TAX REVIEWER GENERAL PRINCIPLES DEFINITION OF TAXATION Taxation is the inherent power of the so erei!n" exer#ise$ thro%!

h the &e!is&at%re" to i'pose (%r$ens %pon the s%()e#ts an$ o()e#ts within its )%ris$i#tion" for the p%rpose of raisin! re en%es to #arr* o%t the &e!iti'ate o()e#ts of the !o ern'ent+ TAXES Enfor#e$ proportiona& #ontri(%tions fro' properties an$ persons &e ie$ (* the State (* irt%e its so erei!nt* for the s%pport of the !o ern'ent an$ for p%(&i# nee$s+ ,ASIS OF TAXATION - GOVERN.ENTAL NECESSIT/ 0 The existen#e of the !o ern'ent $epen$s %pon its #apa#it* to perfor' its two 123 (asi# f%n#tions4 A++ to ser e the peop&e ,++ to prote#t the peop&e T5EOR/ OF TAXATION -RECIPROCAL D6TIES OF S6PPORT AND PROTECTION 73 S%pport on the part of the taxpa*ers 23 Prote#tion an$ (enefits on the part of the !o ern'ent ,ENEFITS RECEIVED PRINCIPLE 1CIR s+ ALG6E3 Despite the nat%ra& re&%#tan#e to s%rren$er part of ones har$ earne$ in#o'e to the taxin! a%thorit*" e er* person who is a(&e to '%st #ontri(%te his share in the r%nnin! of the !o ern'ent+ The !o ern'ent is expe#te$ to respon$ in the for' of tan!i(&e or intan!i(&e (enefits inten$e$ to i'pro e the &i es of the peop&e an$ enhan#e$ their 'ateria& an$ 'ora& a&%es+ In ret%rn for his #ontri(%tion" the taxpa*er re#ei es the !enera& a$ anta!es an$ prote#tion whi#h the !o ern'ent affor$s the taxpa*er an$ his propert*+ One is #o'pensation or #onsi$eration for the other+ Prote#tion for s%pport an$ s%pport for prote#tion+ 5owe er" it $oes not 'ean that on&* those who are a(&e to pa* taxes #an en)o* the pri i&e!es an$ prote#tion !i en to a #iti8en (* the !o ern'ent+ LOREN9O s+ POSADAS - The on&* (enefit to whi#h the taxpa*er is entit&e$ is that $eri e$ for' the en)o*'ent of the pri i&e!es of &i in! in an or!ani8e$ so#iet* esta(&ishe$ an$ safe!%ar$e$ (* the $e otion of taxes to p%(&i# p%rpose+ The !o ern'ent pro'ises nothin! to the person taxe$ (e*on$ what 'a*(e anti#ipate$ fro' an a$'inistration of the &aws for the !enera& !oo$+ - Taxes are essentia& to the existen#e of the !o ern'ent+ The o(&i!ation to pa* taxes rests not %pon the pri i&e!es en)o*e$ (* or the prote#tion affor$e$ to the #iti8en (* the !o ern'ent" (%t %pon the ne#essit* of 'one* for the s%pport of the State+ For this reason" no one is a&&owe$ to o()e#t to or resist pa*'ent of taxes so&e&* (e#a%se no persona& (enefit to hi' #an (e pointe$ o%t as arisin! fro' the tax+ ESSENTIAL ELE.ENTS OF A TAX It is an enfor#e$ #ontri(%tion It is !enera&&* pa*a(&e in 'one* It is proportionate in #hara#ter It is &e ie$ on persons" propert*" or the exer#ise of a ri!ht or pri i&e!e It is &e ie$ (* the State whi#h has )%ris$i#tion o er the s%()e#t or o()e#t of taxation It is &e ie$ (* the &aw:'a;in! (o$* of the State It is &e ie$ for p%(&i#s p%rpose or p%rposes

