INTRODUCTION TO TAXATION 4.

They are all ways in which the State interferes with private
Taxation- defined as a State power, a legislative process, and a
mode of government cost distribution.
1. State power- inherent power; to enforce proportional
contribution from its subjects for public purpose.
2. Legislative process- need to have a legislature to levy taxes
3. Mode of cost distribution- allocate its cost or burden to its
subjects
rights and properties.
5. They all exist independently of the Constitution and are
exercisable even without a Constitutional grant.
6. They all presuppose an equivalent from of compensation
received by the persons affected by the exercise of the
power.
7. The exercise of these powers by the local government
units may be limited by the national legislature.

Basis of Taxation--- mutuality of support between people and the

government.

Public Services

Government People
Taxes

*Receipt of benefits is conclusively presumed

Theories of Cost Allocation

1. Benefit received Theory-more benefits you receive, more
taxes you pay
2. Ability to Pay Theory – those who earn more; pay more
taxes

Lifeblood Doctrine- taxes are the lifeblood of the government.

Implications of the lifeblood doctrine in taxation:

1. Tax is imposed even in the absence of a Constitutional
grant.
2. Claims for tax exemption are construed against the
taxpayers.
3. The government reserves the right to choose the objects
of taxation.
Scope of the Taxation Power
4. The courts are not allowed to interfere with the collection
 Taxation power is the most absolute of all powers of the
of taxes.
government
5. In taxation:
a. Income received in advance is taxable upon  It is regarded as comprehensive, unlimited, plenary, and
receipt supreme (CUPS).
b. Deduction for capital expenditures and
prepayments is not allowed as it effectively Limitations of the Taxation Power
defers the collection of income tax 1. Inherent limitations
c. A lower amount of deduction is preferred when a. Territoriality of taxation
a claimable expense is subject to limit b. International comity
d. A higher tax base is preferred when the tax c. Public Purpose
object has multiple bases. d. Exemption of the government
e. Non-delegation of the taxing power
Inherent Powers of the State
1. Taxation power- the power to enforce proportional 2. Constitutional Limitations
contribution from its subjects to sustain itself a. Due process of law
2. Police power- the general power to enact laws to protect b. Equal protection of the law
the well-being of the people c. Uniformity rule in taxation
3. Eminent Domain- the power of the State to take private d. Progressive system of taxation
property for public use after paying just compensation. e. Non imprisonment for non-payment of debt or poll
tax
Similarities of the 3 Inherent Powers of the State f. Non-impairment of obligation and contract
1. They are all necessary attributes of the sovereignty g. Free worship rule
2. They are all inherent to the State h. Exemption of religious or charitable entities, non-
3. They are all legislative in nature profit cemeteries, churches and mosque from
property taxes
 i. Non-appropriation of public funds or property for the Categories of Escapes from Taxation
benefit of any church, sect or system of religion I.Those that result to loss of government revenue
j. Exemption from taxes of the revenues and assets of 1. Tax Evasion- tax dodging; illegal
non-profit, non stock educational institutions. 2. Tax avoidance- legal, tax minimization; side stepping the law
k. Concurrence of a majority of all members of Congress 3. Tax exemption
for the passage of a law granting tax exemption
l. Non diversification of tax collections II.Those that do not result to loss of government revenue
m. Non delegation of the power of taxation 1. Shifting- transferring tax burden
n. Non impairment of the jurisdiction of the Supreme a. Forward shifting
Court to review tax cases b. Backward shifting
o. The requirement that appropriations, revenue, or c. Onward shifting
tariff bills shall originate exclusively in the House of 2. Capitalization
Representatives 3. Transformation
p. The delegation of taxing power to local government
units. Tax Amnesty- giving taxpayers to reform; covers both civil and
criminal liability; forgives retrospectively; requires payment
Stages of the Exercise of the Taxation Power
1. Levy or imposition- called impact of taxation; legislative Tax Condonation-tax remission. Forgiveness of a tax obligation;
act in taxation covers civil obligation; requires no payment; forgives prospectively
Matters of legislative discretion in the exercise of taxation
a. Determining the object of taxation
b. Setting the tax rate or amount to be collected
c. Determining the purpose of the levy which must be
public use
d. Kind of tax to be imposed
e. Apportionment of the tax between the national and
local government
f. Situs of taxation
g. Method of collection

2. Assessment and Collection – incidence of taxation;

administrative act of taxation

Situs of Taxation- place of taxation

Other Fundamental Doctrines in Taxation

1. Marshall Doctrine
2. Holme’s Doctrine
3. Prospectivity of Tax Laws
4. Non compensation or set off
5. Non assignment of taxes
6. Imprescriptibility in taxation
7. Doctrine of Estoppel
8. Judicial Non interference
9. Strict Construction of Tax Laws

Double Taxation – occurs when the same taxpayer is taxed twice by

the same tax jurisdiction for the same thing
Elements of double Taxation
1. Same Object
2. Same type of tax
3. Same purpose of tax
4. Same taxing jurisdiction
5. Same tax period

Type of Double Taxation

1. Direct Double Taxation
2. Indirect Double Taxation

Escapes from Taxation- means available to taxpayer to limit or avoid

impact of taxation.