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SPIT - I. General principles of Taxation, Random notes (Anj), X, Sec. 5 |…

- - - - D. Requisites of a valid tax
        
        The tax must be for a public purpose;
        
        The rule of taxation should be uniform;
        
        The person or property taxed is within the jurisdiction of the taxing authority;
        
        The assessment and collection should be in harmony with the due process clause; and
        
        The tax must not infringe on the inherent and constitutional limitations of the power of taxation.
        
        E. Tax as distinguished from other forms of exactions
        
        F. Classifications of Taxes
        
        G. Doctrines in Taxation
        
        G1. Lifeblood Theory - The underlying basis of taxation is governmental necessity, for without taxation, a government can neither exist nor endure.
        
        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 (1988); See also CIR v. Pineda, G.R. No. L-22734 (1967)].
        
        G2. Construction and interpretation of tax laws, rules and regulations
        
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        Income Tax
        
        Estate Tax
        
        Donor's Tax
        
        Value Added Tax
        
        Percentage Taxes
        
        Excise Taxes
        
        Documentary stamp Tax
        
        Local Taxation -
        
        Real Property Taxation
        
        As to Object -
        
        Personal, Poll or Capitation - Imposed on persons residing within a specified territory, regardless of status.
        
        Property Tax - Imposed on property, in prportion to its value or some other method of apportionment.
        
        Privilege/Excise Tax - Imposed upon the performance of an act / Enjoyment of privilege / Engagement in occupation, profession or business.
        
        Obligation to pay excise tax is based on the voluntary action of the person taxed in performing the act or engaging in the activity which is subject to the excise. The term “excise tax” is synonymous with “privilege tax” and the two are often used interchangeably (e.g., income tax, value added tax, estate tax, donor’s tax).
        
        As to Who Bears Burden -
        
        Direct Tax - taxes which are demanded from persons who also shoulder them; taxes for which the taxpayer is directly or primarily liable, or which he cannot shift to another. The liability for the payment of the tax (incidence) and the burden (impact) of the tax falls on the same person. (e.g., income tax, estate tax, donor’s tax, community tax)
        
        Indirect Tax -
        
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        Sir: Only income, donors and estate are direct taxes. All others are indirect.
        
        Because burden of tax may be shifted to someone else as part of purchase price.
        
        C1. Debts (Caltex v. COA) - A tax does not establish a debtor-creditor relationship between the taxpayer and the state, nor does it bear interest unless the statute explicitly provides. Similarly, cannot be setoff, and is not enforceable by personal action against the taxpayer absent statutory authority.
        
        C2. License Fees (Ferrer Jr v. Bautista) - License fees may be imposed via police power (regulatory measure) or taxation (revenue measure) but, are generally an imposition on the right to use/dispose property, or to exercise a privilege, or to pursue a business/occupation/calling.
        
        Minimal Amount.
        
        C3. Special Assessments/Levies (Apostolic Prefect of Mt. Province v. Treasurer of Baguio) - Taxes are general, assessments are specific. Assessments are 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.
        
        C4. Tolls - Taxes are levied for the support of the government, the amount of which is regulated by its necessities. Tolls are compensation for the use of property/improvements of another, determined by the cost of the property as consideration of the return which such values or expenditures should yield. Taxes are a demand of sovereignty, a toll is a demand of proprietorship.
        
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        Enumeration - A special assessment:
        
        Can be levied only on land;
        
        Cannot (at least in most states) be made a personal liability of the person assessed;
        
        Is based wholly on benefits; and
        
        Is exceptional both as to time and locality.
        
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        Debts are due to the Government in its corporate capacity, while taxes are due to the Government in its sovereign capacity.
        
        Set off of Debts (Domingo v. Garlitos) - : If the claim against the government has been recognized and acknowledged, and an amount has already been appropriated by a corresponding law.
        
