Condensed Reviewer for Taxation TAXATION inherent power in every sovereign State to impose a charge or burden upon persons,

properties, or rights to raise revenues for the use and support of the government to enable it to discharge its appropriate functions. to defray the necessary expenses of government inherent = does not need to be stated in constitution. apportioning the cost to those who have privilege to enjoy the benefits of the State

7. It is levied for public purpose or purposes. SCOPE OF TAXATION: (SPUC) 1. Unlimited 2. Comprehensive- covers persons, businesses, activities, rights 3. Plenary- it is complete; BIR may avail remedies to ensure collection of taxes 4. Supreme selection of subject of taxation PRINCIPLES OF SOUND TAX SYSTEM: (FAT) 1. Fiscal Adequacy revenue must be sufficient to meet the demands of public expenditures. 2. Equality or Theoretical Justice proportionate to ability to pay. 3. Administrative Feasibility capable of convenient, just and effective administration. PURPOSES OF TAX 1. Revenue to finance government expenditures. 2. Non- Revenue/ Sumptuary a. Promotion of general welfare b. Regulation Oil fund c. Reduction of Social Inequality Progressive Tax System d. Enhance Economic Growth inflation/deflation e. Protectionism tariffs THEORY AND BASIS OF TAXATION 1. LifeBlod Doctrine Existence of government is a NECESSITY. Government is sustained through TAXES, it is the blood that flows through the vein of the government. Taxes should be collected without hindrance. Without taxes, the government would be paralyzed for lack of motive power to activate and operate it. The government, for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values.

TAXES - enforced proportional contributions from persons and property levied by the law-making body of the State by virtue of its sovereignty for the support of the government and all public needs. not arbitrary exactions but contributions levied by authority of law

ESSENTIAL ELEMENTS OF A TAX 1. It is an enforced contribution. - not a voluntary payment or donation. It does not depend on the will/consent of the taxpayer. 2. It is generally payable in money. - money must be legal tender. Back certificates are allowed as payment. 3. It is proportionate in character. 4. It is levied on persons, property, or the exercise of a right or privilege (Excise tax). 5. It is levied by the State which has jurisdiction over the subject or object of taxation. 6. It is levied by the law-making body of the State. - the power to impose taxes is a legislative power; it cannot be imposed by the department nor by the courts.

2. Necessity Theory It is necessary to preserve States sovereignty, protect the territory, and provide benefits and upold public welfare. Government cannot continue its operations/functions without the means to pay its expenditures. It has the right to compel its citizens and properties to contribute.

Symbiotic relationship is the rationale of taxation and should dispel the notion that it is an arbitrary method of exaction. Taxes are what we pay for civilized society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. POWER TO TAX IS THE POWER TO DESTROY

3. Benefits- Protection Theory reciprocal duties of support and protection between the State and its citizens. The citizen supports the State by paying the portion from his property that is demanded in order that he may, by means thereof, be secured in the enjoyment of the benefits of an organized society. Thus, the taxpayer cannot question the validity of the tax law on the ground that payment of such tax will render him impoverished, or lessen his financial or social standing, because the obligation to pay taxes is involuntary and compulsory, in exchange for the protection and benefits one receives from the government. One is compensation or consideration for the other; protection for support and support for protection. the government renders no special or commensurate benefit to any particular property or person. The only benefit to which the taxpayer is entitled is that derived from the enjoyment of the privilege of living in an organized society established and safeguarded by the devotion of taxes to public purpose. The government promises nothing to the person taxed beyond what may be anticipated from an administration of the laws for the general good. no one is allowed to object to or resist payment of taxes solely because no personal benefit to him can be pointed out as arising from the tax.

