Taxation I AY 2009 2010 First Semester Atty. Deborah S.

. Acosta Textbook: Law of Basic Taxation in the Philippines (Revised Edition), Benjamin B. Aban I. General Principles Aban, pp. 1 -168 A. Cases: B. Commissioner of Internal Revenue v. Algue, Inc., G.R. No. L-28896, 17 February 1988 Nature of the Power of Taxation 1. 2. Attribute of sovereignty Legislative in character a. Scope of the legislative taxing power i. Authority to determine the nature, object, extent, coverage, apportionment of the tax, situs of the imposition, and method of collection ii. Authority to grant tax exemptions or condonations iii. Authority to specify or provide for the administrative as well as judicial remedies 3. Not delegated to executive or judicial department a. Exceptions i. Local governments (Sec. 5, Article X, Constitution) ii. When allowed by the Constitution (Sec. 28(2), Art. VI, Constitution) iii. When delegation merely relates to administrative implementation or implied from the policy and purpose of the Act 4. Subject to inherent and constitutional limitations Definition of Taxation

Cases: C. Mactan Cebu International Airport Authority v. Marcos, 261 SCRA 667 (1996) Planters Products, Inc. v. Fertiphil Corp., G.R. No. 166006, 14 March 2008 Maceda v. Macaraig, 197 SCRA 771 Petron v. Pililla, 198 SCRA 82 Pepsi-Cola Bottling Company of the Phil. v. Mun. of Tanauan, Leyte, 69 SCRA 460 FELS Energy, Inc. v. The Province of Batangas, G.R. No. 168557, 16 February 2007 Petron v. Tiangco, G.R. No. 158881, 16 April 2008 City Government of Quezon City v. Bayantel, Inc., G.R. No. 162015, 6 March 2006

Aspects of Taxation 1. 2. 3. Levy Assessment Collection

D.

Theory or Underlying Basis of Taxation 1. 2. Lifeblood Theory / Necessity Theory Benefits-Protection Theory

Cases: E. Commissioner of Internal Revenue v. Algue, supra. Phil. Guaranty Co., Inc. v. CIR, G.R. No. L-22074, 6 September 1965 FELS Energy, Inc. v. The Province of Batangas, supra.

Purposes and Objectives of Taxation 1. 2. 3. 4. 5. 6. Revenue Regulatory / Sumptuary Promotion of General Welfare Reduction of Social Inequality Encouragement of Economic Growth Protectionism

Cases: Southern Cross Cement Corp. v. Cement Manufacturers Association of the Phil., et al., G.R. No. 158540, 3 August 2005 Caltex Phils. v. COA, G.R. No. 92585, 8 May 1992

 F.

Gerochi v. DOE, G.R. No. 159796, 17 July 2007

Taxation Distinguished from Police Power and Eminent Domain 1. 2. Taxation v. Police Power Taxation v. Eminent Domain

Cases: G. Commissioner of Internal Revenue v. Central Luzon Drug Corp., G.R. No. 159647, 15 April 2005 Lutz v. Araneta, 98 Phil 148 Planters Products v. Fertiphil, Inc., supra. Gerochi v. DOE, supra.

Basic Principles of a Sound Tax System 1. 2. 3. Fiscal Adequacy Theoretical Justice Administrative Feasibility

Cases: H. Chavez v. Ongpin, G.R. No. 76778, 6 June 1990 Tolentino v. Secretary of Finance, G.R. No. 115455, 25 August 1994

Taxes 1. 2. Definition Attributes or characteristics a. b. c. d. e. f. g. Cases: Borja v. Gella, 8 SCRA 602 Vera v. Fernandez, 89 SCRA 199 Republic v. Patanao, 20 SCRA 712 Forced charge, imposition or contribution Assessed in accordance with some reasonable rule of apportionment (Sec. 28(a), Art. VI, Constitution) Pecuniary burden payable in money Imposed by the State on persons, property or services or excises within its jurisdiction (Principle of Territoriality) Levied by the legislative body of the State Levied for a public purpose Personal to the taxpayer

 3.

Sunio v. NLRC, 127 SCRA 390 Tan Tiong Bio v. CIR, G.R. No. L-15778, 23 April 1962 Distinguished from other impositions a. Tax v. debt i. ii. b. c. d. e. Set-off or compensation Effect of non-payment

Tax v. toll Tax v. license fee Tax v. special assessment Tax v. penalty

Cases: 4. Francia v. IAC, G.R. No. 76749, 8 June 1988 Terminal Facilities and Services Corp v. Philippine Ports Authority, 378 SCRA 82 (2002) Cuunjieng v. Patstone, 42 Phil. 818 Philippine Airlines, Inc. v. Edu, G.R. No. L-41383, 15 August 1988 Apostolic Prefect of the Mountain Province v. City Treasurer of Baguio, 71 Phil 547 Esso Standard Eastern, Inc. v. CIR, G.R. Nos. L-28508-09, 7 July 1989 Caltex Phils. v. COA, supra. Domingo v. Garlitos, 8 SCRA 443 Philex Mining Corp v. CIR, G.R. No. 125704, 28 August 1998 Classification a. b. c. d. e. f. g. h. i. j. k. l. m. n. o. Cases: Personal tax Property tax Direct tax Indirect tax Excise tax General tax Special tax Specific tax Ad valorem tax Customs duties National tax Local tax Progressive tax Regressive tax Proportional tax

 I.