        Alternative -
        
        Uniform - Must apply to all persons belonging to the same class;
        
        Equitable - State recognizes not everyone has the same economic resources taxes cannot be applied in same manner to everyone
        
        Progressive - Rate increases as the tax base increases, with social justice as basis Taxation as an instrument for a more equitable . distribution of wealth
        
        Limitations -
        
        Only for a public purpose
        
        Even if immediate beneficiaries are private individuals
        
        Tax should not be confiscatory
        
        Legislature has discretion to determine nature, object, extent, coverage and situs of taxation
        
        But where tax measure becomes unconscionable and unjust as to amount to confiscation of property, courts will not hesitate to strike it down
        
        Uniform and equitable [Sec. 28(1), Art. VI, Constitution]
        
        Geographical uniformity: same force and effect in every place where subject of it is found
        
        Rule does not prohibit valid classification for purposes of taxation
        
        Stages or Aspects of Taxation -
        
        Legislative Act: Levy or Imposition - Passage of tax laws, which determine the following:
        
        i. Those to be taxed (person, property or rights);
        
        ii. How much is to be collected (the rate and the base of tax); and
        
        iii. How taxes are to be implemented (the manner of imposing and collecting tax).
        
        iv - granting of exemptions, condonation or amnesties claim for refund is filed with the CIR.
        
        Executive Act - Assessment and Collection - Administration and implementation of tax laws by the executive.
        
        This is enforcement of a tax law passed by Congress. Executive function, through its administrative agencies, such as the BIR and the Bureau of Customs handle this.
        
        Taxpayer's Act;l Payment - Compliance by the taxpayer. This covers options, schemes or
        remedies as may be legally open or available
        to the taxpayer such as amensty, comrpomise or abatement.
        
        Taxpayer; Refund - Governed by NIRC 229, whereby a
        
        Sir: Bar Q. Enumerate the aspects and stages of taxation and explain them.
        
        Nature of Collection - A compulsory process, iresspective of the consent of the subject upon whom the tax is enforced.
        
        Note on remedies before and after payment.
        
        Court Supervision -
        
        Purpose - Only to determine if the tax was for a public purpose. No other inquiry may be made as to the purpose of the tax.
        
        Subjects - Subject to the equal protection clause
        
        Amount or Rate of Tax - Modern view: If power to tax is solely for revenue raising, cannot be allowed to confiscate or destroy. Otherwise, may be attacked on the basis of grave abuse of discretion. (Cruz, Const. Law)
      - C. Scope and Nature of Taxation (CONST. Art. VI, Sec. 28)
        
        Rule of Taxation - Uniform and equitable. Congress shall also evolve a progressive system of taxation.
        
        President's Power to Tax - Congress may, by law, authorize the President to fix, within specified limits and subject to limitations and restrictions the following:
        
        Tariff Rates
        
        Import and Export Quotas
        
        Tonnage and Wharfage dues
        
        Other duties or imposts within the framework of the national development program of the government.
        
        Tax Exemptions - The following are exempt from taxation:
        
        Charitable Institutions
        
        Churches
        
        Clergy house (parsonages)
        
        Convents appurtenant thereto
        
        Cemeteries (non-profit)
        
        Mosques
        
        Lands, buildings, and improvements - ACTUALLY, DIRECTLY, EXCLUSIVELY used for religious/charitable/educational purposes
        
        Tax Laws - No law granting tax exemptions shall be passed without the concurrence of a majority of ALL members of Congress.
        
        Scope of Power - unlimited, plenary and supreme. Inherent in sovereignty as an incident or attribute thereof. (CUPS)
        
        Limitation (Reyes v. Almanzor) - Restricted by the due process and equal protection clauses. Thus, while the determination of tax by the legislature is not interfered with unless there is a clear violation of some constitutional inhibition. (Sarasola v. Trinidad)
        
        Power of LGUS (Art. X, Sec. 5) - Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments.
        
        Inherent Power (Amjur) - Can be imposed regardless of law. Constitutional provisions are not grants of the power, but to limit the exercise of the power of taxation.
        
