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 TAXATION
I 
 
 
 
 REGINA
IUSTITIAE 
 Jay ‐ Z
1




 





 TAXATION
I 
 

REGINA
IUSTITIAE 

Jay ‐ Z 
























 Abad
+
Vitug
Acosta
Reviewer
+
Case
Doctrines 

Sorore
Lex
Atheneum 

Definition
of
Taxation 

A
 mode
 by
 which
 governments
 make
 exactions
 for
 revenue
 in
 order
 to
 support

their
existence
and
carry
out
their
legitimate
objectives 

Courts
 do
 not
 have
 the
 power
 to
 inquire
 into
 the
 wisdom
 of
 the
 tax.
 The
 courts

power
in
 taxation
is
limited
only
 to
 the
app lication
and
interpretation
of
 the
law.

However,
courts
may
determine
whether
the
purpose
is
public
or
not 

o
CIR
 v.
Algue,
 Inc :

 Taxation
is
 the
indispensable
and
inevitable
price
 for

civilized
society. 

Purpose
and
Objectives
of
Taxation 

May
re fer
to
the
power
to
tax
or
the
process
of
exercising
it 

Revenue :
to
provide
funds
or
property
with
which
the
State
promotes
the
general

welfare
and
protection
of
its
cit izens 

Construction
of
Tax
Statutes
 

o
Construed
Strictly
against
the
Government 

Philippine
Health
Care
Providers,
Inc.
v.
CIR:
 A
Health
Maintenance
Organization

cannot
 be
 taxed
 similar
 to
 an
 insurance
 compan y
 for
 documentary
 stamp
 tax

because
 tax
 statutes
 are
 strictly
 construed
 against
 the
 taxing
 authority.
 This
 is

because
 taxation
 is
 a
 destructive
 power,
 which
 interferes
 with
 the
 personal
 and

property
rights
of
the
people
and
takes
 from
them
a
portion
of
the ir
property
 for

the
 support
 of
 the
 government.
 Hence,
 tax
 laws
 may
 not
 be
 extended
 by

implication
 beyond
 the
 clear
 import
 of
 their
 language,
 nor
 their
 operation

enlarged
so
as
to
embrace
matters
it
specifically
provided.
 .
 

Philippine
 Airlines,
 Inc.
 v
 Edu: 
 PAL
 was
 exempt
 from
 the
 payment
 of

taxes.
 However,
 the
 exemption
 cannot
 extend
 to
 motor
 vehicle

registration
 fees,
which
are
imposed
 to
raise
additional
revenues
 for
 the

government
 

Regulation :
taxes
also
have
a
regul atory
purpose 

o
Tio
 v.
 Videogram
 Regulatory
 Board: 
 Taxes
 imposed
 on
 processed

videotape
 cassettes
 cannot
 be
 struck
 down
 as
 unreasonable.
 Such
 taxes

are
 imposed
 to
 regulate
 the
 videogram
 trade.
 The
 levy
 is
 for
 a
 public

purpose
and
is
not
confiscatory
and
in
r estraint
of
trade
 

o
Basis
of
Taxation 

• Lifeblood
the ory :
Taxes
are
the
lifeblood
of
the
Government
and
their
prompt
and

certain
availability
are
an
imperious
need 

Lutz
 v.
 Araneta : 
 The
 taxes
 imposed
 on
 sugar
 manufacturing
 on
 a

graduated
basis
was
levied
with
a
regulatory
purpose:
to
provide
means

for
 the
 rehabilitation
 and
 stabilization
 of
 the
 threatened
 sugar
industry.

The
power
to
levy
a
tax
may
 be
done
in
the
exercise
of
police
power.
 

o
CIR
v.
Algue,
Inc : 
Taxes
are
the
lifeblood
of
the
government
and
so
should

it
 be
collected
without
hindrance.
Without
 taxes,
 the
government
would 

be
paralyzed. 

Promotion
of
General
Welfare :
taxes
may
be
used
as
an
implement
of
the
police

power
in
order
to
promote
the
general
welfare
of
the
people
 

o
• Benefits
Protection
Theory :
Citizens
pay
taxes
in
order
that
he
may
be
secured
in

the
enjoyments
of
the
benefits
of
organized
society
 

Caltex
 Philippines
 v.
 Commission
 on
 Audit:
 The
 Oil
 Price
 Stabilization

Fund 
 was
 created
 to
 regulate
 the
 oil
 industry,
 which
 is
 imbued
 with

public
 interest
 as
 it
 vitally
 affects
 the
 general
 welfare.
 Contributions
 to

the
OPSF
by
oil
companies
are
a
valid
levy
for
a
public
purpose. 

Nature
of
Taxation 

• The
 power
 to
 tax
 is
 an
 inherent
 prerogative;
 to
 assure
 the
 performance
 of
 vital

state
 functions
 

Reduction
 of
 Social
 Inequality :
 taxes
 makes
 the
 red uction
 of
 social
 inequality

possible
 thru
 the
progressive
 system
 of
 taxation,
where
 taxes
imposed
are
based

on
the
ability
to
pay 

o
o
Basco
v.
PAGCOR:
 Where
 the
power
of
a
municipal
corporation
 to
 tax
is

withdrawn
 by
a
 subsequent
legislative
act,
it
 can
 no
longer
exercise
 the

power
to
tax.
Local
governments
have
no
inherent
right
to
impose
taxes;

a
charter
or
a
statute
must
gr ant
such
power.
 

Tolentino
 v.
 Secretary
 of
 Finance:
 The
 Value
 Added
 Tax
 is
 equitable.

Even
 though
 the
rate
is
 fixed
at
10%,it
distributed
 the
 t ax
burdern
 to
as

many
 goods
 and
 services
 as
 possible,
 particularly
 to
 those
 which
 are

within
the
reach
of
higher ‐ income
groups,
 

o
Mactan
Cebu
International
Airport
Authority
v.
Marcos: 
 The
MCIAA
is
a

Encourage
 Economic
 Growth :
 Taxation
 can
 allow
 the
 grant
 of
 exemptions
 or

incentives
to
encourage
investments
and
promote
econom ic
growth
 

taxable
 person
 under
 its
 Charter,
 and
 was
 only
 exempted
 from
 the

payment
of
real
property
 taxes.
The
grant
of
 the
privilege
is
evidence
of

legislative
 intent
 that
 it
 is
 not
 exempt
 from
 other
 taxes,
 such
 as
 those

imposed
by
the
local
government.
 

o
Philippine
Coconut
Producers
Federation
v .
 PCGG: 
 The
sequestration
of

coconut
 levy
 funds
 did
 not
 have
 the
 effect
 of
 converting
 the
 fund
 to
 a

private
one.
The
sequestration
was
done
in
 the
exercise
of
police
power

to
sustain
the
growth
of
coconut 
industry.

 

• Inherently
legislative.
 

o
Sarasola
 v.
 Trinidad: 
 The
 determination
 of
 how
 the
 power
 of
 taxation

will
 be
 exercised
 is
 vested
 upon
 the
 legislature.
 Consequently,
 the

legislature
 also
 has
 exclusive
 authority
 to
 give
 remedies
 to
 aggrieved

taxpayers.
 

