Lesson 1

GENERAL PRINCIPLES OF TAXATION

INTRODUCTION

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

PURPOSES OF TAXATION

The purposes of taxation maybe classified into the primary and secondary, to wit:

● Primary Purpose
o To provide funds or property with which to promote the general welfare and
protection of its citizens and to enable it to finance its multifarious activities
● Secondary Purpose
o To strengthen anemic enterprises by giving tax exemptions;
o To protect local industries against foreign competition through imposition of high
customs duties on imported goods;
o To reduce inequities in wealth and income by imposing progressively higher tax
rates;
o To prevent inflation by increasing taxes or ward off depression by decreasing
them.

SCOPE OF TAXATION

In the absence of constitutional restrictions and subject to the will of the legislative
bodies with whom it is entrusted and the discretion of the authorities which exercise it, the power
of taxation is unlimited, comprehensive, plenary and supreme, the principal check upon its abuse
resting in the responsibility of the members of the legislative to their constituents.

Since the power of tax is the strongest of all the powers of the government the legislative
is free to select the subjects or objects to be taxed. They may be persons, whether natural or
judicial; property, whether real or personal, tangible or intangible; business, transactions, rights
or privileges.

It is of course to be admitted for all its plenitude, the power to tax is not without
restrictions (Comm. Vs. Algue, G.R. No. L-28896, 17 Feb. 1998). Despite all its tenacity,
taxation is nonetheless subject to established limitations, such as those inherent in the power
itself or mandated by the constitutional precepts ( Vitug, Tax law and Jurisprudence, 3 Ed., p. 4)

THEORY AND BASIS OF TAXATION

● Theory – The power of taxation proceeds upon the theory that the existence of the
government is a necessity; that it cannot continue without the means to pay its expenses;
and that it has a right to compel all its citizens and property within the limitations to
contribute ( see 51 Am. Jr., 42-43).
● Basis – The basis of taxation is found on the reciprocal duties of protection and support
between the State and its inhabitants. The state receives taxes that it may be enacted to
carry out its mandates into effect and perform functions of government and the citizens
pays the portion of taxes demanded in order that he may, by means thereof, be secured in
the enjoyment of benefits of an organized society (Ibid). This is otherwise known as
benefit- received principle.

BASIS PRINCIPLES OF A SOUND TAX SYSTEM

● Fiscal Adequacy – The sources of revenue should be sufficient to meet the demands of
public expenditures
● Equality or Theoretical Justice – The tax burden should be proportionate to the
taxpayer’s ability to pay (This is the so-called Ability-to-Pay Principle)
● Administrative Feasibility – The tax laws should be capable of convenient, just, and
effective administration

NATURE OR CHARACTERISTICS OF THE STATE’S POWER TO TAX

● It is inherent in sovereignty. The power of taxation may be exercised by the State

although not expressly granted by the constitution.
● Legislative in character. It is only the legislature that can enact tax laws.
 ● Subject to constutional and inherent limitations. Taxation is not an absolute power
that can be exercised by the legislature anyway it pleases

LIMITATIONS ON THE POWER OF TAXATION

● Constitutional Limitations. Those restrictions found in the constitution or implied from

its provisions.
1. Due Process- No person shall be derived of life, liberty, or property without due
process of law, nor shall be denied the equal protection of the law.
2. Equal Protection of the laws – The constitutional provision on equal protection
of laws means that “no person or class of persons shall be deprived of the same
protection of laws enjoyed by other persons or other classes in the same place and
in like circumstances ( Phil Rural Electric Cooperatives Ass, Inc. vs. DILG, 403
SCRA 558)
3. Rules of uniformity and equity in taxation – The rule of taxation shall be
uniform and equitable. The Congress shall evolve a progressive system of
taxation. Uniformity of taxation means that all the taxable persons or property of
the same class shall be taxed at the uniform or same rate. There is uniformity of
taxation when the tax operates with the same force and effect on this subject
wherever found ( Churchill vs. Concepcion, 24 Phil 969)
4. Non-imprisonment for non-payment of poll tax – No person shall be
imprisoned for debt or non-payment of a poll tax.
5. Non-impairment of the obligations of contracts – No law impairing the
obligations of contracts shall be passed.

