General Principles of Taxation ➢ Despite the natural reluctance to surrender part

Taxes, Laws, Systems & Administrative of one’s hard-earned income to the taxing
authorities, every person who is able to must
TAXATION contribute his share in the running of the
is the inherent power by which the sovereign, through its government.
law. making body raises revenue to defray the necessary ➢ The government for its part, is expected to
expenses of the government. respond in the form of tangible and intangible
benefits intended to improve the lives of the
INHERENT TO THE STATE people and enhance their moral and material
• It is inherent in character because its exercise is values.
guaranteed by the mere existence of the state. ➢ This symbiotic relationship is the rationale of
• It could be exercised even in the absence of a taxation and should dispel the erroneous notion
constitutional grant. that it is an arbitrary method of exaction by those
• The power to tax proceeds upon the theory that in the seat of power. (Commissioner of Internal
the existence of a government is a necessity, and Revenue vs. Algue, supra).
this power is an essential and inherent attribute
of sovereignty, belonging as a matter of right to FORMS OF ESCAPE FROM TAXATION
every independent state or government. (Pepsi- 1. Shifting - the burden of payment is transferred from
Cola Bottling Co. of the Philippines vs. the statutory taxpayer to another without violating the
Municipality of Tanauan, Leyte, G.R. No. L-31156, law.
February 27, 1976) 2. Capitalization - the reduction in the price of the taxed
object equal to the capitalized value of future taxes the
SCOPE OF LEGISLATIVE POWER TO TAX purchaser is expected to be called upon to pay.
1. The determination of purposes for which taxes shall 3. Transformation - for manufacturers or producers,
be levied provided it is for the benefit of the public. upon whom tax are imposed, fearing the loss of his
2. The determination of subjects of taxation such as market if he should add to the price, pays the tax and
the person, property or occupation within its endeavors to recoup himself by improving his process of
jurisdiction. production, thereby producing his units at a lower cost.
3. The determination as to the amount or rate of tax 4. Tax Avoidance - exploitation by the taxpayer of legally
unless constitutionally prohibited. permissible alternative tax rates or methods of assessing
4. The determination as to the kind of tax to be collected taxable property or income, in order to avoid or reduce
(i... tax liability. Also known as "tax minimization." (e.g.,
property tax, income tax, inheritance tax, etc.). utilizing all permissible allowable deductions)
5. The determination of agencies to collect the taxes. 5. Tax Exemption - grant of immunity to particular
6. The power to specify or provide for administrative and persons or corporations of a particular class from a tax
judicial remedies. which persons or corporations generally within the same
7. The power to grant tax exemptions and condonations. rate or taxing district are obliged to pay.
6. Tax Evasion - use of a taxpayer of illegal or fraudulent
THEORY AND BASIS means to defeat or lessen the payment of tax. Also
1. Life Blood Theory - Taxes are the lifeblood of the known as "tax dodging" it presupposes malice, fraud,
government and so should be collected without bad faith, or willful intent on the part of the taxpayer
unnecessary hindrance. (Commissioner of Internal either to underdeclared income or overdeclared
Revenue vs. Algue; GR No. L-28896, Feb. 17, 1988) deductions to defeat tax liability.
2. Necessity Theory - government is necessary; 7. Compensation or Set-off: as a general rule, taxes
however, it cannot continue without the means of cannot be the subject of a set-off or compensation
paying for its existence; hence, it has the right to because of the lifeblood doctrine; they are not
compel all citizens and property within its power to contractual obligations but arise out of duty to the
contribute for the same purpose. (71 Am. Jur. 2d 346) government, and the government and the taxpayer are
3. Symbiotic relationship theory - It is said that taxes are not mutually debtors and creditors of each other. (Francia
what we pay for a civilized society. vs. IAC No. L-67649; June 28, 1988).
➢ Without taxes, the government would be 8. Compromise and Abatement - these are powers
paralyzed for lack of the motive power to activate granted to the Commissioner of Internal Revenue to
and operate it. reduce tax liabilities and/or penalties.
9. Tax Amnesty - refers to the articulation of the absolute Grounds for Tax Exemption
waiver by a sovereign of its right to collect taxes and a. Contract - the grant of tax exemption is usually
power to impose penalties on persons or entities guilty contained in the charter of the corporation to which the
of violating a tax law. Tax amnesty aims to grant a general exemption is granted.
reprieve to tax evaders who wish to come clean by giving b. Public policy - to encourage new and necessary
them an opportunity to straighten out their records. industries, or to foster charitable institutions.
(Metropolitan Bank and Trust Co. v. Commissioner of c. Reciprocity - to reduce the rigors of international
Internal Revenue, G.R. No. 178797, 4 August 2009) double or multiple taxation, tax exemptions may be
granted in treaties. A tax exemption is a personal
Basic Principles Regarding Tax Exemption privilege of the grantee and therefore not assignable; it is
i. Exemptions are highly disfavored by law and he who generally revocable by the government, unless founded
claims an exemption must be able to justify his claim by on contract and must not be discriminatory.
the clearest grant of law. An exemption from the
common burden cannot be permitted to exist upon Revocation of Tax Exemption
vague implication. (Asiatic Petroleum Co. vs. Llanes, 49 • If the grant of an exemption does not constitute
Phil 466; see also House vs. Posadas, 53 Phil. 338)." a contract, but merely "a spontaneous
(Collector of Int. Revenue vs. Manila Jockey Club, Inc., G.R. concession by the legislature, not connected
No . L-8755, March 24, 1956) with any service or duty imposed" it is
REVOCABLE by the power which made the grant.
ii. He who claims exemption should prove his factual and • If the basis of the tax exemptions is by virtue of a
legal basis for exemption. (Commissioner of Internal franchise granted by Congress, the exemption
Revenue v. Acesite (Philippines) Hotel Corporation, G.R. may be revoked.