Protectionism :
 taxes
 provide
 protection
 to
 local
 industries
 by
 taxing
 foreign

imports 

o
Philippine
Health
Care
providers
v.
CIR: 

To
impose
documentary
stamp

tax
 on
 PHCP
 is
 highly
 oppressive
 considering
 that
 its
 main
 object
 is
 to

provide
the
mem bers
of
a
group
with
health
services
at
cost.
 

o
CIR
v.
Santos:
 Where
the
wisdom
of
an
excise
tax
on
jewelry
sales
 


2





 





 TAXATION
I 
 




























 Abad
+
Vitug
Acosta
Reviewer
+
Case
Doctrines 



 Scope
of
Taxation 
 • Every
trade,
 occupa

Scope
of
Taxation

Every
trade,
 occupa tion,
object
of
industry,
use, 
en joyment,
species
of
possession 


It
is
unlimited,
plenary,
comprehensive
and
supreme
 


Tan
v.
Del
Rosario: 
 The
legislature
has
the
power
to 
choose: 


 

o

The
persons,
property,
or
occupation
to
be
taxed 


o

The
amount
or
rate
of
the
tax 


o

The
purposes
for
which
taxes
shall
be
levied
(must
be
for
the
public) 


o

The
kind
of
tax
to
be
collected 


o

The
apportionment
of
the
tax
(general
or
local) 


o

Situs
of
taxation 


o

The
method
of
collection 


Principles
of
a
Sound
Tax
System

Fiscal
adequacy 
 ‐ 
tax
should
coincide
with
the
expenditures;
neither
excessive
nor
 deficient 


Theoretical
 justice 
 ‐ 
 tax
 should
 be
 fair
 to
 the
average
 taxpayer
and
 based
 upon
 his
ability
to
pay
 


Admi nistrative
 Feasibility 
 ‐ 
 capable
 of
 being
 properly
 and
 efficiently
 administered
by
the
government
with
least
inconvenience
to
the
taxpayer 


Effect
 of
 non ­ observance :
 will
 not
 render
 the
 tax
 void.
 The
 constitution
 only
 requires
tax
to
be
equitable.
 


Taxatio n
Distinguished
from
Police
Power
 


 

As
to: 


Taxation 


Police
Power
 


Purpose 


Revenue 


Promote
Public
Welfare 


Amount


of


No
Limit 


Only
 to
 cover
 the
 cost
 of
 regulation,
 issuance
of
the
license,
or
surveillance 


Exaction 


Benefits


No
direct
benefit 


 

No
direct
benefit 
 Economic
Standard
of
society 


Received 


Protec tion
of
his
person,


property


and


the


 

welfare
of
all 


Non ‐ impairment
 of
Contracts 


Subsists 


Limitation
does
not
apply 


Transfer


of


Taxes
 become
 part
 of
 public
funds 


No
 transfer;
 but
 only
 restrain t
 on
 the
 exercise
of
property
rights 


Property
Rights 


Taxation
Distinguished
from
Eminent
Domain 


 

As
To 


Taxation 


Eminent
Domain 


Nature
 of
 Power
 Exercised 


To
raise
public
revenue 


To
 make
 property
 available
 for
 public
use 


Compensation


General
 benefit
 for
 all
 citi zens 


Just
 compensation
 to
 property
 owner 


Received 


Non ‐ impairment
 of
Contracts 


Subsists
 


Limitation
does
not
apply 


Persons
Affected 


All
 persons,
 property,
 and


Only
particular
property 


excises
 that
 may


be



 
 
 
 REGINA
IUSTITIAE 
 Jay ‐ Z 
 
 
 
 Sorore
Lex
Atheneum 

REGINA
IUSTITIAE 

Jay ‐ Z 

Sorore
Lex
Atheneum 

Persons
Affected 

All
 persons,
 property,
 and

Only
particular
property 

excises
 that

may

be

subjected
thereto 

Taxes
Distinguished
from
other
impositio ns 

• Toll 
is
a
demand
of
ownership;
an
amount
charged
for
the
cost
and
maintenance
of

property
used;
Tax
is
a
demand
of
sovereignty
for
the
purpose
of
raising
revenue 

• Penalty 
is
a
punishment
for
the
commission
of
a
crime;
Tax
is
a
civil
liability
which

may
g ive
rise
to
criminal
liability
if
it
remains
unpaid 

o Republic
of
the
Philippines
v.
Patanao :
 The
acquittal
of
the
taxpayer
in

criminal
proceedings
does
not
automatically
exonerate
the
taxpayer
from

the
liability
to
pay.
Taxes
are
not
a
consequence
of
the
ch arges
in
criminal

proceedings,
 nor
 are
 it
 civil
 liability
 that
 may
 be
 wiped
 out
 due
 to
 the

non ‐ existence
 of
 the
 criminal
 charge.
 Rather,
 taxes
 are
 in
 the
 nature
 of

civil
liabilities,
the
failure
to
pay,
may
be
a
basis
for
criminal
action. 

• Compromise
 or
 com promise
 penalty
 is
 an
 amount
 that
 is
 collected
 as
 a

compromise
in
lieu
of
criminal
prosecution
involving
tax
violations 

• Special
 assessment
 ( The
 Apostolic
 Prefect
 of
 the
 Mountain
 Province
 v.

Treasurer
of
Baguio ): 

o
Levied
only
on
land 

o
Cannot
be
made
a
persona l
liability
 of
the
person
assessed 

o
Based
on
benefit 

o
Exceptional
both
as
to
time
and
locality 
(it
does
not
have
to
be
uniform) 

• License
Fee 
emanates
from
police
power
with
the
purpose
of
regulation.
 

o
Three
Kind s 

 For
the
regulation
of
useful
occupations 

 For
 the
 regulation
 /
 restriction
 of
 non ‐ useful
 occupations
 or

enterprises 

 For
revenue 

o
Victorias
Milling
Co.,
Inc.
v.
CIR:
 A
municipality
is
authorized
to
impose

th ree
kinds
of
licenses: 

 License
for
regulation
of
useful
occupations/enterprises 

 License
for
restriction/regulation
of
non ‐ useful

occupations/enterprises 

Regulation
and
restriction
licenses
are
for
general

welfare
purpose
and
are
in
the
exercise
of
police

p
ower 

 License
for
revenue
 ‐

emanates
from
taxing
power 

o

G.A.
Cuunjieng
v.
Patstone:
 T
he
amount
charged 
for
the
license
fee 
must

be
sufficient
to
cover
the
expenses
of
the
issuance
of
the
license
and
the

costs
of
inspection
and
surveillance.
 

o
Physical
Therap y
Organization
of
the
Philippines
v.
Municipa l
Board

of
the
City
of
Manila:
 The
imposition
of
higher
rates
for
licenses
for
non ‐
useful
occupations/enterprises
than
the
useful
ones
is
justified,
since
the

purpose
of
the
former
is
restriction,
and
the
purpos e
of
the
latter
is

regulation.
 