RE<6ISITES of a VALID TAX #o$e4 =P" 6" >" A" N? It sho%&$ (e for a p%(&i# p%rpose The r%&e of taxation sho%&$ (e %nifor' That either the person or propert* taxe$ (e within the )%ris$i#tion of the taxin! a%thorit* That the assess'ent an$ #o&&e#tion (e in #onsonan#e with the $%e pro#ess #&a%se The tax '%st not infrin!e on the inherent an$ #onstit%tiona& &i'itations of the power of taxation 0- Taxes are the &ife(&oo$ of the !o ern'ent an$ sho%&$ (e #o&&e#te$ witho%t %nne#essar* hin$ran#e+ ,%t their #o&&e#tion sho%&$ not (e tainte$ with ar(itrariness NAT6RE OF TAXATION Inherent in so erei!nt* Le!is&ati e in #hara#ter SCOPE OF TAXATION Co'prehensi e 6n&i'ite$ P&enar* S%pre'e TOLENTINO s+ SEC+ Of FINANCE - In the se&e#tion of the o()e#t or s%()e#t of taxation the #o%rts ha e no power to in@%ire into the wis$o'" o()e#ti it*" 'oti e" expe$ien#* or ne#essit* of s%#h tax &aw+ 1WO.EN3 P6RPOSES OF TAXATION PRI.AR/ To raise re en%e in or$er to s%pport the !o ern'ent SECONDAR/ 6se$ to re$%#e so#ia& ine@%a&it* 6ti&i8e$ to i'p&e'ent the po&i#e power of the State 6se$ to prote#t o%r &o#a& in$%stries a!ainst %nfair #o'petition 6ti&i8e$ (* the !o ern'ent to en#o%ra!e the !rowth of &o#a& in$%stries PAL s+ ED6 - It is possi(&e for an exa#tion to (e (oth a tax an$ a re!%&ation+ Li#ense fees an$ #har!es" &oo;e$ to as a so%r#e of re en%e as we&& as a 'eans re!%&ation+ The fees 'a* proper&* re!ar$e$ as taxes e en tho%!h the* a&so ser e as an instr%'ent of re!%&ation+ If the p%rpose is pri'ari&* re en%e" or if re en%e is at &east one of the rea& an$ s%(stantia& p%rposes" then the exa#tion is proper&* #a&&e$ a tax+ CALTEX s++ CIR - Taxation is no &on!er a 'eas%re 'ere&* to raise re en%e to s%pport the existen#e of the !o ern'ent+ Taxes 'a* (e &e ie$ with a re!%&ator* p%rpose to pro i$e 'eans for reha(i&itation an$ sta(i&i8ation of a threatene$ in$%str* whi#h is affe#te$ with p%(&i# interest as to (e within the po&i#e power of the State+ LIFE,LOOD DOCTRINE - Taxes are the &ife(&oo$ of the nation - Witho%t re en%e raise$ fro' taxation" the !o ern'ent wi&& not s%r i e" res%&tin! in $etri'ent to so#iet*+ Witho%t taxes" the !o ern'ent wo%&$ (e para&*8e$ for &a#; of 'oti e power to a#ti ate an$ operate it+ 1CIR s+ ALG6E3

- Taxes are the &ife(&oo$ of the !o ern'ent an$ there pro'pt an$ #ertain a ai&a(i&it* is an i'perio%s nee$+ - Taxes are the &ife(&oo$ of the nation thro%!h whi#h the a!en#ies of the !o ern'ent #ontin%e to operate an$ with whi#h the state effe#ts its f%n#tions for the (enefit of its #onstit%ents ILL6STRATIONS OF T5E LIFE,LOOD T5EOR/ Co&&e#tion of the taxes 'a* not (e en)oine$ (* in)%n#tion Taxes #o%&$ not (e the s%()e#t of #o'pensation or set off A a&i$ tax 'a* res%&t in $estr%#tion of the taxpa*erAs propert* Taxation is an %n&i'ite$ an$ p&enar* power POWER TO TAX AND POWER TO DESTRO/ 0 - The power to tax in#&%$es the power to $estro* if it is %se$ as an i'p&e'ent of the po&i#e power 1re!%&ator*3 of the State+ 5owe er" it $oes not in#&%$e the power to $estro* if it is %se$ so&e&* for the p%rpose of raisin! re en%e+ 1ROXAS s+ CTA3 NOTES4 - If the p%rpose of taxation is re!