CONSTITUTIONAL LIMITATIONS those limitations on the state's exercise of the

taxing power specifically provided by the particular provisions of the Philippine

Constitution.
1. DUE PROCESS OF LAW
-There must be a valid law
-Tax measure should not be unconscionable and unjust as to amount to
confiscation of property.
-Tax statute must not be arbitrary as to find no support in the Constitution.
*Sec. 1 Art. III 1987 No person shall be deprived of life, liberty, or property without
due process of law, nor shall any person be denied the equal protection of the laws.
2. EQUAL PROTECTION OF THE LAWS
*Right to be treated under like circumstance.
*Nor shall any person be denied equal protection of law.
-Equal protection of the law is similar to the right to due process of law, but
specifically applies to fairness through equal treatment.
3. UNIFORMITY AND EQUITY IN TAXATION
-Same class, same rate
-Classifications of taxpayers, subject or items to be taxed.
*Sec. 28 (1) Art. III 1987
4. NON-IMPRISONMENT FOR NON-PAYMENT OF DEBT OR POLL TAX
- In other words, no one could be compelled to pay a debt under pain of
criminal sanctions (estafa is a different matter). No one could also substitute the
payment of debt through imprisonment or other criminal penalties (subsidiary
imprisonment is also another matter).
5. NON IMPAIRMENT OF OBLIGATIONS OF CONTRACTS
- No law impairing the obligation of contracts shall be passed. [Section 10,
Article III, Constitution]
- To impair is to damage or to harm and obligation referred to is the duty or
commitment imposed upon by the valid contract entered into by
the contracting parties. Applied to tax, a new tax law shall not be passed in such a
way as to impair or to prejudice the obligation of a contracting party by virtue of a
contract entered into with the state. This is to give due respect to the contractual
terms the state is bind with respect to its contract with private individuals.
A theoretical example of this is, if an exemption is granted by the state by virtue of
a contract with a private entity for which a valuable consideration is involved, then
no new law could later be passed to prejudice said exemption.
6. NON-INFRINGEMENT OF RELIGIOUS FREEDOM (Separation of Church and
State)
- No law shall be made respecting an establishment of religion, or prohibiting
the free exercise thereof. The free exercise and enjoyment of religious profession
and worship, without discrimination or preference, shall forever be allowed. No
religious test shall be required for the exercise of civil or political rights. [Section 5,
Article III, Constitution]
7.
EXEMPTION
OF
EDUCATIONAL,
CHARITABLE,
AND
RELIGIOUS
INSTITUTIONS
-The state acknowledges the valuable contribution of educating its
inhabitants, benefits brought about by charities on various programs for general
welfare, and the religious well-being of its inhabitants to the success and
development of the society as a whole. Thus, to encourage private individuals and
entities for the furtherance of this objectives, the constitution provided certain tax
exemptions from income, real property and customs duties and taxes under specific
circumstances and limitations. There must be showing of an actual, direct, and

exclusive use and furtherance of such objectives in order to be exempt to prevent

