c


 
the payment by the private respondent of a franchise tax of 2% of its

gross receipts, while other taxpayers similarly situated were subject to
NOTE: The Constitution does not grant the power to tax on the State, the % franchise tax imposed in Section 2  of the Tax Code, thereby
since the power is inherent. Rather, it regulates and defines, rather than discriminatory and violative of the rule on uniformity and equality of
grant, the power. taxation.

 3

 







Held: A tax is uniform when it operates with the same force and effect
in every place where the subject of it is found. £niformity means that all
a. 3rohibition against imprisonment for non-payment of poll property belonging to the same class shall be taxed alike. The
tax Legislature has the inherent power not only to select the subjects of
taxation but to grant exemptions. Tax exemptions have never been
½ 


 No person shall be imprisoned for debt or non- deemed violative of the equal protection clause. Inequality which
payment of a poll tax. results in singling out one particular class for taxation or exemption
infringes no constitutional limitation.
Community tax vs. 3oll Tax
3oll tax is one levied on persons who are residents within the taxing
authority without regard to their property, business or occupation. Valid Classification of taxpayers/subject matter to be taxed
Only the 
 community tax under the LGC could qualify as poll tax,
and the non-payment of other (additional) taxes therein imposed, not 3Ê

Ê




being in the nature of poll taxes, may validly be subjected by the law to
imprisonment.
b. £niformity and Equity in Taxation
Art. VI, Section 28(1) The rule of taxation shall be uniform and
equitable. The Congress shall evolve a progressive system of taxation.
- £niformity requires that all subjects or objects of taxation,
similarly situated, are to be treated alike or put on equal
footing both in privileges and liabilities
- For example, self-employed individuals are allowed to have
deductions while employed individuals are not. The rule is
still uniform since there is a valid distinction: self-employed
incur expenses related to the business while the employed
individuals do not.
- The same with the principle of equal protection of the law
- Equitable means that it shall be fair, just, reasonable and
based on the taxpayer·s ability to pay
- In Tolentino vs Sec of Finance, the petitioners contend that
the VAT is unconstitutional since it is regressive. The Court
held even if the VAT law constitutes a regressive system of
taxation, the provision of the Consti does not explicitly
prohibit a regressive system of taxation, it merely encourages
Congress to adopt a progressive system of taxation.
£niformity in Taxation
Ê
Facts: 3epsi seeks to recover the sums paid by it to the City of Butuan
pursuant to Municipal Ordinance No. 11
, as amended by Municipal
Ordinance No. 112, which 3epsi assails as null and void. Section 2 of
the Ordinance provides for the payment by ´any agent and/or
consigneeµ of any dealer ´engaged in selling liquors, imported or local,
in the City,· of taxes at specified rates. Section 3-A defines the meaning
of an agent and/or consignee as any person, association, partnership,
company or corporation who acts in the place of another by authority
from him or one entrusted with the business of another or to who is
consigned or shipped no less than 1,


cases of hard liquors or soft
drinks every month for resale, either retail or wholesale. Section
provides that the taxes ´shall be based and computed from the cargo
manifest or bill of lading or any other record showing the number of
cases of soft drinks, liquors or all other soft drinks or carbonated drinks
received within the month.µ
Held: The ordinance is invalid because it is discriminatory. The
classification of the objects of taxation to be valid must be reasonable
and this requirement is not deemed satisfied unless:
(1) it is based upon substantial distinctions which make real differences;
(2) these are germane to the purpose of the legislation or ordinance;
(3) the classification applies, not only to present conditions, but, also, to
future conditions substantially identical to those of the present; and
(4) the classification applies equally all those who belong to the same
class.
These conditions are not fully met by the ordinance in question. Even if
the tax in question is regarded as a tax on the sale of the beverages, it




 would still be invalid as discriminatory because only sales by ´agents or
Facts: Respondent de Leon assailed the validity of an ordinance which
provides that a real estate dealer who leases property worth 3
,


or
above must pay an annual fee of 31

and if the property is worth
31
,


but not over 3
,


, then he pays 3
and 324 if the value is
less than 31
,


.
Held: The ordinance cannot be assailed as violative of the
constitutional requirement of uniformity. Equality and uniformity in
taxation means that all taxable articles or kinds of property of the same
class shall be taxed at the same rate. The taxing power has the authority
to make reasonable and natural classifications for purposes of taxation.
Ê

 
consigneesµ of outside dealers would be subject to the tax. Sales by local
dealers, not acting for or on behalf of other merchants, regardless of
their volume of their sales, would be exempt from the disputed tax. If
the purpose is to put a tax on the sale of these beverages, there is no
reason why dealers other than agents of merchants established outside
Butuan City should be exempt from tax.
c. Grant by Congress of Authority to 3resident to Impose
Tariff Rates
Art. VI, Section 28(2) The Congress may, by law, authorize the

