Taxation

I

PART I
TAXATION IN GENERAL

CHAPTER I – GENERAL PRINCIPLES OF TAXATION

I. TAXATION

1. Definition of Taxation
a. 71 Am Jur 2nd 342
2. Nature of Internal Revenue Laws
a. Hilado v. CIR, 100 Phil 288
3. Scope of Taxation
a. §28, Art. VI, 1987 Constitution
b. 71 Am Jur 2nd 394 – 395
c. 71 Am Jur 2nd 397-398
d. Sison v. Ancheta, 130 SCRA 654 (citing C.J. John Marshall
[McCulloch v. Maryland] and J. Holmes [Panhandle Oil Co. v.
Mississippi])
e. Reyes v. Almanzor, 196 SCRA 322
f. Sarasola v. Trinidad, 40 Phil. 259, GR No. 14595, October 11,
1919
4. Underlying theory and basis
a. 71 Am Jur 2nd 346-347
b. CIR v. Algue, Inc. L-28896 Feb 17, 1988
5. Principles of a sound tax system
a. Chavez v. Ongpin 186 SCRA 331
6. Comparison with Police Power and Eminent Domain
a. Similarities and distinctions 71 Am Jur 2nd 395-397
b. Gerochi, et al. v. DOE, et al., GR No. 159796, July 17, 2007
c. Matalin Coconut Co., Inc. v. Mun. Council of Malabang, 143
SCRA 404
d. Lutz v. Araneta, 98 Phil 48
e. NTC v. CA, 311 SCRA 508 (1999)

II. TAXES

1. Definition
a. 71 Am Jur 2nd 343-346
b. Republic v. Philippine Rabbit Bus Lines, Inc., GR No. L-26862,
March 30, 1970
2. Essential Characteristics of Taxes
3. Taxes distinguished from:
a. Debts

Syllabus for Taxation I (UP Law SY 2018-2019) 1

Atty. Marissa O. Cabreros, CPA

 i. 71 Am Jur 2nd 345-346
ii. Caltex v. COA, 208 SCRA 726
iii. Francia v. IAC, 162 SCRA 753
iv. Philex Mining Corp. v. CIR, CA, and CTA, GR No. 125704,
August 28, 1998
b. License Fees
i. 71 Am Jur 2nd 352-353
ii. Progressive Dev. Corp. v. QC, 172 SCRA 629
iii. PAL v. Edu, 164 SCRA 320
iv. ESSO v. CIR, 175 SCRA 149
c. Special Assessments (now special levies under the 1991 Local
Government Code)
i. Apostolic Prefect v. Treasurer of Baguio, 71 Phil. 547
d. Tolls
i. 71 Am Jur 2nd 351
ii. City of Ozamiz v. Lumapas, GR No. L-30727, July 15,
1975
e. Penalties
i. NDC v. CIR 151 SCRA 472
f. Custom duties

III. CLASSIFICATION OF TAXES

1. As to subject matter
a. 71 Am Jur 2nd 357 – 361
b. Capitation or poll taxes
c. Property taxes
d. Excise or license taxes
2. As to incidence or burden
a. 71 Am Jur 2nd 354
b. Direct Taxes
c. Indirect Taxes
d. Maceda v. Macaraig 223 SCRA 217 (G.R. No. 88291 6/8/1993)
3. As to determination of amount
a. 71 Am Jur 2 355
nd

b. Specific taxes – Sec. 129, NIRC

c. Ad valorem taxes – Sec. 129, NIRC
4. As to purpose
a. 71 Am Jur 2nd 355 – 356
b. General or Fiscal
c. Special, Regulatory or Sumptuary
5. As to scope
a. National taxes
b. Local taxes
6. As to graduation or rate
a. Progressive
b. Regressive
c. Proportionate
d. Mixed or Degressive
Syllabus for Taxation I (UP Law SY 2018-2019) 2
Atty. Marissa O. Cabreros, CPA


