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CONSTITUTIONAL LIMITATIONS
1. Observance of due process of law
Instances of violation of due process:
Tax being imposed amounts to confiscation;
Tax law is in violation of requisite public purpose;
Subject or object is outside the territorial jurisdiction
of the taxing authority;
Taxpayer is not given an opportunity to be heard;
Tax law is applied retroactively;
2. Equal protection of law- all persons subject to legislation shall
be treated alike;
3. Uniformity- all taxable articles of the same class shall be taxed
at the same rate;
Juan Luna Subdivision vs. Sarmiento- the term uniformity
requires that all subjects or objects of taxation, similarly
situated, are to be treated alike or put on equal footing both in
privileges and liabilities.
City of Baguio vs. de Leon- equality and uniformity in taxation
means that all taxable articles or kinds of property of the same
class shall be taxed at the same rate. A tax is considered uniform
when it operates with the same force and effect in every place
where the subject may be found.
CIR vs. Lingayen Gulf Electric- When tax laws applies equally well
to all persons, firms, and corporations placed in similar
situation, there is no infringement of the rule of equality.
Inequality which results in singling out one particular class for
taxation or exemption infringes no constitutional limitation.
Pepsi Cola vs. City of Butuan- Classification is permitted:
1. Standards used are not arbitrary but reasonable
and substantial;
2. Classification is germane to achieve the purpose
of legislation;
3. Classification applies to both present and future
conditions, other circumstances being equal;
4. If classification applies equally to all those
belonging to the same class.
Eastern Theatrical Co. vs. Alfonso- SC held to be absolutely
without merit the contention that an ordinance which impose
taxes on some places of amusement such as cinematographs,
theaters, vauderville companies, theatrical shows, boxing
exhibitions and other kinds of amusements or places of
amusements, but not on many more kinds of amusements like
race tracks, cockpits, carabets, concert halls, circuses, and
other places of amusements is against the equality and
uniformity of the tax imposition.
Basco vs. PAGCOR- Equality and uniformity in taxation means
that all taxable articles or kinds of property of the same class
shall be taxed at the same rate.
Assoc. of Customs Brokers vs. Municipality of Manila- There is
no pretense that the ordinance equally applies to motor
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Exceptions:
a) Power to tax delegated to the President under flexibility
clause and Tariff and Customs Code
b) Delegated to the LGU under LGC
c) Matters involving expedient and effective administration
and implementations of assessments and collection of
taxes on certain aspects of taxing process that are not
legislative in character
President shall have the power to veto any particular item in
an appropriation, revenue or tariff, but veto shall not affect
the items to which no objection has been made. Art 6, Sec 27
(2)
Non-impairment of the jurisdiction of the SC to review tax
cases
Art VII, Sec 5 (2)b- The Supreme Court shall have the power
to review, revise, reverse, modify or affirm on appeal or
certiorari, as the law of the Rules of Court may provide,
final judgments and orders of lower courts in all cases
involving the legality of any tax, impost, assessment, or toll
or any penalty imposed in relation thereto.
Appropriations, revenue or tariff bills shall originate
exclusively in the House of Representatives but the Senate
may propose or concur with amendments
Art. VI, Sec 28 (2)- The Congress may, by law, authorize the
President to fix within specified limits, and subject to such
limitations and restrictions as it may impose, tariff rates, import
and export quotas, tonnage and wharfage dues, and other
duties or imposts within the framework of the national devt
program of the govt.
Each LGU shall exercise the power to create its own sources of
revenue and shall have a just share in the national taxes.
Art X, Sec 5- Each local govt unit shall have the power to create
its own resources of revenues and to levy taxes, fees and
charges subject to such guidelines and limitations as the
Congress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees and charges shall accrue exclusively
to the local governments.
Art X, Sec 6- Local government units shall have a just share, as
determined by law, in the national taxes which shall be
automatically released to them.
Purpose
Amount
Exaction
of
There is no
limit;
Police Power
Exercised to
promote
public welfare
through
regulations;
Limited
to
cover the cost
of regulation,
issuance
of
the license or
surveillance;
Eminent Domain
Taking of private
property
for
public use;
No
exaction;
compensation is
paid by the
govt;
Benefit
No special or
direct benefit
is received;
Nonimpairment
of contracts
Transfer of
property
rights
The
nonimpairment
rule subsists;
Transfer paid
becomes
part of the
public fund;
Scope
Affects
all
persons,
property and
excises;
No
direct
benefits are
received;
damnum
absque
injuria
Contracts may
be impaired;
Direct
benefit
results in the
form of just
compensation;
No transfer
but
only
restraint on
the exercise
of
property
rights exist;
Affects
all
persons,
property,
privileges, and
even rights;
Property is taken
by the govt for
public use upon
payment of just
compensation;
Contracts may
be impaired;
Necessity of the
public for private
property;
2)
3)
d)
1)
b) As to subject matter
Personal (poll or capitation)- does not consider the amount of
property, occupation or business of the taxpayer.
e)
CLASSIFICATION OF TAXES
a) As to purpose
1. Fiscal (general or revenue)- they are levied without a
specific or pre-determined purpose
2. Regulatory (special or sumptuary)- those intended to
achieve some social or economic goals.
Calalang vs. Lorenzo- An imposition may partake the nature of
both a revenue measure and a regulatory fee. In such a case,
the real intent and the primary and substantial purpose of the
law must be inquired into from which it may be held to be one
of the other depending on the statutes predominant objective.
PAL vs. Edu- The Court held that since the fees imposed are
mainly used for revenue and only a fifth thereof is retained by
the LTO for regulation, the same should be considered as taxes
rather than license fees.
