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DEFINITION OF TAXATION

Taxation is the inherent power of the sovereign, exercised through thelegislature, to impose urdens upon the su!ects and o!ects within its

!urisdiction, for the purpose of raising revenues to carr" out the legitimate

o!ects of the government#

TAXE$

Enforced proportional contriutions from properties and persons levied " the$tate " virtue its sovereignt" for the support of the government and forpulic needs#

%A$I$ OF TAXATION& 'O(E)N*ENTA+ NEE$$IT-

. The existence of the government depends upon its capacit" to perform itstwo /01 asic functions2

A## to serve the people

%## to protect the people

T3EO)- OF TAXATION

&)EI4)OA+ D5TIE$ OF $544O)T AND 4)OTETION

61 $upport on the part of the taxpa"ers

01 4rotection and ene7ts on the part of the government

%ENEFIT$ )EEI(ED 4)INI4+E

/I) vs# A+'5E1

8 Despite the natural reluctance to surrender part of ones hard earnedincome to the taxing authorit", ever" person who is ale to must contriutehis share in the running of the government#

8 The government is expected to respond in the form of tangile or intangileene7ts intended to improve the lives of the people and enhanced their

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material and moral values#

8 In return for his contriution, the taxpa"er receives the general advantagesand protection which the government a9ords the taxpa"er and his propert"#One is compensation or consideration for the other# 4rotection for support

and support for protection#3owever, it does not mean that onl" those who are ale to

pa" taxes can en!o" the privileges and protection

given to a citi:en " the government#

+O)EN;O vs# 4O$ADA$

8 & The onl" ene7t to which the taxpa"er is entitled is that derived form the

en!o"ment of the privileges of living in an organi:ed societ" estalished andsafeguarded " the devotion of taxes to pulic purpose# The governmentpromises nothing to the person taxed e"ond what ma"e anticipated froman administration of the laws for the general good#

8 & Taxes are essential to the existence of the government# The

oligation to pa" taxes rests not upon the privileges en!o"ed " or theprotection a9orded to the citi:en " the government, ut upon the necessit"of mone" for the support of the $tate# For this reason, no one is allowed too!ect to or resist pa"ment of taxes solel" ecause no personal ene7t to him

can e pointed out as arising from the tax#

E$$ENTIA+ E+E*ENT$ OF A TAX

61 It is an enforced contriution

01 It is generall" pa"ale in mone"

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)EC5I$ITE$ of a (A+ID TAX code2 4, 5, , A, N

61 It should e for a pulic purpose

01 The rule of taxation should e uniform

1 The tax must not infringe on the inherent and constitutional limitations ofthe power of taxation

.& Taxes are the lifelood of the government and should e collected withoutunnecessar" hindrance# %ut their collection should not e tainted witharitrariness

NAT5)E OF TAXATION

61 Inherent in sovereignt"

01 +egislative in character

$O4E OF TAXATION

61 omprehensive

01 5nlimited

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of such tax law# /HO*EN1

45)4O$E$ OF TAXATION

4)I*A)-

@ To raise revenue in order to support the government

$EONDA)-

61 5sed to reduce social ineGualit"

01 5tili:ed to implement the police power of the $tate

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I++5$T)ATION$ OF T3E +IFE%+OOD T3EO)-

61 ollection of the taxes ma" not e en!oined " in!unction

01 Taxes could not e the su!ect of compensation or set o9

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1 Apportionment of the tax

?1 $itus of taxation

B1 *ethod of collection

A$4ET$ OF TAXATION61 +E(- or I*4O$ITION

L enactment of tax laws

L legislative in character

01 A$$E$$*ENT

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L collection

L administrative in character

NOTE$2

8 & It is inherent in the power to tax that the $tate is free to select the o!ectof taxation

8 & The power of the legislature to impose tax includes the power

61 what to tax

01 whom to tax

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61 T3EO)ETIA+ 5$TIE

01 FI$A+ ADEC5A-

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tax law violates this principle such tax law is valid#

T3EO)ETIA+ 5$TIE

@ (IO+ATION J IN(A+ID

8 & This principle mandates that taxes must e !ust, reasonale and fair

L Taxation shall e uniform and eGuitale

8 & EGuitale taxation has een mandated " our constitution, as if taxes areun!ust and unreasonale then the" are not eGuitale, thus invalid#

8 & The tax urden should e in proportion to the taxpa"ers ailit" to pa"/A%I+IT- TO 4A- 4)INI4+E1

DI$TINTION$2

TAXATION vs# 4O+IE 4OHE) vs# E*INENT DO*AIN

61 As to purpose2

Taxation J for the support of the government

Eminent Domain@ for pulic use

4olice 4ower J to promote general welfare, pulic health, pulic morals, andpulic safet"#

01 As to compensation2

Taxation J 4rotection and ene7ts received from the government#

Eminent Domain J !ust compensation, not to exceed the maret valuedeclared " the owner or administrator or an"one having legal interest in the

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propert", or as determined " the assessor, whichever is lower#

4olice 4ower J The maintenance of a health" economic standard of societ"#

1 As to amount of imposition2

Taxation J 'enerall" no limit to the amount of tax that ma" e imposed#

4olice 4ower J +imited to the cost of regulation

Eminent Domain J There is no imposition rather, it is the owner of thepropert" taen who is !ust paid compensation#

?1 As to the relationship to the onstitution2

Taxation and Eminent Domain J $u!ect to certain constitutional limitations,including the prohiition against impairment of the oligation of contracts#

4olice 4ower J )elativel" free from constitutional limitations and superior to

the non@impairment provisions thereof#

TAX DI$TIN'5I$3ED F)O* +IEN$E FEE2

a1 45)4O$E2 Tax imposed for revenue H3I+E license fee for regulation# Taxfor general purposes H3I+E license fee for regulator" purposes onl"#

