THEORY AND

BASIS OF
TAXATION
1. The Power of Taxation proceeds
upon the theory that the
existence of government is a
necessity.

Government Expenses
Citizens
2. The Basis of Taxation is found in the
reciprocal duties of protection and support
between the state and its inhabitants.

The Tax payer receives the general advantages

and protection which the government affords
the taxpayer and his property .
benefit-received principle
One is compensation or consideration for the
other : protection for support and support for
protection.
THE FORGOING STATEMENTS, HOWEVER,
MUST BE QUALIFIED

a. IT DOES NOT MEAN THAT ONLY THOSE

WHO ARE ABLE TO AND DO PAY TAXES
CAN ENJOY THE PRIVILEGES AND
PROTECTION GIVEN TO A CITIZEN BY
THE GOVERNMENT.

b. FROM THE CONTRIBUTION RECEIVED,

THE GOVERNMENT RENDERS NO
SPECIAL OR COMMENSURATE BENEFITS
TO ANY PARTICULAR PROPERTY OR
PERSON.
c. THE ONLY BENEFIT TO WHICH THE
TAX PAYER IS ENTITLED IS THAT
DERIVED FROM HIS ENJOYMENT OF
THE PRIVILEGES OF LIVING IN AN
ORGANIZED SOCIETY ESTABLISHED
AND SAFEGUARDED BY THE
DEVOTION OF TAXES OF PUBLIC
PURPOSES.
NATURE OF THE
POWER OF
TAXATION
1. IT IS INHERENT IN SOVEREIGNTY.

The power of taxation is inherent in

sovereignty as an incident or attribute
thereof , being essential to the existence
of every government.
(a) Constitutional provision relating to the
power of taxation do not operate as grants
of power to the government.

(b) While the power to tax is not expressly

provided for in our Constitution , its
existence is recognized by the provisions
relating to taxation.
2. IT IS LEGISLATIVE IN CHARACTER.

The power of tax is peculiarly and

exclusively legislative and cannot be
exercised by the executive or judicial
branch of the government.
3. IT IS SUBJECT TO CONSTITUTIONAL
AND INHERENT LIMITATIONS.

The power of taxation is subject to

certain limitations.
 ASPECTS
OF
TAXATION
 1. Levying or imposition of the Tax
which is legislative act.

2. Collection of the tax levied which

is essentially administrative in
character.
EXTENT OF THE
LEGISLATIVE
POWER TO TAX
 1. THE SUBJECTS OR OBJECTS TO BE
TAXED.

- Theserefer to coverage and the kind or

nature of tax.

2. THE PURPOSE OR OBJECT OF THE TAX

SO LONG AS IT IS A PUBLIC PURPOSE.

- The Legislative body can levy a tax or make

an appropriation provided it is for a public
purpose.
 Judicial action is limited only to a
review where it involves:

(a) THE DETERMINATION OF THE

VALIDITY OF THE TAX IN RELATION TO
CONSTITUTIONAL PRECEPTS OR
PROVISIONS.

(b) THE DETERMINATION IN AN

APPROPRIATE CASE OF THE
APPLICATIONS OF TAX LAW.
 3. THE AMOUNT OR RATE OF THE TAX.

- As a general rule , the Legislature may levy a

tax of any amount or rate it sees fit.

4. THE MANNER, MEANS, AND AGENCIES OF

COLLECTION OF THE TAX.

- These Refer To the administration of tax or the

implementation of tax laws.
NON-REVENUE
OBJECTIVES OF
TAX
(1) Taxation can strengthen anemic enterprises or
provide incentive to greater production through
grant of tax exemptions or the creation of
condition conducive to their growth.
(2) Taxes on import may be increased to protect
local industries against foreign competition or
decrease to encourage foreign trade.
(3) Taxes on imported goods may also be used as a
bargaining tool by a country by setting rates
first at relatively high level before trade
negotiations are entered into with another
country to enhance its bargaining power.
(4) Taxes may be increased in periods of prosperity
to curb spending power and halt inflation or
lowered in period of slump to expand business
and ward off depression

(5) Taxes may be levied to reduce inequalities in

wealth and incomes, as for instance, the estate,
donors and income taxes, their payers being
the recipients of unearned wealth or mostly the
higher income brackets.
(6) Taxes may be levied to promote science and
inventions (see R.A. No. 5448.) or to finance
educational activities (see R.A. No, 5447.) or to
improve the efficiency of local police forces in
the maintenance of peace and order through
grant of subsidy.

(7) Taxation may be made as an implement of the

police power (infra.) to promote the general
welfare.