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The power to tax is an inherent power but such power must still be exercised in accordance with the inherent and constitutional
If there exists conflicting interest between the taxing authorities and taxpayers, it must be resolved in favor of the real purpose of
taxation, which is, promotion of common good.
2 Kinds of Limitations:
o Constitutional Limitation those provided for in the Constitution
o Inherent Limitations restrictions to the power to tax attached to its nature
(Le) Levied for a public purpose
(N) Non-delegability of the taxing power
(T) Territoriality or situs of taxation
(Ex) Tax exemptions of the Government
(Ice) International Comity
Violation of any or all of the above is
a. equal to taking without due process
b. infringement of the general principles of intl law which form part of the law of the land

Amount raised must

o Inure to the benefit of the public
o Used for
Support of the state
Some recognized object of the Government

Public service

You cannot use public funds to promote an individuals interest, even if it may incidentally result to the benefit of the public
Rationale: tax can be levied against one class of individuals in favor of another class; you can ruin one class while favoring the other
If it is for a private purpose, it is robbery because government takes property of another and then gives it in favor of another person.
public purpose includes indirect public advantage
o if an individual directly enjoys the tax, it is still valid as long as there is a link to public purpose

Test to determine existence of Public Purpose

o Duty test if it is the duty of the government to provide such thing
o Promotion of General Welfare Test if proceeds will directly promote the publics welfare

Purposes of levying tax:

o regulatory purpose
o raise government revenue
o support government existence
o rehabilitate/stablize a threatened industry, which is affected with public interest

If purpose of the tax is not stated, it is presumed that it is created for a public purpose
Examples (presumption of public purpose)
o Pensions of war veterans assurance that a persons patriotism will be acknowledged and rewarded
o Unemployment relief
o Support for the handicapped
o Care for the aged
o Scholarships for poor but deserving citizens
o Tax on sugar
o Oil Price Stabilization Fund oil industry is imbued with public interest, and a dramatic increase in oil prices will result to
economic crisis

The public purpose must exist at the time the law was enacted.

o Government may only use public funds for a public purpose

o The existence of public purpose determines its validity, not the incidental benefit to the public

Source of Power People

Delegation Transferred from the people to Congress
Basis: delegata potestas non potest delegari.

Theories that justify the delegation:

o Power to fill up the details- subjects of less interest in which general provision may be made, thus those who are to act under such
general provision, has the power to fill up the details.
o Power of Contingent Legislation- what is delegated is the task of ascertaining the facts that bring its declared policy into

Delegable Powers: (Ta-Em-Trea-LIA)

a. (Ta) Tariff Powers-reason for its delegation is necessity.
b. (Em) Emergency Power- President can exercise this power in times of war or other national emergency, as authorized by Congress
through law. (Sec23(2) ArtVI, 1987 Constitution)
c. (Trea) Treaty and Executive Agreement Powers-Power of President to enter in to executive agreements, and to ratify treaties. (Sec21,
ArtVII, 1987 Constitution)
d. (L) Local taxing power- Theory of non-delegation of legislative power does not apply in local units. Reason- LGU not sovereign
e. (I) Initiative and Referendumo Initiative- power of the people to propose and enact legislation without action by the legislature.
o Referendum- power of the people to approve or reject any act of the legislature, and also to approve or reject legislation that
the legislature has referred to them.
f. (A) Administrative Matters:
o Valid as regards:
i. Valuation of property pursuant to fixed rules
ii. Equalization of assessments by a central body

iii. Collection of taxes

Test to determine permissible delegation:

a. Completeness test- The law must be complete in itself, setting forth therein the policy to be executed, carried out, or implemented by
the delegate
b. Sufficiency standard test -The law must fix a standard. The limits of which are sufficiently determinate and determinable to which
the delegate must conform in the performance of his functions.

Non-Delegable Powers:
a. Selection of property or transaction to be taxed
b. Determination of purposes
c. Rate of taxation
d. Rules of taxation

Prohibition on Executive Legislation and Judicial Legislation

o Based on separation of powers of state.
o Law-making power-legislative branch
o Law-executing power- executive branch
o Law-interpreting power- judicial branch

General rule: A state may not tax property lying outside its borders or lay an excise or privilege tax upon the exercise or enjoyment of a
right or privilege derived from the laws of another state and therein exercised or enjoyed.
Taxation is an act of sovereignty which could only be exercised within states territorial boundaries.
Taxes are paid for the protection and services provided by the taxing authority which could not be provided outside the territorial limits
of the taxing power.
Situs of taxation: situs is latin term which means situation, location or place.
Determination of situs: (S-NCR-L)
o (S) Subject matter of the tax- Situs may depend on what is being taxed: excise/privilege, business, occupation, person, act or activity.


(N) Nature/kind/ classification of the tax- situs may depend on what tax is being levied: income tax, import duty, sales tax or real
property tax.
(C) Citizenship of the tax payer- situs may depend on which state the taxpayer is a citizen of, or probably an alien, dual citizen,
stateless or refugee.
(R) Residenxe of the taxpayer- situs may depend on the residence of the taxpayer: resident, non- resident.
(L) Location of the property- situs may depend on the palce the thing or property is located: within the Philippines or outside the

It is a matter of public policy.

o Property belonging to the State or any of its political division intended for government use and purposes is generally exempt
from taxation.
o express provision of law needed to satisfy the rule.

Always remember that Exemption is the rule and taxation is the exception.

Reasons for exemption (A-Nore-So-Re)

o (A) Avoid transferring money from one pocket to another.
o (Nore) No revenue.
o (So) So as not to unduly impede govt functions.
o (Re) Reduce amount of money to be handled.

Exception to the (General Rule) Exemption

o The rule on the exemption of government is not absolute.
o The government may tax itself. Clearly, exemption applies only to government entities which immediately and directly exercise
its government powers.
o GOCCs, agencies, or instrumentalities are subject to taxation under the NIRC and LGC. However, only income from
proprietary activities and not from essential governmental functions are taxable.

Definition of Terms

o RP (Republic of the Philippines) corporate government entity through which the functions of government are exercised
throughout the Philippines.
o NG (National Government) entire machinery of the central government as distinguished from different forms of local
o GOCC (Government-Owned and Controlled Corporations) any agency organized as a stock or non-stock corporation
o GA (Government Agency) any of the various units of the government including a department, bureau, office, instrumentality,
or GOCC, or LGU or a distinct unit therein.

DSE (Doctrine of Sovereign Equality)

o In par parem non habet imperium or as between equals there is no sovereign
o Foreign sovereign does not subject itself to another.

DSI (Doctrine of Sovereign Immunity)

o The State cannot be sued without its consent.
o The State can do no wrong.
o Based on practicality because of the difficulty of enforcing tax laws.

IC (Incorporation Clause)
o The Philippines adopts the generally accepted principles on international law as part of the law of the land.
o The Philippines adheres to the policy of peace, equality, justice, freedom,
cooperation, and amity with all nations.