There is “impairment” when a law substantially invalidates, releases, or

extinguishes the obligations of a contract, or that derogates, substantial
contractual rights (Home Building & Loan Association vs. Blaisdell, 290 U.S.
398, Bar Reviewer in Taxation)

6. Non- Infringement of religious freedom – No law shall be made respecting the

establishment of religion, or prohibiting the free exercise thereof. The free
 exercise of religious profession and worship, without discrimination or
preference, shall forever be allowed. No religious test shall be required for the
exercise of civil or political rights.
7. No appropriations for religious purposes – No public money or property shall
be appropriated, applied, paid or employed, directly or indirectly, fot the use,
benefit, or support of any sect, church, denomination, sectarian, institution, or
system of religion, or of any priest, preacher, minister, or other religious teacher
or dignitary as such, except when such priest, preacher, minister or dignitary is
assigned to the armed forces, or to any penal institution, or government orphanage
or leprosarium.
8. Exemption of religious, charitable or educational entities, non-profit
cemeteries, and churches from taxation – Charitable institutions, churches, and
personage or convents appurtenant thereto, mosques, non-profit cemetaries, and
all lands, buildings and improvements, actually, directly, and exclusively used for
religious, charitable or educational purposes shall be exempt from taxation.

The word “exclusive” means primarily rather than solely (Hospital de San Juan de
Dios v. Pasay City, 16 SCRA 226). Thus, the admission of pay patients does not
detract from the charitable character of a hospital if all its funds are devoted
exclusively to the maintenance of the institution as a public charity.

9. Exemption of revenues and asset of non-stock, non-profit educational

institutions and donations for educational purposes from taxation – All
revenues and assets of non-stock, non-profit educational institutions used actually,
directly, and exclusively for educational purposes shall be exempt from taxes and
duties. Upon the dissolution or cessation of the corporate existence of such
institutions, their assets shall be disposed of in the manner provided by law.

Proprietary educational institutions, including those cooperatively owned may

likewise be entitled to such exemptions, subject to the limitations provided by
law, including restrictions on dividends and provisions for reinvestments.
 Subject to the conditions prescribed by law, all grants, endowments, donations or
contributions used actually, directly, and exclusively for educational purposes
shall be exempt from tax.

Comparison of Charitable, Educational & Religious Institution against Non-

Stock, Non- Proft Educational Institutions:

Who are exempt? Charitable, educational & Non-Stock, Non-Profit

Religious Institutions educational Institutions
What taxes are exempt? Property Tax Income Tax, Property tax,
Custom Duties

10. Concurrence by a majority of all the members of the congress for the passage
of a law granting any tax exemption – No law granting any tax exemption shall
be passed without the concurrence of a majority of all the members of the
Congress.
11. Power of the President to veto any particular item or items in a revenue or
tariff bill – The President shall have the power to veto any particular item or
items in an appropriation, revenue, or tariff bill, but the veto shall not affect the
item or items to which he does not object.

● Inherent Limitations. Those which restrict the power although they are not embodied in
the constitution.
1. Requirement that levy must be for a public purpose
2. Non- delegation of the legislative power to tax – The rule is “ potestas delegata
non delegare potest” what has been delegated cannot be delegated. The people
created a legislative department for the exercise of legislative power. Thus, this
power should not be delegated to any other person or body. However, delegation
of this power is permitted in the following cases:
 ▪ Delegation to the President. This is based on the section 28(2) of Article
VI of the Constitution which provides that “the Congress may be law
authorize the President to fix within the specified limits, and subject to
such limitations and restrictions as it may impose tariff rates, import and
export quotas, tonnage and wharfage dues, and other duties or imposts,
within the framework of the national development program of the
government.”
▪ Delegation to local governments. The reason for this is that local
legislatures are in a better position to enact necessary and appropriate
legislation considering that they are more knowledgeable than the national
lawmaking body on matters of purely local concern.

