PART 1GENERAL PRINCIPLES AND CONCEPT OF TAXATION

MARY JOY P. JUNIO, CPANotre Dame of Midsayap CollegeMidsayap, Cotabato

The Concept of TaxationINHERENT POWERS OF THE

STATEPOLICE EMINENT DOMAIN

TAXATION

The Power to protect citizens and provide for safety and welfare society.

The power to take private property (with just compensation) for public use.

The power to enforce contributions to support the government, and other inherent powers of the state.

PowerCo-extensive with sovereignty to demand

contributions for public purposes to support the government

Process It passes a legislative act through the enactment

of tax laws by the Congress which will be implemented by the Executive branch through the BIR

Means A way of collecting and apportioning the cost of

government among those who are privileged to enjoy its benefits

What is taxation?

Nature of Taxation Power•Inherent power of sovereignty•Essentially a legislative function•For public purpose•Territorial in operation•Tax exemption of government•The strongest among the inherent powers•Subject to constitutional and inherent limitations

Inherent Power of Sovereignty

•Taxation is as old as government itself. Its existence commences with the four elements of a state- people, territory, sovereignty and government.•From the moment a state is born, it automatically possesses the power to collect taxes from its inhabitants.•The government having sovereignty can enforce contributions upon its citizens even without a specific provision in the Constitution authorizing it.

Essentially a Legislative Function

The law-making body of the government and its political subdivisions exercise the power of taxation. The powers to enact laws and ordinances, and to impose and collect taxes are given to the Congress.

PUBLIC Purpose

The tax revenues are for a public purpose if utilized for the benefit of the community in general. An alternative meaning is that tax proceeds should be utilized only to attain the objectives of government.

Public use is no longer confined to the traditional notion of use by the public but held synonymous with public interest, public benefit, public welfare, and public convenience. (Commissioner of Internal Revenue v. Central Luzon Drug Corporation, G.R. No. 159647, April 16, 2005)

Territorial in Operation

As a rule, the power to tax can only be exercised within the territorial jurisdiction of a taxing authority except when there exists a privity of relationship between the taxing State and the object of tax.

Where privity of relationship exists, the state can still exercise its taxing powers over its citizens outside its territory.

Tax Exemption of the Government

The State immunity from taxation is inherent in its power to impose tax.

Tax exemption applies only to government entities through which the government immediately and directly exercises its governmental functions.

The Strongest among the Inherent Powers

Taxation power is the strongest of all inherent powers of the government because, without money, the government can neither survive nor dispense any of its other powers and functions effectively.

Subject to Inherent Limitations

Inherent Limitations•Taxes may be levied only for public purpose•Being inherently legislative, taxation may not be delegated•Tax power is limited to territorial jurisdiction of the State•Taxation is subject to international comity•Government entities are generally exempt

Subject to Constitutional Limitations

Constitutional Limitations•Due process of law•Equal protection of law•Rule of uniformity and equity•President’s power to veto separate items in revenue or tariff bill•No public money shall be appropriated for religious purposes•Majority of all the members of the Congress granting tax exemption•The Congress may not deprive the Supreme Court of its jurisdiction in all cases involving the legality of any tax•No imprisonment for nonpayment of poll tax•Tax collection shall be generally be treated as general funds