COVERAGELAW ON TAXATIONI. General Principles of TaxationTwo Fold Nature of the Power of Taxation1. It is an inherent attribute of sovereignty2. It is legislative in character

Extent of Taxing PowerSubject to constitutional and inherent restrictions, the power oftaxation is regarded as comprehensive, unlimited, plenary and supreme.

SCOPE OF LEGISLATIVE TAXING POWER1. Amount or rate of tax2. Apportionment of the tax3. Kind of tax4. Method of collection5. Purpose/s of its levy, provided it is for public purpose6. Subject to be taxed, provided it is within its jurisdiction7. Situs of taxation

TAXES enforced proportionalcontributions from the persons andproperty levied by the law-making bodyof the State by virtue of its sovereigntyin 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; 5. imposed by the State within its jurisdiction;6. levied for public purpose

REQUISITES OF A VALID 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 of the taxing authority4. that the assessment and collection of certain kinds of taxes guarantees against injustice to individuals, especially by way of notice and opportunity for hearing be provided5. the tax must not impinge on the inherent and Constitutional limitations on the power of taxation

A. Definition and concept of taxation A mode of raising revenue for public purpose; the exercise of sovereign power to raise revenue for the expense of the government. Power by which an Independent State, through its lawmaking body, raises and accumulates revenue from its inhabitants to pay the necessary expenses of the government. [51 AM JUR 341] Process or act of imposing a charge by governmental authority on property, individuals or transactions to raise money for public purposes. [ Blacks Law Dictionary] Taxation is described as a destructive power which 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. Court of Appeals, GR No. 119286, October 13, 2004) Taxation is merely a way of apportioning the cost of government among those who in some measure areprivileged to enjoy its benefits and must bear itsburdens. [71 AM JUR 2ND 342] The process or means by which the sovereign, through its law-making body, raises income to defray the necessary expenses of government; a method of apportioning the cost of government among those who in some measure are privileged to enjoy its benefits and must, therefore, bear its burdens, (see 51 Am. Jur. 341; 1 Cooley 72-93.)

B. Nature of taxation Taxation is inherent in nature, being an attribute of sovereignty. (Chamber of Real Estate and Builders Association, Inc. v. Romulo, 614 SCRA 605 (2010)) The power to tax is inherent in the State, such power being inherently legislative, based on the principle that taxes are a grant of the people who are taxed, and the grant must be made by the immediate representative of the people, and where the people have laid the power, there it must remain and be exercised. (Commissioner of Internal Revenue v. Fortune Tobacco Corporation, 559 SCRA 160 (2008)) As an incident of sovereignty, the power to tax has been described as unlimited in its range, acknowledging in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay it. (Mactan Cebu International Airport Authority v. Marcos, 261 SCRA 667 (1996)) The power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter of right to every independent government, without being expressly conferred by the people. (Pepsi-Cola Bottling Company of the Phil. V. Mun. of Tanauan, Leyte, 69 SCRA 460) The power to tax is peculiarly and exclusively legislative and cannot be exercised by the executive or judicial branch of the government (1 Cooley 160-161). Hence, only Congress, our national legislative body, can impose taxes. The levy of a tax, however, may also be made by a local legislative body subject to such limitations as may be provided by law.

C. Characteristics of taxation It is generally payable in the form of money, although the law may provide payment in kind (e.g. backpay certificates under Sec. 2, R.A. No. 304, as amended) It is a forced charge, imposition or contribution. As such, it operates ad invitum; it is in no way dependent upon the will or contractual assent, express or implied, of the person taxed. It is not contractual, either express or implied, but postive acts of government. (Panay Electric Co. v Collector of Internal Revenue, L-10574, May 28, 1958) It is levied on persons, property, rights, acts, privileges, or transactions. It is levied by the State which has jurisdiction or control over the subject to be taxed. (Vera vs Fernandez, 89 SCRA 199) It is levied by the law-making body of the State. The power to tax is a legislative power but is also granted to local governments, subject to such guidelines and limitations as law may provide. [Sec. 5, Art. X, Constitution] It is levied for public purpose. Revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private persons. [Gaston v. Republic Planters Bank, 158 SCRA 626, March 15, 1988]. It is assessed in accordance with some reasonable rule of apportionment which means that conformably with the constitutional mandate for Congress to evolve a progressive tax system, taxes must be based on taxpayers ability to pay(Sec 28(a), Art VI, 1987 Constitution)D. Power of taxation compared with other powers 1. Police power Police Power is the power to make, ordain and establish all manner of wholesome and reasonable laws, statutes and ordinances whether with penalties or without, not repugnant to the Constitution, the good and welfare of the commonwealth, and for the subjects of the same. (Metropolitan Manila Development Authority v. Garin, GR No. 130230, April 15, 2005) The main purpose of police power is the regulation of a behavior or conduct, while taxation is revenue generation. The "lawful subjects" and "lawful means" tests are used to determine the validity of a law enacted under the police power. The power of taxation, on the other hand, is circumscribed by inherent and constitutional limitations. (PLANTERS PRODUCTS, INC. v. FERTIPHIL CORPORATION, G.R. No. 166006, March 14, 2008) If generation of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that revenue is incidentally raised does not make the imposition a tax. (GEROCHI v. DEPARTMENT OF ENERGY, 527 SCRA 696 (2007)) The lawful subjects and lawful means tests are used to determine the validity of a law enacted under the police power. While police power is inherent in the state, it is not in municipal corporations. (Balacuit vs CFI of Agusan del Norte, 163 SCRA 182) A zoning ordinance, reclassifying residential into commercial or light industrial area, is a valid exercise of the police power. (Ortigas vs Feati Bank, 94 SCRA 533) The Manila ordinance prohibiting barbershop shops from conduction massage business in another room was held valid, as it was passed for the protection of public morals. (Velasco vs Villegas, 120 SCRA 568) The act of the Municipal Mayor in opening Jupiter and Orbit Streets, Bel Air Subdivision, to the buplic was deemed a val id exercise of police power (Sangalang vs Gaston, G.R. No. 71169, Dec. 22, 1988) Coco-levy funds are not only affected with public interest; they are, infact, prima facie public funds. They were raised with the use of thepolice and taxing powers of the State for the benefit of the coconutindustry and its farmers in general 2. Power of eminent domain The ordinance requiring owners of commercial cemeteries to reserve 6% of their burial lots for burial grounds of paupers was held invalid; it was not an exercise of the police power, but of eminent domain. (Quezon City vs Ericta, 122 SCRA 759)E. Purpose of taxation 1. Revenue-raising Primary purpose of taxation is to provide funds or property with which to promote the general welfare and protection it its citizens. 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. [PAL v. Edu, G.R. No. L- 41383 August 15, 1988] Caltex Phil. Inc. vs Commission on Audit, 208 SCRA 726(1992) Osmena vs Secretary Oscar Orbos GR L99886 March 31, 1993

2. Non-revenue/special or regulatory Taxes may be levied with a regulatory purpose to provide means for rehabilitation and stabilization of a threatened industry which is imbued with public interest as to be within the police power of the State. [Caltex v. COA, G.R. No. 92585 May 8, 1992] As long as a tax is for a public purpose, its validity is not affected by collateral purposes or motives of the legislature in imposing the levy, or by the fact that it has a regulatory effect [51 Am. Jur. 381-382.] or it discourages or even definitely deters the activities taxed. The principle applies even though the revenue obtained from the tax appears very negligible or the revenue purpose is only secondary. [see United States vs. Sanchez, 340 U.S. 42; Tio vs. Videogram Regulatory Board, 151 SCRA 208, 1987] The Sugar Adjustment Act is an act enacted primarily under the police power and designed to obtain a readjustment of the benefits derived by people interested in the sugar industry as well as to rehabilitate and stabilize the industry which constitutes one of the great sources of the country's wealth and, therefore, affects a great portion of the population of the country. (Lutz v Araneta, 78 PHIL 148) The Court was satisfied that the coco-levy funds were raised pursuant to law to support a proper governmental purpose. They were raised with the use of the police and taxing powers of the State for the benefit of the coconut industry and its farmers in general. (PAMBANSANG KOALISYON NG MGA SAMAHANG MAGSASAKA AT MANGGAGAWA SA NIYUGAN v. EXECUTIVE SECRETARY G.R. Nos. 147036-37 April 10, 2012) In relation to the regulatory purpose of the imposed fees, the imposition questioned must relate to an occupation or activity that so engages the public interest, morals, safety and development as to require regulation for the protection and promotion of such public interest; the imposition must also bear a reasonable relation to the probable expenses of regulation, taking into account not only the costs of direct regulation, but also its incidental consequences. (CHEVRON PHILIPPINES, INC. v. BASES CONVERSION DEVELOPMENT AUTHORITY, 630 SCRA 519 (2010)) As an elementary principle of law, license taxation must not be so onerous to show a purpose to prohibit a business which is not injurious to health or morals. (TERMINAL FACILITIES AND SERVICES CORPORATION v. PHILIPPINE PORTS AUTHORITY, 378 SCRA 82 (2002))F. Principles of sound tax system 1. Fiscal adequacy Certainly, to continue collecting real property taxes based on valuations arrived at several years ago, in disregard of the increases in the value of real properties that have occurred since then, is not in consonance with a sound tax system. Fiscal adequacy, which is one of the characteristics of a sound tax system, requires that sources of revenues must be adequate to meet government expenditures and their variations. (FRANCISCO I. CHAVEZ v. JAIME B. ONGPIN, G.R. No. 76778, June 6, 1990) 2. Administrative feasibility Tax laws should be capable of convenient, just and effective administration. Each tax should be capable of uniform enforcement by government officials, convenient as to the time, place, and manner of payment, and not unduly burdensome upon, or discouraging to business activity. 3. Theoretical justice The tax burden should be in proportion to the taxpayers ability to pay. This is the so-called ability to pay principle. Taxation should be uniform as well as equitable