IV. DOCTRINES IN TAXATION

1. Prospectivity of Tax Laws
a. Hydro Resources v. CA, GR No. 80276, December 21, 1990, 192
SCRA 604
2. Imprescriptibility of Taxes
a. CIR v. Ayala Securities Corporation, GR No. L-29485,
November 21, 1980, 101 SCRA 231
3. Double Taxation
a. Definition and Nature. 71 Am Jur 2nd 362-365
b. Villanueva v. City of Iloilo, GR No. L-26521, December 28,
1968, 26 SCRA 578
c. Sanchez v. CIR 97 Phil. 687, G.R. No. L-7521, October 18, 1955.
d. Punsalan v. Mun Board of Manila 95 Phil. 46
e. CIR v. Citytrust Investment Phils. Inc., GR No. 139786,
September 27, 2006
4. Methods of avoiding the occurrence of double taxation
a. Tax Treaty – CIR v. SC Johnson & Sons, Inc. 309 SCRA 87, G.R.
No. 127105. June 25, 1999
b. Tax Credit – CIR v. Lednicky, GR Nos. L-18169, L-18286, & L-
21434. July 31, 1964

CHAPTER II – LIMITATION UPON THE POWER OF TAXATION

I. INHERENT LIMITATIONS

1. Public Purpose
a. Lutz v. Araneta, 98 Phil. 48
b. Pascual v. Sec. of Public Works 110 Phil 331
c. Pepsi Cola v. Municipality of Tanauan, 69 SCRA 460
d. Tio v. Videogram Regulatory Board et al. GR No. 75697, June
19, 1987, 151 SCRA 208
2. Taxing power is inherently legislative
a. In general – Delegata potestas non potest delegari
b. Exceptions:
i. Local Government Units
1. Quezon City, et al. v. Bayantel, GR No. 162015,
March 6, 2006
ii. Delegation to President –§28(2), Art. VI, 1987
Constitution
iii. Administrative Rate Fixing
1. Phil Comm. Satellite Corp. v. Alcuaz 180 SCRA
218
2. Smith Bell & Co. v CIR, L-28271 July 25, 1975
3. Territoriality or Situs of Taxation
a. Meaning and scope of limitation
b. Situs of Taxation
i. Meaning
Syllabus for Taxation I (UP Law SY 2018-2019) 3
Atty. Marissa O. Cabreros, CPA

 ii. Determination of Situs
iii. Situs of subjects of taxation
iv. Persons §157-158, 1991 LGC
v. Community Tax – individuals and corporate
vi. Lex Situs or Lex Rei Sitae - Real Property
vii. Mobilia Sequuntur Personam - Personal Property
viii. Income
ix. Business, Occupation, Transaction
x. Transfer of property by death or gift
xi. Multiple situs of taxation
c. Manila Electric Company v. Yatco, GR No. 45697, November 1,
1939, 69 Phil 89
d. Manila Gas v. Collector, 62 Phil 895 (G.R. No. 42780, January
17, 1936)
e. Wells Fargo Bank v. Col, 70 Phil. 325
f. CIR v. Baier-Nickel, GR No. 153793, August 29, 2006
g. CIR v. Marubeni Corporation, GR No. 137377, December 18,
2001
4. International Comity (in par parem, non habet imperium – An equal has no
power over an equal)