3





 





 TAXATION
I 
 




























 Abad
+
Vitug
Acosta
Reviewer
+
Case
Doctrines 



 o

o Progressive
Development
Corporation
v.
Quezon
City: 
 A
license
fee
 must
relate
to
an
occupation
or
activity
that
engages
the
pubic
interest
in
 health,
morals,
safety
and
development,
as
to
require
regulation.


Margin
fee
 is
a 
currency
measure
designed
to
stabilize
the
currency 


Debt
 is
an
obligation
imposed
by
a
contract 


o

Caltex
Philippines,
Inc.
v.
COA:
 A
tax
is
a
forced
charge
imposed
by
the
 government.
It
is
not
a
debt 
that
arises
from
a
contract; 
thus ,
it
cannot
be
 offset/co mpensated.

o

Domingo
v.
Garlitos:
 The
rule
prohibiting
legal
compensation
between
 taxes
owed
to
the
government
may
be
set
aside
if
equity
so
requires.
In
 the
case
of
taxpayers
assessed
of
inheritance
tax
over
property
they
sold
 to
farmers
at
cost
to
be
paid
 by
the
government,
legal
compensation
may
 apply.



Regulatory
taxes


Subsidy
 is
 a
 legislative
 grant
 of
 money
 in
 aid
 of
 a
 private
 enterprise
 deemed
 to
 promote
the
public
welfare 


Customs
 Duties
 and
 Fees
 are
 duties
 charged
 upon
 commodities
 on
 their
 being


impo rted
in
or
exported
from
a
country

Revenue
 is
broader
than
taxes,
as
it
includes
income
from
other
sources
as
well
 


Tribute
 is
synonymous
with
tax 


Impost
 signifies
 any
 tax,
 usually
 pertains
 to
 duties
 on
 imported
 goods
 and
 merchandise 


Classification
of
Tax es

According
to
subject
matter
or
Object 


o

Personal
 Tax 
 ‐ 
 capitation
 or
 poll
 taxes,
 of
 a
 fixed
 amount
 upon
 all
 persons
 if
 a
 certain
 class
 within
 the
 jurisdiction
 of
 the
 taxing
 power
 without
regard
to
his
property,
business
or
occupation
(community
tax) 


o

Prope rty
 Tax 
 ‐ 
 taxes
 assessed
 on
 all
 property
 or
 property
 of
 a
 certain
 class
within
the
jurisdiction
of
the
taxing
power
(real
estate
tax)
 


o

Villanueva
v.
City
of
Iloilo:
 A
license
is
imposed
on
the
operation
of
a
 business,
while
real
estate
taxes
are
imposed
on 
the
property.


 

Real
Property
Tax 


License
Tax 


Direct
tax
on
ownership
of
lands,
 payable
regardless
of
use
 


Tax
on
the
 business/occupation 


Single/indivisible;
though
 improvements
may
also
be
assessed
 


No
intervention
of
assessors 


Fixed
proportion
of
the
 assessed
 value
of
the
property
taxed 


Different
rates 


It
is
a
superior
lien
and
is
enforceable
 against
the
property 


Enforceable
against
the
 operators 


o

Association
of
Customs
Brokers,
Inc.
v.
Municipality
Board
of
Manila:
 If
 a
tax
is
in
its
nature
an
excise,
it
does
not
become
a
property
tax
because
 it
is
proportioned
in
amount
to
the
value
 of
the
property
used
in
 connection
with
the
occupation ,
privilege
or
act
which
is
taxed.
 Stated
 differently,
an
ad
valorem
tax
is
not 
necessarily
a
property
tax.



 
 
 
 REGINA
IUSTITIAE 
 Jay ‐ Z 
 
 
 
 Sorore
Lex
Atheneum 

REGINA
IUSTITIAE 

Jay ‐ Z 

Sorore
Lex
Atheneum 

According
to
Burden 

o
Direct
 Tax 
 ‐ 
 taxes
 wherein
 both
 the
 liability
 for
 the
 payment
 of
 tax
 as

well
as
the
impact
or
burden
of
the
tax
falls
on
the
same
person
(income

tax) 

o
Indirect
Tax 
 ‐ 
wherein
the
liability
 for
payment
 falls
on
one
person,
but

the
burden
thereof
can
be
shifted
to
another 
(excise
taxes) 

o
Silkair
[Singapore]
Pte
Ltd
v.
CIR:
 An
excise
tax
is
an
indirect
tax
where

the
 tax
 burden
 can
 be
 shifted
 to
 the
 consumer,
 but
 the
 tax
 liability

remains
with
the
manufacturer
or
producer.
Indirect
taxes
are
those
that

are
 demanded
 from,
 or
 a r
 paid
 by,
 one
 person
 in
 the
 expectation
 and

intention
 that
 he
 can
 shift
 the
 burden
 to
 someone
 else.
 In
 the
 refund
 of

indirect
 taxes,
 the
 statutory
 taxpayer
is
 the
 proper
 party
who
 can
 claim

the
refund.

 

o
Contex
Corporation
v.
CIR : 
A
non ‐ VAT
taxpayer
is
ex empt
from
the

liability
for
VAT,
but
is
not
entitled
to
a
tax
credit
or
refund.
Rather,
its

suppliers
are
the
proper
parties
to
claim
the
tax
credit,
and
then
refund

the
credit
to
the
non ‐ VAT
taxpayer,
as
it
shifted
the
burden
of
payment . 

According
to
Purp ose 

o
General 
 ‐ 
levied
for
the
general
or
ordinary
purposes
of
the
government

(internal
revenue) 

o
Special 
 ‐ 
levied
for
a
special
purpose 

o
Excise
tax 
 ‐ 
privilege
tax
laid
upon
the
manufacture,
sale,
or
consumption

of
commodities
 

o
Customs
 Duties 
 ‐ 
 duties
 charged 
 upon
 commodities
 upon
 being

imported
into
of
exported
from
the
country
 

According
to
Determination
of
Amount 

o
Specific 
 ‐ 
 imposes
 a
 specific
 sum
 by
 the
 head
 or
 number
 or
 by
 some

standard
 of
 weight
 or
 measurement
 and
 which
 requires
 no
 assessment

beyond
a
lis ting
and
classification
of
the
subjects
to
be
taxed
(sin
taxes) 

o
Ad
Valorem 
 ‐ 
tax
upon
the
value
of
the
article
or
thing
subject
to
taxation

(property
tax) 

According
to
Scope
or
Authority
imposing
the
tax 

o
National 
 ‐ 
levied
by
the
national
government 

o
Local 
 ‐ 
levied
by
the
local
governments 

According
to
graduation 

o
Progressive 
 ‐ 
imposed
 whereby
 the
 rate
 or
 amount
 of
 tax
increases
 as

the
amount
of
the
income
to
be
taxed
increases
(individual
income
tax) 

o
Regressive 
 ‐ 
the
tax
rate
decreases
as
the
amount
of
income 
or
earning
to

be
taxed
increases 

o
Mixed
 ‐ 
the
tax
rates
are
partly
progressive
and
partly
regressive 

o
Proportionate
 ‐ 
 the
 tax
 rates
 are
 fixed,
 either
 in
 amounts
 or
 in

percentage,
on
a
flat
rate
basis 

Inherent
Limitations: 