 3resident to fix within specified limits, and subject to such limitations
Facts: Lingayen Gulf Electric was given a franchise by Congress
wherein it was provided that the grantee shall pay 1% of the gross
earnings during the first 2
years and 2% on the remaining fifteen years
of the franchise. The BIR assessed franchise taxes with a rate of % of
the gross receipts as prescribed in Sec 2  of the NIRC. LGE
protested the assessment. During pendency of the appeal, RA 3842 was
enacted wherein it was provided that LGE shall pay franchise tax of
only 2% of the gross receipts. CTA ruled that RA 3842 shall apply.
CIR contends that said law is unconstitutional insofar as it provides for
and restrictions as it may impose, tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties or imposts within the
framework of the national development program of the Government.
- Flexible tariff clause
- Tariff commission (in the executive dept) X assist the
president; conducts studies, public hearings for
recommendation on the changes of tariff rates
 d. 3rohibition Against Taxation of Religious, Charitable Entities
and Educational Entities
Art. VI, Section 28(3) Charitable institutions, churches and personages
or convents appurtenant thereto, mosques, non-profit cemeteries, and
all lands, buildings, and improvements, actually, directly, and exclusively
used for religious, charitable, or educational purposes shall be exempt
from taxation.
- Criteria:

portions of the hospital are used for the treatment of patients and the
dispensation of medical services to them, whether paying or non-
paying, other portions thereof are being leased to private individuals for
their clinics and a canteen. Further, a portion of the land is being leased
to a private individual for her business enterprise under the business
name "Elliptical Orchids and Garden Center."
e. 3rohibition Against Taxation of Non-Stock, Non-3rofit
 

 
 
 


 Institutions





 

- The test of exemption is use and not ownership. For Art, XIV, Sec. 4(3) All revenues and assets of non-stock, non-profit
example, a land is being leased to a religious assoc and is educational institutions used actually, directly, and exclusively for
being used for a religious purposes, it is still exempted. educational purposes shall be exempt from taxes and duties. £pon the
- Covers real property taxes only dissolution or cessation of the corporate existence of such institutions,
their assets shall be disposed of in the manner provided by law.
½

Ê
½ 

Facts: The 2nd floor of one of the buildings of Abra Valley College was
used as residence of the school director and his family. In addition, its
first floor is leased to National Marketing Corp. The Municipal
Treasure assessed property tax on the land and buildings of Abra,
claiming that since it was not ´exclusivelyµ used for educational
purposes, it is not exempt from taxation.
Held: The exemption in favor of property used exclusively for
charitable or educational purposes is 'not limited to property actually
indispensable' therefore, but extends to facilities which are incidental to
and reasonably necessary for the accomplishment of said purposes.
3roprietary educational institutions, including those cooperatively
owned, may likewise be entitled to such exemptions, subject to the
limitations provided by law, including restrictions on dividends and
provisions for reinvestment.
Subject to conditions prescribed by law, all grants, endowments,
donations, or contributions used actually, directly, and exclusively for
educational purposes shall be exempt from tax.
Sec. 27(b) of NIRC: 3
 
 



 




 


. -
However, the use of the school building or lot for commercial purposes 3roprietary educational institutions and hospitals which are non-profit
is neither contemplated by law, nor by jurisprudence. Thus, while the shall pay a tax of ten percent (1
%) on their taxable income except
use of the second floor of the main building in the case at bar for those covered by Subsection (D) hereof:3
 that if the gross
residential purposes of the Director and his family, may find income from unrelated trade, business or other activity exceeds fifty
justification under the concept of incidental use, which is percent (
%) of the total gross income derived by such educational
complimentary to the main or primary purpose³educational, the lease institutions or hospitals from all sources, the tax prescribed in
of the first floor thereof to the Northern Marketing Corporation cannot Subsection (A) hereof shall be imposed on the entire taxable income.
be considered incidental to the purpose of education. For purposes of this Subsection, the term 'unrelated trade, business or
other activity' means any trade, business or other activity, the conduct
Ê
 

3Ê of which is not substantially related to the exercise or performance by
Facts: Lung Center of the 3hilippines (both land and hospital) was such educational institution or hospital of its primary purpose or
assessed for tax purposes. In the middle of the lot is the hospital. A big function. A3
 

 



 



 is any private school
space at the ground floor is being leased to private parties, for canteen maintained and administered by private individuals or groups with an
and small store spaces, and to medical or professional practitioners who issued permit to operate from the Department of Education, Culture
use the same as their private clinics for their patients whom they charge and Sports (DECS), or the Commission on Higher Education (CHED),
for their professional services. The corner right side of Quezon Avenue or the Technical Education and Skills Development Authority
and Elliptical Road, is being leased for commercial purposes to (TESDA), as the case may be, in accordance with existing laws and
Elliptical Orchids and Garden Center. The petitioner accepts paying regulations.
and non-paying patients. The petitioner receives annual subsidies from
the government. The institution filed a claim for exemption predicated
Sec. 3
(H) of NIRC: Exemptions from tax on Corporations: A
on its claim that it is a charitable institution.
nonstock and nonprofit educational institution
Held: To be entitled to the exemption in Sec. 28(3), Art. VI of the 187
Constitution, LC3 must prove by clear and unequivocal proof that it is Revenue Memorandum Circular No. 76-2

