ROQUE | INCOME TAX | CHAPTER 1 – PPT NOTES
 Non-revenue/special or regulatory (Sumptuary /
Compensatory)
Taxation is often employed as a device for regulation by
means of which certain effects or conditions envisioned
by governments may be achieved.
Taxes may be levied with a regulatory purpose to
provide means for the rehabilitation and stabilization of
a threatened industry which is affected by public
interest as to be within the police power of the state.
 Purpose - Thus, taxation can:
1. Promote the general welfare of the people as an
implement of police power. The so-called “sin taxes” on
alcohol and tobacco manufacturers help dissuade the
consumers from excessive intake of these potentially
harmful products. [Southern Cross Cement Corporation
v. Cement Manufacturers Association of the Philippines,
et al., G. R. No. 158540 (2005)]
2. Strengthen anemic enterprises or provide incentives
to greater production through grant of tax exemptions
or the creation of conditions conducive to their growth.
Definition and Concept
 Revenue Raising Measure
Raises income to defray the necessary expenses of
government to
The process or means by which the sovereign, through
its lawmaking body, raises income to defray the
necessary expenses of government; a method of
apportioning the cost of government among those who
in some measures are privileged to enjoy its benefits
and must, therefore, bear its burdens [51 Am. Jur. 34; 1
Cooley 72-93]
 As a Power
It refers to the inherent power of the state to demand
enforced contributions for public purposes.
It is described as a destructive power that interferes
with the personal and property rights of the people and
takes from them a portion of their property for the
support of the government. [Paseo Realty &
Development Corporation v. CA, G.R. No. 119286
(2004)]
 Revenue-Raising (Fiscal Purpose)
The primary purpose is to generate funds for the State
to finance the needs of the citizenry and to advance the
common weal. [Napocor v. Province of Albay G.R. No.
87479, 4 June 1990.]
A government can run its administrative set up only
through public funding which is collected in the form of
tax.
Fees may be properly regarded as taxes even though
they also serve as an instrument of regulation. If the
purpose is primarily revenue, or if revenue is, at least,
one of the real and substantial purposes, then the
exaction is properly called a tax.
3. Protect local industries against foreign competition by
imposing additional taxes on imported goods or
encourage foreign trade by providing tax incentives on
imported goods.
4. Be a bargaining tool by setting tariff rates first at a
relatively high level before trade negotiations are
entered into with another country.
5. Halt inflation in periods of prosperity to curb
spending power; ward off depression in periods of
slump to expand business.
6. Reduce inequalities in wealth and incomes, as for
instance, the estate, donor's and income taxes, their
payers being the recipients of unearned wealth or
mostly in the higher income brackets. Progressivity is
based on the principle that those who are able to pay
more should shoulder a bigger portion of the tax
burden. [MAMALATEO]
7. Encourage economic growth through the grant of
incentives or exemptions, which encourage investment
and thereby stimulate economic activity
8. Taxes may be levied to promote science and invention
[see RA. No. 5448] or to finance educational activities
[see RA. No. 5447] or to improve the efficiency of local
police forces in the maintenance of peace and order
through grant of subsidy [see RA. No. 6141].
9. To push for the government’s health measure, just
like what happened in the landmark legislation on sin
taxes in 2012 [see R.A. No. 10351].
 Elements of Taxation
 Enforced proportional contribution from persons and
properties.
- Its imposition is in no way dependent upon the will or
assent of the person taxed. It is not contractual, either
express or implied, but positive acts of government.
 Imposed by the State by virtue of its sovereignty; and
 Levied for the support of the government [Republic v.
COCOFED, G.R. Nos. 147062-64 (2001)].
 Characteristics of Taxing Power (Power of Taxation)
 A license granted by the State is always revocable.
[Gonzalo Sy Trading v. Central Bank of the Phil., G.R. No.
L-41480 (1976)]
 It is comprehensive. Covers persons, businesses,
activities, professions, rights, and privileges.
 It is unlimited. A tax does not cease to be valid merely
because it regulates, discourages, or even deters the
activities taxed. The power to impose taxes is one so
unlimited in force and so searching in extent, that the
courts scarcely venture to declare that it is subject to
any restrictions whatever, except such as rest in the
discretion of the authority which exercises it. [Tio v.
Video gram Regulatory Board, G.R. No. 75697 (1987)]
 It is plenary or complete. Under NIRC, the BIR may
avail itself of certain remedies to ensure the collection
of taxes. Taxes, being the lifeblood of the government,
should be collected without unnecessary hindrance,
every precaution must be taken not to unduly suppress
it. [Republic v. Caguioa G.R. No. 168584 (2007)]
 It is supreme. It is supreme insofar as the selection of
the subject of taxation is concerned, but it does not
mean that it is superior to the other inherent powers of
the State.