%&ator* in #hara#ter" taxation is %se$ to i'p&e'ent the po&i#e power of the state - If the power of taxation is %se$ to $estro* thin!s" (%sinesses" or enterprises an$ the p%rpose is to raise re en%e" the #o%rt wi&& #o'e in (e#a%se there wi&& (e io&ation of the inherent an$ #onstit%tiona& &i'itations an$ it wi&& (e $e#&are$ in a&i$+ NAT6RE OF T5E TAXING POWER Attri(%te of so erei!nt* an$ e'anates fro' ne#essit*" re&in@%ish'ent of whi#h is ne er pres%'e$ Le!is&ati e in #hara#ter" an$ S%()e#t to inherent an$ #onstit%tiona& &i'itations NECESSIT/ T5EOR/ - Existen#e of a !o ern'ent is a ne#essit* an$ #annot #ontin%e witho%t an* 'eans to pa* for expenses ,ENEFITS B PROTECTION T5EOR/ - Re#ipro#a& $%ties of prote#tion an$ s%pport (etween State an$ inha(itants+ Inha(itants pa* taxes an$ in ret%rn re#ei e (enefits an$ prote#tion fro' the State SCOPE OF LEGISLATIVE TAXING POWER The persons" propert* an$ ex#ises to (e taxe$" pro i$e$ it is within its )%ris$i#tion A'o%nt or rate of tax P%rposes for its &e *" pro i$e$ it (e for a p%(&i# p%rpose Cin$ of tax to (e #o&&e#te$ Apportion'ent of the tax Sit%s of taxation .etho$ of #o&&e#tion ASPECTS OF TAXATION LEV/ or I.POSITION ena#t'ent of tax &aws &e!is&ati e in #hara#ter

ASSESS.ENT #o&&e#tion a$'inistrati e in #hara#ter NOTES4 - It is inherent in the power to tax that the State is free to se&e#t the o()e#t of taxation - The power of the &e!is&at%re to i'pose tax in#&%$es the power what to tax who' to tax how '%#h to tax ,AGATSING s+ RA.IRE9 - What #annot (e $e&e!ate$ is the &e!is&ati e ena#t'ent of a tax 'eas%re (%t as re!ar$s to the a$'inistrati e i'p&e'entation of a tax &aw that #an (e $e&e!ate$+ - The #o&&e#tion 'a* (e entr%ste$ to a pri ate #orporation+ - The r%&e that the power of taxation #annot (e $e&e!ate$ $oes not app&* to the a$'inistrati e i'p&e'entation of a tax &aw - There is no io&ation (e#a%se what is $e&e!ate$ or entr%ste$ is the #o&&e#tion an$ not the ena#t'ent of s%#h &aws - The iss%an#e of re!%&ations or #ir#%&ars (* the ,IR or the Se#retar* of Finan#e sho%&$ not !o (e*on$ the s#ope of the tax 'eas%re ,ASIC PRINCIPLES OF A SO6ND TAX S/STE. T5EORETICAL >6STICE FISCAL ADE<6AC/ AD.INISTRATIVE FEASI,ILIT/ NOTES4 FISCAL ADE<6AC/ VIOLATION B VALID - So%r#es of re en%e sho%&$ (e s%ffi#ient to 'eet the $e'an$s of p%(&i# expen$it%re - Re en%es sho%&$ (e e&asti# or #apa(&e of expan$in! or #ontra#tin! ann%a&&* in response to ariations in p%(&i# expen$it%re -E&asti#it* 'a* (e o(taine$ witho%t #reatin! ann%a&&* an* new taxes or an* new tax 'a#hiner* (%t 'ere&* (* #han!es in the rates app&i#a(&e to existin! taxes - E en if a tax &aw io&ates the prin#ip&e of Fis#a& A$e@%a#* " in other wor$s" the pro#ee$s 'a* not (e s%ffi#ient to satisf* the nee$s of the !o ern'ent" sti&& the tax &aw is a&i$ AD.INISTRATIVE FEASI,ILIT/ VIOLATION B VALID - The tax &aw '%st (e #apa(&e of effe#ti e or effi#ient enfor#e'ent - Tax &aws sho%&$ (e #apa(&e of #on enient" )%st an$ effe#ti e a$'inistration - Tax &aws sho%&$ #&ose:%p the &oopho&es for tax e asion an$ $eter %ns#r%p%&o%s offi#ia&s fro' #o''ittin! fra%$ - There is no &aw that re@%ires #o'p&ian#e with this prin#ip&e" so e en if the tax &aw io&ates this prin#ip&eD s%#h tax &aw is a&i$+ T5EORETICAL >6STICE

VIOLATION B INVALID - This prin#ip&e 'an$ates that taxes '%st (e )%st" reasona(&e an$ fair Taxation sha&& (e %nifor' an$ e@%ita(&e - E@%ita(&e taxation has (een 'an$ate$ (* o%r #onstit%tion" as if taxes are %n)%st an$ %nreasona(&e then the* are not e@%ita(&e" th%s in a&i$+ - The tax (%r$en sho%&$ (e in proportion to the taxpa*ers a(i&it* to pa* 1A,ILIT/ TO PA/ PRINCIPLE3

