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San Beda College of Law!

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TAXATION LAW

I. GENERAL PRINCIPLES

POWER OF TAXATIONTAXATION power by which thesovereign through its law-making body

raises revenue to defray the necessaryexpenses of government from among

those who in some measure areprivileged to enjoy its benefits and mustbear its burdens.

Two Fold Nature of the Power of

Taxation1. It is an inherent attribute of

sovereignty

2. It is legislative in character

Extent of Taxing PowerSubject to constitutional and

inherent restrictions, the power of

taxation is regarded as comprehensive,unlimited, plenary and supreme.

SCOPE OF LEGISLATIVE TAXING POWER1. Amount or rate of tax

2. Apportionment of the tax3. Kind of tax4. Method of collection

5. Purpose/s of its levy, provided it isfor public purpose

6. Subject to be taxed, provided it is

within its jurisdiction7. Situs of taxation

TAXES enforced proportionalcontributions from the persons and

property levied by the law-making bodyof the State by virtue of its sovereignty

in support of government and for publicneeds.

CHARACTERISTICS OF TAXES1. forced charge;2. pecuniary burden payable in money;

3. levied by the legislature;4. assessed with some reasonable rule

of apportionment; (see theoreticaljustice)

5. imposed by the State within its

jurisdiction;

6. levied for a public purpose.

REQUISITES OF AVALID TAX1. should be for a public purpose2. the rule of taxation shall be uniform3. that either the person or property

taxed be within the jurisdiction ofthe taxing authority

4. that the assessment and collectionof certain kinds of taxes guaranteesagainst injustice to individuals,

especially by way of notice andopportunity for hearing be provided

5. the tax must not impinge on theinherent and Constitutionallimitations on the power of taxation

THEORIES AND BASES OF TAXATION1. Lifeblood Theory

Taxes are what we pay for civilizedsociety. Without taxes, the government

would be paralyzed for lack of themotive power to activate and operate it.Hence, despite the natural reluctance to

surrender part of one's hard-earnedincome to the taxing authorities, every

person who is able to must contributehis share in the running of thegovernment. (CIR v. Algue, Inc.)

2. Necessity TheoryThe power to tax is an attribute of

sovereignty emanating from necessity. Itis a necessary burden to preserve theState's sovereignty and a means to give

the citizenry an army to resist anaggression, a navy to defend its shores

from invasion, a corps of civil servants toserve, public improvements designed for

the enjoyment of the citizenry and thosewhich come within the State's territory,and facilities and protection which a

government is supposed to provide.(Phil. Guaranty Co., Inc. v. CIR)

3. Benefits-Protection / ReciprocityTheoryTaxation is described as a symbiotic

relationshipwhereby in exchange of thebenefits and protection that the citizens

get from the Government, taxes arepaid. (CIR v. Algue, Inc.)

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