INHERENT LIMITATIONS OF TAXATION

1. The levy must be for a public purpose

2. Non-delegation of the legislative power to tax
3. Exemption from taxation of government entities
4. International comity

A. PUBLIC PURPOSE
 Taxes are exacted only for public purpose.
 It cannot be used for purely private purpose or for the exclusive benefit of private
person.
 Rationale: The power to tax exist for the general welfare; hence, implicit in its power
is the limitation that it should be used only for a public purpose.
 Example Cases:
o It is a general rule that the legislature is without power to appropriate public
revenue for anything but a public purpose. It is the essential character of the
direct object of the expenditure which must determine its validity as justifying a
tax, and not the magnitude of the interest to be affected nor the degree to
which the general advantage of the community, and thus the public welfare,
may be ultimately benefited by their promotion. Incidental to the public or to
the state, which results from the promotion of private interest and the
prosperity of private enterprises or business, does not justify their aid by the
use public money. (Pascual v. Secretary of Public Works)
o It is a robbery for the State to tax the citizen and use the funds generation for
a private purpose.  Public purpose does NOT only pertain to those purpose
which are traditionally viewed as essentially governmental function such as 
building roads and delivery of basic services, but also includes those purposes
designed to promote social justice. Thus, public money may now be used for
the relocation of illegal settlers, low-cost housing and urban or agrarian
reform. (Planters Product v. Fertiphil Corp.)
B. INHERENTLY LEGISLATIVE
 General Rule: Power to tax may not be delegated
 Exceptions:
o Delegation to the LGU
o Delegation to the President
o Delegation to the Administrative Agency
 Note: Delegation must pass the Completeness Test and Sufficient Standard Test. It
must not contravene the Constitutional provision and Inherent limitations of taxation.
 Example Cases:
o The power to impose taxes is one so unlimited in force and so searching in
extent, that the courts scarcely venture to declare that it is subject to any
restrictions whatever, except such as rest in the discretion of the authority
which exercises it.
o It is inherent in the power to tax that a state be free to select the subjects of
taxation, and it has been repeatedly held that “inequities which result from a
singling out of one particular class for taxation or exemption infringe no
 constitutional limitation. Taxation has been made the implement of the state’s
police power. At the bottom, the rate of tax is a matter better addressed to the
taxing legislature. (Tio v. Videogram Regulatory Board; Commissioner v.
Santos)
o To justify the nullification of a law, there must be a clear and unequivocal
breach of the Constitution, not a doubtful and argumentative implication. The
Court, following the time-honored doctrine of separation of powers, cannot
substitute its judgment for that of the President as to the wisdom, justice and
advisability of the adoption of the VAT. The Court can only look into and
determine whether or not EO 273 was enacted and made effective as law, in
the manner required by, and consistent with, the Constitution, and to make
sure that it was not issued in grave abuse of discretion amounting to lack or
excess of jurisdiction. (Kapatiran v. Tan)