Professional Documents
Culture Documents
General Principles of Taxation
General Principles of Taxation
I. TAXATION
TAXATION is the inherent power by which the sovereign, through its law-making body, raises revenue to defray the necessary
expenses of the government.
It is a manner of apportioning the costs of the government among those who, in some measure, are privileged to enjoy its
benefits and must bear its burdens.
INHERENT TO THE STATE: It is inherent in character because its exercise is guaranteed by the mere existence of the state. It
could be exercised even in the absence of a constitutional grant. The power to tax proceeds upon the theory that the existence
of a government is a necessity and this power is an essential and inherent attribute of sovereignty, belonging as a matter of
right to every independent state or government. (Pepsi-Cola Bottling Co. of the Philippines vs. Municipality of Tanauan, Leyte,
G.R. No. L-31156, February 27, 1976)
PURPOSE OF TAXATION
1. Primary – to raise revenues; to support the existence of the State and enable the state to promote the general welfare.
2. Secondary – non-revenue or sumptuary
a. Promotion of general welfare – taxation may be used to implement police power (e.g., grant of VAT exemption and Discounts to
Senior Citizens);
b. Regulation - where taxes are levied on excises or privileges for purposes of rehabilitation and stabilization of threatened
industry which is affected by public interest or to discourage consumption of harmful products (e.g., excise taxes on cigarettes
and alcohol);
c. Reduction of Social Inequity – This is made possible through the progressive system of taxation where the objective is to
prevent the undue concentration of wealth in the hands of few individuals. Progressivity is keystoned on the principle that
those who are able to pay should shoulder the bigger portion of the tax burden. (e.g., Income tax)
d. Encouragement of economic growth – tax incentives and reliefs may be granted to encourage investment (i.e., Income Tax
Holiday, 5% preferential Gross Income Tax for PEZA registered entities);
e. Protectionism – for the protection of local industries, in case of foreign importations, protective tariffs and customs
duties and fees (e.g., Special Duties imposed by the Bureau of Customs)
DOUBLE TAXATION: means taxing the same person for the same tax period and the same activity twice, by the same jurisdiction.
Double taxation in strict sense is when:
1. Both taxes are imposed on the same property or subject matter;
2. For the same purpose;
3. Imposed by the same taxing authority;
4. Within the same jurisdiction;
5. During the same taxing period;
6. Covering the same kind or character of tax.
Double Taxation in Broad sense is the opposite of direct double taxation and is not legally objectionable. The absence of one or
more of the foregoing requisites of obnoxious direct tax makes it indirect.
Constitutionality of double taxation: Double taxation in its stricter sense is unconstitutional but that in the broader sense is
not necessarily so.
Our Constitution does not prohibit double taxation. However, double taxation will not be allowed if it results in a violation of
the equal protection clause.
TAX AMNESTY ACT (Republic Act No. 11213): towards the policy of the State in protecting and enhancing revenue administration and
collection, the State shall:
a. Provide a one-time opportunity to settle estate tax obligations through an estate tax amnesty program that will give
reasonable relief to estates with deficiency estate taxes
b. Enhance revenue collection by providing a tax amnesty on delinquencies to minimize administrative costs in pursuing tax cases
and declog the dockets of the BIR and the courts; and
c. Provide a more equitable tax system by adopting a comprehensive tax reform program that will simplify the requirements on tax
amnesties with the use of simplified forms and utilization of information technology in broading the tax base.
General Amnesty: the law originally includes a general tax amnesty to cover all other taxes, but this portion of the law (Title
III) was vetoed entirely by the President stating that “without the provisions breaking down the walls of bank secrecy, setting
the legal framework for us to comply with international standards on exchange of information for tax purposes, and safeguarding
against those who abuse the amnesty by declaring an untruthful asset or net worth, a general amnesty that is overgenerous and
unregulated would create an environment ripe for future tax evasion, the very thing we wish to address.”
