CHAPTER 1

★ Existence of government is a necessity - cannot continue without

A. CONCEPT + CHARACTERISTICS means to pay its expenses therefore has the right to compel
State: citizens to contribute
(1) Government or Sovereignty ★ Reciprocal duties between state (compensation) and inhabitants
(a) Legislative: Senate, House of Representatives (benefits)
(b) Executive: President ★ Lawful taxation - public purpose
(c) Judiciary: Chief Justice
(2) People ★ Inherent in sovereignty
(3) Territory ★ Legislative in character
(4) Money ★ Subject to constitutional and inherent limitations

Taxation (Tax) Imposition of tax (legislative act) v. collection (administrative)

1. Enforced contribution
○ not voluntary
○ Not dependent on the will of the person
2. Proportionate
○ Based on ability to pay
3. Payable in money
○ Pecuniary burden
○ Form of money in legal tender
4. Levied (Impose) on persons / property
○ Imposed on acts, transactions, rights or privileges
○ But person is the one who pays
○ *not all who pay shoulder burden of the tax
5. Levied by the states
○ Subject to jurisdiction of the state
○ For tax to be enforced
6. Levied by law
○ Power to tax of congress + local legislative bodies
(sometimes executive)
7. Levied for public purpose (benefit)
○ Provide income for public purposes
○ Can’t be used for purely private purposes
○ People’s benefit + needs of government
Basic Principles of a sound tax system:
1. Fiscal Adequacy: enough money
2. Administrative Feasibility: properly administered
3. Theoretical Justice: ability to pay
B. CLASSIFICATIONS + DISTINCTIONS
1. As to subject matter or object
a. Personal - fixed amt. for people residing in a specific
territory (ex. Community tax)
b. Property - whether real or personal
c. Excise - performance, privilege, occupation (ex.
Income tax, VAT, estate tax, donor’s tax)
2. As to who bears the burden
a. Direct - taxpayer primarily liable
b. Indirect - burden passed on (ex. VAT, customs)
3. As to determination of amount
a. Specific
b. Ad Valorem (acc. to value)
4. As to purpose
 a. General/Fiscal/Revenue C. LIMITATIONS ON THE POWER OF TAXATION
b. Special/Regulatory
5. As to scope of authority imposing the tax (1) Constitutional Limitations
a. National (a) Due process of law
b. Municipal/Local (b) Equal protection of the laws
6. As to graduation or rate (c) Rule of uniformity & equity in taxation
a. Proportional(PH) - flat/uniform tax (d) No imprisonment for non-payment of a poll tax
b. Progressive/Graduated(PH) (e) Non-impairment of the obligation of contracts
c. Regressive (f) Non-infringement of religious freedom
(g) No appropriation for religious purposes
(h) Exemption of religious, charitable, and educational
Three (3) Main Powers of Government: entities, non-profit cemeteries, and churches from
1. Police Power property taxation
- State’s capacity to maintain safety, well being, and (i) Exemption of non-stock, non-profit educational
comfort of its people institutions from taxation
- Legislative regulates conduct (j) Concurrence by a majority of all the members of
2. Eminent Domain Congress for the passage of a law granting tax
- Power of govt. to buy property of its people exemption
3. Taxation (k) Power of the president to veto any particular item or
- Most comprehensive, most important, all items in a revenue or tariff bill
encompassing (l) Non-impairment of the jurisdiction of the Supreme
- Power of govt. To buy property of its people Court in tax cases
- Purpose: revenue and non-revenue (public (2) Inherent Limitations
schools/health) (a) Requirement that levy must be for a public purpose
(b) Non-delegation of the legislative power to tax
Lifeblood Doctrine: importance of taxes in the whole of (c) Exemption from taxation of govt. Entities
statehood (d) International comity
(e) Territorial jurisdiction
Necessity Theory: taxes are needed by the govt. for it to
function

Symbiotic Relationship: people’s taxes needed by the

govt. and govt. needed by the
people

D. SITUS OF TAXATION AND DOUBLE TAXATION

Situs of taxation - place of taxation

E. FORMS OF ESCAPE FROM TAXATION

(1) Shifting
(2) Capitalization
(3) Transformation
(4) Evasion - illegal
(5) Avoidance
(6) Exemption