TAX 01: General Principles of Taxation

• Tax


  An enforced proportionate contribution imposed upon persons, properties, businesses, rights, interests, privileges, transactions and acts within the territorial jurisdiction of the taxing authority exercise by the legislature for a public purpose and generally payable in money
• Tax


  A compulsory contribution to state revenue, levied by the government on workers' income and business profits or added to the cost of some goods, services, and transactions
• Tax


  The enforced proportional contributions from persons and property levied by the lawmaking body of the State by virtue of its sovereignty for the support of the government and all public needs
• Tax


  A sum of money demanded by a government for its support or for specific facilities or services, levied upon incomes, property, sales, etc.
• Tax


  An involuntary fee levied on corporations or individuals that is enforced by a level of government in order to finance government activities
• Tax


  A contribution for the support of a government required of persons, groups, or businesses within the domain of that government
• Tax is what we pay for a civilized society
• Taxation as a power

  The power by which the sovereign raises revenue to defray the expenses of government
• Taxation as a power


  The inherent power of the state to demand enforced contribution for public purpose to support the government
• Taxation as a power


  The destructive power which interferes with the personal and property rights of the people and takes from them a portion of their property for the support of the government
• Taxation as a means or process


  The process or means by which the sovereign, through its lawmaking body, raises income to defray the necessary expenses
• Taxation as a means or process


  The means by which governments finance their expenditure by imposing charges on citizens and corporate entities
• Taxation as a means or process


  The process or means by which the sovereign through its law-making body, imposes burdens upon subjects or objects within its jurisdiction for the purpose of raising revenues to carry out the legitimate objects of the government
• Taxation as a price


  The indispensable and inevitable price for civilized society
• Taxation as an act


  The legislative act of levying/imposing a tax to raise income for the government to defray its necessary expenses
• Taxation as an act


  The act of a taxing authority actually levying tax
• Taxation as an act


  The practice of collecting taxes (money) from citizens based on their earnings and property
• Taxation as a mode of cost allocation


  A way of apportioning the cost of government among those who in some measures are privileged to enjoy its benefits and must bear its burden
• Elements of a valid tax

  • Must not violate inherent and constitutional limitations
  • Must be for a public purpose
  • Must be proportionate in character
  • Must be levied by the taxing power (legislature) having jurisdiction over the object of taxation
  • Must be uniform and equitable, not unjust, excessive, oppressive, confiscatory or discriminatory
  • Generally payable in money
• Purposes/Objectives of taxation


  • Primary (Revenue or Fiscal) - to raise revenue to promote the general welfare and protection of its citizens
  • Secondary - Regulatory: implement of police power, promotion of general welfare, protect local industry
  • Secondary - Compensatory: to provide some sort of compensation to an activity
  • Secondary - Income Redistribution: to lessen inequalities in the distribution of income and wealth
  • Secondary - Encourage economic growth thru grant of tax incentives or exemptions
• Lifeblood theory


  The existence of the government is a necessity; it cannot exist nor endure without means to pay its expenses; and for those means, the government has the right to compel all its citizens and property within its limits to contribute in the form of taxes
• Lifeblood theory


  Taxes are indispensable to the existence of the State. Without taxation the State cannot raise revenue to support its operations
• Lifeblood theory


  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
• Lifeblood theory


  A doctrine that recognizes the importance of taxes for the state and its citizens
• Benefit-received theory or benefits-protection theory or reciprocity theory


  The government and the people have the reciprocal and mutual duties of support and protection
• Benefit-received theory or benefits-protection theory or reciprocity theory


  Involves the power of the State to demand and receive taxes based on the reciprocal duties of support and protection between the State and its citizens
• Benefit-received theory or benefits-protection theory or reciprocity theory


  Doctrine of Symbiotic Relationship - every person who is able to must contribute his share in the running of the government. The government, for its part, is expected to respond in the form of tangible and non-tangible benefits intended to improve the lives of the people and enhance their moral and material values
• Power of taxation


  The power to take property for the support of the government and for public purpose. It is also the ability of a State to impose and collect taxes
• Police power


  The power to enact laws to promote public safety, health, morals and the common good (general welfare of the people). It extends to the protection of the lives, limbs, health, comfort, and quiet of all persons and the protection of all property within the state and further even to the destruction of property
• Power of eminent domain


  The power to take private property for public use upon payment of just compensation (Power to Expropriate)
• Elements of eminent domain

  • Permanent taking of private property (not temporary)
  • Payment of Just Compensations (Market value - BIR zonal / Assessor's fair value)
  • Public use
• Distinctions of the inherent powers of the state


  • Taxation - Exercising Authority: State, Necessity of Delegation: Not necessary, Purpose: Raise revenue, Persons affected: Community or class of individuals, Effect of transfer of property rights: Tax paid goes to treasury, Amount of Imposition: Generally, unlimited, Importance: Most important, Relationship with the Constitution: Inferior to the "Non-Impairment Clause"
  • Police Power - Exercising Authority: State, Necessity of Delegation: Valid delegation, Purpose: Protection or regulation for general welfare, Persons affected: Community or class of individuals, Effect of transfer of property rights: No transfer of title, Amount of Imposition: Sufficient to cover the costs of regulation, Importance: Most superior, Relationship with the Constitution: Superior to the "Non-Impairment Clause"
  • Eminent Domain - Exercising Authority: State or private entities, Necessity of Delegation: Valid delegation, Purpose: Property is taken for public use, Persons affected: Owner of the property, Effect of transfer of property rights: There is transfer of right or title, Amount of Imposition: No imposition, Importance: Superior and may override the "Non-Impairment Clause", Relationship with the Constitution: Superior
• Similarities of the three powers

  • All are inherent powers of the State
  • All are legislative in nature
  • All three powers are necessary attributes of sovereignty
  • They are means by which the State interferes with private rights of persons
  • They exist independently with the Constitution
  • The exercise of these powers by the local government units may be limited by national legislature
• Taxation power can be used as an implement of Police power
• Police power can be used to raise revenue for the government (ex: license fee)
• Nature or characteristics of the power of taxation

  • It is an attribute of sovereignty
  • It is legislative in character
  • It is subject to international comity or treaty
  • It is subject to inherent and constitutional limitations
  • It is generally payable in money
  • It is territorial
  • It is for public purpose
• Scope of the power of taxation

  • Comprehensive - it covers all persons, activities, businesses, professions, rights and privileges
  • Unlimited - in the absence of limitations, the power to tax is unlimited
  • Plenary - it is complete
  • Supreme - as to the selection of the subject/object of taxation
• Discretion of the taxing power

  • Determine the nature or kind of tax
  • Determine the object to be taxed
  • Determine the purpose of taxation
  • Determine the extent (amount or rate of tax)
  • Determine the situs or place of the imposition
  • Determine the coverage of those to be taxed (subjects or objects)
  • Determine the apportionment of the tax
  • Determine the method of collection
• The taxing power can grant tax incentives/exemptions/condonations/amnesty
• The taxing power can specify or provide for the administrative as well as judicial remedies that either the government or the taxpayers may avail themselves in the proper implementation of the tax measure