Estate Tax Amnesty:
a. Coverage: estate of decedents who died on or before December 31, 2017, with or without assessments duly issued therefor,
whose estate taxes have remained unpaid or have accrued as of December 31, 2017.
b. Exceptions to the Coverage: the Estate Tax Amnesty shall not extend to cases which shall have become final and executory and
to properties involved in cases pending in appropriate courts:
i. Falling under the jurisdiction of the Presidential Commission on Good Government;
ii. Involved in unexplained or unlawfully acquired wealth under RA No. 3019, or the Anti-Graft and Corrupt Practices Act, and RA
No. 7080 or the Plunder Act;
iii. Involving violations of RA No. 9160, or the Anti-Money Laundering Act, as amended;
iv. Involving tax evasion and criminal offenses under the Tax Code, as amended; and
v. Involving felonies of frauds, illegal exactions and transactions, and malversation of public funds and property under the
Revised Penal Code.
c. Tax Base:
i. Total net estate at the time of death, or the gross estate less all allowable deductions as provided in the Tax Code, as
amended, or the applicable estate tax laws prevailing at the time of death of the decedent;
ii. If an estate tax return was previously filed, the estate tax shall be based on net undeclared estate.
d. Tax Rate: 6%
e. Tax Due: shall be 6% of the Net Estate as determined above. However, if allowable deductions applicable at the time of death
of the decedent exceed the value of the gross estate, the heirs, executors, or administrators may avail of the benefits under
the Tax Amnesty Act and pay the minimum estate amnesty tax of P5,000.
f. Who will avail:
i. The executor or administrator of the estate, or
ii. if there is no executor or administrator appointed, the legal heirs, transferees or beneficiaries
g. Period of availment: 2 years from the effectivity of the Implementing Rules and Regulations (IRR) of the Tax Amnesty Act.
h. Where to File: the sworn Estate Tax Amnesty Return shall be filed with the RDO of the BIR which has jurisdiction over the
last residence of the decedent. For non-residents, the return shall be filed and the tax paid at RDO No. 39, or any other RDO
which shall be indicated in the IRR.
i. Time of payment: at the time of the filing of the return.
j. Previous transfers of property: the Tax Amnesty Act originally provided that if the estate involved properties which are
still in the name of another decedent or donor, the present holder, heirs, executors or administrators shall file only 1 Estate
Tax Amnesty Return and pay the corresponding taxes thereon based on the total net estate at the time of death of the LAST
decedent covering all accrued taxes under the Tax Code, arising from the transfer of such estate from all prior decedents or
donors through which the property/ies comprising the estate shall pass.
The President, however, vetoed such provision, the message providing that the tax is imposed not because of the property itself
but on the privilege of transferring property to the heirs. As the message provides, the flat rate of 6% estate amnesty tax,
without penalties, imposed at EVERY STAGE OF TRANSFER is more than a fair imposition on the privilege.
k. No admission of liability: the availment of the Estate Tax Amnesty and the issuance of the corresponding Acceptance Payment
Form do not imply admission of criminal, civil or administrative liability on the part of the availing estate.
l. NO Presumption of Correctness of the Estate Tax Amnesty Returns: the TAA originally provides that the Estate Tax Amnesty
Returns shall be conclusively presumed as true, correct and final upon filing and shall be deemed complete upon full payment of
the amount due. However, the President vetoed this provision stating that beyond the transfer of property, rights and
obligations to the heirs, legatees, and devisees, the valuation of the subject properties is a technical aspect that cannot be
left to mere self-declaration and that there must be an opportunity for implementing agencies to evaluate the truthfulness of
the declarations made by the taxpayers.
m. Duties of the BIR: the RDO shall issue an acceptance form for the Authorized Agent Bank or the revenue collection agent or
municipal treasurer concerned, to accept the tax amnesty payment.
After payment, a Certificate of Availment of the Estate Tax Amnesty shall be issued by the BIR within 15 calendar days from
submission to the BIR of the Acceptance Payment Form and the Estate Tax Amnesty Return. Otherwise, the duplicate copies of the
Acceptance Payment Form and the Estate Tax Amnesty Return shall be deemed sufficient proof of availment.
n. Immunities and Privileges: Estates covered by the Estate Tax Amnesty, which have fully complied with the conditions set forth
above, including the payment of the estate amnesty tax shall be immune from the payment of all estate taxes for taxable year
2017 and prior years, and from all appurtenant civil, criminal and administrative cases and penalties under the Tax Code, as
amended.
Tax Amnesty on Delinquencies
a. Coverage: all national internal revenue taxes collected by the BIR, including VAT and excise taxes collected by the Bureau of
Customs.