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1 %A$I$2 Tax imposed under power of taxation H3I+E license fee underpolice power#

c1 A*O5NT2 In taxation, no limit as to amount H3I+E license fee limited tocost of the license and expenses of police surveillance and regulation#

d1 TI*E OF 4A-*ENT2 Taxes normall" paid after commencement of usinessH3I+E license fee efore#

e1 EFFET OF 4A-*ENT2 Failure to pa" a tax does not mae the usiness

illegal H3I+E failure to pa" license fee maes usiness illegal#

f1 $5))ENDE)2 Taxes, eing lifelood of the state, cannot e surrenderedexcept for lawful consideration H3I+E a license fee ma" e surrendered withor without consideration#

I*4O)TANE OF DI$TINTION %ETHEEN TAXE$ AND +IEN$E FEE$#

It is necessar" to determine whether a particular imposition is a tax or a

license fee, ecause some limitations appl" onl" to one and not to the other#Furthermore, exemption from taxes does not include exemption from licensefees

TAXE$ DI$TIN'5I$3ED F)O* OT3E) I*4O$ITION$2

61 toll J amount charged for the cost and maintenance of propert" used

01 compromise penalt" J amount collected in lieu of criminal prosecution incases of tax violations

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# A special assessment is exceptional oth as to time and place a tax hasgeneral application#

$ome )ules2

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8 An exemption from taxation does not include exemption from a specialtreatment#

8 The power to tax carries with it a power to lev" a special assessment#

Toll v# tax

6# Toll is a sum of mone" for the use of something# It is the considerationwhich is paid for the use of a road, ridge, or the lie, of a pulic nature#

Taxes, on the other hand, are enforced proportional contriutions from

persons and propert" levied " the $tate " virtue of its sovereignt" for thesupport of the government and all pulic needs#

0# Toll is a demand of proprietorship tax is a demand of sovereignt"#

# Toll ma" e imposed " the government or " private individuals orentities tax ma" e imposed onl" " the government#

Tax v# penalt"

6# 4enalt" is an" sanction imposed as a punishment for violation of law or foracts deemed in!urious taxes are enforced proportional contriutions from

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persons and propert" levied " the $tate " virtue of its sovereignt" for thesupport of the government and all pulic needs#

0# 4enalt" is designed to regulate conduct taxes are generall" intended to

generate revenue#

# A person cannot e imprisoned for non@pa"ment of tax, except poll tax#

?# A det is governed " the ordinar" periods of prescription, while a tax isgoverned " the special prescriptive periods provided for in the NI)#

B# A det draws interest when it is so stipulated or where there is default,while a tax does not draw interest except onl" when delinGuent#

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)eGuisites of compensation

6# That each one of the oligor e ound principall", and that he e at thesame time a principal creditor of the other#

0# That oth dets consist in a sum of mone", or if the things due areconsumale, the" e of the same ind and also of the same Gualit" if thelatter has een stated#

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!urisdiction of the estate had found that the claim of the estate against thegovernment has een appropriated for the purpose " a corresponding lawshows that oth the claim of the government for inheritance taxes and theclaim of the intestate for services rendered have alread" ecome overdueand demandale as well as full" liGuidated# ompensation therefore taes

place " operation of law#

$urve" of 4hilippine Taxes

A# Internal )evenue taxes imposed under the NI)#6# Income tax

0# Transfer taxes

a1 Estate tax

1 Donors tax

# Documentar" stamp tax

%# +ocalR *unicipal Taxes

# Tari9 and ustoms Duties

D# Taxes R Tax Incentives under special laws

+A$$IFIATION OF TAXE$

A$ TO $5%ET *ATTE) O) O%ET

6# 4ersonal, poll or capitation tax

Tax of a 7xed amount imposed on persons residing within a speci7edterritor", whether citi:ens or not, without regard to their propert" or the

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occupation or usiness in which the" ma" e engaged, i#e# communit" tax#

0# 4ropert" tax

Tax imposed on propert", real or personal, in proportion to its value or inaccordance with some other reasonale method of apportionment#

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A speci7c tax is a tax of a 7xed amount imposed " the head or numer or "some other standard of weight or measurement# It reGuires no assessmentother than the listing or classi7cation of the o!ects to e taxed#

0# Ad valorem tax

An ad valorem tax is a 7xed proportion of the value of the propert" withrespect to which the tax is assessed# It reGuires the intervention of assessorsor appraisers to estimate the value of such propert" efore due from eachtaxpa"er can e determined#

A$ TO ')AD5ATION O) )ATE

6# 4roportional tax

Tax ased on a 7xed percentage of the amount of the propert" receipts orother asis to e taxed# Example2 real estate tax#

0# 4rogressive or graduated tax

Tax the rate of which increases as the tax ase or racet increases#

Digressive tax rate2 progressive rate stops at a certain point# 4rogressionhalts at a particular stage#

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4rogressive s"stem of taxation v# regressive s"stem of taxation

8 A progressive s"stem of taxation means that tax laws shall place emphasison direct taxes rather than on indirect taxes, with ailit" to pa" as theprincipal criterion#

8 A regressive s"stem of taxation exists when there are more indirect taxesimposed than direct taxes#

8 No regressive taxes in the 4hilippine !urisdiction

+A$$IFIATION OF TAXE$2

6# personal tax J also nown as capitali:ation or poll tax

0# propert" tax J assessed on propert" of a certain class

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EXE4TION$

6# stocholders ma" e held liale for unpaid taxes of a dissolved corporationif the corporate assets have passed into their hands and

0# heirs ma" e held liale for the transfer taxes on the estate, if prior to the

pa"ment of the same, the properties of the decedent have een distriutedto the heirs#

+I*ITATION$ ON T3E 4OHE) OF TAXATION

Inherent +imitations

6# It must e imposed for a pulic purpose#

0# If delegated either to the 4resident or to a +#'#5#, it should e validl"

delegated#

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remit 7nes and forfeitures after conviction " 7nal !udgment#

Direct J

a1 )evenue ill must originate exclusivel" in 3#)# ut the $enate ma" proposewith amendments#

1 Non@imprisonment for non@pa"ment of poll tax#

c1 Taxation shall e uniform and eGuitale#

d1 ongress shall evolve a progressive s"stem of taxation#

e1 Tax exemption of charitale institutions, churches and personages orconvents appurtenant thereto, mosGues, non@pro7t cemeteries, and all lands,uildings and improvements ADE /actuall", directl" , exclusivel"1 used forcharitale, religious, and educational purposes#

f1 Tax exemption of all revenues and assets used ADE for educationalpurposes of J

