CONSOLIDATED SYLLABUS

IN TAXATION
As of January , 2019

TAX 1

A. General Principles of Taxation

a. Concept1Underlying Basis2 and Purpose
1. Taxation, Taxes Defined
2. Attributes or Characteristics of Taxes

b. Principles of a Sound Tax System

1. Fiscal Adequacy
2. Theoretical Justice
3. Administrative Feasibility
4. Will the non-observance of these principles invalidate the tax law?
No, unless other inherent and constitutional limitations are infringed.

c. Scope of Taxation
1. No attribute of sovereignty is more pervading,
unlimited, plenary, comprehensive and supreme
2. Wide spectrum of the power to tax reaches every
trade or occupation, every object of industry, use or enjoyment, every
species of possession
3. Imposes burden, if not followed could result to
seizure and penalty
4. Pervasive affecting constantly and consistently all
relations of life
5. It also involves the power to destroy per Justice
Marshall [but Justice Holmes said no while the US SC sits]

d. Limitation of Taxation
1. Inherent Limitations
b. Public Purpose
c. Legislative in Nature
d. Territorial
e. International Comity
e. Exemption of Government from tax

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What is the concept of taxation? It can be viewed in two ways, namelya) as a power to
tax and (b) as the act or process by which taxing power is exercised.
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What is the theory or underlying basis of taxation? It is a necessity without which no
government could exist; revenues collected are intended to finance government and its
activities. It can reach what traditionally are within police power measures to attain:
i. Social justice
ii. Equitable distribution of wealth
iii. Economic progress
iv. Protection of local industries, public welfare and the like

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 2. Constitutional Limitations
Directly affecting taxation
a. Non-imprisonment for non-payment of poll tax
b. Rule of taxation should be uniform and equitable;
progressive system of taxation to evolve; authorized
President to fix limits by Congress
c. Bills to originate from the House of Representatives
d. Exempt charitable and religious institution from property
tax
e. Exempting law must be passed by majority of all members
of Congress
f. Special purpose tax should be used for said purpose and
excess to revert to general fund
g. Veto power of the President
h. Review power of the SC
i. Grant of power to local government
j. Exemption of non-stock, non-profit educational
institution, etc from taxes

Indirectly affecting taxation

a. Due Process Clause
b. Equal Protection Clause
c. Police Power and Eminent Domain higher, can override
constitutional rights, subject to limitations

Distinguish Taxation from Police Power and Eminent Domain

Taxation is subordinate to:

1) Due Process
1) Separation of Church and State
1) Non-impairment clause of contracts
1) Free exercise and enjoyment of religious profession

e. Aspects of Taxation

Levy
Assessment & Collection
Payment

f. Classification of Taxes

According to subject matter (Capitation Tax, Property Tax, Excise

Tax)
According to burden or incidence (Direct or indirect)
According to determination of amount (Ad Valorem, Specific)
According to purpose (General, Special)

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 According to authority imposing the tax (National, Local)
According to graduation (tax base / tax rate) – (Progressive,
regressive, etc)

g. Distinguished from other exactions

License

Toll
Special Assessments (Now, Special Levy under the Local
Government Coe)
Debt or an ordinary obligation

h. Interpretation and Construction of Tax Statutes

How are tax laws interpreted or construed?
a. Rules of Statutory Construction are applied, legislative
intent is primordial
b. In case of doubt, construed in favor of taxpayer
c. But for exemptions, construed against taxpayer
i. Except when it applies to government
ii. Special class of subjects under special conditions
iii. When the law says so

How are the rules applied? Apply first the doctrine that imposition
is a burden thus construed strictly vs. govt, then if applicable, the
burden shifts to taxpayer to prove he is exempt.

i. Classifications of Exemptions
Express

iv. Section 30 of NIRC

v. Section 105 of Tariffs and Customs Code
vi. Special Laws, like the Omnibus Investment Code

Implied or by Omission

i. Government is impliedly not subject to tax but it

can tax itself
ii. Equity
iii. Contractual

j. Instances Exemptions construed liberally

The law says so
Special classes of persons under special circumstances
In favor of the government, etc

Exemptions granted to traditional exemptees, such as religious /

charitable

k. Certain Doctrines in Taxation

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Prospectivity of tax laws
How may tax laws be applied? General rule, prospective, but the
law can provide that it has retro effect and it is still valid, except if
too harsh and oppressive as to violate due process clause of the
constitution.