Delinquencies covered and Applicable Rates:
Delinquency Covered
Applicable Rate
A
Delinquencies and assessments, which have become final and executory, including delinquent tax account, where the application
for compromise has been requested but was denied by the Regional
40% of the basic tax assessed
Evaluation Board or the National Evaluation Board, as the case may be, on or before the IRR takes effect.
B
Pending criminal cases with the DOJ or the courts for tax evasion and other criminal offenses under the Tax Code, as amended,
with or without assessments issued.
60% of the basic tax assessed
C
Tax cases subject of final and executory judgment by the courts on or before the IRR takes effect.
50% of the basic tax assessed
D
Withholding tax agents who withheld taxes but failed to remit the same to the BIR
100% of the basic tax assessed
Delinquent Account: pertains to a tax due from a taxpayer arising from the audit of the BIR which had been issued Assessment
Notices that have become final and executory due to the following instances:
i. Failure to file a valid Protest, whether a request for reconsideration or reinvestigation, within 30 days from receipt
thereof.
ii. Failure to file an appeal with the CTA or an administrative appeal before the CIR within 30 days from receipt of the
decision denying the request for reinvestigation or reconsideration; or
iii. Failure to file an appeal with the CTA within 30 days from receipt of the decision of the CIR denying the taxpayer’s
administrative appeal to the FDDA.
Basic Tax Assessed: refers to:
i. Tax due shown on the Assessment Notice, net of any basic tax paid prior to the effectivity of RR No. 4-2019, exclusive of
civil penalties;
ii. The computed basic tax liabilities as shown in the criminal complaint filed by the BIR with the DOJ/Prosecutor’s Office or
int eh information filed in the Courts for violations of tax laws and regulations; and
iii. The basic tax liabilities as per Court’s final and executory decision.
Deficiency Withholding Taxes in assessments or tax cases: the tax rate shall still be 100% under letter D above, even in cases
of non-remittance of withholding taxes falling under letters A, B and C above.
With Pending Compromise Settlement Application under letter A above: if the delinquent tax is subject of an application for
compromise settlement, whether denied or pending, the amount of payment shall be based on the NET basic tax as certified by the
concerned office.
ILLUSTRATION: B Company received a Final Assessment Notice with a P1,000,000 basic tax deficiency. It applied for compromise and
paid P400,000 as the minimum amount required. If B Company applied for Tax Amnesty, how much would it pay?
Basic Tax per FAN
P1,000,000
Basic Tax paid per Compromise Settlement Application
(400,000)
Net Basic Tax prior to the effectivity of the Regulation
600,000
Amnesty Rate
40%
Amnesty Tax to be paid
P240,000
Partial/Installment Payments: the amount of payment shall be based on the NET amount as certified by the concerned office.
b. When and Where to File: Any person, natural or juridical, who wishes to avail of the Tax Amnesty on Delinquencies shall,
within one year from the effectivity of the IRR file with the appropriate office of the BIR, which has jurisdiction over the
residence or principal place of business of the taxpayer, a sworn Tax Amnesty on Delinquencies Return accompanied by a
Certification of Delinquency.
The payment of the amnesty tax shall be made at the time of the filing of the Return. Similar to the Estate Tax Amnesty, the RDO
shall issue and endorse an Acceptance Payment Form authorizing the authorized agent bank, or in the absence thereof, the revenue
collection agent or municipal treasurer concerned, to accept the amnesty tax payment.
c. No admission of liability: the availment of the Tax Amnesty on Delinquencies and the issuance of the corresponding Acceptance
Payment Form do not imply admission of criminal, civil or administrative liability on the part of the availing taxpayer.
d. Immunities and Privileges: The tax delinquency of those who avail of the Tax Amnesty on Delinquencies and have fully complied
with all the conditions and upon payment of the amnesty tax shall be considered settled and the criminal case under Sec. 18(c)
of the Tax Code, as amended, as such relate to the taxpayer’s assets, liabilities, networth and internal revenue taxes that are
subject of the tax amnesty, and from such other investigations or suits.
e. Proof of Availment and Compliance; effects thereof: Any notices of levy, attachments and/or warrants of garnishment issued
against the taxpayer shall be set aside pursuant to the lifting of notice of levy/garnishment duly issued by the BIR.