3
a charitable institution and that its real properties are actually, directly
and exclusively used for charitable purposes. Revenue Regulations No. 13-8
LC3 is a charitable institution. The test of a charitable organization:
Whether it exists to carry out a purpose reorganized in law as charitable - BIR uses the ´source testµ provided in the Tax Code but the
or whether it is maintained for gain, profit, or private advantage. The Constitution uses the ´use testµ
LC3 is a non-profit and nonstock corporation which, subject to the - 3roprietary educational institutions are usually stock
provisions of the decree, organized for the welfare and benefit of the corporations
Filipino people principally to help combat the high incidence of lung - Non-stock X there are only members and board of trustees,
and pulmonary diseases in the 3hilippines (3D 1823). A charitable there are no owners holding share of stock
institution does not lose its character as such and its exemption from
taxes simply because it derives income from paying patients, or receives f. Majority Vote of Congress for Grant of Tax Exemption
subsidies from the government, so long as the money received is
devoted or used altogether to the charitable object which it is intended Art. VI, Section 28(4) No law granting any tax exemption shall be
to achieve; and no money inures to the private benefit of the persons passed without the concurrence of a majority of all the Members of the
managing or operating the institution. Congress.
However, LC3 failed to prove that the entirety of its real property is
actually, directly and exclusively used for charitable purposes. While
 - Majority of all the members, and not just majority of the released to them.
attendees constituting a quorum
- Only Congress can grant tax exemptions, but it can delegate
its power? ² pati ba pag delegate dapat absolute majority?  3

 








g. 3rohibition on £se of Tax Levied for Special 3urposes a. Due 3rocess

½ 




All money collected on any tax levied for a b. Religious Freedom
special purpose shall be treated as a special fund and paid out for such
purpose only. If the purpose for which a special fund was created has - Where do we draw the line?
been fulfilled or abandoned, the balance, if any, shall be transferred to
the general funds of the Government. c. Non-impairment of Contract

  
 - Normally invoked in contracts between private parties and
 Government, with consideration
 

  3 
  ! - Franchises are not contract, they are privileges. Therefore,
Facts: Gatson et. al., who are sugarcane planters and millers filed this franchisee cannot invoke non-impairment of contract clause
petition to compel respondents to transfer and distribute shares of
stock of Republic 3lanters Bank to them. The investments derived
funding from deduction of 31.

per picul from sugar proceeds of the 
½


½½

sugar planters as stabilization fund pursuant to 3D 388. Respondents
allege that the stabilization fees collected are considered government A. Levy
funds under the Government Auditing Code.
B. Assessment and Collection
Held: There was no implied trust that can be deduced from the
imposition of the levy. There was no provision in the statute which C. 3ayment
unequivocally states that 3HILS£COM imposed on itself the obligation
of holding the stabilization fund for the benefit of the petitioners. The
collections made accrue to a ´Special Fundµ. They are in the nature of 
!

½

tax which was levied with a regulatory purpose. The purpose being is to
finance the growth and development of the sugar industry and all its A. As to Object
components, stabilization of the domestic market including the foreign 1. 3ersonal, capitation or poll tax
market. The levy is primarily in the exercise of the police power of the
state. 2. 3roperty tax

h. 3resident·s Veto 3ower on Appropriation, Revenue and 3. 3rivilege tax
Tariff Bills
B. As to burden or incidence
Art VI, Section 2 (2) No provision or enactment shall be embraced in 1. Direct
the general appropriations bill unless it relates specifically to some
particular appropriation therein. Any such provision or enactment shall 2. Indirect
be limited in its operation to the appropriation to which it relates.
- Distinguishing between direct and indirect tax is important
Art VI, Section 27(2) The 3resident shall have the power to veto any when claiming tax exemptions. Since exemptions are strictly
particular item or items in an appropriation, revenue, or tariff bill, but construed against taxpayers, a general grant of tax provision
the veto shall not affect the item or items to which he does not object. does not include indirect taxes. However, when it is the
government that is claiming an exemption, the rule must be
liberally construed (i.e., Maceda vs Macaraig).
i. Non-impairment of Jurisdiction of the SC
C. As to Tax Rates
1. Specific Tax
Art VIII, Section (2.b) The Supreme Court shall have the power to
review and revise, reverse, modify or affirm on appeal or certiorari, as
2. Ad valorem
the law o the Rules of Court may provide, final judgment or decrees of
lower courts in all cases involving the legality of any tax, impost,
D. As to 3urposes
assessment, or toll, or any penalty imposed in relation thereto.
1. General or Fiscal

2. Special, Regulatory or Sumptuary

j. Grant of 3ower to LG£s to Create its Own Source of
Revenue E. As to Scope or Authority to Impose
1. National
Art. X

 Each local government unit shall have the power to create its 2. Local
own sources of revenues and to levy taxes, fees and charges subject to
such guidelines and limitations as the Congress may provide, consistent F. As to Graduation
with the basic policy of local autonomy. Such taxes, fees, and charges 1. 3rogressive
shall accrue exclusively to the local governments.
2. Regressive

 Local government units shall have a just share, as
determined by law, in the national taxes which shall be automatically 3. 3roportionate
VIII. !"

