FUNDAMENTAL POWERS

OF THE STATE
 POLICE POWER
Police power is the power of the state to promote
public welfare by restraining and regulating the
use of liberty and property.
It is the most pervasive, the least limitable, and
the most demanding of the three fundamental
powers of the State.
 POLICE POWER
As an inherent attribute of sovereignty which virtually
extends to all public needs, police power grants a wide
panoply of instruments through which the State, as
parens patriae, gives effect to a host of its regulatory
powers.
The power to “regulate” means the power to protect,
foster, promote, preserve, and control, with due regard
for the interests, first and foremost, of the public, then of
the utility of its patrons.
 POLICE POWER
The state, in order to promote general welfare, may
interfere with personal liberty, with property, and with
business and occupations.
Persons may be subjected to all kinds of restraint and
burdens in order to secure the general comfort, health
and prosperity of the state and to this fundamental aim
of our Government, the rights of the individual are
subordinated.
 POLICE POWER
Generally, police power extends to all the great
public needs. Its particular aspects, however, are
the following:
1. Public health;
2. Public morals;
3. Public safety; and
4. Public welfare
 POLICE POWER
Requisites for a valid exercise of police power
1.Lawful subject – The interests of the public generally,
as distinguished from those of a particular class, require
the exercise of the police power; and
2.Lawful means – The means employed are reasonably
necessary for the accomplishment of the purpose and
not unduly oppressive upon individuals.
 POLICE POWER
Question:
President Rodrigo Duterte issued Proclamation No. 475 formally
declaring a state of calamity in Boracay and ordering its closure for six
(6) months. On account of this, Boracay residents Mark Anthony Zabal
and Thiting Jacosalem filed the present petition alleging that they
would suffer grave and irreparable damage as their livelihood depends
on the tourist activities therein. They attacked the order on the ground
that it is an invalid exercise of legislative powers. Is the order invalid?
Answer: POLICE POWER
NO. That the assailed governmental measure in this case is within the scope
of police power cannot be disputed.
Verily, the statutes from which the said measure draws authority and the
constitutional provisions which serve as its framework are primarily
concerned with the environment and health, safety, and well-being of the
people, the promotion and securing of which are clearly legitimate objectives
of governmental efforts and regulations.
The only question now is whether the temporary closure of Boracay as a
tourist destination for six months reasonably necessary under the
circumstances?
The answer is in the affirmative.
 POLICE POWER
Answer (continuation)
Tourist arrivals in the island were clearly far more than Boracay
could handle.
Certainly, the closure of Boracay, albeit temporarily, gave the
island its much needed breather, and likewise afforded the
government the necessary leeway in its rehabilitation program.
Note that apart from review, evaluation and amendment of
relevant policies, the bulk of the rehabilitation activities involved
inspection, testing, demolition, relocation, and construction.
 POLICE POWER
Answer (continuation)
These works could not have easily been done with
tourists present.
The rehabilitation works in the first place were not
simple, superficial or mere cosmetic but rather
quite complicated, major, and permanent in
character as they were intended to serve as long-
term solutions to the problem.
Question: POLICE POWER

Hotel and motel operators in Manila sought to declare Ordinance 4670

as unconstitutional for being unreasonable, thus violative of the due
process clause. The Ordinance requires the clients of hotels, motels and
lodging house to fill out a prescribed form in a lobby, open to public
view and in the presence of the owner, manager or duly authorized
representative of such hotel, motel or lodging house. The same law
provides that the premises and facilities of such hotels, motels and
lodging houses would be open for inspection either by the City Mayor,
or the Chief of Police, or their duly authorized representatives. It
increased their annual license fees as well. Is the ordinance
constitutional?
Answer: POLICE POWER

YES. The mantle of protection associated with the due process

guaranty does not cover the hotel and motel operators.
This particular manifestation of a police power measure being
specifically aimed to safeguard public morals is immune from such
imputation of nullity resting purely on conjecture and unsupported by
anything of substance.
To hold otherwise would be to unduly restrict and narrow the scope of
police power which has been properly characterized as the most
essential, insistent and the least limitable of powers, extending as it
does "to all the great public needs."
 POLICE POWER

There is no question that the challenged ordinance was precisely

enacted to minimize certain practices hurtful to public morals.
The challenged ordinance then proposes to check the clandestine
harboring of transients and guests of these establishments by
requiring these transients and guests to fill up a registration form,
prepared for the purpose, in a lobby open to public view at all
times, and by introducing several other amendatory provisions
calculated to shatter the privacy that characterizes the registration
of transients and guests.
 POLICE POWER

Moreover, the increase in the licensed fees

was intended to discourage "establishments of
the kind from operating for purpose other than
legal" and at the same time, to increase "the
income of the city government."
Question: POLICE POWER

The City of Manila enacted Ordinance No. 7774 entitled, “An

Ordinance Prohibiting Short-Time Admission, Short-Time
Admission Rates, and Wash-Up Rate Schemes in Hotels,
Motels, Inns, Lodging Houses, Pension Houses, and Similar
Establishments in the City of Manila.” The purpose of the
ordinance is to prohibit motel and inn operators from offering
short-time admission, as well as pro-rated or “wash-up” rates for
abbreviated stays. Is the ordinance a valid exercise of police
power?
 POLICE POWER

Answer:
NO. A reasonable relation must exist between the
purposes of the measure and the means employed
for its accomplishment, for even under the guise of
protecting the public interest, personal rights and
those pertaining to private property will not be
permitted to be arbitrarily invaded.
 POLICE POWER