6# Non@pro7t non@stoc educational institutions#

0# 4roprietar" or cooperative educational institutions su!ect to limitationsprovided " law including J

a1 restriction on dividends

1 provisions for re@investments#

g1 Tax exemption of grants, endowments, donations or contriutions ADE foreducational purposes, su!ect to conditions prescried " law#

h1 No tax exemption without the concurrence of a ma!orit" of all memers ofongress#

i1 $ power to review !udgments or orders of lower courts in all casesinvolving J +egalit" of an" tax# Impost or toll, +egalit" of an" penalt" imposedin relation thereto#

IN3E)ENT +I*ITATION$

NOTE$2 45%+I 45)4O$E J

'O(E)N*ENTA+ 45)4O$E

)5+E2

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8 SThe +egislature is without the power to appropriate revenues for an"thingut for pulic purposes#

)5+E2

8 S4ulic mone" can onl" e spent for a pulic purpose#

45%+I 45)4O$E J A purpose a9ecting the inhaitants of the $tate or taxingdistrict as a communit" and not merel" as individuals

& 4ulic purpose includes not onl" direct ene7ts or advantage, it alsoincludes indirect ene7ts or advantage

TIO vs# (IDEO')A*

8 & It is not the immediate result ut the ultimate result that determines,whether the purpose is pulic or not

8 & It is not the numer of persons ene7ted ut it is the character of thepurpose that determines the pulic character of such tax law

8 & Hhat is not allowed is that if it has no lin to pulic welfare

8 & 4ulic purpose is determined " the use to which the tax mone" isdevoted

& If it ene7ts the communit" in general then it is for a pulic purpose nomatter who collects it

TE$T6# If the pulic advantage or ene7t is merel" incidental in the promotion of aparticular enterprise, that will render the law IN(A+ID

0# If what is incidental is the promotion of a private enterprise, the tax law isstill for a pulic purpose/(A+ID1

8 & A tax levied for a private, not pulic purpose constitutes taing ofpropert" without due process of law as it is e"ond the powers of thegovernment to impose it#

8 & Although private individuals are directl" ene7ted, the tax would still evalid, provided such ene7t is onl" incidental

8 & If what is incidental is the promotion of a private enterprise, as long asthere is a lin to the pulic welfare, the purpose is still pulic

8 & The test is not as to who receives the mone", ut the character of thepurpose for which it is expended

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& Not the immediate result of the expenditure, ut rather the ultimate

8 & The test that must e applied in determining whether the purpose ispulic or private

61 The character of the direct o!ect

01 The ultimate result not the immediate result

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)EC5I$ITE$ FO) A TAX4A-E)$ 4ETITION

61 That mone" is eing extracted and spent in violation of speci7cconstitutional protections against auses of legislative power

01 That pulic mone" is eing deWected to an" improper purpose

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')O5ND$ FO) TAX EXE*4TION OF FO)EI'N 'O(E)N*ENT 4)O4E)T-

61 $overeign eGualit" of $tates

01 5sage among $tates

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1

8 & +ocal government units have no power to further delegate saidconstitutional grant to raise revenue, ecause what is delegated is not theenactment or the imposition of a tax, it is the administrative implementation

%A$O vs# 4A'O)

8 & The power of local government units to impose taxes and fees is alwa"ssu!ect to the limitations which ongress ma" provide, the former having noinherent power to tax#

8 & *unicipal corporations are mere creatures of ongress which has thepower to create and aolish municipal corporations# ongress therefore hasthe power to control over local government units# If ongress can grant to amunicipal corporation the power to tax certain matters, it can also provide for

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exemptions or even tae ac the power

DE+E'ATION TO AD*INI$T)ATI(E A'ENIE$

8 & For the delegation to e constitutionall" valid, the law must e completein itself and must set forth suMcient standards

8 & ertain aspects of the taxing process that are not reall" legislative innature are vested in administrative agencies# In these cases, there reall" isno delegation, to wit2

A1 power to value propert"

%1 power to assess and collect taxes

1 power to perform details of computation, appraisement or ad!ustments#

NOTE$2 EXE*4TION OF 'O(E)N*ENT A'ENIE$

61 Agencies performing governmental functions

& TAX EXE*4T

01 Agencies performing proprietar" functions

& $5%ET TO TAX

. & The exemption applies onl" to governmental entities through which thegovernment immediatel" and directl" exercises its sovereign powers#

ND vs# E%5 IT-

8 & Tax exemption of propert" owned " the )epulic of the 4hilippines refersto the propert" owned " the government and its agencies which do not haveseparate and distinct personalit"#

& Those with O)I'INA+ 3A)TE)$ /incorporated agencies1

8 & Those created " $4EIA+ 3A)TE) /incorporated agencies1 are notcovered " the exemption

'O(E)N*ENT ENTITIE$ EXE*4T F)O* INO*IN' TAX

61 '$I$

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01 $$$

1 4A'O)

)EA$ON FO) EXE*4TION$

61 'overnment will e taxing itself to raise mone" for itself#

01 Immunit" is necessar" in order that governmental functions will not eimpeded#

NOTE$2 TE))ITO)IA+ 5)I$DITION

)5+E$2

8 & Tax laws cannot operate e"ond a $tates territorial limits

8 & The government cannot tax a particular o!ect of taxation which is notwithin its territorial !urisdiction#

8 & 4ropert" outside ones !urisdiction does not receive an" protection of the$tate

8 & If a law is passed " ongress, ongress must alwa"s see to it that the

o!ect or su!ect of taxation is within the territorial !urisdiction of the taxingauthorit"

$IT5$ OF TAXATION

L 4lace of taxation

)5+E2

@ The $tate where the su!ect to e taxed has a situs ma" rightfull" lev" and

collect the tax

8 & In determining the situs of taxation, "ou have to consider the nature ofthe taxes