The Authority to Cancel Assessment shall be issued in favor of the taxpayer within 15 days from submission to the BIR of the
Acceptance Payment Form and the Tax Amnesty on Delinquencies Return. Otherwise, the duplicate copies, stamped as received, of
the Acceptance Payment Form, and the Tax Amnesty on Delinquencies Return shall be deemed sufficient proof of availment.
The Form and the Return shall be submitted to the RDO after complete payment and the completion of these requirements shall be
deemed full compliance with the provisions of the TAA.
After full compliance with all the conditions and payment of the corresponding tax on delinquency, the tax amnesty granted shall
become final and irrevocable.
Confidentiality and Non-Use of Information and Data: any information or data contained in, derived from or provided by the
taxpayer in the Tax Amnesty Return and appurtenant documents shall be confidential in nature and shall not be used in any
investigation or prosecution before any judicial, quasi-judicial and administrative bodies.
Documents:
Document
BIR Form/Reference
Tax Amnesty Return
BIR Form No. 2118-DA (Annex A of RR No. 4-19)
Acceptance Payment Form
BIR Form No. 0621-DA (Annex B of RR No. 4-19)
Certificate of Tax Delinquencies/Tax Liabilities
Annex C of RR No. 4-2019
Offenses and Penalties:
Offense
Penalty
Unlawful Divulgence of Information – any officer or employee of the BIR who divulges to any person or makes known in any other
manner than may be provided by law, information regarding the business, income, or estate of any taxpayer, the secrets,
operations, style of work, or apparatus of any manufacturer or producer, or confidential information regarding the business of
any taxpayer, knowledge of which was acquired by him in the discharge of his official duties.
Divulgence in any other manner to any person other than the requesting foreign tax authority information obtained from banks and
financial institutions, knowledge or information acquired by him in the discharge of his official duties
Fine – P50,000 to P100,000;
Imprisonment – 2 years to 5 years;
Or both
Fine – P500,000 to P1,000,000;
Imprisonment – 2 years to 5 years.;
Or both
Unlawful Divulgence of Tax Amnesty Return and Appurtenant Documents – any person having knowledge of the Tax Amnesty Return and
appurtenant documents who discloses any information relative thereto, and any violation hereof.
If the offender is an officer or employee of the BIR or any government entity
Fine – P150,000;
Imprisonment – 6 years to 10 years;
Or both
Fine – P50,000 to P100,000;
Imprisonment – 2 years to 5 years;
Or both
Plus perpetual disqualification to hold public office
CLASSIFICATOIN OF TAXES
1. As to purposes:
a. General/Fiscal or Revenue – purpose is to raise revenue for the government’s ordinary needs;
b. Special/Regulatory or Sumptuary – purpose is some social or economic ends irrespective of whether revenue is actually raised.
2. As to subject matter:
a. Personal, poll or capitation – those imposed upon residents of a territory, regardless of citizenship, property, occupation,
business.
b. Property – those imposed upon real and personal property depending on their value.
c. Excise or privilege – those imposed upon the performance of an act, enjoyment of a privilege, or engaging in an occupation,
profession or business.
3. As to incidence:
a. Direct – where the burden for the payment of the tax as well as the impact falls on the same person; as such, the person who
pays is the person who is statutory liable to pay the tax (e.g., income tax);
b. Indirect – where the incidence falls on one person but the burden falls another. (e.g., VAT).
4. As to amount:
a. Specific – amounts fixed and is imposed by the head or number or some measurement, hence, no valuation is needed except for
the list of things to be taxed.
b. Ad valorem – one which is based on the value of the object to be taxed.
5. As to rate/progression:
a. Progressive – tax rates increase as the tax base or bracket increases.
b. Regressive – tax rate decreases as tax base or bracket increases.
c. Proportionate – tax is based on a fixed percentage of the amount of the property, receipts or other bases to be taxed.
6. As to authority imposing the tax:
a. National – levied by the national government and enforced by the BIR;
b. Local – levied by the local government through its sanggunian and enforced by the treasurer.
IMPORTANCE OF DISTINCTION:
1. Government instrumentality concerned may not be authorized to exact taxes but IS authorized to exact license fees
2. Person imposed upon may be exempt from taxes BUT NOT exempt from license fees
3. Tax, NOT fees, may be claimed as income tax deduction for income tax purpose. However, fees may be considered as expenses
ordinary and necessary for business.