TAXATIONPOLICE POWEREMINENT DOMAIN

1. Purpose

To raise revenueTo promote public purpose through regulationsTo facilitate the States need of property for public use

2. Amount of Exaction

No limitLimited to the cost of regulation, issuance of the license or surveillanceNo exaction; but private property is taken by the State for public purpose

3. Benefits Received

No special or direct benefit is received by the taxpayer; merely general benefit of protectionNo direct benefit is received; a healthy economic standard of society is attainedA direct benefit results in the form of just compensation to the property

4. Non-impairment of Contracts

Contracts may not be impairedContracts may be impairedContracts may be impaired

5. Transfer of Property Rights

Taxes paid become part of public fundsNo transfer but only restraint in its exerciseTransfer is effected in favor of the State

6. Scope

All persons, property and excisesAll persons, property, rights and privilegesOnly upon a particular property

G. Theory and basis of taxation1. Lifeblood theory Taxes are the lifeblood of the government and their prompt and certain availability is an imperious need. [CIR v. Pineda] Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance... It is said that taxes are what we pay for civilized society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. [CIR v. Algue, G.R. No. L-28896, February 17, 1988] Taxes being the lifeblood of the government should be collected promptly. No court shall have the authority to grant an injunction to restrain the collection of any internal revenue tax, fee or charge imposed by the National Internal Revenue Code. (Angeles City v Angeles Electric Corp 622 SCRA 43 (2010)) We are not unaware of the doctrine that taxes are the lifeblood of the government, without which it cannot properly perform its functions; and that appeal shall not suspend the collection of realty taxes. However, there is an exception to the foregoing rule, i.e., where the taxpayer has shown a clear and unmistakable right to refuse or to hold in abeyance the payment of taxes. (Emerlinda S. Talento vs Hon. Remigio M. Escalada, JR., G.R. No. 180884, June 27, 2008)2. Necessity theory The power to tax, an inherent prerogative, has to be availed of to assure the performance of vital state functions. It is the source of the bulk of public funds. [Sison v. Ancheta, G.R. No. L- 59431, July 25, 1984] The obligation to pay taxes rests upon the necessity of money for the support of the state. For this reason, no one is allowed to object to or resist the payment of taxes solely because no personal benefit to him can be pointed out. [Lorenzo v. Posadas, G.R. No. L-43082, June 18, 1937]. 3. Benefits-protection theory (Symbiotic relationship) Despite the natural reluctance to surrender part of one's hard earned income to the taxing authorities, every person who is able to must contribute his share in the running of the government. The government for its part is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power. [CIR v. Algue]4. 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 none else.H. Doctrines in taxation 1. Prospectivity of tax laws Tax laws are prospective in operation. Nature and amount of the tax could not be foreseen and understood by the taxpayer at the time the transaction.Exception: Tax laws may be applied retroactively provided it is expressly declared or clearly the legislative intent.(e.g increase taxes on income already earned) when retroactive application would be so harsh and oppressive [Republic v. Fernandez, G.R. No. L-9141. September 25, 1956]. It is a cardinal rule that laws shall have no retroactive effect, unless the contrary is provided/ (citing Art. 4 of the Civil Code) [Hydro Resources v.CA] Note that the issue on the retroactivity of Section 204(c) of the 1997 NIRC arose because the last paragraph of Section 204(c) was not found in Section 230 of the old Code. After a thorough consideration of this matter, we find that we cannot give retroactive application to Section 204(c) abovecited. We have to stress that tax laws are prospective in operation, unless the language of the statute clearly provides otherwise. (COMMISSIONER OF INTERNAL REVENUE v. ROSEMARIE ACOSTA G.R. No. 154068 August 3, 2007)2. Imprescriptibility Unless otherwise provided by the tax law itself, taxes in general are not cancelable. (Commissioner vs Ayala Securities Corporation 101 SCRA 231) Although the NIRC provides for the limitation in the assessment and collection of taxes imposed, such prescriptive period will only be applicable to those taxes that were returnable. The prescriptive period shall start from the time the taxpayer files the tax return and declares his liablility. (Collector vs Bisaya Land Transportation Co. 1958) The law on prescription being a remedial measure should be interpreted liberally in order to protect the taxpayer. (Republic vs Ablaza 108 Phil 1105)3. Double taxation KINDS OF DOUBLE TAXATION(1) Direct Duplicate Taxation /Obnoxious double taxation in the objectionable or prohibited sense. This constitutes a violation of substantive due process.Elements:a. the same property or subject matter is taxed twice when it should be taxed only once.b. both taxes are levied for the samepurposec. imposed by the same taxing authorityd. within the same jurisdictione. during the same taxing periodf. covering the same kind or character of tax.(Villanueva vs. City of Iloilo)(2) Indirect Duplicate Taxation not legally objectionable. The absence of one or more of the abovementioned elements makes the double taxation indirect.(3) Domestic- this arises when the taxes are imposed by the local or national government (within the same state)(4) International- refers to the imposition of comparable taxes in two or more states on the same taxpayer in respect of the same subject matter and for identical periods.

REMEDIES OF DOUBLE TAXATION1. Tax Sparing Rule same dividendearned by a NRFC within the Phil. isreduced by imposing a lower rate of15% (in lieu of the 35%), on thecondition that the country to whichthe NRFC is domiliced shall allow acredit against the tax due from theNRFC, taxes deemed to have beenpaid in the Phil. (Sec.28 B 5b) (CIRvs Procter & Gamble) (GR No.66838, Dec. 2, 1991)2. Tax deductionsExample: vanishing deduction underSection 86(A)(2), NIRC3. Tax creditsInstances under the NIRC: For VAT purposes, the tax oninputs or items that go into themanufacture of finished products(which are eventually sold) may becredited against or deducted fromthe output tax or tax on the finishedproduct. Foreign income taxes may becredited against the Phil. Incometax, subject to certain limitations,by citizens, including members ofgeneral professional partnerships orbeneficiaries of estates or trusts(pro rata), as well as domesticcorporations. A tax credit is granted for estatetaxes paid to a foreign country onthe estate of citizens and residentaliens subject to certain limitations. The donors tax imposed upon acitizen or a resident shall becredited with the amount of anydonors tax imposed by the authorityof a foreign country, subject tocertain limitations.4. Tax Exemptions5. Principle of Reciprocity6. Treaties with other states

a) Strict sense Double taxation means taxing the same property twice when it should be taxed only once; that is, "taxing the same person twice by the same jurisdiction for the same thing." It is obnoxious when the taxpayer is taxed twice, when it should be but once. Otherwise described as "direct duplicate taxation," the two taxes must be imposed on the same subject matter, for the same purpose, by the same taxing authority, within the same jurisdiction, during the same taxing period; and they must be of the same kind or character. (COMMISSIONER OF INTERNAL REVENUE v. SOLIDBANK CORPORATION G.R. No. 148191 November 25, 2003)

b) Broad sense Subjecting interest income to a 20% FWT and including it in the computation of the 5% GRT is clearly not double taxation: First, the taxes herein are imposed on two different subject matters; Second, although both taxes are national in scope because they are imposed by the same taxing authority -- the national government under the Tax Code -- and operate within the same Philippine jurisdiction for the same purpose of raising revenues, the taxing periods they affect are different; Third, these two taxes are of different kinds or characters. (CIR v SOLIDBANK CORPORATION G.R. No. 148191 November 25, 2003)

c) Constitutionality of double taxation Regulation and taxation are two different things, the first being an exercise of police power, whereas the latter involves the exercise of the power of taxation. While R.A. 2264 provides that no city may impose taxes on forest products and although lumber is a forest product, the tax in question is imposed not on the lumber but upon its sale; thus, there is no double taxation and even if there was, it is not prohibited. (SERAFICA v. CITY TREASURER OF ORMOC, G.R. No. L- 24813, April 28, 1968) Both a license fee and a tax may be imposed on the same business or occupation, or for selling the same article. This is not being in violation of the rule against double taxation. (COMPANIA GENERAL DE TABACOS DE FILIPINAS v. CITY OF MANILA, 8 SCRA 367)

d) Modes of eliminating double taxation Double taxation usually takes place when a person is resident of a contracting state and derives income from, or owns capital in the other contracting state and both states impose tax on that income or capital. In order to eliminate double taxation, a tax treaty resorts to several methods. First, it sets out the respective rights to tax of the state of source or situs and of the state of residence with regard to certain classes of income or capital. In some cases, an exclusive right to tax is conferred on one of the contracting states; however, for other items of income or capital, both states are given the right to tax, although the amount of tax that may be imposed by the state of source is limited. The second method for the elimination of double taxation applies whenever the state of source is given a full or limited right to tax together with the state of residence. In this case, the treaties make it incumbent upon the state of residence to allow relief in order to avoid double taxation. There are two methods of relief- the exemption method and the credit method. In the exemption method, the income or capital which is taxable in the state of source or situs is exempted in the state of residence, although in some instances it may be taken into account in determining the rate of tax applicable to the taxpayers remaining income or capital. On the other hand, in the credit method, although the income or capital which is taxed in the state of source is still taxable in the state of residence, the tax paid in the former is credited against the tax levied in the latter. The basic difference between the two methods is that in the exemption method, the focus is on the income or capital itself, whereas the credit method focuses upon the tax. (COMMISSIONER OF INTERNAL REVENUE v. S.C. JOHNSON AND SON, INC. G.R. No. 127105 June 25, 1999) In negotiating tax treaties, the underlying rationale for reducing the tax rate is that the Philippines will give up a part of the tax in the expectation that the tax given up for this particular investment is not taxed by the other country. Thus, if the rates of tax are lowered by the state of source, in this case, by the Philippines, there should be a concomitant commitment on the part of the state of residence to grant some form of tax relief, whether this be in the form of a tax credit or exemption. (COMMISSIONER OF INTERNAL REVENUE v. S.C. JOHNSON AND SON, INC. G.R. No. 127105 June 25, 1999) 4. Escape from taxation a) Shifting of tax burden Section 135(a) should be construed as prohibiting the shifting of the burden of the excise tax to the international carriers who buy petroleum products from the local manufacturers. Said international carriers are thus allowed to purchase the petroleum products without the excise tax component which otherwise would have been added to the cost or price fixed by the local manufacturers or distributors/sellers. (COMMISSIONER OF INTERNAL REVENUE v. PILIPINAS SHELL PETROLEUM CORPORATION, G.R. No. 188497, February 19, 2014)