        Characteristics of taxing power (CUPS)
        
        Comprehensive - Covers persons, businesses, activities, professions, rights, and privileges
        
        Unlimited - the power to impose taxes is one so unlimited in force and so searching in extent that courts scarcely venture to declare that it is subject to any restrictions except such as rest in the discretion of the authority which exercises it (Tio vs Videogram Regulatory Board) tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed
        
        Plenary / complete - Taxes, being the lifeblood of the government, should be collected without unnecessary hindrance, every precaution must be taken not to unduly suppress it
        BIR may avail of certain remedies to ensure the collection of taxes
        
        Supreme - supreme insofar as the selection of the subject of taxation is concerned, but it does not mean that it is superior to the other inherent powers of the State in relation to other matters.
        
        Re: Power To Destroy (Sison v. Ancheta) - SC has the power to limit the plenary power of taxation.
        
        Inherent Limitations
        
        Requirement of Public Purpose -
        
        Whether the object to be furthered by the appropriation of taxes is something which is the duty of the Government to provide;
        
        Whether the proceeds of the tax will directly promote the welfare of the community in equal measure.
        
        Non-Delegability -
        
        GR - Power to tax is plenary, may not be delegated.
        
        XCPNS -
        
        i. Delegation to LGUs – Constitutional delegation
        
        ii. Delegation to the President – Flexible tariff clause
        
        iii. Delegation to administrative agencies
        
        Situs of taxation -
        
        Exemption of Government from taxation
        
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        Inherent Constitutional Limitations
        
        Territoriality Pinrciple and Situs fo Taxation
        
        Due Process Clause
        
        Equal Protection
        
        Freedom of Speech
        
        Non-Infringement of Religious Freedom and Worship
        
        Non-impairment of contracts (Sec. 10, Art. III, Constitution).
        
        Non-imprisonment for non-payment of poll tax (Sec. 20, Art. III, Constitution).
        
        Rule requiring that appropriations, revenue and tariff bills shall originate exclusively from the House of Representatives (Sec. 24, Art. VI, Constitution).
        
        Uniformity, equitability and progressivity of taxation (Sec. 28(1), Art. VI, Constitution).
        
        Limitations on the congressional power to delegate to the President the authority to fix tariff rates, import and export quotas, etc. (Sec. 28(2) Art. VI, Constitution).
        
        Tax exemption of properties actually, directly and exclusively used for religious, charitable and educational purposes (Sec. 28(3), Art. VI, Constitution)
        
        Voting requirement in connection with the legislative grant of tax exemption (Sec. 28(4), Art. VI, Constitution). “No law granting any tax exemption shall be passed without the concurrence of MAJORITY of all the members of Congress”..
        
        Non-impairment of the jurisdiction of the Supreme Court in tax cases (Secs. 2 and 5, Art. VIII, Constitution); and
        
        Exemption from taxes of the revenues and assets of non-stock non- profit educational institutions, including grants, endowments, donations and contributions (Sec. 4(3) and (4), Art. XIV, Constitution).
        
        Other Constitutional Provisions on Taxation -
        
        One-Subject - One Title -
        
        Veto Power/Tariff - Sec. 27(2), Art. VI – “ The President shall haver the power to veto any particular item or items in an appropriation, revenue or tariff bill but the veto shall not affect the item or items to which he does not object”.
        
        Appropriation prior to Payment - Sec. 29(1), Art. VI – “No money shall be paid out of the Treasury except in pursuance of an appropriation made by law”.
        
        Religion Clause - Sec. 29(2), Art. VI – “No public money or property shall be appropriated, applied, paid or employed, directly or indirectly for the use, benefit, or support of any sect, church, denomination, sectarian institution, or system of religion or of any priest, preacher, minister, or other religious teacher or dignitary as such except when such priest, preacher, minister or dignitary is assigned to the armed forces or to any penal institution, or government orphanage or leprosarium”.
        
