TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B.

Aban
CABANEIRO) A2011
Chapter 1: GENERAL PRINCIPLES
TAXATION DEFINED
Taxation is the inherent power of the sovereign, exercised
through the legislature, to impose burdens upon the
subjects and objects within its jurisdiction, for the purpose
of raising revenues to carry out the legitimate objects of the
government.
It is also defined as the act of levying a tax, i.e. the process
or means by which the sovereign, through its law-making
body, raises income to defray the necessary expenses of
government. It is a method of apportioning the cost of
government among those who, in some measure, are
privileged to enjoy its benefits and must therefore bear its
burdens.
It is a mode of raising revenue for public purposes, (Cooley)
Symbiotic relationship between the government and the
citizens.
RATIONALE OF TAXATION: DOCTRINE OF SYMBIOTIC
RELATIONSHIP
This doctrine is enunciated in CIR v. Algue, Inc. [158
SCRA 9], which states that 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. Hence, despite the natural reluctance to
surrender part of ones hard-earned income to the
taxing authorities, every person who is able must
contribute his share in the burden of running the
government. 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 material and moral values.
TAXES DEFINED
Taxes are the 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, [Cooley]

JUICY NOTES (PROF.

They are not arbitrary exactions but contributions levied by

authority of law, and by some rule of proportion which is
intended to ensure uniformity of contribution and a just
apportionment of the burdens of government.
Thus:
a. Taxes are enforced contributions
It operates in invitum which means that it is in no way
dependent on the will or contractual assent, express or
implied, of the person taxed. They are positive acts of
the government (Rochester vs Bloss).
b. Taxes are proportional in character, since taxes are
based on ones ability to pay.
c. Taxes are levied by authority of law.
The power to impose taxes is a legislative power; it
cannot be imposed by the executive department nor by
the courts.
d. Taxes are for the support of the government and all its
public needs.
e. Taxes are pecuniary burden payable in money, such that
a tax is not necessarily confined to those payable in
money (e.g. a backpay cert may be used to pay real
estate taxes).
f. Taxes are imposed by the State on persons, property or
services within its jurisdiction.

IMPORTANCE OF TAXES
Taxes are importants because they the lifeblood of the
government and so should be calculated without
unnecessary hindrance (CIR vs Algue).
LIFEBLOOD DOCTRINE
The lifeblood theory constitutes the theory of taxation,
which provides that the existence of government is a
necessity; that government cannot continue without means
to pay its expenses; and that for these means it has a right
to compel its citizens and property within its limits to
contribute.

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
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Without revenue raised from taxation, the government will

not survive, resulting in detriment to society. Without taxes,
the government would be paralyzed for lack of motive
power to activate and operate it. (CIR vs. ALGUE)
Taxes are the lifeblood of the government and there prompt
and certain availability is an imperious need. (CIR vs
Goodrich International Rubber Co.)

ILLUSTRATION OF LIFEBLOOD THEORY

1.
Collection of taxes cannot be enjoined by injunction.
2.
Taxes could not be the subject of compensation or set
off.
3.
A valid tax may result in the destruction of the
taxpayers property.
4.
Taxation is an unlimited and plenary power.
TAXES,PERSONAL TO TAXPAYER
A corporations tax delinquency cannot be enforced against
its stockholders except for unpaid taxes of a dissolved
corporation if it appears that the corporate assets have
passed into their hands (Tan Tiong Bio vs CIR).
Estate taxes accruing upon transmission of the decedents
estate to his heirs are not liabilities which can be enforced
against heirs.
NATURE OF THE TAXING POWER
1) Inherent in sovereignty
2) Legislative in character
PURPOSES AND OBJECTIVES OF TAXATION
PRIMARY
1. To raise revenue in order to support the government
(Revenue)
SECONDARY
2. Used for regulatory purposes (Regulation)
3. Used to reduce social inequality (Reduction of Social
Inequality)

JUICY NOTES (PROF.