Villegas vs. Hsiu- Only the portion of a permit fee in excess of
the cost of regulation was held to be a tax.
Esso Standard Eastern vs. CIR- A margin levy on foreign
exchange was held to be police power measure to strengthen
the countrys international reserve rather than tax.
Lozano vs. Energy Regulatory Board- An amount imposed by
the Energy Regulatory Board on petroleum products to augment
the resources of the Price Stabilization Fund under P.D. 1956
was not considered, with Justice Paras dissenting, as an act of
taxation.
f)
Person,
properties,
business,
rights,
interests, privileges,
acts and transactions
LICENSE
Purposes of regulation
Police power of the
govt
Has limit based on
necessity to carry out
regulation
Required
for
commencement
of
business or profession
or to exercise a
right/privilege
Nature of permanence
Always revocable
Scope
Basis of computation
Nature
Limitation
When imposed
Exemption
Self-assessing
Subject
to
constitutional,
Inherent
and
contractual limitations
Post-activity
imposition
Exemption from tax
does not include
exemption
from
regulatory fees
Exemption
from
regulatory fees is not
allowed.
Tax
Based on law
Not assignable
Non-payment
covers
imprisonment, except poll tax
Payable in money
Not subject to set-off
Does not earn interest, except
when delinquent
NIRC
Toll
Demand of proprietorship
Compensation for the use of
somebody elses property
Imposed by govt or by private
individuals
Determined by the cost of property
or improvement thereon
Debt
Based on contract
Assignable
No imprisonment for non-payment
Payable in cash or kind
Subject to set-off
Draws interest when stipulated or
in default
Civil Code or Rules of Court
Special Assessment
Levied on land
Exemption is qualified
Implied of by Omission
SSS vs Bacolod City- There is no tax by silence but, but where the
law levies a tax, so also must the tax exemption be explicit in the
law. While exemptions are not presumed, the govt however,
unless otherwise expressed, is deemed not subject to a law
imposing taxes.
Bisaya Land Transportation vs CIR- No prohibition against the
govt taxing itself. There is no tax exemption solely on the
ground of equity, but equity can be used as basis for a statutory
exemption; thus, at times the law authorizes the condonation of
taxes on equitable considerations.
C.
objection that they infringe upon the due process of law clause
of the Constitution; that taxes on income are not subject to the
constitutional objection because of their retroactivity.
2)
Tax Exemption
Immunity from tax
Grantee need not pay anything
Can be availed by any qualified
taxpayer
Prospective in application
Liability does not attach top one
enjoying a privilege of tax
exemption
Immunity from civil liability only
Requires no payment of tax
Tax Amnesty
Condonation from payment of
existing tax liability
Grantee pays a portion
Not always available
Retroactive in application
Tax liability attaches to a taxpayer
who wants to avail of tax amnesty
Immunity from criminal, civl and
administrative liability
Requires the payment of certain
percentage of unpaid taxes
3)
4)
5)
TAX
AVOIDANCE
(tax
minimization)
Tax saving device within means
sanctioned by law. Not punishable.
7)
Set-off Taxes
General Rule: Taxes are not subject to Set-off or Legal
Compensation because tax is not a debt.
A tax is not a debt for the reason that a tax does not depend
upon the consent of the taxpayer and there is no express or
implied contract to pay taxes.
Exceptions:
1) Tax is secured by a bond
2) Collection is enforced by court action
3) Compromise agreement validly entered into between the govt
and the taxpayer
4) Interest on tax delinquency is considered as interest on
indebtedness
9)
10) COMPROMISES
CITIZENS SUIT
Complainant or
plaintiff is a mere
instrument of the
public concern;
CLASS SUIT
Complaint of a group of
individuals with common
concern
against
a
respondent
for
an
alleged violation of the
groups individual rights;
CIR vs CA, R.O.H. Auto Product & CTA- The authority of the Sec
of Finance, in conjunction with the CIR, to promulgate all
needful rules and regulations for the effective enforcement of
internal revenue laws cannot be controverted.
Arches vs Bellosillo- A revenue regulation, the issuance of which
is authorized by stature, has the force and effect of law.
CIR vs CA, CTA, and Fortune Tobacco Corp- Interpretative rule,
one the 3 quasi-legislative or rule-making power of the an
administrative agency refers to no single person or party in
particular, but concerns all those belonging to the same class
which may be covered by the said interpretative rule.
CIR vs Burroughs- Any revocation, modification or reversal of
such rules or regulations, including rulings or circulars of the
Commissioner, shall not be given retroactive effect if the same
would be prejudicial to the taxpayer, except in case of rulings:
a) where the taxpayer deliberately misstates or
omits material facts;
b) where the facts subsequently gathered by the BIR
are materially different from the facts on which
the ruling is based; or
c) where the taxpayer acted in bad faith;
c)
d)
e)
f)
g)
h)
i)
j)
k)
Gross Income- All income, gain or profit subject to tax, whether the same
is realized from legal or illegal activities.
Net Income- Gross income less allowable deductions and exemptions.
Gross Income Taxation
Fixed or computed without
allowable deductions;
Applies to: (a) compensation
income earners, (b) non-resident
aliens not engaged in trade or
business, (c) non-resident foreign
corporations.
A final tax is imposed on the gross
amount of specific types of
income, such as interest,
royalties, prize, dividend and
capital gains;
Grants no exemptions;
Tax base is gross income;
g)
h)
Capital
Tree or source of income
Fund or tool for the production of
health;
Resident citizens
ARTICLE IV
CITIZENSHIP
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