Summary - January 17, 2018

A Taxation in General
I. Concepts
a. Taxation
i. Definition
as a power
by which an independent state, through its law-making body, raises

and accumulates revenue from its inhabitants to pay the necessary
expenses of the government; inherent power of a state, coextensive
with sovereignty to demand contributions
as a process
of imposing a charge by gov’t authority on property, individuals,

or transactions to raise money for public purposes; enactment of
tax laws by the Congress which will be implemented by the
Executive Branch through BIR to raise revenue in order to pay the
necessary expenses of the government
as a means
by which the Sovereign State through its law-making body, demands

for revenue in order to supports its existence and carry out
legitimate objectives; collection and appropriation of cost to
those entitles to its benefits.
ii. Nature of the power of taxation

1. Inherent power of sovereignty;
Existence commences concurrently with the four elements of

state (people, territory, sovereignty and government)
Sovereign government can enforce contribution even without
a specific provision in the Constitution authorizing it.
Only the NATIONAL GOVERNMENT (NOT LOCAL) exercises the

inherent power of taxation of the state. UNLESS, (1) there
is an expressed Constitutional provision granting them the
power to tax; (2) valid delegation of tax power through the
statute from the national legislature…
2. Essentially a legislative function;
The law-making body of the government exercise the power of

taxation. Congress have the power to enact laws and
ordinances, and impose the collection of taxes.
Scope of legislative taxing power:

 Subjects of taxation: (1)Persons; (2)Property;
(3)Rights; (4)Transactions; (5)Occupation;etc.
 Amount or rate of the tax
 Purposes of tax (public purposes)
 Apportionment of tax
 Situs of taxation; and
 Method of tax collection
The power to make tax laws cannot be delegated to other
branches of the government. If the powers delegated are
ministerial and advisory (power to value property, assess
and collect), they are allowed since they are only
administrative in nature, not legislative.
Distinguishing between tax delegation and tax

administration.
3. For public purposes;
Public taxes are public money—they must be used to finance

recognized public needs (finance constructions and
maintenance of roads; health care, education, security,
promotion of science, commerce, industry, and others) for
the welfare of the general public.
Public purpose- for the welfare of the nation, no other

reason for appropriation of tax
Tax utilized for public purpose if welfare of the nation or

the greater portion of its population has benefited its
use.
4. Territorial in operation;
Taxing authorities must observe tax situs because the

country’s tax laws are effective and enforceable only
within its territorial limits.
Privity of relationship – implies contractual support or

duty of care afforded by the Gov’t to its citizen residing
outside the country.
If privity of relationship exists, the state can still
exercise its taxing powers over its citizen outside its
territory.
International Comity – courteous recognition, friendly

agreement, interaction and respect accorded by one nation
to the laws and institutions of another. (example, tax
exemption of properties used by diplomats in the exercise
of sovereign powers and diplomatic function)
5. Tax exemption of government;
Grant of tax immunity to a particular class of persons or

corporations
Only applies to government entities through which the

government immediately and directly exercises its
governmental functions like the AFP. (unless expressly
taxed)
However, if they are performing proprietary functions like

PNR, they are generally subject to tax in the absence of
tax exemption provisions in their charters or the law
creating them
6. The strongest among the inherent powers of the
government; and
Taxation – strongest of all inherent powers, because gov’t

can’t survive nor dispense any of its powers and functions
effectively.
7. Subject to Constitutional and inherent limitations

iii. Purposes
Revenue Purpose
Primary purpose of taxation is to raise revenue by collecting
funds or property for the support of the government in promoting
the general welfare and protecting its inhabitants.
Regulatory Purpose
AKA Sumptuary, objective is accomplished to:
(1) Regulate inflation
- To curve spending power and minimize inflation in times of
prosperity. It can also be reduced to expand business and
ward off depression in times of delicining economic
conditions
(2) Achieve economic and social stability, and
- To encourage econ growth by granting tax exemptions, tax
relief and incentives, which could attract investments and
create employment.
- International relations
(3) Serve as key instrument for social control
-
iv. Underlying theory and basis

v. Aspects/ stages
vi. Scope
vii. As distinguished from other inherent powers of the State
Sovereign state’s indispensable powers necessary for survival.

Essential force in order that a government can command, maintain
peace and order, and survive, irrespective of any Constitutional
provision
1. Police Power
Inherent power of the sovereign state to legislate for the

protection of health, welfare and morals of the community.
(guard against excesses or abuses of individual liberty.)
This power is restricted by the “due process clause” of the
Constitution
Police Power of the State may be exercised through taxation

because taxes may be levied for the promotion of the
welfare of the public
Examples: preservation of natural resources, segregation of

lepers from the public, imprisonment of convicted
criminals, and regulation of various professions
2. Eminent Domain
Power of the sovereign state to take private property for

public purposes.
Founded upon the idea: common necessities and interests of
the community transcend individual rights in property.
Constitutional limits of the exercise of this power –

providing that property may not be taken without just
compensation.
Just Compensation means paying the owner the full monetary

equivalent of the property taken for public use.

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A Taxation in General

by which an independent state, through its law-making body, raises

of imposing a charge by gov’t authority on property, individuals,

by which the Sovereign State through its law-making body, demands

ii. Nature of the power of taxation

Existence commences concurrently with the four elements of

Only the NATIONAL GOVERNMENT (NOT LOCAL) exercises the

2. Essentially a legislative function;

The law-making body of the government exercise the power of

Scope of legislative taxing power:

Distinguishing between tax delegation and tax

3. For public purposes;

Public taxes are public money—they must be used to finance

Public purpose- for the welfare of the nation, no other

Tax utilized for public purpose if welfare of the nation or

Taxing authorities must observe tax situs because the

Privity of relationship – implies contractual support or

International Comity – courteous recognition, friendly

5. Tax exemption of government;

Grant of tax immunity to a particular class of persons or

Only applies to government entities through which the

However, if they are performing proprietary functions like

Taxation – strongest of all inherent powers, because gov’t

7. Subject to Constitutional and inherent limitations

iv. Underlying theory and basis

Sovereign state’s indispensable powers necessary for survival.

Inherent power of the sovereign state to legislate for the

Police Power of the State may be exercised through taxation

Examples: preservation of natural resources, segregation of

Power of the sovereign state to take private property for

Constitutional limits of the exercise of this power –

Just Compensation means paying the owner the full monetary

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