½½
assessment of collection;


½  3 #$%
&
 '
 (
(2) The taxpayer requests for a reinvestigation and executes a

waiver in writing before expiration of the period within which
- Taxes may be imposed retroactively by law but unless so to assess or collect; and
expressed by such law, these taxes must only be imposed
prospectively

- Even if the statute provides a retroactive effect, a harsh (3) The taxpayer is out of the country or otherwise cannot be
retroactivity of the law, however, may make it inequitable and located.
violative of the Constitution; similarly due process is violated
if the tax is oppressive

, 3 
 #
 #  
 Ê

 
 3

 
 - The
- Income taxes: universal practice has been to increase taxes on basic real property tax and any other tax levied under this Title shall be
income already earned, yet notwithstanding this retroactive collected within five ( ) years from the date they become due. No
operation, income taxes have not been successfully assailed as action for the collection of the tax, whether administrative or judicial,
invalid.
shall be instituted after the expiration of such period. In case of fraud or
- In order to declare a tax as transgressing the constitutional intent to evade payment of the tax, such action may be instituted for the
limitation, t must be so harsh and oppressive in its retroactive collection of the same within ten (1
) years from the discovery of such
application
fraud or intent to evade payment.
- The legislative intent evincing that a tax statute should
operate retroactively should be explicit and perfectly clear

- In the same way that taxes can be made retroactive, so also The period of prescription within which to collect shall be suspended
tax exemptions may be revoked. Contractual tax exemptions, for the time during which:
however, may not be unilaterally so revoked by the taxing
authority without thereby violating the non-impairment (1) The local treasurer is legally prevented from collecting the tax;
clause of the Constitution


(2) The owner of the property or the person having legal interest therein
c  #  #)
%
requests for reinvestigation and executes a waiver in writing before the

expiration of the period within which to collect; and



$ 
*


 ½

3

 "



 
! 
 - Real property
declared for the first time shall be assessed for taxes for the period (3) The owner of the property or the person having legal interest therein
during which it would have been liable but in no case of more than ten is out of the country or otherwise cannot be located.
(1
) years prior to the date of initial assessment: 3rovided, however,
That such taxes shall be computed on the basis of the applicable  

"$
*

schedule of values in force during the corresponding period.


3 





$
½

Ê



- Except as
provided in Section 222, internal revenue taxes shall be assessed within
If such taxes are paid on or before the end of the quarter following the three (3) years after the last day prescribed by law for the filing of the
date the notice of assessment was received by the owner or his return, and no proceeding in court without assessment for the
representative, no interest for delinquency shall be imposed thereon; collection of such taxes shall be begun after the expiration of such
otherwise, such taxes shall be subject to an interest at the rate of two period: 3
 That in a case where a return is filed beyond the period
percent (2%) per month or a fraction thereof from the date of the prescribed by law, the three (3)-year period shall be counted from the
receipt of the assessment until such taxes are fully paid day the return was filed. For purposes of this Section, a return filed
before the last day prescribed by law for the filing thereof shall be
considered as filed on such last day.


+ 3 

½

Ê


 -

  




3 






½

Ê




(a) Local taxes, fees, or charges shall be assessed within five ( ) years 
 %
from the date they became due. No action for the collection of such
taxes, fees, or charges, whether administrative or judicial, shall be
instituted after the expiration of such period: 3rovided, That. taxes, fees (a) In the case of a false or fraudulent return with intent to evade tax or
or charges which have accrued before the effectivity of this Code may of failure to file a return, the tax may be assessed, or a proceeding in
be assessed within a period of three (3) years from the date they became court for the collection of such tax may be filed without assessment, at
due. any time within ten (1
) years after the discovery of the falsity, fraud or
omission: 3rovided, That in a fraud assessment which has become final
and executory, the fact of fraud shall be judicially taken cognizance of in
(b) In case of fraud or intent to evade the payment of taxes, fees, or the civil or criminal action for the collection thereof.
charges, the same may be assessed within ten (1
) years from discovery (b) If before the expiration of the time prescribed in Section 2
3 for
of the fraud or intent to evade payment. the assessment of the tax, both the Commissioner and the taxpayer
have agreed in writing to its assessment after such time, the tax may be
(c) Local taxes, fees, or charges may be collected within five ( ) years assessed within the period agreed upon. The period so agreed upon may
from the date of assessment by administrative or judicial action. No be extended by subsequent written agreement made before the
such action shall be instituted after the expiration of said period: expiration of the period previously agreed upon.
3rovided, however, That, taxes, fees or charges assessed before the (c) Any internal revenue tax which has been assessed within the period
effectivity of this Code may be collected within a period of three (3) of limitation as prescribed in paragraph (a) hereof may be collected by
years from the date of assessment. distraint or levy or by a proceeding in court within five ( ) years
following the assessment of the tax.
(d) Any internal revenue tax, which has been assessed within the period
(d) The running of the periods of prescription provided in the
agreed upon as provided in paragraph (b) hereinabove, may be collected
preceding paragraphs shall be suspended for the time during which:
by distraint or levy or by a proceeding in court within the period agreed
upon in writing before the expiration of the five ( ) -year period. The
(1) The treasurer is legally prevented from making the period so agreed upon may be extended by subsequent written
agreements made before the expiration of the period previously agreed
upon.
(e) 3
 