DISTINCTIONS4 TAXATION s+ POLICE POWER s+ E.INENT DO.AIN As to p%rpose4 Taxation B for the s%pport of the !o ern'ent E'inent Do'ainE: for p%(&i# %se Po&i#e Power B to pro'ote !enera& we&fare" p%(&i# hea&th" p%(&i# 'ora&s" an$ p%(&i# safet*+ As to #o'pensation4 Taxation B Prote#tion an$ (enefits re#ei e$ fro' the !o ern'ent+ E'inent Do'ain B )%st #o'pensation" not to ex#ee$ the 'ar;et a&%e $e#&are$ (* the owner or a$'inistrator or an*one ha in! &e!a& interest in the propert*" or as $eter'ine$ (* the assessor" whi#he er is &ower+ Po&i#e Power B The 'aintenan#e of a hea&th* e#ono'i# stan$ar$ of so#iet*+ As to persons affe#te$4 Taxation an$ Po&i#e Power B operate %pon a #o''%nit* or a #&ass of in$i i$%a&s E'inent Do'ain B operates on the in$i i$%a& propert* owner+ As to a%thorit* whi#h exer#ises the power4 Taxation an$ Po&i#e Power B Exer#ise$ on&* (* the !o ern'ent or its po&iti#a& s%($i isions+ E'inent Do'ain B 'a* (e exer#ise$ (* p%(&i# ser i#es #orporation or p%(&i# %ti&ities if !rante$ (* &aw+ As to a'o%nt of i'position4 Taxation B Genera&&* no &i'it to the a'o%nt of tax that 'a* (e i'pose$+ Po&i#e Power B Li'ite$ to the #ost of re!%&ation E'inent Do'ain B There is no i'positionD rather" it is the owner of the propert* ta;en who is )%st pai$ #o'pensation+ As to the re&ationship to the Constit%tion4 Taxation an$ E'inent Do'ain B S%()e#t to #ertain #onstit%tiona& &i'itations" in#&%$in! the prohi(ition a!ainst i'pair'ent of the o(&i!ation of #ontra#ts+ Po&i#e Power B Re&ati e&* free fro' #onstit%tiona& &i'itations an$ s%perior to the non:i'pair'ent pro isions thereof+ TAX DISTING6IS5ED FRO. LICENSE FEE4 P6RPOSE4 Tax i'pose$ for re en%e W5ILE &i#ense fee for re!%&ation+ Tax for !enera& p%rposes W5ILE &i#ense fee for re!%&ator* p%rposes on&*+ ,ASIS4 Tax i'pose$ %n$er power of taxation W5ILE &i#ense fee %n$er po&i#e power+ A.O6NT4 In taxation" no &i'it as to a'o%nt W5ILE &i#ense fee &i'ite$ to #ost of the &i#ense an$ expenses of po&i#e s%r ei&&an#e an$ re!%&ation+

TI.E OF PA/.ENT4 Taxes nor'a&&* pai$ after #o''en#e'ent of (%siness W5ILE &i#ense fee (efore+ EFFECT OF PA/.ENT4 Fai&%re to pa* a tax $oes not 'a;e the (%siness i&&e!a& W5ILE fai&%re to pa* &i#ense fee 'a;es (%siness i&&e!a&+ S6RRENDER4 Taxes" (ein! &ife(&oo$ of the state" #annot (e s%rren$ere$ ex#ept for &awf%& #onsi$eration W5ILE a &i#ense fee 'a* (e s%rren$ere$ with or witho%t #onsi$eration+ I.PORTANCE OF DISTINCTION ,ETWEEN TAXES AND LICENSE FEES+ It is ne#essar* to $eter'ine whether a parti#%&ar i'position is a tax or a &i#ense fee" (e#a%se so'e &i'itations app&* on&* to one an$ not to the other+ F%rther'ore" exe'ption fro' taxes $oes not in#&%$e exe'ption fro' &i#ense fees

TAXES DISTING6IS5ED FRO. OT5ER I.POSITIONS4 to&& B a'o%nt #har!e$ for the #ost an$ 'aintenan#e of propert* %se$D #o'pro'ise pena&t* B a'o%nt #o&&e#te$ in &ie% of #ri'ina& prose#%tion in #ases of tax io&ationsD spe#ia& assess'ent B &e ie$ on&* on &an$ (ase$ who&&* on the (enefit a##r%in! thereon as a res%&t of i'pro e'ents of p%(&i# wor;s %n$erta;en (* !o ern'ent within the i#init*+ &i#ense fee B re!