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GENERAL PRINCIPLES OF

TAXATION
Definition

Taxation is the inherent power by which the sovereign


through its law making body raises income/revenue to
defray the necessary expenses of the government.

Taxation may be defined as a State power, a legislative


process, and a mode of government cost distribution
Inherent Powers of the State

 Taxation power – power of the State to enforce proportional


contribution from its subjects to sustain itself

 Police power – power of the State to enact laws to protect the


well being of the people

 Eminent domain – power of the State to take private property


for public use after paying just compensation
Characteristics of the State’s power to
tax
 Inherent in sovereignty – maybe exercised although not
expressly granted by the constitution

 Legislative in character – only the legislature can impose taxes

 Subject to constitutional and inherent limitations – not an


absolute power that can be exercised by the government
Nature/Scope of Taxation
 Plenary
 Comprehensive
 Supreme

Aspects of Taxation

 Levy
 Enforcement or Tax Administration
Purposes of Taxation Theories and Bases of Taxation
 Raise revenue  Lifeblood Theory
 Non-Revenue  Necessity Theory
 Promotion of general
welfare  Benefits-Protection
Theory
 Regulation
 Reduction of social
inequality
 Encourage economic
growth
 Protection
Basic Principles of a Sound Tax System

 Fiscal Adequacy – sufficiency to meet government


expenditures and other needs

 Administrative Feasibility – capability of being effectively


enforced

 Theoretical Justice – based on the taxpayer’s ability to


pay; must be progressive
Limitations of the Taxation Power
 Inherent Limitations

 Public purpose
 Exemption of the government
 Non-delegation of the taxing power
 International Comity
 Territoriality or Situs of Taxation
 Constitutional Limitations

 Due process clause (Art. III, Sec. 1, 1987 Constitution)


 Equal protection clause (Art. III, Sec. 1, 1987 Constitution)
 Non-infringement of religious freedom (Art. III, Sec. 5, 1987
Constitution)
 Non-impairment of contracts (Art. III, Sec. 10, 1987 Constitution)
 Uniformity, equitability and progressivity of taxation(Art VI, Sec 28(1)
1987 Constitution)
 Tax exemption of properties actually, directly and exclusively used
for religious, charitable and educational purposes (Art VI, Sec 28(3),
1987 Constitution)
 Exemption from taxes of the revenues and assets of educational
institutions, including grants, endowments, donations and
contributions (Art XIV, Sec 4(3) and (4), 1987 Constitution)

 Powerof the President to veto any particular item or items in an


appropriation, revenue, or tariff bill (Art VI, Sec 27(2), 1987
Constitution)

 Non-appropriation of public money or property for the use,


benefit, or support of any sect, church, or system of religion
(Art VI, Sec 29(2), 1987 Constitution)