TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
CABANEIRO) A2011 1
Chapter 2: LIMITATIONS ON THE TAXING POWER
INHERENT LIMITATIONS ON THE TAXING POWER
Taxing power has very distinct and positive limitations some of
which inhere in its very nature and exists whether declared or not
declared in the constitution.
Inherent limitations are so called because they proceed from the
very nature of the taxing power itself.
These inherent limitations are: (PENTI indispensable for women
kaya inherent limitation)
1. Public purpose of taxes
2. Exemption of the government from taxes
3. Non-delegability of the taxing power
4. Territoriality or the situs of taxation
5. International comity
A. PUBLIC PURPOSE OF TAXES
Public purpose in taxation is important because of all the powers
of government, that of taxation is said to be the strongest as it
can be readily employed against one class of individuals in favor
of another so as to ruin one class and give unlimited wealth and
property to another, if there is no implied limitation on the uses
for which such taxing power may be exercised.
Public purpose may be interpreted to be that kind of purpose
that inures to great majority of inhabitants and needs to be
addressed by the government.
TESTS FOR DETERMINING THE PUBLIC PURPOSE IN A
TAX:
1. Whether the thing to be furthered by the appropriation of
public revenue is something which is the duty of the State,
as a government, to provide.
2. Whether the proceeds of the tax will directly promote the
welfare of the community in equal measure.
What is being violated if a tax is being collected for a private
purpose?
1. Inherent limitation
2. Due process of law
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JUICY NOTES (PROF.
B. NON-DELEGABILITY OF THE TAXING POWER
Power of taxation is exclusively legislative
General Rule: Taxing Power may not be delegated
Exceptions:
1. Delegation to the President (Flexible Tariff Clause)
Authority given to the President in case of
emergency upon the recommendation of the
NEDA to increase or to decrease or to amend
tariff rates, wharfage dues or quotas.
2. Delegation to the local government
Basis: Sec 5 Art. X, Constitution w/c mandates
that local government should be autonomous.
They were given the power to exact their own
source of revenue.
3. Delegation to the administrative body
What is delegated to the administrative body is
the duty of implementation.
Dept. of Finance has the task of regulating or
clarifying the law because the law that comes
out of Congress is not really complete.
Without the regulation, taxpayer has the best
defense not to pay because you cannot be
compelled to pay based on ambiguous law.
Certain aspects of the taxing process that are
not really legislative in nature are vested in
administrative agencies. In these cases, there
really is no delegation, to wit:
a. power to value property
b. power to assess and collect taxes
c. power to perform details of computation,
appraisement or adjustments.
POWERS WHICH CANNOT BE DELEGATED
1. Determination of the subjects to be taxed
2. Purpose of the tax
3. Amount or rate of the tax
4. Manner, means and agencies of collection
5. Prescription of the necessary rules with respect thereto
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
C. TERRITORIALITY OR THE SITUS OF TAXATION
Place of taxation
It is a determinant or criteria to determine which governmental
entity has the power to tax.
The government cannot tax a particular object of taxation which
is not within its territorial jurisdiction.
Some Basic Considerations Affecting Situs of Taxation
1. Protection a basic consideration that justifies the situs of
taxation
2. Double taxation and the situs of taxation
Double taxation is never invalid where it is
imposed by different states.
3. The maxim of Mobilia Sequuntur Personam and Situs of
Taxation
Movables follow the person.
The situs of personal property is the domicile of
the owner.
The doctrine of Mobilia Sequuntur Personam is
not allowed to stand in the way of taxation of
personalty in the place where it has its actual
situs and the requisite legislative jurisdiction
exists.
4. Legislative power to fix situs
If no constitutional provisions are violated, the
power of the legislature to fix situs is
undoubted.
Factors Affecting Territoriality
a. Kind or classification of the tax being levied
b. Situs of the thing or property taxed
c. Domicile or residence of the person taxed
d. Citizenship or nationality of the person taxed
e. Source of the income taxed
f. Situs of the excise, privilege, business or occupation
being taxed.