Example2

61 4O++ TAX, A4ITATION TAX, O**5NIT- TAX

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& )esidence of the taxpa"er

01 )EA+ 4)O4E)T- TAX O) 4)O4E)T- TAX

& +ocation of the propert"

8 & He can onl" impose propert" tax on the properties of a person whoseresidence is in the 4hilippines#

EXE4TION$ TO T3E TE))ITO)IA+IT- )5+E

A1 Hhere the tax laws operate outside territorial !urisdiction

61 TAXATION of resident citi:ens on their incomes derived from aroad

%1 Hhere tax laws do not operate within the territorial !urisdiction of the $tate

61 Hhen exempted " treat" oligations

01 Hhen exempted " international comit"

$IT5$ OF TAX ON )EA+ 4)O4E)T-

@ +EX )EI $IT5$ or where the propert" is located

)EA$ON2

L The place where the real propert" is located gives protection to the realpropert", hence the propert" or its owner should support the government ofthat place

$IT5$ OF 4)O4E)T- TAX ON 4E)$ONA+ 4)O4E)T-

@ *O%I+IA $EC5NT5) 4E)$ONA*

Y movales follow the owner

Y movales follow the domicile of the owner

)5+E$2

61 TAN'I%+E 4E)$ONA+ 4)O4E)T-

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@ Hhere located, usuall" the owners domicile

01 INTAN'I%++E 4E)$ONA+ 4)O4E)T-

'# )# J Domicile of the owner

EXE4TION2 The situs location not domicile

& Hhere the intangile personal propert" has acGuired a usiness situs inanother !urisdiction

. & The principle of S*oilia $eGuntur 4ersonam is onl" for purposes ofconvenience# It must "ield to the actual situs of such propert"#

. & 4ersonal intangile properties which acGuires usiness situs here in the4hilippines

61 Franchise which is exercised within the 4hilippines

01 $hares, oligations, onds issued " a domestic corporation

1 )ights, interest in a partnership, usiness or industr" estalished in the4hilippines

& These intangile properties acGuire usiness situs here in the 4hilippines,"ou cannot appl" the principle of S*oilia $eGuntur 4ersonam ecause theproperties have acGuired situs here#

$IT5$ OF INO*E TAX

A1 DO*II++A)- T3EO)-

@ The location where the income earner resides in the situs of taxation

%1 NATIONA+IT- T3EO)-

@ The countr" where the income earner is a citi:en is the situs of taxation

1 $O5)E )5+E

@ The countr" which is the source of the income or where the activit" thatproduced the income too place is the situs of taxation#

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$IT5$ OF $A+E OF 4E)$ONA+ 4)O4E)T-

8 & The place where the sale is consummated and perfected

$IT5$ OF TAX ON INTE)E$T INO*E

8 & The residence of the orrower who pa"s the interest irrespective of theplace where the oligation was contracted

I) vs# %OA

8 & )evenue derived " an of@line international carrier without an" Wight fromthe 4hilippines, from ticet sales through its local agent are su!ect to tax ongross 4hilippine illings

$IT5$ OF EXI$E TAX

& Hhere the transaction performed

3O4EHE++ vs# O*# OF 5$TO*$

8 & The power to lev" an excise upon the performance of an act or theengaging in an occupation does not depend upon the domicile of the personsu!ect to the exercise, nor upon the ph"sical location of the propert" or in

connection with the act or occupation taxed, ut depends upon the place onwhich the act is performed or occupation engaged in#

Thus, the gauge of taxailit" does not depend on the location of the oMce,ut attaches upon the place where the respective transaction is perfectedand consummated

ON$TIT5TIONA+ +I*ITATION$I# D5E 4)OE$$

8 & Due process mandates that no person shall e deprived of life, liert", orpropert" without due process of law#

4E4$I O+A vs# *5N# OF TANA5AN

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@ )EC5I)E*ENT$ OF D5E 4)OE$$ IN TAXATION

61 Tax must e for a 4ulic purpose

01 Imposed within the Territorial !urisdiction

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)E*ED- J as for refund

8 & To !ustif" the nulli7cation of a tax law, there must e a clear anduneGuivocal reach of the constitution

& There must e proof of aritrariness

IN$TANE$ H3EN T3E TAX +AH *A-%E DE+A)ED A$ 5NON$TIT5TIONA+, O, N, 5

61 If it amounts to con7scation of propert" without due process

01 If the su!ect of taxation is outside of the !urisdiction of the taxing state

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tax power# /Tan vs# del )osario1

8 & $5%$TATNTI(E D5E 4)OE$$ reGuires that a tax statute must e withinthe constitutional authorit" of ongress to pass and that it e reasonale, fairand !ust

8 & 4)OED5)A+ D5E 4)OE$$ reGuires notice and hearing or at least anopportunit" to e heard

II# EC5A+ 4)OTETION +A5$E

& All persons, all properties, all usinesses should e taxed at the same rate

& prohiits class legislation

& prohiits undue discrimination

EC5A+IT- IN TAXATION /5NIFO)*IT-1

& EGualit" in taxation reGuires that all su!ects or o!ects of taxation similarl"situated should e treated alie or put on eGual footing oth on the privilegeconferred and liailities imposed

& All taxale articles of the same class shall e taxed at the same rate

8 & The Doctrine does not reGuire that persons or properties di9erent in facte treated in law as though there were the same# Hhat it prohiits is class

legislation which discriminates against some and favors others8 & As long as there are rational or reasonale grounds for doing so,ongress ma" group persons or properties to e taxed and it is suMcient if allmemers of the same class are su!ect to the same rate and the tax isadministered impartiall" upon them#

)EC5I$ITE$ OF A (A+ID +A$$IFIATION /$ A ' E 1

61 It must e ased on sustantial distinction

01 It must appl" not onl" to the present condition, ut also to futureconditions

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$5%$TANTIA+ DI$TINTION

& It must e real, material and not super7cial distinction

8 & Hhat is not allowed is ineGualit" resulting from singling out of a particularclass which violates the reGuisites of a valid classi7cation

