1. What are the theories of taxation?

2. What are the Principles of a Sound Tax System or the Canons of Taxation? What is the effect of the
violation of the above principles?
3. When can LGUs exercise the power of taxation?
4. Is the Power to Tax the Power to Destroy?
5. The Doctrine of Separate Legal Entity provides protection to shareholders against the liabilities of the
Corporation, and this include, among others, taxes. What are the exceptions?
6. How do you classify taxes and what are the kinds of taxes under each classification?
Taxes may be classified as follows:
As to object:
1. Personal/Poll or Capitation Tax – A fixed amount imposed upon all persons, or upon all persons of a
certain class, residents within a specified territory, without regard to their property or occupation. (e.g.
community tax)
2. Property Tax – Tax imposed on property, whether real or personal, in proportion either to its value, or in
accordance with some other reasonable method of apportionment.(e.g. real property tax)
3. Privilege/Excise Tax – A charge upon the performance of an act, the enjoyment of a privilege, or the
engaging in an occupation. An excise tax is a tax that does not fall as property tax. (e.g. income tax, estate
tax, donor’s tax, VAT)
As to burden or incidence:
1. Direct taxes - demanded from the very person who, as intended, should pay the tax which he cannot
shift to another (e.g. income tax, estate tax, donor’s tax)
2. Indirect taxes - demanded in the first instance from one person with the expectation that he can shift the
burden to someone else, not as a tax but as a part of the purchase price. Income tax, estate and donor's
tax are considered as direct taxes. On the other hand, value-added tax, excise tax, other percentage taxes,
and documentary stamp tax are indirect taxes.
NOTE: The liability for payment of the indirect taxes lies only with the seller of the goods or services, not in
the buyer thereof. Thus, one cannot invoke one’s exemption privilege to avoid the passing on or the shifting
of the VAT to him by the manufacturers/suppliers of the goods. Hence, it is important to determine if the tax
exemption granted specifically includes the indirect tax, otherwise, it is presumed that the tax exemption
embraces only those taxes for which the buyer is directly liable (CIR v. PLDT, 478 SCRA 61).
Indirect taxes, like VAT and excise tax, are different from withholding taxes (direct taxes). To distinguish,
indirect taxes, the incidence of taxation falls on one person but the burden thereof can be shifted or passed
on to another person, such as when the tax is imposed upon goods before reaching the consumer who
ultimately pays for it. On the other hand, in case of withholding taxes, the incidence and burden of taxation
fall on the same entity, the statutory taxpayer. The burden of taxation is not shifted to the withholding agent
who merely collects, by withholding, the tax due from income payments to entities arising from certain
transactions and remits the same to the government. Due to this difference, the deficiency VAT and excise
tax cannot be “deemed” as withholding taxes merely because they constitute indirect taxes (Asia
International Auctioneers, Inc. v. CIR, G.R. No. 179115, September 26, 2012).
As to tax rates:
1. Specific – tax of a fixed amount imposed by the head or number, or by some standard of weight or
measurement. (e.g. excise tax on cigar, cigarettes and liquors)
2. Ad valorem – tax based on the value of the property with respect to which the tax is assessed. It requires
the intervention of assessors or appraisers to estimate the value of such property before the amount due
can be determined. (e.g. real estate tax, income tax, donor’s tax and estate tax)
3. Mixed – a choice between ad valorem and/or specific depending on the condition attached.
As to purposes:
1. General/fiscal or revenue – tax imposed solely for the general purpose of the government. (e.g. income
tax and donor’s tax)
2. Special/regulatory or sumptuary – tax levied for specific purpose, i.e. to achieve some social or economic
ends. (e.g. tariff and certain duties on imports)
As to scope or authority to impose:
1. National tax – Tax levied by the National Government. (e.g. income tax, estate tax, donor’s tax,
VAT, other percentage taxes and documentary stamp taxes)
2. Local or municipal – Tax levied by a local government. (e.g. real estate tax and community tax)
As to graduation:
1. Progressive – A tax rate which increases as the tax base or bracket increases. (e.g. income tax, estate
tax and donor’s tax)
2. Regressive – The tax rate decreases as the tax base or bracket increases.
3. Proportionate – A tax of a fixed percentage of amounts of the base (value of the property, or amount of
gross receipts etc.). (e.g. VAT and other percentage taxes)