RULE:
The State where the subject to be taxed has a situs may
rightfully levy and collect the tax
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JUICY NOTES (PROF. CABANEIRO) A2011 2
EXCEPTIONS TO THE TERRITORIALITY RULE
1. Where the tax laws operate outside territorial jurisdiction
a. TAXATION of resident citizens on their incomes
derived from abroad
2. Where tax laws do not operate within the territorial
jurisdiction of the State
a. When exempted by treaty obligations
b. When exempted by international comity
D. EXEMPTION OF THE GOVERNMENT FROMTAXES
Is the government subject to tax?
No, but it covers only govt entities engaged in sovereign
function.
BUT in the case of Bisaya Land Transportation Corp, SC held
that there is no impediment for the given to tax even govt
entities engaged in governmental function.
Cabans opinion: If the legislature says lets not tax the govt
entity engaged in governmental function, SC cannot do anything
because the limitation of the SC is only to interpret and that
congress being the decision maker as to who will be taxed.
Agencies performing governmental functions: TAX EXEMPT
Agencies performing proprietary functions: SUBJECT TO TAX
Those with ORIGINAL CHARTERS (incorporated agencies)
Those created by SPECIAL CHARTER (incorporated agencies) are
not covered by the exemption
The exemption applies only to governmental entities through
which the government immediately and directly exercises its
sovereign powers.
Tax exemption of property owned by the Republic of the
Philippines refers to the property owned by the government and
its agencies which do not have separate and distinct personality.
GOVERNMENT ENTITIES EXEMPT FROM INCOMING TAX
1. GSIS
2. SSS
3. PHIC
4. PCSO
5. PAGCOR
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 3
REASON FOR EXEMPTIONS DUE PROCESS IN TAXATION DOES NOT REQUIRE
1. Government will be taxing itself to raise money for itself. 1. Determination through judicial inquiry of
2. Immunity is necessary in order that governmental functions a. property subject to tax
will not be impeded. b. amount of tax to be imposed
2. Notice of hearing as to:
GROUNDS FOR TAX EXEMPTION OF FOREIGN GOVERNMENT a. amount of the tax
PROPERTY b. manner of apportionment
1. Sovereign equality of States
2. Usage among States REQUISITES OF DUE PROCESS OF LAW
3. Immunity from suit of a State 1. There must be a valid law
2. Tax measure should not be unconscionable and unjust as to
E. INTERNATIONAL COMITY amount to confiscation of property
What is international comity? 3. Tax statute must not be arbitrary as to find no support in the
The way to answer this accdg to Atty. Caban is, well constitution
international comity is one of the inherent limitations on
taxation (I know). This is a limitation that says that there A tax law which denies a taxpayer a fair opportunity to assert his
are bilateral arrangements among countries whereby certain substantial rights before a competent tribunal is invalid
activities of persons will not be taxed by one country A taxpayer must not be deprived of his property for non-payment of
because they are neighbors; they are friends subject to the taxes without
principles of international law. 1) notice of liability
Based on tradition, practice or custom 2) sale of property at public auction

DOCTRINE OF INCORPORATION
The Philippines adopts the generally accepted principles of
international law as part of the law of the land
If a tax law violates certain principles of international law,
then it is not only invalid but also unconstitutional
CONSTITUTIONAL LIMITATIONS ON THE TAXING POWER
A. DUE PROCESS OF LAW (Sec. 1, Art. III)
Due process of law in taxation: Before a tax can be collected,
there must be a law.
Before a tax is to be paid for:
1. There must be a law
2. It must not be arbitrary
The validity of statute maybe contested only by one who will sustain
a direct injury in consequence of its enforcement
INSTANCES WHEN THE TAX LAW MAYBE DECLARED AS
UNCONSTITUTIONAL (CUNO pag constitutional cuno, eh di
unconstitional yun.)
1) If it amounts to Confiscation of property without due
process
2) If a tax law which is applied retroactively, imposes Unjust
and oppressive taxes.
