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TAXATION: II. TAXES - Coggle Diagram

- - - - B. LICENSE FEES
        
        C. SPECIAL ASSESSMENTS
        
        D. TOLLS
        
        E. PENALTIES
        
        F. TAXES AND CUSTOMS DUTIES
        
        CUSTOMS/DUTIES ARE TYPES OF TAXES
        Customs duties are a type of tax, but their object is limited to goods imported or exported.
        
        PENALTIES ARE DESIGNED TO
        REGULATE CONDUCT
        Any sanction imposed as a punishment for violation of law or acts deemed injurious is a penalty.
        Violation of tax laws may lead to penalties.
        They are designed to regulate conduct and is subject to set off or compensation.
        
        National Development Corporation v. CIR Petitioner was charged with deficiency taxes with regard to transactions it had with Japanese shipping companies it engaged to construct ocean-going vessels for it. The tax was based on the income-bearing obligations of resident companies (which petitioner was).
        The Court ruled that the Japanese shipbuilders were liable for the tax and the NDC should have withheld such taxes before remitting such interest payments.
        The imposition of the tax on NDC was, in effect, a penalty on it for its failure to withhold the taxes from the said Japanese shipbuilders.
        
        TAXES vs TOLLS
        Taxes are levied for the support of government, their amount is regulated by its necessities.
        Tolls are the compensation for the use of another’s property, or of improvements made by him;
        their amount is determined by the cost of the property, or of the improvements, and a consideration of the return which such values or expenditures should yield.
        A tax is a demand of sovereignty; a toll is a demand of proprietorship. [71 AmJur 2d 351]
        
        CITY TREASURERS IMPOSING PARKING FEES ON VEHICLES THAT STOP TO LOAD/UNLOAD PASSENGERS/CARGOES
        The City of Ozamis released Ordinance No. 466 which imposes parking fees when a motor vehicle is stopped on any portion of the existing parking areas for the purpose of loading and unload passengers or cargoes.
        Thus, the City Treasurer collected parking fees from all the transportation buses for passengers and cargoes of operator Lumapas.
        The latter paid under protest and filed a complaint for recovery of parking fees on the ground that the ordinance is null and void for being in the nature of toll fees, in violation of Section 59(b) of RA 4136 (Land Transportation and Traffic Code), there being no prior approval by President of the Philippines upon recommendation of Secretary of Public Works.
        
        FEES FOR LOADING/UNLOADING ARE DEEMED PARKING FEES
        The Court held that the fees were not exacted for mere passage thru the street but for stopping in the designated parking areas to load/unload passengers or cargoes.
        Thus, it is a parking fee, which the Municipal Board of Ozamis City was expressly granted authority by its Charter to regulate for public welfare and decongestion of traffic.
        
        So ang SLEX, property siya ng government, and the latter is only demanding fees (tolls) for the use of its property?
        Well, firstly, the concession of SLEX is owned by Malaysiyan Group MTD Berhad
        
        ASSESSMENT DEFINED
        An assessment is confined to local impositions upon property for the payment of the cost of public improvements in its immediate vicinity and levied with reference to special benefits to the property assessed.
        
        SPECIAL ASSESSMENT vs TAX
        The differences between a special assessment and a tax are that
        
        A special assessment can be levied only on LAND;
        
        A special assessment cannot be made a personal liability of the person assessed (at least in most states);
        
        A special assessment is based wholly on BENEFITS; and
        
        A special assessment is exceptional both as to TIME AND LOCALITY.
        
        IMPOSITION ON BOTH REAL & PERSONAL PROPERTY = TAX, EVEN IF PURPOSE IS TO IMPROVE LOCAL STREET HIGHWAY
        The imposition of a charge on all property, real and personal, in a prescribed area, is a tax and not an assessment, although the purpose is to make a local improvement on a street or highway.
        A charge imposed only on property owners benefited is a special assessment rather than a tax notwithstanding the statute calls it a tax.
        [Apostolic Prefect of Mt. Province v. Treasurer of Baguio]
        
        RELIGIOUS INSTITUTIONS ARE NOT EXEMPT FROM SPECIAL ASSESSMENTS
        The City of Baguio passed an ordinance which sought to assess all properties within city limits. The Apostolic Prefect of Mountain Province paid an assessment on its properties under protest, claiming that was exempted from the assessment since it was a religious institution. The Court clarified the difference between a special assessment and a tax, and held that the Apostolic Prefect cannot claim an exemption since what Baguio passed was a special assessment.
        
        But aren't license taxes on registration confined to vehicle owners who wish to register their vehicle?
        Taxes can be confined to a certain class of people, such as to those who only seek registration or those who buy products (VAT).
        