7. What are the distinctions of tax from other forms of exactions? (e.i. Debt, Toll, Special Assessment,
License Fee, Penalty, Tariff, Compromise Penalty, Subsidy, and Revenue)
a. Tax vs Debt
b. Tax vs Toll
c. Tax vs Special Assessment
d. Tax vs License Fee
e. Tax vs Penalty
f. Tax vs Tariff
g. Tax vs Compromise Penalty
h. Tax vs Subsidy
i. Tax vs Revenue
8. Is the right to assess and collect taxes imprescriptible? What are the exceptions? ‘
As a general rule, taxes are imprescriptible by reason that it is the lifeblood of the government.
As an exception, however, tax laws may provide for statute of limitations. In particular, the NIRC and LGC
provide for the prescriptive periods for assessment and collection. Under the NIRC, the right to assess must
be done within 3 years from the date of actual filing of the return, or from the last date prescribed by law for
the filing of such return, whichever is later.

9. Explain the Doctrine of Prospectivity of Tax Laws.

Under the doctrine of prospectivity of tax laws, tax laws must only be imposed prospectively. The
exception is if the law expressly provides for retroactive application.

10. Explain the Doctrine of Equitable Recoupment. Is it applicable in the Philippines?

The Doctrine of Equitable Recoupment is a principle which allows a taxpayer, whose claim for refund
has been barred due to prescription, to recover said tax by setting off the prescribed refund against a tax
that may be due and collectible from him. Under this doctrine, the taxpayer is allowed to credit such refund
to his existing tax liability.
The Doctrine of Equitable Recoupment is allowed only in common countries, not in the Philippines. The
Supreme Court, rejected this doctrine in Collector v. UST (G.R. No. L-11274, Nov. 28, 1958), since it may
work to tempt both parties to delay and neglect their respective pursuits of legal action within the period set
by law.

11. Explain the concept of compensation or set-off in Taxation. What are the requisites for it to be allowed?
As provided under the Civil Code, compensation or set-off shall take place when two persons, in their own
right, are creditors and debtors of each other. No set-off is admissible against the demands for taxes
levied for general or local governmental purposes. Taxes cannot be subject to compensation because
the government and the taxpayer are not creditors and debtors of each other.
NOTE: The prevalent rule in our jurisdiction disfavors set-off or legal compensation of tax obligations for
the following reasons: (1) taxes are of a distinct kind, essence and nature, and these impositions cannot be
so classed in merely the same category as ordinary obligations; (2) the applicable laws and principles
governing each are peculiar, not necessarily common to each and (3) public policy is better subserved if
the integrity and independence of taxes be maintained (lifeblood doctrine). The collection of a tax cannot
await the results of a lawsuit against the government (Republic v. Mambulao Lumber Company, 4 SCRA
622, 1962; Francia v. IAC, G.R. No. L-67649, June 28, 1988; Caltex Philippines, Inc. v. Commission on
Audit, et al., G.R. No. 92585, May 8, 1992).
XPN: Where both the claims of the government and the taxpayer against each other have already become
due, demandable, and fully liquidated, compensation takes place by operation of law and both obligations
are extinguished to their concurrent amounts. In the case of the taxpayer’s claim against the government,
the government must have appropriated the amount thereto (Domingo v. Garlitos, G.R. No. L-18994, June
29, 1963).
Offsetting can be allowed if the determination of the taxpayer’s liability is intertwined with the resolution of
the claim for tax refund of erroneously or illegally collected taxes under Section 229 of the NIRC (CIR v.
Toledo Power Company, G.R. No. 196415. December 2, 2015, Del Castillo, J.).
Note: In CIR v. Toledo Power Company, the SC did not allow BIR to assess Toledo Power if deficiency
taxes and claim compensation because the case involves a VAT refund claim under Section 112.
Ratio: To award such refund despite the existence of that deficiency assessment is an absurdity and a
polarity in conceptual effects” and that “to grant the refund without determination of the proper assessment
and the tax due would inevitably result in multiplicity of proceedings or suits (CIR v. CTA, G.R. No. 106611,
July 21, 1994, 234 SCRA 348).
12. Can taxes be subject to a compromise? Who are the persons allowed to Compromise?
Compromise and tax amnesty
Compromise
Compromise is a contract whereby the parties, by reciprocal concessions, avoid litigation or put an end to
one already commenced. It implies the mutual agreement by the parties in regard to the thing or subject
matter which is to be compromised.
Compromises are generally allowed and enforceable when the subject matter thereof is not prohibited from
being compromised and the person entering such compromise is duly authorized to do so.
Persons allowed to enter into compromise of tax obligations
The law allows the following persons to do compromise in behalf of the government:
1. BIR Commissioner, as expressly authorized by the NIRC, and subject to the following conditions:
a. When a reasonable doubt as to validity of the claim against the taxpayer exists; or
b. The financial position of the taxpayer demonstrates a clear inability to pay the assessed tax (Sec. 204[A],
NIRC).
2. Collector of Customs, with respect to customs duties limited to cases where the legitimate authority is
specifically granted such as in the remission of duties (Sec. 709, TCC).
3. Customs Commissioner, subject to the approval of the Secretary of Finance, in cases involving the
imposition of fines, surcharges, and forfeitures (Sec. 2316, TCC).