4. Utilized to implement the police power of the State

(Promotion of General Welfare)
5. Used to protect our local industries against unfair
competition (Protectionism)
6. Utilized by the government to encourage the growth of local
industries (Encourage Economic Growth)
THEORY AND BASIS OF TAXATION
1) NECESSITY THEORY
Taxation as stated in the case of Phil. Guaranty Co., Inc.
v. Commissioner [13 SCRA 775], is a power predicated
upon necessity. It is a necessary burden to preserve the
States sovereignty and a means to give the citizenry an
army to resist aggression, a navy to defend its shores
from invasion, a corps of civil servants to serve, public
improvements for the enjoyment of the citizenry, and
those which come within the States territory and
facilities and protection which a government is supposed
to provide.
2) BENEFITS PROTECTION THEORY
This theory bases the power of the State to demand and
receive taxes on the reciprocal duties of support and
protection. 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.
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, [Lorenzo v.
Posadas].
SCOPE OF THE LEGISLATIVE TAXING POWER
1) The persons, property and excises to be taxed, provided it
is within its jurisdiction
2) Amount or rate of tax
3) Purposes for its levy, provided it be for a public purpose
4) Kind of tax to be collected
5) Apportionment of the tax
6) Situs of taxation
7) Method of collection

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban
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IS THE POWER TO TAX THE POWER TO DESTROY? /
CONSTITUTIONAL RESTRAINTS RE: TAXATION IS THE POWER
TO DESTROY
The power to tax "is an attribute of sovereignty". In fact, it is
the strongest of all the powers of government. But for all its
plenitude, the power to tax is not unconfined as there are
restrictions. Adversely effecting as it does property rights,
both the due process and equal protection clauses of the
Constitution may properly be invoked to invalidate in
appropriate cases of a revenue measure. If it were
otherwise, there would be truth to the 1903 dictum of Chief
Justice Marshall that "the power to tax involves the power to
destroy." The web or unreality spun from Marshall's famous
dictum was brushed away by one stroke of Mr. Justice
Holmes' pen, thus: "The power to tax is not the power to
destroy while this Court sits." "So it is in the Philippines." It
is because of the constitutional restraints placed on a taxing
power that violates fundamental rights.
The power to tax includes the power to destroy if it is used
as an implement of the police power (regulatory) of the
State. However, it does not include the power to destroy if it
is used solely for the purpose of raising revenue. (ROXAS vs.
CTA)
If the purpose of taxation is regulatory in character, taxation
is used to implement the police power of the state
If the power of taxation is used to destroy things,
businesses, or enterprises and the purpose is to raise
revenue, the court will come in because there will be
violation of the inherent and constitutional limitations and it
will be declared invalid.
POWER OF JUDICIAL REVIEW IN TAXATION
Courts cannot inquire into the wisdom of a taxing act.
(CIR vs Lingayen Gulf Electric Power Co)
Courts power in taxation is limited only to the
application and interpretation of the law.
It is not within the province of the court to inquire into
the wisdom of the law for indeed courts are bound by

JUICY NOTES (PROF.

the words in the mouth of the lawmaker. A verbo legis

non est recedendum (Commissioner of Customs vs
Manila Star Ferry inc.)
BASIC PRINCIPLE OF A SOUND TAX SYSTEM
1) FISCAL ADEQUACY
The sources of revenues must be adequate to meet
govt expenditures. (Chavez v. Ongpin, 186 SCRA
331).
Even if a tax law violates the principle of Fiscal
Adequacy and the proceeds may not be sufficient to
satisfy the needs of the government, still the tax law
is valid
2) THEORETICAL JUSTICE
The tax burden should be in proportion to the
taxpayers ability to pay (ABILITY TO PAY PRINCIPLE)
Equitable taxation has been mandated by our
constitution; as if taxes are unjust and unreasonable
then they are not equitable, thus invalid.
3) ADMINISTRATIVE FEASIBILITY

The tax law must be capable of effective or efficient

enforcement.