3) The law maybe declared as unconstitutional if it is imposed
Not for a public purpose
4) If the subject of taxation is Outside of the jurisdiction of the
taxing state

Chapter 2: LIMITATIONS ON THE TAXING POWER. Page 3 of 10

TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
A violation of the inherent limitations on taxation would contravene
the constitutional injunctions against deprivation of property without
due process of law
There must be proof of arbitrariness, otherwise apply the
presumption of constitutionality
Due process requires hearing before adoption of legislative rules by
administrative bodies of interpretative rulings. ( Misamis vs. DFA)
Compliance with strict procedural requirements must be followed
effectively to avoid a collision course between the states power to
tax and the individual recognized rights (CIR vs. Algue)
The due process clause may correctly be invoked only when there is
a clear contravention of inherent or constitutional limitations in the
exercise of tax power. (Tan vs. del Rosario)
SUBSTATANTIVE DUE PROCESS requires that a tax statute must be
within the constitutional authority of Congress to pass and that it be
reasonable, fair and just
PROCEDURAL DUE PROCESS requires notice and hearing or at least
an opportunity to be heard
B. EQUAL PROTECTION OF THE LAW (Sec. 1, Art. III)
Taxation should be uniform and equitable.
Equal protection of law means that under this guaranty, all
taxable objects or subjects of the same footing, should be
treated ALIKE.
Class legislation is abhorred unless it is supported by substantial
distinction.
It is inherent in the power to tax that a state be free to select
the subjects of taxation, and it has been repeatedly held that
inequalities which result from a singling out of one particular
class for taxation or exemption infringe no constitutional
limitation. The rule of uniformity does not call for perfect
uniformity or perfect equality, because this is hardly attainable.
The taxing power has the authority to make reasonable and
natural classifications for purposes of taxation. In this regard,
the Court constantly held that classification, if rational in
character, is allowable.(Sison vs Ancheta)
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JUICY NOTES (PROF. CABANEIRO) A2011 4
TWO WAYS EQUAL PROTECTION CLAUSE CAN BE
VIOLATED
1. When classification is made where there should be none
ex. When the classification does not rest upon
substantial distinctions that make for real difference
2. When no classification is made where a classification is
called for
ex. When substantial distinctions exist but no
corresponding classification is made on the basis
thereof
C. FREEDOM OF SPEECH AND OF THE PRESS (Sec. 4, Art. III)
The press is not exempt from taxation
The sale of magazines or newspapers, maybe the subject of
taxation
What is not allowed is to impose tax on the exercise of an
activity which has a connection with freedom of the press
(license fee)
The imposition of tax on persons before they can deliver or
broadcast a particular news or information is the one which
cannot be taxed.
What is prohibited by the constitutional guarantee of free press
are laws which single out the press or target a group belonging
to the press for special treatment or which in any way
discriminates against the press on the basis of the content of the
publication. TOLENTINO vs. SEC. OF FINANCE
D. NON-INFRINGEMENT OF RELIGIOUS FREEDOM (Sec. 5, Art. III)
Religion is a constitutional guaranty that any person can join to
any form of religion, for as long as the religion you joined in
does not disturb public order.
A municipal license tax on the sale of bibles and religious articles
by a non-stock, non-profit missionary organization at a little
profit constitutes a curtailment of religious freedom and worship
which is guaranteed by the Constitution. (American Bible Society
vs City of Manila)
It is the activity which cannot be taxed
activities which have connection with the exercise of religion
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
The payment of license fees for the distribution and sale of
bibles suppresses the constitutional right of free exercise of
religion. AMERICAN BIBLE SOCIETY vs. MANILA
The Free Exercise of Religion Clause does not prohibit imposing
a generally applicable sales and use tax on the sale of religious
materials by a religious organization. JIMMY SWAGGART vs.
BOARD OF EQUALIZATION
The Sale of religious articles can be the subject of the VAT
What cannot be taxed is the exercise of religious worship or
activity
The income of the priest derived from the exercise of religious
activity can be taxed.
E. NON-IMPERMAINT OF CONTRACTS (Sec. 10, Art. III)
The parties to the contract cannot exercise the power of
taxation.
They cannot agree or stipulate that this particular transaction
may be exempt from tax- not allowed (except if government)
Police power prevails over the non-impairment clause. OPOSA
vs. FACTORAN
A lawful tax on a new subject or an increased tax on an old one
does not interfere with a contract or impairs its obligation. LA
INSULAR vs. MANCHUCA
The constitutional guarantee of the non-impairment clause can
only be invoked in the grant of tax exemption.
RULES:
1. If the exemption was granted for valuable consideration and
it is granted on the basis of a contract.
cannot be revoked
2. If the exemption is granted by virtue of a contract, wherein
the government enters into a contract with a private
corporation
cannot be revoked unilaterally by the government
3. If the basis of the tax exemption is a franchise granted by
Congress and under the franchise or the tax exemption is
given to a particular holder or person
can be unilaterally revoked by the government
(Congress)
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JUICY NOTES (PROF. CABANEIRO) A2011 5
The non-impairment clause applies only to contracts and not to
a franchise.