It must also be evident that no other alternative for the

accomplishment of the purpose less intrusive of private
rights can work.
In the present case, there is less intrusive measures
which can be employed such as curbing out the
prostitution and drug use through active police force.
The ordinance has a lawful purpose but does not have
the lawful means hence, unconstitutional.
 POLICE POWER

Question:
Are the rates to be charged by utilities like MERALCO subject to State regulation?
Answer:
YES. The regulation of rates to be charged by public utilities is founded upon the
police powers of the State, and statutes prescribing rules for the control and
regulation of public utilities are a valid exercise thereof.
When private property is used for a public purpose and is affected with public
interest, it ceases to be juris privati only and becomes subject to regulation.
The regulation is to promote the common good.
As long as use of the property is continued, the same is subject to public
regulation.
 POLICE POWER
NOTE:
Mall owners and operators cannot be validly compelled
to provide free parking to their customers because
requiring them to provide free parking space to their
customers is beyond the scope of police powers.
It unreasonably restricts the right to use property for
business purposes and amounts to confiscation of
property.
 POLICE POWER

Requisites for the valid exercise of police power by the

delegate:
1.Express grant by law;
2.Must not be contrary to law; and
General Rule: Within territorial limits of LGUs.
Exception: When exercised to protect water supply.
 POLICE POWER

The courts cannot interfere with the exercise

of police power.
If the legislature decides to act, the choice of
measures or remedies lies within its exclusive
discretion, as long as the requisites for a valid
exercise of police power have been complied
with.
Question: POLICE POWER

Can MMDA exercise police power?

Answer:
NO. The MMDA cannot exercise police powers since its
powers are limited to the formulation, coordination, regulation,
implementation, preparation, management, monitoring, setting
of policies, installing a system, and administration.
Nothing in RA No. 7924 granted the MMDA police power, let
alone legislative power
 EMINENT DOMAIN

Eminent domain is the right or power of a sovereign state to

appropriate private property to particular uses to promote public
welfare.
It is an indispensable attribute of sovereignty; a power grounded
in the primary duty of government to serve the common need
and advance the general welfare.
The power of eminent domain is inseparable in sovereignty
being essential to the existence of the State and inherent in
government.
 EMINENT DOMAIN

Conditions for the exercise of the Power of Eminent Domain

(T-U-C-O)
1.Taking of private property;
2.For public Use;
3.Just Compensation; and
4.Observance of due process.
NOTE: There must be a valid offer to buy the property and refusal of
said offer.
 EMINENT DOMAIN
Power of expropriation as exercised by Congress vs. Power of expropriation as exercised by delegates
POWER OF EXPROPRIATION AS POWER OF EXPROPRIATION AS EXERCISED
EXERCISED BY CONGRESS BY DELEGATES

The power or pervasive and all-

encompassing; It can reach every form of
property which may be needed by the State It can only be broad as the enabling law and the
SCOPE for public use. In fact, it can reach even conferring authorities want it to be.
private property already dedicated to public
use, or even property already devoted to
religious worship.

Judicial question (The courts can determine

QUESTION OF
NECESSITY Political question whether there is genuine necessity for its exercise,
as well as the value of the property)
 EMINENT DOMAIN

Requisites for a valid taking:

1.The expropriator must enter a private property;
2.Entry must be for more than a momentary period;
3.Entry must be under warrant or color of legal authority;
4.Property must be devoted to public use or otherwise
informally appropriated or injuriously affected; and
5.Utilization of property must be in such a way as to oust the
owner and deprive him of beneficial enjoyment of the
property.
 EMINENT DOMAIN

Nature of property taken

General Rule:
All private property capable of ownership, including services, can be
taken.
Exceptions: (Mo-Cho)
1.Money; and
2.Choses in action - personal right not reduced in possession but
recoverable by a suit at law such as right to receive, demand or
recover debt, demand or damages on a cause of action ex contractu or
for a tort or omission of duty.
 EMINENT DOMAIN

NOTE: A chose in action is a property right in

something intangible, or which is not in one’s
possession but enforceable through legal or
court action e.g. cash, a right of action in tort or
breach of contract, an entitlement to cash refund,
checks, money, salaries, insurance claims.
 EMINENT DOMAIN

Requisites before an LGU can exercise Eminent Domain (O-Pu –JO)

1. An Ordinance is enacted by the local legislative council authorizing the local
chief executive, in behalf of the LGU, to exercise the power of eminent domain
or pursue expropriation proceedings over a particular private property;
2. An Ordinance is enacted by the local legislative council authorizing the local
chief executive, in behalf of the LGU, to exercise the power of eminent domain
or pursue expropriation proceedings over a particular private property;
3. There is payment of Just compensation; and
4. A valid and definite Offer has been previously made to the owner of the property
sought to be expropriated, but said offer was not accepted.
 EMINENT DOMAIN

Expansive concept of “Public Use”

Public use does not necessarily mean “use by the public
at large.”
Whatever may be beneficially employed for the general
welfare satisfies the requirement.
Moreover, that only few people benefit from the
expropriation does not diminish its public use character
because the notion of public use now includes the
broader notion of indirect public benefit or advantage.
 EMINENT DOMAIN

Concept of Vicarious Benefit

Abandons the traditional concept (number of actual
beneficiaries determines public purpose).
Public use now includes the broader notion of indirect
public advantage, i.e. conversion of a slum area into a
model housing community, urban land reform and
housing. There is a vicarious advantage to the society.
 EMINENT DOMAIN