        MANNER OF IMPOSITION DETERMINES WHETHER IT IS AN ASSESSMENT
        Apparently, an assessment is more easily spotted based on the imposition, whether it is confined or not. It is not where such funds go and is used for.
        
        LICENSE FEES/LICENSE TAX
        License fees or license tax implies an imposition or exaction on the right to use or dispose of property, to pursue a business, occupation or calling, or to exercise a privilege.
        
        TAXES MAY BE IMPOSED EITHER UNDER
        POLICE POWER OR TAXING POWER
        Such charges may be imposed either under the police power for purposes of regulation OR under the taxing power for purposes of revenue.
        
        REGULATORY FEES ARE IMPOSED UNDER POLICE POWER, ARE NOT TAXES AND NOT SUBJECT TO CONSTITUTIONAL LIMITATIONS
        A regulatory fee imposed under police power is not a tax and is not subject to any of the constitutional limitations which apply to taxing powers as such. [71 AmJur 2d 353]
        
        REGULATORY FEES ARE NOT TAXES;
        REGULATORY FEES ARE FOR ENACTMENT OF SPECIFIC MEASURES
        Unlike a tax, other pecuniary burdens like regulatory fees have not for its object the raising of revenue but looks rather to the enactment of specific measures that govern the relations not only as between individuals but also as between private parties and the political society.
        (Republic v. Philippine Rabbit Bus Lines, Inc., G.R. No. L-26862, [March 30, 1970], 143 PHIL 158-166)
        
        REGISTRATION FEES ARE NOT TAXES; UNDER THE MVA, THEY ARE POLICE POWER
        Clearly the Motor Vehicle Act requires the payment not of a tax but of a registration fee under the police power.
        Hence, the inapplicability of the section relied upon by defendant-appellee under the Back Pay Law for the payment of a liability of a registration fee with Backpay Certificates.
        (Republic v. Philippine Rabbit Bus Lines, Inc., G.R. No. L-26862, [March 30, 1970], 143 PHIL 158-166)
        
        1 more item...
        
        LICENSE TAX vs TAX
        The Former is NOT an exercise of taxing power, but of police power.
        
        LICENSE TAX/FEE IS NOT A TAX, BUT AN EXERCISE OF POLICE POWER
        The term "tax" frequently applies to all kinds of exactions of monies which become public funds.
        It is often loosely used to include levies for revenue as well as levies for regulatory purposes such that license fees are frequently called taxes although license fee is a legal concept distinguishable from tax:
        the former is imposed in the exercise of police power primarily for purposes of regulation, while the latter is imposed under the taxing power primarily for purposes of raising revenues.
        
        PRIMARY PURPOSE vs INCIDENTAL
        Thus, if the generating 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 incidentally revenue is also obtained does not make the imposition a tax.
        
        LICENSE FEE/TAX
        
        MUST RELATE TO REGULATION FOR PROTECTION AND PROMOTION OF PUBLIC INTEREST
        To be considered a license fee, the imposition questioned 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;
        
        MUST HAVE REASONABLE RELATION TO PROBABLE EXPENSES OF REGULATION
        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.
        
        ABSENT A RELATION, THE COST MAY BE A TAX RATHER THAN AN EXERCISE OF
        POLICE POWER
        ...Accordingly, a charge of a fixed sum which bears no relation at all to the cost of inspection and regulation may be held to be a tax rather than an exercise of the police power.
        
        HAS THE PRESUMPTION OF VALIDITY OF A LICENSE TAXING EVER BEEN OVERTURNED?
        Has there been an instance where an ordinance imposed a fee under police power but was proven to have no reasonable relation so as to be classified as tax and, subsequently, proven as unauthorized by law since tax is not inherent in LGUs?
        
        FEES, MOST OF WHICH IS USED FOR THE CONSTRUCTION AND MAINTENANCE OF PUBLIC HIGHWAYS FOR EVERYONE'S USE, ARE CLEARLY TAX
        "From the data submitted in the court below, it appears that the expenditures of the Motor Vehicle Office are but a small portion — about 5 per centum — of the total collections from motor vehicle registration fees.
        