No. 147295, February 16, 2007) • If the tax exemption constitutes a binding
contract and for a valuable consideration, the
iii. Tax exemptions are strictly construed against the government cannot unilaterally revoke the tax
person claiming it (Esso Standard Eastern, Inc. vs. Acting exemption.
Commissioner of Customs; GR No. L-21841; Oct. 28, • Doctrine of Equitable Recoupment: is a doctrine
1966) in common law applicable where the taxpayer
has a claim for refund, but he was not able to file
iv. Constitutional grants of exemptions are self-executing. a written claim due to the lapse of the
v. In the same way that taxes are personal, tax prescription period within which to make a
exemptions are also personal. refund.
• The taxpayer is allowed to credit such refund to
vi. Deductions from income tax purposes partake of the his existing tax liability.
nature of tax exemptions, therefore should also be • Note that the prescription of tax refunds in this
construed strictly against the taxpayer. (Commissioner of jurisdiction is two years from the date of
Internal Revenue vs. General Foods (Phils), Inc.; GR No. payment (for illegally collected or erroneously
143672; April 24, 2003). paid taxes), and the lapse of such period bars
recovery.
vii. Same treatments are given to tax refunds.
(Commissioner of Internal Revenue v. Eastern
Telecommunications Phils., Inc., G.R. No. 163835, July 7,
2010)
TAX AMNESTY ACT Delinquent Account: pertains to a tax due from a
Republic Act No. 11213: towards the policy of the State taxpayer arising from the audit of the BIR which had been
in protecting and enhancing revenue administration and issued Assessment Notices that have become final and
collection, the State shall: executory due to the following instances:
a. Provide a one-time opportunity to settle estate • i. Failure to file a valid Protest, whether a request
tax obligations through an estate tax amnesty for reconsideration or reinvestigation, within 30
program that will give reasonable relief to days from receipt thereof.
estates with deficiency estate taxes. • ii. Failure to file an appeal with the CTA or an
b. Enhance revenue collection by providing a tax administrative appeal before the CIR within 30
amnesty on delinquencies to minimize days from receipt of the decision denying the
administrative costs in pursuing tax cases and de- request for reinvestigation or reconsideration; or
clog the dockets of the BIR and the courts; and • iii. Failure to file an appeal with the CTA within 30
c. Provide a more equitable tax system by adopting days from receipt of the decision of the CIR
a comprehensive tax reform program that will denying the taxpayer's administrative appeal to
simplify the requirements on tax amnesties with the FDDA.
the use of simplified forms and utilization of
information technology in broadening the tax Basic Tax Assessed: refers to:
base. i. Tax due shown on the Assessment Notice, net of
• General Amnesty: the law originally any basic tax paid prior to the effectivity of RR
includes a general tax amnesty to cover No. 4-2019, exclusive of civil penalties,
all other taxes, but this portion of the law ii. ii. The computed basic tax liabilities as shown in
(Title III) was vetoed entirely by the the criminal complaint filed by the BIR with the
President stating that "without the DOJ/Prosecutor's Office or in the information
provisions breaking down the walls of filed in the Courts for violations of tax laws and
bank secrecy, setting the legal regulations; and
framework for us to comply with iii. The basic tax liabilities as per the Court's final
international standards on exchange of and executory decision
information for tax purposes, and • Deficiency Withholding Taxes in assessments or
safeguarding against those who abuse tax cases: the tax rate shall still be 100% under
the amnesty by declaring an untruthful letter D above, even in cases of non-remittance
asset or net worth, a general amnesty of withholding taxes falling under letters A, B and
that is overgenerous and unregulated C above.
would create an environment ripe for
future tax evasion, the very thing we ILLUSTRATION: Mr. Meliodas received a final assessment
wish to address." notice from the BIR which has become final and
executory covering the following deficient/delinquent
TAX AMNESTY ON DELINQUENCIES taxes:
a. Coverage: all national internal revenue taxes collected • Aside from the above taxes, a surcharge of
by the BIR. including P500,000, interests amounting to P800,000 and
VAT and excise taxes collected by the Bureau of compromise penalties amounting to P500,000
Customs. are charged in the assessment. How much is the
• Delinquencies covered and Applicable Rates: amnesty tax to be paid?
 • With Pending Compromise Settlement d. Immunities and Privileges: The tax delinquency of
Application under letter A above: if the those who avail of the Tax Amnesty on Delinquencies and
delinquent tax is subject of an application for have fully complied with all the conditions and upon
compromise settlement, whether denied or payment of the amnesty tax shall be considered settled
pending, the amount of payment shall be based and the criminal case under Sec. 18(c) of the Tax Code, as
on the NET basic tax as certified by the amended, as such relate to the taxpayer's assets,
concerned office. liabilities, net worth and internal revenue taxes that are
subject of the tax amnesty, and from such other
ILLUSTRATION: investigations or suits.
B Company received a Final Assessment Notice with a
P1,000,000 basic tax deficiency. It applied for e. Proof of Availment and Compliance; effects thereof:
compromise and paid P400,000 as the minimum amount Any notices of levy, attachments and/or warrants of
required. If B Company applied for Tax Amnesty, how garnishment issued against the taxpayer shall be set
much would it pay? aside pursuant to the lifting of notice of levy/garnishment
duly issued by the BIR.
• The Authority to Cancel Assessment shall be
issued in favor of the taxpayer within 15 days
from submission to the BIR of the Acceptance
Payment Form and the Tax Amnesty on
Delinquencies Return Otherwise, the duplicate
copies, stamped as received, of the Acceptance
Payment Form, and the Tax Amnesty on
Delinquencies Return shall be deemed sufficient
proof of availment.