abuse and capitalization of such objectives to escape from tax.
8. CONCURRENCE OF THE MAJORITY MEMBERS OF CONGRESS IN GRANTING
TAX EXEMPTION
-Tax exemptions are immunity from a particular tax that is being imposed to
others similarly situated. The more exemptions, the less collections. Accordingly, in
order to control and to see to it that only those necessarily entitled must be
provided exemptions, the constitution require that such grant of tax exemption shall
be concurred by the vote of the majority of the membership in the Congress. It
should be noted that Philippines is on a bicameral congress, the senate and the
lower house, thus, granting tax exemptions are not quite easy to legislate.
9. NON-IMPAIRMENT OF THE JURISDICTION OF THE SUPREME COURT ON
TAX CASES
-This is in furtherance of the principles of check and balances. The jurisdiction
of the lower courts are based on the mercy of the laws passed for the purpose, thus,
may be modified and revised from time to time. However, in the case of the
Supreme Court, no law can take its power to become the final arbiter of tax cases.
10. VETO POWER OF THE PRESIDENT IN TAX BILLS
-Generally, on bills passed by Congress, the President is empowered to either
approve or disapprove a bill as a whole. If approved or not acted upon within a
certain period of time, it becomes a law, and if vetoed, it does not become a law in
its entirety. Tax bills however, can be granted either fully or partially. If a bill is
granted partially, provisions which are approved become part of the law while those
provisions vetoed upon become ineffective.
While the power does not emanate from a grant, as the same is necessarily inherent
upon the existence of the state, exercise of the power is subject to those limitations
inherent upon it and those expressly provided for by the Constitution as follows:
Inherent limitations. These limitations are those limitations that emanates from
the very nature of the power of taxation. They are very basic and are built-in with
the power. Some may be similar to the constitutional limitation but the
constitutional limitation seems to be supreme as they are the most specific, thus,
specifically intended to rule the application or exercise of the power of taxation.
Hereunder are the INHERENT LIMITATIONS:
Levy for public purpose. To levy a tax means to impose or to charge or to
collect a tax from those to whom it is addressed. Technically however, to levy is to
pass on laws or ordinances imposing a tax or duty upon specific group of taxpayers.
Under this concept, the impelling reason for the imposition of the tax must be the
welfare of the public, in general. This follows that the proceeds from such imposition
shall inure to the benefit of the public.
Non-delegation of legislative power to tax. To delegate is to pass on or to
entrust to another a certain duty or obligation. Power to tax is lodged with the
legislative department. To my mind, this is because the legislative branch is
theoretically the representative of the people and they are directly aware and in
common contact with the instances and situations of their districts making them the
ones knowledgeable of how best their district could be affected by the new taxes
imposed. Likewise, this is premised on the legal maxim delegate potestas, non
delegari potest which means, what has been delegated cannot be redelegated so as not to hamper the objective of the delegation. However,
there are at least two (2) instances where delegation is possible (a) delegation to

the President of some tariff powers, and (b) Local government units fiscal
autonomy for their self serving needs.
Exemption of government entities. Government is the people, by (not BUY)
the people, for (not POOR) the people. Government exists for the people and
whatever amount it makes, came from the people and such amount it use to
finance its various activities to address the general welfare of its inhabitants. It is
not constituted to engage in any trade or business but to deliver basic services and
serve everyone within. Analytically, taxing the government itself will not generate
more revenue. The money will only rotate and so no effect, at all, would be made.
Suffice it to say however, there exist no express prohibition
International comity has something to do with the friendly interaction and
participation of different estates. This adheres to some amount of submission and
compliance of certain international rules and covenants for mutual benefits and
enjoyment of the states and its inhabitants. Bilateral agreements, conventions and
international treaties fall under this category.
Territorial jurisdiction relates to the area of jurisdiction and responsibility of a
particular estate. Independent states power of taxation is generally confined only
within its jurisdiction to give due respect and as courtesy to other states. A state, as
a rule, can only impose and implement tax laws and rules within its jurisdiction in
accordance with its wishes. Outside its jurisdiction, it is without power to do so. But
then, it can tax on citizens or entities of other states doing a trade or business or
deriving income within the jurisdiction of its state. See the case of Spratley
islands for better picture. Issue on who owns spratley had long been outstanding for
each party claims jurisdiction in accordance with its of the parties belief that it
rightfully belongs to it.
Business Taxes
The form of business you operate determines what taxes you must pay and how you
pay them. The following are the five general types of business taxes.

Income Tax

Estimated Taxes

Self-Employment Tax

Employment Taxes

Excise Tax
Income Tax
All businesses except partnerships must file an annual income tax
return. Partnerships file an information return. The form you use depends on how
your business is organized. Refer to Business Structures to find out which returns
you must file based on the business entity established.
Income Tax is a tax on a person's income, emoluments, profits arising from
property, practice of profession, conduct of trade or business or on the pertinent
items of gross income specified in the Tax Code of 1997 (Tax Code), as amended,
less the deductions and/or personal and additional exemptions, if any, authorized
for such types of income, by the Tax Code, as amended, or other special laws.
Who Are Required To File Income Tax Returns
Individuals