        MARGIN FEE IS NOT A TAX;
        IT IS TO CURB THE EXCESSIVE DEMANDS ON INTERNATIONAL RESERVE
        A margin fee is not a tax but an exaction designed to curb the excessive demands upon our international reserve.
        The margin fee under Republic Act No. 2009 was imposed by the State in the exercise of its police power and not the power of taxation.
        (Esso Standard Eastern, Inc. v. Commissioner of Internal Revenue, G.R. Nos. L-28508-9, [July 7, 1989], 256 PHIL 601-610)
        
        THOUGH ORIGINALLY FOR REGULATION, REGISTRATION BECAME USED FOR A
        PUBLIC PURPOSE
        And as proof that the money collected is not intended for the expenditures of that office, the law itself provides that all *such money shall accrue to the funds for the construction and maintenance of public roads, streets and bridges.
        It is thus obvious that the fees are not collected for regulatory purposes, that is to say, as an incident to the enforcement of regulations governing the operation of motor vehicles on public highways, for their express object is to provide revenue with which the Government is to discharge one of its principal functions — the construction and maintenance of public highways for everybody's use. They are veritable taxes, not merely fees.
        ||| (Philippine Airlines, Inc. v. Edu, G.R. No. L-41383, [August 15, 1988], 247 PHIL 283-296)
        
        EXACTIONS MAY BE BOTH A TAX AND A REGULATION;
        THOUGH THEY MAY SERVE AS AN INSTRUMENT OF REGULATION, THEY ARE REGARDED AS TAXES
        "It is possible for an exaction to be both tax and regulation. License fees are often looked to as a source of revenue as well as a means of regulation. (Sonzinsky v. U.S., 300 U.S. 506)
        This is true, for example, of automobile license fees. In such case, the fees may properly be 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.
        (1955 CCH Fed. Tax Course, Par. 3101, citing Cooley on Taxation (2nd Ed.) 592, 593; Calalang v. Lorenzo, 97 Phil. 212; Lutz v. Araneta, 98 Phil. 198.)
        
        EXACTIONS ARE SOMETIMES CALLED REGULATORY TAXES
        These exactions are sometimes called regulatory taxes.
        (See Secs. 4701, 4711, 4741, 4801, 4811, 4851, and 4881, U.S. Internal Revenue Code of 1954, which classify taxes on tobacco and alcohol as regulatory taxes.)"
        (Umali, Reviewer in Taxation, 1980, pp. 12-13, citing Cooley on Taxation, 2nd Edition, 591-593).
        (Philippine Airlines, Inc. v. Edu, G.R. No. L-41383, [August 15, 1988], 247 PHIL 283-296)
        
        FEES MAY STILL BE REGARDED AS TAXES
        Fees may be properly regarded as taxes even though they also serve as an instrument of regulation.
        (Philippine Airlines, Inc. v. Edu, G.R. No. L-41383, [August 15, 1988], 247 PHIL 283-296)
        
        REGISTRATION OF VEHICLES BECAME A CONVENIENT WAY OF RAISING REVENUES
        It is quite apparent that vehicle registration fees were originally simple exactions intended only for regulatory purposes in the exercise of the State's police powers. Over the years, however, as vehicular traffic exploded in number and motor vehicles became absolute necessities without which modern life as we know it would stand still, Congress found the registration of vehicles a very convenient way of raising much needed revenues. Without changing the earlier denomination of registration payments as "fees," their nature has become that of "taxes."||| (Philippine Airlines, Inc. v. Edu, G.R. No. L-41383, [August 15, 1988], 247 PHIL 283-296)
        
        NOWADAYS, MOTOR VEHICLE REGISTRATION FEES ARE TAXES
        we rule that motor vehicle registration fees as at present exacted pursuant to the Land Transportation and Traffic Code are actually taxes intended for additional revenues of government even if one fifth or less of the amount collected is set aside for the operating expenses of the agency administering the program.||| (Philippine Airlines, Inc. v. Edu, G.R. No. L-41383, [August 15, 1988], 247 PHIL 283-296)
      - TAXATION DOES NOT ESTABLISH A
        DEBTOR-CREDITOR RELATIONSHIP
        A tax does not establish the relation of debtor and creditor between the taxpayer and the state,
        
        TAX DO NOT BEAR INTEREST
        it does not bear interest when past due
        
        NOT LIABLE TO SETOFF
        it is not liable to setoff and
        
        TAXES ARE NOT ENFORCEABLE BY PERSONAL ACTION
        it is not enforceable by personal action against the taxpayer...
        
        UNLESS PROVIDED BY STATUTE
        ...absent statutory authority.
        
        NO EXCEPTIONS?
        