• Pepsi
Cola
v.
Municipality
of
Tana uan :
 The
power
of
taxation
is
purely
legislative

and
cannot
be
delegated
to
the
executive
or
judicial
department
of
the
government

without
infringing
upon
the
theory
of
separation
of
powers
 


4





 





 TAXATION
I 
 




























 Abad
+
Vitug
Acosta
Reviewer
+
Case
Doctrines 



 • Taxation
is
for
a
public
purpose
 
 o

Taxation
is
for
a
public
purpose
 


o

For
the
support
of
the
State
or 
for
some
recognized
objects
of
government
 or
directly
to
promote
the
welfare
of
the
community
 


o

Incidental
advantage
to
the
State
does
not
justify
tax
=
void
 


o

It
is
not
necessary
that
a
particular
taxpayer
receives
immediate
benefit 


o

It
is
both
a
regulatory 
and
revenue
measure
 


o

Tests:
 


Whether
the
thing
to
be
furthered
by
the
appropriation
of
public
 revenue
is
something
which
is
the
duty
of
the
State
to
provide 


Whether
 the
 proceeds
 of
 the
 tax
 will
 directly
 promote
 the
 welfare
of
the
community
in
equal
measur e 


o

In
the
imposition
of
taxes,
public
purpose
is
presumed
 


o

Citizens’
 Alliance
 for
 Consumer
 Protection
 v.
 Energy
 Regulatory
 Board :
 The
OPSF
is
not
a
fund
to
sustain
the
losses
of
the
oil
companies.


In
fact,
the
OPSF
was
levied
for
a
public
purpose
 ‐ 
to
stabi lize
the
price
of
 oil
due
to
the
changes
in
the
exchange
rate.
 


o

Tio
 v.
 Videogram
 Regulatory
 Board :
 Taxes
 imposed
 on
 processed
 videotape
are
imposed
to
regulate
the
videogram
trade.
The
levy
is
 for
a
 public
purpose
and
is
not
confiscatory
and
in
restraint
o f
trade 


Non ­ delegability
of
the
Taxing
Power
 


o

It
is
an
inherent
power
of
sovereignty
lodged
in
the
Legislature 


o

The
following
cannot
be
delegated: 


To
 determine
 the
 nature
 (kind),
 object
 (purpose),
 extent
 (amount/rate)
and
situs
(place)
of
the
tax
 


To
grant
 tax
exemptions
or
condonations 


To
 specify
 or
 provide
 for
 the
 administrative
 and
 judicial
 remedies
that
the
government
and
taxpayers
may
avail
of
in
its
 implementation
 


o

Exceptions

When
allowed
by
the
Constitution
or
other
laws
 


Delegation
of
tax
administrat ion
 


Rule
making
power
 


Collection
of
taxes 


Equalization
of
assessments
by
a
central
body
 


Only
in
favor
of
local
governments
 


o

People
 v.
 Vera :
 The
 power
 to
 make
 laws
 is
 vested
 in
 the
 legislature.
 However,
 the
 legislative
 may
 delegate
 its
 powers
 to
 local
 au thorities
 provided
the
statute
authorizing
the
delegation
is
complete
and
provides
 a
 standard
 to
 prevent
 local
 authorities
 from
 exercising
 arbitrary
 discretion.
 


o

Manila
 Electric
 Co.
 v.
 Province
 of
 Laguna :
 Local
 Governments
 do
 not
 have
 the
 inherent
 power
 to 
 tax
 except
 to
 the
 extent
 that
 such
 power
 might
be
delegated
to
them
either
by
the
basic
law
or
by
statute.
 


Territoriality
 ­ 
 it
 can
 only
 be
 exercised
 within
 the
 territorial
 jurisdiction
 of
 the
 taxing
authority
 


o Basic
Considerations 



 
 
 
 REGINA
IUSTITIAE 
 Jay ‐ Z 
 
 
 
 Sorore
Lex
Atheneum 

REGINA
IUSTITIAE 

Jay ‐ Z 

Sorore
Lex
Atheneum 

 Protection
 ‐ 
 a
 legal
 si tus
 cannot
 be
 given
 to
 property
 for
 the

purpose
 of
 taxation
 where
 neither
 property
 nor
 the
 person
 is

within
the
protection
of
the
taxing
state 

 Double
Taxation
 ‐ 
is
not
invalid
where
it
is
imposed
by
different

states 

 Movables
follow
the
person 

 Legislative
p ower
to
fix
situs 

o
For
poll
taxes
 ‐ 
the
tax
situs
is
the
residence
of
the
taxpayer 

o
For
property
taxes
 ‐ 
where
the
property
is
situated 

o
For
 excise
 taxes
 ‐ 
 Generally
 the
 place
 where
 the
 privilege
 is
 exercised.

Others:
where
the
taxpayer
is
a
national
of
or
wh ere
he
has
his
residence
 

 Iloilo
 Bottlers
 v.
 City
 of
 Iloilo :
 Excise
 taxes
 on
 distributors
 of

soft
 drinks
 can
 be
 levied
 if
 the
 business
 is
 done
 or
 performed

within
the
jurisdiction
of
the
taxing
authority.
 

Tax
Exemption
of
the
state 

 

o
General
 Rule:
 The
 Sta te
 and
 its
 municipal
 subdivisions
 devoted
 to

Government
 uses
 and
 purposes
 are
 exempt
 from
 taxation,
 even
 though

there
is
no
express
provision
in
the
law 

o
Exception:
If
the
Government
allows
itself
to
be
taxed
 

o
Maceda
 v.
 Macaraig :
 Law
 granted
 NAPOCOR
 exempti on
 from
 paying

taxes
 is
 a
 matter
 of
 public
 policy.
 If
 the
 exemption
 is
 not
 granted,
 the

revenue
 due
 to
 the
 government
 may
 increase,
 but
 the
 power
 rates

charged
to
the
consumers
would
also
increase.
 

Taxation
is
subject
to
international
comity
 

o
Limits
the
a uthority
of
a
government
to
impose
taxes
on
a
sovereign
state

and
 its
 instrumentalities,
 properties,
 and
 activities
 undertaken
 in
 its

sovereign
capacity
 

o
Rooted
upon
reciprocity 

o
Tanada
 v.
 Angara :
 The
 WTO
 became
 part
 of
 the
 law
 of
 the
 land.
 A

portion
of
sov ereignty
may
be
waived
without
violating
the
constitution,

based
on
the
generally
accepted
principles
of
international
law.
 

Effect
of
violation :
 May
amount
to
a
contravention
of
the
due
process
clause
(taking

of
property).
 