        Taxes Levied for a Special Purpose – Sec. 29(3), Art. VI – “ All money collected or any tax levied for special purposes shall be treated as special fund and paid out for such purpose only. If the purpose for which a special fund was created has been fulfilled or abandoned, the balance if any, shall be transferred to the general funds of the Government”.
        
        Allotments to Local Governments – Sec. 6 Art. X of the Constitution – “Local government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them”. See Section 150 of the Local Government Code (RA No. 7160) and Section 283, NIRC about disposition of national internal revenue taxes collected under Sec. 106, 108 and 116 of the Tax Code.
    - - Taxation - exercised for the purpose of raising revenue and is subject to certain designated constitutional limitations.
        
        Police Power - is exercised for the promotion of the public welfare by means of the regulation of dangerous or potentially dangerous businesses, occupations, or activities and is not subject to the constitutional restrictions applicable to the taxing power
        
        Eminent Domain - Taking of property for just compensation. The requirements of just compensation for private property taken for a public use applies only to eminent domain and not to taxation. There must be a specific and direct benefit i.e., the compensation 71 AmJur 2d 39
        
        If the primary purpose is to raise revenue it represents an exercise of taxing power, while if the primary purpose is the regulation of some particular occupation, calling, or activity, it is an exercise of police power even if it incidentally produces revenue.
        
        Police Power via Taxation (Lutz v. Araneta) - Taxation may be made in the implement of the State's police power, such as when it involves an important industry. In such instances,
        
        Local Governments - Important to distinguish if police-power or tax measure. If police power, subject to tax limitations. If police power, subject to public welfare.
  - - - D. Underlying Theory and Basis; Necessity Theory; Benefit-Received Principle
        
        E. Purpose of Taxation
        
        E1. General/Fiscal/Revenue - Here, the government renders no return of special benefit to any property, but only secures to the citizen the general benefit which results from protection this person and property and the promotion of various schemes which have for their object, the welfare of all.
        
        Ex. Motor Vehicle Registration Fees - May be classified as tax, if purpose was to raise revenue. (PAL v. EDU)
        
        E2. Non-revenue/Special or Regulatory - Levied for a special purpose to achieve some social or economic objective. For example, SIN taxes. (Protective Tariffs or Customs duties)
        
        Specific Purpose - Funds raised from tax may be earmarked for a specific purposes. Example, SIN-Tax for healthcare.
        
        Other Reasons -
        
        Reduction of Social Inequity - – accomplished through the progressive system of taxation
        
        Ex. Imposition of personal income taxes i.e., the graduated rate is progressive.
        
        Sir notes that TRAIN Law removes this in transfer taxes by reducing it to 6%
        
        Encourage Economic Growth - grant of tax exemptions and tax relief
        
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        This is how taxation is used to implement police power.
        
        If main purpose of exaction is not to raise revenue, you cannot call it a tax.
        
        Generally, promotion of the general welfare.
        
        F. Principles of a Sound Tax System (Chavez v. Ongpin) - Based on three principles.
        
        FISCAL Adequacy - requires that sources of revenue must be adequate to meet government expenditures and their variations.
        
        ADMINISTRATIVE Feasibility - the tax system should be capable of being properly and efficiently administered by the government and enforced with the least inconvenience to the taxpayer.
        
        THEORETICAL Justice - Otherwise known as the ability to pay principle. The tax system should be fair to the average taxpayer and based upon the ability to pay.
        
        Non-Compliance - Generally still constitutional. Except, theoretical justice renders taxation subject to uniform adn equitable taxation attack.
        
        Symbiotic Theory (CIR v. Algue) - The existence of the government is a necessity --> The government cannot continue without the means to pay its expenses --> Thus, it has the right to compel all citizens and property within its limits to contribute. Symbiotic relationship, people contribute government provides benefits to improve the lives of the people/enhance their moral/material values.
        
