This document outlines the key principles of taxation. It defines taxation as the power of the sovereign to impose burdens on subjects within its jurisdiction to raise revenue for government purposes. Taxes are enforced proportional contributions levied by lawmaking bodies based on ability to pay. The document discusses the essential elements of a tax, purposes of taxation including revenue and regulation, and limitations such as the requirement for a public purpose. It also covers the nature, theory, and bases of taxation including the life-blood necessity theory and benefit received principle. Key differences between taxes and related concepts like duties, fees, penalties, and debts are explained. Finally, the document lists the three basic principles of a sound taxation system: fiscal adequacy, equality or justice
2. TAXATION-
Is the inherent power of the sovereign, exercised
through the legislature, to impose burdens upon
subjects and objects within its jurisdiction for the
purpose of raising revenues to carry out the legitimate
objects of government.
the action, process, or system of taxing people
or things
TAXES-
are the enforced proportional contributions
from persons and property levied by the law-making
body of the state by virtue of its sovereignty for the
support of the government and all public needs.
3. Essential elements of a tax
1. It is enforced contributions which signifies that it
is compulsory on the part of the government and an
obligations of the citizen.
2. is generally payable in money.
3. It is proportionate in character which means it is
largely based on the ability to pay principle.
4. It is levied on persons, property, or the exercise of
a right or privilege.
4. 5. It is levied by the state which has jurisdiction over the
subjects or objects of taxation.
6. It is levied by the law-making body of the state which is
deemed to be the direct representatives of the taxpayers
themselves, the people.
7. It is levied for public purpose or purposes which takes the
form of benefit for the greater majority.
5. Purposes of taxation
1. Revenue or fiscal: the primary purpose of the taxation on the part of
the government is to provide funds or property with which to promote
the general welfare and the protection of its citizens and to enable it to
finance its multifarious activities without which the government cannot
function.
2. Non-revenue or regulatory: taxation may also be employed for
purposes of regulation or control. This takes the form of the following
measures, to wit;
a.) imposition or tariffs on imported goods to protect local industries
b.) the adoption of progressively higher tax rates to reduce
inequalities in wealth and income
c.) the increase or decrease of taxes prevent inflation or ward off
depression.
6. PUBLIC PURPOSE IN TAXATION
This is one of the inherent limitations of the power to
tax and is synonymous to “governmental purpose”, a tax must
always be imposed for a public purpose otherwise, it will be
declared as invalid. The term “public purpose” has no fixed
connotation.
7. It has been said that the best test of rightful taxation is the
proceeds tax must be used:
a)For the support of the government; or
b)Some of the recognized objects of government; or
c) To promote the welfare of the community.
8. Effects of incidental benefit to private interest
The purpose to be accomplished by taxation need not to be
exclusively public although private individuals are directly
benefited, the tax would still be valid provided such benefit is only
incidental. The test is not as to who receives the money, but the
character of the purpose for which it is expended; not the
immediate result of the expenditure, but rather the ultimate results.
Inherent limitations
1. Purpose must be public in nature
2. Prohibition against delegation of the taxing power
3. Exemption of government entities, agencies and
instrumentalities
4. International comity
5. Limitation of territorial jurisdiction
9. Nature of the power of taxation
1. It is inherent in sovereignty; hence, it may be exercised
although it is not expressly granted by the constitution.
2. It is legislative in character; hence, only the legislature can
impose taxes.
3. It is subject to constitutional and inherent limitations;
hence, it is not an absolute power that can be exercised by
the legislature anyway it pleases.
10. Theory and basis of taxation
It should be very well emphasized that the power of
taxation proceeds upon the theory that the existence of
government is a necessity; that it cannot continue without
means to pay its expenses; and that for these means , it has a
right to compel all its citizens and property within its limit to
contribute. The basis of taxation is found in the reciprocal
duties of protection and support between the state and
inhabitants. In return for his contribution, the taxpayer receive
benefits and protection from the government. This is so-called
“benefit received principle”
11. Life-blood necessity theory
The life blood theory of taxation provides that the existence of
government is a necessity; that the government cannot continue
without means to pay its expenses and that for these means it has a
right to compel its citizens and property within its limits to contribute
Benefit receive principle
This principle serves as the basis of taxation and is founded on the
reciprocal duties of protection and support between the state and its
inhabitants. Also called “symbiotic relation” between the state and its
citizens. In return for his contribution, the taxpayer receives the
general advantages and protection which the government affords the
taxpayer and his property. One is compensation or consideration for
the other; protection or support and support for protection. However,
it does not means that only those who are able to and do pay taxes can
enjoy the privileges and protection given to a citizen by the government
12. Tariff/duties
Customs duties or simply duties, are taxes imposed on goods
exported from or imported into a country. Customs duties are really
taxes but the latter term is broader in scope
License fee
License fee is legal compensation or reward of an officer for specific
service while a tax is an enforced contribution from person or
property by the law-making body by virtue of its sovereignty and
for the support of the government and all public needs. License fee
is imposed for regulation, while tax is levied for revenue
13. Toll vs. tax
• Toll is a sum of money for the use of something, it is the
consideration which is paid for the use of a road, bridge, or
the like, of a public nature. Taxes, on the other hand, are
enforced proportional contributions from persons and
property levied by the state by virtue of its sovereignty for
the support of the government and all public needs.
• Toll is a demand of proprietorship; tax is a demand of
sovereignty.
• Toll is paid for the use of another’s property; tax is paid for
the support of government.
• Toll may be imposed by the government or by private
individuals or entities; tax may be imposed only by the
government
14. Tax vs. penalty
Penalty is an any sanction imposed as a punishment for
violation of law or for acts deemed injurious; taxes are
enforced proportional contributions from persons and
property levied by the state by virtue of its sovereignty for the
support of the government and all public needs. Penalty is a
designed to regulate conduct; taxes are generally intended to
regulate revenue.
15. Obligations to pay debt vs. obligations to pay tax
• A debt is generally based on contract, express or implied,
while a tax is based on laws.
• A debt is assignable, while tax cannot generally be assigned.
• A debt may be paid in kind, while tax is generally paid in
money.
• A debt may be the subject of set off or compensation, a tax
cannot.
• A person cannot be imprisoned for non-payment of tax.
Except poll tax
16. General rule
A tax delinquency cannot e extinguished by legal
compensation. This is because the government and the
delinquent are not mutually creditors and debtors. Neither is a
tax obligation an ordinary debt. Moreover, the collection of a
tax cannot await the result of a lawsuit against the government.
Taxes are not in the nature of contracts but grow out of a duty
to, and are the positive acts of the government to the making
and enforcing of which the personal consent of the taxpayer is
not required.
[francia v. IAC, 162 SCRA 754 and republic v. Mambulao
lumber 4 SCRA 622]
17. Three basic principle of a sound system
A good taxation is grounded on the following;
1. Fiscal adequacy
it means that the sources of revenue should be sufficient to
meet the demands of public expenditure. (Chavez V. Ongpin,
186 SCRA 331)
2. Equality or theoretical justice
It means that the tax burden should be proportionate to the
taxpayer’s ability to pay. This is the so-called “ability to pay
principle”
3. Administrative feasibility
It means that the laws should be capable of convenient, just
and effective administration