Franchise is a privilege given to a private person to
engage in an activity that affects the public, whether
it is electrification, water system, telecommunication
or water utilities.
Franchise is a unilateral grant at the pleasure of the
granting power.
The non-impairment clause applies to taxation but not to police
power and eminent domain. Furthermore, it applies only where
one party is the government and the other, a private individual.
As a rule, the obligation to pay tax is based on law. But when,
for instance, a taxpayer enters into a compromise with the BIR,
the obligation of the taxpayer becomes one based on contract
F. NON-IMPRISONMENT FOR DEBT OR NON-PAYMENT OF
POLL TAX (Sec. 20, Art. III)
The non-imprisonment rule applies to non-payment of poll tax
which is punishable only by a surcharge, but not to other
violations like falsification of community tax certificate or non-
payment of other taxes
POLL TAX tax of fixed amount imposed upon residents within
a specific territory regardless of citizenship, business or
profession. A.K.A : community tax, residence tax, cedula
Community tax certificate proof of payment of poll tax
G. ORIGIN OF APPROPRIATION, REVENUE AND TARIFF BILLS
(Sec. 24, Art. VI)
It is not the revenue statute but the revenue bill which is
required by the constitution to originate exclusively in the House
of Representatives
REASON:
1. To insist that a revenue statute and not only the bill which
initiated the legislative process culminating in the enactment
of the law must substantially be the same as the House bill
would be to deny the Senates power not only to concur
with amendments but also to propose amendments. It
would be to violate the co-equality of legislative power of
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
the two houses of Congress and in fact make the House
superior to the Senate. (Tolentino vs. Sec. of Finance)
2. The Constitution simply requires that there must be that
initiative coming from the House of Representatives relative
to appropriation, revenue and tariff bills.
3. The Constitution does not also prohibit the filing in the
Senate of a substitute bill in anticipation of its receipt of the
bill from the House, as long as action by the Senate is
withheld until receipt of said bill (Tolentino vs. Sec. of
Finance)
H. UNIFORMITY, EQUITABILITY AND PROGRESSIVITY OF
TAXATION (Sec. 28[1], Art. VI)
Differentiate uniformity from equal protection of law?
In equal protection of the law, all taxpayers or subjects
or properties that are standing in equal footing should
be treated alike while in uniformity, all taxable articles of
the same class shall be taxed at the same rate.
The rule on uniformity means that for as long as all those
subjects and persons in the same class are taxed in the same
rate, it is uniform.
UNIFORMITY
means that all taxable articles kinds of property of the
same class shall be taxed at the same rate
A tax is uniform when it operates with the same force
and effect in every place where the subject of it is found
EQUITABILITY
Taxation is said to be equitable when its burden falls on
those better able to pay
PROGRESSIVITY
Taxation is progressive when its rate goes up depending on
the sources of the person affected
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SYTEMS OF TAXATION
1. PROPORTIONAL TAXATION - where the tax increases or
decreases in relation to the tax bracket
2. PROGRESSIVE or GRADUATED SYSTEM - where the tax
increases as the income of the taxpayer goes higher
3. REGRESSIVE SYSTEM - where the tax decreases as the
income of the taxpayer increases
PROGRESSIVITY IS NOT REPUGNANT TO UNIFORMITY
and EQUALITY
1. Uniformity does not require the things which are not
different be treated in the same manner
2. Differentiation, which is not arbitrary and conforms to the
dictates of justice and equity is allowed. Progressivity is one
way of classification.
3. The State has the inherent right to select subjects of
taxation.
Resort to indirect taxes should be minimized but not to be
avoided entirely because it is difficult, if not impossible to avoid
them by imposing such taxes according to the taxpayers ability
to pay.
The mandate to Congress is not to prescribe, but to evolve, a
progressive system of taxation
TOLENTINO vs. SEC. OF FINANCE
RA 7716 (EVAT), does not violate the constitutional mandate
that Congress shall evolve a progressive system of
taxation
The Constitution does not really prohibit the imposition of
indirect taxes, which like the VAT, are regressive. The
constitutional provision means simply that indirect taxes
shall be minimized.