Question:
The Republic, through the Office of the Solicitor-General, instituted
a complaint for expropriation of a piece of land in Taguig, alleging
that the National Historical Institute declared said land as a national
historical landmark, because it was the site of the birth of Felix
Manalo, the founder of Iglesia ni Cristo. The Republic filed an action
to expropriate the land. Petitioners argued that the expropriation was
not for a public purpose. Is their argument correct?
 EMINENT DOMAIN
Answer:
NO. Public use should not be restricted to the traditional uses.
It has been held that places invested with unusual historical
interest is a public use for which the power of eminent domain
may be authorized.
The purpose in setting up the marker is essentially to recognize
the distinctive contribution of the late Felix Manalo to the
culture of the Philippines, rather than to commemorate his
founding and leadership of the Iglesia ni Cristo.
 EMINENT DOMAIN

The practical reality that greater benefit may be derived

by members of the Iglesia ni Cristo than by most others
could well be true but such a peculiar advantage still
remains to be merely incidental and secondary in
nature.
Indeed, that only a few would actually benefit from the
expropriation of property does not necessarily diminish
the essence and character of public use.
 EMINENT DOMAIN

Just Compensation
It is the full and fair equivalent of the property taken from the
private owner (owner’s loss) by the expropriator.
It is usually the fair market value (FMV) of the property and
must include consequential damages (damages to the other
interest of the owner attributed to the expropriation) minus
consequential benefits (increase in the value of other interests
attributed to new use of the former property).
 EMINENT DOMAIN

JUST COMPENSATION = FMV + consequential DAMAGES –

consequential BENEFITS

NOTE:
To be just, the compensation must be
paid on time.
 EMINENT DOMAIN

Fair Market Value

The price that may be agreed upon by parties
who are willing but are not compelled to
enter into a contract of sale.
 EMINENT DOMAIN
Question:
Lucy Grace Franco and Elma Gloria Franco were the registered owners of parcels of
agricultural land in Barangay Maquina, Dumangas, Iloilo, covered by Transfer
Certificate of Title Nos. T62209, T-62210, and T-51376. The Francos voluntarily
offered their land to the Department of Agrarian Reform for the Comprehensive
Agrarian Reform Program. The Francos were initially offered 714,713.78 pesos for
just compensation, but it was later raised to 739,461.43 pesos upon review. The
Francos withdrew the compensation but was still dissatisfied with the amount. Hence,
they filed before the RTC a complaint for the determination of just compensation.
The court fixed the just compensation to 1,024,115.59 pesos, and ruled that the
Francos were entitled to an additional 5% cash payment by way of incentive for
voluntarily offering their lots for sale. Is the Special Agrarian Court’s valuation of
just compensation using a variation of the basic general formula provided for by the
DAR correct?
 EMINENT DOMAIN

Answer:
NO. While the formula prescribed by the Department of Agrarian Reform
requires due consideration, the determination of just compensation shall
still be subject to the final decision of the special agrarian court.
In its exercise of original jurisdiction, the special agrarian court may
deviate from the formulas if it can show that the value is not equivalent to
the fair market value at the time of the taking.
However, any deviation to the basic formula made in the exercise of
judicial discretion must be supported by a reasoned explanation grounded
on the evidence on record.
 EMINENT DOMAIN

A computation by a court made in utter and blatant disregard of

the factors spelled out by law and by the implementing rules
amounts to grave abuse of discretion.
Here, the Special Agrarian Court’s computation of the just
compensation resulted in a “double take up” of the market
value per tax declaration of the property.
This method of valuation has already been considered in
jurisprudence as a departure from the mandate of law and basic
administrative guidelines.
 EMINENT DOMAIN

Period to determine just compensation

General Rule:
Just compensation must be reckoned from the
time of taking or filing of the complaint,
whichever came first.
Exceptions:
 EMINENT DOMAIN

1. In NPC vs. Macabangkit Sangkay (G.R. No. 165828, August 24, 2011),
NAPOCOR, in the 1970s, undertook the construction of several underground
tunnels to be used in diverting the water flow from the Agus River to the
hydroelectric plants.
On November 21, 1997, respondents therein sued NAPOCOR for recovery of
property and damages, alleging that they belatedly discovered that one of the
underground tunnels of NPC traversed their land.
In that case, the Court adjudged that the value of the property at the time the
property owners initiated inverse condemnation proceedings should be
considered for purposes of just compensation for the following reasons, viz:
 EMINENT DOMAIN

Compensation that is reckoned on the market value prevailing at the

time either when NPC entered or when it completed the tunnel, as
NPC submits, would not be just, for it would compound the gross
unfairness already caused to the owners by NPC's entering without the
intention of formally expropriating the land, and without the prior
knowledge and consent of the Heirs of Macabangkit.
NPC's entry denied elementary due process of law to the owners since
then until the owners commenced the inverse condemnation
proceedings.
 EMINENT DOMAIN

The Court is more concerned with the necessity to

prevent NPC from unjustly profiting from its deliberate
acts of denying due process of law to the owners.
As a measure of simple justice and ordinary fairness to
them, therefore, reckoning just compensation on the value
at the time the owners commenced these inverse
condemnation proceedings is entirely warranted.
 EMINENT DOMAIN
2. In National Power Corporation v. Spouses Saludares, 686 Phil. 967, respondents
therein filed a complaint for the payment of just compensation against
NAPOCOR, averring that it had entered and occupied their property by erecting
high-tension transmission lines and failed to reasonably compensate them for the
intrusion.
For its part, NAPOCOR countered that it had already paid just compensation
for the establishment of the transmission lines by virtue of its compliance with
the final and executory decision in National Power Corporation v. Pereyras.
In ruling that the reckoning value of just compensation is that prevailing at the
time of the filing of the inverse condemnation proceedings, the Court declared:
 EMINENT DOMAIN