Silkair (Singapore) PTE, Ltd. v. CIR, G.R. No. 173594, 6 February 2008 Abakada Guro Party List v. Ermita, G.R. No. 168056, 1 September 2005 Commissioner of Internal Revenue v. PLDT, G.R. No. 140230, 15 December 2005

Limitations on the Power of Taxation 1. General Rule: Power to tax is unlimited Power to tax includes the power to destroy. Power to tax is not the power to destroy while this court sits. Cases: 2. Tio v. Videogram Regulatory Board, et al., 151 SCRA 213 Commissioner of Internal Revenue v. Tokyo Shipping Co. Ltd., 244 SCRA 332 Inherent Limitations 1. 2. 3. 4. 5. Cases: 3. Planters Products, Inc. v. Fertiphil Corp., supra. CIR v. Fortune Tobacco Corp., G.R. Nos. 167274-75, 21 July 2008 Commissioner v. British Overseas Airways Corporation, 149 SCRA 395 Santos & Co. v. Municipality of Meycauayan, et al., 94 Phil 1047 Constitutional Limitations a. b. c. d. e. f. g. h. i. j. Sec. 1(a), Art. III, Constitution Sec. 1(b), Art. III, Constitution Sec. 28(1), Art. VI, Constitution Sec. 10, Art. III, Constitution Sec. 5, Art. III, Constitution Sec. 4, Art. III, Constitution Sec. 28(3), Art. III, Constitution Sec. 24, Art. VI, Constitution Sec. 28(4), Art. VI, Constitution Sec. 26(1), Art. IV, Constitution They levy must be for a public purpose Non-delegation of the legislative power to tax Exemption from taxation of government entities International comity Territorial jurisdiction

k. Cases: J. Cases: K.

Sec. 20, Art. III, Constitution

J.B.L. Reyes v. Almanzor, G.R. Nos. 49839046, 26 April 1991 CIR v. Lingayen Gulf Electric Power Co., Inc., H.R. No. L-23771, 4 August 1988 Philippine Press Institute, et al. v. Chato, G.R. No. 115754, 25 August 1994 Lung Center of the Philippines v. Quezon City, 433 SCRA 119 (2004) Tolentino v. Secretary of Finance, supra. Tolentino v. Secretary of Finance, G.R. No. 115455, 30 October 1995 John Hay Peoples Alternative Coalition, et al. v. Lim, G.R. No. 119775, 24 October 2003 Philippine Airlines v. Secretary of Finance, G.R. No. 115873, 25 August 1994 Commissioner v. Court of Appeals, G.R. No. 119761, 30 August 1996 British American Tobacco v. Camacho, G.R. No. 163583, 20 August 2008 People of the Philippines v. Sandiganbayan, G.R. No. 152532, 16 August 2005

Taxpayers Suit

Jumamil v. Cafe, et al., G.R. No. 144570, 21 September 2005 David, et al. v. Macapagal-Arroyo, G.R. No. 171396, 3 May 2006 Double Taxation A. B. Definition / Principle Kinds 1. 2. C. Direct duplicate taxation Indirect duplicate taxation

Methods of Avoiding Occurrence of Double Taxation 1. 2. Allowance of reciprocal exemption either by law or by treaty; Allowance of tax credit for foreign taxes paid; See Sec. 34(3) and (4), Tax Code Sec. 86(E), Tax Code

3. 4. Cases: K.

Allowance of deduction of foreign taxes paid; and Reduction of the Philippine tax rate.

Villanueva v. City of Iloilo, 26 SCRA 578 (1968) Commissioner v. Bank of Commerce, G.R. No. 149636, 8 June 2005 Commissioner v. Hawaiian-Philippine Co., 11 SCRA 256 Commissioner v. S.C. Johnson & Son, Inc., G.R. No. 127105, 25 June 1999 Commissioner v. Citytrust Investment Phils., Inc., G.R. No. 139786, 27 September 2006

Exemption from Taxation Sec. 28(4), Article VI, Constitution Sec. 4, Article X, Constitution Sec. 28(2), Article VI, Constitution Cases: Lung Center of the Phil. v. Quezon City, G.R. No. 144104, 29 June 2004 Compagnie Financiere Sucres Et Denrees v. CIR, G.R. No. 133834, 28 August 2006 CIR v. P.J. Kiener Co., Ltd., et al., G.R. No. L-24754, 18 July 1975 Maceda v. Macaraig, supra. Bibiano V. Banas, Jr. v. Court of Appeals, G.R. No. 102967, 10 February 2000 Surigao Consolidated Mining Co., Inc. v. Collector of Customs, 9 SCRA 728 PLDT v. City of Davao, G.R. No. 143867, 25 March 2003 City of Iloilo v. Smart Communications, Inc., G.R. No. 167260, 27 February 2009

L.

Tax Laws A. B. C. D. E. F. G. Nature Sources Construction Power of the Commissioner to Interpret Tax Laws (Sec.4, Tax Code) Prospective Application as a General Rule Publication Requirement Special Laws vs. General Laws

Cases: M. Cases: Commissioner v. Toda, Jr., G.R. No. 147188, 14 September 2004 International Exchange Bank v. Commissioner, G.R. No. 171266, 4 April 2007 Commissioner v. Acesite Hotel Corporation, G.R. No. L-147295, 16 February 2007 CIR v. Marubeni Corp., G.R. No. 137377, 18 December 2001 CIR v. Acosta, G.R. No. 154068, 3 August 2007 Misamis Oriental Association of Coco Traders, Inc. v. Dept of Finance Secretary, et al., G.R. No. 108524, 10 November 1994 Begosa v. Philippine Veterans Administration, G.R. No. L-25916, 30 April 1970 ABS-CBN Broadcasting Corporation v. Court of Tax Appeals and Commissioner, 108 SCRA 142 Dizon v. Court of Tax Appeals, G.R. No. 140944, 30 April 2008 Tax Evasion; Tax Avoidance