(i) Ways of shifting the tax burden It may indeed be that the economic burden of the tax finally falls on the purchaser; when it does the tax becomes a part of the price which the purchaser must pay. It does not matter that an additional amount is billed as tax to the purchaser. The method of listing the price and the tax separately and defining taxable gross receipts as the amount received less the amount of the tax added, merely avoids payment by the seller of a tax on the amount of the tax. (PHILIPPINE ACETYLENE CO., INC. v. COMMISSIONER OF INTERNAL REVENUE, G.R. No. L- 19707, August 17, 1967) (ii) Taxes that can be shifted(ii) Meaning of impact and incidence of taxation In indirect taxation, a distinction is made between the liability for the tax and burden of the tax: The seller who is liable for the VAT may shift or pass on the amount of VAT it paid on goods, properties or services to the buyer. In such a case, what is transferred is not the seller's liability but merely the burden of the VAT. (RENATO V. DIAZ and AURORA MA. F. TIMBOL v. THE SECRETARY OF FINANCE, G.R. No. 193007, July 19, 2011) b) Tax avoidance Tax avoidance is the tax saving device within the means sanctioned by law. This method should be used by the taxpayer in good faith and at arms length. (COMMISSIONER OF INTERNAL REVENUE v. THE ESTATE OF BENIGNO P. TODA, JR. G.R. No. 147188 September 14, 2004) c) Tax evasion Tax evasion, on the other hand, is a scheme used outside of those lawful means and when availed of, it usually subjects the taxpayer to further or additional civil or criminal liabilities. (COMMISSIONER OF INTERNAL REVENUE v. THE ESTATE OF BENIGNO P. TODA, JR. G.R. No. 147188 September 14, 2004) Tax evasion connotes the integration of three factors: (1) the end to be achieved, i.e., the payment of less than that known by the taxpayer to be legally due, or the non-payment of tax when it is shown that a tax is due; (2) an accompanying state of mind which is described as being "evil," in "bad faith," "willfull," or "deliberate and not accidental"; and (3) a course of action or failure of action which is unlawful. (COMMISSIONER OF INTERNAL REVENUE v. THE ESTATE OF BENIGNO P. TODA, JR. G.R. No. 147188 September 14, 2004) It is obvious that the objective of the sale to Altonaga was to reduce the amount of tax to be paid especially that the transfer from him to RMI would then subject the income to only 5% individual capital gains tax, and not the 35% corporate income tax. Altonagas sole purpose of acquiring and transferring title of the subject properties on the same day was to create a tax shelter. (COMMISSIONER OF INTERNAL REVENUE v. THE ESTATE OF BENIGNO P. TODA, JR. G.R. No. 147188 September 14, 2004)5. Exemption from taxation a) Meaning of exemption from taxation It is the legislature, unless limited by a provision of the state constitution, that has full power to exempt any person or corporation or class of property from taxation, its power to exempt being as broad as its power to tax. Other than Congress, the Constitution may itself provide for specific tax exemptions, or local governments may pass ordinances on exemption only from local taxes. (JOHN HAY PEOPLES ALTERNATIVE COALITION, et al. v. VICTOR LIM, et al., G. R. No. 119775, October 24, 2003) Greenfield vs Meer 77 Phil 394 Phil Petroleum Corp vs Pililla, 198 SCRA 82 (1991) b) Nature of tax exemption Taxation is the rule and exemption is the exception. (FELS ENERGY, INC. v. PROVINCE OF BATANGAS, 516 SCRA 186 (2007)) Since the power to tax includes the power to exempt thereof which is essentially a legislative prerogative, it follows that a municipal mayor who is an executive officer may not unilaterally withdraw such an expression of a policy thru the enactment of a tax. (PHILIPPINE PETROLEUM CORPORATION v. MUNICIPALITY OF PILILLA, G.R. No. 90776, June 3, 1991) A tax exemption being enjoyed by the buyer cannot be the basis of a claim for tax exemption by the manufacturer or seller of the goods for any tax due to it as the manufacturer or seller. The excise tax imposed on petroleum products under Section 148 is the direct liability of the manufacturer who cannot thus invoke the excise tax exemption granted to its buyers who are international carriers; nevertheless, the manufacturer, as the statutory taxpayer who is directly liable to pay the excise tax on its petroleum products, is entitled to a refund or credit of the excise taxes it paid for petroleum products sold to international carriers(COMMISSIONER OF INTERNAL REVENUE v. PILIPINAS SHELL PETROLEUM CORPORATION, G.R. No. 188497, February 19, 2014) Manila Electric Company vs Vera 67 SCRA 351 Commissioner vs Guerrero, 21 SCRA 180 c) Kinds of tax exemption (i) Express Sec. 27 D (4), NIRC (ii) Implied It bears repeating that the law looks with disfavor on tax exemptions and he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted. (WESTERN MINOLCO CORPORATION v. COMMISSIONER OF INTERNAL REVENUE, G.R. No. L-61632, August 16, 1983) (iii) Contractual Nevertheless, since taxation is the rule and exemption therefrom the exception, the exemption may thus be withdrawn at the pleasure of the taxing authority. The only exception to this rule is where the exemption was granted to private parties based on material consideration of a mutual nature, which then becomes contractual and is thus covered by the non-impairment clause of the Constitution. (MCIAA v. Marcos, G.R. No. 120082 September 11, 1996)Cagayan Electronic Co. vs Commissioner 138 SCRA 629 Manila Electric Company vs Prov of Laguna 306 SCRA 750 (1999)d) Rationale/grounds for exemption In recent years, the increasing social challenges of the times expanded the scope of state activity, and taxation has become a tool to realize social justice and the equitable distribution of wealth, economic progress and the protection of local industries as well as public welfare and similar objectives. Taxation assumes even greater significance with the ratification of the 1987 Constitution. (BATANGAS POWER CORPORATION v. BATANGAS CITY and NATIONAL POWER CORPORATION, G.R. No. 152675, April 28, 2004) The PPI says that the discriminatory treatment of the press is highlighted by the fact that transactions, which are profit oriented, continue to enjoy exemption under R.A. No. 7716 but an enumeration of some of these transactions will suffice to show that by and large this is not so and that the exemptions are granted for a purpose. As the Solicitor General says, such exemptions are granted, in some cases, to encourage agricultural production and, in other cases, for the personal benefit of the end-user rather than for profit. (ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, G.R. No. 115455, October 30, 1995)