To reiterate, NAPOCOR should have instituted eminent

domain proceedings before it occupied respondent spouses'
property.
Because it failed to comply with this duty, respondent spouses
were constrained to file the instant Complaint for just
compensation before the trial court.
From the 1970s until the present, they were deprived of just
compensation, while NAPOCOR continuously burdened their
property with its transmission lines.
 EMINENT DOMAIN

This Court cannot allow petitioner to profit from its

failure to comply with the mandate of the law. We
therefore rule that, to adequately compensate
respondent spouses from the decades of burden on their
property, NAPOCOR should be made to pay the value
of the property at the time of the filing of the instant
Complaint when respondent spouses made a judicial
demand for just compensation.
 EMINENT DOMAIN

NOTE: The rulings in Macabangkit Sangkay and Saludares are

more in consonance with the rules of equity than with the Rules
of Court, specifically Rule 67 on expropriation.
Inverse condemnation has the objective to recover the value of
property taken in fact by the governmental defendant, even
though no formal exercise of the power of eminent domain has
been attempted by the taking agency.
 EMINENT DOMAIN

Consequential Damages
Consist of injuries directly caused on the residue of the
private property taken by reason of expropriation.
Where, for example, the expropriator takes only part of
a parcel of land, leaving the remainder with an odd
shape or area as to be virtually unusable, the owner can
claim consequential damages.
 EMINENT DOMAIN

Question:
Spouses Salvador owns a land where a one storey building is erected. The said land
is subject to expropriation wherein the DPWH shall construct the NLEX extension
exiting McArthur Highway. DPWH paid the spouses amounting to P685,000 which
was the fair market value of the land and building. RTC issued a Writ of Possession
in favor of the Republic but decided to pay an additional amount corresponding to
the capital gains tax paid by the spouses. The Republic, represented by DPWH
contested the decision of the RTC adding the capital gains tax as consequential
damages on the part of the Spouse Salvador. Is the decision of the RTC correct?
Answer: EMINENT DOMAIN

NO. Just compensation is defined as the full and fair

equivalent of the property sought to be expropriated.
The measure is not the taker’s gain but the owner’s loss.
The compensation, to be just, must be fair not only to the
owner but also to the taker.
Consequential damages are only awarded if as a result of
the expropriation, the remaining property of the owner
suffers from an impairment or decrease in value.
 EMINENT DOMAIN

In this case, no evidence was submitted to prove any

impairment or decrease in value of the subject property as a
result of the expropriation.
More significantly, given that the payment of capital gains
tax on the transfer· of the subject property has no effect on
the increase or decrease in value of the remaining property,
it can hardly be considered as consequential damages that
may be awarded to respondents.
 EMINENT DOMAIN

Consequential Benefits
Where the expropriator takes only part of a parcel of
land and the remainder, as a result of the expropriation,
is placed in a better location (such as fronting a street
where it used to be an interior lot), the owner will enjoy
consequential benefits which should be deducted from
the consequential damages.
 EMINENT DOMAIN

NOTE: If the consequential benefits exceed

the consequential damages, these items
should be disregarded altogether as the basic
value of the property should be paid in every
case. (Rule 67, Section 6, Rules of Court)
 EMINENT DOMAIN
Form of payment
General Rule:
Compensation has to be paid in money.
Exception:
In cases involving CARP, compensation may be in bonds or
stocks, for it has been held as a nontraditional exercise of the
power of eminent domain. It is not an ordinary expropriation
where only a specific property of relatively limited area is sought
to be taken by the State from its owner for a specific and perhaps
local purpose. It is rather a revolutionary kind of expropriation.
 EMINENT DOMAIN

NOTE: The owner is entitled to the payment of interest

from the time of taking until just compensation is
actually paid to him. Taxes paid by him from the time
of the taking until the transfer of title (which can only
be done after actual payment of just compensation),
during which he did not enjoy any beneficial use of the
property, are reimbursable by the expropriator.
 EMINENT DOMAIN

Pursuant to Bangko Sentral ng Pilipinas

Circular No. 799, series of 2013, from
July 1, 2013 onwards and until full
payment, an interest rate of 6% per
annum should be used in computing the
just compensation.
 EMINENT DOMAIN

NOTE: The right to recover just compensation is

enshrined in no less than our Bill of Rights, which
states in clear and categorical language that private
property shall not be taken for public use without
just compensation. This constitutional mandate
cannot be defeated by statutory prescription.
 EMINENT DOMAIN

Determination
Role of the Judiciary
The final determination of just compensation
is a judicial function; that the jurisdiction of
the Regional Trial Court, sitting as Special
Agrarian Court, is original and exclusive, not
appellate.
 EMINENT DOMAIN

Effect of Delay
General Rule:
Non-payment by the government does not entitle
private owners to recover possession of the
property because expropriation is an in rem
proceeding, not an ordinary sale, but only entitle
them to demand payment of the fair market value
of the property.
 EMINENT DOMAIN

Exceptions:
1.When there is deliberate refusal to pay just
compensation; and
2.Government’s failure to pay compensation within 5
years from the finality of the judgment in the
expropriation proceedings. This is in connection with
the principle that the government cannot keep the
property and dishonor the judgment.
 EMINENT DOMAIN

Abandonment of intended use and right of repurchase

Question:
Several parcels of lands located in Lahug, Cebu City were the
subject of expropriation proceedings filed by the Government
for the expansion and improvement of the Lahug Airport. The
RTC rendered judgment in favor of the Government and
ordered the latter to pay the landowners the fair market value of
the land. The landowners received the payment.
 EMINENT DOMAIN

