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TAXATION LAW I

Prof. Geoff Lyn D. San Agustin


First Semester, SY 2016-2017
Manuel S. Enverga University Foundation
Enverga Law School

I.

General Principles of Taxation


A. Definition and concept of taxation
Commissioner v. Algue, 158 SCRA 9 (1988)
B. Nature of taxation
C. Characteristics of taxation
D. Power of taxation compared with other powers
1. Police power
2. Power of eminent domain
E. Purpose of taxation
1. Revenue-raising
Osmea v. Orbos, 220 SCRA 703 (1993)
PAL v. Edu, 164 SCRA 320 (1988)
2. Non-revenue/special or regulatory
Republic v. Bacolod Murcia, 12 SCRA 632 (1966)
Tio v. Videogram Regulatory Board, 151 SCRA 208 (1987)
Caltex v. Commissioner, 208 SCRA 754 (1992)
F. Principles of sound tax system
1. Fiscal adequacy
2. Administrative feasibility
3. Theoretical justice
Chavez v. Ongpin, 186 SCRA 331 (1990)
G. Theory and basis of taxation
1. Lifeblood theory
2. Necessity theory
Phil. Guaranty Co., Inc. v. CIR, GR No. L-22074, April 30, 1965
Commissioner v. Algue, supra
3. Benefits-protection theory (Symbiotic relationship)
Gomez v. Palomar, GR No. L-23645, October 29, 1968
Lorenzo v. Posadas, 63 Phil 353 (1937)
H. Doctrines in taxation

1. Prospectivity of tax laws


2. Imprescriptibility
3. Double taxation
a. Strict sense
b. Broad sense
Villanueva v. City of Iloilo, 26 SCRA 528 (1968)
c. Constitutionality of double taxation
City of Baguio v. De Leon, 25 SCRA 528 (1968)
Pepsi Cola Bottling Co. v. City of Butuan, 24 SCRA 788 (1968)
d. Modes of eliminating double taxation
4. Escape from taxation
a. Shifting of tax burden
i. Ways of shifting the tax burden
ii. Taxes that can be shifted
iii. Meaning of impact and incidence of taxation
b. Tax avoidance
Delpher Traders Corp. v. IAC, 157 SCRA 349 (1988)
Yutivo v. CTA, 1 SCRA 160 (1961)
c. Tax evasion
Republic v. Gonzales, 13 SCRA 633 (1965)
5. Exemption from taxation
a. Meaning of exemption from taxation
Greenfield v. Meer, 77 Phil 394 (1946)
b. Nature of tax exemption
Tolentino v. Sec. of Finance (1994)
Maceda v. Macaraig, 197 SCRA 771 (1991)
Philippine Acetylene v. Com., 20 SCRA 1056 (1967)
Wonder Mech. v. CTA, 64 SCRA 555 (1975)
c. Kinds of tax exemption
Atlas Fertilizer v. Commissioner, 100 SCRA 556 (1980)
Commissioner v. Phil. Ace Line, 25 SCRA 913 (1968)
Caltex v. Com., 208 SCRA 751 (1992)
d. Rationale/grounds from exemption
Tolentino v. Sec. of Finance (1994)
Maceda v. Macaraig, supra
Davao Light v. Com., 22 SCRA 122 (1972)

Tam Kim Kee v. CTA, 7 SCRA 122 (1963)


NPC v. Presiding Judge, 190 SCRA477 (1930)
Abra Valley College v. Aquino (1988)
Lung Center of the Philippines vs. Quezon City (2004)
e. Revocation of tax exemption
6. Compensation and set-off
7. Compromise
8. Tax amnesty
a. Definition
b. Distinguished from tax exemption
Republic v. IAC, 196 SCRA 335 (1991)
People v. Castaeda, 165 SCRA 327 (1988)
Pascual v. Com., 166 SCRA 560 (1988)
Com. v. Marubeni, G.R. No. 137377, December 18, 2001
9. Construction and interpretation of:
a. Tax laws
i. General rule
ii. Exception
b. Tax exemption and exclusion
i. General rule
Commissioner v. CA, G.R. No. 115349, April 18, 1997
Misamis Oriental Asso. v. Dept. of Finance, 238 SCRA 63
(1994)
Com. of Customs v. Phil. Acetylene Co., 39 SCRA 70 (1971)
Manila Electric Company v. Tabios, 67 SCRA 352 (1975)
Benguet Corporation v. CBAA, 210 SCRA 579 (1992)
PLDT v. City of Davao (2003)
ii. Exceptions
Maceda v. Macaraig, 196 SCRA 771 (1991)
Maceda v. Macaraig, 223 SCRA 217 (1993)
c. Tax rules and regulations
d. Penal provisions of tax laws
e. Non-retroactive application to taxpayers
i. Exceptions
I. Scope and limitation of taxation
1. Inherent limitations
Roxas v. CTA, 23 SCRA 276 (1968)

