prohibiting certain things or enterprises inimical to the (2) Regulatory – Taxes may be levied with a Taxes are what
Taxes are what we pay for civilized society.
public welfare.
However, if it is employed solely to raise revenues, the
modern view is that it cannot be allowed to confiscate or
destroy. If this is to be done, the tax may be
successfully attacked as an unconstitutional exercise of
discretion, which is usually vested in the legislature
(Cruz, 2007).
While the power to tax is so unlimited in force and so
searching in extent that the courts scarcely venture to
declare that it is subject to any restrictions whatever, it
is subject to the inherent and constitutional limitations
which are intended to prevent abuse on the exercise of
the otherwise plenary and unlimited powers. It is the
court’s role to see to it that the exercise of the power
does not transgress these limitations (Tio v. Videogram
Regulatory Board et al., 151 SCRA 213).
In order to maintain the general public’s trust and
confidence in the government, this power must be used
justly and not treacherously (Roxas y Cia v. CTA, 23
SCRA
276). It should be exercised with caution to minimize
injury to the proprietary rights of the taxpayer. It must
be exercised fairly, equally and uniformly, lest the tax
collector kills the ‘hen that lays the golden egg’ (CIR v.
SM Prime Holdings, Inc., 613 SCRA 774 (2010)).
Taxpayers may seek redress before the courts in case of
illegal imposition of taxes and irregularities as the
Constitution overrides any legislative or executive act
that runs counter to it (Sison Jr. v. Ancheta, G.R. No. L-
59431, July 25, 1984).
j. Give at least 5 purposes of Taxation and
explain each briefly.
Ans:
k.
(1) Revenue – To raise revenue to promote
general welfare and protection of its
citizens;
NON-REVENUE: (RPREP)
regulatory purpose to provide means for the
rehabilitation and stabilization of a threatened
industry which is affected with public interest
as to be within the police power of the state
(The “lawful subjects” and “lawful means” test
are used to determine the validity of a law
enacted under the police power.);
(3) Promotion of general welfare - taxation
may be used as an implement of police power
to promote the general welfare of the people.
In the case of Lutz v. Araneta (G.R. No. L-
7859, December 22, 1955), the Supreme Court
upheld the validity of the Sugar Adjustment
Act, which imposed a tax on milled sugar since
the purpose of the law was to strengthen an
industry that is so undeniably vital to the
economy – the sugar industry (Aban, 2001).;
(4) Reduction of social inequality - prevents
the undue concentration of wealth in the hands
of a few individuals. Progressivity is based on
the principle that those who are able to pay
more should shoulder the bigger portion of the
tax burden. ;
(5) Encourage economic growth by granting
incentives and exemptions to encourage
investment thereby stimulating economic
activity. ;
(6) Protectionism – to protect local industries
from foreign competition.
(Under the “Filipino First Policy” of the
Constitution);
(7) Compensatory - to make up with the
benefits given.
What are the 3 underlying basis of
Taxation? Explain.
Ans:
1) Lifeblood Theory
Without taxes, the government would be
paralyzed for lack of the motive power to
activate and operate it. Hence, despite the
natural reluctance to surrender part of one's
hard-earned income to the taxing authorities,
every person who is able to must contribute his
share in the running of the government. (CIR
v. Algue, Inc.)
2) Necessity Theory
The power to tax is an attribute of sovereignty
emanating from necessity. It is a necessary
burden to preserve the State's sovereignty and
a means to give the citizenry an army to resist
an aggression, a navy to defend its shores
from invasion, a corps of civil servants to
serve, public improvements designed for the
enjoyment of the citizenry and those which
come within the State's territory, and facilities
and protection which a government is
supposed to provide. (Phil. Guaranty Co., Inc.
v. CIR)
3) Benefits-Protection / Reciprocity Theory
Taxation is described as a symbiotic
relationship whereby in exchange of the
benefits and protection that the citizens get
from the Government, taxes are paid. (CIR v.
Algue, Inc.)
BAR Q 1991
Q: Discuss the meaning and the implications of the
statement: “Taxes are the lifeblood of the
government and their prompt and certain
availability is an imperious need” (1991 Bar).
A: It expresses the underlying basis of taxation which is
governmental necessity, for indeed, without taxation, a
government can neither exist nor endure.
Considering that taxes are the lifeblood of the
government and in Holmes’s memorable metaphor, the
price we pay for civilization, tax laws must be faithfully
and strictly implemented (CIR v. Acosta, G.R. No.