Section 5, Article X of the Constitution provides that “each local

government unit shall have the power to create its own sources of
revenues and levy taxes, fees and charges, subject to such guidelines and
limitations as the Congress may provide, consistent with the basic policy
of local autonomy. Such taxes, fees and charges shall accrue exclusively
to the local governments.

▪ Delegation to administrative bodies – This is otherwise known as the

“power of subordinate legislation’. To be valid, (1) the delegation must be
complete in itself, setting forth therein the policy to be executed, carried
out, or implemented by the delegate, and (2) the law must fix a standard –
the limits of which are sufficiently determinate and determinable – to
which the delegate must conform in the performance of his functions
( Abakada Guro Party List vs. Ermita, G. R. 168056, Sept. 1, 2005)
3. Exemption from taxation of government entities.
4. International comity – The term “comity” means recognition or respect accorded
by one jurisdiction within its territory over the law of another because they are
sovereign equals. As a consequence of international comity, no state can claim
jurisdiction over another ( par in parem non habet imperium)
 5. Territorial Jusrisdiction

ASPECTS OF TAXATION

1. Levy. Deals with the provisions of law which determines the person or property to be
taxed, the sum or sums to be raised, the rate thereof, and the time and manner of levying,
receiving and collecting the taxes.
2. Collection. Constituted of the provisions of law which prescribe the manner of enforcing
the obligation on the part of those taxed to pay the demand thus created.

ESSENTIAL ELEMENTS OF A TAX

1. Enforced contribution.
2. Generally payable in money.
3. Proportionate in character.
4. Levied on persons, property, or the exercise of a right or privelege
5. Levied by the state which has jurisdiction over the subject or object of taxation.
6. Levied by the lawmaking body of the state – The power of taxation can only be levied
by the Congress of the Philippines through enactment of tax statues. But this power is
also granted by the constitution to local government units, subject to such limitations as
may be provided by law.

It should be noted that Executive Order no. 273, otherwise known as the “Value added
Tax Law’ was enacted through issuance of an Executive Order by former President
Corazon C. Aquino. During that time, the country was under Revolutionary Government
where the executive and the legislative power were vested solely in the President of the
Philippines. During the Martial Law era, then President Marcos exercise also legislative
power despite the existence of the Interim Batasang Pambansa, including the power to
tax, through issuance of Presidential Decrees because he was vested such power in the
1973 Constitution.
7. Levied for Public Purpose or Purposes - The term “public purpose” includes the
following:
a. Construction of roads and bridges
b. Pensions to retired government employees and their widows and children
 c. Assistance to victims of calamities; and
d. Social welfare and health care projects.

CLASSIFICATION OF TAXES

1. As to Subject matter or object

a. Personal, poll or capitation – Tax of a fixed amount imposed on individuals,
whether citizens or not, residing within a specified territory without regard to their
property or the occupation in which they may be engaged.
Example: Community tax
b. Property – Tax imposed on property, whether real or personal in proportion
either to its value, or in accordance with some other reasonable meathod of
apportionment.
Example: Real Property Tax
c. Excise (Privelege Tax) – A tax imposed upon the performance of an act, the
enjoyment of a privilege, or the engaging in a occupation; any tax which does not
fall within the classification of a poll tax or a property tax.
Example: Income Tax, Donor’s tax, Estate Tax
2. As to who bears the burden
a. Direct – A tax that is demanded from the person who also shoulders the burden of
a tax.
Example: Income tax, Estate tax, Donor’s tax
b. Indirect – A tax demanded from one person in the expectation and intention that
he shall indemnify himself at the expense of another
Example: Value-added tax and percentage taxes
3. As to determination of amount
a. Specific – Tax of fixed amount imposed by the head or number, or by some
standard of weight or measurement; it requires no assessment other than a listing
of classification of the subjects to be taxed.
Examples: Excise tax on distilled spirits, cigars, cigarettes
b. Ad Valorem – Tax on fixed proportion of the value of the property with respect
to which the tax is assessed; it requires the intervention of assessors or appraisers
 to estimate the value of such property before the amount due from each taxpayer
can be determined.
Examples: Real Property Tax
4. As to Purpose
a. General, fiscal or revenue – Tax that is imposed solely to raise revenue for
government expeditures
Examples: Income Tax, Value-added tax
b. Special or regulatory – Tax imposed for a special purpose, i.e. to achieve some
social or economic ends irrespective of whether revenue is actually raised or not.
Examples: Sugar adjustment taxes; Oil Price Stabilization Fund(OPSF)
5. As to authority imposing the same
a. National – Tax imposed by the national government
Examples: Internal revenue taxes, customs duties
b. Municipal or Local – Tax imposed by municipal corporations
Examples: Sand and gravel tax, Occupation tax
6. As to graduation or rate
a. Proportional – Tax based on a fixed percentage of the amount of the property,
receipts, or other basis to be taxed.
Examples: Value-added tax
b. Progressive – Tax the rate of which increases as the tax base or bracket increases.
Examples: Income tax, estate tax, donor’s tax
c. Regressive Tax – tax rate of which decreases as the tax base increases