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
I. DELEGATION OF LEGISLATIVE AUTHORITY TO FIX TARIFF
RATES, IMPORT AND EXPORTS QUOTAS, etc (Sec. 28[2], Art.
VI)
TARIFF POWER OF THE PRESIDENT
REQUISITES:
1. There must be a law passed by Congress authorizing the
President to impose tariff rates and other fees.
2. Under the law, there must be limitations and restrictions on
the exercise of such power
3. The taxes that may be imposed by the President are limited
to:
a. Tariff rates
b. Import and export quotas
c. Tonnage and wharfage dues
d. Other duties (customs duties)
4. The imposition of these tariff and duties must be within the
framework of the National Development program of the
government
Congress may not pass a law authorizing the President to
impose income tax, donors tax, and other taxes which are not in
the nature of customs duties.
The Constitution allows only the imposition by the President of
these custom duties
J. TAX EXEMPTION OF PROPERTIES ACTUALLY, DIRECTLY AND
EXCLUSIVELY USED FOR RELIGIOUS, CHARITABLE AND
EDUCATIONAL PURPOSES (Sec. 28[3], Art. VI)
TAX EXEMPTION OF REAL PROPERTY
APPLICATION:
The exemption only covers property taxes and not other
taxes
TEST OF EXEMPTION:
It is the USE of the property and not ownership of the
property
The exemption in favor of property used exclusively for
charitable or educational purpose is not limited to property
actually indispensable therefore, but extends to facilities which
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JUICY NOTES (PROF. CABANEIRO) A2011 7
are incidental to and reasonably necessary for the
accomplishment of said purpose. [Abra Valley College v. Aquino,
162 SCRA 106].
To be exempt from realty taxation, there must be proof of
actual, direct and exclusive use of lands, buildings and
improvements for religious or charitable purposes, [Province of
Abra v. Hernando 107 SCRA 104].
K. VOTING REQUIREMENTS IN CONNECTION WITH THE
LEGISLATIVE GRANT OF TAX EXEMPTION (Sec. 28[4], Art. VI)
LAW GRANTING TAX EXEMPTIONS
RULES ON VOTE REQUIREMENT
1. Law granting any tax exemption
absolute majority
2. Law withdrawing any tax exemption
Relative majority
Tax exemption, amnesties, refunds are considered in the nature
of tax exemptions
A law granting such needs approval of the absolute majority of
the Congress
L. NON-IMPAIRMENT OF THE SUPREME COURTS
JURISDICTION IN TAX CASES (Secs. 2 & 5, Art. VIII)
SUPREME COURTS POWER OF REVIEW
Congress cannot take away from the Supreme Court the power
given to it by the Constitution as the final arbiter of the tax
cases.
M. TAX EXEMPTION OF REVENUE AND ASSETS, INCLUDING
GRANTS, ENDOWMENTS, DONATIONS OR CONTRIBUTION
TO EDUCATIONAL INSTITUTIONS (Sec. 4[3] & [4], Art. XIV)
TAX EXEMPTIONS OF EDUCATIONAL INSTITUTIONS
REQUISITES FOR EXEMPTION:
1. It must be a private educational institution
2. It must be non-stock and non-profit
3. Its assets (property) and revenues (income) must be used
actually, directly and exclusively for educational purposes
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
RULES:
1. If the first requisite is absent (meaning, its a government
educational institution), it is nonetheless exempt from
income tax
2. If the second requirement is absent (meaning, it is stock and
profit) as long as the third requirement is present, it is
nonetheless exempt from real estate tax
3. If the third requirement is absent, as long as it is non-stock
and non-profit, it is nonetheless exempt from income tax
4. If the third requirement is absent, but it is private and non-
profit, it is subject to income tax, but at the preferential rate
of ten percent (10%)
Under the present tax code, for a private educational institution
to be exempt from the payment of income tax, all it has to be is
non-stock and non-profit. However, a governmental educational
institution is exempt from income tax without any condition
EXEMPTION DOES NOT EXTEND TO:
1. Income derived by these educational institutions from their
property, real or personal, and
2. From activities conducted by them for profit regardless of
the disposition made on such income
Proceeds of the sale of real property by the Roman Catholic
church is exempt from income tax because the transaction was
an isolated one. MANILA POLO CLUB vs. CTA
Income derived from the hospital pharmacy, dormitory and
canteen was exempt from income tax because the operation of
those entities was merely incidental to the primary purpose of
the exempt corporation. ST. PAUL HOSPITAL of ILOILO vs. CIR
Where the educational institution is private and non-profit (but a
stock corporation) it is subject to income tax but at the
preferential rate of ten percent (10%)
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REQUISITES for APPLICATION of 10% PREFERENTIAL
RATE
1. It is private;
2. It has permit to operate from the DECS, or CHED or TESDA;
3. It is non-profit;
4. Its gross income from unrelated trade or business must not
exceed fifty percent (50%) of its total gross income from all
sources.