Describes the degree of vigor with which the taxing power may be employed to raise revenue. it should be exercised with caution to minimize injury to the proprietary rights of the taxpayer. It must be exercised fairly, equally and uniformly. the power to tax is not the power to destroy while this court sits.. The imposition of a valid tax measure could not be judicially restrained merely because it would prejudice the taxpayers property. An illegal tax could be judicially declared invalid and should not work to prejudice a taxpayers property. JUDICIAL REVIEW Courts power is limited only to application and interpretation of the law. Determination of validity on the tax in relation to constitutional limitations and provisions. STAGES OF TAXATION (Taxation System) 1. Levy determination who/what is to be taxed, amount of tax, date of payment, etc. 2. Collection manner of enforcement

SYMBIOTIC RELATIONSHIP CLASSIFICATION OF TAXES:

1) As to scope National imposed by National government (ex. Income Tax, Estate Tax, Custom duties, Value Added Tax, Other Percentage Taxes, and Documentary Stamp Tax). Local or Municipal imposed by municipal corporations (ex. Real Estate Tax and Community Tax). 2) As to who bears the burden Direct tax which is demanded from the person who also shoulders the burden of tax or tax which the taxpayer cannot shift to another (ex. Income Tax, Estate Tax and Donors Tax). Indirect tax which is demanded from one in the expectation and intention that he shall indemnify himself at the expense of another or tax which can be shifted to another person (ex. Value Added Tax and Other Percentage Taxes). 3) As to the determination of the amount Specific tax of fixed amount imposed by the head or number, or by some standard of weight or measurement. It requires no assessment other than a listing or classification of the subjects to be taxed (ex. Excise Tax on cigarettes and liquors). Ad Valorem Tax of fixed proportion of 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 from each taxpayer can be determined (ex. Value Added Tax, Income Tax, Donors Tax and Estate Tax). 4) As to purpose General/Fiscal tax imposed solely for the general purpose of the government, to raise revenue for government expenditures (ex. Income Tax, Donors Tax and Estate Tax). Special/Regulatory tax imposed for a specific purpose, to achieve some social or economic ends irrespective of whether revenue is actually raised or not (ex. Tariff and Certain duties on Imports). 5) As to object or subject matter Personal/Poll/Capitation tax of fixed amount imposed on individual, whether citizens or not, residing within a

specified territory without regard to their property or the occupation in which he may be engaged (ex. Community Tax). Property tax imposed on property, whether real or personal, in proportion either to its value, or in accordance with some other reasonable method of apportionment (ex. Real Estate Tax). Excise any tax which does not fall within the classification of a poll tax or a property tax. This is a tax on the exercise of certain rights or privileges (ex. Income Tax, Estate Tax, Donors Tax, Value Added Tax and Other Percentage Taxes). 6) As to rates or gradation Proportional tax based on a fixed percentage of amounts of the property, receipts, or other basis to be taxed (ex. Value Added Tax and Other Percentage Taxes). Progressive tax the rate of which increases as the tax base or bracket increases (ex. Income Tax, Estate Tax and Donors Tax). Regressive tax the rate of which decreases as the tax base or bracket increases.

INHERENT LIMITATIONS 1.Purpose must be public in nature. - governmental purpose. - The essential point is that the purpose of the tax affects the inhabitants as a community and not merely as inhabitants. - purpose need not to be exclusively public. Private persons can be incidentally benefited. - if silent about the purpose, it is assumed to be for public purpose - Test of rightful taxation. Taxes must be used a. For the support of the government. b. For some of the recognized objects of the government; or c. To promote the welfare of the community. 2.Prohibition against delegation of the taxing power. - Rationale: Doctrine of Separation of Powers; Taxation is purely legislative, Congress cannot delegate it to others. - if tax legislation is delegated = INVALID - if tax administration is delegated = VALID - Exception:
a. Delegation to the President. - Tariff rates; - Import and export quotas; - Tonnage and wharfage dues; and - other duties or imposts within the national development program of the government. b. Delegation to local government units c. Delegation to administrative agencies - Power to and value property; - Power to assess and collect taxes; - Power to perform details of computation, appraisal, or adjustment; among others.

- only those who do not have separate and distinct personality are exempted in tax

4.International comity

5. Situs or Territoriality of Taxation

3.Exemption of government entities, agencies, and instrumentalities. - Government will be taxing itself to raise money for itself
- Immunity is necessary on order that the governmental functions will not be impeded