TAXATION
Mutuality
may be defined as a State Power, a legislative process, and a mode of
government cost distribution.
Basis of Taxation
Theories of Cost Allocation:
 Benefit received theory – The more benefit received from the gov’t, the more taxes to pay
 Ability to pay theory - Those who have more are taxed more regardless of benefit received
Aspects of the Ability to Pay Theory:
 Vertical Equity – directly proportional to the level of tax base
 Horizontal Equity – considers circumstance of the taxpayer
LIFEBLOOD DOCTRINE
Implications in Taxation:
 Tax is imposed even in the absence of a Constitutional Grant
 Claims for tax exemption are construed against taxpayers
 The government reserves the right to choose the objects of taxation
 The courts are not allowed to interfere with the collection of taxes.
 Income Taxation:
a. Income received in advance is taxable upon receipt.
b. Deduction for capital expenditures and prepayments is not allowed as it
effectively defers the collection of income tax
c. A lower amount of deduction is preferred when a claimable expense is subject
to limit
d. A higher tax base is preferred when the tax object has multiple tax bases
Other Fundamental Doctrines in Taxation:
 Marshall Doctrine
- “The power to tax involves the power to destroy.”
 Holme’s Doctrine
-“Taxation power is not the power to destroy while the court sits”
 Prospectivity of tax laws
 Non-compensation or set-off
 Non-assignment of taxes
 Imprescriptibility in taxation
 Doctrine of estoppel
 Judicial Non-interference
 Strict construction of Tax laws
Inherent Powers of the State:
 Taxation Power
 Police Power
 Eminent domain
Limitations of the Taxation Power:
 Inherent Limitations
1. Territoriality

2. International comity
3. Public Purpose
4. Exemption of the government
5. Non-delegation
Constitutional Limitations
1. Due Process of law
2. Equal protection of the law
3. Uniformity rule
4. Progressive System
5. Non-imprisonment for non-payment of debt or poll tax
6. Non-impairment of obligation and contract
7. Free worship rule
8. Exemption of religious or charitable entities, non-profit cemeteries , churches and
mosque from property taxes.
9. Non-appropriation of public funds or property for the benefit of any church, sect, or
system of religion
10. Exemption from taxes of the revenues and assets of non-profit, non-stock educational
institutions including grants, endowments, donations, or contributions for educational
purposes.
11. Concurrence of a majority of all members of Congress for the passage of a law granting
tax exemption
12. Non-diversification of tax collections
13. Non-delegation of the power of taxation
14. Non-impairment of the jurisdiction of the Supreme Court to review tax cases
15. Appropriations, revenue, or tariff bills be originating exclusively in the House of
Representatives, but the senate may propose or concur with amendments
16. Delegation to local government units
Stages of the exercise of taxation power:
 Levy or imposition – Impact of taxation/legislative act
 Assessment and collection – incidence of taxation/administrative act
SITUS OF TAXATION – Place of taxation
1. Business Tax situs
2. Income tax situs on services
3. Income tax situs on goods
4. Property Tax Situs
5. Personal Tax Situs
DOUBLE TAXATION
Elements:
1. Primary: Same Object
2. Secondary:
a. Same type of tax
b. Same purpose of tax
c. Same taxing jurisdiction
d. Same tax period
Types:
: in the place the business is conducted
: where they are rendered
: in the place of sale
: in their location
: in their place of residence
1. Direct Double Taxation
2. Indirect Double Taxation
ESCAPES FROM TAXATION
A. Those that result to loss of government revenue
1. Tax Evasion
2. Tax Avoidance
3. Tax Exemption
B. Those that do not result to loss of government revenue
1. Shifting
a. Forward Shifting
b. Backward Shifting
c. Onward Shifting
2. Capitalization
3. Transformation
Tax Amnesty
-General Pardon granted by the government
-Both Civil and Criminal Liabilities
-Retrospective
-Forgiving past violations
-condition upon the taxpayer paying the
government a portion of the tax
vs.
Tax Condonation
-Tax Remission
-Civil Liabilities only
-Prospective
-Unpaid balance of tax
- no payment
TAXATION LAW
Types:
 Tax laws
 Tax Exemption laws
Sources:
1. Constitution
2. Statutes and Presidential Decrees
3. Judicial Decisions or case laws
4. Executive Orders and Batas Pambansa
5. Administrative Issuance
6. Local Ordinances
7. Tax treaties and conventions with foreign countries
8. Revenue Regulations
Types:
1. Revenue regulations
2. Revenue memorandum orders
3. Revenue memorandum rulings
4. Revenue memorandum circulars
5. Revenue bulletins
6. BIR rulings
Types of rulings:
 Value-Added Tax (VAT)
 International Tax Affairs Division (ITAD) rulings


BIR rulings
Delegated Authority (DA) rulings
CLASSIFICATION OF TAXES
A. As to purpose
1. Fiscal or revenue tax – general purpose
2. Regulatory – imposed to regulate
3. Sumptuary – tax levied to achieved some objectives
B. As to subject matter
1. Personal,Poll or Capitation – tax on persons
2. Property Tax – tax on property
3. Excise or privilege tax – tax impose upon performance
C. As to incidence
1. Direct Tax – Only taxpayer
2. Indirect Tax – paid by another person
D. As to amount
1. Specific tax - fixed amount ( per unit basis )
2. Ad valorem – fixed proportion ( value of tax object )
E. As to rate
1. Proportional Tax – flat or fixed rate tax
2. Progressive or graduated tax – increase rate as tax base increase
3. Regressive tax – decrease rate tax base increase
4. Mixed Tax – combination of any from above
F. As to imposing authority
1. National Tax – Imposed by national government
2. Local tax – imposed by municipal or local government