a. Public Purpose
Pascual v. Secretary of Public Works, 110 Phil 331 (1960)
Caltex v. Commissioner, supra
Tio v. Videogram Regulatory Board, 151 SCRA 208 (1987)
Gaston v. Republic Planter, 158 SCRA 626 (1988)
b. Inherently legislative
i. General rule
Tan v. Del Rosario, 237 SCRA 324 (1994)
Sison v. Ancheta, 130 SCRA 654 (1984)
Kapatiran v. Tan, 163 SCRA 372 (1988)
ii. Exceptions
1. Delegation to local governments
Sec. 5, Art. X, Phil. Constitution
Book II, Local Government Code
Basco v. PAGCOR, 197 SCRA 52 (1991)
NPC v. City of Cabanatuan, G.R. No. 149110, April 9, 2003
2. Delegation to the President
Sec. 28(2), Art. VI, Phil. Constitution
Sec. 401, Tariff and Customs Code
Garcia v. Executive Secretary, 210 SCRA 219 (1992)
3. Delegation to administrative agencies
Maceda v. Macaraig, 197 SCRA 771 (1991)
Maceda v. ERB, 192 SCRA 365 (1990)
c. Territorial
i. Situs of taxation
1. Meaning
2. Situs of income tax
a. From sources within the Philippines
Commissioner v. BOAC (1987)
CIR v. Japan Air Lines, Inc. (1991)
b. From sources without the Philippines
Wells Fargo v. Collector (1940)
3. Situs of property taxes
a. Taxes on real property
b. Taxes on personal property
4. Situs of excise tax
a. Estate tax
b. Donors tax
5. Situs of business tax

a. Sale of real property


b. Value-Added Tax (VAT)
d. International comity
Sec. 2, Art. II, Phil. Constitution
Sec. 159, Local Government Code
e. Exemption of government entities, agencies and instrumentalities
Sec. 24 (c), NIRC
Maceda v. Macaraig, supra
2. Constitutional limitations
a. Provisions directly affecting taxation
i. Prohibition against imprisonment for non-payment of poll tax
Sec. 20, Art. III, Phil. Constitution
Community tax v. Poll tax
Sec. 156-164, Local Government Code
ii. Uniformity and equality of taxation
Sec. 28 (1), Art. VI, Phil. Constitution
-

Adoption of a progressive system of taxation


Tolentino v. Sec. of Finance, supra

Valid classification of taxpayers/subject or items to be


taxed
Pepsi Cola v. City of Butuan, 24 SCRA 787 (1968)
Manila Race Horse v. Dela Fuente, 88 Phil 60 (1951)
Eastern Theatrical v. Alfonso, 83 Phil 852 (1949)
Shell v. Municipality of Cordova, 94 Phil 387 (1954)

iii. Grant by Congress of authority to the president to impose


tariff rates
iv. Prohibition against taxation of religious, charitable entities,
and educational entities
Sec. 28 (3), Art. VI, Phil. Constitution
Abra Valley College v. Aquino, 162 SCRA 106 (1988)
Lung Center v. Quezon City, G.R. No. 144104, June 29,
2004
v. Prohibition against taxation of non-stock, non-profit
institutions
Sec. 4 (3), Art. XIV, Phil. Constitution
Sec. 4 (4), Art. XIV, Phil. Constitution

Sec. 28 (3), Art. VI, Phil. Constitution


Sec. 24 (b), NIRC
vi. Majority vote of Congress for grant of tax exemption
Sec. 28 (4), Art. VI, Phil. Constitution
vii. Prohibition on use of tax levied for special purpose
Sec. 29, Art. VI, Phil. Constitution
viii. Presidents veto power on appropriation, revenue, tariff bills
Gonzales v. Macaraig, 191 SCRA 452 (1990)
ix. Non-impairment of jurisdiction of the Supreme Court
Sec. 2 and 5 (b), Art. III, Phil. Constitution
San Miguel Corp. v. Avelino, 89 SCRA 70 (1979)
x. Grant of power to the local government units to create its
own sources of revenue
xi. Flexible tariff clause
xii. Exemption from real property taxes
xiii. No appropriation or use of public money for religious
purposes
b. Provisions indirectly affecting taxation
i. Due process
Tan v. Del Rosario, 237 SCRA 324 (1994)
Sec. 1, Art. III, Phil. Consitution
Sison v. Ancheta, 130 SCRA 654 (1984)
ii. Equal protection
Sec. 1, Art. III, Phil. Constitution
Sison v. Ancheta, supra
Villegas v. HiuChiong Tsai Pao, 86 SCRA 270 (1978)
Tan v. Del Rosario, supra
iii. Religious freedom
Sec. 5, Art. III, Phil. Constitution
American Bible Society v. City of Manila, 101 Phil 386
(1957)
Tolentino v. Sec. of Finance, supra
iv. Non-impairment of obligations of contracts