• The Form and the Return shall be submitted to
TAX AMNESTY ON DELINQUENCIES the RDO after complete payment and the
b. When and Where to File: Any person, natural or completion of these requirements shall be
juridical, who wishes avail of the Tax Amnesty on deemed full compliance with the provisions of
Delinquencies shall, within one year from the effectivity the TAX.
of the IRR file with the appropriate office of the BIR, • After full compliance with all the conditions and
which has jurisdiction over the residence or principal payment of the corresponding tax on
place of business of the taxpayer, a sworn Tax Amnesty delinquency, the tax amnesty granted shall
on Delinquencies Return accompanies by a Certification become final and irrevocable.
of Delinquency. Documents:
• The payment of the amnesty tax shall be made at
the time of the filing of the Return. Similar to the
Estate Tax Amnesty, the RDO shall issue and
endorse an Acceptance Payment Form
authorizing the authorized agent bank, or in the
absence thereof, the revenue collection agent or
treasurer concerned, to accept the amnesty tax
payment.
c. No admission of liability: the availment of the Tax
Amnesty on Delinquencies and the issuance of the
corresponding Acceptance Payment Form do not imply
admission of criminal, civil or administrative liability on
the part of the availing taxpayer.
 TAXATION AND THE OTHER INHERENT POWERS
1. Taxation is the power of the State to demand from the
members of society their proportionate share or
contribution in the maintenance of the government.
2. Eminent Domain is the power of the State to forcibly
acquire private property, upon payment of just
compensation, for some intended public use.
3. Police Power is the power of the State to regulate
liberty and property for the promotion of general
welfare.

CONSTRUCTION AND INTERPRETATION OF TAX LAWS SIMILARITIES:

Tax laws must be construed reasonably to carry out the 1. Inherent in the State and need not be conferred by the
purpose, intent and the objective of the law. Constitution;
• As a rule, if the tax law is clear and free of 2. Indispensable in that the State cannot continue or be
ambiguity, it will be applied in its literal import. If effective unless it is able to exercise the same;
there is doubt as to its validity or if it is 3. Methods whereby the State interferes with private
ambiguous, the law will be construed strictly rights;
against the Government and liberally in favor of 4. Presuppose an equivalent compensation, tangible or
the taxpayer. otherwise, for the private rights interfered with; and
• "A statute will not be construed as imposing a tax 5. Primarily exercised by the legislature.
unless it does so clearly, expressly, and
unambiguously. A tax cannot be imposed without
clear and express words for that purpose.
Accordingly, the general rule of requiring
adherence to the letter in construing statutes
applies with peculiar strictness to tax laws and
the provisions of a taxing act are not to be
extended by implication." (CIR vs. CA, CTA and
Ateneo de Manila University, GR No. 115349,
April 18, 1997)
• Tax Exemptions; deductions and refund: in case
of ambiguity, the law will be construed strictly
against the taxpayer and liberally in favor of the TAXES: are enforced proportional contributions from the
government, except: persons and property levied by the law-making body of
1. Where the statute granting exemption expressly the State by virtue of its sovereignty in support of
provides for a liberal interpretation; government and for public needs.
2. Special taxes relating to special cases and affecting only
special classes of persons; ESSENTIAL CHARACTERISTICS OF TAX
3. Property held in private ownership; 1. Imposed by the State which has jurisdiction over the
4. Traditional exemptees, such as those in favor of person, property or excises (activity);
religious and charitable institutions; 2 Levied by the Legislature:
5. In favor of the government, its political subdivisions or 3. It is an enforced contribution:
instruments; and 4. Generally payable in money;
6. By clear legislative intent. 5. Proportionate in character-based on the taxpayer's
• Tax exemptions are never presumed. It must be ability to pay:
established and proved by the taxpayer; must be 6. Levied on persons, property or excises;
limited to what the law says; and personal to the 7. Levied for public purpose;
person entitled to the same. 8. Paid at regular periods of intervals;
9. Personal to the taxpayer.
CLASSIFICATION OF TAXES IMPORTANCE OF DISTINCTION:
1. As to purposes: 1. Government instrumentality concerned may not be
a. General/Fiscal or Revenue - purpose is to raise authorized to exact taxes but IS authorized to exact
revenue for the government's ordinary needs; license fees.
b. Special/Regulatory or Sumptuary purpose is 2. Person imposed upon may be exempt from taxes BUT
some social or economic ends irrespective of NOT exempt from license fees.
whether revenue is actually raised. 3. Tax, NOT fees, may be claimed as income tax deduction
2. As to subject matter: for income tax purpose. However, fees may be
a. Personal, poll or capitation - those imposed considered as expenses ordinary and necessary for
upon residents of a territory, regardless of business.
citizenship, property, occupation, business. 4. In Local Government Taxation, Sec. 187 of the Local
b. Property those imposed upon real and personal Government Code covers only "tax" ordinance. Such that,
property depending on their value. if the ordinance is regulatory, it does not come within the
c. Excise or privilege - those imposed upon the purview of Sec. 187 and the CTA does not have
performance of an act enjoyment of a privilege, jurisdiction over the legality of the same, jurisdiction
or engaging in an occupation, profession or thereof being under the RTC.
business.
3. As to incidence:
a. Direct - where the burden for the payment of the
tax as well as the impact falls on the same
person; as such, the person who pays is the
person who is statutory liable to pay the tax;
b. Indirect - where the incidence falls on one
person, but the burden falls another.
4. As to amount:
a. Specific - amounts fixed and is imposed by the
head or number or some measurement, hence,
no valuation is needed except for the list of
things to be taxed.
b. Ad valorem - one which is based on the value of
the object to be taxed.