%&ator* i'position in the exer#ise of the po&i#e power of the StateD 'ar!in fee B exa#tion $esi!ne$ to sta(i&i8e the #%rren#* #%sto' $%ties an$ fees B $%ties #har!e$ %pon #o''o$ities on their (ein! i'porte$ into or exporte$ fro' a #o%ntr*D $e(t B a tax is not a $e(t (%t is an o(&i!ation i'pose$ (* &aw+ Spe#ia& assess'ent + tax A spe#ia& assess'ent tax is an enfor#e$ proportiona& #ontri(%tion fro' owners of &an$s espe#ia&&* (enefite$ (* p%(&i# i'pro e'ents A spe#ia& assess'ent is &e ie$ on&* on &an$+ A spe#ia& assess'ent is not a persona& &ia(i&it* of the person assesse$D it is &i'ite$ to the &an$+ A spe#ia& assess'ent is (ase$ who&&* on (enefits" not ne#essit*+ A spe#ia& assess'ent is ex#eptiona& (oth as to ti'e an$ p&a#eD a tax has !enera& app&i#ation+ Rep%(&i# + ,a#o&o$" 7F SCRA GH2 A spe#ia& assess'ent is a &e * on propert* whi#h $eri es so'e spe#ia& (enefit fro' the i'pro e'ent+ Its p%rpose is to finan#e s%#h i'pro e'ent+ It is not a tax 'eas%re inten$e$ to raise re en%es for the !o ern'ent+ The pro#ee$s thereof 'a* (e $e ote$ to the spe#ifi# p%rpose for whi#h the assess'ent was a%thori8e$" th%s a##r%in! on&* to the owners thereof who" after a&&" pa* the assess'ent+ So'e R%&es4 An exe'ption fro' taxation $oes not in#&%$e exe'ption fro' a spe#ia& treat'ent+ The power to tax #arries with it a power to &e * a spe#ia& assess'ent+

To&& + tax To&& is a s%' of 'one* for the %se of so'ethin!+ It is the #onsi$eration whi#h is pai$ for the %se of a roa$" (ri$!e" or the &i;e" of a p%(&i# nat%re+ Taxes" on the other han$" are enfor#e$ proportiona& #ontri(%tions fro' persons an$ propert* &e ie$ (* the State (* irt%e of its so erei!nt* for the s%pport of the !o ern'ent an$ a&& p%(&i# nee$s+ To&& is a $e'an$ of proprietorshipD tax is a $e'an$ of so erei!nt*+ To&& is pai$ for the %se$ of anotherAs propert*D tax is pai$ for the s%pport of !o ern'ent+ The a'o%nt pai$ as to&& $epen$s %pon the #ost of #onstr%#tion or 'aintenan#e of the p%(&i# i'pro e'ents %se$D whi&e there is no &i'it on the a'o%nt #o&&e#te$ as tax as &on! as it is not ex#essi e" %nreasona(&e" or #onfis#ator*+ To&& 'a* (e i'pose$ (* the !o ern'ent or (* pri ate in$i i$%a&s or entitiesD tax 'a* (e i'pose$ on&* (* the !o ern'ent+ Tax + pena&t* Pena&t* is an* san#tion i'pose$ as a p%nish'ent for io&ation of &aw or for a#ts $ee'e$ in)%rio%sD taxes are enfor#e$ proportiona& #ontri(%tions fro' persons an$ propert* &e ie$ (* the State (* irt%e of its so erei!nt* for the s%pport of the !o ern'ent an$ a&& p%(&i# nee$s+ Pena&t* is $esi!ne$ to re!%&ate #on$%#tD taxes are !enera&&* inten$e$ to !enerate re en%e+ Pena&t* 'a* (e i'pose$ (* the !o ern'ent or (* pri ate in$i i$%a&s or entitiesD taxes on&* (* the !o ern'ent+ O(&i!ation to pa* $e(t + o(&i!ation to pa* tax A $e(t is !enera&&* (ase$ on #ontra#t" express or i'p&ie$" whi&e a tax is (ase$ on &aws+ A $e(t is assi!na(&e" whi&e a tax #annot !enera&&* (e assi!ne$+ A $e(t 'a* (e pai$ in ;in$" whi&e a tax is !enera&&* pai$ in 'one*+ A $e(t 'a* (e the s%()e#t of set off or #o'pensation" a tax #annot+ A person #annot (e i'prisone$ for non:pa*'ent of tax" ex#ept po&& tax+ A $e(t is !o erne$ (* the or$inar* perio$s of pres#ription" whi&e a tax is !o erne$ (* the spe#ia& pres#ripti e perio$s pro i$e$ for in the NIRC+ A $e(t $raws interest when it is so stip%&ate$ or where there is $efa%&t" whi&e a tax $oes not $raw interest ex#ept on&* when $e&in@%ent+ Re@%isites of #o'pensation That ea#h one of the o(&i!or (e (o%n$ prin#ipa&&*" an$ that he (e at the sa'e ti'e a prin#ipa& #re$itor of the other+ That (oth $e(ts #onsist in a s%' of 'one*" or if the thin!s $%e are #ons%'a(&e" the* (e of the sa'e ;in$ an$ a&so of the sa'e @%a&it* if the &atter has (een state$+ That the two 123 $e(ts (e $%e+