        CLAIMS AGAINST THE GOVERNMENT CANNOT OFFSET TAXES
        A taxpayer may not offset taxes due from the claims that he may have against the government.
        Taxes cannot be the subject of compensation because the government and taxpayer are not mutually creditors and debtors of each other, and
        a claim for taxes is not such a debt, demand, contract, or judgment as is allowed to be setoff.
        (Caltex v. COA)
        
        JUST COMPENSATION DUE
        CANNOT OFFSET TAXES
        Francia was the owner of a property in Pasay which was expropriated and then later sold at public action after he failed to pay real estate taxes.
        Francia sought the annulment of the auction, claiming that since the government owed him compensation for the expropriation of his property, the amount should have been set-off his taxes.
        (Francia v. IAC)
        
        ONE CANNOT REFUSE TO PAY TAX JUST BECAUSE GOVERNMENT OWES HIM AN EQUAL OR GREATER AMOUNT
        The Court held that there can be no offsetting of taxes against the claims that the taxpayer may have against the government.
        A person cannot refuse to pay a tax on the ground that the government owes him an amount equal to or greater than the tax being collected.
        
        1 more item...
        
        UNLESS EXPRESSLY PROVIDED BY STATUTE
        unless the statute provides,
        
        EXCEPT: IF GOVERNMENT ACTS IN ITS CORPORATE CAPACITY, DEBTS MAY BE DUE IN THE GOVERNMENT
        Debts are due in the government in its’ corporate capacity while taxes are due to the government in its’ sovereign capacity.
        
        How do we know if the Government is acting in its corporate capacity when it's collecting money?
    - - IF TAXES ARE COLLECTED/USED FOR OBJECTS NOT CONNECTED WITH PUBLIC INTEREST/WELFARE, IT IS PLUNDER
        It ceases to be taxation and becomes plunder when it is prostituted to objects in no way connected with public interest or welfare.
    - - MAY BE DELEGATED
        but it may be delegated to local governments subject to limitations.
        
        PRESUMPTION OF VALIDITY:
        WHETHER ORDINANCES ARE EXERCISED AS TAX POWER or POLICE POWER, THEY ARE PRESUMED REASONABLE
        While it is true that the amount imposed by the questioned ordinances may be considered in determining whether the exaction is really one for revenue or prohibition, instead of one of regulation under the police power, it nevertheless will be presumed to be reasonable.
        
        JUDICIAL INQUIRY:
        REASONABLENESS IS OPEN TO
        JUDICIAL INQUIRY
        Thus: "[A]n ordinance carries with it the presumption of validity. The question of reasonableness though is open to judicial inquiry.
        [Even so,] much should be left thus to the discretion of municipal authorities Courts will go slow in writing off an ordinance as unreasonable unless the amount is so excessive as to be prohibitory, arbitrary, unreasonable, oppressive, or confiscatory.
        
        RELEVANT FACTORS TO REASONABLENESS OF ORDINANCE
        
        MUNICIPAL CONDITIONS AS A WHOLE
        
        NATURE OF BUSINESS MADE SUBJECT TO IMPOSITION
        
        A rule which has gained acceptance is that factors relevant to such an inquiry are the municipal conditions as a whole and the nature of the business made subject to imposition."
        
        Petitioner has not shown that the rate of the gross receipts tax is so unreasonably large and excessive and so grossly disproportionate to the costs of the regulatory service being performed by the respondent as to compel the Court to characterize the imposition as a revenue measure exclusively.
        (Progressive Development Corp. v. Quezon City, G.R. No. L-36081, [April 24, 1989], 254 PHIL 635-647)
        
        ABSENT PROOF OF PARTICULAR MUNICIPAL CONDITIONS, LOCAL GOV'TS HAVE WIDE DISCRETION IN IMPOSING FEES, EVEN IN POLICE POWER MEASURES
        Local governments are allowed wide discretion in determining the rates of imposable license fees even in cases of purely police power measures,
        in the absence of proof as to particular municipal conditions and the nature of the business being taxed as well as other detailed factors relevant to the issue of arbitrariness or unreasonableness of the questioned rates.
        (Progressive Development Corp. v. Quezon City, G.R. No. L-36081, [April 24, 1989], 254 PHIL 635-647)
        
        POWER TO TAX IS NOT INHERENT IN LGUs
        As a general rule, there must be a statutory grant for a local government unit to impose lawfully a gross receipts tax, that unit not having the inherent power of taxation. 21
        
        BUT IF THEY EXERCISE POLICE POWER, THEY MAY IMPOSE FEES THROUGH REGULATORY POWER
        The rule, however, finds no application in the instant case where what is involved is an exercise of, principally, the regulatory power of the respondent City and where that regulatory power is expressly accompanied by the taxing power.
        (Progressive Development Corp. v. Quezon City, G.R. No. L-36081, [April 24, 1989], 254 PHIL 635-647)
        
        IS THE EXPRESS PROVISION A REQUIREMENT? OR HAS THERE BEEN AN INSTANCE WHERE THE LGU WAS ABLE TO TAX BASED ON A NECESSARILY IMPLIED POWER TO TAX?