5. As to rate/progression:
a. Progressive-tax rates increase as the tax base or
bracket increases.
b. Regressive-tax rate decreases as tax base or
bracket increases.
c. Proportionate - tax is based on a fixed
percentage of the amount of the property,
receipts or other bases to be taxed.
6. As to authority imposing the tax:
a. National - levied by the national government and
enforced by the BIR;
b. Local- levied by the local government through its
sanggunian and enforced by the treasurer.
 INHERENT LIMITATIONS
A. IT MUST BE FOR A PUBLIC PURPOSE
• A revenue measure must be laid for a public
purpose determined by the legislature. The
proceeds of the tax must be used either for the
support of the State or for some recognized
objective of government or directly to promote
the welfare of the community.
• The public purpose must exist at the time the law
is enacted. (Pascual vs. Secretary of Public Works,
GR No. L-10405; Dec. 29, 1960)

Tests in determining public purpose:

• 1. Duty Test - whether the thing to be furthered
by the appropriation o public revenue is
something which is the duty of the State, as a
government.
• 2. Promotion of General Welfare Test-whether
the law providing the tax directly promotes the
welfare of the community in equal measure.
• One sector is not benefited: Public purpose is not
destroyed by the fact that the tax law may not be
beneficial to one group. The fact that one sector
is benefited and in the process another sector is
being in a way prejudiced would not diminish the
public character of the tax (Tio v. Videogram
Regulatory Board, G.R. 75697, June 1987)

B. EXEMPTION OF GOVERNMENT ENTITIES,

AGENCIES and INSTRUMENTALITIES
• As a rule, the government, its agencies and
instrumentalities performing governmental
function are exempt from VAT. This is because
taxes financial burdens imposed for the purpose
of raising revenues to defray the cost of the
SOURCES OF REVENUE: the following are considered operation of the Government, and a tax on
national internal revenue taxes: property of the Government, whether national
1. Income tax; or local, would merely have the effect of taking
2. Estate and donor's taxes; money from one pocket to put it in another
3. Value-added tax; pocket (Board of Assessment of Appeals of
4. Other percentage taxes; Laguna vs. CTA, G.R. No. L-18125, May 31, 1963).
5. Excise taxes;
6. Documentary Stamp Taxes; and Exceptions:
7. Such other taxes as are or hereafter may be imposed 1. Agencies performing proprietary functions;
and collected by the Bureau of Internal Revenue. 2. When the charter creating the agency or
instrumentality or the law provides that they are subject
to tax.
3. If the government wishes to tax itself.
GOCCS: performing proprietary functions are taxable 3. Delegation to Administrative Agencies -
similar to a corporation. However, Sec. 27(c) of the Tax administrative agencies m issue rules and regulations to
Code provides for the following corporations as exempt: implement tax laws, under their quasi. legislative powers,
1. Government Service Insurance System (GSIS) subject to the following tests:
2. Social Security System (SSS) a. Completeness test- in order for the delegation to
3. Philippine Health Insurance Corporation (PHIC) be valid, the law must be complete in all aspects
4. Local Water Districts when it leaves the legislature. The only thing left
5. Home Development Mutual Fund (HDMF) (as included for the delegate to do is to implement the law.
by the CREATE Law) b. Sufficiently Determinable Standards test - there
must exist sufficient standards which should limit
PAGCOR is no longer exempt from income tax by its the boundaries of the delegate's authority by
omission from the above list. (PAGCOR vs BIR, GR No. defining legislative policy and the circumstance
12087, March 15, 2011) However, PAGCOR remains under which it is to be pursued and
exempt from income tax for its income arising from implemented.
casino operations which are subject to franchise tax in • Technically, no. 3 is not really an exception as the
lieu of all taxes (PAGCOR BIR GR No. 215427, Dec. 10, powers of the administrative agencies are limited
2014) to implementing and/or interpreting the tax laws
issued by Congress.
PCSO: was removed under the TRAIN and is thus taxable
beginning January 1, 2018. D. INTERNATIONAL COMITY
• Par in parem non habet imperium is a principle
C. THE POWER TO TAX IS INHERENTLY LEGISLATIVE of international law forming the basis of state
(NON- DELEGABILITY) immunity which translates to "equals have no
sovereignty over each other." The principle of
• Taxation is the inherent power of the state, and international comity recognizes that States are
it is exercised primarily by the Legislature as co-equal sovereigns such that one cannot
delegates of the people. In accordance with the exercise its inherent sovereign powers over
Latin maxim potestas delegatas non delegari another, including the power to tax.
potest, which means, what has been delegated • States find it mutually advantageous to create
can no longer be delegated, as a rule, only the self-imposed restraints on their taxing powers
Congress (to whom the legislative power has with reference to properties of foreign
been delegated by the people) can exercise this governments. Moreover, when on state enters
power. the territory of another, there is an implied
understanding that the former does not intend
Exceptions: to degrade its dignity by placing itself under the
1. Delegation to Local Government- the Constitution, as jurisdiction of the latter, note that a foreign state
implemented by the Local Government Code, empowers cannot be sued without its consent, thus it would
the local government units (LGU) to create its own be useless to impose or assess a tax which cannot
sources of revenue and to levy taxes, fees and charges be collected.
which shall accrue exclusively to the LGU. (Sec. 5, Art. X
of the Constitution)
2. Delegation to the President - the Constitution, as
implemented by the Tariff and Customs Code, allows the
President to fix tariff rates, import and export quotas,
tonnage and wharfage dues and other duties or imposts.
