DE LA SALLE UNIVERSITY CLWTAXN (TAXATION)

Ramon V. del Rosario College of Business

Department of Commercial Law

I. Definition, Basis, Purpose, and Scope of Taxation

Taxation is the inherent power of the sovereign exercised through the

legislature to impose burdens upon subjects and objects within its jurisdiction
for the purpose of raising revenues and to carry out the legitimate objectives
of government.

Basis – inherent in a sovereign state because it is a necessary attribute of

sovereignty

Purpose – primarily to raise revenue and to carry out the legitimate objectives
of government.

Scope - the subjects and objects on which taxes are imposed.

The power to tax is said to be comprehensive, unlimited, plenary and

supreme. What does that mean? (Characteristics of Taxation)

Is the power to tax required to be explicitly provided in a State’s constitution?

Why or why not?

Do we have constitutional provisions related to Taxation in our present

constitution? Cite some examples. What is the purpose of those
Constitutional provisions?

II. Nature of the Taxing Power

It is legislative in nature since it involves the promulgation of laws. The

legislature determines:

- Coverage
- Object
- Nature
- Extent
- Situs of the tax to be imposed

Such power is exclusively vested in the legislature except where the

Constitution provides otherwise.

Do we need laws before taxes can be imposed?

1
 Reconcile the two concepts that Taxation is an inherent attribute of
sovereignty and laws are required to be passed by the Legislature in order to
imposed taxes.

The power to tax is the power to destroy – Justice Marshall (McCulloch v.

Maryland)

The power to tax involves the power to destroy. Therefore it should be

exercised with caution to minimize injury to the proprietary rights of the
taxpayer. It should be exercised fairly, equally and uniformly, lest the tax
collector kill the hen that lays the golden egg.

“The power to tax is not the power to destroy while the Supreme Court sits”–
Justice Holmes

If so great an abuse is manifested as to destroy natural and fundamental

rights which no free government consistently violates, it is the duty of the
judiciary to hold such act as unconstitutional.

III. Aspect of Taxation

Also known as the stages of taxation

1. Levying stage – This is the role of Congress, determining

and enacting a tax law (Legislative)
2. Assessment and Collection – Tax administration (Executive)
3. Payment – Tax administration (Executive)

Which government agency has the primary role of tax administration in the
Philippines?

The levying stage is legislative in character. Why is that so?

Are assessment, collection and payment also legislative in character? Why or

why not?

IV. Purpose of Taxation

a. Revenue

b. Non-revenue

i. Promotion of general welfare – Taxation may be used as an

implement of police power to promote the general welfare of the
people;

2
 Example: The imposition of a higher tax on vehicles powered by
petroleum products such as diesel or gasoline.

ii. Regulation of activities industries

Example: Sin Tax

iii. Reduction of social inequality

Examples: Minimum wage exemption law, Income tax on

individuals

iv. Encourage economic growth

Examples: CREATE Law, reduction of the corporate income tax

rates, incentives and tax holidays to foreign investors and entities
within PEZA

v. Protectionism – tariffs and customs duties

V. Principles of a Sound Tax System

a. Fiscal Adequacy – Revenue raised must be sufficient to meet

government/public expenditures and other public needs;

b. Administrative Feasibility – The tax system should be capable of being

effectively administered and enforced with the least inconvenience to the
taxpayer;

c. Theoretical Justice – must take into consideration the taxpayer’s ability to

pay. Our Constitution mandates that the rule on taxation must be uniform
and equitable and that the State must evolve a progressive system of
taxation.

What if the foregoing are not present, would that invalidate a tax imposition?
No. except if specific constitutional or statutory limitations are impaired.

VI. Theories on Taxation

a. Lifeblood theory – Taxes are the lifeblood of the government and should
be collected without unnecessary hindrance. On the other hand, such
collection should be made in accordance with law as any arbitrariness will
negate the very reason for government itself.

Correlate this with “the power to tax is the power to destroy”

3
 b. Benefits Protection Theory (also known as the Doctrine of Symbiotic
Relationship) – It involves the power of the state to demand and receive
taxes based on the reciprocal duties of support and protection between
the State and its citizens.

c. Necessity theory - Taxation is predicated upon necessity. It is a

necessary burden to preserve the State’s sovereignty. In order for the
government to perform its functions.

Under these theories, If such protection, government service, government

function, etc, can no longer be afforded or provided by the State, can the
subjects (citizens) refuse to pay taxes?

VII. Similarities and differences among Taxation, Police Power and Eminent
Domain

What is Police Power? What is the Power of Eminent Domain?

a. Similarities:

1. They are inherent powers of the State

2. All are necessary attributes of sovereignty
3. They exist independently of the constitution
4. They constitute the three methods by which the State
interferes with private rights and property
5. They presuppose equivalent compensation

b. Differences