e) Revocation of tax exemption Since the law granted the press a privilege, the law could take back the privilege anytime without offense to the Constitution. The reason is simple: by granting exemptions, the State does not forever waive the exercise of its sovereign prerogative; indeed, in withdrawing the exemption, the law merely subjects the press to the same tax burden to which other businesses have long ago been subject. (ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, G.R. No. 115455, October 30, 1995) The rule is that a special and local statute applicable to a particular case is not repealed by a later statute which is general in its terms, provisions and application even if the terms of the general act are broad enough to include the cases in the special law unless there is manifest intent to repeal or alter the special law. (THE PROVINCE OF MISAMIS ORIENTAL, represented by its PROVINCIAL TREASURER v. CAGAYAN ELECTRIC POWER AND LIGHT COMPANY, INC., G.R. No. L-45355, January 12, 1990) This Court recognized the removal of the blanket exclusion of government instrumentalities from local taxation as one of the most significant provisions of the 1991 LGC. Specifically, we stressed that Section 193 of the LGC, an express and general repeal of all statutes granting exemptions from local taxes, withdrew the sweeping tax privileges previously enjoyed by the NPC under its Charter. (BATANGAS POWER CORPORATION v. BATANGAS CITY and NATIONAL POWER CORPORATION, G.R. No. 152675, April 28, 2004) 6. Compensation and set-off 7. Compromise 8. Tax amnesty a) Definition b) Distinguished from tax exemption 9. Construction and interpretation of: a) Tax laws (i) General rule (ii) Exception b) Tax exemption and exclusion (i) General rule But since taxes are what we pay for civilized society, or are the lifeblood of the nation, the law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed in strictissimi juris against the taxpayers and liberally in favor of the taxing authority. (MCIAA v. Marcos, G.R. No. 120082 September 11, 1996) Entrenched in our jurisprudence is the principle that tax refunds are in the nature of tax exemptions which are construed in strictissimi juris against the taxpayer and liberally in favor of the government. As tax refunds involve a return of revenue from the government, the claimant must show indubitably the specific provision of law from which her right arises; it cannot be allowed to exist upon a mere vague implication or inference nor can it be extended beyond the ordinary and reasonable intendment of the language actually used by the legislature in granting the refund. (COMMISSIONER OF INTERNAL REVENUE v. ROSEMARIE ACOSTA G.R. No. 154068 August 3, 2007) Well-settled in this jurisdiction is the fact that actions for tax refund, as in this case, are in the nature of a claim for exemption and the law is construed in strictissimi juris against the taxpayer. The pieces of evidence presented entitling a taxpayer to an exemption are also strictissimi scrutinized and must be duly proven. (KEPCO PHILIPPINES CORPORATION v. COMMISSIONER OF INTERNAL REVENUE G.R. No. 179961 January 31, 2011) The legislative intent, as shown by the discussions in the Bicameral Conference Meeting, is to require PAGCOR to pay corporate income tax; hence, the omission or removal of PAGCOR from exemption from the payment of corporate income tax. It is a basic precept of statutory construction that the express mention of one person, thing, act, or consequence excludes all others as expressed in the familiar maxim expressio unius est exclusio alterius. (PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR) v. THE BUREAU OF INTERNAL REVENUE G.R. No. 172087 March 15, 2011) It is a basic precept of statutory construction that the express mention of one person, thing, act, or consequence excludes all others as expressed in the familiar maxim expressio unius est exclusio alterius. Not being a local water district, a cooperative registered under R.A. No. 6938, or a non-stock and non-profit hospital or educational institution, petitioner clearly does not belong to the exception and it is therefore incumbent upon it to point to some provisions of the LGC that expressly grant its exemption from local taxes. (NATIONAL POWER CORPORATION v. CITY OF CABANATUAN G.R. No. 149110 April 9, 2003) Definitely, the taxability of a party cannot be blandly glossed over on the basis of a supposed "broad, pragmatic analysis" alone without substantial supportive evidence, lest governmental operations suffer due to diminution of much needed funds. While international comity is invoked in this case on the nebulous representation that the funds involved in the loans are those of a foreign government, scrupulous care must be taken to avoid opening the floodgates to the violation of our tax laws. (COMMISSIONER OF INTERNAL REVENUE v. MITSUBISHI METAL CORPORATION G.R. No. L-54908 January 22, 1990) The claimed statutory exemption of the John Hay SEZ from taxation should be manifest and unmistakable from the language of the law on which it is based; it must be expressly granted in a statute stated in a language too clear to be mistaken. If it were the intent of the legislature to grant to the John Hay SEZ the same tax exemption and incentives given to the Subic SEZ, it would have so expressly provided in the R.A. No. 7227. (JOHN HAY PEOPLES ALTERNATIVE COALITION, et al. v. VICTOR LIM, et al., G. R. No. 119775, October 24, 2003) The Court in PLDT v. City of Davao, held that in approving Section 23 of RA No. 7925, Congress did not intend it to operate as a blanket tax exemption to all telecommunications entities. The Court also clarified the meaning of the word "exemption" in Section 23 of RA 7925: that the word "exemption" as used in the statute refers or pertains merely to an exemption from regulatory or reporting requirements of the Department of Transportation and Communication or the National Transmission Corporation and not to an exemption from the grantees tax liability. (SMART COMMUNICATIONS, INC. v. THE CITY OF DAVAO, G.R. No. 155491, July 21, 2009)

In Philippine Long Distance Telephone Company (PLDT) v. Province of Laguna, the issue that the Court had to resolve was whether PLDT was liable to pay franchise tax to the Province of Laguna in view of the "in lieu of all taxes" clause in its franchise and Section 23 of RA 7925. Applying the rule of strict construction of laws granting tax exemptions and the rule that doubts are resolved in favor of municipal corporations in interpreting statutory provisions on municipal taxing powers, the Court held that Section 23 of RA 7925 could not be considered as having amended petitioner's franchise so as to entitle it to exemption from the imposition of local franchise taxes. (SMART COMMUNICATIONS, INC. v.THE CITY OF DAVAO, G.R. No. 155491, July 21, 2009) The "in lieu of all taxes" clause in a legislative franchise should categorically state that the exemption applies to both local and national taxes; otherwise, the exemption claimed should be strictly construed against the taxpayer and liberally in favor of the taxing authority. (SMART COMMUNICATIONS, INC. v.THE CITY OF DAVAO, G.R. No. 155491, July 21, 2009) PLDTs contention that the in-lieu-of-all-taxes clause does not refer to tax exemption but to tax exclusion and hence, the strictissimi juris rule does not apply. The Supreme Court explains that these two terms actually mean the same thing, such that the rule that tax exemption should be applied in strictissimi juris against the taxpayer and liberally in favor of the government applies equally to tax exclusions. (PHILIPPINE LONG DISTANCE TELEPHONE COMPANY vs PROVINCE OF LAGUNA G.R. No. 151899, August 16, 2005)

(iii) Exception However, if the grantee of the exemption is a political subdivision or instrumentality, the rigid rule of construction does not apply because the practical effect of the exemption is merely to reduce the amount of money that has to be handled by the government in the course of its operations. (MCIAA v. Marcos, G.R. No. 120082, September 11, 1996) There is parity between tax refund and tax exemption only when the former is based either on a tax exemption statute or a tax refund statute. Obviously, that is not the situation here since Fortune Tobaccos claim for refund is premised on its erroneous payment of the tax, or better still, the governments exaction in the absence of a law. (COMMISSIONER OF INTERNAL REVENUE v. FORTUNE TOBACCO CORPORATION, G.R. Nos. 167274-75, July 21, 2008) A claim for tax refund may be based on statutes granting tax exemption or tax refund and in such case, the rule of strict interpretation against the taxpayer is applicable as the claim for refund partakes of the nature of an exemption, a legislative grace, which cannot be allowed unless granted in the most explicit and categorical language. Tax refunds (or tax credits), on the other hand, are not founded principally on legislative grace but on the legal principle which underlies all quasi-contracts abhorring a persons unjust enrichment at the expense of another. (COMMISSIONER OF INTERNAL REVENUE v. FORTUNE TOBACCO CORPORATION, G.R. Nos. 167274-75, July 21, 2008) As a necessary corollary, when the taxpayers entitlement to a refund stands undisputed, the State should not misuse technicalities and legalisms, however exalted, to keep money not belonging to it. The government is not exempt from the application of solutio indebiti, a basic postulate proscribing one, including the State, from enriching himself or herself at the expense of another. (COMMISSIONER OF INTERNAL REVENUE v. FORTUNE TOBACCO CORPORATION, G.R. Nos. 167274-75, September 11, 2013) c) Tax rules and regulations (i) General rule only While administrative agencies, such as the Bureau of Internal Revenue, may issue regulations to implement statutes, they are without authority to limit the scope of the statute to less than what it provides, or extend or expand the statute beyond its terms, or in any way modify explicit provisions of the law. Hence, in case of discrepancy between the basic law and an interpretative or administrative ruling, the basic law prevails.(FORT BONIFACIO DEVELOPMENT CORPORATION v. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 173425, September 4, 2012) Revenue Memorandum Circulars (RMCs) must not override, supplant, or modify the law, but must remain consistent and in harmony with the law they seek to apply and implement. (COMMISSIONER OF INTERNAL REVENUE v. SM PRIME HOLDINGS, INC. 613 SCRA 774 (2010)) Admittedly the government is not estopped from collecting taxes legally due because of mistakes or errors of its agents. But like other principles of law, this admits of exceptions in the interest of justice and fair play, as where injustice will result to the taxpayer. (COMMISSIONER OF INTERNAL REVENUE v. COURT OF APPEALS, G.R. No. 117982, February 6, 1997) "When a statute is susceptible of the meaning placed upon it by a ruling of the government agency charged with its enforcement and the [l]egislature thereafter [reenacts] the provisions [without] substantial change, such action is to some extent confirmatory that the ruling carries out the legislative purpose." (COMMISSIONER OF INTERNAL REVENUE v. AMERICAN EXPRESS INTERNATIONAL, INC. (PHILIPPINE BRANCH), G.R. No. 152609, June 29, 2005) BIR Ruling No. DA-489-03 is a general interpretative rule because it is a response to a query made, not by a particular taxpayer, but by a government agency tasked with processing tax refunds and credits. Thus, all taxpayers can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi on 6 October 2010, where this Court held that the 120+30 day periods are mandatory and jurisdictional. (TEAM ENERGY CORPORATION (Formerly MIRANT PAGBILAO CORPORATION) v. COMMISSIONER OF INTERNAL REVENUE, G.R. No. 197760, January 13, 2014) d) Penal provisions of tax laws In criminal cases, statutes of limitations are acts of grace, a surrendering by the sovereign of its right to prosecute. They receive strict construction in favor of the Government and limitations in such cases will not be presumed in the absence of clear legislation. (LIM, et al. v. COURT OF APPEALS, G.R. No. 48134-37, October 18, 1990) e) Non-retroactive application to taxpayers Revenue statutes are substantive laws and in no sense must their application be equated with that of remedial laws. As well said in a prior case, revenue laws are not intended to be liberally construed. (COMMISSIONER OF INTERNAL REVENUE v. ROSEMARIE ACOSTA, G.R. No. 154068, August 3, 2007)

(i) Exceptions While it is a settled principle that rulings, circulars, rules and regulations promulgated by the BIR have no retroactive application if to so apply them would be prejudicial to the taxpayers, this rule does not apply: (a) where the taxpayer deliberately misstates or omits material facts from his return or in any document required of him by the Bureau of Internal Revenue; (b) where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or (c) where the taxpayer acted in bad faith. Not being the taxpayer who, in the first instance, sought a ruling from the CIR, however, FDC cannot invoke the foregoing principle on non-retroactivity of BIR rulings. (COMMISSIONER OF INTERNAL REVENUE v. FILINVEST DEVELOPMENT CORPORATION, G.R. No. 163653, July 19, 2011)I. Scope and limitation of taxationLIMITATIONS ON THE TAXING POWERA. INHERENT LIMITATIONS (KEY: SPINE)1. Territoriality or Situs of taxation2. Public purpose of taxes3. International comity4. Non-delegability of the taxing power5. Tax Exemption of the government

1. Inherent limitations a) Public purposeTESTS IN DETERMINING PUBLIC PURPOSEa. Duty Test whether the thing to be furthered by the appropriation of public revenue is something, which is the duty of the State, as a government, to provide.b. Promotion of General Welfare Test whether the proceeds of the tax will directly promote the welfare of the community in equal measure.

