JULY 6, 2022 – TAXATION LAW 1

1. Meaning of Taxation
2. Meaning of Taxes
Proof of Taxes
Lifeblood Doctrine
MEMORIZE: It is said that taxes are what we pay
1st Case: CIR v. Algue
for civilized society. Without taxes, the
government would be paralyzed for lack of the
motive power to activate and operate it.
2nd Case: Phil Guaranty Co v CIR Taxability due to jurisdiction
territoriality principle
Strictissimi juris
MEMORIZE: Taxpayers owe honesty to
3rd Case: CIR v Tokyo Shipping
government just as government owes fairness to
taxpayers
Tax Refund v Tax Credit
Tax Return Form Checkbox
4th Case: BPI v CA and CIR
Incurred Net Loss, can carry tax credit to
subsequent years (up to 5 years, as amended)

A tax is not imposed on the basis of a special or

particular benefit accruing to each citizen in
5th Case: Lorenzo v Posadas proportion to the tax paid.
Estate Tax Settlement gives a privilege to transfer
ownership of the properties of the deceased.

JULY 8, 2022 – TAXATION LAW 1

QUIZ questions
1. Discuss/Define the power of taxation
2. Is there a constitutional grant of the power to tax
3. Discuss the lifeblood doctrine
4. Discuss the benefit received principle and necessity theory
5. Is direct benefit a requirement to compel taxpayer to pay tax
Distinguish Tax Rate and Tax Base
(schedular income tax/ imposed graduated rates
under BP Blg 135)
MEMORIZE: The power to tax, an inherent
prerogative, has to be availed of to assure the
performance of vital state functions. It is the
source of the bulk of public funds. To praphrase a
1st CASE: Sison v. Ancheta
recent decision, taxes being the lifeblood of the
government, their prompt and certain availability
is of the essence.
Dictum of Chief Justice Marshall that "the power
to tax involves the power to destroy."
In a separate opinion in Graves v. New York, 15
Justice Frankfurter, after referring to it as an 1,
unfortunate remark characterized it as "a flourish
of rhetoric [attributable to] the intellectual
fashion of the times following] a free use of
absolutes." 16 This is merely to emphasize that it
is riot and there cannot be such a constitutional
mandate. Justice Frankfurter could rightfully
conclude: "The web of unreality spun from
Marshall's famous dictum was brushed away by
one stroke of Mr. Justice Holmess pen: 'The power
to tax is not the power to destroy while this Court
sits. So it is in the Philippines.
To adhere to the authoritative doctrine that were
the due process and equal protection clauses are
invoked, considering that they are not fixed rules
but rather broad standards, there is a need for of
such persuasive character as would lead to such
a conclusion. Absent such a showing, the
presumption of validity must prevail.
Adversely affecting as it does properly rights, both
the due process and equal protection clauses inay
properly be invoked, all petitioner does, to
invalidate in appropriate cases a revenue
measure. if it were otherwise, there would -be
truth to the 1803 dictum of Chief Justice Marshall
that "the power to tax involves the power to
destroy.
Supreme Court held: "Equality and uniformity in
taxation means that all taxable articles or kinds of
property of the same class shall be taxed at the
same rate. The taxing power has the authority to
make reasonable and natural classifications for
purposes of taxation.
USE IN EXAM/REVALIDA: It is undoubted that the
due process clause may be invoked where a taxing
statute is so arbitrary that it finds no support in the
Constitution.
MEMORIZE: It suffices then that the laws operate
equally and uniformly on all persons under similar
circumstances or that all persons must be treated
in the same manner, the conditions not being
different, both in the privileges conferred and the
liabilities imposed.
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 'inequalities which
result from a singling out of one particular class for

2nd Case: Lutz v. Araneta
3rd Case: NAPOCOR v. Province of Albay
4th Case: CIR vs. Lingayen Gulf
taxation, or exemption infringe no constitutional
limitation.
It was competent for the legislature to find that
the general welfare demanded that the sugar
industry should be stabilized in turn; and in the
wide field of its police power, the lawmaking body
could provide that the distribution of benefits
therefrom be readjusted among its components
to enable it to resist the added strain of the
increase in taxes that it had to sustain
A power to tax can be exercised as an implement
of police power.
Differentiate the three inherent powers of the
State
Power to tax v. Police Power
Are all kinds of exactions presumed to be always
for public purpose? NO.
Payment of Real Property Taxes
Application of Proceeds of Real Property Tax
Collections in the provinces: Fifty per cent shall
accrue to the municipality where the property
subject to the tax is situated; twenty per cent shall
accrue to the province; and thirty per cent shall be
remitted to the Treasurer of the Philippines to be
expended exclusively for stabilizing the Special
Education Fund in municipalities, cities and
provinces in accordance with the provisions of
Section seven of R.A. No. 5447.
MEMORIZE: To all intents and purposes, real
property taxes are funds taken by the State with
one hand and given to the other. In no measure
can the Government be said to have lost anything.
MEMORIZE: As a rule finally, claims of tax
exemption are construed strongly against the
claimant. They must also be shown to exist clearly
and categorically, and supported by clear legal
provisions.
Taxes are the lifeblood of the nation. Their primary
purpose is to generate funds for the State to
finance the needs of the citizenry and to advance
the common weal.
5% franchise tax Sec. 259 of Tax Code v 2%
franchise tax under RA 3843
A tax is uniform when it operates with the same
force and effect in every place where the subject
of it is found. Uniformity means that all property
belonging to the same class shall be taxed alike
The Legislature has the inherent power not only to
select the subjects of taxation but to grant
exemptions. Tax exemptions have never been
deemed violative of the equal protection clause
General Rule: Laws shall have only a prospective
effect.

The question of whether a statute operates

retrospectively or only prospectively depends on
the legislative intent.

In the instant case, Act No. 3843 provides that

"effective ... upon the date the original franchise
was granted, no other tax and/or licenses other
than the franchise tax of two per centum on the
gross receipts ... shall be collected, any provision
to the contrary notwithstanding." Republic Act No.
3843 therefore specifically provided for the
retroactive effect of the law