8 & There ma"e ineGualit" ut as long as it does not violate the reGuisites ofa valid classi7cation that such mere ineGualit" is not enough to !ustif" thenulli7cation of a tax law or tax ordinance

8 & Taxation is eGuitale when its urden falls on those etter ale to pa"

8 &Although the eGual protection clause does not forid classi7cation, it isimperative that the sustantial di9erences having a reasonale relation tothe su!ect of the particular legislation

8 & Taxes are uniform and eGual when imposed upon all propert" of the sameclass or character within the taxing authorit"

8 & Tax exemptions are not violative of the eGual protection clause, as longas there is valid classi7cation#

TI5 vs# A

The onstitutional right to eGual protection of the law is not violated " anexecutive order, issued pursuant to law, granting tax and dut" incentives onl"to usiness within the Ssecured area of the $uic $pecial Economic ;oneand den"ing them to those who live within the :one ut outside such Sfenced

in territor"# The onstitution does not reGuire the asolute eGualit" amongresidents# It is enough that all persons under lie circumstances or conditionsare given the same privileges and reGuired to follow the same oligations# Inshort, a classi7cation ased on valid and reasonale standards does notviolate the eGual protection clause#

He 7nd real and sustantial distinctions etween the circumstances otaininginside and those outside the $uic Naval %ase, there" !ustif"ing a valid andreasonale classi7cation#

THO HA-$ EC5A+ 4)OTETION +A5$E AN %E (IO+ATED

61 Hhen classi7cation is made where there should e none

ex# Hhen the classi7cation does not rest upon sustantial distinctions thatmae for real di9erence

01 Hhen no classi7cation is made where a classi7cation is called for

ex# Hhen sustantial distinctions exist ut no corresponding classi7cation is

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made on the asis thereof

O)*O $5'A) ENT)A+ vs# I)

8 & If the ordinance is intended to suppl" to a speci7c taxpa"er and to no oneelse regardless of whether or not other entities elonging to the same classare estalished in the future, it is a violation of the eGual protection clause,ut if it is intended to appl" also to similar estalishments which ma"eestalished in the future, then the tax ordinance is valid even if in themeantime, it applies to onl" one entit" or taxpa"er for the simple reason thatthere is so far onl" one memer of the class su!ect of the tax measure

5NIFO)*IT- IN TAXATION

8 & The concept of uniformit" in taxation implies that all taxale articles orproperties of the same class shall e taxed at the same rate#

It reGuires the uniform application and operation, without discrimination, ofthe tax in ever" place where the su!ect of the tax is found# It does not,however, reGuire asolute identit" or eGualit" under all circumstances, utsu!ect to reasonale classi7cation#

EC5IT- IN TAXATION

8 & The concept of eGuit" in taxation reGuires that the apportionment of the

tax urden e more or less, !ust in the light of the taxpa"ers ailit" toshoulder to tax urden and if warranted, on the asis of the ene7ts receivedfrom the government# Its cornerstone is the taxpa"ers ailit" to pa"#

)ITE)IA OF EC5A+ 4)OTETION

61 Hhen the laws operate uniforml"

A1 on all persons

%1 under similar circumstances

01 All persons are treated in the same manner

A1 The conditions not eing di9erent

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%1 %oth in privileges conferred and liailities imposed

1 Favoritism and preference not allowed

)E-E$ vs# A+*A;O)

8 & Taxation is eGuitale when its urden falls on those etter ale to pa"

KA4ATI)AN vs# TAN

8 & It is inherent in the power to tax that the state e free to select thesu!ects of taxation and it has een repeatedl" held that ineGualities whichresult from a singling out of one particular class of taxation or exemptioninfringe no constitutional limitation

III# F)EEDO* OF T3E 4)E$$

8 & The press is not exempt from taxation

8 & The sale of maga:ines or newspapers, ma"e the su!ect of taxation

8 & Hhat is not allowed is to impose tax on the exercise of an activit" whichhas a connection with freedom of the press /license fee1

& If we impose tax on persons efore the" can deliver or roadcast aparticular news or information, that is the one which cannot e taxed#

TO+ENTINO vs# $E# OF FINANE

8 & Hhat is prohiited " the constitutional guarantee of free press are lawswhich single out the press or target a group elonging to the press for specialtreatment or which in an" wa" discriminates against the press on the asis ofthe content of the pulication#

I(# F)EEDO* OF )E+I'ION

8 & It is the activit" which cannot e taxed

8 & activities which have connection with the exercise of religion

A*E)IAN %I%+E $OIET- vs# *ANI+A

8 & The pa"ment of license fees for the distriution and sale of ilessuppresses the constitutional right of free exercise of religion#

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I**- $HA''A)T vs# %OA)D OF EC5A+I;ATION

8 & The Free Exercise of )eligion lause does not prohiit imposing agenerall" applicale sales and use tax on the sale of religious materials " a

religious organi:ation#

8 & The $ale of religious articles can e the su!ect of the (AT

8 & Hhat cannot e taxed is the exercise of religious worship or activit"

8 & The income of the priest derived from the exercise of religious activit"can e taxed#

(# NON@I*4AI)*ENT +A5$E

8 & The parties to the contract cannot exercise the power of taxation#

8 & The" cannot agree or stipulate that this particular transaction ma" eexempt from tax@ not allowed /except if government1

O4O$A vs# FATO)AN

8 & 4olice power prevails over the non@impairment clause

+A IN$5+A) vs# *AN35A

8 & A lawful tax on a new su!ect or an increased tax on an old one, does notinterfere with a contract or impairs its oligation#

8 & The constitutional guarantee of the non@impairment clause can onl"invoed in the grant of tax exemption#

)5+E$2

61 If the exemption was granted for valuale consideration and it is grantedon the asis of a contract#

& cannot e revoed

01 If the exemption is granted " virtue of a contract, wherein thegovernment enters into a contract with a private corporation

& cannot e revoed unilaterall" " the government

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person

& can e unilaterall" revoed " the government /ongress1

8 & The non@impairment clause applies onl" to contracts and not to afranchise#

8 & The non@impairment clause applies to taxation ut not to police powerand eminent domain# Furthermore, it applies onl" where one part" is thegovernment and the other, a private individual#