Section 2 of P.D. 755, Article III, Section 5 of P.D. 961, and Article III, Section 5 of P.D. 1468 completely ignore the fact that coco-levy funds are public funds raised through taxation. And since taxes could be exacted only for a public purpose, they cannot be declared private properties of individuals although such individuals fall within a distinct group of persons. (PAMBANSANG KOALISYON NG MGA SAMAHANG MAGSASAKA AT MANGGAGAWA SA NIYUGAN v. EXECUTIVE SECRETARY G.R. Nos. 147036-37 April 10, 2012) The Court of course grants that there is no hard-and-fast rule for determining what constitutes public purpose. But the assailed provisions, which removed the coco-levy funds from the general funds of the government and declared them private properties of coconut farmers, do not appear to have a color of social justice for their purpose. (PAMBANSANG KOALISYON NG MGA SAMAHANG MAGSASAKA AT MANGGAGAWA SA NIYUGAN v. EXECUTIVE SECRETARY G.R. Nos. 147036-37 April 10, 2012) It would be a robbery for the State to tax its citizens and use the funds generated for a private purpose. When a tax law is only a mask to exact funds from the public when its true intent is to give undue benefit and advantage to a private enterprise, that law will not satisfy the requirement of "public purpose." (PLANTERS PRODUCTS, INC. v. FERTIPHIL CORPORATION, G.R. No. 166006, March 14, 2008) Jurisprudence states that "public purpose" should be given a broad interpretation. It does not only pertain to those purposes which are traditionally viewed as essentially government functions, such as building roads and delivery of basic services, but also includes those purposes designed to promote social justice. (PLANTERS PRODUCTS, INC. v. FERTIPHIL CORPORATION, G.R. No. 166006, March 14, 2008)

b) Inherently legislative (i) General rule The power to tax is purely legislative, and which the central legislative body cannot delegate either to the executive or judicial department of the government without infringing upon the theory of separation of powers. (Pepsi-Cola Bottling Company of the Phil. V. Mun. of Tanauan, Leyte, 69 SCRA 460) The powers which Congress is prohibited from delegating are those which are strictly, or inherently and exclusively, legislative. Purely legislative power, which can never be delegated, has been described as the authority to make a complete law complete as to the time when it shall take effect and as to whom it shall be applicable and to determine the expediency of its enactment. (ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA and ED VINCENT S. ALBANO v. THE HONORABLE EXECUTIVE SECRETARY G.R. No. 168056 September 1, 2005)(ii) Exceptions(a) Delegation to local governments The power to tax is primarily vested in the Congress; however, in our jurisdiction, it may be exercised by local legislative bodies, no longer merely by virtue of a valid delegation as before, but pursuant to direct authority conferred by Section 5, Article X of the Constitution. (MCIAA v. Marcos, G.R. No. 120082 September 11, 1996) The power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of local government units. It may also be relevant to recall that the original reasons for the withdrawal of tax exemption privileges granted to government-owned and controlled corporations and all other units of government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises. (MCIAA v. Marcos, G.R. No. 120082 September 11, 1996) Taxation assumes even greater significance with the ratification of the 1987 Constitution. Thenceforth, the power to tax is no longer vested exclusively on Congress; local legislative bodies are now given direct authority to levy taxes, fees and other charges pursuant to Article X, section 5 of the 1987 Constitution. (NATIONAL POWER CORPORATION v. CITY OF CABANATUAN G.R. No. 149110 April 9, 2003) Clearly then, while a new slant on the subject of local taxation now prevails in the sense that the former doctrine of local government units delegated power to tax had been effectivelymodified with Article X, Section 5 of the 1987 Constitution now in place, the basic doctrine on local taxation remains essentially the same. For as the Court stressed in Mactan, "the power to tax is [still] primarily vested in the Congress." (QUEZON CITY, et al. v. ABS-CBN BROADCASTING CORPORATION, G.R. No. 162015, March 6, 2006) Section 5, Article X of the Constitution does not change the doctrine that municipal corporations do not possess inherent powers of taxation; what it does is to confer municipal corporations a general power to levy taxes and otherwise create sources of revenue and they no longer have to wait for a statutory grant of these powers and the power of the legislative authority relative to the fiscal powers of local governments has been reduced to the authority to impose limitations on municipal powers. The important legal effect of Section 5 is thus to reverse the principle that doubts are resolved against municipal corporations; henceforth, in interpreting statutory provisions on municipal fiscal powers, doubts will be resolved in favor of municipal corporations. (QUEZON CITY, et al. v. ABS-CBN BROADCASTING CORPORATION, G.R. No. 162015, March 6, 2006)(b) Delegation to the President Assuming that Section 28(2) Article VI did not exist, the enactment of the SMA [Safeguard Measure Act] by Congress would be voided on the ground that it would constitute an undue delegation of the legislative power to tax. The constitutional provision shields such delegation from constitutional infirmity, and should be recognized as an exceptional grant of legislative power to the President, rather than the affirmation of an inherent executive power. (SOUTHERN CROSS CEMENT CORPORATION v. CEMENT MANUFACTURERS ASSOCIATION OF THE PHILIPPINES, G.R. No. 158540, August 3, 2005) When Congress tasks the President or his/her alter egos to impose safeguard measures under the delineated conditions, the President or the alter egos may be properly deemed as agents of Congress to perform an act that inherently belongs as a matter of right to the legislature. It is basic agency law that the agent may not act beyond the specifically delegated powers or disregard the restrictions imposed by the principal. (SOUTHERN CROSS CEMENT CORPORATION v. CEMENT MANUFACTURERS ASSOCIATION OF THE PHILIPPINES, G.R. No. 158540, August 3, 2005) Delegation of legislative powers to the President is permitted in Sections 23 (2) and 28 (2) of Article VI of the Constitution. By virtue of a valid delegation of legislative power, it may also be exercised by the President and administrative boards, as well as the lawmaking bodies of all municipal levels, including the barangay. (Camarines North Electric Cooperative v. Torres, GR No. 127249, February 27, 1998)

(c) Delegation to administrative agencies Clearly, the legislature may delegate to executive officers or bodies the power to determine certain facts or conditions, or the happening of contingencies, on which the operation of a statute is, by its terms, made to depend, but the legislature must prescribe sufficient standards, policies or limitations on their authority. While the power to tax cannot be delegated to executive agencies, details as to the enforcement and administration of an exercise of such power may be left to them, including the power to determine the existence of facts on which its operation depends. (ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA and ED VINCENT S. ALBANO v. THE HONORABLE EXECUTIVE SECRETARY G.R. No. 168056 September 1, 2005) In the present case, in making his recommendation to the President on the existence of either of the two conditions, the Secretary of Finance is not acting as the alter ego of the President or even her subordinate; he is acting as the agent of the legislative department, to determine and declare the event upon which its expressed will is to take effect. Thus, being the agent of Congress and not of the President, the President cannot alter or modify or nullify, or set aside the findings of the Secretary of Finance and to substitute the judgment of the former for that of the latter. (ABAKADA GURO PARTY LIST (Formerly AASJAS) OFFICERS SAMSON S. ALCANTARA and ED VINCENT S. ALBANO v. THE HONORABLE EXECUTIVE SECRETARY G.R. No. 168056 September 1, 2005) c) TerritorialKIND OF TAXSITUS

Personal or Community taxResidence or domicile of the taxpayer

Real property tax-tangible: where it is physically located or permanently kept (Lex rei sitae) -intangible: subject to Sec. 104 of the NIRC and the principle of mobilia sequuntur personam

Business taxPlace of business

Excise or Privilege taxWhere the act is performed or where occupation is pursued

Sales taxWhere the sale is consummated

Transfer taxResidence or citizenship of the taxpayer or location of property

Franchise TaxState which granted the franchise

(i) Situs of taxation

SITUS OF TAXATION OF INTANGIBLE PERSONALPROPERTYGeneral Rule: Domicile of the owner pursuant to the principle of the mobilia sequuntur personam or movables follow the person.