THREE INHERENT POWER OF THE GOVERNMENT

The three inherent power of the government are the following:

1. Eminent Domain. The power of the state or those to whom the power has been delegated
to take private property for public use upon paying to the owner a just compensation
2. Police Power. The power of the state to enact such laws in relation to persons and
property as may promote public health, public morals, public safety, and the general
welfare of the people.
 3. Taxation. The power by which the sovereign, thru its legislature, raises revenue to
support the necessary expenditures of the government.

DISTINCTIONS- Eminent domain, police power and taxation

The three inherent powers of the State differ from each other in the following ways:

1. The police power regulates both liberty and property. The power of eminent domain and
the power of taxation affect only property rights.
2. The polic power and the power of taxation may be exercised only by the government.
The power of eminent domain may be exercised by some public entities or public service
companies.
3. The property taken in the exercise of the police power is destroyed because it is noxious
or intended for a noxious purpose. The property taken under the power of eminent
domain and the power of taxation is intended for a public use or purpose and is therefore
wholesome.
4. The compensation of the person subjected to police power is the intangible altruistic
feeling that he has contributed to the general welfare. The compensation involved in the
other powers is more concrete, to wit, a full and fair compensation of the property
expropriated or protection and public improvements for the taxes paid(Cruz, Political
law(1987], p. 37)
5. There is generally no limit on the amount of tax that may be imposed. In the police
power, the amount is limited to cover the cost of the license and the necessary expenses
of police surveillance and regulation; whereas, in eminent domain, there is no imposition,
rather the owner of the property taken is paid its market value.

TAX DISTINGUISHED FROM LICENSE FEE

Permit or license fee is a charged imposed under the police power for purposes of
regulation.
1. Taxes are levied by virtue of the taxing power; license fees are imposed by the virtue of
the police power
2. Taxes are levied for revenue; license fees are imposed for regulation;
 3. There is generally no limit on the amount of tax that may be imposed; license fees may
not exceed the amount necessary to defray the cost of regulation;
4. Taxes are imposed on the persons, property, business, occupation, or the exercise of any
privilege, whether legal or illegal; license fees may be imposed only on legitimate
businesses and occupation; and
5. Failure to pay taxes does not render the business or occupation illegal; non-payment of a
license fee renders the business or occupation illegal.

TAX DISTINGUISHED FROM TOLL

Toll is a sum of money for the use of something, generally applied to the consideration
which is paid for the use of a road, bridge or the like, of a public nature

1. Toll is demand of proprietorship; tax is a demand of sovereignty;

2. Toll is a compensation for the use of another’s property, or of improvements made by
him; taxes are levied for support of the government, and their amount is regulated by
necessities; and
3. A toll may be imposed by the government or private individuals or entities; a tax may be
imposed only by the State.

TAX DISTINGUISHED FROM SPECIAL ASSESSMENT

Special assessment is enforced proportional contribution from owners of lands for special
benefits resulting from public improvements.