10% PREFERENTIAL TAX RATE DOES NOT APPLY TO THE
FOLLOWING:
1. Passive incomes derived by the educational institution
(subject to final income tax) and
2. Where the educational institution is engaged in unrelated
trade, business or other activity, and the gross income from
such unrelated trade, business or other activities exceeds
fifty percent (50%) of the total gross income derived by the
school from all sources
Income derived by YMCA from leasing out a portion of its
premises to small shop owners, like restaurant and canteen
operators, and from parking fees collected from non-members
are taxable income. YMCA is not an educational institution. CIR
vs. CA (298 SCRA 83)
Subject to conditions prescribed by law, all grants
endowments, donations, or contributions used actually, directly
and exclusively for educational purposes shall be exempt from
tax. (Sec. 4 (4) ART XIV)
Where a donation is made in favor of an educational institution
pursuant to sports competition and tournaments, the donor is
exempt from the payment of donors tax
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
OTHER CONSTITUTIONAL PROVISIONS RELATED TO TAXATION
The following are not actually limitations on the taxing
power but which have bearing on taxation:
A. CONSTITUTIONAL REQUIREMENT ON THE SUBJECT AND
TITLE OF BILLS (Sec 26 [1], Art VI)
1. SUBJECT ONE TITLE RULE
Every bill passed by the Congress shall embrace only one
subject which shall be expressed in the title thereof ( Sec. 26 (1)
ART II)
2. THREE READING RULE
No bill passed by either House shall become a law unless it has
passed three readings on separate days and printed copies
thereof in its final form have been distributed to its members
three days before its passage, EXCEPT when the President
certifies to the necessity of its immediate enactment to meet a
public calamity or emergency. (Sec. 26 (2) ART II)
A presidential certification dispenses with the
requirement not only of printing but also that of
reading the bill on separate days. PHIL. JUDGES
ASSOC. vs. PRADO
It is within the power of a Bicameral Conference
Committee to include in its report an entirely new
provision that is not found either in the House Bill or
Senate Bill, so long as such amendment is germane
to the subject of the bills before the committee.
After all its report was not final but needed the
approval of both houses of Congress to become
valid as an act of the legislative department. PHIL.
JUDGES ASSOC. vs. PRADO
3. ENROLLED BILL DOCTRINE
G.R. An enrolled copy of a bill is conclusive not only of its
provisions but also of its due enactment
EXCEPTION: In ASTORGA vs. VILLEGAS, the Supreme Court
went behind the enrolled bill and consulted the journal to
determine whether certain provisions of a state had been
approved by the Senate Presidents admission of a mistake and
withdrawal of his signature.
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B. POWER OF THE PRESIDENT TO VETO ANY PARTICULAR
ITEMS IN AN APPROPRIATION, REVENUE OR TARIFF BILL
PRESIDENTIAL VETO (Sec. 27 (2), ART VI)
The President shall have 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
C. PROVISION WHICH REQUIRES THAT NO MONEY SHALL BE
PAID OUT OF THE TREASURY EXCEPT IN PURSUANCE OF AN
APPROPRIATION MADE BY LAW (Sec 29 [1] Art VI)
No money shall be paid out of the treasury except in pursuance
of an appropriation made by law.
D. PROVISION AGAINST THE APPROPRIATION OF PUBLIC
MONEY OR PROPERTY FOR THE BENEFIT OF ANY CHURCH,
SECT OR SYSTEM OF RELIGION, etc. (Sec 29 [2] Art VI)
Public property may be leased to a religious group provided that
the lease will be totally under the same conditions as that to
private persons (amount of rent)
Congress is without power to appropriate funds for a private
purpose.