There is no law that requires compliance with this

principle, so even if the tax law violates this
principle; such tax law is valid.
TAXATION DISTINGUISHED FROM POLICE POWER AND
EMINENT DOMAIN
TAXATION

POLICE POWER

AS TO PURPOSE

For the purpose

raising revenue

AS
TO
COMPENSATION

Protection
and
benefits
received
from
the government.

To
promote
general welfare
through
regulations
The
maintenance of
a
healthy
economic
standard
of
society
(damnum
absque injuria)

EMINENT
DOMAIN
For public use

Just
compensation,
not to exceed the
market value by
the
owner
or
administrator or
anyone
having
legal interest in

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AS TO PERSONS
AFFECTED

Operate upon community or a class

of individuals

AS TO AUTHORITY
WHICH
EXERCISES
THE
POWER

Exercised only by the government

or its political subdivisions.

AS TO AMOUNT
OF IMPOSITION

Generally
limit
to
amount of
that
may
imposed

AS
TO
THE
RELATIONSHIP TO
THE
CONSTITUTION

Subject
to
certain
constitutional
limitations,
including
the
prohibition
against
impairment
of
the obligation of
contracts
Taxes
paid
become part of
the public funds

AS TO TRANSFER
OF
PROPERTY
RIGHTS

no
the
tax
be

Limited to
cost
regulation

the
of

Relatively
free
from
constitutional
limitations and
superior to the
non-impairment
provisions

the property, or
as determined by
the
assessor,
whichever
is
lower.
Operates on the
individual
property owner
May be exercised
by public services
corp or public
utilities if granted
by law
There
is
no
imposition;
rather, it is the
owner
of
the
property
taken
who is paid just
compensation.
Subject to certain
constitutional
limitations, NOT
including
the
prohibition
against
impairment
of
the obligation of
contracts

No transfer, but
only restraint on
the exercise, of
property
right
exists

ASPECTS OF TAXATION
1) LEVY or IMPOSITION
enactment of tax laws
legislative in character
2) ASSESSMENT
collection
administrative in character
TAXES DISTINGUISHED FROM OTHER IMPOSITIONS

JUICY NOTES (PROF.

1) toll amount charged for the cost and maintenance of

property used;
2) penalty punishment for the commission of a crime
3) compromise penalty amount collected in lieu of criminal
prosecution in cases of tax violations;
4) special assessment levied only on land based wholly on
the benefit accruing thereon as a result of improvements of
public works undertaken by government within the vicinity.
5) license fee regulatory imposition in the exercise of the
police power of the State;
6) margin fee exaction designed to stabilize the currency
7) debt a tax is not a debt but is an obligation imposed by
law.
8) regulatory fees exaction designed to regulate industries
9) subsidy legislative grant of money in aid of a private
enterprise deemed to promote the public welfare.
10) custom duties and fees duties charged upon
commodities on their being imported into or exported from
a country;
11) revenue broad term that includes not only taxes but
income from other sources as well.
12) Tribute synonymous with tax
13) Impost signifies any tax, tribute or duty.
Toll v. Tax
Toll is a sum of money for the use of something. It is the
consideration which is paid for the use of a road, bridge, or
the like, of a public nature. Taxes, on the other hand, are
enforced proportional contributions from persons and
property levied by the State by virtue of its sovereignty for
the support of the government and all public needs.
Toll is a demand of proprietorship; tax is a demand of
sovereignty.
Toll is paid for the used of anothers property; tax is paid for
the support of government.
The amount paid as toll depends upon the cost of
construction or maintenance of the public improvements
used; while there is no limit on the amount collected as tax
as long as it is not excessive, unreasonable, or confiscatory.

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Toll may be imposed by the government or by private

individuals or entities; tax may be imposed only by the
government.

