➢ Art. 3 Sec.

9 “Private property shall not be taken for

INCOME TAXATION NOTES public use without just compensation”
➢ Who may exercise the power?
▪ The Congress
*paying taxes is mandatory, and a duty ▪ The President of the Philippines
▪ various local legislative bodies
TAXES (used by the govt.) ▪ Certain public corporations— Land Authority
and National Housing Authority.
▪ Quasi-public corporations— Philippine
➢ to support the people
National Railways, Philippine Long Distance
➢ to provide general welfare
Telephone Co., Meralco, etc.
➢ example/s: VECO claiming property for the
construction of tower.
GENERAL PRINCIPLE OF TAXATION ➢ Requisite for Valid Exercise
▪ Necessity of Exercise
I. INHERENT POWERS OF THE STATE ▪ Private Property
▪ Taking of the Private Property
▪ Public Use
*REASON WHY IT IS CALLED ‘’INHERENT’’ (power given by
▪ Just Compensation – amount agreed upon by
the people, co-exist with the govt., it does not need a
the govt. and owner of the property.
constitutional grant.)
- the COURT will determine (judgement)

I. POLICE POWER
- INDIRECT III. POWER OF TAXATION
➢ Power of PROMOTING the PUBLIC WELFARE - INDIRECT
by RESTRAINING and REGULATING the USE OF ➢ Power to RAISE REVENUE, through the
LIBERTY AND PROPERTY. ENACTMENT OF LAWS that IMPOSE CHARGES
➢ MOST PERVASIVE, LEAST LIMITABLE, and the upon PERSONS, PROPERTY AND ACTIVITY under its
MOST DEMANDING of the three powers. JURISDICTION, to DEFRAY GOVERNMENT
➢ Once exercised, it is not deemed exhausted EXPENSES.
and may be exercised again, as often as it is ➢ Jurisdiction – official power to make legal
necessary for the protection of the promotion decisions and judgements.
of the public welfare. ➢ GOVT: public service
➢ examples: regulations for PROFESSIONAL ➢ PEOPLE: money
LICENSE, coming to school, taking the board.
➢ primarily lodged in the NATIONAL
II. PURPOSE OF THE POWER OF TAXATION
LEGISLATURE.
➢ lies in the discretion of the legislative
department. Primary Purpose : Revenue or Fiscal Purpose
➢ TESTS OF THE POLICE POWER • raise revenue to meet the legitimate objectives
• Lawful Subject – must be within the of government.
scope of the police power, that is, that • pay the govt. expenses
the activity or property sought to be Secondary Purpose
regulated affects the public welfare. • Regulatory – devise for regulation or control by
• Lawful Means – a lawful subject must be means of which certain affects or conditions
pursued through a lawful method. envisioned by the govt. may be achieved.
- one way of imposing or exercising police
II. POWER OF EMINENT DOMAIN power through power of taxation.
- DIRECT - impose more taxes
➢ also called as the “POWER OF EXPROPRIATION” - examples: cigarettes, alcoholic drinks,
➢ highest and most exact idea of property remaining and sweets.
in the government that may be acquired for some • Compensatory – use in attaining some social or
public purpose through a method “in the nature of economic ends, irrespective or whether revenue
a compulsory sale to the State” is actually raised or not.
 - opposite of regulatory ➢ PP: Sufficient to cover cost of the license and
- not make them pay taxes the necessary expenses to police surveillance
- address inequality of wealth and regulation.
distribution (rich ppl pay more taxes) ➢ ED: NO IMPOSITION
- collect more taxes from those who ➢ TX: Unlimited
earned more, so that those who earned
less will enjoy more. IMPAIRMENT OF CONTRACTS
- examples: charity, NGO ➢ PP: Superior
➢ ED: Superior
III. SIMILARITIES OF THE INHERENT POWERS ➢ TX: Inferior (use the time it becomes taxable)

➢ inherent in the state V. ASPECTS OF TAXATION

➢ underlie and exist independently of the constitution
although the conditions for their exercise may be
prescribed by the constitution.
➢ CONSTITUTION – protect the powerless
➢ ways by which the State interfere with private rights
and property.
➢ Legislative in nature and character.
➢ Presuppose an equivalent compensation received,
directly or indirectly, by the persons affected.

LEVY OR IMPOSITION
➢ Enactment of a tax law by Congress and is called
IMPACT OF TAXATION. Legislative Act in Taxation.
IV. DIFFERENCES OF THE INHERENT POWERS
➢ Who levies the tax? the LEGISLATIVE BRANCH OF
THE GOVT., CONGRESSMEN, AND SENATORS.
AUTHORITY ASSESSMENT AND COLLECTION
➢ PP: Government Only ➢ Determination of the tax liabilities of the taxpayer
➢ ED: Government and Public Service Companies and collection.
or Utilities ➢ Incidence of Taxation or the Administrative Act of
➢ TX: Government Only taxation.