That the* (e &i@%i$ate$ an$ $e'an$a(&e+ That o er neither of the' there (e an* retention or #ontro ers*" #o''en#e$ (* thir$ persons an$ #o''%ni#ate$ in $%e ti'e to the $e(tors+ R%&es re4 set off or #o'pensation of $e(ts Genera& r%&e4 A tax $e&in@%en#* #annot (e extin!%ishe$ (* &e!a& #o'pensation+ This is so (e#a%se the !o ern'ent an$ the tax $e&in@%ent are not '%t%a&&* #re$itors an$ $e(tors+ Neither is a tax o(&i!ation an or$inar* a#t+ .oreo er" the #o&&e#tion of a tax #annot await the res%&ts of a &aws%it a!ainst the !o ern'ent+ Fina&&*" taxes are not in the nat%re of #ontra#ts (%t !row o%t of the $%t* to" an$ are the positi e a#ts of the !o ern'ent to the 'a;in! an$ enfor#in! of whi#h the persona& #onsent of the taxpa*er is not re@%ire$+ 1Fran#ia + IAC" 7G2 SCRA FIJ an$ Rep%(&i# + .a'(%&ao L%'(er" J SCRA G223 Ex#eption4 SC a&&owe$ set off in the #ase of Do'in!o + Gar&itos =K SCRA JJH? re4 #&ai' for pa*'ent of %npai$ ser i#es of a !o ern'ent e'p&o*ee is:L: is the estate taxes $%e fro' his estate+ The fa#t that the #o%rt ha in! )%ris$i#tion of the estate ha$ fo%n$ that the #&ai' of the estate a!ainst the !o ern'ent has (een appropriate$ for the p%rpose (* a #orrespon$in! &aw shows that (oth the #&ai' of the !o ern'ent for inheritan#e taxes an$ the #&ai' of the intestate for ser i#es ren$ere$ ha e a&rea$* (e#o'e o er$%e an$ $e'an$a(&e as we&& as f%&&* &i@%i$ate$+ Co'pensation therefore ta;es p&a#e (* operation of &aw+

Phi&ex .inin! Corporation + Co''issioner" 2MJ SCRA GKF 17MMK3 Phi&ex .inin! Corporation was to set off its #&ai's for VAT inp%t #re$itNref%n$ for the ex#ise taxes $%e fro' it+ The S%pre'e Co%rt $isa&&owe$ s%#h set off or #o'pensation+ S%r e* of Phi&ippine Taxes Interna& Re en%e taxes i'pose$ %n$er the NIRC+ In#o'e tax Transfer taxes Estate tax DonorAs tax Per#enta!e taxes Va&%e A$$e$ Tax Other Per#enta!e Taxes Ex#ise taxes Do#%'entar* sta'p tax Lo#a&N .%ni#ipa& Taxes Tariff an$ C%sto's D%ties Taxes N Tax In#enti es %n$er spe#ia& &aws CLASSIFICATION OF TAXES AS TO S6,>ECT .ATTER OR O,>ECT Persona&" po&& or #apitation tax Tax of a fixe$ a'o%nt i'pose$ on persons resi$in! within a spe#ifie$ territor*" whether #iti8ens or not" witho%t re!ar$ to their propert* or the o##%pation or (%siness in whi#h the* 'a* (e en!a!e$" i+e+ #o''%nit* tax+ Propert* tax Tax i'pose$ on propert*" rea& or persona&" in proportion to its a&%e or in a##or$an#e with so'e other reasona(&e 'etho$ of apportion'ent+ Ex#ise tax A #har!e i'pose %pon the perfor'an#e of an a#t" the en)o*'ent of pri i&e!e" or the en!a!in! in an o##%pation+ AS TO P6RPOSE