Lawful
exercise
of
power :
 

o
Tax
 is
for
a
public
purpose 

o
The
rule
on
uniformity
of
taxation
is
observed 

o
Either
 the
 person
 or
 property
 taxes
 is
 within
 the
 jurisdiction
 of
 the

government
levying
the
tax 

o
In
the
assessment
and
collection
of
certain
taxes,
notice
and
opportunity

for
hearing
ar e
provided
 

Constitutional
Limitations
 ‐ 
intended
to
regulate
 & 
define
the
power
to
tax,
not
grant
it 

• Direct
Limitations :
 

o Due
process
(Article
III,
Section
1) 

 Tan
v.
Del
Rosario :
 
The
simplified
net
income
taxation
scheme

cannot
 be
 struck
 down
 as
 inequit able.
 The
 congress
 has
 the

prerogative
 to
 shift
 the
 income
 tax
 system
 to
 the
 scheduler


 
 5
 


 





 TAXATION
I 
 
 
 
 REGINA
IUSTITIAE 
 Jay ‐ Z
5




 





 TAXATION
I 
 

REGINA
IUSTITIAE 

Jay ‐ Z 
























 Abad
+
Vitug
Acosta
Reviewer
+
Case
Doctrines 

Sorore
Lex
Atheneum 

approach;
and
absent
a
clear
contravention
of
constitutional
or

inherent
limitations,
a
violation
of
the
due
process
clause
cannot

be
invoked.

 

Pepsi ­ Cola
 v.
 Municipali ty
 of
 Tanauan :
 The
 delegation
 of
 the

power
 to
 tax
 to
local
governments
is
not
a
 violation
of
 the
due

process
 clause
 because
 the
 tax
 imposed
 was
 for
 a
 public

purpose,
 it
 was
 uniform,
 the
 taxable
 entity
 was
 within
 the

jurisdiction
of
the
local
government,
an d
notice
and
opportunity

for
hearing
were
provided
 

 Philippine
 American
 Life
 Insurance
 v.
 Auditor
 General :
 The

freedom
 of
 contracts
 may
 be
 limited
 by
 certain
 regulations

enacted
by
 the
 State
in
 the
exercise
of
its
police
power,
 for
 the

furtherance
 of
 public
 interest.
 The
 margin
 law
 was
 enacted
 in

the
 exercise
 of
 police
 power
 and
 for
 a
 public
 purpose:
 to

stabilize
the
currency. 

 Tolentino
 v.
 Secretary
 of
 Finance :
 The
 imposition
 of
 VAT
 on

c
ontracts
involving
the
sale
of
real
estate
is
not
unconstitutional.

o
Equal
protection
of
the
law
(Article
III,
Section
1)
Between
 the
 power
 of
 the
 state
 to
 tax
 and
 the
 contract
 clause,

the
latter
must
yield.
 

 Sison
 v.
 Ancheta :
 Taxpayers
 may
 be
 classified
 into
 different

categories,
 provided
 there
 is
 ample
 justification
 to
 do
 so.
 Tax

imposed
 on
 compensation
 an d
 business
 income
 by
 the
 NIRC

may
 be
 different
 due
 to
 factors
 such
 as
 overhead
 expenses
 (in

case
of
businesses)
and
uniform
costs
(as
to
compensation)
 

o
Non ‐ imprisonment
for
non ‐ payment
of
poll
tax
(Article
III,
Section
20) 

 Poll
 tax
 ‐ 
 levied
 on
 persons
 w ho
 are
 residents
 within
 the

territory
 of
 the
 taxing
 authority
 without
 regard
 to
 their

property,
business
or
occupation
 

 Tan
 v.
Del
 Rosario:
 Uniformity
 of
 taxation,
like
 the
 concept
 of

equal
protection
does
not
prohibited
cla ssification,
provided: 

 An
imposition
of
a
 fine
or
even
imprisonment
 for
any
violation

other
than
non ‐ payment
would
not
be
unconstitutional
 

o
Limitation
 on
 congr essional
 power
 to
 delegate
 to
 the
 President
 the

• The
 standards
 that
 are
 used
 are
 substantial
 and
 not

arbitrary 

authority
 to
 fix
 tariff
 rates,
 import
 and
 export
 quotas,
 etc
 (Article
 IV,

Section
28(2)) 

• The
 categorization
 is
 germane
 to
 achieve
 the

legislative
purpose 

o
Tax
exemptions
 of
 properties
actually,
 directly,
and
exclusively
 used
 for

religious,
charitable,
and
educational
purpos es
(Article
III,
Section
28(3)) 

• The
law
applies
to
both
present
and
future
conditions 

• The
classification
applies
equally
to
all
those
belo nging

to
the
same
class 

 The
 exemptions
 covers
 property
 taxes
 only;
 special
 levies
 or

assessments
are
not
covered 

 The
term
“exclusively”
means
primarily,
not
solely
 

o
Uniformity,
equitability
and
 progressivity
 of
 taxation
 (Article
VI,
Section

28(1)) 

 Incidental
use
is
covered,
commercial
is
not
 

 Test
of
Exemption:
character
of
use 

 Uniformity
 ‐ 
 requires
 that
 all
 subjects
 or
 objects
 of
 taxation,

similarly
situated
are
to
be
treated
alike
or
put
on
equal
footing

both
in
privileges 
and
liabilities
 

o
A ll
appropriation,
revenue,
or
 tariff
bills
must
originate
exclusively
 from

the
House
of
Representatives,
but
the
Senate
may
propose
or
concur
with

amendments
(Article
VI,
Section
24) 

 Inequality
 ‐ 
 results
 when
 on
 particular
 class
 is
 singled
 out
 for

taxation
or
exemptions
(unconstitutional) 

 Classification
is
permitted:
 

• If
 standards
 used
 therefor
 are
 not
 arbitrary
 but

reasonable
and
substantial 

 Guingona
 v.
 Carague: 
 The
 automatic
 appropriation
 for
 debt

service
is
not
 a
violation
of
the
constitution
because
the
amount

payable
is
determinable.
Furthermore,
existing
laws,
prior
to
the

adoption
of
the
Constitution
shall
remain
in
effect
until
they
are

repealed
or
revoked.

 

• It
germane
to
achieve
the 
purpose
of
legislation 

 Tolentino
v.
Secretary
of
Finance: 
 The
VAT
bill
o riginated
from

• It
applies
 to
both
present
and
 future
conditions,
other

circumstances
being
equal 

the
House
 of
 Representatives
 and
 the
 Senate
merely
 proposed

amendments
via
consolidation.
 

o
Non ‐ infringement
of
religious
freedom
and
worship
(Article
III,
Section
5) 

o
American
 Bible
 Society
 v.
 City
 of
 Manila: 
 The
 constitutional

guarantee
 of
 t he
 free
 exercise
 and
 enjoyment
 of
 religious

profession
and
worship
carries
with
it
 the
right
 to
disseminate

religious
information.
To
prohibit
the
Society
from
selling
bibles

because
it
did
not
obtain
a
Mayor’s
permit
and
municipal
license

would
constitute 
an
impairment
of
its
rights
of
dissemination
of

religious
beliefs.
 