154068, August 3, 2007). Taxes should be collected
promptly. No court shall have the authority to grant an
injunction to restrain the collection of any internal

revenue tax, fee or charge imposed by the NIRC
(Angeles City v. Angeles Electric Cooperation, 622 SCRA
43, 2010).
l. What are the different objects of taxation?
Give at least 1 example each.
Ans: Persons, Property and Excise
1) Personal Tax – Ex. Community Tax
2) Property Tax – Ex. Real Estate Tax,
3) Excise Tax – Transactions, privilege, right
and interest. (Ex. Income Tax)
m. What are the 3 basic principles of a sound
tax system? Explain each briefly.
Ans: The following are the 3 basic principles of
a sound systems:
1) Fiscal Adequacy – Revenue raised must be
sufficient to meet government/public
expenditures and other public needs
(Chavez v. Ongpin, G.R. No. 76778, June
6, 1990). Neither an excess nor a
deficiency of revenue vis-à-vis the needs
of government would be in keeping with
the principle (Vitug, 2006).
Sufficiency to meet government
expenditures and other public needs;
2) Administrative Feasibility/ Convenience –
The tax system should be capable of being
effectively administered and enforced with
the least inconvenience to the taxpayer
(Diaz v. Secretary of Finance, G.R. No.
193007, July 19, 2011).;
3) Theoretical Justice –
a. Must take into consideration the
taxpayer’s ability to pay (Ability to Pay
Theory).
b. Art. VI, Sec. 28(1), 1987 Constitution
mandates that the rule on taxation must
be uniform and equitable and that the
State must evolve a progressive system of
taxation.
Q: A violation of the principle of a sound tax
system may or may not invalidate a tax law.
A tax law will retain its validity even if it is not in
consonance with the principles of fiscal adequacy and
administrative feasibility because the Constitution does
not expressly require so. These principles are only
designated to make our tax system sound. However, if a
tax law runs contrary to the principle of theoretical
justice, such violation will render the law
unconstitutional considering that under the Constitution,
the rule of taxation should be uniform and equitable (J.
Dimaampao, 2015).
----
Q: Is the VAT law violative of the administrative
feasibility principle?
A: NO. The VAT law is principally aimed to rationalize
the system of taxes on goods and services. Thus,
simplifying tax administration and making the system
more equitable to enable the country to attain economic
recovery (Kapatiran ng Mga Naglilingkod sa Pamahalaan
v. Tan, G.R. No. 81311, June 30, 1988).
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Q: Is the imposition of VAT on tollway operations
valid?
A: YES. Administrative feasibility is one of the canons of
a sound tax system. Non-observance of the canon,
however, will not render a tax imposition invalid “except
to the extent that specific constitutional or statutory
limitations are impaired.” Thus, even if the imposition of
VAT on tollway operations may seem burdensome to
implement, it is not necessarily invalid unless some
aspect of it is shown to violate any law or the
Constitution (Diaz v. Secretary of Finance, 654 SCRA 96,
G.R. No. 193007, July 19, 2011).
-----
Q: Frank Chavez, as taxpayer, and Realty Owners
Association of the Philippines, Inc. (ROAP),
alleged that E.O. 73 providing for the collection of
real property taxes as provided for under Section
21 of
P.D. 464 (Real Property Tax Code) is
unconstitutional because it accelerated the
application of the general revision of assessments
to January 1, 1987 thereby increasing real
property taxes by 100% to 400% on
improvements, and up to 100% on land which
would necessarily lead to confiscation of property.
Is the contention of the Chavez and ROAP correct?
A: NO. Without E.O. 73, the basis for collection of real
property taxes will still be the 1978 revision of property
values. Certainly, to continue collecting real property
taxes based on valuations arrived at several years ago,
in disregard of the increases in the value of real
properties that have occurred since then, is not in
consonance with a sound tax system. Fiscal adequacy,
which is one of the characteristics of a sound tax
system, requires that sources of revenues must be
adequate to meet government expenditures and their
variations (Chavez v. Ongpin, 186 SCRA 331, G.R. No.
76778, June 6, 1990).
n. What are the 4 stages of Taxation?
Explain each briefly. ( BAR 2006)
Ans: The following are the 4 satges of Taxation:
(LAPR)
1) Levy – This refers to the enactment of a
law by Congress authorizing the
imposition of tax. It further contemplates
the determination of the subject of
taxation, purpose for which the tax shall
be levied, fixing the rate of taxation and
the rules of taxation in general.;
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Q: Taxes are assessed for the purpose of
generating revenue to be used for public needs.
Taxation itself is the power by which the State
raises revenue to defray the expenses of
government. A jurist said that a tax is what we pay
for civilization. In our jurisdiction, which of the
following statements may be erroneous?