Exceptions:1. When the property has acquired a business situs in another jurisdiction;2. When an express provision of the statute provide for another rule.Illustration: For purposes of estate and donors taxes, the followingintangible properties are deemed with a situs in the Philippines:(1) franchise which must be exercised in the Philippines;(2) shares, obligations or bonds issued by any corporation organized or constituted in the Philippines in accordance with its laws;(3) shares, obligations or bonds by any foreign corporation eighty five percent (85%) of the business of which is located in the Philippines;(4) shares, obligations or bonds issued by any foreign corporation if such shares, obligations or bonds have acquired a business situs in the Philippines; and(5) shares or rights in any partnership, business or industry established in the Philippines. (Sec. 104, 1997 NIRC). (a) Meaning (b) Situs of income tax The important factor therefore which determines the source of income of personal services is not the residence of the payor, or the place where the contract for service is entered into, or the place of payment, but the place where the services were actually rendered. (COMMISSIONER OF INTERNAL REVENUE v. JULIANE BAIER-NICKEL, G.R. No. 153793, August 29, 2006)

(1) From sources within the Philippines

The reinsurance premiums remitted to appellants by virtue of the reinsurance contracts, accordingly, had for their source the undertaking to indemnify Commonwealth Insurance Co. against liability. Said undertaking is the activity that produced the reinsurance premiums, and the same took place in the Philippines. (Alexander Howden & Co., Ltd. v. Collector of Internal Revenue as cited in COMMISSIONER OF INTERNAL REVENUE v. JULIANE BAIER-NICKEL, G.R. No. 153793, August 29, 2006) The "sale of tickets" in the Philippines is the "activity" that produced the income and therefore BOAC should pay income tax in the Philippines because it undertook an income producing activity in the country. The tickets exchanged hands here and payments for fares were also made here in Philippine currency; thus, the situs of the source of payments is the Philippines. (Commissioner of Internal Revenue v. British Overseas Airways Corporation (BOAC) as cited in COMMISSIONER OF INTERNAL REVENUE v. JULIANE BAIER-NICKEL, G.R. No. 153793, August 29, 2006) For the source of income to be considered as coming from the Philippines, it is sufficient that the income is derived from activities within this country regardless of the absence of flight operations within Philippine territory. Indeed, the sale of tickets is the very lifeblood of the airline business, the generation of sales being the paramount objective. (COMMISSIONER OF INTERNAL REVENUE v. JAPAN AIR LINES, INC., G.R. No. 60714, March 6, 1991)(2) From sources without the Philippines (3) Income partly within and partly without the Philippines (c) Situs of property taxes (1) Taxes on real property (2) Taxes on personal property (d) Situs of excise tax Since it partakes of the nature of an excise tax, the situs of taxation is the place where the privilege is exercised, in this case in the City of Iriga, where CASURECO III has its principal office and from where it operates, regardless of the place where its services or products are delivered. (CITY OF IRIGA v. CAMARINES SUR III ELECTRIC COOPERATIVE, INC., G.R. No. 192945, September 5, 2012) (1) Estate tax (2) Donors tax (e) Situs of business tax (1) Sale of real property (2) Sale of personal property It is not the place where the contract was perfected, but the place of delivery which determines the taxable situs of the property sought to be taxed. In the cases of Soriano y Cia. v. Collector of Internal Revenue, 51 O.G. 4548; Vegetable Oil Corporation v. Trinidad, 45 Phil. 822; and Earnshaw Docks and Honolulu Iron Works vs. Collector of Internal Revenue, 54 Phil. 696, it has been ruled that for a sale to be taxed in the Philippines it must be consummated there; thus indicating that the place of consummation (associated with the delivery of the things subject matter of the contract) is the accepted criterion in determining the situs of the contract for purposes of taxation, and not merely the place of the perfection of the contract. (THE MUNICIPALITY OF JOSE PANGANIBAN, PROVINCE OF CAMARINES NORTE, ETC. v. THE SHELL COMPANY OF THE PHILIPPINES, LTD., G.R. No. L-18349, July 30, 1966)

(2) Value-Added Tax (VAT) As a general rule, the VAT system uses the destination principle as a basis for the jurisdictional reach of the tax. Goods and services are taxed only in the country where they are consumed; thus, exports are zero-rated, while imports are taxed. (COMMISSIONER OF INTERNAL REVENUE v.AMERICAN EXPRESS INTERNATIONAL, INC. (PHILIPPINE BRANCH), G.R. No. 152609, June 29, 2005) Consumption is "the use of a thing in a way that thereby exhausts it, and applied to services, the term means the performance or "successful completion of a contractual duty, usually resulting in the performers release from any past or future liability." The services rendered by respondent are performed or successfully completed upon its sending to its foreign client the drafts and bills it has gathered from service establishments here; thus, its services, having been performed in the Philippines, are also consumed in the Philippines. (COMMISSIONER OF INTERNAL REVENUE v.AMERICAN EXPRESS INTERNATIONAL, INC. (PHILIPPINE BRANCH), G.R. No. 152609, June 29, 2005) Unlike goods, services cannot be physically used in or bound for a specific place where their destination is determined but instead, there can only be a "predetermined end of a course" when determining the service "location or position for legal purposes." Respondents facilitation service has no physical existence, yet takes place upon rendition, and therefore upon consumption, in the Philippines. (COMMISSIONER OF INTERNAL REVENUE v.AMERICAN EXPRESS INTERNATIONAL, INC. (PHILIPPINE BRANCH), G.R. No. 152609, June 29, 2005) d) International comityThese principles limit the authority of the government to effectively impose taxes on a sovereign state and its instrumentalities, as well as on its property held and activities undertaken in that capacity. Even where one enters the territory of another, there is an implied understanding that the former does not thereby submit itself to the authority and jurisdiction of the other.

e) Exemption of government entities, agencies, and instrumentalitiesAs a matter of public policy, property of the State and of its municipal subdivisions devoted to government uses and purposes is deemed to be exempt from taxation although no express provision in the law is made therefor.General Rule: The Government is tax exempt.- However, it can also tax itself.

RULES:1. Administrative Agenciesa. Governmental function tax exempt unless when the law expressly provides for tax. (Sec.32 B7)b. Proprietary function taxable unless exempted by law. (Sec.27C) 2. GOCCsGeneral Rule: Income is taxable at the rate imposed upon corporations or associations engaged in a similar business, industry, or activity. Exception: GSIS, SSS, PHIC, PCSOand PAGCOR. (Sec. 27(C), NIRC)

3. Government Educational Institutionsa. Property or real estate tax property actually, directly and exclusively used for educational purposes exempt but income of whatever kind and character from any of their properties, real or personal, regardless of the disposition, is taxable. (Sec.30, last par., NIRC)b. Income received by them as such are exempt from taxes. However, their income from any of their activities conducted for profit regardless of the disposition, is taxable. (Sec. 30,last par., NIRC)

4. Income derived from any public utility or from the exercise of any essential governmental function accruing to the Government of the Philippines or to any political subdivision thereof is not included in gross income and exempt from taxation. (Sec. 32(B)(7)(b), NIRC)

5. Donations in favor of governmental institutions are considered as income on the part of the donee. However, it is not considered as taxable income because it is an exclusion from the computation of gross income. (Sec.32 (B)(3), NIRC)

6. The amount of all bequests,legacies, devises or transfers to or for the use of the Government or any political subdivision for exclusively public purposes is deductible from the gross estate. (Sec.86 (A)(3), NIRC)

7. Gifts made to or for the use of the National Government or any entity created by any of its agencies which is not conducted for profit, or to any political subdivision of the said Government are exempt from donors tax. (Sec. 101(A)(2), NIRC)

8. Local government units are expressly prohibited by the LGC from levying tax upon National Government, its agencies, and instrumentalities, and local government units. [Sec. 133 (o), LGC]

9. Unless otherwise provided in the Local Government Code (LGC), tax exemptions granted to all persons, whether natural or juridical, including GOCC, except local water districts, cooperatives duly registered under RA No. 6938, nonstick and non-profit institutions, are withdrawn upon effectivity of the LGC. (Sec. 193, LGC)

10. Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person shall be exempt from payment of real property tax. (Sec. 234, LGC)

The Court rules that the Authority [PFDA] is not a GOCC but an instrumentality of the national government which is generally exempt from payment of real property tax. However, said exemption does not apply to the portions of the IFPC which the Authority leased to private entities. (Philippine Fisheries Development Authority v. Court of Appeals, G.R. No. 169836, 31 July 2007) As property of public dominion, the Lucena Fishing Port Complex is owned by the Republic of the Philippines and thus exempt from real estate tax. (PHILIPPINE FISHERIES DEVELOPMENT AUTHORITY (PFDA) v. CENTRAL BOARD OF ASSESSMENT APPEALS, G.R. No. 178030, December 15, 2010) 2. Constitutional limitations a) Provisions directly affecting taxation (i) Prohibition against imprisonment for non-payment of poll tax (ii) Uniformity and equality of taxation 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. The taxing power has the authority to make reasonable and natural classifications for purposes of taxation; inequalities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation. (KAPATIRAN NG MGA NAGLILINGKOD SA PAMAHALAAN NG PILIPINAS, INC. v. HON. BIENVENIDO TAN, G.R. No. 81311, June 30, 1988)