Penalty v. Tax
Penalty is any sanction imposed as a punishment for
violation of law or for acts deemed injurious; taxes are
enforced proportional contributions from persons and
property levied by the State by virtue of its sovereignty for
the support of the government and all public needs.
Penalty is designed to regulate conduct; taxes are generally
intended to generate revenue.
Penalty may be imposed by the government or by private
individuals or entities; taxes only by the government.
Special assessment v. Tax
A special assessment tax is an enforced proportional
contribution from owners of lands especially benefited by
public improvements
A special assessment is levied only on land; tax is imposed
on persons, property and excises.
A special assessment is not a personal liability of the person
assessed; it is limited to the land.
A special assessment is based wholly on benefits, not
necessity.
A special assessment is exceptional both as to time and
place; a tax has general application.
Some rules:
An exemption from taxation does not include
exemption from a special assessment.
The power to tax carries with it the power to levy a
special assessment.

License fee v. Tax

JUICY NOTES (PROF.

PURPOSE: Tax imposed for revenue WHILE license fee for

regulation. Tax for general purposes WHILE license fee for
regulatory purposes only.
BASIS: Tax imposed under power of taxation WHILE license
fee under police power.
AMOUNT: In taxation, no limit as to amount WHILE license
fee limited to cost of the license and expenses of police
surveillance and regulation.
TIME
OF
PAYMENT:
Taxes
normally
paid
after
commencement of business WHILE LF before.
EFFECT OF PAYMENT: Failure to pay a tax does not make the
business illegal WHILE failure to pay license fee makes
business illegal.
SURRENDER: Taxes, being lifeblood of the state, cannot be
surrendered except for lawful consideration WHILE a license
fee may be surrendered with or without consideration.
IMPORTANCE OF DISTINCTION BETWEEN TAXES AND
LICENSE FEES:
It is necessary to determine whether a particular
imposition is a tax or a license fee, because some
limitations apply only to one and not to the other.
Furthermore, exemption from taxes does not include
exemption from license fees

Obligation to pay debt v. obligation to pay tax

A debt is generally based on contract, express or implied,
while a tax is based on laws.
A debt is assignable, while a tax cannot generally be
assigned.
A debt may be paid in kind, while a tax is generally paid in
money.
A debt may be the subject of set off or compensation, a tax
cannot.
A person cannot be imprisoned for non-payment of tax,
except poll tax.
A debt is governed by the ordinary periods of prescription,
while a tax is governed by the special prescriptive periods
provided for in the NIRC.

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A debt draws interest when it is so stipulated or where there

is default, while a tax does not draw interest except only
when delinquent.

TAXES CLASSIFIED
AS TO SUBJECT MATTER OR OBJECT
1. Personal, poll or capitation tax
Tax of a fixed amount imposed on persons residing within a
specified territory, whether citizens or not, without regard to
their property or the occupation or business in which they
may be engaged, i.e. community tax.
2. Property tax
Tax imposed on property, real or personal, in proportion to
its value or in accordance with some other reasonable
method of apportionment.
3. Excise tax
A charge imposed upon the performance of an act, the
enjoyment of privilege, or the engaging in an occupation.
AS TO PURPOSE
4. General/fiscal revenue tax is that imposed for the
purpose of raising public funds for the service of the
government.
5. Special or regulatory tax is imposed primarily for the
regulation of useful or non-useful occupation or enterprises
and secondarily only for the purpose of raising public funds.
AS TO WHO BEARS THE BURDEN
6. Direct tax
A direct tax is demanded from the person who also
shoul,ders the burden of the tax. It is a tax which the
taxpayer is directly or primarily liable and which he or she
cannot shift to another.
7. Indirect tax
An indirect tax is demanded from a person in the
expectation and intention that he or she shall indemnify
himself or herself at the expense of another, falling finally
upon the ultimate purchaser or consumer. A tax which the
taxpayer can shift to another.