(Sec. 28[2], Art. VI of the Constitution)
• Likewise, the President may exercise emergency
powers (Sec. 23[2], Art. VI of the Constitution)
and enter into executive agreements or or
treaties which may contain tax exemption
provisions subject to the concurrence of the
Senate. (Sec. 27, Art. VII of the Constitution)
E. TERRITORIAL IN APPLICATION (SITUS) Modes of eliminating double taxation:
• Tax is territorial in application in the sense that 1. Tax Deduction - an amount subtracted from the gross
the object and/or subject of the tax must be income to arrive at taxable income.
within the territorial jurisdiction of a State. The 2. Tax Credit an amount subtracted from an individual's
object of taxation is the income, and the subject or entity's tax liability (tax due) to arrive at the tax liability
would be the income earner. As such for a non- still due.
resident alien, income earned outside the • A deduction differs from a tax credit, in that a
Philippines is non-taxable herein, because the deduction reduces taxable income while a credit
income (object) and the individual (subject) are reduces tax liability.
both outside the Philippines. However, if the 3. Treaties with other states: a tax treaty sets out the
income (object) is earned within the Philippines, respective rights to tax of the state of source (situs)
then it can be subject to tax here, since the and the state of residence with regard to certain
object is now within Philippine territory. cases, an exclusive right to tax is conferred on one of
• On the other hand, a resident citizen is taxable the contracting states; however, for other items of
even on income earned outside the Philippines, income or capital, both states are given the right to
since the individual is a resident herein, or the tax, although the amount of tax that may be imposed
subject of taxation is within Philippine territory. by the state of source is limited.
• It applies whenever the state of source is given
DOUBLE TAXATION full or limited right to tax. The treaty makes it
It means taxing the same person for the same tax period incumbent upon the state of residence to allow
and the same activity twice, by the same jurisdiction. relief in order to avoid double taxation. (See
Double Taxation Agreements)
Double taxation in strict sense is when:
1. Both taxes are imposed on the same property or STAGES OR ASPECTS OF TAXATION
subject matter, 1. LEVY
2. For the same purpose; • The determination by Congress of the subject
3. Imposed by the same taxing authority; and object of taxation as well as the rate
4. Within the same jurisdiction; (Domondon, 9 ed, p. 29). It refers to the
5. During the same taxing period; enactment of tax laws or statutes (Dimaampao,
6. Covering the same kind or character of tax. 2011 ed, p. 14).
• Note: This is NOT the "Levy" under Sec. 207 of
Double Taxation in Broad sense is the opposite of direct NIRC, which refers to the remedy of the
double taxation and is not legally objectionable. The Government to collect taxes.
absence of one or more of the foregoing requisites of 2. ASSESSMENT AND COLLECTION
obnoxious direct tax makes it indirect. • Assessment is a notice to the effect that the
amount therein stated is due as tax and a
Constitutionality of double taxation: Double taxation in demand for payment thereof.
its stricter sense is unconstitutional but that in the
broader sense is not necessarily so. Rules governing assessment and collection of taxes to
Our Constitution does not prohibit double taxation. prevent its abuse:
However, double taxation will not be allowed if it results 1. The tax law must designate which agency will collect
in a violation of the equal protection clause. the taxes.
2. The circulars or regulations issued by the Secretary of
Kinds of double taxation as to taxing authorities: Finance or the Commissioner of the Internal Revenue
1. Domestic double taxation - when both the taxes are must be in accordance with the tax measures imposed by
imposed within the same state. Congress.
2. International double taxation - when the taxes are • Collection is the final stage and goal of tax
imposed by different states. administration.
3. PAYMENT C. UNIFORMITY AND PROGRESSIVITY OF TAXATION
• The act of compliance by the taxpayer, including • Art. VI, Sec. 28 (1) The rule of taxation shall be
such options, schemes or remedies as may be uniform and equitable. The Congress shall evolve
legally open or available to him. a progressive system of taxation.
4. REFUND • UNIFORMITY means that all taxable articles or
• The taxpayer asks for restitution of the money kinds of property of the same classes shall be
paid as tax which is either excessive or taxed at the same rate. A tax is uniform when it
erroneous. operates with the same force and effect in every
place where the subject of it is found.
CONSTITUTIONAL LIMITATIONS (Commissioner vs. Lingayen Gulf Elec. Co., G.R.
A. DUE PROCESS REQUIREMENT No. L-23771, August 4, 1988)
• Art. III, Sec. 1: No person shall be deprived of Uniformity vs. Equitability vs. Equality
life, liberty or property without due process of • Uniformity - All taxable property shall be taxed
law, nor shall any person be denied the equal alike.
protection of laws. • Equitability - The burden of taxation falls to those
• Procedural due process: requires that taxpayers better able to pay.
must be notified of the assessment in writing and • Equality-When the burden of the tax falls equally
must state the fact and the law upon which it is and impartially upon all persons and property
based. Moreover, assessments and collection subject to it.
must not be arbitrary. • PROGRESSIVITY means that the tax rate
• Substantive due process: requires that increases as the tax base thereof increases. Our
assessments must not be harsh, oppressive or income tax system is one good example of such
confiscatory; it must be made under authority of progressivity because it is built on the principle
a valid law; and must be imposed within the of the taxpayer's ability to pay. Taxation is
territorial jurisdiction of the State. progressive when its rate goes up depending on
B. EQUAL PROTECTION OF THE LAWS the resources of the person affected (Reyes vs.
• Art. III, Sec. 1: No person shall be deprived of life, Almanzor, G.R. Nos. 49839-46, April 26, 1991)
liberty or property without due process of law,
nor shall any person be denied the equal D. NO IMPRISONMENT FOR PAYMENT OF POLL TAX
protection of laws. • Art. III, Sec. 20. No person shall be imprisoned
• The requirement of equal protection of the laws for debt or non-payment of a poll tax.
requires that the law must apply equally to all • Poll Tax is a tax on individuals residing within a
persons within the same class. As such, providing specified territory, whether citizens or not,
for a classification and applying the law only to a without regard to their property or the
particular class is not violative of the occupation in which they may be engaged.
constitutional right so long as it comes from a
valid classification.