Genera&Nfis#a& re en%e tax is that i'pose$ for the p%rpose of raisin! p%(&i# f%n$s for the ser i#e of the !o ern'ent+ A spe#ia& or re!%&ator* tax is i'pose$ pri'ari&* for the re!%&ation of %sef%& or non:%sef%& o##%pation or enterprises an$ se#on$ari&* on&* for the p%rpose of raisin! p%(&i# f%n$s+ AS TO W5O ,EARS T5E ,6RDEN Dire#t tax A $ire#t tax is $e'an$e$ fro' the person who a&so sho%&"$ers the (%r$en of the tax+ It is a tax whi#h the taxpa*er is $ire#t&* or pri'ari&* &ia(&e an$ whi#h he or she #annot shift to another+ In$ire#t tax An in$ire#t tax is $e'an$e$ fro' a person in the expe#tation an$ intention that he or she sha&& in$e'nif* hi'se&f or herse&f at the expense of another" fa&&in! fina&&* %pon the %&ti'ate p%r#haser or #ons%'er+ A tax whi#h the taxpa*er #an shift to another+ AS TO T5E SCOPE OF T5E TAX Nationa& tax A nationa& tax is i'pose$ (* the nationa& !o ern'ent+ Lo#a& tax A &o#a& tax is i'pose$ (* the '%ni#ipa& #orporations or &o#a& !o ern'ent %nits 1LG6s3+ AS TO T5E DETER.INATION OF A.O6NT Spe#ifi# tax A spe#ifi# tax is a tax of a fixe$ a'o%nt i'pose$ (* the hea$ or n%'(er or (* so'e other stan$ar$ of wei!ht or 'eas%re'ent+ It re@%ires no assess'ent other than the &istin! or #&assifi#ation of the o()e#ts to (e taxe$+ A$ a&ore' tax An a$ a&ore' tax is a fixe$ proportion of the a&%e of the propert* with respe#t to whi#h the tax is assesse$+ It re@%ires the inter ention of assessors or appraisers to esti'ate the a&%e of s%#h propert* (efore $%e fro' ea#h taxpa*er #an (e $eter'ine$+ AS TO GRAD6ATION OR RATE Proportiona& tax Tax (ase$ on a fixe$ per#enta!e of the a'o%nt of the propert* re#eipts or other (asis to (e taxe$+ Exa'p&e4 rea& estate tax+ Pro!ressi e or !ra$%ate$ tax Tax the rate of whi#h in#reases as the tax (ase or (ra#;et in#reases+ Di!ressi e tax rate4 pro!ressi e rate stops at a #ertain point+ Pro!ression ha&ts at a parti#%&ar sta!e+ Re!ressi e tax Tax the rate of whi#h $e#reases as the tax (ase or (ra#;et in#reases+ There is no s%#h tax in the Phi&ippines+ TAX S/STE.S Constit%tiona& 'an$ate The r%&e of taxation sha&& (e %nifor' an$ e@%ita(&e+ The Con!ress sha&& e o& e a pro!ressi e s*ste' of taxation+ =Se#tion 2K 173" Arti#&e VI" Constit%tion? Re!ressi it* is not a ne!ati e stan$ar$ for #o%rts to enfor#e+ What Con!ress is re@%ire$ (* the Constit%tion to $o is to Oe o& e a pro!ressi e s*ste' of taxation+P This is a $ire#ti e to Con!ress" )%st &i;e the $ire#ti e to it to !i e priorit* of the ena#t'ent of &aw for the enhan#e'ent of h%'an $i!nit*+ The pro isions are p%t in the Constit%tion as 'ora& in#enti es to &e!is&ation" not as )%$i#ia&&* enfor#ea(&e ri!hts+ 1To&entino + Se#retar* of Finan#e+3 Pro!ressi e s*ste' of taxation + re!ressi e s*ste' of taxation A pro!ressi e s*ste' of taxation 'eans that tax &aws sha&& p&a#e e'phasis on $ire#t taxes rather than on in$ire#t taxes" with a(i&it* to pa* as the prin#ipa& #riterion+ A re!ressi e s*ste' of taxation exists when there are 'ore in$ire#t taxes i'pose$ than $ire#t taxes+ No re!ressi e taxes in the Phi&ippine )%ris$i#tion CLASSIFICATION OF TAXES4 persona& tax B a&so ;nown as #apita&i8ation or po&& taxD propert* tax B assesse$ on propert* of a #ertain #&assD $ire#t tax B in#i$en#e an$ i'pa#t of taxation fa&&s on one person an$ #annot (e shifte$ to anotherD

