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Aculeus Iustitia
Atty. Balan: of the tax laws and ordinances. Applied to
taxation, due process mandates that there
Constitutional Limitations: 7 Questions should be a valid law imposing a tax to a
particular taxpayer, and should the taxpayer
Cases on: failed to pay the same, it must be given each
and every opportunity to explain itself and justify.
1. Non-stock, Non-profit educational instuttions No law imposing a tax, then the taxpayer shall
not be collected such tax. On the other hand,
2. Non impairment of contracts
granting that the taxpayer failed to pay in full but
3. Due Process was not issued as assessment notice informing
the facts and the law of the assessment, still, the
4. Equal Protection taxpayer could not be held to pay. These are the
essence of due process. The taxing authority,
5. Exemption of charitable institutions while implementing the necessary mandates of
its office must give due respect to the
established procedures the way it works in an
organized society.
Constitutional Limitations:
This post is a sequel to the limitations of the
taxing power of the state. This time let us b. Equal protection of law. "...nor shall any
proceed to the CONSTITUTIONAL person be denied equal protection of law". Equal
LIMITATIONS - those limitations on the state's protection relates to how a particular tax
exercise of the taxing power specifically measure or ordinance is being applied to
provided by the particular provisions of the persons or class of persons similarly situated.
Philippine Constitution. Thus, if two entities falling on the same
classification shall be taxed similarly. Example, if
1. Due process of Law an ordinance imposes a tax on technicians and
2. Equal Protection of Law it happened that in a locality there was a single
3. Non-Imprisonment for non-payment of technician, such technician cannot complain for
debt or poll tax unequal application because the ordinance is
4. Non-impairment of obligations of made applicable to all technicians belonging to
contracts the same class.
5. Rule of taxation shall be uniform and
equitable
6. Separation of church and state
7. Exemption of charitable, educational, c. Non-imprisonment for non-payment of
and religious institutions debt or poll tax. Debt refers to a civil obligation
8. Concurrence of the majority members of that is payable in money or in kind, while poll tax
Congress in granting tax exemption or community tax refers to an charge or
9. Non-impairment of the jurisdiction of the imposition administered by the local government
Supreme Court on tax cases unit (LGU) where the taxpayer is located. The
10. Veto power of the President in tax bills prohibition admits the fact of inequality of
distribution of wealth in the society and provides
for instances in extreme poverty. This is likewise
in furtherance of the basic doctrine in civil law
a. Due process of law. As provided for, no that civil liability does not put the person liable
person shall be deprived of life, liberty or behind bars. Applied to tax, while poll tax is a
property without due process of law. This covers basic mandate in the Local Government Code,
two types: substantive, and procedural. its non-payment does not entitle imprisonment.
Substantive due process relates to the
circumstances and procedures in the passage of
tax laws and ordinances, while the other relates
to the procedural aspects in the implementation
a. the same property or subject matter is (1) That there will be a disbursement of
taxed twice when it should be taxed only once. funds which came from revenues, where
such disbursement is illegal or not
b. both taxes are levied for the same permitted by law; and
purpose (2) That the person suffers direct harm or
injury because of the first requisite
c. imposed by the same taxing authority
FORMS OF ESCAPE
FROM TAXATION (3) TRANSFORMATION the
manufacturer or producer upon whom the tax
has been imposed, fearing the loss of his market
(1) SHIFTING the process by which the if he should add the tax to the price, pays the tax
tax burden is transferred from the statutory and endeavors to recoup himself by improving
taxpayer (impact of taxation) to another (incident his process of production, thereby turning out his
of taxation) without violating the law. units at a lower cost.
KINDS OF SHIFTING
a. Forward shifting- when burden of (5) TAX EVASION use by the taxpayer of
tax is transferred from a factor of illegal or fraudulent means to defeat or lessen
production through the factors of the payment of the tax.
distribution until it finally settles on
the ultimate purchaser or consumer
CASE: Republic v. Gonzales
Facts: Defendant-appellant, Blas Gonzales is a
b. Backward shifting- when burden is private concessionaire in the US military Base at
transferred from consumer through factors of Clark Field, Angeles City, who is engaged in the
distribution to the factors of production manufacture of furniture and, per agreement
with base authorities, supplied them with his
c. Onward shifting- when the tax is
manufactured articles.
shifted 2 or more times either forward or
backward The BIR discovered that for the years 1946-47,
appellant have undeclared income for the two
years causing deficiency in its tax dues. Despite
the demand of the BIR to pay its tax due,
(2) CAPITALIZATION a mere increase in appellant failed to do so. In defense, appellant
the value of the property is not income but claim that as a concessionaire in an American
merely an unrealized increase in capital. No Air Base, he is not subject to Philippine Tax laws
income until after the actual sale or other pursuant to the US-Phil. Military Bases
disposition of the property in excess of its Agreement.
original cost.
Issue: Is appellant is exempt from taxes?
EXCEPT: if by reason of appraisal, the cost Ruling: No. A Filipino concessionaire in an
basis of property increased and the resultant American Air Base is subject to Philippine
basis is used as the new tax base for purposes Income Tax laws under the US-Phil Military
of computing the allowable depreciation Bases Agreement. Non in the provisions of the
1. If the laws themselves povide for their Case on Non-retro activity of BIR Rulings:
retoractivity (Art. 4 Civil Code).
Question: Whether pawnshops included in the
2. If the laws are remedial in nature.
term lending investors for the purpose of
3. If the statute is penal in nature, provided: imposing the 5% percentage tax under the
NIRC.
a. It is favorable to the accused or convict.
Answer:
b. The accused or convict is not a habitual
delinquent as defined in Art. 22 of the Revised No.
Penal Code.
The court held that even though the RMOs No
4. If the laws are of an emergency nature and were issued in accordance with the power of the
are authorized by the police power of the CIR, they cannot issue administrative rulings or
government. (Santos vs. Alvarez 44 O.G. 4259) circulars not consistent with the law sought to be
applied. It should remain consistent with the law
5. If the law is curative (necessarily retroactive they intend to carry out. Only Congress can
for the precise purpose to cure errors or repeal or amend the law.
irregularities). This kind of law to be valid must
not impair vested rights nor affect final In the NIRC, the term lending investor includes
judgments. (Frivaldo vs. Comelec and Lee G.R. all persons who make a practice of lending
120295, June 28, 1996) money for themselves or others at
interest. A pawnshop, on the other hand, is
Construction / Interpretation of tax laws:If the defined under Section 3 of P.D. No. 114 as a
question presented in the interpretation of a tariff person or entity engaged in the business of
law is one of doubt, the doubt would be resolved lending money on personal property delivered
in favor of the importer, as duties are never as security for loans.
imposed upon citizens upon vague and doubtful
interpretation. (Hart Ranft vs. Wiegman, 129 While it is true that pawnshops are engaged in
U.S., 609; Zamboanga Mutual Bldg. & Loan the business of lending money, they are not
Association vs. Rafferty, 24 Phil., considered lending investors for the purpose of
408.)chanrobles virtual law library imposing the 5% percentage taxes citing the
following reasons:
116 of the NIRC of 1977 was practically lifted There is no legal basis for the contention. We
from Section 175 of the NIRC of 1986, and there have consistently ruled that there can be no off-
being no change in the law, the interpretation setting of taxes against the claims that the
thereof should not have been altered. (CIR vs. taxpayer may have against the government. A
MJ Lhuiller) person cannot refuse to pay a tax on the ground
that the government owes him an amount equal
to or greater that the tax being collected. The
collection of tax cannot await the results of a
Set-off of taxes: lawsuit against the government.