The other dissatisfied landowners appealed. Pending appeal, the Air

Transportation Office (ATO), proposed a compromise settlement
whereby the owners of the lots affected by the expropriation proceedings
would either not appeal or withdraw their respective appeals in
consideration of a commitment that the expropriated lots would be
resold at the price they were expropriated in the event that the ATO
would abandon the Lahug Airport, pursuant to an established policy
involving similar cases. Because of this promise, the landowners did not
pursue their appeal.
 EMINENT DOMAIN

Thereafter, the lot was transferred and registered in the

name of the Government. The projected improvement
and expansion plan of the old Lahug Airport, however,
was not pursued. From the date of the institution of the
expropriation proceedings up to the present, the public
purpose of the said expropriation (expansion of the
airport) was never actually initiated, realized, or
implemented.
 EMINENT DOMAIN

Thus, the landowners initiated a complaint for the

recovery of possession and reconveyance of
ownership of the lands based on the compromised
agreement they entered into with the ATO. Do the
former owners have the right to redeem the
property?
 EMINENT DOMAIN

Answer:
YES. It is well settled that the taking of private property by the
Government’s power of eminent domain is subject to two mandatory
requirements:
(1)that it is for a particular public purpose; and
(2)that just compensation be paid to the property owner.
These requirements partake of the nature of implied conditions that
should be complied with to enable the condemnation or to keep the
property expropriated.
 EMINENT DOMAIN

More particularly, with respect to the element of public

use, the expropriator should commit to use the property
pursuant to the purpose stated in the petition for
expropriation filed, failing which, it should file another
petition for the new purpose. If not, it is then incumbent
upon the expropriator to return the said property to its
private owner, if the latter desires to reacquire the same.
 EMINENT DOMAIN

Otherwise, the judgment of expropriation suffers an intrinsic

flaw, as it would lack one indispensable element for the proper
exercise of the power of eminent domain, namely, the particular
public purpose for which the property will be devoted.
Accordingly, the private property owner would be denied due
process of law, and the judgment would violate the property
owner’s right to justice, fairness, and equity.
 EMINENT DOMAIN

NOTE: In view of the discontinuance of the proceedings and

the eventual return of the property to the owners, there is no
need to pay “just compensation” to them because their property
would not be taken. However, instead of full market value of
the property, the expropriator should compensate the owners
for the disturbance of their property rights from the time of
entry until the time of restoration of the possession by paying to
them actual or other compensatory damages.
 EMINENT DOMAIN

The expropriator who has taken possession of the

property subject of expropriation is obliged to pay
reasonable compensation to the landowner for the
period of such possession although the
proceedings had been discontinued on the ground
that the public purpose for the expropriation had
meanwhile ceased.
 TAXATION

It is the process by which the government, through its

legislative branch, imposes and collects revenues to
defray the necessary expenses of the government, and
to be able to carry out, in particular, any and all projects
that are supposed to be for the common good. Simply
put, taxation is the method by which these contributions
are exacted.
 TAXATION

In other words, taxation is:

1.The inherent power of the sovereign exercised through
legislature
2.To impose burdens
3.Upon subjects and objects
4.Within its jurisdiction
5.For the purpose of raising revenues
6.To carry out the legitimate objects of government
 TAXATION
Lifeblood Doctrine
Taxes are the lifeblood of the government, for without taxes, the
government can neither exist nor endure.
A principal attribute of sovereignty, the exercise of taxing power
derives its source from the very existence of the state whose social
contract with its citizens obliges it to promote public interest and
common good.
The theory behind the exercise of the power to tax emanates from
necessity; without taxes, government cannot fulfill its mandate of
promoting the general welfare and well-being of the people.
 TAXATION
Question:
May the legislature enact laws to raise revenues in the absence of
constitutional provisions granting said body the power of tax? Explain.
Answer:
YES. The constitutional provisions relating to the power of taxation do
not operate as grants of the power of taxation to the government, but
instead merely constitute a limitation upon a power which would
otherwise be practically without limit.
Moreover, it is inherent in nature, being an attribute of sovereignty.
There is, thus, no need for a constitutional grant for the State to
exercise this power.
 TAXATION
Question:
Is the grant of the power of taxation inherent for both National and Local
Government?
Answer:
NO. It is inherent in the National Government but not in the Local Government
Unit (LGU) since the latter is merely a State’s agency to carry out in detail the
objects of the government.
The LGU can only impose taxes when it is granted by the:
1. Constitution e.g. LGU’s taxation power outside autonomous region (Art. X,
Sec. 5, 1987 Constitution)
2. Legislation by Congress e.g. LGU’s taxation power within the autonomous
region (Art. X, Sec. 20, 1987 Constitution)
 TAXATION
Purpose of Taxation
1. Primary or revenue purpose
- to raise funds or property to enable the State to promote the
general welfare and protection of the people.
2. Secondary or non-revenue purposes:
a. Promotion of general welfare
b. Regulation of activities/industries
c. Reduction of social inequality
d. Encourage economic growth
e. Protectionism
 TAXATION

Promotion of general welfare

Taxation may be used as an implement of police power to
promote the general welfare of the people.
In the case of Lutz v. Araneta, the Supreme Court upheld the
validity of the Sugar Adjustment Act, which imposed a tax
on milled sugar since the purpose of the law was to
strengthen an industry that is so undeniably vital to the
economy – the sugar industry.
 TAXATION
Regulation of activities/industries
Taxes may also be imposed for a regulatory purpose as, for
instance, in the rehabilitation and stabilization of a threatened
industry which is affected with public interest, like the oil
industry (Caltex Philippines, Inc. v. Commission on Audit).
Taxation also has a regulatory purpose as in the case of taxes
levied on excises or privileges like those imposed on tobacco
and alcoholic products, or amusement places like night clubs,
cabarets, cockpits, etc.
 TAXATION