1. Tax has general application; special assessment has special application only as to a
particular time and place;
2. Tax can be levied on land, persons, property, income, business, etc; special assessment is
levied only on land; and
3. Tax is based on necessity and partially on benefits; special assessment is based wholly on
benefits( Apostolic Prefect vs. Treasurer of Baguio, 71 Phil 547)

TAX DISTINGUISHED FROM DEBT

1. Debt generally arises from contract, express or implied; tax is created by law;
2. Debt is assignable; tax cannot generally be assigned;
 3. Debt may be paid in kind; tax is generally payable in money; and
4. A person cannot be imprisoned for non-payment of debt; imprisonment is a sanction for
non-payment of tax(except poll tax)

TAX DISTINGUISHED FROM CUSTOM DUTIES

A tax includes various kinds of imposition on persons or property, for supplying the
treasury as tribute, subsidy, excise, imposts, or customs; custom duties are taxes levied upon
commodities, imported into or exported across national boundaries. It follows that taxes include
customs duties; and an act granting exemption from all taxes of any kind and nature carries with
it exemptions from customs duties(Umali, Reviewer in Taxation[1977], p. 13)

DOUBLE TAXATION

In the strict sense ( referred to as direct duplicate or direct double taxation), it means
taxing twice for the same purpose, by the same taxing authority, in the same jurisdiction, in the
same period, some of the property in the territory.

In its broad sense ( referred to as indirect duplicate or indirect double taxation), which is
taxation other than direct duplicate, it extends to all cases in which there is a burden of two or
more pecuniary impositions.

In a long line of cases, The Supreme Court considered double taxation as not
unconstitutional although obnoxious. It is not in itself a valid defense against the validity of a tax
measure. But such taxation, while not forbidden is something not favored, that is why it should
be avoided and prevented whenever possible to avoid injustice or unfairness ( Pepsi Cola
Bottling Co. vs. Municipality of Tanauan, L-31156, Feb. 27, 1976)

However, double taxation may give rise to certain defenses that would render the tax
void, such as:

1. The two taxes which are of the same kind, nature, and from the same taxing authority
make taxation inequitable, excessive, oppresive, and unreasonable.
2. Uniformity in taxation is violated as when the first measure applies to all the members of
a certian class, while the second measure applies only to limited members of the same
class.
REVENUE
Revenue refers to all funds or income derived by the government whether from tax or any
other source
It may be derived from the following sources:
1. Grants received from another government;
2. Donations from non-government sources;
3. Loans from private entities or another government entity;
4. Commercial revenues such as those received by government-owned or controlled
enterprises;
5. Administrative revenues such as fines, penalties and forfeitures; and
6. Taxes such as internal revenues and customs duties
SITUS OF TAXATION
Situs of taxation means place of taxation. The rule is that the state which has jurisdiction
to tax the person, property or transactions may rightfully levy and collect the tax.

SITUS OF TAXATION SHALL BE AS FOLLOWS:

1. Business, occupation or transaction – Place where the business is conducted; the place
where the occupation is practiced; or the place where the transaction took place.
2. Real and tangible personal property – Location of property
3. Intangible personal property – Domicile of the owner unless the property acquired a
business situs in another jurisdiction
4. Income – Place where the same is earned, or citizenship or domicile of the owner.
5. Gratutious transfer of property – Residence or citizenship of the taxpayer, or location of
the property.
INTERPRETATION OF TAX LAWS
In case of doubt as to whether a taxpayer is covered by the tax or not, the doubt shall be
resolved in favor of the taxpayer and strictly against the government(Comm. Vs. Firemans Ins.
Co., G.R. L- 30644, March 9, 1987).
However, doubts as to the validity of tax exemptions are resolved liberally in favor of the
government and strictly against the taxpayer, except:
1. When the statute granting exemption provides for liberal constructions thereof;
 2. Exemptions in favor of the government, political subdivisions or
instrumentalities(Maceda vs. Macaraig, 197 SCRA 771)
3. Exemptions in favor of exemptees traditionally exempt such as churches and educational
institutions (Cooley); and
4. Special Circumstances to special classes of persons such as the granting of exemptions to
victims of the eruption of Mount Pinatubo.
FORMS OF ESCAPE FROM TAXATION
Escapes from taxation are means or methods by which the taxpayer saves the tax or
escapes the burden of tax payment.
The means resorted by the taxpayer may or may not result is loss of revenue to the
government. They may also be legal or illegal. With the exception of tax evasion, all are legal
means of escape from taxation.