13. What is a taxpayers' suit? When is it available? What are the requisites? Is direct injury necessary to
establish locus standi as procedural technicality?
A taxpayer’s suit is a case where the act complained of directly involves the illegal disbursement of public
funds collected through taxation. A taxpayer is allowed to sue where there is a claim that public funds are
illegally disbursed, or that public money is being deflected to any improper purpose, or that there is wastage
of public funds through the enforcement of an invalid or unconstitutional law.
The two requisites of a taxpayer’s suit:
1. Public funds derived from taxation are disbursed by a political subdivision or instrumentality and in doing
so, a law is violated or some irregularity is committed; and
2. The petitioner is directly affected by the alleged act.
The party suing as a taxpayer must prove that he has sufficient interest in preventing the illegal expenditure
of money raised by taxation. Thus, taxpayers have been allowed to sue where there is a claim that public
funds are illegally disbursed or that public money is being deflected to any improper purpose, or that public
funds are wasted through the enforcement of an invalid or unconstitutional law.
The taxpayer must establish that:
1. He has a personal and substantial interest in the case; and
2. He has sustained or will sustain direct injury as a result of its enforcement or that he stands to be benefited
or injured by the judgment in the case, or is entitled to the avails of the suit (Public Interest Center, Inc. v.
Roxas, 513 SCRA 457, G.R. No. 125509, January 31, 2007).
NOTE: Being a mere procedural technicality, the requirement of locus standi may be waived by the Court
in the exercise of its discretion

14. Is the Doctrine of Transcendental Importance relevant to the question of "direct injury"?
15. Explain the Rule of No Estoppel Against the Government.
16. What are the inherent limitations to the Power of Taxation? What is the effect of the violation of any of
these limitations?
17. What is the rule on territoriality or situs of taxation? What Doctrine/Theory supports this rule?
18. Can Tax Laws operate outside territorial jurisdiction?
19. State the situs of taxation for the following: (1) Persons, and (2) Property -- real, tangible, intangible,
income, excise or privilege.
20. What is meant by Public Purpose? What are the tests to determine public purpose?
21. Explain International Comity and site some bases of this rule.
22. Explain the Non-delagation of Taxing Power limitation. What are the exceptions?
23. Can Congress enact a law subjecting the Government Instrumentilies or Agencies to tax?
24. Cite some reasons as to the exemption of Government Entities, Agencies, and Instrumentalities from
tax.
25. What is a GOCC? Are GOCCs exempt from tax?