8 & As a rule, the oligation to pa" tax is ased on law# %ut when, forinstance, a taxpa"er enters into a compromise with the %I), the oligation ofthe taxpa"er ecomes one ased on contract

4)O(INE OF *I$A*I$ vs# A'A-AN E+ET)I

8 & Franchises with magic words, Sshall e in lieu of all taxes descriptive ofthe pa"ment of a franchise tax on their gross earnings are exempt from2

61 all taxes

01 the franchise tax under the NI)

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)EA$ON2 Erroneous application and enforcement of the law " pulic oMcersdo not loc suseGuent correct application of the statute# The government isnever estopped " mistaes or errors " its agents#

44 vs# A$TA[EDA

8 & Defense of tax amnest", lie amnest", is a personal defense

)EA$ON2 It relates to the circumstances of a particular accused and not thecharacter of the acts charged in the information

)E45%+I vs# IA

8 &In case of dout, tax amnest" is to e strictl" construed against thegovernment

)EA$ON2 Taxes are not construed, for taxes eing urdens are not to e

presumed e"ond what the tax amnest" expressl" and clearl" declares

(I# +AH *AKIN' 4)OE$$

A1 ONE $5%ET J ONE TIT+E )5+E

& Ever" ill passed " the ongress shall emrace onl" one su!ect whichshall e expressed in the title thereof /$ec# 0? /61 A)T II1

%1 T3)EE )EADIN' )5+E

& No ill passed " either 3ouse shall ecome a law unless it has passedthree readings on separate da"s and printed copies thereof in its 7nal formhave een distriuted to its memers three da"s efore its passage, EXE4Twhen the 4resident certi7es to the necessit" of its immediate enactment tomeet a pulic calamit" or emergenc"# /$ec# 0? /01 A)T II1

1 EN)O++ED %I++ DOT)INE

'#)# J An enrolled cop" of a ill is conclusive not onl" of its provisions ut alsoof its due enactment

(II# 4A)DONIN' 4OHE) OF T3E 4)E$IDENT

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& The 4resident has the power to grant reprieves, commutations and pardonsand remit 7nes and forfeitures after conviction " 7nal !udgment# /$ec# 6U,A)T (II1

NAT5)E OF TAX A*NE$T-

J A general pardon or intentional overlooing " the state of its authorit" toimpose penalties on persons otherwise guilt" of evasion or violation of arevenue or tax law

@ asolute forgiveness or waiver to collect

(III# NO I*4)I$ON*ENT FO) NON@4A-*ENT OF 4O++ TAX

@ No person shall e imprisoned for det or non@pa"ment of poll tax /$ec# 0V

A)T III18 & The non@imprisonment rule applies to non@pa"ment of poll tax which ispunishale onl" " a surcharge, ut not to other violations lie falsi7cation ofcommunit" tax certi7cate or non@pa"ment of other taxes

4O++ TAX J tax of 7xed amount imposed upon residents within a speci7cterritor" regardless of citi:enship, usiness or profession

Ex# ommunit" tax

IX# TAXATION $3A++ %E 5NIFO)* AND EC5ITA%+E

@ The rule of taxation shall e uniform and eGuitale# The ongress shallevolve a progressive s"stem of taxation# /$ec# 0P /61 A)T (I1

5NIFO)*IT-

@ means that all taxale articles inds of propert" of the same class shall etaxed at the same rate

8 & A tax is uniform when it operates with the same force and e9ect in ever"

place where the su!ect of it is found

EC5ITA%I+IT-

8 & Taxation is said to e eGuitale when its urden falls on those etter aleto pa"

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X# ON')E$$ $3A++ E(O+(E A 4)O')E$$I(E $-$TE* OF TAXATION

4)O')E$$I(IT-

8 & Taxation is progressive when its rate goes up depending on the sources ofthe person a9ected

$-TE*$ OF TAXATION

61 4)O4O)TIONA+ TAXATION

@ where the tax increases or decreases in relation to the tax racet

01 4)O')E$$I(E or ')AD5ATED $-$TE*

@ where the tax increases as the income of the taxpa"er goes higher

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XI# O)I'IN OF )E(EN5E, TA)IFF or TAX %I++$

All appropriation, revenue or tari9 ills, ills authori:ing increase of the pulicdet, ills of local application, and private ills shall originate exclusivel" inthe 3ouse of )epresentatives, ut the $enate ma" propose or concur with

amendments# /$ection 0=, Article (I1)5+E2

@ It is not the revenue statute ut the revenue ill which is reGuired " theconstitution to originate exclusivel" in the 3ouse of )epresentatives

)EA$ON2

@ To insist that a revenue statute and not onl" the ill which initiated thelegislative process culminating in the enactment of the law must sustantiall"e the same as the 3ouse ill would e to den" the $enates power not onl"

to Sconcur with amendments ut also to Spropose amendments# It would eto violate the co@eGualit" of legislative power of the two houses of ongressand in fact mae the 3ouse superior to the $enate# /Tolentino vs# $ec# ofFinance1

8 & The onstitution simpl" reGuires that there must e that initiative comingfrom the 3ouse of )epresentatives relative to appropriation, revenue andtari9 ills#

8 &The onstitution does not also prohiit the 7ling in the $enate of asustitute ill in anticipation of its receipt of the ill from the 3ouse, as long

as action " the $enate is withheld until receipt of said ill /Tolentino vs# $ec#of Finance1

XII# 4)E$IDENTIA+ (ETO

8 & SThe 4resident shall have the power to veto an" particular item or itemsin an appropriation, revenue or tari9 ill, ut the veto shall not a9ect the itemor items to which he does not o!ect /$ec# 0B /01, A)T (I1

XIII# TA)IFF 4OHE) OF T3E 4)E$IDENT

8 SThe ongress ma", " law, authori:ing the 4resident to 7x within speci7climits, and su!ect to such limitations and restrictions as it ma" impose, tari9rates, import and export Guotas, tonnage and wharfage dues, the otherduties or imports within the framewor of the national development programof the 'overnment /$ec# 0P /01, A)T (I1