II. CONSTITUTIONAL LIMITATIONS

1. Due process Clause
a. §1, Art. III, 1987 Constitution
b. Com. of Customs v. CTA & Campos Rueda Co., 152 SCRA 641,
G.R. No. 70648. July 31, 1987
c. Pepsi Cola v. Municipality of Tanauan, 69 SCRA 460
d. Phil Bank of Comm v. CIR 302 SCRA 241, G.R. No. 112024.
January 28, 1999
2. Equal Protection Clause
a. §1, Art. III, 1987 Constitution
b. Ormoc Sugar Co. v. Treasurer of Ormoc City 22 SCRA 603, G.R.
No. L-23794. February 17, 1968
c. Shell Co. v. Vaño 94 Phil. 388, G.R. No. L-6093. February 24,
1954
d. Tiu v. CA 301 SCRA 279
e. British American Tobacco v. Camacho and Parayno, GR No.
163583, August 20, 2008 and April 15, 2009
3. Rule of Taxation shall be Uniform and Equitable
a. §28(1), Art. VI, 1987 Constitution
b. City of Baguio v. De Leon, G.R. No. L-24756, October 31, 1968,
25 SCRA 938
c. Eastern Theatrical Co. v. Alfonso, GR No. L-1104, May 31, 1949,
83 Phil 852
4. Non-Impairment of Contracts
a. §10, Art. III & §11, Art. XII, 1987 Constitution
b. Imus Electric Co. v. CTA and CIR, GR No. L-22421, March 18,
1967
Syllabus for Taxation I (UP Law SY 2018-2019) 4
Atty. Marissa O. Cabreros, CPA

 c. Phil. Rural Electric Cooperatives Association Inc., et al. v. DILG
and DOF, GR No. 143076, June 10, 2003
5. Non-imprisonment for non payment of poll tax
a. §20, Art. III, 1987 Constitution
6. Prohibition against taxation of real property of charitable institutions,
churches, parsonages or convents, mosques and non-profit cemeteries
a. §28(3), Art. VI, 1987 Constitution
b. Abra Valley Collecge, Inc. v. Aquino, GR No. L-39086, June 15,
1988, 162 SCRA 106
c. Lung Center v. QC et. al. GR No. 144104, June 29, 2004
7. Prohibition against taxation of non-stock non-profit educational
institutions
a. §4(3,4), Art. XIV, 1987 Constitution
b. §30(H), NIRC
c. CIR v. CA & YMCA, 298 SCRA 83
d. CIR v. CA, CTA and Ateneo De Manila University, GR No.
115349, April 18, 1997
8. Passage of tax bills
a. §24, Art. VI, 1987 Constitution
b. Tolentino v. Secretary of Finance 249 SCRA 628
9. Granting of tax exemption
a. §28(4), Art. VI, 1987 Constitution
b. John Hay Peoples Alternative Coalition, et. al. v. Lim, et al., GR
No. 119775, October 24, 2003
10. Veto power of the President
a. §27(2), Art. VI, 1987 Constitution
11. Judicial Power to review legality of tax
a. §5(2)(b) AVIII, 1987 Constitution


CHAPTER III – ESCAPE FROM TAXATION

I. SHIFTING OF TAX BURDEN
1. Shifting of Tax
a. Manner of shifting taxes
b. Example: Indirect Taxes §105, NIRC
2. Impact of Tax vs. Tax Incidence

II. EXEMPTION - IN GENERAL

1. Definition
2. Kinds of Exemption
a. Express
b. Implied or by Omission
c. Contractual
3. Nature of power to grant tax exemption / Rationale of Granting
Exemption
a. Maceda v. Macaraig 223 SCRA 217 (G.R. No. 88291. June 8,
1993)
Syllabus for Taxation I (UP Law SY 2018-2019) 5
Atty. Marissa O. Cabreros, CPA

 4. Constitutional Exemption
a. §28(3), Art. VI, 1987 Constitution
b. §4(3,4), Art. XIV, 1987 Constitution
5. Legislative grant of exemption
a. CIR v Botelho Shipping Corp. 20 SCRA 487, G.R. Nos. L-21633-
34. June 29, 1967
b. CIR v CTA, GCL Retirement Plan, 207 SCRA 487, G.R. No. 95022.
March 23, 1992
c. CIR v Guerrero, 21 SCRA 180, G.R. No. L-20942. September 22,
1967
d. Phil. Acetylene v CIR, 20 SCRA 1056
e. Sea-Land Service v. CA 357 SCRA 441
6. Exemption created by Treaty
a. Example: Par 4 Article 12 of Philippine – US Tax Treaty
7. Exemption of government agencies
a. §27(C), NIRC
b. §30(I), NIRC
c. §32(B)(7)(b), NIRC
d. Philippine Ports Authority v. City of Iloilo, GR No. 109791, July
14, 2003
e. Philippine Fisheries Development Authority v. CA, GR 169836
July 31, 2007