Sec. 10, Art. III, Phil. Constitution


Sec. 11, Art. XII, Phil. Constitution
Tolentino v. Sec. of Finance, supra
*** Validity of a tax measure of expenditure of taxes taxpayers suit
Lozada v. Com., 120 SCRA 337 (1983)
Maceda v. Macaraig, 197 SCRA 771 (1991)
Gonzales v. Marcos, 65 SCRA 624 (1975)
J. Stages of taxation
1. Levy
2. Assessment and collection
3. Payment
4. Refund
K. Definition, nature and characteristics of taxes
L. Requisites of a valid tax
M. Tax as distinguished from other forms of exactions
1. Tariff
2. Toll
3. License fee
4. Special Assessment
5. Debt
N. Kinds of taxes
1. As to object
a. Personal, capitation, or poll tax
b. Property tax
c. Privilege tax
Villanueva v. City of Iloilo, 26 SCRA 587 (1968)
Com. V. CA, G.R. No. 104151, March 10, 1995, 242 SCRA 289
Ass. Of Customs Brokers v. Municipal Board, 93 Phil 106 (1953)
2. As to burden or incidence
a. Direct
b. Indirect
Sec 1, RA 7716
Philippine Acetylene v. Commissioner, 20 SCRA 1056 (1967)
Maceda v. Macaraig, 197 SCRA 771 (1991)
Maceda v. Macaraig, 223 SCRA 217 (1993)
Com. V. John Gotamco, 148 SCRA 36 (1987)
3. As to tax rates
a. Specific
b. Ad valorem
c. Mixed
We Wa Yu v. City of Lipa, 99 Phil 575 (1956)

4. As to purposes
a. General or fiscal
b. Special, regulatory or sumptuary
5. As to scope or authority to impose
a. National internal revenue taxes
b. Local real property tax, municipal tax
Benguet Corporation v. CBAA, 210 SCRA 579 (1993)
6. As to graduation
a. Progressive
b. Regressive
c. Proportionate

***

Philippine Tax Laws and Regulations


A. Nature of Laws
B. Sources of Tax Laws
a. Constitution
b. National Internal Revenue Code
c. Tariff and Customs Code
d. Local Government Code
e. Local tax ordinance
f. Tax treaties/international agreements
g. Special laws
h. Decisions of the SC/CTA
i. Revenue rules and regulations/ Administrative rulings and opinions
Sec. 245, Tax Code
Secs. 511 and 519 and the Customs Code
Misamis Oriental v. Department of Finance, G.R. No. 108524, November
10, 1994
1. Validity of revenue rules and regulations
Tan v. Del Rosario, 237 SCRA 324 (1994)
Commissioner v. CA, 240 SCRA 368 (1995)
Phil. Petroleum Corp. v. Municipality of Pililla, 198
SCRA 82 (1991)
Umali v. Estanislao, 209 SCRA 446 (1992)
La Suerte v. CTA 134 SCRA 29 (1985)
2. BIR Rulings
C. Interpretation of Tax Laws
i.

Rules when legislative intent is clear


Umali v. Estanislao, supra
Lorenzo v. Posadas, supra

ii. Rule when there is doubt


Collector v. La Tondea, 5 SCRA 665 (1962)
D. Application of Tax Laws/Revenue Regulations and Rulings
i.

General
Art. 2, Civil Code
Umali v. Estanislao, supra
Lorenzo v. Posadas, supra
Hijo Plantation v. CB, 164 SCRA 192 (1988)
Commissioner v. Filipinas Cia de Seguros, 107 Phil 1055 (1965)
Cebu Portland v. Collector, 25 SCRA 789 (1968)
Commissioner v. Rio Tuba Nickel Mining, 202 SCRA 137 (1991)

ii. Application of revenue rules and regulations/rulings


Tuazon v. CA, 212 SCRA 739 (1992)
Com. v. Mega General, 166 SCRA (1988)
ABS-CBN v. CTA, 108 SCRA 143 (1992)
BPI c. Commissioner, G.R. No. 144653, August 28, 2001
iii. Effectivity and validity provisions of tax laws
E. Mandatory and directory provisions of tax laws
Roxas v. Rafferty, 37 Phil 958 (1918)
Aragon v. George, 85 Phil 246 (1949)
Pecson v. CA, 222 SCRA 580 (1993)
***

Tax Administration and Enforcement


A.
B.
C.
D.

***

Bureau of Internal Revenue


Bureau of Customs
Local Government units
Other government agencies

Tax Remedies
A. Remedies to the Government
B. Remedies of Taxpayers

Prepared based on the Coverage of 2015 Bar Examination with inclusion of topics Philippine Tax
Laws and Regulations, Tax Administration and Enforcement, and Tax Remedies.