Reduction of social inequality

A progressive system of taxation prevents the
undue concentration of wealth in the hands of few
individuals.
Progressivity is based on the principle that those
who are able to pay more should shoulder the
bigger portion of the tax burden.
 TAXATION

Encourage economic growth

The grant of incentives or exemptions
encourage investment thereby
stimulating economic activity.
 TAXATION

Protectionism
Protective tariffs and customs duties are
imposed as taxes in order to protect
important sectors of the economy or local
industries, as in the case of foreign
importations.
 TAXATION

Scope of legislative power in taxation

1.The determination of ASK-MAPS
2.The grant of tax exemptions and
condonations.
3.The power to specify or provide for
administrative as well as judicial remedies
ASK-MAPS TAXATION
a. Amount or Rate of tax
b. Subjects of taxation (persons, property, occupation, excises or
privileges to be taxed, provided they are within the taxing
jurisdiction)
c. Kind of tax to be collected
d. Method of collection (not exclusive to the Congress)
e. Apportionment of the tax (whether the tax shall be of general
application or limited to a particular locality, or partly general and
partly local)
f. Purposes for which taxes shall be levied, provided they are public
purposes
g. Situs of taxation
 TAXATION
Constitutional Limitations 8. Prohibition on use of tax levied for special
1. Prohibition against imprisonment for purpose
nonpayment of poll tax 9. President’s veto power on appropriation,
2. Uniformity and equality of taxation revenue, and tariff bills
3. Progressive taxation 10.Non-impairment of the jurisdiction of the
4. Grant by Congress of Authority to the Supreme Court
President to impose tariff rates 11.Grant of power to LGUs to create its own
5. Prohibition against taxation of religious, source of income
charitable, and educational entities. 12.Origin of revenue and tariff bills
6. Prohibition against taxation of non-stock and 13.No appropriation or use of public money for
non-profit educational institutions religious purposes
7. Majority vote of Congress for grant of tax
exemption
 TAXATION
Prohibition against imprisonment for non-payment of poll tax
Payment of taxes is an obligation based on law, and not on contract.
It is a duty imposed upon the individual by the mere fact of his
membership in the body politic and his enjoyment of the benefits
available from such membership.
Except only in the case of poll (community) taxes, non-payment of a
tax may be the subject of criminal prosecution and punishment. The
accused cannot invoke the prohibition against imprisonment for
debt, as taxes are not considered debts.
 TAXATION
Uniformity and equality of taxation
Uniformity in taxation means that all taxable articles or kinds
of property, of the same class, shall be taxed at the same rate.
It does not mean that lands, chattels, securities, incomes,
occupations, franchises, privileges, necessities, and luxuries
shall all be assessed at the same rate.
Different articles may be taxed at different amounts, provided
the rate is uniform on the same class everywhere, with all
people, and at all times.
 TAXATION
Uniformity and equality of taxation
General Law:
The power to tax operates with the same force and
effect in every place where the subject of it is found.
This is known as geographical uniformity.
Exception:
The rule on uniformity does not prohibit classification
for purposes of taxation, provided the requisites for
valid classification are met.
 TAXATION

Progressive taxation
Taxation is progressive when tax rate
increases as the income of the taxpayer
increases.
It is based on the principle that those who are
able to pay more should shoulder the bigger
portion of the tax burden.
 TAXATION
Progressive taxation
Question:
Does the Constitution prohibit regressive taxes?
Answer:
NO. The Constitution does not really prohibit the
imposition of regressive taxes.
What it simply provides is that Congress shall
evolve a progressive system of taxation.
 TAXATION

Meaning of “evolve” as used in the Constitution

The constitutional provision has been interpreted to mean
simply that "direct taxes are to be preferred and as much as
possible, indirect taxes should be minimized.”
The mandate of Congress is not to prescribe but to evolve a
progressive tax system.
This is a mere directive upon Congress, not a justiciable right
or a legally enforceable one.
We cannot avoid regressive taxes but only minimize them.
Question: TAXATION
Is VAT regressive?
Answer:
YES. The principle of progressive taxation has no relation with the VAT system in as
much as the VAT paid by the consumer or business for every goods bought or
services enjoyed is the same regardless of income.
In other words, the VAT paid eats the same portion of an income, whether big or
small.
The disparity lies in the income earned by a person or profit margin marked by a
business, such that the higher the income or profit margin, the smaller the portion of
the income or profit that is eaten by VAT.
A converse, the lower the income or profit margin, the bigger the part that the VAT
eats away.
At the end of the day, it is really the lower income group or businesses with low-
profit margins that is always hardest hit.
 TAXATION

Grant by Congress of Authority to the President to impose tariff

rates
Basis:
The Congress may, by law, authorize the President to fix within
specified limits and subject to such limitations and restrictions
at 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.
 TAXATION
Flexible tariff clause
This clause provides the authority given to the President
to adjust tariff rates under Sec. 401 of the Tariff and
Customs Code [now Sec. 1608 of R.A. 10863, known as
Customs Modernization and Tariff Act (CMTA) of 2016]
(Garcia v. Executive Secretary, G.R. No. 101273, July 3,
1992).
This authority, however, is subject to limitations and
restrictions indicated within the law itself.
 TAXATION

Prohibition against taxation of religious, charitable, and

educational entities
Basis:
Charitable institutions, churches and parsonages 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.
 TAXATION
Meaning of “actual, direct and exclusive use of the property
for religious, charitable and educational purposes”
It is the direct and immediate and actual application of
the property itself to the purposes for which the
charitable institution is organized.
It is not the use of the income from the real property that
is determinative of whether the property is used for tax
exempt purposes.
 TAXATION
NOTE:
In the case of Lung Center of the Philippines v. City
Assessor of Quezon City (433 SCRA 119), the Court
ruled that under the 1987 Constitution, for "lands,
buildings, and improvements" of the charitable institution
to be considered exempt, the same should not only be
"exclusively" used for charitable purposes;
it is required that such property be used "actually" and
"directly" for such purposes.
 TAXATION