        Whereby in exchange of protection from government, taxes are paid.
        
        Rule of Interpretation (Paseo v. CIR) - the law frowns against exemptions from taxation and statutes granting tax exemptions are thus construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority.
        
        Refunds (Paseo) - A claim of refund or exemption from tax payments must be clearly shown and be based on language in the law too plain to be mistaken. Elsewise stated, taxation is the rule, exemption therefrom is the exception.”
        
        Necessity Principle (Phil Guaranty) - The power to tax is an attribute of sovereignty. It is a power emanating from necessity. It is a necessary burden to preserve the State's sovereignty and a means to give the citizenry an army to resist an aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public improvement designed for the enjoyment of the citizenry and those which come within the State's territory, and facilities and protection which a government is supposed to provide.
        
        Existence of government is a necessity which gives it a right to compel all persons and property within its jurisdiction to contribute.
        
        Benefits-Protection Theory/Symbiotic Relationship (CIR v. Algue) - Taxes are what pays for civilized society.
        
        Benefits - Does not require that there be direct benefit to the particular taxpayer. It is sufficient that there be a general improvement/public services provided from the tax. In the case of, specific targeted industries sufficient that that industry benefit.
      - Continuity of Laws – Similarly, as a rule, law once established continues until changed by some competent legislative power. It is not changed merely by change of sovereignty. The only exception are laws of a political nature.
    - - Characteristics of Taxes -
        
        Enforced Contribution - As it is imposed regardless of the will of the person taxed
        
        Levied - on persons, property, rights, acts, privileges or transactions
        
        Levied by the State - which has jurisdiction or control over the subject to be taxed.
        
        Legislative - in character, but may be delegated to LGUs
        
        Pecuniary Burden - tax is generally used to refer to money, but may include contribution of property or services.
        
        Public Purpose - Necessary to justify the exercise of taxing power. Generally, must be used to provide revenue for public purposes of a general nature. Otherwise, plunder.
        
        Proportionate - involves a portioning of payment, depending on the capacity of the taxpayer.
        
        Personal - to the taxpayer.
        
        Compensation (Republic v. Mambulao) - No set-off is admissible against demands for taxes levied for general or local governmental purposes. Taxes are not contracts between the party and party but grow out of a duty to, and are the positive acts of the government, to the making and enforcing of which, the personal consent of individual taxpayers is not required
        
        Exception (Domingo v. Garlitos) - They may be offset when the claim against the government has been recognized and an amount has been appropriated for the purpose by a corresponding law. Amount must be determined, i.e., ripened into a determined amount.
        
        Inheritance Tax (Domingo v. Garlitos) - The ordinary procedure by which to settle claims of indebtedness against the estate of a deceased person, as an inheritance tax, is for the claimant to present a claim before the probate court so that said court may order the administrator to pay the amount thereof, not via a writ of execution.
        
        Compensation - The following requisites must be met for compensation to be allowed.
        
        Due and demandable
        
        Liquidated
        
        Appropriation marked by law
        
        Uniformity of Taxation (Tan v. Hosana) - non-uniformity does not prevent classification as long as:
        
        The standards that are used therefor are substantial and not arbitrary,
        
        The categorization is germane to achieve the legislative purpose,
        
        The law applies, all things being equal, to both present and future conditions, and
        
        The classification applies equally well to all those belonging to the same class.
        
        Specificity of Tax Fund (Gaston v. Republic Planters) - Taxation is valid even if it targets a specific industry so long as for a public purpose.
        
        Q.
        
        What basic principle of a sound tax system will be violated if a tax law would require payment of taxes in kind?
        
        A: Administrative Feasibility
        
        Are there other constitutional issues for the government collecting taxes in property other than money?
        
        A: Requirement that no money from public funds shall be spent except via appropriations.
        
        A: Accountability rule in the constitution, possible abuse.
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        Levy
        
        Assessment
        
        Payment