1. Taxes are pecuniary in nature.
2. Taxes are enforced charges and contributions.
3. Taxes are imposed on persons and property
within the territorial jurisdiction of a State.

4. Taxes are levied by the executive branch of the
government.
5. Taxes are assessed according to a reasonable
rule of apportionment. (2004 Bar)
A: (4) Taxes are levied by the executive branch of
government. This statement is erroneous because levy
refers to the act of imposition by the legislature which is
done through the enactment of a tax law. Levy is an
exercise of the power to tax which is exclusively
legislative in nature and character. Clearly, taxes are not
levied by the executive branch of government (NPC v.
Albay, G.R. No. 87479, June 4, 1990).
-----
2) Assessment and Collection – an act of the
administration and implementation of the
tax law by the executive department
through the administrative agencies. The
act of assessing and collecting taxes is
administrative in character, and therefore
can be delegated (J. Dimaampao, 2015,).;
NOTE: The term “assessment” which here means notice
and demand for payment of a a tax liability, should not
be confused with “assessment” relative to a real
property taxation, which refers to the listing and
valuation of taxable real property.
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Q: Is the approval of the court, sitting as probate
or estate settlement court, required in the
enforcement of the estate tax? (2005 Bar)
A: NO. The approval of the court, sitting in probate, is
not a mandatory requirement in the collection of estate
tax.
On the contrary, under Section 94 of the NIRC, it is the
probate or settlement court which is forbidden to
authorize the executor or judicial administrator of the
decedent’s estate, to deliver any distributive share to
any party interested in the estate, unless a certification
from the Commissioner of the Internal Revenue that the
estate
tax has been paid is shown (Marcos II v. CA, G.R.
No.120880, June 5, 1997).
NOTE: Assessment and collection may be delegated but
not levy since it is exclusively conferred with the
Congress.
3) Payment – The act of compliance by the
taxpayer, including such options, schemes
or remedies as may be legally available.
GR: Tax shall be paid by the person subject thereto at
the time the return is filed (Sec. 56[A][1], NIRC).
XPN: When the tax due is in excess of P2,000, the
taxpayer other than a corporation may elect to pay the
tax in 2 equal installments in which case, the first
installment shall be paid at the time the return is filed
and the second installment, on or before July 15
following the close of the calendar year (Sec. 56[A]
[2],NIRC).
NOTE: If any installment is not paid on or before the
date fixed for its payment, the whole amount of the tax
unpaid becomes due and payable, together with
delinquency penalties.
4) Refund - The recovery of any alleged to
have been erroneously or illegaly assessed
or collected, or of any penalty claimed to
have been collected without authority, or
of any sum alleged to have been
excessively, or in any manner wrongfully
collected.
I. July 4, 2018
1. Commonly used doctrines/Principles in
Taxation:
a. Prospectivity of Tax Laws;
GR: Tax laws must only be imposed prospectively.
XPN: If the law expressly provides for retroactive
application. Retroactive application of revenue laws may
be allowed if it will not amount to denial of due process.
There is a violation of due process when the tax law
imposes harsh and oppressive tax (CIR v. Acosta, G.R.
No.154068 August 3, 2007).
Ex post facto law as applied in taxation
The prohibition against ex post facto laws applies only to
criminal matters and not to laws which are civil in
nature.
NOTE: When it comes to civil penalties like fines and
forfeiture (except interest), tax laws may be applied
retroactively unless it produces harsh and oppressive
consequences which violate the taxpayer’s constitutional
rights regarding equity and due process. But criminal
penalties arising from tax violations may not be given
retroactive effect.
b. Imprescriptibility of Taxation;
- As a rule, the right of the government to
collect taxes is imprescriptible because the
very existence of the state depends upon
the exercise of this power.
GR: Taxes are imprescriptible by reason that it is the
lifeblood of the government.
XPN: Tax laws may provide for statute of limitations. In
particular, the NIRC and LGC provide for the prescriptive
periods for assessment and collection.
Tax laws provide for statute of limitations in the
collection of taxes for the purpose of safeguarding
taxpayers from any unreasonable examination,
investigation or assessment (CIR v. B.F. Goodrich Phils.,
G.R. No. 104171, February 24, 1999).
NOTE: Although the NIRC provides for the limitation in
the assessment and collection of taxes imposed, such
prescriptive period will only be applicable to those taxes
that were returnable. The prescriptive period shall start
from the time the taxpayer files the tax return and
declares his liability (Collector of Internal Revenue v.