Voting
 requirement
 in
 connection
 with
 the
 legislative
 grant
 of
 tax

exemption
(Article
VI,
Section
28(4)) 

Concurrence
of
a
majority
of
all
the
Members
 of
the
Congress.
 

o
The
Congress
shall
evolve
a
progress
system
of
taxation 

Tolentino
v.
Secretary
of
Finance: 
 What
congress
is
required
to

do
is
to
“evolve
a
progressive
system
of
taxation.”
It
is
merely
a

directive. 

o
o
Non ‐ impairment
of
contracts
(Article
III,
Section
10) 

Non ‐ impairment
of
the
Supreme
Court’s
ju risdiction
in
tax
cases
(Article

VIII,
Sections
2
and
5) 


6





 





 TAXATION
I 
 




























 Abad
+
Vitug
Acosta
Reviewer
+
Case
Doctrines 



 o Exemption
 from
 taxes
 of
 the
 revenues


o

Exemption
 from
 taxes
 of
 the
 revenues
 and
 assets
 of
 educational


institutions
 including
 grants,
 endowments,
 donations
 or
 contributions
 (Article
XIV,
Section
4(3 ‐ 4) 


o

Power
of
Local
Governments
to
tax
(Ar ticle
X,
Section
5)
 


Basco
v.
PAGCOR :
 Where
the
power
of
a
municipal
corporation
 to
 tax
 is
 withdrawn
 by
 a
 subsequent
 legislative
 act,
 it
 can
 no
 longer
 exercise
 the
 power
 to
 tax.
 Local
 governments
 have
 no
 inherent
right
to
impose
taxes;
a
charter
or
a
statu te
must
grant
 such
power. 


Manila
Electric
Co.
v.
Province
of
Laguna :
 Local
Governments
 do
not
have
the
inherent
power
to
tax
except
to
the
extent
that
 such
power
might
be
delegated
to
them
either
by
the
basic
law


or
by
statute. 


Indirect
Limitations
 


 
 

o

The
 po wer
 of
 the
 President
 to
 veto
 any
 particular
 item
 or
 items
 in
 an
 appropriation,
revenue,
or
tariff
bill
(Article
VI,
Section
27(2)) 


o

No
 money
 shall
 be
 paid
 out
 of
 the
 Treasury
 except
 in
 pursuance
 of
 an
 appropriation
made
by
law
(Article
VI,
Section
29(1)) 


o

No 
 appropriation
 of
 public
 money
 or
 property
 shall
 be
 made
 for
 the
 benefit
of
any
church,
sect,
or
system
of
religion
(Article
VI,
Section
29(2)) 


o

Money
collected
on
a
tax
levied
for
a
public
purpose
shall
be
paid
out
for
 such
purpose
only
(Article
VI,
Sectio n
29
(3)) 


 

Osmena
 v.
 Orbos: 
 The
 Oil
 Price
 Stabilization
 Fund
 is
 a
 trust
 account
 established
 for
 the
 purpose
 of
 minimizing
 frequent
 price
changes
brought
about
by
the
exchange
rate
adjustment.
 


Other
Recognized
Limitations


Reconciliation
of
Conflicting
Int erests
of
Tax
Authorities
and
Taxpayers 


o Roxas
 v.
 CTA :
 The
 power
 to
 tax
 is
 often
 referred
 to
 as
 the
 power
 to
 destroy.
 The
 power
 to
 tax
 must
 be
 exercised
 with
 caution.
 In
 a
 case
 where
 real
 estate
 inherited
 is
 resold
 to
 farmers
 at
 cost
 (which
 the
 government
 s hould
 have
 done_,
 the
 sellers
 should
 no
 longer
 be
 held
 liable
for
the
payment
of
real
estate
and
dealers
tax.
 


Prospective
Application 


o Lorenzo
v.
Posadas :
 A
statute
should
be
considered
as
perspective
in
its
 operation,
unless
the
language
of
the
statute
cl early
demands
that
it
shall
 have
retroactive
effect. 


Promptness
in
Payment 


o Philippine
 Guaranty
 Co.
 v.
 CIR :
 Income
 taxes
 are
 withheld,
 although
 contested,
to
avoid
undue
delay
in
the
collection
of
taxes.
If
taxpayers
are


given
 the
 opportunity
 to
 contest
 the ir
 tax
 liabilities
 before
 they
 are
 collected,
there
is
a
possibility
of
collusion
and
evasion
of
its
payment.
 


Injunction
against
collection
of
taxes 


o CIR
v.
Yuseco :
 The
CTA
is
not
vested
with
the
authority
to
issue
writs
of
 prohibition
or
injunctions
in
its
original
jurisdiction.
It
can
only
do
so
in
 appealed
cases. 



 
 
 
 REGINA
IUSTITIAE 
 Jay ‐ Z 
 
 
 
 Sorore
Lex
Atheneum 

REGINA
IUSTITIAE 

Jay ‐ Z 

Sorore
Lex
Atheneum 

o Churchill
 v.
 Rafferty :
 An
 injunction
 against
 the
 collection
 of
 taxes
 will

not
prosper.
In
fact,
no
court
will
entertain
an
suit
assailing
the
validity
of

a
 tax
 law
 until
 the
 taxpayer
 has
 paid
 th e
 tax
 due,
 under
 protest.
 The

legislature
 provided
 that
 the
 remedy
 in
 cases
 of
 allegedly
 illegal
 tax

would
be
to
pay
the
tax
under
protest,
then
seek
recovery
of
the
allegedly

illegal
amount
paid 

Inapplicability
of
Estoppel
against
the
State
o
Philippine
Nat ional
Oil
Co.
v.
CA :
 The
government’s
ability
to
serve
the

people
 depends
 upon
 taxation.
 To
 safeguard
 such
 interest,
 estoppel

cannot
 apply
 against
 the
 government
 for
 the
 mistakes,
 errors,
 and

negligence
of
its
officers.
 

o
Secretary
 of
 Finance
 v.
 Oro
 Maura
 S hipping :
 It
 is
 axiomatic
 that
 the

government
cannot
and
must
not
be
estopped
in
matters
involving
taxes.

Taxes
 are
 the
 lifeblood
 of
 the
 nation
 through
 which
 the
 government

agencies
 continue
 to
 operate
 and
 with
 which
 the
 State
 effects
 its

functions
 for
 the
 welfare
 of
 its
 constituents.
 It
 should
 be
 collected

without
unnecessary
hindrance
or
delay.
 

No
Legal
Compensation
between
taxes
and
debts 

o
Caltex
Philippines
v.
COA :
 Taxes
cannot
be
the
subject
of
compensation

because
 the
 government
 and
 taxpayer
 are
 not
 mu tually
 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
set ‐ off.
(1992) 

o
Domingo
v.
Garlitos :
 Legal
compensation
was
allowed
between
claims
of

an
estate
against
the
government
for 
262K
and
claims
of
the
government

against
 the
 estate
 for
 inheritance
 tax,
 because
 both
 have
 been
 long

overdue.
(1963)
 

Principle
of
 Solutio
Indebiti 

o
Filinvest
Development
Corporation
v.
CIR :
 Where
the
company
agreed

to
a
tax
deduction
in
lieu
of
a
refund
 of
taxes
erroneously
paid,
its
right
to

recover
the
excess
tax
paid
cannot
be
said
to
have
prescribed
if
it
incurs

business
losses
in
 the
 following
years.
 In
 the
 field
of
 taxation
where
 the

State
 exacts
 strict
 compliance
 upon
its
 citizens,
 the
 State
must
l ikewise

deal
 with
 taxpayers
 with
 fairness
 and
 honesty.
 The
 harsh
 power
 of

taxation
 must
 be
 tempered
 with
 evenhandedness.
 Hence,
 under
 the

principle
 of
 solutio
 indebiti ,
 the
 Government
 has
 to
 restore
 to
 the

company
the
latter
erroneously
paid. 