Requisites for a valid classification:
1. Must be based upon substantial distinctions;
2. Must be germane to the purpose of law;
3. Must apply to both present and future
conditions; and
4. Must apply equally to all members of a class.

Two ways by which equal protection clause is violated;

1. When classification is made when there should
be none
2. When classification is not made when called
for
E. EXEMPTION FROM PROPERTY TAX OF RELIGIOUS • Incidental User; the exception likewise covers
CHARITABLE AND EDUCATIONAL INSTITUTIONS activities which are incidental to the main
• Art. VI, Section 28. activity. As such, canteens owned and operated
• (3) Charitable institutions, churches and by the school, as well as libraries are covered by
parsonages or convents appurtenant thereto, the exemption extended to schools.
mosques, non-profit cemeteries, and all lands, • If the use is not incidental, exemption does not
buildings, and improvements, actually, directly, apply: While the use of the second floor of the
and exclusively used for religious, charitable, or main building for residential purposes of the
educational purposes shall be exempt from Director and his family may find justification
taxation. under the concept of incidental use, which is
• Property Tax: The tax exemption under this complimentary to the main or primary purpose,
constitutional provision covers property taxes Le., educational, the lease of the first floor to the
only. As Chief Justice Hilario G. Davide, Jr., then a Northern Marketing Corporation cannot be
member of the 1986 Constitutional Commission, considered incidental to the purpose of
explained: "what is exempted is not the education. Since only a portion is used for the
institution itself; those exempted from real purpose of commerce, it is only fair that half of
estate taxes are lands, buildings and the assessed tax be returned to the school
improvements actually, directly and exclusively involved (Abra Valley vs. Aquino, G.R. No. L-
used for religious, charitable or educational 39086, June 15, 1988).
purposes." (Lung Center of the Philippines vs. • Only the portion used for commercial purpose
Quezon City, GR No. 144104, June 29, 2004) are subject to the tax: While portions of the
• Estate and donor's tax are excise taxes on the hospital are used for the treatment of patients
privilege to transfer property gratuitously. and the dispensation of medical services to
Accordingly, the above exemption does not cover them, whether paying or non-paying, other
estate and donor's tax unless specifically portions thereof are being leased to private
provided under the Tax Code. (See Sections individuals for their clinics and a canteen.
101(A)(3) and 101(B)(2) of the Tax Code) Accordingly, we hold that the portions of the land
• "Exclusive": is defined as possessed and enjoyed leased to private entities as well as those parts of
to the exclusion of others; debarred from the hospital leased to private individuals are not
participation or enjoyment; and "exclusively" is exempt from such taxes. On the other hand, the
defined, "in a manner to exclude; as enjoying a portions of the land occupied by the hospital and
privilege exclusively." If real property is used for portions of the hospital used for its patients,
one or more commercial purposes, it is not whether paying or non-paying, are exempt from
exclusively used for the exempted purposes but real property taxes. (Lung Center of the Phil. vs.
is subject to taxation. The words "dominant use" Quezon City, G.R. No. 144104, June 29, 2004).
or "principal use" cannot be substituted for the
words "used exclusively" without doing violence
to the Constitution and the law (Lung Center of
the Phil. vs. Quezon City, G.R. No. 144104, June
29, 2004).
• Actual and Direct Use is necessary: To be exempt
from tax, the lands, buildings and improvements
must not only be exclusively but also actually and
directly used for religious and charitable
purposes,
• Thus, even if a property is owned by a religious,
educational or charitable institution, if it is
rented out and used for activities other than the
main purpose of the institutions, it will be subject
to tax and not covered by the exemption. Note
that in Real Property Taxation, the actual use is
determinative of assessment and taxability NOT
OWNERSHIP.
F. EXEMPTION OF NON-STOCK, NON-PROFIT • Proprietary educational institutions: are subject
EDUCATIONAL INSTITUTIONS to 10% income tax on their taxable income under
• Art. XIV, Sec. 4(3): All revenues and assets of Sec. 27(B) of the Tax Code (now 1% under the
non-stock, non-profit educational institutions CREATE Act from July 1, 2020 to June 30, 2023).
used actually, directly, and exclusively for The same provision provides that if income from
educational purposes shall be exempt from taxes unrelated trade, business or other activity
and duties. Upon the dissolution or cessation of exceeds 50% of the total gross income, the tax
the corporate existence of such institutions, their shall be the 30% (now 25%) Regular Corporate
assets shall be disposed of in the manner Income Tax.
provided by law.
• Proprietary educational institutions, including THE BUREAU OF INTERNAL REVENUE
those cooperatively owned, may likewise be • The Bureau of Internal Revenue is the agency
entitled to such exemptions subject to the tasked under the Tax Code for its implementation
limitations provided by law including restrictions and its powers and duties shall comprehend the
on dividends and provisions for reinvestment. assessment and collection of all national internal
• Coverage: the above exemption does not only revenue taxes, fees and charges, and the
cover property tax but also income tax unlike the enforcement of all forfeitures, penalties, and
exemption of religious and educational fines connected therewith, including the
institutions provided under (E) above which execution of judgments in all cases decided in its
covers only property taxes. favor by the CTA and the ordinary courts
• The tax exemption granted is conditioned only on • It is under the supervision and control of the
the actual, direct and exclusive USE of their Department of Finance
revenues and assets for educational purposes.