Bisaya Land Transportation Co., Inc., G.R. Nos. L-12100
& L-11812, May 29, 1959).

c. Double Taxation;
- Means taxing for the same tax period the
same thing or activity twice, when it
should be taxed but once, by the same
taxing authority for the same purpose and
with the same character of tax.
(Villanueva vs. City of Iloilo 26 SCRA 578)
IS DOUBLE TAXATION PROHIBITED IN THE PHILIPPINES?
No. There is no constitutional prohibition against double
taxation in the Philippines. It is something not favored,
but is permissible, provided some other constitutional
requirement is not thereby violated, such as the
requirement that taxes must be uniform (Villanueva v.
City of Iloilo, 1968).
There is no constitutional prohibition against double
taxation. It is not favored but permissible. (Pepsi Cola
Bottling Co. v. City of Butuan, 1968).
Two Types:
1) As to validity –
A. Direct (Strict sense) - Double taxation in
the objectionable or prohibited sense since it violates the
equal protection clause of the Constitution
Elements of Direct Double Taxation:
1. The same property is taxed twice
when it should be taxed only once;
and
2. Both taxes are imposed
a. on the same subject matter,
b. for the same purpose,
c. by the same taxing authority,
d. within the same jurisdiction,
e. during the same taxing period; and
f. the taxes must be of the same kind or
character (City of Manila v. Coca Cola
Bottlers Philippines, G.R. No. 181845,
August 4, 2009).
All the elements must be present in order
to apply double taxation in its strict sense.
B. Indirect (Broad sense) - It is a
permissible double taxation. It is indirect when
some elements of direct double taxation are
absent.
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BAR Q 2015
Q: Differentiate between double taxation in the
strict sense and in a broad sense and give an
example of each (2015 Bar).
A: Double taxation in the strict sense pertains to the
direct double taxation. This means that the taxpayer is
taxed twice by the same taxing authority, within the
same taxing jurisdiction, for the same property and
same purpose. On the other hand, double taxation in
broad sense pertains to indirect double taxation. This
extends to all cases in which there is a burden of two or
more impositions. It is the double taxation other than
those covered by direct double taxation.
BAR Q 1996
Q: X, a lessor of a property, pays real estate tax on
the premises, a real estate dealer’s tax based on
rental receipts and income tax on the rentals. He
claims that this is double taxation. Decide. (1996
Bar)
A: There is no double taxation. The real estate tax is a
tax on property; the real estate dealer’s tax is a tax on
the privilege to engage in business; while the income
tax is a tax on the privilege to earn an income. These
taxes are imposed by different taxing authorities and are
essentially of different kind and character (Villanueva v.
Iloilo, GR L-26521, Dec. 28, 1968).
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BAR Q 2004
Q: BB Municipality has an ordinance which
requires that all stores, restaurants, and
other
establishments selling liquor should pay an annual
fee of P20,000. Subsequently, the municipal board
proposed an ordinance imposing a sales tax
equivalent to 5% of the amount paid for the
purchase or consumption of liquor in stores,
restaurants and other establishments. The
municipal mayor, CC, refused to sign the ordinance
on the ground that it would constitute double
taxation. Is the refusal of the mayor justified?
Reason briefly. (2004 Bar)
A: NO. The impositions are of different nature and
character. The fixed annual fee is in the nature of a
license fee imposed through the exercise of police
power, while the 5% tax on purchase or consumption is
a local tax imposed through the exercise of taxing
powers. Both license fee and tax may be imposed on the
same business or occupation, or for selling the same
article and this is not in violation of the rule against
double taxation (Compania General de Tabacos de
Filipinas v. City of Manila, G.R. No. L-16619, June 29,
1963).
d. Different Modes of Eliminating Double
Taxation;
Local legislation and tax treaties may provide for:
1. Tax credit – an amount subtracted from taxpayer’s
tax liability in order to arrive at the net tax due.
2. Tax deduction – an amount subtracted from the gross
amount on which a tax is calculated.
3. Tax exemption – a grant of immunity to particular
persons or entities from the obligation to pay taxes.
4. Imposition of a rate lower than the normal domestic
rate
5. Tax treaty - The purpose is to reconcile the national
fiscal legislation of the contracting parties in order to
help the taxpayer avoid simultaneous taxation in two
different jurisdictions (international double taxation).
This is to encourage the free flow of goods and services
and the movement of capital, technology and persons
between countries, conditions deemed vital in creating
robust and dynamic economies.
e. Ways to Escape from Taxation;
TAXATION LAW REVIEWER
Based on the lectures of Atty. Gerald Yu
SRT Faelnar Notes