III. TAX AMNESTY

1. Definition
a. People v Cataneda GR No. L-46881, Sept 15, 1988
b. CIR v Marubeni GR No. 137377 Dec 18, 2001
2. Sample Amnesty Program: RA No. 9480
a. Philippine Banking Corporation vs. CIR, G.R. No. 170574.
January 30, 2009
3. Voluntary Amnesty Program (VAP)
a. CIR v. Ariete, GR No. 164152, January 21, 2010

IV. TAX AVOIDANCE vs. TAX EVASION

1. Definitions
2. CIR v. The Estate of Benigno P. Toda GR 147188, Sept 14, 2004


CHAPTER IV – SOURCES AND CONSTRUCTION OF TAX LAWS

I. SOURCES OF TAX LAW

1. Statutes
a. Constitution
b. Existing Tax Laws
i. National – National Internal Revenue Code of 1997
ii. Local – Book II, 1991 Local Government Code
Syllabus for Taxation I (UP Law SY 2018-2019) 6
Atty. Marissa O. Cabreros, CPA

 iii. Special Laws
1. Tariff and Customs Code
2. Incentives Laws (e.g. BCDA Law, PEZA Law, Omnibus
Investment Law, Tourism Act of 2009)
3. Personal Equity Retirement Account Act of 2009
4. Magna Carta for Senior Citizen
5. Magna Carta for Persons with Disability
2. BIR Issuances BIR Revenue Administrative Order (RAO) No. 2-2001
a. BIR Revenue Regulations
i. Authority to promulgate. §244, NIRC
ii. Specific provisions to be contained in RR. §245, NIRC
iii. What is the force and effect of RR?
1. Art. 7, Civil Code
2. Asturias Sugar Central v Comm., 29 SCRA 617
3. BPI Leasing Corp v. CA and CIR, GR no. 127624
Nov 18, 2003
b. BIR Rulings
i. Rulings of first impression
ii. Rulings with established precedents
iii. Power of CIR to Interpret Tax Laws. §4, NIRC
iv. Non-Retroactivity of Rulings
1. §246, NIRC
2. CIR v. Burroughs Ltd., G.R. L-66653. June 19,
1986
3. CIR v. Philippine Health Care Providers, Inc., GR
No. 168129, April 24, 2007
v. Exceptions
1. PBCOM vs. CIR 302 SCRA 241
c. Revenue Memorandum Circulars (RMC)
d. Revenue Memorandum Orders (RMO)
3. Opinions of the Secretary of Justice
4. Legislative Materials
5. Court Decision

II. CONSTRUCTION OF TAX LAWS, EXEMPTIONS AND REFUNDS

1. General Rules of Construction of Tax Laws
a. Luzon Stevedoring v Trinidad, 43 Phil. 803
b. Philippine Health Care Providers, Inc. v. CIR, GR No. 167330,
September 18, 2009
2. Construction of Tax Exemptions
a. City of Iloilo v. Smart, GR No. 167260, February 27, 2009
b. Rodriguez, Inc. v Collector 28 SCRA 119
c. Wonder Mechanical Engineering v. CTA 64 SCRA 555
d. Republic Flour Mills v CIR, 31 SCRA 148, G.R. No. L-25602.
February 18, 1970
3. Construction of Tax Refunds
a. Resins, Inc. v. Auditor Gen. 25, SCRA 754, G.R. No. L-17888.
October 29, 1968
Syllabus for Taxation I (UP Law SY 2018-2019) 7
Atty. Marissa O. Cabreros, CPA

 b. Kepco Philippines Corp. v. CIR GR No. 179356, December 14,
2009

Syllabus for Taxation I (UP Law SY 2018-2019) 8

Atty. Marissa O. Cabreros, CPA