Chapter 1:

FUNDAMENTAL PRINCIPLES OF TAXATION

Taxation
● is the inherent power of the sovereign (independent state o isang bansa, gaya ng Pilipinas),
exercised through the legislature, to impose burdens (pinapatawan ng buwis) upon
subjects and objects (person, property, privileges) within its jurisdiction (sa loob lang ng
bansa) for the purpose of raising revenues to carry out the legitimate objects of
government.

Taxes
● are the enforced proportional contributions or charges from persons and property levied by
the law-making body of the state by virtue of its sovereignty for the support of the
government and all public needs.

NATURE OF TAXATION
1. Inherent in sovereignty taxation is an inherent power of every government. A state cannot
exist without taxation to support its operation and welfare of people.
2. Legislative in character – the government's inherent power to impose and collect taxes is
exercise through its legislative branch or the congress.

EXTENT OF THE POWER OF TAXATION

● Subject to constitutional and inherent restrictions, the power of taxation is regarded as
comprehensive, unlimited, plenary and supreme.

PURPOSE OF TAXATION
● Primary: Revenue or Fiscal Purpose
○ To provide funds or property to promote the general welfare and protection of its
citizens and to finance its diverse activities.
■ Examples of taxes to raise revenues are income and business taxes.
● Secondary: Regulatory Purpose (or Sumptuary/Compensatory)
○ in this purpose taxation is employed as a devise for regulation or control such as:
A. Promotion of General Welfare
B. Reduction of Social Inequality
C. Economic Growth

Lesson 2 - THEORY AND BASIS OF TAXATION

The power of taxation proceeds upon the theory that the existence of government is a necessity.
This power is essential because the government can neither exist nor endure without taxation. Its
basis is the reciprocal duties of protection and support between the state and its inhabitants.

LIFEBLOOD THEORY OR NECESSITY THEORY

● Taxes are the lifeblood of the nation
● Without revenue raised from taxation, the government will not survive, resulting in detriment
to society. Without taxes, the government would be paralyzed for lack of motive power to
activate and operate it.

“POWER TO DESTROY"
● The power to tax includes the power to destroy if it is used as an implement of the police
power (regulatory) of the State. However, it does not include the power to destroy if it is used
solely for the purpose of raising revenue.

Basis of Taxation: BENEFITS RECEIVED THEORY OR RECIPROCITY THEORY

The state collects taxes from the subjects of taxation in order that it may be able to perform the
functions of government. The citizens, on the other hand, pay taxes in order that it may be secured
in the enjoyment of the benefits of organized society.