Resident citizens receiving income from sources within or outside the

Philippines
o employees deriving purely compensation income from 2 or more employers,
concurrently or successively at anytime during the taxable year
o employees deriving purely compensation income regardless of the amount,
whether from a single or several employers during the calendar year, the
income tax of which has not been withheld correctly (i.e. tax due is not equal
to the tax withheld) resulting to collectible or refundable return
o self-employed individuals receiving income from the conduct of trade or
business and/or practice of profession
o individuals deriving mixed income, i.e., compensation income and income
from the conduct of trade or business and/or practice of profession
o individuals deriving other non-business, non-professional related income in
addition to compensation income not otherwise subject to a final tax
o individuals receiving purely compensation income from a single employer,
although the income of which has been correctly withheld, but whose spouse
is not entitled to substituted filing
o marginal income earners

Non-resident citizens receiving income from sources within the Philippines

Aliens, whether resident or not, receiving income from sources within the
Philippines
Corporation shall include partnerships, no matter how created or organized.
Domestic corporations receiving income from sources within and outside the
Philippines
Foreign corporations receiving income from sources within the Philippines
Estates and trusts engaged in trade or business

Estimated tax
Generally, you must pay taxes on income, including self-employment tax (discussed
next), by making regular payments of estimated tax during the year. For additional
information, refer toEstimated Taxes.
Self-Employment Tax
Self-employment tax (SE tax) is a social security and Medicare tax primarily for
individuals who work for themselves. Your payments of SE tax contribute to your
coverage under the social security system. Social security coverage provides you
with retirement benefits, disability benefits, survivor benefits, and hospital
insurance (Medicare) benefits.
Generally, you must pay SE tax and file Schedule SE (Form 1040) if either of the
following applies.

If your net earnings from self-employment were $400 or more.

If you work for a church or a qualified church-controlled organization (other

than as a minister or member of a religious order) that elected an exemption
from social security and Medicare taxes, you are subject to SE tax if you receive
$108.28 or more in wages from the church or organization.
Note: There are special rules and exceptions for aliens, fishing crew members,
notary public, state or local government employees, foreign government or
international organization employees, etc. For additional information, refer to SelfEmployment Tax.
Employment Taxes
When you have employees, you as the employer have certain employment tax
responsibilities that you must pay and forms you must file. Employment taxes
include the following:

Social security and Medicare taxes

Federal income tax withholding

Federal unemployment (FUTA) tax

For additional information, refer to Employment Taxes for Small Businesses.

Excise Tax
BASIC CONCEPT:

Excise Tax is a tax on the production, sale or consumption of a commodity in

a country.

APPLICABILITY:

On goods manufactured or produced in the Philippines for domestic sale or

consumption or for any other disposition; and
On goods imported.

TYPES OF EXCISE TAX:

Specific Tax refers to the excise tax imposed which is based on weight or
volume capacity or any other physical unit of measurement
Ad Valorem Tax refers to the excise tax which is based on selling price or
other specified value of the goods/articles

MANNER OF COMPUTATION:

Specific Tax = No. of Units/other measurements x Specific Tax Rate

Ad Valorem Tax = No. of Units/other measurements x Selling Price of any
specific value per unit x Ad Valorem Tax Rate

MAJOR CLASSIFICATION OF EXCISABLE ARTICLES AND RELATED CODAL

SECTION:
1. Alcohol Products (Sections 141-143)
a. Distilled Spirits (Section 141)
b. Wines (Section 142)
c. Fermented Liquors (Section 143)
2. Tobacco Products (Sections 144-146)
a. Tobacco Products (Section 144)
b. Cigars & Cigarettes (Section 145)
c. Inspection Fee (Section 146)
3. Petroleum Products (Section 148)
4. Miscellaneous Articles (Section 149-150)
a. Automobiles (Section 149)
b. Non-essential Goods (Section 150)
5. Mineral Products (Sections 151)
PERSONS LIABLE TO EXCISE TAX:
In General:
a. On Domestic or Local Articles

Manufacturer

Producer
Owner or person having possession of articles removed from the place of
production without the payment of the tax

b. On Imported Articles

Importer
Owner
Person who is found in possession of articles which are exempt from excise
taxes other than those legally entitled to exemption

Others:
On Indigenous Petroleum

Local Sale, Barter or Transfer

o First buyer, purchaser or transferee
Exportation
o Owner, lessee, concessionaire or operator of the mining claim

TIME OF PAYMENT:
In General

On domestic products
o Before removal from the place of production
On imported products
o Before release from the customs' custody