&  That nothing in the immediately preceding and
paragraph (a) hereof shall be construed to authorize the examination
and investigation or inquiry into any tax return filed in accordance with
the provisions of any tax amnesty law or decree.

to subject the shares of stock to inheritance tax, to which Wells Fargo

 "

 
"




 % The running of objected.
the Statute of Limitations provided in Sections 2
3 and 222 on the
making of assessment and the beginning of distraint or levy a
proceeding in court for collection, in respect of any deficiency, shall be
*.
Originally, the settled law in the £nited States is that intangibles
suspended for the period during which the Commissioner is prohibited
from making the assessment or beginning distraint or levy or a
proceeding in court and for sixty (6
) days thereafter; when the taxpayer
requests for a reinvestigation which is granted by the Commissioner;
when the taxpayer cannot be located in the address given by him in the
return filed upon which a tax is being assessed or
collected: 3
that, if the taxpayer informs the Commissioner of
any change in address, the running of the Statute of Limitations will not
be suspended; when the warrant of distraint or levy is duly served upon
the taxpayer, his authorized representative, or a member of his
household with sufficient discretion, and no property could be located;
and when the taxpayer is out of the 3hilippines.
anonima), organized under the laws of the 3hilippines. She left a will
duly admitted to probate in California where her estate was
administered and settled. Wells Fargo bank and £nion Trust Co. was
duly appointed trustee of the trust by the said will. The Federal and
California State·s inheritance taxes due thereon have been duly paid.
The Collector of Internal Revenue in the 3hilippines, however, sought
D
have only one situs for the purpose of inheritance tax, and such situs is
in the domicile of the decedent at the time of his or her death. But the
rule has been relaxed. The maxim ´mobila sequuntur personam,µ upon
which the rule rests, has been decried as a mere ´fiction of law having
its origin in considerations of general convenience and public policy,
and cannot be applied to limit or control the right of the State to tax
property within its jurisdictionµ and must ´yield to established fact of
legal ownership, actual presence and control elsewhere, and cannot be
applied if to do so would result in inescapable and patent injustice.µ The
relaxation of the original rule rests on either of two fundamental
considerations: (1) upon the recognition of the inherent power of each
government to tax persons, properties, and rights within its jurisdiction
and enjoying, thus, the protection of its laws; and (2) upon the principle
 &&
*

*

Sec. 16
3. Finality of Liquidation. ³ When articles have been entered
and passed free of duty or final adjustment of duties made, with
subsequent delivery, such entry and passage free of duty or settlement
of duties will, after the expiration of one year, from the date of the final
payment of duties, in the absence of fraud or protest, be final and
conclusive upon all parties, unless the liquidation of the import entry
was merely tentative


corporation, to whom they have been delivered and indorsed in blank.
- General Rule: £nless otherwise provided by the tax law itself,
taxes are imprescriptible

- Sec 2
3 and 222 of the NIRC provides for statutes of
limitation in the assessment and collection of taxes therein
that as to intangibles, a single location in space is hardly possible,
considering the multiple, distinct relationships which may be entered
into with respect thereto.
Herein, the actual situs of the shares of stock is in the 3hilippines, the
corporation being domiciled therein. The certificates of stock remained
in the 3hilippines up to the time when the deceased died in California,
and they were in possession of one Syrena McKee, secretary of the
McKee had the legal title to the certificates of stock held in trust for the
true owner thereof. The owner residing in California has extended here
her activities with respect to her intangibles so as to avail hereself of the
protection and benefit of 3hilippine laws. Accordingly, the jurisdiction
imposed. However, it was held in Ê ½

"  
Ê
 of the 3hilippine Government to tax must be upheld.
that the prescriptive periods therein contained were
considered to be applicable only to those taxes that were

thereunder required to be reported or returned by the Ê ½Ê
taxpayer for tax purposes.
Facts: British Overseas Airways Corporation is a 1

% British
- Where however the taxpayer, although not required, files a Government-owned corporation engaged in the international airline
return and declares his tax liability, then the prescriptive business. During the periods covered by the disputed assessments, it is
periods may become operative (Ê   

 
 admitted that BOAC had no landing rights for traffic purposes in the






'
3hilippines. , It did not carry passengers and/or cargo to or from the
- The law on prescription, being a remedial measure, should be 3hilippines, although during the period covered by the assessments, it
liberally construed in order to afford such protection. The maintained a general sales agent in the 3hilippines ³ Wamer Barnes
exceptions to the law on prescription should perforce be and Company, Ltd., and later Qantas Airways ³ which was responsible
strictly construed.
for selling BOAC tickets covering passengers and cargoes.