Double
Taxat ion 

• 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. 
 

• City
 of
 Manila
 v.
 Coca ­ Cola
 Bottlers
 Philippines,
 Inc: 
 For
 there
 to
 be
 double

t axation,
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
period 
(time) ,
and
the
taxes
are
of
the
same
kind
and
character
 (SPAJTC) 

• Also
called
duplic ate
taxation
 

• There
is
no
constitutional
prohibition
against
double
taxation 


7





 





 TAXATION
I 
 




























 Abad
+
Vitug
Acosta
Reviewer
+
Case
Doctrines 



 Kinds
of
Double
taxation 
 •

Kinds
of
Double
taxation

Direct
duplicate
taxation 
 ‐ 
also
double
taxation
in
the
objectionable
or
prohibited
 sense; 
Where
the
tax
burden
and
the
tax
liability
is
imposed
on
the
s ame
entity 


 

o

The
same
property
is
taxed
twice
when
it
should
be
taxed
only
once 


o

Both
 taxes
 are
imposed
 on
 the
 same
 property
 or
 subject
matter
 for
 the
 same
purpose 


o

Imposed
 by
 the
 same
 State,
 Government
 or
 taxing
 authority
 within
 the
 same
jurisdiction
 


o

During
 the
same
period 


Indirect
duplicate
taxation 
 ‐ 
opposite
of
direct
duplicate
taxation.
Where
the
tax
 liability
is
imposed
 on
 a
 certain
 person
 and
 the
 tax
 burden
is
 shifted
 to
 another.
 Examples: 


 

o

Tax
on
different
businesses
though
carried
on
in
the
same
factor y

o

Tax
on
a
business
or
occupation
and
a
tax
on
the
land
or
property

o

Real
estate
tax
on
tenements
and
dealer’s
tax
on
the
lease
of
said
property 


o

License
fees
and
taxes
on
the
same
business
or
occupation 


o

Local
taxes
and
licenses 


o

Tax
on
the
occupation
of
fish ing
and
tax
on
the
fishpond
itself 


Means
employed
to
avoid
Double
Taxation

 

Imposition
of
lower
tax
rates
 


 

o

On
dividend
income
earned
in
 the
Philippines
 by
a
non ‐ resident
 foreign
 corporation,
the
tax
is
15%,
not 
35%
(Sec.25b5B
of
the
Tax
code) 


o

Vanishing
 ded uction
 in
 the
 case
 of
 estate
 tax
 law
 transferred,
 in
 accordance
with
the
conditions
of
law 


 

Tax
credit
scheme 


 

o

For
value
added
tax 
(VAT) ,
where
the
tax
on
input
goods
are
deducted
fro
 taxes
of
output
goods 


o

For
 foreign
 tax
 credit,
 where
 the
 tax
 paid
 or
 the
 ma ximum
 allowable
 foreign
 tax
credit,
whichever
is
lower
is
deducted
 from
 the
 total
income
 tax
to
be
paid
(not
available
to
non ‐ resident
Filipinos 


 

In
 the
 case
 of
 non ‐ resident
 Filipinos,
 the
 tax
 relief
 comes
 in
 the
 form
 a
 reduced
 income
as
tax
basis,
which
is 
the
foreign
income
reduced
by
the
foreign
tax. 


Tax
Exemptions

 
 

It
is
a
grant
of
immunity,
express
or
implied,
to
particular
persons
or
corporations
 from
the
obligation
to
pay
taxes 


Kinds
of
Tax
Exemptions

Constitutional
Exemptions 
 ‐ 
immunities
 from
 taxat ion
which
originate
 from
 the
 Constitution 


Statutory
Exemptions 
 ‐ 
those
which
emanate
from
legislation 


Express
Exemptions 
 ‐ 
expressly
granted
by
organic
or
statute
law 


Implied
 Exceptions 
 ‐ 
 exist
 whenever
 particular
 persons,
 properties,
 excises
 are
 deemed
ex empt
from
tax
as
they
fall
outside
the
scope
of
the
taxing
power
 


Total
exemption 
 ‐ 
connotes
absolute
immunity 


Partial
Exemption 
 ‐ 
is
one
where
collection
of
a
part
of
the
tax
is
dispensed
with
 



 
 
 
 REGINA
IUSTITIAE 
 Jay ‐ Z 
 
 
 
 Sorore
Lex
Atheneum 

REGINA
IUSTITIAE 

Jay ‐ Z 

Sorore
Lex
Atheneum 

Principles
Governing
Tax
Exemptions 

Taxation
is
the
rule,
ta x
exemption
is
the
exception 

The
burden
of
proof
rests
upon
the
party
claiming
the
exemption
 

Proof
of
exemption
must
be
clear
and
convincing
proof
 

Tax
exemptions
are
strictly
construed
 

Con stitutional
grants
of
tax
exemption
are
self ‐ executing 

Tax
exemptions
are
personal 

Deductions
 for
 income
 tax
 partake
 the
 nature
 of
 tax
 exemptions,
 and
 must
 be

strictly
construed 

Quezon
 City
 v.
 ABS ­ CBN
 Broadcasting
 Corporation :
 Taxes
 are
 what
 civilized

peop le
 pay
 for
 civilized
 society.
 Thus,
 statutes
 granting
 tax
 exemptions
 are

construed
 strictissimi
juris 
against
the
taxpayer
and
liberally
in
favor
of
the
taxing

authority.
A
claim
of
tax
exemption
must
be
clearly
shown
and
based
on
language

in
law
too
plain 
to
be
mistaken 

Examples
of
Tax
Exemptions 

Tax
on
persons
 ‐ 
community
tax
shall
not
be
collected
from
transient
visitors
who

stay
in
the
Philippines
for
not
more
than
three
months 

Tax
on
property
 ‐ 
real
property
 tax
on
properties
of
 the
Government
shall
n ot
be

taxed,
provided
its
beneficial
use
is
not
transferred
to
a
taxable
person 

Tax
 on
 Excises
 and
 Privileges
 ‐ 
 sale
 or
 importation
 in
 their
 original
 state
 of

agricultural
and
marine
food
products
are
exempt
from
value
added
tax 

Tax ‐ exempt
Persons
Require d
to
keep
books
of
account 

Tax
exempt
persons
are
not
justified
in
the
non ‐ keeping
of
books
of
accounts
and

other
accounting
records 

Such
 shall
 be
 subject
 to
 examination
 by
 the
 Bureau
 of
 Internal
 Revenue
 for
 the

purposes
 of
 ascertaining
 compliance
 with
 the 
 conditions
 under
 which
 they
 have

been
granted
tax
exemptions
or
incentives,
and
their
tax
liability,
if
any 

Tax
Condonation
/
Remission 

Surigao
Consolidated
Mining
Co.,
Inc.
v .
CIR:
 The
condonation
of
a
tax
liability
is

in
 the
 nature
 of
 a
 tax
 exemption.
 Being
 so,
 it
 should
 be
 sustained
 only
 when

expressed
in
explicit
terms,
and
it
cannot
be
extended
beyond
the
plain
meaning
of

those
 terms.
 It
 is
 the
 universal
 rule
 that
 he
 who
 claims
 an
 exemption
 from
 his

share
of
the
common
burden
of
taxation
must
justify 
his
claim
by
showing
that
the

legislature
intended
to
exempt
him
by
words
too
plain
to
be
mistaken

 