4. In Local Government Taxation, Sec. 187 of the Local Government Code covers only “tax” ordinance. Such that, if the ordinance
is regulatory, it does not come within the purview of Sec. 187 and the CTA does not have jurisdiction over the legality of the
same, jurisdiction thereof being under the RTC.
TAX VS. TOLL
Tax
Toll
Definition
Demand of sovereignty for raising revenue
Amount charged for the cost and maintenance of property used
Purpose
For support of the government
As compensation for use of another's property
Determination of Amount
Determined by the sovereign
Determined by the cost of the property or improvement
Who may impose
Imposed by the State
Imposed by the government or private individual
TAX VS. PENALTY
Tax
Penalty
Definition
Enforced proportional contributions from persons and property
Sanction imposed for violation of laws
Purpose
For revenue
To regulate conduct
Authority
Imposed only by the government
Imposed either by the government or by private individuals or entities
TAX VS. SPECIAL ASSESSMENT
Tax
Special Assessment
Definition
Demand of sovereignty for raising revenue
Special levy on lands comprised within the territorial jurisdiction of a Province, City or Municipality specially benefitted by
public works, projects, improvements funded by the LGU concerned
Subject
Imposed on lands, persons, property, income, business, etc.
Imposed on land only
Liability
Personal
Non-personal
Basis
Based on necessity (and partially on benefits)
Based solely on benefits
Application
General
Special to a particular time and place
TAX VS. CUSTOMS DUTIES
Tax
Custom Duties
Purpose
Raising revenue
Controlling the flow of the goods of the country
Broadness
Broader term
Tariff or tax on the importation (usually) or exportation (unusually) of goods
TAX VS. DEBT
Tax
Debt
Basis
Law
Contract/ judgment
Effect of failure to pay
Civil and criminal liability
Civil liability only (No imprisonment)
Mode of payment
Money
Money, property or service
Assignability
No
Yes
Subjectivity to Compensation/ Set-off
No
Yes
Interest
Yes, if deficient or delinquent.
General Rule: no interest, unless expressly stipulated or after demand is made
Authority
Public authority
Private individuals
Prescription
Determined by the Tax Code
Determined by the Civil Code
SOURCES OF REVENUE: the following are considered national internal revenue taxes:
1. Income tax;
2. Estate and donor’s taxes;
3. Value-added tax;
4. Other percentage taxes;
5. Excise taxes;
6. Documentary Stamp Taxes; and
7. Such other taxes as are or hereafter may be imposed and collected by the Bureau of Internal Revenue.
V. CONSTITUTIONAL LIMITATIONS
A. DUE PROCESS REQUIREMENT
Art. III, Sec. 1: No person shall be deprived of life, liberty or property without due process of law, nor shall any person be
denied the equal protection of laws.
Procedural due process: requires that taxpayers must be notified of the assessment in writing and must state the fact and the
law upon which it is based. Moreover, assessments and collection must not be arbitrary.
Substantive due process: requires that assessments must not be harsh, oppressive or confiscatory; it must be made under
authority of a valid law; and must be imposed within the territorial jurisdiction of the State.
Specific Cases:
1. There is a denial of due process on account of the passage of an ordinance in the City of Manila which imposes a permit fee
of P50.00 on aliens as a condition to employment or engaging in any business or occupation, where it appears that under said
ordinance, the City Mayor of Manila could withhold or refuse issuance of such permit at will. Aliens, once admitted in the
Philippines, cannot be deprived of life without due process of law and this guarantee includes the means of livelihood (Villegas
vs. Hiu Chiong Tsai Pao Ho, G.R. No. L-29646, November 10, 1978)
2. Due process was not violated when the VAT law (EO 273) was promulgated. Petitioners failed to show that EO 273 was issued
capriciously and whimsically or in arbitrary or despotic manner by passion or personal hostility since it appears that a
comprehensive study of the VAT was made before EO 273 was issued (Kapatiran vs. CIR, G.R. No. L-81311, June 30, 1988).
3. The modified schedular income tax whereby individual income was classified into three different classes under different tax
rates (compensation, business/other income and passive investment income) is not a denial of due process because there is no
proof of arbitrariness in the imposition of tax rates (Sison vs. Ancheta, G.R. No. 59431, July 25, 1984).