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)EC5I$ITE$2

61 There must e a law passed " ongress authori:ing the 4resident toimpose tari9 rates and other fees#

01 5nder the law, there must e limitations and restrictions on the exercise of

such power

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X(# +AH ')ANTIN' TAX EXE*4TION$

8 S No law granting an" tax exemptions shall e passed without theconcurrence of a ma!orit" of all memers of the ongress /$ec# 0P /=1 A)T(I1

)5+E$ ON (OTE )EC5I)E*ENT

61 +aw granting an" tax exemption

& asolute ma!orit"

01 +aw withdrawing an" tax exemption

& )elative ma!orit"

8

8 & Tax exemption, amnesties, refunds are considered in the nature of taxexemptions

& A law granting such needs approval of the asolute ma!orit" of theongress

X(I# NO 5$E OF 45%+I *ONE- O) 4)O4E)T- FO) 45%+I 45)4O$E$

8 & S No pulic mone" or propert" shall e appropriated, applied, paid, oremplo"ed, directl" or indirectl", for the use, ene7t, or support of an" sect,

church, denomination, sectarian, institution or s"stem of religion, or of an"priest, preacher, minister or other religious teacher or dignitar" as such,EXE4T when such priest, preacher, minister or dignitar" is assigned to thearmed forces, or to an" penal institution, or government orphanage orleprosarium as such /$ec# 0U /01 A)T (I1

8 & 4ulic propert" ma" e leased to a religious group provided that thelease will e totall" under the same conditions as that to private persons/amount of rent1

8 & ongress is without power to appropriate funds for a private purpose#

X(II# TAX +E(IED FO) $4EIA+ 45)4O$E$

S All mone" collected or an" tax levied for a special purpose shall e treatedas a special fund and paid out for such purpose onl"# If the purpose for whicha special fund was created has een ful7lled or aandoned, the alance, if

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an", shall e transferred to the general funds of the 'overnment# /$ec# 0U/, A)T X1

+I*ITATION$ ON 4OHE) TO TAX /+#'#5#1

61 It is su!ect to such guidelines and limitations provided " ongress#

01 It must e consistent with the asic polic" of local autonom"#

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S local government units shall have a !ust share, as determined " law, in thenational taxes which shall e automaticall" released to them#

XX# TAX EXE*4TION$ OF ED5ATIONA+ IN$TIT5TION$

S All revenues and assets of non@stoc, non@pro7t educational institutionsused actuall", directl", and exclusivel" for educational purposes shall eexempt from taxes and duties# /$ec# = /

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8 & Hhere the educational institution is private and non@pro7t /ut a stoccorporation1 it is su!ect to income tax ut at the preferential rate of tenpercent /6V1

)EC5I$ITE$ for A44+IATION of 6V 4)EFE)ENTIA+ )ATE

61 It is private

01 It has permit to operate from the DE$, or 3ED or TE$DA

V1 of the total gross income derived" the school from all sources

8 & Hhere a donation is made in favor of an educational institution pursuantto sports competition and tournaments, the donor is exempt from thepa"ment of donors tax

I) vs# A /0UP $)A P

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XXII# NO EX4O$T FATO +AH 4)O3I%ITION IN TAXATION

FE)NANDE; vs# FE)NANDE;

8 & The prohiition against Sex post facto laws applies onl" to criminal lawsand not to those that concern civil matters

L Our tax laws are civil in nature

8 & The collection of interest on taxes is not penal in nature and the ex postfacto law prohiition does not appl" to it#

E$A4E F)O* TAXATION

%A$I FO)*$ OF E$A4E F)O* TAXATION

61 $3IFTIN'

01 A4ITA+I;ATION

1 EXE*4TION

?1 E(A$ION

I# $3IFTIN'

@ $hifting is the transfer of the urden of a tax " the original pa"er or theone on whom the tax was assessed or imposed to someone else

@ 4rocess " which such tax urden is transferred from statutor" taxpa"er toanother without violating the law

8 & It should e orne in mind that what is transferred is not the pa"ment ofthe tax, ut the urden of the tax

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8 & Onl" indirect taxes ma" e shifted direct taxes cannot e shifted

HA-$ OF $3IFTIN' T3E TAX %5)DEN

61 FO)HA)D $3IFTIN'

@ Hhen the urden of the tax is transferred from a factor of productionthrough the factors of distriution until it 7nall" settles on the ultimatepurchaser or consumer#

Example2

@ *anufacturer or producer ma" shift tax assessed to wholesaler, who in turnshifts it to the retailer, who also shifts it to the 7nal purchaser or consumer

01 %AKHA)D $3IFTIN'

@ Hhen the urden of the tax is transferred from the consumer or purchaser

through the factors of distriution to the factors of production

Example2

@ onsumer or purchaser ma" shift tax imposed on him to retailer "purchasing onl" after the price is reduced, and from the latter to thewholesaler, or 7nall" to the manufacturer or producer

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8 The $tatutor" taxpa"er is the person reGuired " law to pa" the tax or theone on whom the tax is formall" assessed# In short, he or she is the su!ect ofthe tax#

8 In direct taxes, the statutor" taxpa"er is the one who shoulders the urden

of the tax while in indirect taxes, the statutor" taxpa"er is the one who pa"the tax to the government ut the urden can e passed to another person orentit"#

)elationship etween impact, shifting, and incidence of a tax

8 The impact is the initial phenomenon, the shifting is the intermediateprocess, and the incidence is the result# Thus, the impact in a sales tax /i#e#(AT1 is on the seller /manufacturer1 who shifts the urden to the customerwho 7nall" ears the incidence of the tax#

8 Impact is the imposition of the tax shifting is the transfer of the tax while

incidence is the setting or coming to rest of the tax#

II# A4ITA+I;ATION

@ )eduction is the price of the taxed o!ect eGual to the capitali:ed value offuture taxes on the propert" sold