"Exclusive" is defined as possessed and enjoyed to

the exclusion of others; debarred from participation
or enjoyment; and "exclusively" is defined, "in a
manner to exclude; as enjoying a privilege
exclusively.“
If real property is used for one or more commercial
purposes, it is not exclusively used for the
exempted purposes but is subject to taxation.
 TAXATION
The words "dominant use" or "principal use"
cannot be substituted for the words "used
exclusively" without doing violence to the
Constitution and the law.
In sum, the Court ruled that the portions of the
land leased to private entities as well as those parts
of the hospital leased to private individuals are not
exempt from taxes.
 TAXATION
Prohibition against taxation of non-stock and nonprofit
educational institutions
Basis:
All revenues and assets of non-stock, nonprofit educational
institutions used actually, directly, and exclusively for
educational purposes shall be exempt from taxes and duties.
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.
 TAXATION

Meaning of “actually, directly, and exclusively used”

The use of the term “actually, directly, and exclusively used”
referring to religious institutions cannot be applied to non-stock,
non-profit educational institutions.
The provision of Article VI, Section 28(3) applies to religious,
charitable, and educational institutions – while Article XIV
applies solely to nonstock, non-profit educational institutions.
Hence, in this case, we should apply its literal interpretation –
“solely” – in consonance with the principle of strictissimi juris.
The word “exclusively” indicates that the provision is mandatory.
 TAXATION

Majority vote of Congress for grant of tax

exemption
Basis:
No law granting any tax exemption shall be passed
without the concurrence of a majority of all the
members of Congress (Section 28 [4], Art. VI).
The inherent power of the State to impose taxes
carries with it the power to grant tax exemptions.
 TAXATION
Prohibition on use of tax levied for special purpose
Basis:
All money collected on any tax levied for a 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
been fulfilled or abandoned, the balance, if any, shall be
transferred to the general funds of the government (Sec.
29[3], Art. VI).
NOTE: TAXATION
In Gaston v. Republic Planters Bank, 158 SCRA 626, the Court ruled
that the “stabilization fees” collected by the State (PHILSUCOM)
for the promotion of the sugar industry were in the nature of taxes
and no implied trust was created for the benefit of sugar industries.
Thus, the revenues derived therefrom are to be treated as a special
fund to be administered for the purpose intended.
No part thereof may be used for the exclusive benefit of any private
person or entity but for the benefit of the entire sugar industry.
Once the purpose is achieved, the balance, if any remaining, is to be
transferred to the general funds of the government.
 TAXATION

President’s veto power on appropriation, revenue,

and tariff bills
Basis:
The President shall have the power to veto any
particular item or items in an appropriation, revenue
or tariff bill but the veto shall not affect the item or
items which he does not object (Art. VI, Sec.
27[2]).
 TAXATION
The item or items vetoed shall be returned to the Lower House
of Congress together with the objections of the President.
If after consideration 2/3 of all the members of such House
shall agree to pass the bill, it shall be sent, together with the
objection, to the other House by which it shall likewise be
considered, and if approved by 2/3 of all the members of that
House, it shall become a law.
 TAXATION
Non-impairment of the jurisdiction of the Supreme Court
Basis:
The Supreme Court shall have the power to review, revise,
reverse, modify or affirm on appeal on certiorari as the laws or
the Rules of Court may provide, final judgments or orders of
lower courts in all cases involving the legality of any tax,
impost, assessment, or toll or any penalty imposed in relation
thereto (Art. VIII, Sec. 5[2][b]).
NOTE: TAXATION
These jurisdictions are concurrent with the RTCs; thus, the petition
should generally be filed with the RTC following the hierarchy of courts.
However, questions on tax laws are usually filed direct with the Supreme
Court as these are impressed with paramount public interest.
It is also provided under Art. VI, Sec. 30 of the Constitution that “no law
shall be passed increasing the appellate jurisdiction of the Supreme
Court without its advice and concurrence.”
The courts cannot inquire into the wisdom of a taxing act, EXCEPT
when there is an allegation of violation of constitutional limitations or
restrictions.
 TAXATION
Grant of power to LGUs to create its own source of income
Basis:
Each LGU shall have the power to create its own sources of revenues and to
levy taxes, fees and charges subject to such guidelines and limitations as the
Congress may provide, consistent with the basic policy of local autonomy.
Such taxes, fees, and charges shall accrue exclusively to the local governments
(Art. X, Sec. 5).
NOTE:
The Congress cannot abolish the local government’s power to tax as it cannot
abrogate what is expressly granted by the fundamental law.
The only authority conferred to Congress is to provide the guidelines and
limitations on the local government’s exercise of the power to tax.
 TAXATION

Justification in the delegation of legislative taxing

power to local governments
Delegation of legislative taxing power to local
governments is justified by the necessary implication
that the power to create political corporations for
purposes of local self-government carries with it the
power to confer on such local government agencies the
authority to tax.
 TAXATION

