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Consti Law 4

This document discusses the power of taxation under the Philippine Constitution. It covers: 1) The power to tax primarily lies with the legislature but is also exercised by local legislative bodies and the President under certain conditions. 2) Taxes are subject to limitations like due process and equal protection. Courts can strike down confiscatory or unjust taxes. 3) Certain institutions like churches and schools are exempt from taxation under the Constitution. Exemptions granted for valuable consideration cannot be revoked, unlike those granted gratuitously. 4) The distinction between taxation and police power depends on whether the primary purpose is revenue generation or regulation. License fees are a police measure while taxes are revenue measures.

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23 views2 pages

Consti Law 4

This document discusses the power of taxation under the Philippine Constitution. It covers: 1) The power to tax primarily lies with the legislature but is also exercised by local legislative bodies and the President under certain conditions. 2) Taxes are subject to limitations like due process and equal protection. Courts can strike down confiscatory or unjust taxes. 3) Certain institutions like churches and schools are exempt from taxation under the Constitution. Exemptions granted for valuable consideration cannot be revoked, unlike those granted gratuitously. 4) The distinction between taxation and police power depends on whether the primary purpose is revenue generation or regulation. License fees are a police measure while taxes are revenue measures.

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D.

Power of Taxation

1. Definition; nature and scope of power.

2. Who may exercise. Primarily, the legislature; also: local legislative bodies [Sec. 5, Art. X, Constitution];
and to a limited extent, the President when granted delegated tariff powers [Sec. 28 (2), Art. VI],

3. Limitations on the exercise.

a) Due process of law: tax should not be confiscatory.

1 With the legislature primarily lies the discretion to determine the


nature, object, extent, coverage and situs of taxation. But where a tax measure becomes so unconscionable
and unjust as to amount to confiscation of property, courts will not hesitate to strike it down, for despite all its
plenitude, the power to tax cannot override constitutional prescriptions. This postulate, however, has not been
demonstrated in the challenge to the constitutionality of the Simplified Net Income Taxation Scheme (SNITS)
[Tan v. del Rosario, 237 SCRA 324].

b) Equal protection clause: Taxes should be uniform and equitable [Sec. 28 (1), Art. VI].

c) Public purpose. See: Pascual v. Secretary of Public Works and Communications, infra..

i) Tax for special purpose [Sec. 29 (3), Art. VI]: Treated as a special
fund and paid out for such purpose only; when purpose is fulfilled, the balance, if any, shall be transferred to
the general funds of the Government. See: Osmena v. Orbos, 220 SCRA 703.

4. Double Taxation. Additional taxes are laid on the same subject by the same taxing jurisdiction during
the same taxing period and for the same purpose. See: Punzalan v. Municipal Board of Manila, 95 Phil 46.

a) Despite lack of specific constitutional prohibition, double taxation will


not be allowed if the same will result in a violation of the equal protection clause.

5. Tax Exemptions. Requisite: No law granting any tax exemption shall be passed without the
concurrence of a majority of all the Members of Congress [Sec.
28 (4), Art. VI, Constitution].

a) Sec. 28 (31 Art. VI: Charitable institutions, churches and parsonages or convents
appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings and improvements, actually,
directly and exclusively used for religious, charitable or educational purposes shall be exempt from taxation.

b) Sec. 4 (3) Art. XIV: All revenues and assets of non-stock, non-profit educational institutions
used actually, directly and exclusively for educational purposes shall be exempt from taxes and duties, x x x
Proprietary educational institutions, including those co-operatively owned, may likewise be entitled to such
exemptions subject to the limitations provided by law including restrictions on dividends and provisions for
reinvestment.
c) Sec. 4 (41 Art. XIV: Subject to conditions prescribed by law, ail grants,
endowments, donations, or contributions used actually, directly and exclusively for educational purposes shall
be exempt from tax.

d) Where tax exemption is granted gratuitously, it may be revoked at will; but not if granted for a
valuable consideration. See Mactan Cebu International Airport Authority v. Marcos, 261 SCRA 667; Casanova
v. Hord, 8 Phil 125; Lladoc v. Commissioner of Internal Revenue, 14 SCRA 292.

6. Police Power v. Taxation. In Gerochi v. Department of Energy, G.R. No. 159796, July 17, 2007, the
Court made a conservative and pivotal distinction between police power and taxation, holding that the
distinction rests in the purpose for which the charge is made. If generation of revenue is the primary purpose
and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that
revenue is incidentally raised does not make the imposition a tax. Thus, the Supreme Court concluded that the
Universal Charge imposed under Sec. 34 of the EPIRA is an exaction that invokes the State’s police power,
particularly its regulatory dimension, gleaned from Sec. 34 itself which enumerates the purposes of the
Universal Charge which can be amply discerned as regulatory in character.

a) License fee v. Tax

i) License fee is a police measure; tax is a revenue measure.

ii) Amount collected for a license fee is limited to the cost of permit
and reasonable police regulation [except when the license fee is imposed on a non-useful occupation, as in
Physical Therapy Organization v. Municipal Board of Manila, infra.]; amount of tax may be unlimited provided it
is not confiscatory.

iii) License fee is paid for the privilege of doing something, and may
be revoked when public interest so requires; Tax is imposed on persons or property for revenue. See:
Compania General de Tabacos v. City of Manila, 8 SCRA 367.

b) Kinds of license fee

i) For useful occupations or enterprises.

ii) For non-useful occupations or enterprises. When a license fee


is imposed in order to discourage non-useful occupations or enterprises, the amount imposed may be a bit
exorbitant [Physical Therapy Organization v. Municipal Board of Manila, infra.].

7. Supremacy of the national government over local governments in taxation. When local governments
invoke the power to tax on national government instrumentalities, the exercise of the power is construed
strictly against local governments. The rule is that a tax is never presumed and there must be clear language
in the law imposing the tax [Manila International Airport Authority (MIAA) v. Court of Appeals, G.R. No.
155650, July 20, 2006], In this case, the Supreme Court ruled that airports, lands and buildings of MIAA are
exempt from real estate tax for the following reasons: (a) MIAA is not a government-owned or -controlled
corporation but an instrumentality of the National Government; and (b) the real properties of MIAA are owned
by the Republic of the Philippines, and thus, exempt from local taxation.

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