TAX CHAPTER 1: PRINCIPLES
1. Police Power 2. Power of Eminent Domain 3. Power of Taxation
3 Inherent Powers of the State (P E T)
Assessment
ASPECTS OF TAXATION: determination of the correct amount of applicable tax (executive function)
Collection
ASPECTS OF TAXATION: essentially administrative in character (executive function)
Levying
ASPECTS OF TAXATION: imposition of the tax which is a legislative act/function (can't be delegated)
proprietary
Agencies performing __________________ functions are subject to tax unless expressly exempted
governmental
Agencies performing _________________________ functions are tax exempt unless expressly taxed
1. Levying 2. Assessment 3. Collection
Aspects of Taxation (L A C)
a. Specific b. Ad valorem
CLASSIFICATION OF TAXES AS TO DETERMINATION OF AMOUNT:
Specific
CLASSIFICATION OF TAXES AS TO DETERMINATION OF AMOUNT: fixed amount imposed by the head or number, or by some standard of weight or measurement
Ad valorem
CLASSIFICATION OF TAXES AS TO DETERMINATION OF AMOUNT: fixed proportion/percentage of the value of the property
a. Proportional b. Progressive or graduated c. Regressive
CLASSIFICATION OF TAXES AS TO GRADUATION OR RATE:
Proportional
CLASSIFICATION OF TAXES AS TO GRADUATION OR RATE: based on a fixed percentage of amount of the property, receipts, or other basis to be taxed
Progressive or graduated
CLASSIFICATION OF TAXES AS TO GRADUATION OR RATE: the rate increases as the tax base or bracket increases; tax rate goes up depending on the resources of the person affected
Regressive
CLASSIFICATION OF TAXES AS TO GRADUATION OR RATE: the rate of which decreases as the tax base of bracket increases
a. Primary/Fiscal/Revenue Purpose b. Secondary/Regulatory/Special/Sumptuary
CLASSIFICATION OF TAXES AS TO PURPOSE:
Secondary/Regulatory/Special/Sumptuary
CLASSIFICATION OF TAXES AS TO PURPOSE: imposed for a specific purpose, to achieve some social or economic ends irrespective of whether the revenue is actually raised or not
Primary/Fiscal/Revenue Purpose
CLASSIFICATION OF TAXES AS TO PURPOSE: imposed solely for the general purpose of the government
Local
CLASSIFICATION OF TAXES AS TO SCOPE: imposed by LGUs; local government's power to tax isn't inherent, but granted by the Constitution
National
CLASSIFICATION OF TAXES AS TO SCOPE: imposed by the National Government
a. Personal, poll or capitation b. Property c. Excise
CLASSIFICATION OF TAXES AS TO SUBJECT MATTER OR OBJECT (P P E):
Excise
CLASSIFICATION OF TAXES AS TO SUBJECT MATTER OR OBJECT: -tax on the exercise of certain rights and privileges -tax levied or imposed on sin products and non-essential goods
Excise
CLASSIFICATION OF TAXES AS TO SUBJECT MATTER OR OBJECT: any tax which doesn't fall within the classification of a poll or property tax
Property
CLASSIFICATION OF TAXES AS TO SUBJECT MATTER OR OBJECT: imposed on property, whether real or personal
Personal, poll or capitation
CLASSIFICATION OF TAXES AS TO SUBJECT MATTER OR OBJECT: tax of a fixed amount imposed upon individuals, whether citizens or not, residing within a specified territory without regard to their property or occupation
a. National b. Local
CLASSIFICATION OF TAXES AS TO TAXING AUTHORITY:
Local
CLASSIFICATION OF TAXES AS TO TAXING AUTHORITY: imposed by LGUs
National
CLASSIFICATION OF TAXES AS TO TAXING AUTHORITY: taxes imposed under the NIRC (Tax Code) collected by the national government
a. Direct b. Indirect
CLASSIFICATION OF TAXES AS TO WHO BEARS THE BURDEN:
Direct
CLASSIFICATION OF TAXES AS TO WHO BEARS THE BURDEN: both the incidence (liability for the payment of the tax) as well as the impact or burden of the tax falls on the same person
Indirect
CLASSIFICATION OF TAXES AS TO WHO BEARS THE BURDEN: the incidence of or the liability for the payment of the tax falls on one person but the burden thereof can be shifted/passed on to another person
-rest on substantial distinctions -be relevant to the purpose of the law -not be limited to existing conditions only (must apply to present and future conditions) -apply equally to all members of the same class
Classification (of subjects), to be valid must:
a) Due process of law b) Equal protection of laws c) Rule of uniformity and equity in taxation d) Prohibition against imprisonment for non-payment of "poll tax" e) Prohibition against impairment of obligation of contracts f) Prohibition against infringement of religious freedom g) Prohibition against appropriation of proceeds of taxation for the use, benefit, or support of any church h) Prohibition against taxation of religious, charitable and educational entities i) Prohibition against taxation of non-stock, non-profit educational institutions j) Others
Constitutional Limitations
-power to value property -power to assess and collect taxes -power to perform details of computation, appraisement or adjustment; among others
Delegation to administrative agencies
Fiscal Adequacy
ELEMENTS OF A SOUND TAX SYSTEM: it's necessary that the sources of revenues must be adequate/sufficient to meet government expenditures and sustain the level of public services demanded
Administrative Feasibility
ELEMENTS OF A SOUND TAX SYSTEM: tax laws must be capable of effective and efficient enforcement -the tax system should be as simple as possible
Theoretical Justice or Equity (ability to pay principle)
ELEMENTS OF A SOUND TAX SYSTEM: the tax burden should be proportionate to the taxpayer's ability to pay
