4/7/2025
TAXATION
• Inherent power of the state to impose a
Principle of Taxation charge or burden upon PERSON,
PROPERTY and EXERCISE OF
PRIVILEGE/RIGHT
• To raise revenue for the support of the
Government
Elements of State LIFEBLOOD DOCTRINE
• People
• Taxes are the lifeblood of the government and their
• Territory prompt and certain availability is an imperious need.
• Government • The power of taxation proceeds upon the theory that
• Sovereignty the existence of government is a necessity. (Necessity
theory)
Symbiotic relationship Inherent power of the state
• The state collects taxes from the subjects of • Police Power - it is inherent power of the
taxation in order that it may be able to state to restrict certain person or property right
perform the functions of government. to the promotion of General welfare
• Imminent Domain – to take private property
for public use upon payment of just
compensation
• Taxation – to raise revenue to defray the
necessary expenses of the government
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Distinctions amount the three (3) Inherent Powers Distinctions amount the three (3) Inherent Powers
TAXATION POLICE POWER EMINENT
DOMAIN
TAXATION POLICE POWER EMINENT
DOMAIN Scope Plenary, Comprehensive, Broader in application. Merely a power to take
Supreme private property for
Nature To raise revenue To make and implement To take private property
public use
laws for the general for public use with just
welfare compensation Effect Contribution becomes No transfer or title. There is a transfer of
part of public funds There may just be a title to property
Authority Government only Government only Maybe granted to public
restraint on the injurious
service companies
use of property
Purpose For the support of Promotion of general Taking private property
Benefits received In form of protection No direct and immediate Market value of
Government welfare for public use
and benefits received benefit property taken
Person affected Community or class of Community or class of On an individual as the from government
individuals. PERSON, individuals owner of personal
Amount of imposition No limit Sufficient to cover cost No Imposition. The
PROPERTY and property
of the license and the owner is paid equivalent
EXCISE that may be
necessary expenses of to the fair value of his
subject
regulation property
Who exercise the inherent power of the state? Legislature include the determination of:
• Legislative Branch • Executive Branch • Executive Branch • The subject or object to be taxed
• The amount of tax
• The Rate of the tax
• The purpose of the taxed as long as it is a public purpose
• Kind of tax
• Apportionment of tax
• Situs of taxation
• The manner, means, and agencies of collection of tax
Scope of the Power of Tax Essential Elements of Tax
• It has the broadest scope of all the powers of the government because in the • 1. it is an enforced contribution
absence of limitations, it is considered as:
• 2. it is generally payable in MONEY
• Comprehensive
• 3. it is proportionate in character
• Unlimited • 4. it is levied on persons, property, or exercise of a right or privilege
• Plenary
• 5. it is levied by the law-making body of the state
• Supreme • 6. it is levied for public purpose
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Stages/Aspect of Taxation Inherent Limitation
• 1. Levying or imposition of tax • 1. Public Purpose – taxes levied only for public purpose.
• 2. Territoriality or Situs of Taxation – state’s taxing power extends only to
persons, properties, and transactions within its jurisdiction.
• 2. Assessment or determination of the correct
amount of applicable tax • 3. Non-Delegation of taxing power – the power to tax is vested in the
legislature and cannot be delegated without clear and specific guidelines.
• 4. International Comity – it is polite and friendly agreement(s) among the
• 3. Collection of the tax states.
• 5. Exemption of Government Entities
Double taxation Constitutional Limitation
• 2 or more tax • Example: • Due process of law
• Same subject • Jimmy Santos, a lessor of property, pays the • Equal protection of law
following; Real estate tax on the premises, a real • Rule of uniformity and equity in taxation
• Same Purpose
estate dealer’s tax based on rental receipts and • Prohibition against imprisonment for non-payment of “poll tax”
• Same Period income tax on the rentals. Jimmy claims that this • Prohibition against impairment of obligation of contracts
• Same Jurisdiction is double taxation.
• Prohibition against infringement of religious freedom
• Decide. • Prohibition against appropriation of proceeds of taxation for the use, benefit, or
support of any church
Constitutional Limitation Situs of Taxation
• Prohibition against taxation of religious, charitable and educational entities • Person – Residence of the taxpayer
• Prohibition against taxation of non-stock, non-profit educational institutions • Real Property – Location
• Others;
• Personal Property – Location, Place of sale or transaction
• Grant of tax exemption
• Veto of appropriation, revenue, tariff bills by the president • Intangible – Domicile of the owner except when the intangible has a situs
• Non-impairment of the Supreme Court (SC) jurisdiction • Income – Source of Income
• Revenue bills shall originate exclusively from the House of Representatives
• Business – Place of business
• Infringement of press freedom
• Revocation of Tax exemptions • Gratuitous transfer – Residence or Citizenship of the taxpayer; or location of the
property
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Classification of Taxes Classification of Taxes
• As to scope • As to Subject matter or Object
• National Tax – Impose by national government Ex. Income tax, estate tax, donor’s tax, • Personal, poll or capitation
VAT other percentage tax, documentary stamp tax. • Property
• Local tax – Impose by the local government units such as municipal corporation ex. • Excise
Real estate tax and professional tax receipt As to graduation or rate
• Proportional
• Progressive
• Regressive
Means of Avoiding or Minimizing the burden
Classification of Taxes
of Taxation
• As to who bears the burden • Shifting – is the transfer of the burden of a tax by the original payer or the one on
whom the tax was assessed or imposed to someone else.
• Direct – demanded from the person who also shoulders the burden of tax or tax which the
taxpayer cannot shift to another. (example. Income tax, estate tax, donor’s tax) • Tax evasion (tax dodging) – the use by the taxpayer of illegal or fraudulent means
• Indirect – taxes demanded from one person in the expectation and intention that he shall to defeat or lessen the payment of tax.
indemnify himself at the expense of another. (example. VAT, Percentage tax, Excise tax)
• Tax avoidance (tax minimization) – Legally permissible alternative tax rates or
As to determination of amount methods of assessing taxable property or income in order to avoid or deduce tax
• Specific – Tax of fixed amount imposed by the head or number (example. Excise tax on liability
cigars and liquors)
• Ad valorem – Tax of fixed proportion of the value of the property with respect to which
• Exemption
the tax is assessed (example. VAT, income tax, donor’s tax, and estate tax) • Capitalization
• Amnesty – it is absolute forgiveness of the government of its right to collect
Rules when there is doubt in Statute or Law Provision Granting Tax Exemption
• No person or property is subject to taxation unless within the terms or plain • Such provisions are construed strictly against the taxpayer claiming tax
import of a taxing statutes. exemption.
• In case of doubt, tax statutes are construed strictly against the government • When a tax is unquestionably imposed, a claim of exemption from tax
and liberally in favor of the taxpayers payments must be clearly show and based on language in the law to plain to
be mistaken.
• In case of doubt, it is liberally in favor of the government and construed
strictly against the taxpayer
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Application of Tax Laws Taxpayer’s Suit
• General Rule: • It is one brought or filed by a taxpayer arguing the validity of a tax statute
and its enactment or the constitutionality of it allege public purpose.
Tax laws are prospective in operation because the nature and amount
of the tax could not be foreseen and understood by the taxpayer at the time the • It is a case where the act complained of directly involves the illegal
transactions which the law seeks to tax was completed. disbursement of public funds derived from taxation.
• Exception
Statute may nevertheless operate retroactively provided it is expressly
declared or is clearly the legislative intent.
Thank you