(ii) Grant by Congress of authority to the president to impose tariff rates

It is Congress which authorizes the President to impose tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts. Thus, the authority cannot come from the Finance Department, the National Economic Development Authority, or the World Trade Organization, no matter how insistent or persistent these bodies may be. (SOUTHERN CROSS CEMENT CORPORATION v. CEMENT MANUFACTURERS ASSOCIATION OF THE PHILIPPINES, G.R. No. 158540, August 3, 2005) The authorization granted to the President must be embodied in a law. Hence, the justification cannot be supplied simply by inherent executive powers. (SOUTHERN CROSS CEMENT CORPORATION v. CEMENT MANUFACTURERS ASSOCIATION OF THE PHILIPPINES, G.R. No. 158540, August 3, 2005) The authorization to the President can be exercised only within the specified limits set in the law and is further subject to limitations and restrictions which Congress may impose. Consequently, if Congress specifies that the tariff rates should not exceed a given amount, the President cannot impose a tariff rate that exceeds such amount. (SOUTHERN CROSS CEMENT CORPORATION v. CEMENT MANUFACTURERS ASSOCIATION OF THE PHILIPPINES, G.R. No. 158540, August 3, 2005) Assuming there is a conflict between the specific limitation in Section 28 (2), Article VI of the Constitution and the general executive power of control and supervision, the former prevails in the specific instance of safeguard measures such as tariffs and imposts, and would thus serve to qualify the general grant to the President of the power to exercise control and supervision over his/her subalterns. (SOUTHERN CROSS CEMENT CORPORATION v. CEMENT MANUFACTURERS ASSOCIATION OF THE PHILIPPINES, G.R. No. 158540, August 3, 2005) (iv) Prohibition against taxation of religious, charitable entities, and educational entities The word "charitable" is not restricted to relief of the poor or sick. The test whether an enterprise is charitable or not is whether it exists to carry out a purpose recoganized in law as charitable or whether it is maintained for gain, profit, or private advantage.(LUNG CENTER OF THE PHILIPPINES v.QUEZON CITY, G.R. No. 144104, June 29, 2004) Even as we find that the petitioner is a charitable institution, we hold that those portions of its real property that are leased to private entities are not exempt from real property taxes as these are not actually, directly and exclusively used for charitable purposes. On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes. (LUNG CENTER OF THE PHILIPPINES v.QUEZON CITY, G.R. No. 144104, June 29, 2004) To be a charitable institution, however, an organization must meet the substantive test of charity in Lung Center. Charity is essentially a gift to an indefinite number of persons which lessens the burden of government. In other words, charitable institutions provide for free goods and services to the public which would otherwise fall on the shoulders of government. (COMMISSIONER OF INTERNAL REVENUE v. ST. LUKE'S MEDICAL CENTER, INC. G.R. No. 195909 September 26, 2012) In Lung Center, this Court declared: "exclusive" is defined as possessed and enjoyed to the exclusion of others; debarred from participation or enjoyment; and "exclusively" is defined, "in a manner to exclude; as enjoying a privilege exclusively." The words "dominant use" or "principal use" cannot be substituted for the words "used exclusively" without doing violence to the Constitution and the law. Solely is synonymous with exclusively.(COMMISSIONER OF INTERNAL REVENUE v. ST. LUKE'S MEDICAL CENTER, INC. G.R. No. 195909 September 26, 2012)

Services to paying patients are activities conducted for profit. There is a "purpose to make profit over and above the cost" of services. (COMMISSIONER OF INTERNAL REVENUE v. ST. LUKE'S MEDICAL CENTER, INC. G.R. No. 195909 September 26, 2012)

Section 30(E) and (G) of the NIRC requires that an institution be "operated exclusively" for charitable or social welfare purposes to be completely exempt from income tax. An institution under Section 30(E) or (G) does not lose its tax exemption if it earns income from its for-profit activities. Such income from for-profit activities, under the last paragraph of Section 30, is merely subject to income tax, previously at the ordinary corporate rate but now at the preferential 10% rate pursuant to Section 27(B). (COMMISSIONER OF INTERNAL REVENUE v. ST. LUKE'S MEDICAL CENTER, INC. G.R. No. 195909 September 26, 2012) A gift tax is not a property tax, but an excise tax imposed on the transfer of property by way of gift inter vivos, the imposition of which on property used exclusively for religious purposes, does not constitute an impairment of the Constitution. The phrase "exempt from taxation," as employed in the Constitution should not be interpreted to mean exemption from all kinds of taxes. (REV. FR. CASIMIRO LLADOC v. The COMMISSIONER OF INTERNAL REVENUE, G.R. No. L-19201, June 16, 1965)(iv) Prohibition against taxation of non-stock, non-profit institutions An organization may be considered as non-profit if it does not distribute any part of its income to stockholders or members. However, despite its being a tax exempt institution, any income such institution earns from activities conducted for profit is taxable, as expressly provided in the last paragraph of Section 30. (COMMISSIONER OF INTERNAL REVENUE v. ST. LUKE'S MEDICAL CENTER, INC. G.R. No. 195909 September 26, 2012)

(vi) Majority vote of Congress for grant of tax exemption The incentives under R.A. No. 7227 are exclusive only to the Subic SEZ, hence, the extension of the same to the John Hay SEZ finds no support therein. The challenged grant of tax exemption would circumvent the Constitution's imposition that a law granting any tax exemption must have the concurrence of a majority of all the members of Congress. (JOHN HAY PEOPLES ALTERNATIVE COALITION, et al. v. VICTOR LIM, et al., G. R. No. 119775, October 24, 2003) (vii) Prohibition on use of tax levied for special purpose The coco-levy funds, on the other hand, belong to the government and are subject to its administration and disposition. Thus, these funds, including its incomes, interests, proceeds, or profits, as well as all its assets, properties, and shares of stocks procured with such funds must be treated, used, administered, and managed as public funds; the coco-levy funds are evidently special funds. (PAMBANSANG KOALISYON NG MGA SAMAHANG MAGSASAKA AT MANGGAGAWA SA NIYUGAN v. EXECUTIVE SECRETARY G.R. Nos. 147036-37 April 10, 2012) (viii) Presidents veto power on appropriation, revenue, tariff bills An "item" in a revenue bill does not refer to an entire section imposing a particular kind of tax, but rather to the subject of the tax and the tax rate; thus, in the portion of a revenue bill which actually imposes a tax, a section identifies the tax and enumerates the persons liable therefor with the corresponding tax rate. To construe the word "item" as referring to the whole section would tie the President's hand in choosing either to approve the whole section at the expense of also approving a provision therein which he deems unacceptable or veto the entire section at the expense of foregoing the collection of the kind of tax altogether. (COMMISSIONER OF INTERNAL REVENUE v. HON. COURT OF TAX APPEALS, G.R. No. L-47421, May 14, 1990) (ix) Non-impairment of jurisdiction of the Supreme Court (x) Grant of power to the local government units to create its own sources of revenue For a long time, the country's highly centralized government structure has bred a culture of dependence among local government leaders upon the national leadership. The only way to shatter this culture of dependence is to give the LGUs a wider role in the delivery of basic services, and confer them sufficient powers to generate their own sources for the purpose. (NATIONAL POWER CORPORATION v. CITY OF CABANATUAN G.R. No. 149110 April 9, 2003) Republic Act No. 7716, otherwise known as the "Expanded VAT Law," did not remove or abolish the payment of local franchise tax; it merely replaced the national franchise tax that was previously paid by telecommunications franchise holders and in its stead VAT. The imposition of local franchise tax is not inconsistent with the advent of the VAT, which renders functus officio the franchise tax paid to the national government for VAT inures to the benefit of the national government, while a local franchise tax is a revenue of the local government unit. (SMART COMMUNICATIONS, INC. v.THE CITY OF DAVAO, G.R. No. 155491, July 21, 2009) (xi) Flexible tariff clause (xii) Exemption from real property taxes For real property taxes, the incidental generation of income is permissible because the test of exemption is the use of the property and this test requires that the institution use the property in a certain way, i.e. for a charitable purpose. Thus, the Court held that the Lung Center of the Philippines did not lose its charitable character when it used a portion of its lot for commercial purposes since the effect of failing to meet the use requirement is simply to remove from the tax exemption that portion of the property not devoted to charity. (COMMISSIONER OF INTERNAL REVENUE v. ST. LUKE'S MEDICAL CENTER, INC. G.R. No. 195909 September 26, 2012) The Constitution exempts charitable institutions only from real property taxes while the NIRC extends the exemption to income taxes. However, the way Congress crafted Section 30(E) of the NIRC is materially different from Section 28(3), Article VI of the Constitution: Section 30(E) of the NIRC defines the corporation or association that is exempt from income tax while Section 28(3), Article VI of the Constitution does not define a charitable institution, but requires that the institution "actually, directly and exclusively" use the property for a charitable purpose. (COMMISSIONER OF INTERNAL REVENUE v. ST. LUKE'S MEDICAL CENTER, INC. G.R. No. 195909 September 26, 2012) To be exempt from real property taxes, Section 28(3), Article VI of the Constitution requires that a charitable institution use the property "actually, directly and exclusively" for charitable purposes. To be exempt from income taxes, Section 30(E) of the NIRC requires that a charitable institution must be "organized and operated exclusively" for charitable purposes. (COMMISSIONER OF INTERNAL REVENUE v. ST. LUKE'S MEDICAL CENTER, INC. G.R. No. 195909 September 26, 2012)