May tax laws be given retroactive effect? Yes, Lorenzo v. Posadas

64 Phil 353; Smietanka v First Trust Savings Bank, 257 US 602;
Law on Federal Taxation, Vo; 1 p.154

Is the government bound by the errors of its agents? While the

government is not bound by the error of its agent in issuing a
ruling, in the interest of justice and fair play, reversal of ruling may
not be given retro effect

Non-prescriptive

May taxes prescribe? No, but the law can provide for its
prescription, such as NIRC, Customs and LGC

Double Taxation
What is double taxation? Is it valid or constitutional?

Direct Duplicate Taxation – same taxing authority, same year,

same taxes but applying to some of the properties
Indirect Duplicate Taxation – when otherwise

Measures to avoid double taxation

vii. Treaty
viii. Reciprocity
ix. Tax Credit

Means of escaping taxation – tax avoidance / tax evasion

Is equitable recoupment allowed though prescription has set in?

Set off of taxes

Taxpayer suit may be filed

When disbursement of public funds involved

BUT NOT to enjoin COMELEC to call election

Funds were not raised through taxation
Maceda v. Macaraeg, 197 SCRA 771 [Exemption of NPC from taxes]

Are compromises allowed? Yes by the BIR under NIRC and by Customs
under TCCP. NO similar provisions under the LGC, thus Civil Code applies
suppletorily

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 Are tax laws political in nature? No, it applies to territory and not by
reason of occupying forces.

l. DEFINITIONS OF DIFFERENT TAXES UNDER THE NIRC

Capital Gains Tax is a tax imposed on the gains presumed to have

been realized by the seller from the sale, exchange or other disposition
of capital assets located in the Philippines, including pacto de retro
sales and other forms of conditional sale.

Documentary Stamp Tax is a tax on documents, instruments, loan

agreements and papers evidencing the acceptance, assignment, sale or
transfer of an obligation, rights or property incident thereto.

Donor’s Tax is a tax on a donation or gift, and is imposed on the

gratuitous transfer of property between two or more persons who are
living at the time of the transfer.

Estate Tax is a tax on the right of the deceased person to transmit

his / her estate to his / her lawful heirs and beneficiaries at the time of
death and on certain transfers which are made by law as equivalent to
testamentary disposition.

Income Tax is a tax on all yearly profits arising from property,

profession, trades or offices or as a tax on a person’s income,
emoluments, profits and the like.

Percentage Tax is a business tax imposed on persons or entities who

sell or lease goods , properties or services in the ordinary course of
trade or business whose gross annual sales or receipts do not exceed
P1.5million and are not VAT-registered.

Value-Added Tax is a business tax imposed and collected from the

seller in the course of trade or business on every sale of properties
(real or personal) lese of goods or properties (real or personal) or
vendors of services. It is an indirect tax, thus it can be passed on to the
buyer.

Withholding Tax on Compensation is the tax withheld from

individuals receiving purely compensation income.

Expanded Withholding Tax is a kind of withholding tax which is

prescribed only for certain payors and is creditable against the income
tax due of the payee for the taxable quarter / year.

Final Withholding Tax is a kind of withholding tax which is

prescribed only for certain payors and is not creditable against the
income tax due of the payee for the taxable year. Income tax withheld

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constitutes the full and final payment of the Income Tax due from the
payee on the said income.

Withholding Tax on Government Money Payments is the tax

withheld by government offices and instrumentalities, including
government owned or controlled corporations and local government
units, before making any payments to private individuals,
corporations, partnerships and / or associations.