THE BASIC FORMS OF ESCAPE FROM TAXATION ARE:

⮚ Those that do not reduce the revenue collection of the government:
1. Shifting. This is a transfer of the tax burden by one on whom the tax is assessed to
another. This is exemplified by the different taxes on business.
2. Capitalization. It is the reduction in the selling price of income- producing property by
the amount equal to the capitalized value of future taxes that may be paid by the
purchaser.
3. Transformation. It is a method by which the manufacturer or producer upon whom the
tax is imposed pays the tax and strives to recover such expense through lower production
cost without sacrificing the quality of his product. This is resorted to because of his fear
to loss his market if he will add tax to the selling price.
Shifting and capitalization are means of escape through process of exchange, while
transformations are means through process of production.

⮚ Those that result in loss of revenue to the government:

1. Tax evasion. It refers to fraudulent or forbidden schemes or devices designed to lessen or
defeat taxes (Yutivo Sons Hardware Co. vs. CTA, L13203, January 28, 1965). This is
known as tax dodging.
 2. Tax avoidance. The exploitation by the taxpayer of legally permissible alternative tax
rates or methods of assessing taxable property or income, in order to reduce tax
liability(also known as tax minimization)
3. Exemption from taxation. It is the grant of immunity to particular persons or
corporations of a particular class from a tax which persons and corporations generally
within the same taxing district are obliged to pay (51 Am. Jur. 503)
TAX AMNESTY
This is an immunity from all criminal and civil obligations arising from non-payment of
taxes. It is a general pardon given to all taxpayers; it applies only to past periods, hence of
retroactive application.
It is distinguished from tax exemption in the sense that while tax amnesty is immunity
from civil and criminal obligations, tax exemption is immunity from civil liability only.
Moreover, tax is prospective in application, while tax amnesty is retroactive.

DOCTRINE OF EQUITABLE RECOUPMENT

This doctrine states that where the refund of a tax illegaly or erroneously collected or
overpaid by the taxpayer is barred by prescription, a tax presently being assessed against a
taxpayer may be recouped or set-off against the tax whose refund is now barred by prescription.
In the case of University of Santo Tomas vs. Collector (104 Phil. 1062), the Supreme
court rejected this doctrine, saying that it was not convinced of the wisdom and propriety thereof,
and that it may work to tempt both the collecting agency and the taxpayer to delay and neglect
their respective pursuits of legal action within the period set by law.

RULES ON SET-OFF OR COMPENSATION

A claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-
off, neither are they are proper subject or recoupment since they do not arise out of the contract
or transaction.
In the case of Republic vs. Mambulao Lumber Company(4 SCRA 622), the court held
that “the general rule based on grounds of public policy is well settled that no set-off is
admissible against demands for taxes levied for general or local government purposes. The
reason is that taxes are not in the nature of contracts between the party but grow out of duty to,
and are the positive acts of the government to the making and enforcing of which, the personal
consent of individual taxpayer is not required.
However, in case of Domingo vs. Garlitos(8 SCRA 443), the Supreme Court has this ti
say : “the court having jurisdiction of the estate had found that the claim of the estate against the
government has been recognized and an amount of P262,200 has already been appropriated for
the purpose by a corresponding law. Under the above circumstances, both the claim of the
government on inheritance taxes and the claim of the intestate estate for services rendered have
become overdue and demandable as well as fully liquidated. Compensation therefore, takes place
by operation of law, in accordance with the provision of Article 1279 and 1290 of the Civil Code
and both debts are extinguished to concurrent amount.