• Revenues: the exemption extends to the non- COMPOSITION
stock, non-profit educational institution on all The BIR shall be composed of;
revenues that is USED for educational purposes, 1. Commissioner of Internal Revenue which shall be the
regardless of its source. Assets: the property, to chief of the BIR and
be considered exempt from real property tax, the 2. Four Deputy Commissioners, currently for the
test is USE also, not ownership. following:
• Thus, if the institution earns rental income from a Operations Group
a commercial entity but uses such rental for b. Legal Group
educational purposes, it is exempt from income c. Information Systems Group; and
tax, local business tax, and/or VAT, but NOT real d. Resource Management Group
property tax.
• Limitation under Section 30 of the Tax Code: the POWERS AND AUTHORITY OF THE COMMISSIONER OF
last paragraph of Sec. 30 (Exempt Entities) under INTERNAL REVENUE
the Tax Code provides that "income from 1. Exclusive and original jurisdiction to interpret
whatever kind and character of the foregoing the provisions of the Tax Code and other tax laws,
corporations from any of their properties, real or subject to review by the Secretary of Finance.
personal, or from any of their activities 2. The power to decide disputed assessments,
conducted for profit regardless of the disposition refunds of internal revenue taxes, fees or other
made of such income, shall be subject to tax". charges, penalties imposed in relation thereto, or
• While Sec. 30 covers non-stock, non-profit other matters arising under the Tax Code or other
educational institutions, the above limitation on laws or portions thereof administered by the BIR,
exemption does not apply to it. Thus, even if it subject to the exclusive appellate jurisdiction of
derives income from activities conducted for the Court of Tax Appeals,
profit, the income remains exempt as long as it is 3. The power to ascertain the correctness of any
actually, directly and exclusively used for return, or in making a return when none has
educational purposes. been made, or in determining the liability of a
• (Commissioner of Internal Revenue vs. De La Salle person for any internal revenue tax, or in
University, Inc, GR No. 196596, November 9, collecting any such liability, or in evaluating tax
2016) compliance. The Commissioner shall be
authorized:
a. To examine any book, paper, record, or other 4. Inquiry into Bank Deposits: in the following cases
data which may be relevant or material to such a. To determine the gross estate of a decedent
inquiry; b. In relation to a compromise application of a
b. To obtain on a regular basis from any person other taxpayer by reason of financial incapacity to pay
than the person whose internal revenue tax liability his tax liability
is subject to audit or investigation, or from any office c. A specific taxpayer or taxpayers subject of a
or officer of the national and local governments, request for the supply of tax information from a
government agencies and instrumentalities, foreign tax authority pursuant to an international
including the Bangko Sentral ng Pilipinas and convention or agreement on tax matters to
government-owned or controlled corporations, any which the Philippines is a signatory or a party of.
information such as, but not limited to, costs and 5. Power to resort to the Best Evidence Obtainable Rule:
volume of production, receipts or sales and gross When a report required by law as a basis for the
incomes of taxpayers, and the names, addresses, and assessment of any national internal revenue tax shall not
financial statements of corporations, mutual fund be forthcoming within the time fixed by laws or rules and
companies, insurance companies, regional operating regulations or when there is reason to believe that any
headquarters of multinational companies, joint such report is false, incomplete or erroneous, the
accounts, associations, joint ventures of consortia Commissioner shall assess the proper tax on the best
and registered partnerships, and their members; evidence obtainable.
• The Cooperative Development Authority shall • In case a person fails to file a required
submit to the Bureau a tax incentive report, return or other document at the time
which shall include information on the income prescribed by law, or willfully or
tax, value added tax, and other tax incentives otherwise files a false or fraudulent
availed of by cooperatives registered and return or other document, the
enjoying incentives under Republic Act No. 6938, Commissioner shall make or amend the
as amended. return from his own knowledge and from
A. To summon the person liable for tax or such information as he can obtain
required to file a return, or any officer or through testimony or otherwise, which
employee of such person, or any person shall be prima facie correct and sufficient
having possession, custody, or care of the for all legal purposes.
books of accounts and other accounting 6. Inventory taking, Surveillance and Prescribe
records containing entries relating to the Presumptive Gross Sales or Receipts: The Commissioner
business of the person liable for tax, or any may, at any time during the taxable year, order inventory-
other person, to appear before the taking of goods of any taxpayer as a basis for determining
Commissioner or his duly authorized his internal revenue tax liabilities, or may place the
representative at a time and place specified business operations of any person, natural or juridical,
in the summons and to produce such books, under observation or surveillance if there is reason to
papers, records, or other data, and to give believe that such person is not declaring his correct
testimony; income, sales or receipts for internal revenue tax
B. To take testimony of the person concerned, purposes. The findings may be used as the basis for
under oath, as may be relevant or material to assessing the taxes for the other months or quarters of
such inquiry; and the same or different taxable years and such assessment
C. To cause revenue officers and employees to shall be deemed prima facie correct.
make a canvass from time to time of any
revenue district or region and inquire after
and concerning all persons therein who may
be liable to pay any internal revenue tax, and
all persons owning or having the care,
management or possession of any object
with respect to which a tax is imposed.