PURPOSE
➢ PP: Government of general welfare
➢ ED: For public use
➢ TX: For the support of government expenses VI. THEORY OF TAXATION

PERSONS AFFECTED LIFEBLOOD THEORY

➢ PP: Community or Class Individuals
➢ ED: Owner of the Property
➢ TX: Community or Class Individuals ➢ people support the government by giving blood
through paying taxes.
BENEFITS RECEIVED ➢ Without taxes, the government can neither exist
➢ PP: Indirect nor endure.
➢ ED: Direct ➢ Without taxes, the government will not survive,
➢ TX: Indirect resulting in detriment to society.
➢ Without taxes, the government would be
AMOUNT OF IMPOSITION paralyzed for lack of motive power to activate and
operate it.
➢ collect taxes by all means because it is the insolvency to a taxpayer or forfeiture of
lifeblood of the government. properties.

CONCEPTS that support the LIFEBLOOD THEORY VII. BASIS OF TAXATION

➢ Rule of No Estoppel against the Government

• Estoppel – the previous acts of the govt. will BENEFIT RECEIVED OR RECIPROCITY THEORY
hinder them in performing other actions. ➢ The government provides benefit to the people in
the form of public services and the people provide
the funds that finance the government.
➢ Collection of taxes cannot be enjoined by ➢ refers to the mutuality of support between the
injunction. people and the government.
• Injunction
- issued/order by the court, restraining VIII. SCOPE OF TAXATION
order.
- exemption to the rule, the injunction
SUPREME: impose tax on anything
can be issued by the CTA (Court of Tax
PLENARY: (process) avail remedies just to endure
Appeals) – generally injunction is not
collection
honored except if issued by CTA.
UNLIMITED: without restrictions
COMPREHENSIVE: it may cover person, businesses,
➢ Taxes could not be the subject of compensation or
activities, professions, rights, and privileges.
set-off

• The power or authority of collecting taxes is IX. TWO TYPES OF LIMITATIONS

derived from law. It is not a debt that can be
compensated. INHERENT LIMITATIONS (Elements or Characteristics of
• Incurred no delay when paying taxes. Taxation)
• Taxes are not subject to set-off or legal ➢ come together with the power granted
compensation because the government and
the taxpayer are not mutual creditor and ➢ It should be for public purpose
debtor of each other. • For the welfare of the nation or greater
• Exception – if the budget for the payment is portion of the population
already available. • Affects the area as a community rather
than as individuals
➢ Right to select objects (subjects) of taxation • Designed to support the services of govt.
for some of the recognized objects of the
• Right to select the objects/subjects of country
taxation rests with the Congress. It includes
the determination of: ➢ No IMPROPER DELEGATION of the taxing power
- Subject or object to be taxed ➢ Territorial Jurisdiction
- Purpose of the tax ➢ Exemption of Government Entities
- Amount or rate of the tax ➢ International Comity
- Kind of Tax
- Apportionment of the Tax ➢ INHERENTLY LEGISLATIVE (Non-Delegation)
- Situs of taxation • No Improper Delegation or legislative
- The manner, means, and agencies of authority to tax.
collection of the tax • Power to tax is a power that is exercised by
Congress as delegates of the people, then
➢ Valid tax may result in the destruction of the as a general rule Congress could not re-
taxpayer’s property delegate this delegated power.
• EXCEPTIONS:
• POWER TO DESTROY – Its exercise would - Delegations to Local Governments
be destructive or would bring about - Delegations to the President of the
Philippines
 - Delegation to Administrative Bodies

➢ TERRITORIALITY
• Power of taxation could be exercised only *Owning a share. You have the right to receive the
within the territorial boundaries of the taxing dividends and can only be exercised where the
authority, except: corporation is operating.
- Taxation of resident citizens on their
income derived from abroad
- Exempted by treaty (agreement
between two countries) obligations
- Exempted by international comity

➢ EXEMPTION OF GOVERNMENT ENTTITIES, AGENCIES

AND INSTRUMENTALITIES
• Transfer from one pocket and placing it in
another pocket

➢ INTERNATIONAL COMITY
• Comity – Respect accorded by nations to
each other because they are sovereign
equals (Between equals there is no
sovereign)
• The rule of international law that a foreign
government may not be sued without its
consent so that it is useless to impose attacks
which could not be collected.
• When a foreign sovereign enters the
territorial jurisdiction of another, it does not
subject itself to the jurisdiction of the other.

CONSTITUTIONAL LIMITATIONS
➢ limitations stated in the Philippine Constitution

X. SITUS OF TAXATION

Place or authority that has the rights to impose and

collect taxes