TAXPAYER’S SUIT
A taxpayer has sufficient personality and interest to seek judicial assistance with a view
of restraining what he believes to be an attempt to unlawfully disburse public funds.

SOURCES OF TAX LAWS

Taxation is derived from:
1. The Constitution – The provisions of the Constitution dealing on taxation merely
regulate the exercise of the power of taxation. They are not actually grants of the power,
because taxation can be exercised by the government; as stated earlier, the power of
taxation is not a mere constitutional grant.
2. Statutory Enactments – This refers to the tax laws passsed by the Congress.
3. Administrative rulings and regulations – Administrative rulings are the less general
interpretation of tax laws which are issued from time to time by the Commissioner of
Internal Revenue. They are usually rendered on request of taxpayers to clarify certain
provisions of a tax law. They are commonly known as “BIR Rulings.”

Regulations are intended to clarify or explain the law and carry into effect its general
provisions by providing the details of administration and procedure. However, in case of
conflict between a regulation and a stature, the latter shall prevail.
 Regulations issued by the Secretary of Finance, upon the recommendation of the
Commissioner of Internal Revenue, are known as “Revenue Regulations.”
4. Judicial Decisions – This refers to decisions of the Court of Tax Appeals and the
Supreme Court applying or interpreting the tax laws. They constitute major part of the
jurisprudence on taxation and form part of the legal system of the Philippines. Decisions
of the Court of Tax Appeals, however, are still appealable to the Supreme Court of the
Philippines.
STEPS IN THE LEGISLATIVE PROCESS
Under the 1987 Philippine Constitution, all revenue and tariff bills shall originate from
the House of Representatives.
A revenue bill is one that levies taxes and raises funds for the government, while tariff
bill specifies the rates or duties to be imposed on imported artices (Cruz, Philippine Political
Law)
Often, major tax proposals are initiated by the Executive Department thru the President
upon the recommendation of the Department of Finance based on the latter’s study or proposal,
and then introduced into Congress by the allies of the President.
⮚ The steps in the legislative process as are follows:
1. A tax bill is introduced in the House of Representatives and is referred to the House
Committee on Ways and Means. This is known as the first reading. The first reading
involves only a reading of the number and title of the measure.

(Art. VI, Sec. 24, New Constitution) All Appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local application, and private bills shall
originate exclusively in the House of Representatives, but the Senate may propose or
concur with amendments.
2. The proposal is considered by the Committee on Ways and Means, committee hearings as
well as public hearings are held. If there are several bills of the same nature or purpose,
they shall be consolidated in the conduct of the hearings. Moreover, the committee may
introduce amendments or propose substitute bill.
3. The tax bill is voted on by the Committee and if approved, is reported out to the House of
Representatives for a vote. Deliberations, interpretations and even amendment by the
members of the House are held. This is known as the second reading in the House.
4. If passed by the House, the bill is transmitted to the Senate for consideration by the
Senate Committee on Ways and Means, and public hearings are held. This is known as
the second readings in the senate. The bill undergoes the same legislative process in the
Senate.
5. Upon approval by the Senate, both the Senate and the House versions are sent to the
Bicameral Conference Committee consisting of representatives of the House and of the
Senate.
6. The two versions are generally dissimilar. Thus, the conflict is reconciled in the
Bicameral Conference Committee. This process of ironing out the differences generally
involves substantial compromise.
7. A final bill, as approved by the Bicameral Conference Committee, is then resubmitted to
the House and Senate for approval. This is known as the third reading. This is known as
the third reading. Generally, it shall only be the reading of title. No deliberations will be
allowed.
8. If the Bicameral Conference Committee bill is approved by the House and Senate, it is
sent to the President for approval or veto. This is known as the “enrolled bill”.
9. If the President approves the bill, he shall sign it and the bill becomes a law. When the
President vetoes it, both Houses may override the veto by two-thirds vote of all members
of each house.

If the required measure is met, the bill is converted into law over the President’s
objections. Moreover, the bill may become a law when the President does not act upon
the measure within thirty days after it shall have been presented to him.