JUICY NOTES (PROF.

AS TO THE SCOPE OF THE TAX

8. National tax
A national tax is imposed by the national government.
9. Local tax
A local tax is imposed by the municipal corporations or local
government units (LGUs).
AS TO THE DETERMINATION OF AMOUNT
10.Specific tax
A specific tax is a tax of a fixed amount imposed by the
head or number or by some other standard of weight or
measurement. It requires no assessment other than the
listing or classification of the objects to be taxed.
11.Ad valorem tax
An ad valorem tax is a 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 due from each
taxpayer can be determined.
12.Customs Duties
Duties charged upon the commodities on theor being
imported into or exported from a country.
AS TO GRADUATION OR RATE
13.Proportional tax
Tax based on a fixed percentage of the amount of the
property receipts or other basis to be taxed. Example: real
estate tax.
14.Progressive or graduated tax
Tax the rate of which increases as the tax base or bracket
increases.
Digressive tax rate: progressive rate stops at a certain
point. Progression halts at a particular stage.
15.Regressive tax
Tax the rate of which decreases as the tax base or bracket
increases. There is no such tax in the Philippines.
TAXPAYERS SUIT

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One where a taxpayer who feels aggrieved by the

implication of a tax law goes now via judicial review to the
SC and asks for a nullification of the law.
In availing judicial review as a taxpayer, the only option one
can look into are the inherent and constitutional limitations
on taxation.
Taxpayers have sufficient interest of preventing the illegal
expenditures of money raised by taxation (NOT DONATIONS
AND CONTRIBUTIONS)
A taxpayer is not relieved from the obligation of paying a
tax because of his belief that it is being misappropriated by
certain officials
A taxpayer has no legal standing to question executive acts
that do not involve the use of public funds. (GONZALES vs.
MARCOS)
It is only when an act complained of which may include a
legislative enactment of a statute, involves the illegal
expenditure of public money that the so-called taxpayers
suit may be allowed. LOZADA vs. COMELEC
Taxpayers may be levied with a regulatory purpose to
provide means for the rehabilitation and stabilization of a
threatened industry which is affected with the public
interest as to be within the police power of the State.
CALTEX vs. COA
The Supreme Court has discretion whether or not to
entertain taxpayers suit and could brush aside lack of locus
standi. KILOS BAYAN vs. GUINGONA

REQUISITES FOR A TAXPAYERS PETITION

1) That money is being extracted and spent in violation of
specific constitutional protections against abuses of
legislative power
2) That public money is being deflected to any improper
purpose
3) That the petitioner seeks to restrain respondents from
wasting public funds through the enforcement of an invalid
or unconstitutional law.
CASES:

JUICY NOTES (PROF.

Commissioner vs. Algue

GRL-28890, 17 February 1988.First Division, Cruz (J); 4 concur
Facts: The Philippine Sugar Estate Development Company (PSEDC)
appointed Algue Inc. as its agent, authorizing it to sell its land,
factories, and oil manufacturing process. The Vegetable Oil
Investment Corporation (VOICP) purchased PSEDC properties. For
the sale, Algue received a commission of P125,000 and it was from
this commission that it paid Guevara, et. al. organizers of the
VOICP, P75,000 in promotional fees. In 1965, Algue received an
assessment from the Commissioner of Internal Revenue in the
amount of P83,183.85 as delinquency income tax for years 1958
amd 1959. Algue filed a protest or request for reconsideration
which was not acted upon by the Bureau of Internal Revenue (BIR).
The counsel for Algue had to accept the warrant of distrant and
levy. Algue, however, filed a petition for review with the Coourt of
Tax Appeals.
Issue: Whether the assessment was reasonable.
Held: Taxes are the lifeblood of the government and so should be
collected without unnecessary hindrance. Every person who is able
to pay must contribute his share in the running of the government.
The Government, for his 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. This
symbiotic relationship is the rationale of taxation and should dispel
the erroneous notion that is an arbitrary method of exaction by
those in the seat of power. Tax collection, however, should be made
in accordance with law as any arbitrariness will negate the very
reason for government itself. For all the awesome power of the tax
collector, he may still be stopped in his tracks if the taxpayer can
demonstrate that the law has not been observed. Herein, the
claimed deduction (pursuant to Section 30 [a] [1] of the Tax Code
and Section 70 [1] of Revenue Regulation 2: as to compensation for
personal services) had been legitimately by Algue Inc. It has further
proven that the payment of fees was reasonable and necessary in
light of the efforts exerted by the payees in inducing investors (in
VOICP) to involve themselves in an experimental enterprise or a