E. PROVISIONS WHICH MANDATES THAT MONEY COLLECTED
ON A TAX LEVIED FOR A PUBLIC PURPOSE SHALL BE PAID
OUT FOR SUCH PURPOSE ONLY (Sec 29 [3] Art VI)
All money collected or any tax levied for a special purpose shall
be treated as a 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. (Sec. 29 (3) ART VI)
If a Pres. of the Philippines spent a special fund for a general
purpose, he can be charged with culpable violation of the Consti.
F. PROVISION REGARDING ALLOTMENTS TO LOCAL
GOVERNMENTS
local government units shall have a just share, as determined
by law, in the national taxes which shall be automatically
released to them. (Sec 6, Art X)
TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
EXERCISES:
Inherent Limitations of Territoriality and International Comity
May the Philippine government require tax withholding on the salaries of
Filipino employees working in the American Embassy in the Philippines?
Suggested Answer:
No, because this will violate the principle of international comity. If the
Philippine government would impose the requirement of tax withholding
on the salaries of Filipino employees working in the American Embassy in
the Philippines, this would in effect require that the American
government be constituted as the withholding agent of the Philippine
government insofar as the taxes on the salaries of the Filipino employees
are concerned. This is obviously violative of the inherent limitation that
taxation is subject to the principle of international comity.
Due Process
A law imposed a 5% percentage tax on the gross receipts of lending
investors. Without notice, hearing and publication, the CIR issued a
Revenue Memorandum Order (RMO) applying the above-cited law to
pawnshops, on the theory that the principal activity of pawnshops is
lending money at interest, and that such RMO is merely interpretative in
nature; thus, no notice, hearing and publication is required. Is the RMO
valid?
Suggested Answer:
It is not valid. When an administrative rule is merely interpretative
in nature, its applicability needs nothing further than its bare
issuance, for it gives no real consequence more than what the law
itself has already prescribed. When, on the other hand, the
administrative rule goes beyond merely providing for the means that
can facilitate or render least cumbersome the implementation of the law
but substantially increases the burden of those governed, it behooves
the agency to accord at least to those directly affected a chance to
be heard, and thereafter to be duly informed, before that new issuance
is given the force and effect of law.
The questioned RMO cannot be viewed simply as implementing rules
or corrective measures revoking in the process the previous rulings of
past Commissioners. Specifically, they would have been amendatory
provisions applicable to pawnshops. Without the disputed CIR
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issuance, pawnshops would not be liable to pay the 5% percentage
tax, considering that they were not specifically included in the basic
provisions of the law imposing such tax. In so doing, the CIR did not
simply interpret the law. The due observance of the requirements of
notice, hearing, and publication should not have been ignored. (CIR v.
M.J. Lhuiller Pawnshop, Inc. G.R. No. 150947)
Tax Avoidance vs. Tax Evasion (1996)
Distinguish tax evasion from tax avoidance.
SUGGESTED ANSWER:
Tax evasion is a scheme used outside of those lawful means
to escape tax liability and, when availed of, it usually subjects the
taxpayer to further or additional civil or criminal liabilities. Tax
avoidance, on the other hand, is a tax saving device within the means
sanctioned by law, hence legal.
Power of Taxation: Equal Protection of the Law (2000)
An executive Order was issued pursuant to law, granting tax and duty
incentives only to businesses and residents within the "secured area" of
the Subic Economic Special Zone, and denying said incentives to those who
live within the Zone but outside such "secured area". Is the
constitutional right to equal protection of the law violated by the Executive
Order? Explain.
SUGGESTED ANSWER:
No. Equal protection of the law clause is subject to reasonable
classification. Classification, to be valid, must:(1) rest on substantial
distinctions, (2) be germane to the purpose of the law, (3) not be limited to
existing conditions only, (4) apply equally to all members of the same class.
Taxpayer Suit; When Allowed (1996)
When may a taxpayer's suit be allowed?
SUGGESTED ANSWER:
A taxpayer's suit may only be allowed when an act complained of,
which may include a legislative enactment, directly involves the illegal
disbursement of public funds derived from taxation (Pascual vs. Secretary
of Public Works, 110 Phil. 331).