  
&
 ' 
Held: BOAC, during the periods covered by the subject assessments,
- The ff criteria are generally observed in fixing the tax situs:
maintained a general sales agent in the 3hilippines. The regular sale of
¦ For poll taxes, the possible tax situs is the residence tickets, its main activity, is the very lifeblood of the airline business, the
of the taxpayer
generation of sales being the paramount objective. There should be no
¦ For property taxes, the tax situs can only be where doubt then that BOAC was "engaged in" business in the 3hilippines
the property is situated
through a local agent during the period covered by the assessments.
Accordingly, it is a resident foreign corporation subject to tax upon its
¦ For excise taxes, the tax situs can be the place

total net income received in the preceding taxable year from all sources
m Where the privilege is exercised

within the 3hilippines.
m Where the taxpayer is a national of

m Where he has his residence
The test of taxability is the "source", and the source of an income is that
But unless otherwise stated, the tax situs is deemed activity which produced the income. For the source of income to be
to be the place where the privilege is exercised. considered as coming from the 3hilippines, it is sufficient that the

income is derived from activity within the 3hilippines. In BOAC's case,
Cases: the sale of tickets in the 3hilippines is the activity that produces the
#(

Ê



income. The tickets exchanged hands here and payments for fares were
 . Birdie Lillian Eye died on 16 September 132, at Los Angeles, also made here in 3hilippine currency. The site of the source of
California, the place of her alleged last residence and domicile. Among payments is the 3hilippines. The flow of wealth proceeded from, and
the properties she left was her 1/2 conjugal shares of stock in the occurred within, 3hilippine territory, enjoying the protection accorded
Benguet Consolidated Mining Co., an anonymous partnership (sociedad
by the 3hilippine government. In consideration of such protection, the 1. Held: There is no double taxation. The taxes herein are imposed
flow of wealth should share the burden of supporting the government. on two different subject matters. FWT is for passive income
generated in the form of interests in deposits and yield on deposit
Ê )

½ *










½Ê' substitutes, while the GRT is the privilege of engaging in the
business of banking. Also, while both taxes are national in scope




under the Tax Code and imposed by the same taxing authority, the
taxing periods they affect are different. FWT is deducted and
!  !)

 ' 
withheld as soon as income is earned, paid after every


- Means taxing for the same tax period the same thing or quarter in which it is earned. GRT is neither deducted nor
activity twice, when it should be taxed but once, for the same withheld, but is paid only after every


 quarter in which it is
purpose and with the same kind of character of tax
earned. Lastly, the taxes are of different kinds or characters. FWT
- Elements:
is an income tax subject to withholding, GRT is a percentage tax
¦ Same type of taxes being imposed
not subject to withholding.
¦ On the same subject matter/property/article


¦ For the same taxable period 3. Constitutionality of Double Taxation
¦ For the same purpose
¦ And by the same taxing authority Ê

!Ê
ʽ
- Standing alone and not being forbidden by our fundamental There is no constitutional prohibition against double taxation. Citing
law, double taxation is not a valid defense against the validity City of Baguio vs De Leon, it held ´As to why double taxation is not
of a tax return. But from it might emanate such defences violative of due process, Justice Holmes made clear in this language:
against taxation as oppressiveness and inequality of the tax
´The objection to the taxation as double may be laid down on one side .

. . . The 14th Amendment [the due process clause] no more forbids
1. Strict Sense ² this is the one prohibited; all the elements are double taxation than it does doubling the amount of a tax, short of
present
confiscation or proceedings unconstitutional on other grounds.µ With
- Direct duplicate taxation
that decision rendered at a time when American sovereignty in the

3hilippines was recognized, it possesses more than just a persuasive
½
3
!
 
  

Ê

+

effect. To some, it delivered the
  
 to the bogey of double
Section 143(a) of the Local Government Code provides that cities and
municipalities may impose taxes on manufacturers of any article of
commerce. On the other hand, Section 143(h) of the same code
provides that cities or municipalities may impose taxes on any business,
not otherwise specified in the preceding paragraphs, which the
sanggunian concerned may deem proper to tax. Hence, if a
manufacturer, pursuant to an ordinance, is already imposed a local
business tax under Section 143(a) of the Local Government Code, it can
no longer be subject to local tax under Section 143(h) of the same code.
The authority under Section 143(h) to impose local tax on any business
is limited by the proviso ´not otherwise specified in the preceding
paragraphsµ. Imposing local taxes on a business under both Section
143(a) and (h) of the Local Government Code constitutes double
taxation. Furthermore, the CTA emphasized that the publication
requirement under the Local Government Code relative to local
ordinances is mandatory and indispensable for purposes of giving effect
to an ordinance.