 Tax as Distinguished from Other Forms of Exactions
Tariff may be used in one of three (3) senses:
1. A book of rates drawn usually in alphabetical order
containing the names of several kinds of merchandise
with the corresponding duties to be paid for the same;
or
2. The duties payable on goods imported or exported; or
Importance of the distinctions
1. It is necessary to determine whether a particular
imposition is a tax or a license fee because some
limitations apply only to one and not to the other, and
for the reason that exemption from taxes may not
include exemption from license fee.
2. The power to regulate as an exercise of police power
does not include the power to impose fees for revenue
purposes. [Progressive Development Corp. v. Quezon
City, G.R. No. L-36081 (1989)
3. An exaction, however, may be considered both a tax
and a license fee. This is true in the case of car
registration fees which may be regarded as taxes even
as they also serve as an instrument of regulation. If the
purpose is primarily revenue, or if revenue is, at least,
one of the real and substantial purposes, then the
exaction is properly called a tax. [Phil. Airlines, Inc. v.
Edu, G.R. No. L- 41383 (1988)]
4. But it is possible that a tax may only have a regulatory
purpose. The general rule, however, is that the
imposition is a tax if its primary purpose is to generate
revenue, and regulation is merely incidental; but if
regulation is the primary purpose, the fact that
incidentally revenue is also obtained does not make the
imposition a tax. [Progressive Development Corp. v.
Quezon City, supra]
3. The system or principle of imposing duties on the
importation (or exportation of goods).
A toll is a sum of money for the use of something,
generally applied to the consideration, which is paid for
the use of a road, bridge or the like, of a public nature.
[1 Cooley 77].
A license or permit fee is a charge imposed under the
police power for purposes of regulation.
 License is in the nature of a special privilege, of a
permission or authority to do what is within its terms. It
makes lawful an act which would otherwise be unlawful.
 A special assessment is not the personal liability of
the person assessed, i.e., his liability is limited only to
the land involved. It is based wholly on benefits (not
necessity).
 A charge imposed only on property owners benefited
is a special assessment rather than a tax
notwithstanding that the statute calls it a tax.
 The rule is that an exemption from taxation does not
include exemption from special assessment. But the
power to tax carries with it the power to levy a special
assessment.
Note: The term "special levy" is the name used in the
present Local Government Code (RA. No. 7160). A
province, city, or municipality, or the National
Government, may impose a special levy on lands
especially benefited by public works or improvements
financed by it. [Sec. 240, RA 7160]
Stages or Aspects of Taxation
 Legislative Act:
This process involves the passage of tax laws or
ordinances through the legislature. The tax laws to be
passed shall determine.
Characteristics of a Special Assessment:
o Those to be taxed (person, property or rights);
 Levied only on land.
o How much is to be collected (the rate and the
base of tax); and
 Not a personal liability of the person assessed.
 Based wholly on benefits (not necessary); and
 Exceptional both as to time and place.
o How taxes are to be implemented (the
manner of imposing and collecting tax).
It also involves the granting of tax exemptions,
tax amnesties or tax condonation.
Scope of legislative power to tax:
o Discretion as to the purpose for which taxes
shall be levied.
o Discretion as to subjects of taxation. o
Discretion as to amount or rate of tax
 Executive Act:
This process involves the act of administration
and implementation of tax laws by the executive
through its administrative agencies such as the Bureau
of Internal Revenue or Bureau of Customs.
 Taxpayer’s Act:
A tax is not a debt in the ordinary sense of the word.
Penalty is a sanction imposed as a punishment for
violation of law or acts deem injurious. The violation of
tax may give the right to imposition of penalty.
Jurisdiction over Subject and Objects
 The limited powers of sovereignty are confined to
objects within the respective spheres of governmental
control. These objects are the proper subjects or objects
of taxation and no one else.
1. Tax laws cannot operate beyond a State’s territorial
limits.
2. The gov’t cannot tax a particular object of taxation
which is not within its territorial jurisdiction.
3. Property outside the State’s jurisdiction does not
receive any protection from the State; and
4. If a law is passed by Congress, it must see to it that
the object or subject of taxation is within the territorial
jurisdiction of the taxing authority.
Payment - This process involves the act of
compliance by the taxpayer in contributing his share to
pay the expenses of the government. Payment of tax
also includes the options, schemes or remedies as may
be legally open or available to the taxpayer.
Refund - A claim for a refund must first be filed
with the Commissioner of Internal Revenue. A suit or
proceeding may be filed within two years from the date
of payment of the tax or penalty regardless of any
supervening cause that may arise after payment. The
Commissioner may, even without a written claim
therefore, refund or credit any tax, where on the face of
the return, such payment appears clearly to have been
erroneously paid. [Sec. 229, NIRC]
Requisites of a Valid Tax
1. It must be for a public purpose.
2. Rules of taxation should be uniform.
3. The person or property taxed is within the jurisdiction
of the taxing authority.
4. Assessment and collection is in consonance with the
due process clause; AND
5. The tax must not infringe on the inherent and
constitutional limitations of the power of taxation.