Tax
Amnesty 

• CIR
 v.
 Marubeni
 Corporation :
 A
 tax
 amnesty
is
 a
 general
 pardon
 or
intentional

overlooking
by
the
State
of
its
authority
to
impose
penalties
o n
persons
otherwise

guilty
 of
 evasion
 or
 violation
 of
 a
 revenue
 or
 tax
 law.
 It
 partakes
 of
 an
 absolute

forgiveness
 or
waiver
of
the
government
of
its
right
to
collect
what
is
due
it
and
to

give
tax
evaders
who
wish
to
relent
a
chance
to
start
with
a
clean
 slate.
 

• A
 tax
 amnesty
 must
 be
 construed
 strictly
 against
 the
 taxpayer
 and
 liberally
 in

favor
of
the
taxing
authority 

• He
who
claims
an
amnesty
has
the
burden
of
justifying
his
claim
 


8





 





 TAXATION
I 
 




























 Abad
+
Vitug
Acosta
Reviewer
+
Case
Doctrines 



 Tax
Avoidance
and
Tax
Evasion 
 •

Tax
Avoidance
and
Tax
Evasion

Tax
avoidance 


o

o

o

Minimization
of
tax
liabiliti es
thru
legal
means 


Example:
donation
of
assets
to
an
educational
institution 


Requisites
for
exemption: 


Donee
institution
is
a
school,
college,
or
university 


It
 is
 incorporated
 as
 a
 non ‐ stock,
 non ‐ profit
 entity
 paying
 no
 dividends 


It
is
governed
by
trustee s
who
receive
no
compensation 


o

o

All
its
income
is
devoted
to
the
accomplishment
and
promotion
 of
the
purposes
enumerated
in
the
articles
of
incorporation 


Not
 more
 than
 30%
 of
 the
 gift
 shall
 be
 used
 by
 the
 donee
 for
 administrative
purposes 


Not
forbidden
in
Ph ilippine
jurisdiction 


Delpher
 Trades
 Corporation
 v.
 I AC:
 The
 legal
 right
 of
 a
 taxpayer
 to
 decrease
 the
amount
 of
what
 otherwise
could
be
his
 taxes
 or
altogether
 avoid
them,
by
means
which
the
law
permits,
cannot
be
doubted.
The
law
 provides
that
no
gain
or 
loss
shall
be
recognized
if
a
person
exchanges
his
 property
 for
shares
of
stock
in
a
corporation.
Consequently,
such
person
 will
not
be
liable
 for
capital
gains
 tax.
Such
exchange
is
a
 form
 of
estate
 planning,
 which
 is
 the
 disposition
 of
 property
 with
 the 
 purpose
 of
 maximizing
 the
 value
 of
an
estate
 thru
 reduction
 of
expenses
and
 taxes.
 Estate
planning
is
an
example
of
tax
avoidance. 


Tax
Evasion 


o

Minimization
 of
 tax
 liabilities
 thru
 illegal
 means
 and
 when
 availed
 of,


usually
 subjects
 the
 taxpayer
 to
 further 
 or
 additional
 civil
 or
 criminal
 liabilities
 


o

Elements: 


The
end
to
be
achieved:
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 


An
accompanying
state
of
mind,
which
is
desc ribed
as
being
evil,
 in
bad
faith,
willful,
or
deliberate 


A
course
of
action
or
failure
of
action
which
is
unlawful
 


o

CIR
v.
The
Estate
of
Benigno
Toda :
 Where
a
corporation
sells
property
to
 an
individual,
who
sold
the
property
to
another
corporation
on
the 
same
 day,
 the
 transaction
 is
 deemed
 a
 form
 of
 tax
 evasion.
 The
 intermediary
 transaction
 sought
 to
 decrease
 the
 tax
 supposedly
 payable
 by
 the


corporation
at
35%,
by
making
it
appear
that
the
gain
on
the
sale
pertain


to
the
individual,
taxable
at
5 ‐ 32%. 


o

Fra ud
 is
 a
 serious
 charge
 and
 must
 be
 proved
 by
 clear
 and
 convincing
 evidence
 


o

Fraudulent
v.
False
Return 


Aznar
v.
Court
of
Tax
Appeals :
 Fraud
cannot
be
presumed
but
 must
 be
 proven.
 Fraudulent
 intent
 could
 not
 be
 deduced
 from
 mistakes,
 however
 frequent
 they
 m ay
 be,
 especially
 if
 such
 mistakes
 emanate
 from
 erroneous
 entries
 or
 erroneous



 
 
 
 REGINA
IUSTITIAE 
 Jay ‐ Z 
 
 
 
 Sorore
Lex
Atheneum 

REGINA
IUSTITIAE 

Jay ‐ Z 

Sorore
Lex
Atheneum 

classification
 of
 items
 in
 accounting
 methods
 utilized
 for

determination
of
 tax
liabilities.
A
 false
 return
implies
deviation

from
 the
 truth,
whether
intentional
or
not.
A
 fraud ulent
 return

implies
 intentional
 or
 deceitful
 entry
 with
 intent
 to
 evade
 the

taxes
due.
 

Prescription
in
Tax
Cases 

General
Rule:
Prescription
applies
in
tax
cases 

Ratio
 ( Republic
 of
 the
 Philippines
 v.
 Ablaza ):
 It
is
 beneficial
 to
 the
 government

because
 ta x
 officers
 would
 be
 forced
 to
 act
 promptly
 in
 making
 the
 assessment,

and
 to
 the
 citizens
 because
 after
 the
 lapse
 of
 the
 period
 of
 prescription,
 citizens

would
have
a
feeling
of
security
against
unscrupulous
tax
agents.
 

Exception:
 When
 the
 suit
 is
 not
 for
 the
 recovery
 of
 internal
 revenue
 taxes

erroneously,
excessively,
illegally,
or
wrongfully
collected.
 

o
CIR
 v.
 Philippine
 National
 Bank :
 PNB’s
 tax
 credit
 arose
 from
 an

advanced
payment
to
be
used
for
the
settlement
of
future
tax
obligations.

However,
 the
 tax 
 credit
 was
 not
 utilized
 because
 it
 did
 not
 incur
 tax

liabilities
 due
 to
its
 financial
 losses.
 Absent
 provisions
in
 the
 law,
 a
 10 ‐
year
 prescriptive
 period
 shall
 apply
 (according
 to
 the
 Civil
 Code
 Art.

1144,
obligations
created
by
law)