(xiii) No appropriation or use of public money for religious purposes b) Provisions indirectly affecting taxation (i) Due process (Art. III, Sec. 1, 1987 Constitution)Requisites:a. The interests of the public as distinguished from those of a particular class require the intervention of the State.(Substantive limitation)b. The means employed must be reasonably necessary to the accomplishment of the purpose and not unduly oppressive. (Procedural limitation)The constitutionality of a legislative taxing act questioned on the ground of denial of due process requires the existence of an actual case or controversy. In Sison, Jr. v. Ancheta, et al., we held that the due process clause may properly be invoked to invalidate, in appropriate cases, a revenue measure when it amounts to a confiscation of property. But in the same case, we also explained that we will not strike down a revenue measure as unconstitutional (for being violative of the due process clause) on the mere allegation of arbitrariness by the taxpayer. (Chamber of Real Estate and Builders Association, Inc. v. Romulo, 614 SCRA 605 (2010)) The support for the poor is generally recognized as a public duty and has long been an accepted exercise of police power in the promotion of the common good but, in the instant case, the declarations do not distinguish between wealthy coconut farmers and the impoverished ones. Consequently, such declarations are void since they appropriate public funds for private purpose and, therefore, violate the citizens right to substantive due process. (PAMBANSANG KOALISYON NG MGA SAMAHANG MAGSASAKA AT MANGGAGAWA SA NIYUGAN v. EXECUTIVE SECRETARY G.R. Nos. 147036-37 April 10, 2012) (ii) Equal protection(Art. III, Sec. 1, 1987 Constitution Requisites of a Valid Classification: a. based upon substantial distinctions b. germane to the purposes of the law c. not limited to existing conditions only d. apply equally to all members of the class

The real estate industry is, by itself, a class and can be validly treated differently from other business enterprises. What distinguishes the real estate business from other manufacturing enterprises, for purposes of the imposition of the CWT, is not their production processes but the prices of their goods sold and the number of transactions involved. (Chamber of Real Estate and Builders Association, Inc. v. Romulo, 614 SCRA 605 (2010)) PAGCOR cannot find support in the equal protection clause of the Constitution, as the legislative records of the Bicameral Conference Meeting dated October 27, 1997, of the Committee on Ways and Means, show that PAGCORs exemption from payment of corporate income tax, as provided in Section 27 (c) of R.A. No. 8424, or the National Internal Revenue Code of 1997, was not made pursuant to a valid classification based on substantial distinctions. The legislative records show that the basis of the grant of exemption to PAGCOR from corporate income tax was PAGCORs own request to be exempted. (PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR) v. THE BUREAU OF INTERNAL REVENUE G.R. No. 172087 March 15, 2011)(iii) Religious freedomART. XIV, SEC 4(3)ART. VI, SEC 28(3)

GranteeNon- stock, non profit educational institutionReligious, educational, charitable institutions

Taxes coveredIncome tax Custom Duties Property tax (DECS Order No. 137-187)Property Tax

The constitutional guaranty of the free exercise and enjoyment of religious profession and worship carries with it the right to disseminate religious information. Any restraints of such right can only be justified like other restraints of freedom of expression on the grounds that there is a clear and present danger of any substantive evil which the State has the right to prevent. (AMERICAN BIBLE SOCIETY v. CITY OF MANILA, G.R. No. L-9637, April 30, 1957) It may be true that in the case at bar the price asked for the bibles and other religious pamphlets was in some instances a little bit higher than the actual cost of the same but this cannot mean that appellant was engaged in the business or occupation of selling said "merchandise" for profit. For this reason We believe that the City of Manila Ordinance No. 2529 requiring the payment of license fee cannot be applied to appellant, for in doing so it would impair its free exercise and enjoyment of its religious profession and worship as well as its rights of dissemination of religious beliefs. (AMERICAN BIBLE SOCIETY v. CITY OF MANILA, G.R. No. L-9637, April 30, 1957) With respect to Ordinance No. 3000 which requires the obtention of the Mayor's permit before any person can engage in any of the businesses, trades or occupations enumerated therein, We do not find that it imposes any charge upon the enjoyment of a right granted by the Constitution, nor tax the exercise of religious practices. But as the City of Manila is powerless to license or tax the business of plaintiff Society, We find that Ordinance No. 3000 is also inapplicable to said business, trade or occupation of the plaintiff. (AMERICAN BIBLE SOCIETY v. CITY OF MANILA, G.R. No. L-9637, April 30, 1957) The Philippine Bible Society, Inc. claims that although it sells bibles, the proceeds derived from the sales are used to subsidize the cost of printing copies which are given free to those who cannot afford to pay so that to tax the sales would be to increase the price, while reducing the volume of sale. Granting that to be the case, the resulting burden on the exercise of religious freedom is so incidental as to make it difficult to differentiate it from any other economic imposition that might make the right to disseminate religious doctrines costly. (ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, G.R. No. 115455, October 30, 1995) On the other hand the registration fee of P1,000.00 imposed by Sec. 107 of the NIRC, as amended by Sec. 7 of R.A. No. 7716, although fixed in amount, is really just to pay for the expenses of registration and enforcement of provisions such as those relating to accounting in Sec. 108 of the NIRC. That the PBS distributes free bibles and therefore is not liable to pay the VAT does not excuse it from the payment of this fee because it also sells some copies. (ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, G.R. No. 115455, October 30, 1995) The withdrawal of the exemption did not also violate freedom of religion as regards the activities of PBS on religious articles, as the Free Exercise of Religious clause does not prohibit imposing a generally applicable sale and use tax on the sale of religious materials by a religious organization as held by the US Supreme Court in Jimmy Swaggart Ministries v. Board of Equalization (1990). The VAT registration fee does not constitute censorship of such freedom as held in the American Bible Society case. The fee is a mere administrative fee and not imposed on the exercise of a privilege, much less a constitutional right. But for the purpose of defraying cost of registration which is a requirement and a central feature in the VAT system so as to provide record of tax credits of the taxpayer. (ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, G.R. No. 115455, October 30, 1995)

(iv) Non-impairment of obligations of contractsNo law impairing the obligation of contract shall be passed. (Sec. 10, Art. III, 1987 Constitution) The rule, however, does not apply to public utility franchises or right since they are subject to amendment, alteration or repeal by the Congress when the public interest so requires. (CagayanElectric & Light Co., Inc. v.Commissioner, GR No. 60216,September 25, 1985)

RULES:a. When the exemption is bilaterally agreed upon between the government and the taxpayer it cannot be withdrawn withoutviolating the non-impairment clause.b. When it is unilaterally granted by law, and the same is withdrawn by virtue of another law no violation.c. When the exemption is granted under a franchise it may be withdrawn at any time thus, not a violation of the non-impairment of contracts Contractual tax exemptions, in the real sense of the term and where the non-impairment clause of the Constitution can rightly be invoked, are those agreed to by the taxing authority in contracts, such as those contained in government bonds or debentures, lawfully entered into by them under enabling laws in which the government, acting in its private capacity, sheds its cloak of authority and waives its governmental immunity. Truly, tax exemptions of this kind may not be revoked without impairing the obligations of contracts. but these contractual tax exemptions are not to be confused with tax exemptions granted under franchisesthe latter partakes the nature of a grant which is beyond the purview of the non-impairment clause of the Constitution. (PHILIPPINE AMUSEMENT AND GAMING CORPORATION (PAGCOR) v. THE BUREAU OF INTERNAL REVENUE G.R. No. 172087 March 15, 2011) Even though such taxation may affect particular contracts, as it may increase the debt of one person and lessen the security of another, or may impose additional burdens upon one class and release the burdens of another, still the tax must be paid unless prohibited by the Constitution, nor can it be said that it impairs the obligation of any existing contract in its true legal sense." Indeed not only existing laws but also "the reservation of the essential attributes of sovereignty, is read into contracts as a postulate of the legal order." (ARTURO M. TOLENTINO v. THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, G.R. No. 115455, October 30, 1995)DUE PROCESSEQUAL PROTECTIONUNIFORMITY

Taxpayer may not be deprived of life, liberty or property without due process of law. Notice must, therefore , be given in case of failure to pay taxesTaxpayers shall be treated alike under like circumstances and conditions both in the privileges conferred and liabilities imposed.Taxable articles, or kinds of property of the same class, shall be taxed at the same rate. There should therefore, be no direct double taxation

J. Stages of taxation 1. Levy Levy is an exercise of the power to tax, which is exclusively legislative in nature and character. Clearly, taxes are not levied by the executive branch of government. (NPC v. Albay, 186 SCRA 198 (1990)) 2. Assessment and collection3. Payment 4. RefundK. Definition, nature, and characteristics of taxes Taxes are enforced proportional contributions from persons and property, levied by the State by virtue of its sovereignty for the support of the government and for all its public needs. (PAMBANSANG KOALISYON NG MGA SAMAHANG MAGSASAKA AT MANGGAGAWA SA NIYUGAN v. EXECUTIVE SECRETARY G.R. Nos. 147036-37 April 10, 2012)L. Requisites of a valid taxM. Tax as distinguished from other forms of exactions 1. Tariff 2. Toll A tax is imposed under the taxing power of the government principally for the purpose of raising revenues to fund public expenditures; toll fees, on the other hand, are collected by private tollway operators as reimbursement for the costs and expenses incurred in the construction, maintenance and operation of the tollways. Taxes may be imposed only by the government under its sovereign authority, toll fees may be demanded by either the government or private individuals or entities, as an attribute of ownership. (RENATO V. DIAZ and AURORA MA. F. TIMBOL v. THE SECRETARY OF FINANCE, G.R. No. 193007, July 19, 2011) Fees paid by the public to tollway operators for use of the tollways, are not taxes in any sense. Parenthetically, VAT on tollway operations cannot be deemed a tax on tax due to the nature of VAT as an indirect tax. (RENATO V. DIAZ and AURORA MA. F. TIMBOL v. THE SECRETARY OF FINANCE, G.R. No. 193007, July 19, 2011) 3. License fee To be considered a license fee, the imposition must relate to an occupation or activity that so engages the public interest in health, morals, safety and development as to require regulation for the protection and promotion of such public interest; the imposition must also bear a reasonable relation to the probable expenses of regulation, taking into account not only the costs of direct regulation but also its incidental consequences as well. Accordingly, a charge of a fixed sum which bears no relation at all to the co