2. Broad Sense ² allowed; there is really no double taxation
since not all the elements are complied with

¦ Indirect duplicate taxation

 -


Ê
taxation as a constitutional bar to the exercise of the taxing power.
Besides, there is no double taxation when Section 121 of the Tax Code
imposes a gross receipts tax on interest income that is already subjected
to the 2
% final withholding tax under Section 27 of the Tax
Code. The gross receipts tax is a business tax under Title V of the Tax
Code, while the final withholding tax is an income tax under Title II of
the Code. There is no double taxation if the law imposes two different
taxes on the same income, business or property.
The second interpretation, of a prohibition on ´a tax on a tax,µ is as
illusory as the prohibition on double taxation. The gross receipts tax
falls not on the final withholding tax, but on the amount of the interest
income withheld as the final tax. What is being taxed is still the interest
income. The law imposes the gross receipts tax on that portion of the
interest income that the depository bank withholds and remits to the
government. Consequently, the entire amount of the interest income is
taxable and not only the net interest income.
4. Tax treaties (as relief from Double taxation)
- Both states may agree that they will both share in the taxation
It can be agreed that either the residence of the tax payer or



the place where the privilege is exercised can tax
The same tax may be imposed by the national government as well as by 
the local government. There is nothing inherently obnoxious in the Ê " Ê )


"

exaction of license fees or taxes with respect to the same occupation,
calling or activity by both the State and a political subdivision thereof. E. 3(

 '
$
$
1
#(

* %
Also, it is a well-settled rule that a license tax may be levied upon a - SC view on the doctrine: ´Adversely affecting property rights,
business or occupation although the land or property used in both the due process and equal protection clauses may
connection therewith is subject to property tax. properly be invoked to invalidate in appropriate cases a
revenue measure
Ê "

! - The doctrine seeks to describe, in an extreme, the
Facts: Subject of this dispute are two taxes that are usually charged to consequential nature of taxation and its resulting implications
banking institutions. These are: to wit:
(1) ´Final Withholding Taxµ (/), a 2
% 
 ' on passive
income, deducted and withheld at source by payor-corporation
and/or person (not the bank) as withholding agent. This falls
under Section 24(e)(1) of the Tax Code.
(2) ´Gross Receipt Taxµ (
"), a % #  0
 ' on the amount
of gross receipts of bank and other non-bank financial
intermediaries as imposed in Section 11 of the Tax Code.
¦ The power to tax must be exercised with extreme
caution to minimize injury to the proprietary rights
of a taxpayer
¦ But if the tax is lawful and not violative of any of
the inherent and constitutional limitations, the fact
alone that it may destroy an activity or object of
taxation will not entirely permit the courts to affor
any relief
 ¦ A subject or object that may not be destroyed by tax exemption to escape liability for taxes
the taxing authority may not likewise be taxed due on other entity (??)
- Thus, a tax may not be imposed on the exercise of a - IF for example, an entity contracts with
fundamental right since to otherwise permit it would amount NA3OCOR and under their contract
to destroying that fundamental right NA3OCOR should pay the real property
- Fair deal is expected by our taxpayers from the BIR and the taxes imposed on the property of the
duty demands that BIR should refund without any other entity, it is still the entity who is
unreasonable delay what it has erroneously collected. responsible for the tax but it may claim
- The power of taxation is sometimes also called the power to reimbursement from NA3OCOR
destroy. Therefore, it should be exercised with caution to ii. Implied ² while exemptions are not
minimize injury to the proprietary rights of a taxpayer. presumed, the government however,
unless expressed, is deemed not subject
to a law imposing taxes
F.  #
& 
 '  - there is no tax exemption based solely
on the ground of equity, but equity can
1. Shifting of tax burden ² transfer from one tax payer to be used as a basis for a statutory
another exemption; thus, at times the law
- Who ultimately pays depends on the law of supply and authorizes the condonation of taxes on
demand equitable considerations
a. Ways of shifting the tax burden iii. Contractual ² those agreed to by the
i. Forward shifting ² manufacturers to taxing authority in contracts lawfully
wholesalers entered into by them under enabling
ii. Backward shifting ² retailers to laws
wholesalers - these exemptions must not be confused
iii. Onward shifting ² two or more shifts, with the tax exemptions granted under
either forward or backward franchises which are not contracts within
b. Taxes that can be shifted ² indirect taxes the purview of the impairment clause of
c. Meaning of impact and incidence of taxation the Constitution
i. Impact ² refers to the statutory taxpayer d. Nature of the power to grant tax exemption
(i.e., VAT ² it is imposed on the seller, as e. Rationale/grounds for tax exemption
far as the law is concern he is the one f. Construction of Statutes granting tax exemption
liable) i. General Rule ² strictly construed against
ii. Incidence ² refers to the one who the tax payer
shoulders the tax (i.e., VAT ² the tax is ii. Exceptions:
shifted to the buyer so he is the one who 1. When the law so provides for
shoulders the tax) such liberal const·n
- Shifting doesn·t mean that the statutory taxpayer is relieved 2. Exemptions from certain taxes
from the obligation to file the return and pay the BIR granted under special
circumstances to special
2. Tax avoidance ² tax saving devise within the means classes of persons
sanctioned by law 3. Exemptions in favour of the
- Should be used by the taxpayer in good faith and at arms gov·t, its political subdivisions
length or instrumentalities
4. Exemptions to traditional
3. Tax evasion ² is a scheme used outside of those lawful means exemptees, such as those in
and, when availed of, it usually subjects the tax payer to favour of religious and
further add·l civil or criminal liability charitable institutions
- Clear examples of tax evasion: overstatement of expenses or
understatement of income; however, there are a lot of gray
  )

