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• Administrative feasibility which is one of • The basic aim of police power is public
the basic principles of a sound tax good and welfare. Taxation, in its case,
system requires that tax laws should be focuses on the power of government to
capable of convenient, just and effective raise revenue in order to support its
administration which is why it fixes a existence and carry out its legitimate
standard or a uniform tax base upon objectives. Although correlative to each
which taxes should be paid. (Taganito other in many respects, the grant of one
Mining Corp. v. Commissioner of Internal does not necessarily carry with it the
Revenue) grant of the other. The two powers are,
by tradition and jurisprudence, separate
and distinct powers, varying in their
respective concepts, character, scopes
POWER OF TAXATION COMPARED WITH OTHER and limitations. (Land Transportation
POWERS Office v. City of Butuan)
• Taxation is the rule and exemption The shelter of protection under the due
therefrom the exception, the exemption process and equal protection clause is
may thus be withdrawn at the pleasure given to all persons, both aliens and
of the taxing authority. (Mactan Cebu citizens. (Villegas v. Hiu Chiong Tsai Pao
International Airport Authority v. Ho)
Marcos)
• It is well-settled that the equal-
II. CONSTITUTIONAL LIMITATIONS protection guarantee does not require
territorial uniformity of laws. As long as
DUE PROCESS there are actual and material differences
• Due process clause may be invoked between territories, there is no violation
where a taxing statute is so arbitrary of the constitutional clause (Tiu v. Court
that it finds no support in the of Appeals)
Constitution. An obvious example is
where it can be shown to amount to the RELIGIOUS FREEDOM
confiscation of property. (Sison, Jr. v. • The constitutional guaranty of the free
Ancheta) exercise and enjoyment of religious
profession and worship carries with it
• Administrative proceedings are not the right to disseminate religious
exempt from the operation of due information.
process requirements one of which is
that a finding by an administrative Any restraint of such right can only be
tribunal should be supported by justified like other restraints of freedom
substantial evidence presented at the of expression on the grounds that there
hearing or at least contained in the is a clear and present danger of any
records or disclosed to the parties substantive evil which the State has the
affected. (Commissioner of Customs. v. right to prevent. (American Bible Society
Court of Tax Appeals & Campos Rueda) v. City of Manila)
NON-IMPAIRMENT OF CONTRACTS main purposes. (Abra Valley College, Inc.
• Charters or special laws granted and v. Aquino)
enacted by the Legislature are in the
nature of private contracts. They are • There must be proof of the actual and
usually adopted after careful direct use of the lands, buildings, and
consideration of the private rights in improvements for religious or charitable
relation with resultant benefits to the purposes to be exempt from taxation.
State. (Commissioner of Internal (Province of Abra v. Hernando)
Revenue v. Lingayen Gulf Electric Power
Co., Inc.) • The test whether an enterprise is
charitable or not is whether it exists to
• As a charter is in the nature of a private carry out a purpose reorganized in law as
contract, the imposition of another charitable or whether it is maintained
franchise tax on the corporation by the for gain, profit, or private advantage.
local authority would constitute an (Lung Center of the Philippines v. Quezon
impairment of the contract between the City)
government and the corporation.
(Province of Misamis Oriental v. Cagayan TAX EXEMPTION OF NON-STOCK, NON-PROFIT
Electric Power and Light Co., Inc.) EDUCATIONAL INSTITUTIONS
• To be granted the exemption, it must be
• The Constitution provides that a proved with substantial evidence that
franchise is subject to amendment, (1) it falls under the classification non-
alteration or repeal by the Congress stock, non-profit educational institution;
when the public interest so requires and (2) the income it seeks to be
(Cagayan Electric Power & Light Co., Inc. exempted from taxation is used actually,
v. Commissioner of Internal Revenue) directly, and exclusively for educational
purposes. (Commissioner of Internal
• A franchise partakes the nature of a Revenue v. Court of Appeals & YMCA)
grant which is beyond the purview of the
non-impairment clause of the • The tax exemption granted by the
Constitution. (Manila Electric Co. v. Constitution to non-stock, non-profit
Province of Laguna) educational institutions, unlike the
exemption that may be availed of by
UNIFORMITY AND EQUALITY OF TAXATION proprietary educational institutions,
• A tax is considered uniform when it is not subject to limitations imposed
operates with the same force and effect by law. (Commissioner of Internal
in every place where the subject may be Revenue v. De La Salle University, Inc.)
found. (City of Baguio v. De Leon)
MAJORY VOTE OF CONGRESS TO GRANT TAX
TAX EXEMPTION OF REAL PROPERTIES EXEMPTION
• A gift tax is not an assessment on the • Tax exemption cannot be implied as it
properties themselves. It did not rest must be categorically and unmistakably
upon general ownership. Rather it is an expressed. (John Hay Peoples
excise upon the use made of the Alternative Coalition v. Lim)
properties and upon the privilege of
receiving them. It is not, therefore a
property tax, but an excise tax imposed DOUBLE TAXATION AND TAX EXEMPTIONS
on the transfer of property by way of gift
(Lladoc v. Commissioner of Internal DOUBLE TAXATION
Revenue)
DIRECT DOUBLE TAXATION
• The test of exemption from taxation is • It is a well-settled rule that a license tax
the use of the property for purposes may be levied upon a business or
mentioned in the Constitution. occupation although the land or
property used in connection therewith is
The exemption extends to facilities subject to property tax. (Villanueva v.
which are incidental to and reasonably City of Iloilo)
necessary for the accomplishment of the
• In order to constitute double taxation in On the other hand, in the credit method,
the objectionable or prohibited sense, although the income or capital which is
the same property must be taxed twice taxed in the state of source is still taxable
when it should be taxed but once; both in the state of residence, the tax paid in
taxes must be imposed on the same the former is credited against the tax
property or subject-matter, for the same levied in the latter. The basic difference
purpose, by the same State, between the two methods is that in the
Government, or taxing authority, within exemption method, the focus is on the
the same jurisdiction or taxing district, income or capital itself, whereas the
during the same taxing period, and they credit method focuses upon the tax.
must be the same kind or character of (Commissioner of Internal Revenue v.
tax. (Villanueva v. City of Iloilo) S.C. Johnson and Son, Inc.)
TAXPAYERS’ SUIT
• To constitute a taxpayer's suit, two
requisites must be met, namely, that
public funds are disbursed by a political
subdivision or instrumentality in doing
so, a law is violated or some irregularity
is committed, and that the petitioner is
directly affected by the alleged ultra
vires act. (Bagatsing v. San Juan)