a. Fiscal Adequacy b. Administrative Feasibility c. Theoretical Justice or Equity (ability to pay principle)
Elements of a Sound Tax System (F A T)
a. enforced contribution b. generally payable in money; a pecuniary burden payable in money which must be in legal tender c. proportionate in character; should be based on the ability to pay theory or theoretical justice d. levied on persons, property, or the exercise of a right or privilege e. levied by the law-making body of the state f. levied for public purpose
Essential Elements of a Tax
a. Delegation to the President b. Delegation to local government units/political subdivisions c. Delegation to administrative agencies
Exceptions to non-delegation rule
-GSIS, SSS, PHIC, PCSO, Local Water Districts (RA 10026)
GOCCs granted tax exemptions:
proprietary
GOCCs performing __________________ functions are subject to tax
a) Purpose must be public in nature b) Prohibition against delegation of the taxing power (non-delegability) c) Territorial limitation (territoriality) d) Exemption of government from taxes e) International comity
Inherent Limitations
A valid tax may result in the destruction of the taxpayer's property
MANIFESTATION OF THE LIFEBLOOD THEORY: a lawful tax can't be defeated just because its exercise would be destructive or would bring about insolvency to a taxpayer
Taxes could not be the subject of compensation or set-off
MANIFESTATION OF THE LIFEBLOOD THEORY: claim for taxes is not a debt, demand, contract or judgment; a tax is compulsory rather than a matter of bargain
Rule of "No estoppel against the government"
MANIFESTATION OF THE LIFEBLOOD THEORY: erroneous application and enforcement of law by public officers don't block the subsequent current application of statutes
Collection of taxes can't be enjoined/stopped by injunction
MANIFESTATION OF THE LIFEBLOOD THEORY: no court except the Court of Tax Appeals shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by the tax code
Taxes could not be the subject of compensation or set-off
MANIFESTATION OF THE LIFEBLOOD THEORY: the government and the taxpayer aren't mutual creditor and debtor of each other; exception to the rule: both the claims of the government and the taxpayer against each other have already become due, demandable and fully liquidated
A valid tax may result in the destruction of the taxpayer's property
MANIFESTATION OF THE LIFEBLOOD THEORY: the power to tax includes the "power to destroy", where the tax is a valid tax
Rule of "No estoppel against the government"
MANIFESTATION OF THE LIFEBLOOD THEORY: the state can't be estopped by the neglect of its agents/officers
a) Rule of "No estoppel against the government" b) Collection of taxes can't be enjoined/stopped by injunction c) Taxes could not be the subject of compensation or set-off d) Right to select objects (subjects) of taxation e) A valid tax may result in the destruction of the taxpayer's property
Manifestation of the Lifeblood Theory
1. Grant of tax exemption 2. Veto of tariff, revenue, appropriation (t r a) bills by the President 3. Delegated authority of President 4. Non-impairment of the SC jurisdiction 5. Revenue bills shall originate exclusively from the House of Representatives 6. Infringement of press freedom 7. Revocation of Tax Exemptions
Other Constitutional Limitations
Secondary: Regulatory/Sumptuary/Compensatory Purpose
PURPOSE OF TAXATION: device for regulation or control by means of which the promotion of general welfare, reduction of social inequality, and economic growth may be achieved
Primary: Revenue/Fiscal Purpose
PURPOSE OF TAXATION: to provide funds/property with which to promote the general welfare and the protection of its citizens and to enable it to finance its multifarious activities
1) subject/object to be taxed 2) amount of the tax 3) rate of the tax 4) purpose of the tax as long as it is a public purpose 5) kind of tax 6) apportionment of the tax 7) situs of taxation 8) manner, means, and agencies (mode) of collection of the tax
Right to select objects (subjects) of taxation/Scope of taxation (S A R P K A S M)
Plenary
SCOPE OF THE POWER OF TAXATION: complete, unqualified, absolute
Unlimited
SCOPE OF THE POWER OF TAXATION: in the absence of limitations; its force is so searching that the courts scarcely venture to declare that it is subject to any restrictions
Comprehensive
SCOPE OF THE POWER OF TAXATION: it covers persons, businesses, activities, professions, rights and privileges
Supreme
SCOPE OF THE POWER OF TAXATION: to the extent of the selection of the subject of taxation
a. Comprehensive b. Unlimited c. Plenary d. Supreme
Scope of the Power of Taxation (C U P S)
Delegation to local government units/political subdivisions
Sec. 5 Art. X; the power of LGUs (barangays, municipalities, cities, provinces, autonomous regions) to impose taxes and fees is always subject to the limitations which Congress may provide
TRUE
T OR F: any constitutional provision regarding the state's power to tax shouldn't be interpreted as a "grant of power", but merely a limitation on the state's power to tax
T
T OR F: once it is settled that the tax is for a public purpose, it can no longer be a subject of inquiry
F: PUBLIC purpose; GREATER portion
T OR F: tax has been utilized for private purpose if the welfare of the nation or the smaller portion of its population has benefited for its use