"#

areas
- In a tax plan transferring properties to a corporation in
exchange for shares of stock, the factors to consider on
WON there is a tax evasion are: 1) bona fide business
purpose; 2) holding period; 3) buyer actually gains control
4. Exemption from Taxation
a. Meaning of Exemption from Taxation
b. Nature of Tax Exemption ² legislative in nature;
not presumed and, when granted, are strictly
construed against the grantee, such provisions
being highly disfavoured and may almost be said
´to be odious to the lawµ
c. Kinds of tax exemption
i. Express ² by exemption provisions in
the Constitution, statutes, treaties,
franchises or similar legislative acts
- Where the law specifically grants an
entity tax exemption, the entity cannot
transfer the exemption by way of
contract. Also, the entity cannot use its
- Common law doctrine
- A claim for refund barred by prescription may be allowed to
offset unsettled tax liabilities
- should be pertinent only to taxes arising from the same
transaction on which an overpayment is made and
underpayment is due
- Mere mandatory provisions (i.e., Sec 22 of the NIRC
requiring a claim for refund to be in writing and filed within 2
years from payment with the CIR) cannot and should not
really be constraint against the application of the doctrine
even where that period had already lapsed
- CIR vs £ST: rejected the doctrine
D  -&&

  '# % 


- It is only when an act complained of, which may include a
legislative enactment, directly involves the illegal
disbursement of public funds derived from taxation that the
taxpayer·s suit may be allowed.



2 # 

 - Generally, allowed and enforceable when the subject matter
thereof is not prohibited from being compromised and the
person entering into it is duly authorized to do so





3"
"3"½
½!
"


½
½/

A.  
&
 '
 (

1. Constitution
2. NIRC (as amended by RA 337)
3. Tariff and Customs Code
4. LGC Code Book II
. Local tax ordinance/city or municipal tax codes
6. Tax treaties/Int·l Agreements
7. Special Laws (e.g. RA 716 ² 3EZA Law)
8. Decisions of the SC and CTA
. BIR Rules and Regulations
i. Administrative rules and regulations are
intended to carry out not to modify the law.
ii. Interpretative regulations need not be
published and neither is hearing required if
intended only to clarify statutory provisions
for proper observance.
iii. BIR rulings and circulars, rules and
regulations promulgated by the CIR would
have no retroactive application if to so apply
them would be prejudicial to the taxpayers.
iv. Any revocation, modification, reversal of such
rules/regulations including rulings of the CIR
shall not be given retroactive effect except in
case of rulings (a) where taxpayer deliberately
misstates or omits material facts; (b) where
facts subsequently gathered materially differ
from the facts on which rulings are based, and
(c) where taxpayer acted in bad faith.
v. There is requirement of notice and hearing
when promulgated rules substantially adds to
or increases the burden of those governed.
vi. Tax regulations differentiated: Interpretative
vs. Legislative

B. Interpretation and Construction of Tax Status

- 3rimordial considerations: legislative intent
- In case of doubt, it must be resolved liberally in favour of
taxpayers and strictly against the taxing authority
- Tax exemption: strictly construed against tax payer
¦ What if the two principles clash? Determine first if
the tax payer is covered in the statute
- Issue is the validity of the tax law itself: presumed to be valid
- Issue of taxing authority: presumed to be valid
- Government is never stopped from collecting taxes because
of mistakes or errors on the part of its agents. However, the
rule admits of exceptions in the interest of justice and fair
play.
- Tax exemptions (see under I.F)
- Statutes offering rewards: liberally construed in favour of the
awardees
- Tax amnesties ² general pardon to tax payers: construed
strictly against the taxpayer
- Tax condonation ² there must be a law expressly providing
for such: construed strictly against the taxpayer