 • When it is found that a person has failed to issue Provided, further, That the basis of any valuation
receipts and invoices in violation of the including the records of consultations done, shall be
requirements of Sections 113 and 237 of this public records open to the inquiry of any taxpayer. For
Code, or when there is reason to believe that the purposes of computing any internal revenue tax, the
books of accounts or other records do not value of the property shall be, whichever is the higher of:
correctly reflect the declarations made or to be • a. The fair market value as determined by the
made in a return required to be filed under the Commissioner; or
provisions of this Code, the Commissioner, after • b. The fair market value as shown in the
taking into account the sales, receipts, income or schedule of values of the Provincial and City
other taxable base of other persons engaged in Assessors.
similar businesses under similar situations or 9. Authority to Accredit and Register Tax Agents: The
circumstances or after considering other relevant Commissioner shall accredit and register, based on their
information may prescribe a minimum amount professional competence, integrity and moral fitness,
of such gross receipts, sales and taxable base, individuals and general professional partnerships and
and such amount so prescribed shall be prima their representatives who prepare and file tax returns,
facie correct for purposes of determining the statements, reports, protests, and other papers with or
internal revenue tax liabilities of such person. who appear before, the Bureau for taxpayers.
7. Authority to Terminate Taxable Period: When it shall • Individuals and general professional partnerships
come to the knowledge of the Commissioner that a and their representatives who are denied
taxpayer is retiring from business subject to tax, or is accreditation by the Commissioner and/or the
intending to leave the Philippines or to remove his Or national and regional accreditation boards may
property therefrom or to hide or conceal his property, or appeal such denial to the Secretary of Finance,
is performing any act tending to obstruct the proceedings who shall rule on the appeal within sixty (60)
for the collection of the tax for the past or current quarter days from receipt of such appeal. Failure of the
or year or to render the same totally partly ineffective Secretary of Finance to rule on the Appeal within
unless such proceedings are begun immediately, the the prescribed period shall be deemed as
Commissioner shall declare the tax period of such approval of the application for accreditation of
taxpayer terminated at any time and shall send the the appellant.
taxpayer a notice of such decision, together with a 10. Authority of the Commissioner to Prescribe
request for the immediate payment of the tax for the Additional Procedural or Documentary Requirements:
period so declared terminated and the tax for the The Commissioner may prescribe the manner of
preceding year or quarter, or such portion thereof as may compliance with any documentary or procedural
be unpaid, and said taxes shall be due and payable requirement in connection with the submission or
immediately and shall be subject to all the penalties preparation of financial statements accompanying the
hereafter prescribed, unless paid within the time fixed in tax returns.
the demand made by the Commissioner. 11. Delegation of Power: The Commissioner may
8. Authority of the Commissioner to Prescribe Real delegate the powers vested in him under the pertinent
Property Values. -The Commissioner is hereby authorized provisions of the Tax Code to any or such subordinate
to divide the Philippines into different zones or areas and officials with the rank equivalent to a division chief or
shall, upon mandatory consultation with competent higher, subject to such limitations and restrictions as may
appraisers both from the private and public sectors, and be imposed under rules and regulations to be
with prior notice to affected taxpayers, determine the fair promulgated by the Secretary of Finance, upon
market value of real properties located in each zone or recommendation of the Commissioner.
area, subject to automatic adjustment once every three
(3) years through rules and regulations issued by the
Secretary of Finance based on the current Philippine
valuation standards Provided, That no adjustment in
zonal valuation shall be valid unless published in a
newspaper of general circulation in the province, city or
municipality concerned, or in the absence thereof, shall
be posted in the provincial capitol, city or municipal hall
and in two (2) other conspicuous public places therein:
Powers which may NOT be delegated: SOURCES OF TAX LAWS
a. The power to recommend the promulgation of According to hierarchy:
rules and regulations by the Secretary of Finance; 1. Constitution
b. The power to issue rulings of first impression or 2. Statutes (eg, Tax Code), including Supreme
to reverse, revoke modify any existing ruling of Court decisions interpreting the same and
the Bureau; Treaties to which the Philippines is a signatory.
c. The power to compromise or abate, under Sec. 3. Revenue Regulations - are issuances signed by
204 (A) and (B) of this Code, any tax liability, the Secretary of Finance upon recommendation
except the following: of the Commissioner of Internal Revenue, that
i. Assessments issued by the regional offices specify, prescribe or define rules and regulations
involving basic deficiency taxes of Five hundred for the effective enforcement of the provisions of
thousand pesos (₱500,000) or less, and the National Internal Revenue Code (NIRC) and
ii. minor criminal violations, as may be determined related statutes.
by rules and regulations to be promulgated by 4. BIR Issuances:
the Secretary of finance, upon recommendation a. Revenue Memorandum Circulars-are issuances
of the Commissioner, discovered by regional and that publish pertinent and applicable portions, as
district officials. well as amplifications, of laws, rules, regulations
and precedents issued by the BIR and other
• The above may be compromised by a REGIONAL agencies/offices.
EVALUATION BOARD which shall be composed of b. Revenue Memorandum Orders directives or
the Regional Director a Chairman, the Assistant instructions; prescribe guidelines; and outline
Regional Director, the heads of the Legal, processes, are issuances that provide operations,
Assessment and Collection Divisions and the activities, workflows, methods and procedures
Revenue District Officer having jurisdiction over necessary in the implementation of stated
the taxpayer, as members; policies, goals, objectives, plans and programs of
a. The power to assign or reassign internal revenue the Bureau in all areas of operations, except
officers t establishments where articles subject auditing (which is covered by Revenue Audit
to excise tax are produced or kept. Memorandum Orders [RAMO])
• Other BIR officials: c. Revenue Administrative Orders - are issuances
1. Revenue Regional Directors that cover subject matters dealing strictly with
2. Revenue District Officers the permanent administrative set-up of the
3. Revenue Officers Bureau, more specifically, the organizational
structure, statements of functions and/or
responsibilities of BIR offices, definitions and
delegations of authority, staffing and personnel
requirements and standards of performance.
d. Revenue Delegation of Authority Orders refer to
functions delegated by the Commissioner to
revenue officials in accordance with law.