4. Section 112 (B) allows a VAT registered person to apply for the issuance of a tax credit certificate or refund for any unused
input taxes, to the extent that such input taxes have not been applied against output taxes. The input tax is not a property or
property right within the constitutional purview of the due process clause. A VAT-registered person’s entitlement to the
creditable input tax is merely a statutory privilege (Abakada Guro Party List vs. Ermita, Ibid.).
B. EQUAL PROTECTION OF THE LAWS
Art. III, Sec. 1: No person shall be deprived of life, liberty or property without due process of law, nor shall any person be
denied the equal protection of laws.
The requirement of equal protection of the laws requires that the law must apply equally to all persons within the same class.
As such, providing for a classification and applying the law only to a particular class is not violative of the constitutional
right so long as it comes from a valid classification.
Art. VI, Sec. 28 (1) The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of
taxation.
UNIFORMITY means that all taxable articles or kinds of property of the same classes shall be taxed at the same rate. A tax is
uniform when it operates with the same force and effect in every place where the subject of it is found. (Commissioner vs.
Lingayen Gulf Elec. Co., G.R. No. L-23771, August 4, 1988)
Amusement Tax: Uniformity is not disregarded if a tax is levied on admission to cinema, theaters, vaudeville companies,
theatrical shows and boxing exhibitions but does not tax other places of amusement such as race tracks, cockpits, cabarets,
concert halls, circuses and other places of amusement. (Eastern Theatrical Co. vs. Alfonso, G.R. No. L-1104, May 31, 1949)
Uniformity vs. Equitability vs. Equality
• Uniformity – All taxable property shall be alike to be subjected to tax
• Equitability – The burden of taxation falls to those better able to pay.
• Equality – When the burden of the tax falls equally and impartially upon all persons and property subject to it.
PROGRESSIVITY means that the tax rate increases as the tax base thereof increases. Our income tax system is one good example of
such progressivity because it is built on the principle of the taxpayer’s ability to pay. Taxation is progressive when its rate
goes up depending on the resources of the person affected (Reyes vs. Almanzor, G.R. Nos. 49839-46, April 26, 1991)
D. NO IMPRISONMENT FOR PAYMENT OF POLL TAX
Art. III, Sec. 20. No person shall be imprisoned for debt or non-payment of a poll tax.
Poll Tax is a tax on individuals residing within a specified territory, whether citizens or not, without regard to their
property or the occupation in which they may be engaged.
E. EXEMPTION FROM PROPERTY TAX OF REGILIOUS, CHARITABLE AND EDUCATIONAL INSTITUTIONS
Art. XIV, Sec. 4(3): 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 reinvestment.
Coverage: the above exemption does not only cover property tax but also income tax unlike the exemption of religious and
educational institutions provided under (E) above which covers only property taxes.
The tax exemption granted is conditioned only on the actual, direct and exclusive USE of their revenues and assets for
educational purposes.
Revenues: the exemption extends to the non-stock, non-profit educational institution on all revenues that is USED for
educational purposes, regardless of its source.
Assets: the property, to be considered exempt from real property tax, the test is USE also, not ownership.
Thus, if the institution earns rental income from a commercial entity but uses such rental for educational purposes, it is
exempt from income tax, local business tax, and/or VAT, but NOT real property tax.
Limitation under Section 30 of the Tax Code: the last paragraph of Sec. 30 (Exempt Entities) under the Tax Code provides that
“income from whatever kind and character of the foregoing corporations from any of their properties, real or personal, or from
any of their activities conducted for profit regardless of the disposition made of such income, shall be subject to tax”.
While Sec. 30 covers non-stock, non-profit educational institutions, the above limitation on exemption does not apply to it.
Thus, even if it derives income from activities conducted for profit, the income remains exempt as long as it is actually,
directly and exclusively used for educational purposes. (Commissioner of Internal Revenue vs. De La Salle University, Inc., GR
No. 196596, November 9, 2016)
Proprietary educational institutions: are subject to 10% income tax on their taxable income under Sec. 27(B) of the Tax Code.
The same provision provides that if income from unrelated trade, business or other activity exceeds 50% of the total gross
income, the tax shall be the 30% Regular Corporate Income Tax.
