses and
public funds are be denied some right order to avoid or reduce forbidden devices to
illegally disbursed or or privilege to which tax liability. lessen or defeat taxes.
that public money is he is lawfully entitled or
being deflected to any that he is about to be It is a tax saving device Three factors:
improper purpose, OR subjected to some within the means
sanctioned by law and 1. Ends to be achieved
that public funds are burdens or penalties
should be used by (payment of less/non-
wasted through the by reason of statute or taxpayer in good faith and payment when due)
enforcement of an act complained of. at arm’s length. 2. An accompanying
invalid or state of mind w/c is
unconstitutional law. described as evil, in
Requisites of locus standi for taxpayer to sue: bad faith, willful and
deliberate
1. Public funds derived from taxation are disbursed
by a political subdivision or instrumentality and in 3. A course of action
doing so, a law is violated or some irregularity is which is
committed, and UNLAWFUL.
2. Petitioner is directly affected by the alleged act. .

Doctrine of Transcendental Importance – in the WILLFUL BLINDNESS DOCTRINE – taxpayer’s

exercise of sound discretion, Court brushes aside the deliberate refusal or avoidance to verify the contents
procedural barrier and takes cognizance of a petition. It of his or her ITR and other documents.
dispenses with the requirement that petitioner has
 It is by reason of this doctrine that taxpayers cannot
experienced or is in actual danger of suffering direct and
simply invoke reliance on mere representations of
personal injury.
their accountants/authorized rep in order to avoid
liability for failure to pay the correct taxes.
IMPACT INCIDENCE (ignorancia legis non excusat).
The point on which tax is Incidence of taxation is
originally imposed or the point TO BE LIABLE: It is enough that taxpayer knows his or
the one on whom the tax on which the tax burden her obligation to file the required return and he has failed
is formally assessed. finally rests or settles to comply thereto in the manner required by law.
down.
The impact of taxation COMPROMISE ABATEMENT TAX AMNESTY
generally determines the A contract Entire tax Act of Congress
proper party to claim a whereby the liability is - without the
refund (Statutory parties, BY cancelled. concurrence of
Taxpayer) of MAKING a majority of all
erroneous imposed RECIPROCAL Art 204 (b) of the Members of
indirect taxes and CONCESSION NIRC as the Congress.
whether the indirect taxes S, avoid amended
can be passed on to an litigation or put General pardon
exempt buyer. an end to one (B)  Abate or or intentional
already Cancel a Tax overlooking by
commenced. Liability, the State of its
when: authority to
Art 204 (a) of impose
NIRC as (1)  The tax or penalties on
amended any portion persons
thereof appears otherwise guilty
(A)  to be unjustly of violating a tax
TAX TAX EVASION Compromise or excessively law.
the Payment of assessed; or
any Internal It partakes an to POST tax periods,
Revenue Tax, (2)  The absolute waiver RETROACTIVE
when: administration by the application
(1)  A and collection Government of
reasonable costs involved its right to collect
doubt as to the
validity of the
do not justify
the collection
from what is due
it and give tax
DOUBLE TAXATION – taxing the
claim against of the amount evaders who same subject or object twice by same
the taxpayer due. wish to relent a taxing power within the same taxable
exists; or chance to start period for the same purpose.
(2)  The with clean slate.
financial ** The grant of BROAD STRICT SENSE
position of the amnesty, similar SENSE or or direct duplicate or
taxpayer to a tax obnoxious
indirect duplicate
demonstrates a exemption must
Arises in the absence Is objectionable kind since it
clear inability be construed
of one or more of the VIOLATES EQUAL
to pay the strictly against
above-mentioned PROTECTION CLAUSE.
assessed tax. the taxpayer.
elements of direct
double taxation. 1. Same Property or
For cases of Cease to enjoy
subject matter is
financial immunities and
Allowed as long as taxed twice when it
incapacity, a privileges of
there is no violation of should be taxed
minimum tax amnesty:
EQUAL PROTECTION only once;
compromise 1.Fail to file
and UNIFORMITY 2. Both taxes are
rate equivalent SALN and
CLAUSES OF levied for same
to ten percent Tax Amnesty
CONSTITUTION. purpose
(10%) of the Return OR
i. Same
basic 2. Net
jurisdiction
assessed tax; worth in
ii. Same
and SALN as of
taxing
For other cases, December
period
a minimum 31, 2005 is
iii. Same kind
compromise proven to be
or
rate equivalent understated
character
to forty percent to the extent
of tax
(40%) of the of 30% or
USUAL Q: Is there double taxation. WON the other is a
basic more
assessed tax. tax or not. (e.g., toll or fees, or license, hence no double
tax)
** Reduction of CONSTITUTIONALITY: No constitutional prohibition
taxpayer’s
against double taxation in PH. But is something not
liability
favored, but is nevertheless permissible.
Who are allowed to compromise in behalf of the
government: If the properties are subjected to an additional tax
whereas others similarly situated are not similarly taxed,
1. CIR – can enter into criminal and civil liabilities
the owners would have the right to complain.
of the taxpayer
2. Collector of Customs – custom duties
3. Customs Commissioner – subject to approval MODES OF ELIMINATING
of Secretary of Finance (imposition of fines, DOUBLE TAXATION
surcharges and forfeitures)
4. Local Government Code – civil liability is not i. Tax credits
prohibited to be compromised ii. Reduction of Philippine income tax rate by
NRFC within the PH by imposing lower rate of
TAX AMNESTY TAX 15%
iii. Tax exemptions
EXEMPTION iv. Tax deductions – written off as deductions in GI
Immunity from all Immunity from civil v. Tax treaties – agreement bet countries
criminal, civil and liability only and is
specifying what items of income will be taxed by
administrative liabilities prospective in application.
authorities of the country where the income is
arising from non-payment
of taxes, APPLIES ONLY earned.
NO DOUBLE TAX
i. By taxing CORPORATE INCOME and SH
DIVIDENDS from SAME CORP
ii. Tax by STATE and LGC upon same occupation,
calling or activity
iii. RPT and INCOME TAX on same real estate
leased for earning purposes
iv. Taxes on taxpayer’s final product and storage
of raw materials used in production of final
product

IN CONNECTION WITH LIFEBLOOD DOCTRINE:

NO COMPENSATION OR SET-
OFF
Compensation or set-off takes place when two persons
are creditors and debtors of each other, in their own
right.

No set-off is admissible against the demands for taxes

levied for general or local governmental purposes since
a TAX LIABILITY IS A LEGAL OBLIGATION, not a
contractual obligation. And in line with the lifeblood
doctrine, that taxes being the lifeblood of the government
should be collected without unnecessary hindrance.

However, where both claims of the govt and taxpayer

against each other have already become due and
demandable and fully liquidated, set off may occur.

GENERALLY, INJUNCTION DOES NOT LIE

AGAINST THE COLLECTION OF TAXES
STATE IS NOT ESTOPPED FROM
COLLECTING TAX BY MISTAKE OR ERROS
OF ITS AGENTS
TAX EXEMPTIONS ARE NOT PRESUMED
AND CONSTRUED STRICTLY AGAINST THE
TAXPAYER