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business requiring millions of pesos. The assessment was not
reasonable.
Tolentino vs. Secetary of Finance
GR No. 115455. August 25, 1994
Facts: The value-added tax (VAT) is levied on the sale, barter or
exchange of goods and properties as well as on the sale or
exchange of services. RA 7716 seeks to widen the tax base of the
existing VAT system and enhance its administration by amending
the NationalInternal Revenue Code. There are various suits
challenging the constitutionality of RA 7716 on various grounds.
One contention is that RA 7716 did not originate exclusively in the
House of Representatives as required by Art. VI, Sec. 24 of the
Constitution, because it is in fact the result of the consolidation of
2distinct bills, H. No. 11197 and S. No. 1630. There is also a
contention that S. No. 1630 did not pass 3 readings as required by
the Constitution.
Issue: Whether or not RA 7716 violates Art. VI, Secs. 24 and 26(2)
of the Constitution
Held: The argument that RA 7716 did not originate exclusively in
the House of Representatives as required by Art. VI, Sec. 24 of the
Constitution will not bear analysis. To begin with, it is not the law
but the revenue bill which is required by the Constitution to
originate exclusively in the House of Representatives. To insist that
a revenuestatute and not only the bill which initiated the legislative
process culminating in the enactment of the law must substantially
be the same as the House bill would be to deny the Senates power
not only to concur with amendments but also to propose
amendments. Indeed, what the Constitution simply means is that
the initiative for filingrevenue, tariff or tax bills, bills authorizing an
increase of the public debt, private bills and bills of local
application must come from the House of Representatives on the
theory that, elected as they are from the districts, the members of
the House can be expected to be more sensitive to the local needs
and problems. Nor does the Constitution prohibit the filing in the
Senate of a substitute bill in anticipation of its receipt of the bill
from the House, so long as action by the Senate as a body is
withheld pending receipt of the House bill.

JUICY NOTES (PROF.

The next argument of the petitioners was that S. No. 1630 did not
pass 3 readings on separate days as required by the Constitution
because the second and third readings were done on the same day.
But this was because the President had certified S. No. 1630 as
urgent. The presidential certification dispensed with the
requirement not only of printing but also that of reading the bill on
separate days. That upon the certification of a bill by the President
the requirement of 3 readings on separate days and of printing and
distribution can be dispensed with is supported by the weight of
legislative practice.
EXERCISES:
Discuss the importance of taxes
SUGGESTED ANSWER:
Taxes are the lifeblood of the government, for without taxes, the
government can neither exist nor endure. A principal attribute
of sovereignty, the exercise of taxing power derives its source
from the very existence of the state whose social contract with
its citizens obliges it to promote public interest and common
good. The theory behind the exercise of the power to tax
emanates from necessity; without taxes, government cannot
fulfill its mandate of promoting the general welfare and wellbeing of the people. (NAPOCOR v. City of Cabanatuan, G.R. No.
149110, April 9, 2003).