F: Congress
T OR F: the Supreme Court has the power to determine whether the purpose is public or private
T
T OR F: the purposes to be accomplished by taxation need not be exclusively public
T
T OR F: the tax would still be valid provided that the private benefit is only incidental
TRUE
TRUE OR FALSE: no tax law may be enacted for the purpose of raising revenue for private purposes
FALSE; within its jurisdiction
TRUE OR FALSE: taxation is inherent in sovereignty; the state has the supreme power to command and enforce obedience to its will from the people beyond its jurisdiction
TRUE
TRUE OR FALSE: taxation is peculiarly and exclusively legislative in nature; can't be exercised by the executive/judicial branches
TRUE
TRUE OR FALSE: the government can compel payment of tax and forfeiture of property through the exercise of police power
Equal protection of laws
all persons subject to legislation shall be treated alike under similar circumstances and conditions both in the privileges conferred and liabilities imposed
Due process of law
also known as the right to notice and hearing
Police Power
amount of imposition is sufficient to cover cost of license, police surveillance and regulation
a. For the support of the government; or b. For some of the recognized objects of government; or c. To promote the welfare of the community
best test of rightful taxation is that the proceeds of the tax must be used:
Benefits Received/Reciprocity Theory
brought forth the Doctrine of Symbiotic Relationship or Benefits-Protection Theory
Taxes
enforced proportional contributions/charges from persons and property levied by the law-making body of the state
regressive system of taxation
exists when there are more indirect taxes imposed than direct taxes
Police Power
for promoting public welfare by restraining and regulating the use of liberty and property
Power of Taxation
generally, the amount of imposition has no limit
Inherent Limitations
limitations arising from the very nature of the power to tax itself; exist despite the absence of an express constitutional provision
Power of Eminent Domain
may be granted to public service/utility companies
Exemption of government entities, agencies and instrumentalities
necessary in order that governmental functions won't be impeded; otherwise, the government will be taxing itself to raise money for itself
Power of Eminent Domain
no imposition; owner is paid equivalent to the FV of his property
Taxation
power inherent in every sovereign state being essential to the existence of every government
Power of Eminent Domain
power to acquire private property for public purpose upon payment of just compensation
International Comity
property of a foreign state may not be taxed by another state due to: -sovereign equality of states -when one state enters the territory of another, there's an implied understanding that the former doesn't intend to belittle its dignity by placing itself under the other state's jurisdiction -immunity from suit of a state
Prohibition against imprisonment for non-payment of "poll tax"
punishable only by surcharge, but not to other violations like falsification of community tax certificate (CTC) and non-payment of other taxes
Rule of uniformity and equity in taxation
requires the uniform application and operation, without discrimination, of the tax in every place where the subject of the tax is found
Territorial limitation (territoriality)
tax laws can't operate beyond a state's territorial limits
progressive system of taxation
tax laws shall place emphasis on direct taxes rather than on indirect taxes, with ability to pay as the principal criterion
Lifeblood/Necessity Theory
taxation is a power emanating from necessity
Doctrine of Symbiotic Relationship or Benefits-Protection Theory
taxes are what we pay for a civilized society
Lifeblood/Necessity Theory
the existence of government is a necessity
Lifeblood/Necessity Theory
the government can neither exist nor endure without taxation; taxes are the lifeblood of the government and their prompt and certain availability is an imperious need
Taxation
the process or means by which the sovereign (independent state) through its law-making body (the legislature) imposes burdens upon subjects and objects within its jurisdiction for the purpose of raising revenues to carry out the legitimate objects of government
Benefits Received/Reciprocity Theory
the reciprocal duties of protection and support between the state and its inhabitants
Benefits Received/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 pay taxes in order that they may be secured in the enjoyment of the benefits of organized society
-tariff rates -import and export quotas -tonnage and wharfage dues -other duties or imposts within the framework of the national development program
through delegation, the President may impose: (t i t o)
Delegation to the President
under Sec. 28 Art. VI of the Constitution stating that the Congress may authorize, by law, the President to fix, within specified limits and subject to such limitations and restrictions as it may impose (t i t o)
"the power to tax is not the power to destroy as long as the Supreme Court sits"
where it is a invalid tax which violates the inherent and constitutional limitations; there is a sympathetic court that shall come to the help of the taxpayer and declare such tax as invalid