G. GRANT OF EXEMPTION REQUIRES THE MAJORITY VOTE OF CONGRESS
Art. VI, Sec. 28(4): No law granting any tax exemption shall be passed without the concurrence of a majority of all the Members
of the Congress.
Rationale: in order to prevent the indiscriminate grant of tax exemptions.
H. PROHIBITION ON TAX LEVIED FOR SPECIAL PURPOSE
Art. VI, Sec. 29(3): All money collected or any tax levied for special purposes shall be treated as special fund and paid out
for such purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any,
shall be transferred to the general funds of the government.
I. VETO POWER OF THE PRESIDENT
Art. VI, Sec. 27(2): 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 which he does not object.
J. REVENUE OR TARIFF BILL MUST EXCLUSIVELY ORIGINATE FROM THE LOWER HOUSE
Art. VI, Sec. 24: All appropriation, revenue or tariff bills, bills authorizing the increase of public debts, bills of local
application and private bills, shall originate exclusively in the House of Representatives, but the Senate may propose or concur
with amendments.
K. LOCAL GOVERNMENT’S POWER TO TAX
Art. X, Sec. 5: Each local government unit shall have the power to create its own 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. Such taxes, fees, and charges shall accrue exclusively to the local governments.
L. NO APPROPRIATION FOR RELIGIOUS PURPOSES
Art. VI, Sec. 29(2): No public money or property shall be appropriated applied, paid or employed, directly or indirectly, for
the use, benefit or support of any sect, church, denomination, sectarian institution or system of religion, or of any priest,
preacher, minister, 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.
M. RELIGIOUS FREEDOM
Art. III, Sec. 5: No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof. The
free exercise and enjoyment 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.
Sale of Bibles at cost or at a low premium: The Constitutional guaranty of the free exercise of religion carries with it the
right to disseminate religious information. Any restraint on such right can only be justified on the ground that there is a
clear and present danger of any substantive evil which the State has the right to prevent.
Activities simply and purely for propagation of faith are exempt (i.e., sale of bibles and religious articles by non-stock, non-
profit organizations at minimal profit). A license tax, which, unlike an ordinary tax, is mainly for regulation. Its imposition
on the press is unconstitutional because it lays a prior restraint on the exercise of its right. Hence, although its application
to others is valid, its application to the press or to religious groups, such as the Jehovah’s Witnesses, in connection with the
latter’s sale of religious books and pamphlets, is unconstitutional (American Bible Society v. City of Manila, G.R. L-9637,
April 1957)
N. NON-IMPAIRMENT OF CONTRACTS
Art. III, Sec. 10: No law impairing the obligation of contracts shall be passed.
Revocability of Tax Exemption: A law which changes the terms of the contract by making new conditions, or changing those in the
contract, or dispenses with those expressed, impairs the obligation.
However, the non-impairment rule does not apply to public utility franchises since a franchise is subject to amendment,
alteration or repeal by the Congress when the public interest so requires (Article XII, Section 11). This is so because under
the Constitution [now Section 11, Article XII, 1987 Constitution], the legislature can impair a grantee’s franchise since a
franchise is subject to amendment, alteration or repeal by the Congress when the public interest so requires. (Cagayan Electric
Power & Light Co., Inc. vs. CIR, G.R. No. L-60126, September 25, 1985)
Rules applicable to revocation:
a. When the exemption is unilaterally granted by law and the same is withdrawn by virtue of another law, there is no violation.
b. When the exemption is bilaterally agreed upon between the government and the taxpayer, it cannot be withdrawn without
impairing the contract.
c. When the exemption is granted under a franchise, it may be revoked because a franchise is subject to amendment, alteration,
or repeal by Congress.
O. NON-IMPAIRMENT OF THE JURISDICTION OF THE SUPREME COURT
Art. VIII, Sec. 5[2]: The Supreme Court shall have the power to review, revise, modify or affirm on appeal or certiorari as the
law or the Rules of Court may provide, final judgments and orders of lower courts in all cases involving the legality of any
tax, impost, assessment, or toll, or any penalty imposed in relation thereto.
Thus, Congress cannot enact a law which makes the decisions of the Court of Tax Appeals final and non-appealable to the Supreme
Court.