Exception to non-delegation of legislative powers

The general principle against the delegation of
legislative powers as a consequence of the principle of
separation of powers is subject to one well established
exception: legislative powers may be delegated to LGUs.
Included in this grant of legislative power is the grant of
local taxing power.
 TAXATION
Origin of revenue and tariff bills
Basis:
All appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of
local application, and private bills shall originate
exclusively in the House of Representatives, but the
Senate may propose or concur with amendments.
(Art VI, Sec. 24)
 TAXATION
What is required to originate in the House of Representatives is not the
law but the revenue bill which must “originate exclusively” in the lower
house.
The bill may undergo such extensive changes that the result may be a
rewriting of the whole.
The Senate may not only concur with amendments but also propose
amendments.
To deny the Senate's power not only to "concur with amendments" but
also to "propose amendments" would be to violate the coequality of
legislative power of the two houses of Congress and in fact make the
House superior to the Senate.
 TAXATION
No appropriation or use of public money for religious purposes
Basis:
No public money or property shall be appropriated, applied, paid or
employed directly or indirectly for the use, benefit or support of any
sect, church, denomination, sectarian institution, or system of
religion or of any priest, preacher, minister, or other religious
teacher or dignitary as such EXCEPT when such priest, preacher,
minister or dignitary is assigned to the armed forces or to any penal
This is in consonance with the inviolable
institution or government orphanage or leprosarium.
principle
of separation of the Church and State.
 TAXATION
Double taxation
It means taxing the same property twice when it should be taxed
only once; that is, “taxing the same person twice by the same
jurisdiction for the same thing.”
It is obnoxious when the taxpayer is taxed twice, when it should be
but once.
Otherwise described as “direct duplicate taxation,” the two taxes
must be imposed on the same subject matter, for the same purpose,
by the same taxing authority, within the same jurisdiction, during
the same taxing period; and the taxes must be of the same kind or
character.
 TAXATION

Tax treaties
In negotiating tax treaties, the underlying
rationale for reducing the tax rate is that the
Philippines will give up a part of the tax in the
expectation that the tax given up for this
particular investment is not taxed by the other
country.
 TAXATION
In order to eliminate double taxation, a tax treaty resorts
to several methods.
 First, it sets out the respective rights to tax of the state
of source or situs and of the state off residence with
regard to certain classes of income or capital.
 Second, whenever the state of source is given a full or
limited right to tax together with the state of residence,
the treaties make it incumbent upon the state of
residence to allow relief in order to avoid double
taxation.
 TAXATION
Two tax laws or ordinances constitute Double Taxation
when they tax: (PAPS-JK)
1.For the same Purpose;
2.By the same taxing Authority;
3.For the same taxing Periods;
4.On the same Subject matter;
5.Within the same taxing Jurisdiction; and
6.Of the same Kind or character.
 TAXATION
Tax exemptions may either be
1.Constitutional; or
NOTE: Requisites for Constitutional exemption: Actual, Direct
and Exclusive Use by the following:
a. Educational;
b.charitable institutions; and
c. Religious organizations.
2. Statutory.
NOTE: It has to be passed by majority of all the members of
the Congress.
 TAXATION

Revocability of tax exemptions

1.Exemption is granted gratuitously –
revocable; and
2.Exemption is granted for valuable
consideration (non-impairment of contracts)
irrevocable.
 TAXATION

Construction of tax laws

In case of doubt, tax statutes are to be construed
strictly against the Government and liberally in
favor of the taxpayer, for taxes, being burdens,
are not to be presumed beyond what the
applicable statute expressly and clearly declares.
 TAXATION

Construction of laws granting tax exemptions

It must be strictly construed against the taxpayer,
because the law frowns on exemption from
taxation; hence, an exempting provision should be
construed strictissimi juris.
 TAXATION
Power to destroy
The power to tax includes the power to destroy only if it is used as a
valid implement of the police power in discouraging and in effect,
ultimately prohibiting certain things or enterprises inimical to public
welfare.
But where the power to tax is used solely for the purpose of raising
revenues, the modern view is that it cannot be allowed to confiscate or
destroy.
If this is sought to be done, the tax may be successfully attacked as an
inordinate and unconstitutional exercise of the discretion that is usually
vested exclusively in the legislature in ascertaining the amount of tax.
 TAXATION

Question:
Can police power and taxation co-exist in one act of the government?
Answer:
YES. Taxation is no longer envisioned as a measure merely to raise
revenue to support the existence of the government.
Taxes may be levied with a regulatory purpose to provide a means for
the rehabilitation and stabilization of a threatened industry which is
affected with public interest as to be within the police power of the state
(Caltex Philippines, Inc. v. Commission on Audit, 208 SCRA 726).
Thus, the power of taxation may be exercised to implement police
power
 TAXATION
Tax License Fee
Levied in exercise of the taxing power. Imposed in the exercise of the police
power of the state.
The purpose of the tax is to generate License fees are imposed for regulatory
revenues. purposes which means that it must only
be of sufficient amount to include
expenses in issuing a license, cost of
necessary inspection or police
surveillance, etc.
Its primary purpose is to generate Regulation is the primary purpose.
revenue, and regulation is merely The fact that incidental revenue is also
incidental. obtained does not make the imposition a
tax.
 TAXATION

NOTE:
Ordinarily, license fees are in the nature of the
exercise of police power because they are in the
form of regulation by the State and considered as a
manner of paying off administration costs.
However, if the license fee is higher than the cost
of regulating, then it becomes a form of taxation.
Question: TAXATION
Can taxes be subject to off-setting or
compensation?
Answer:
NO. Taxes cannot be subject to compensation for
the simple reason that the government and the
taxpayer are not creditors and debtors of each
other.
There is a material distinction between a tax and
debt.
 TAXATION

Debts are due to the Government in its corporate

capacity, while taxes are due to the Government
in its sovereign capacity.
It must be noted that a distinguishing feature of
tax is that it is compulsory rather than a matter of
bargain.
Hence, a tax does not depend upon the consent
of the taxpayer.