Nature of the Power of Taxation (#1, 2000 Bar Exams)

Justice Holmes once said: The power to tax is not the power
to destroy while this Court (the SC) sits. Describe the power to
tax and its limitations.
SUGGESTED ANSWER:
The power to tax is an inherent power of the sovereignty which
is exercised through the legislature to impose burdens upon
subjects and objects within its jurisdiction for the purpose of
raising revenues to carry out the legitimate objects of govt.
The underlying basis for its exercise is governmental necessity
for without it, no govt can exist nor endure. Accordingly, it has

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the broadest scope of all the powers of government
because in the absence of limitations, it is considered an
unlimited, plenary, comprehensive and supreme. The two
limitations on the power of taxation are the inherent and
constitutional limitations which are intended to prevent
abuse on the exercise of the otherwise plenary and unlimited
power. It is the Courts role to see to it that the exercise of the
power does not transgress these limitations.
Power of Taxation: Legislative in Nature (Bar 1994)
The Secretary of Finance, upon recommendation of the
Commissioner of Internal Revenue, issued a Revenue
Regulation using gross income as the tax base for
corporations doing business in the Philippines. Is the
Rev.Reg.valid?
SUGGESTED ANSWER:
The regulation establishing gross income as the tax base for
corporations doing business in the Philippines (domestic as
well as resident foreign) is not valid. This is no longer
implementation of the law but actually it constitutes
legislation because among the powers that are exclusively
within the legislative authority to tax is the power to
determine -the amount of the tax. (See 1 Cooley 176-184).
Certainly, if the tax is limited to gross income without
deductions of these corporations, this is changing the amount
of the tax as said amount ultimately depends on the taxable
base.
Power of Taxation; Inherent in a Sovereign State
(2005)Describe the power of taxation. May a legislative body
enact laws to raise revenues in the absence of a
constitutional provision granting said body the power to tax?
Explain.
SUGGESTED ANSWER:
Yes, the legislative body may enact laws even in the absence
of a constitutional provision because the power to tax is inherent
in the government and not merely a constitutional grant. The
power of taxation is an essential and inherent attribute of

JUICY NOTES (PROF.

sovereignty belonging as a matter of right to every

independent government without being expressly granted by the
people. (Pepsi-Cola Bottling Company of the Philippines, Inc. v.
Municipality of Tanauan, Leyte, G.R. No. L-31156)
Taxation is the inherent power of a State to collect enforced
proportional contribution to support the expenses of government.
Taxation is the power vested in the legislature to impose
burdens or charges upon persons and property in order to raise
revenue for public purposes.
The power to tax is so unlimited in force and so searching in
extent that courts scarcely venture to declare it is subject to any
restrictions whatever, except such as rest in the discretion of the
authority which exercises it. (Tio v. Videogram Regulatory Board,
G.R. No. L-75697, June 18, 1987) So potent is the power to tax that
it was once opined that "the power to tax involves the power to
destroy."(C.J. Marshall in McCulloch v. Maryland)
Revocation of Exempting Statutes (Bar 1997)
"X" Corporation was the recipient in 1990 of two tax exemptions
both from Congress, one law exempting the company's bond
issues from taxes and the other exempting the company from
taxes in the operation of its public utilities. The two laws
extending the tax exemptions were revoked by Congress before
their expiry dates. Were the revocations constitutional?
SUGGESTED ANSWER:
Yes. The exempting statutes are both granted unilaterally by
Congress in the exercise of taxing powers. Since taxation is the
rule and tax exemption, the exception, any tax exemption
unilaterally granted can be withdrawn at the pleasure of the
taxing authority without violating the Constitution (Mactan Cebu
International Airport Authority v, Marcos, G.R No. 120082,
September 11, 1996).
Neither of these were issued by the taxing authority in a contract
lawfully entered by it so that their revocation would not
constitute an impairment of the obligations of contracts.
ALTERNATIVE ANSWER:
No. The withdrawal of the tax exemption amounts to a
deprivation of property without due process of law, hence
unconstitutional.

Chapter 1: GENERAL PRINCIPLES. Page 9 of 9