8 & This is a special form of acward shifting, where the urden of futuretaxes which the u"er ma" have to pa" is shifted ac to the seller in the

form of reduction in the selling price

III# T)AN$FO)*ATION

@ The manufacturer in an e9ort to avoid losing his customers, maintains thesame selling price and margin of pro7t, not " shifting the tax urden to hiscustomers, ut " improving his method of production and cutting down orother production cost, there" transforming the tax into or earn through themedium of production#

I(# TAX A(OIDANE

@ Also nown as Stax minimi:ation

@ not punished " law

@ Tax avoidance is the exploitation of the taxpa"er of legall" permissile

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alternative tax rates or methods of assessing taxale propert" or income inorder to avoid or reduce tax liailit"

DE+43E)$ T)ADE)$ O)4 vs# IA /6>B $)A

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the individual owners of propert"#

'rounds for granting tax exemptions

61 *a" e ased on contract# In such a case, the pulic, which is represented" the government is supposed to receive a full eGuivalent therefor, i#e#charter of a corporation#

01 *a" e ased on some ground of pulic polic", i#e#, to encourage newindustries or to foster charitale institutions# 3ere, the government need notreceive an" consideration in return for the tax exemption#

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exempted from all certain taxes, either entirel" or in part#

01 Implied exemption or exemption " omission

Hhen a tax is levied on certain classes of persons, properties, or transactionswithout mentioning the other classes#

Ever" tax statute maes exemptions ecause of omissions#

8 No tax exemption " implication

L It must e expressed in clear and unmistaale language

A+TEX vs# OA

8 & In claiming tax exemption, the urden of proof lies upon the claimant

L It cannot e created " mere implication

L It cannot e presumed that "ou are entitled to tax exemption

L -ou must prove it

)5+E2

@ Taxation is the rule and exemption is the exception

4)O4E)T- TAX J 'O(E)N*ENT 4)O4E)T-

8 & 4roperties owned " the government whether in their proprietar" orgovernmental capacit" are exempt from real estate tax

TE$T2

@ OHNE)$3I4

8 & Once estalished that it elongs to the government, the nature of the useof the propert" whether proprietar" or sovereign ecomes immaterial#

8 & Exemption of pulic propert" from taxation does not extend toimprovements therein made " occupants or claimants at their own expense#

KIND$ OF TAX EXE*4TION$ AO)DIN' TO $O4E O) EXTENT

61 TOTA+

@ Hhen certain persons, propert" or transactions are exempted, expressl" or

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impliedl" from all taxes

01 4A)TIA+

@ Hhen certain persons, propert" or transactions are exempted, expressl" orimpliedl" from certain taxes, either entirel" or in part#

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%asco vs# 4A'O) /6U? $)A >012 The power to tax municipal corporationsmust alwa"s "ield to a legislative act which is superior, having een passed" the $tate itself# *unicipal corporations are mere creatures of ongress

which has the power to create and aolish municipal corporations due to itsgeneral legislative powers# If ongress can grant the power to tax, it can alsoprovide for exemptions or even tae ac the power#

have: v# 4'', '#)# No# 6

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01 In cases of exemptions granted to religious, charitale and educationalinstitutions or to the government or its agencies or to pulic propert"ecause the general rule is that the" are exempt from tax#

$trict interpretation does not appl" to the government and its agencies

8 4etitioner cannot invoe the rule on stritissimi !uris with respect to theinterpretation of statutes granting tax exemptions to the N4# The rule onstrict interpretation does not appl" in the case of exemptions in favor of apolitical sudivision or instrumentalit" of the government# *aceda v#*acaraig

Davao 'ulf v# ommissioner, 0U< $)A B? /6UUP1

8 A tax cannot e imposed unless it is supported " the clear and expresslanguage of a statute on the other hand, once the tax is unGuestional"imposed, Sa claim of exemption from tax pa"ers must e clearl" shown andased on language in the law too plain to e mistaen# $ince the partialrefund authori:ed under $ection >, )A 6=, is in the nature of a taxexemption, it must e construed strictissimi !uris against the grantee# 3ence,petitioners claim of refund on the asis of the speci7c taxes it actuall" paidmust expressl" e granted in a statute stated in a language too clear to emistaen#

8 & Exemption of the u"er does not extend to the seller

L Exemption of the principal does not extend to the accessor"

Tax remission or tax condonation

8 The word Sremit means to desist or refrain from exacting, inWicting orenforcing something as well as to restore what has alread" een taen# The

remission of taxes due and pa"ale to the exclusion of taxes alread"collected does not constitute unfair discrimination# $uch a set of taxes is aclass " itself and the law would e open to attac as class legislation onl" ifall taxpa"ers elonging to one class were not treated alie# uan +una $ud#(# $armiento, U6 4hil

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law# $urigao onsolidated *ining v# ommissioner of Internal )evenue, U$)A B0P

Tax amnest"

8 Tax amnest", eing a general pardon or intentional overlooing " the $tate

of its authorit" to impose penalties on persons otherwise guilt" of evasion orviolation of a revenue to collect what otherwise would e due it and, in thissense, pre!udicial thereto# It is granted particularl" to tax evaders who wish torelent and are willing to reform, thus giving them a chance to do so andthere" ecome a part of the new societ" with a clean slate# )epulic v#Intermediate Appellate ourt, 6U? $)A

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ON$TIT5TIONA+ )E$T)ITION2

SNo law granting an" tax exemption shall e passed without the concurrenceof a ma!orit" of all memers of ongress# /$ec# 0P /=1 A)T (I1

(I# TAX E(A$ION

@ It is also nown as Stax dodging

@ It is punishale " law

@ Tax evasion is the use " the taxpa"er of illegal or fraudulent means todefeat or lessen the pa"ment of tax#

-5TI(O vs# TA

8 & Tax evasion is a term that connotes fraud through the use of pretenses orforidden devices to lessen or defeat taxes

E+E*ENT$ OF TAX E(A$ION

@ Tax evasion connotes the integration of three /

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E(IDENE TO 4)O(E TAX E(A$ION

8 & $ince fraud is a state of mind, it need not e proved " direct evidenceut ma" e proved from the circumstances of the case#

)E45%+I vs# 'ON;A+E$ /6< $)A ?