in$ire#t tax B in#i$en#e an$ &ia(i&it* for the tax fa&&s on one person (%t the (%r$en thereof #an (e passe$ on to anotherD ex#ise tax B i'pose$ on the exer#ise of a pri i&e!eD !enera& taxes B taxes &e ie$ for or$inar* or !enera& p%rpose of the !o ern'entD spe#ia& tax B &e ie$ for a spe#ia& p%rposeD spe#ifi# taxes B i'pose$ on a spe#ifi# s%' (* the hea$ or n%'(er or (* so'e stan$ar$s of wei!ht or 'eas%re'entD a$ a&ore' tax B tax i'pose$ %pon the a&%e of the arti#&eD &o#a& taxes B taxes &e ie$ (* &o#a& !o ern'ent %nits p%rs%ant to a&i$&* $e&e!ate$ power to taxD pro!ressi e taxes B rate in#reases as the tax (ase in#reasesD an$ re!ressi e taxes B rate in#reases as tax (ase $e#reases+ GENERAL R6LE4 Taxes are persona& to the taxpa*er+ CorporationAs tax $e&in@%en#* #annot (e enfor#e$ on the sto#;ho&$er or transfer taxes on the estate (e assesse$ on the heirs+ EXCEPTIONS sto#;ho&$ers 'a* (e he&$ &ia(&e for %npai$ taxes of a $isso& e$ #orporation if the #orporate assets ha e passe$ into their han$sD an$ heirs 'a* (e he&$ &ia(&e for the transfer taxes on the estate" if prior to the pa*'ent of the sa'e" the properties of the $e#e$ent ha e (een $istri(%te$ to the heirs+ LI.ITATIONS ON T5E POWER OF TAXATION Inherent Li'itations It '%st (e i'pose$ for a p%(&i# p%rpose+ If $e&e!ate$ either to the Presi$ent or to a L+G+6+" it sho%&$ (e a&i$&* $e&e!ate$+ It is &i'ite$ to the territoria& )%ris$i#tion of the taxin! a%thorit*+ Go ern'ent entities are exe'pte$+ Internationa& #o'it* is re#o!ni8e$ i+e+ propert* of forei!n so erei!ns are not s%()e#t to tax+ Constit%tiona& &i'itations B In$ire#t B a3 D%e pro#ess #&a%se (3 E@%a& prote#tion #&a%se #3 Free$o' of the press $3 Re&i!io%s free$o' e3 Non:i'pair'ent #&a%se f3 Law:'a;in! pro#ess B 7+ One:s%()e#t B One:tit&e R%&e 2+ H rea$in!s on H separate $a*s R%&e ex#ept when there is a Certifi#ate of E'er!en#* H+ Distri(%tion of #opies H $a*s (efore the Hr$ rea$in!+ !3 Presi$entia& power to !rant reprie es" #o''%tations an$ par$ons" an$ re'it fines an$ forfeit%res after #on i#tion (* fina& )%$!'ent+ Dire#t B a3 Re en%e (i&& '%st ori!inate ex#&%si e&* in 5+R+ (%t the Senate 'a* propose with a'en$'ents+ (3 Non:i'prison'ent for non:pa*'ent of po&& tax+ #3 Taxation sha&& (e %nifor' an$ e@%ita(&e+ $3 Con!ress sha&& e o& e a pro!ressi e s*ste' of taxation+ e3 Tax exe'ption of #harita(&e instit%tions" #h%r#hes an$ persona!es or #on ents app%rtenant thereto" 'os@%es" non:profit #e'eteries" an$ a&& &an$s" (%i&$in!s an$ i'pro e'ents ADE 1a#t%a&&*" $ire#t&* " ex#&%si e&*3 %se$ for #harita(&e" re&i!io%s" an$ e$%#ationa& p%rposes+ f3 Tax exe'ption of a&& re en%es an$ assets %se$ ADE for e$%#ationa& p%rposes of B 7+ Non:profit non:sto#; e$%#ationa& instit%tions+ 2+ Proprietar* or #ooperati e e$%#ationa& instit%tions s%()e#t to &i'itations pro i$e$ (* &aw in#&%$in! B a3 restri#tion on $i i$en$s (3 pro isions for re:in est'ents+

!3 Tax exe'ption of !rants" en$ow'ents" $onations or #ontri(%tions ADE for e$%#ationa& p%rposes" s%()e#t to #on$itions pres#ri(e$ (* &aw+ h3 No tax exe'ption witho%t the #on#%rren#e of a 'a)orit* of a&& 'e'(ers of Con!ress+ i3 SC power to re iew )%$!'ents or or$ers of &ower #o%rts in a&& #ases in o& in! B Le!a&it* of an* tax+ I'post or to&&" Le!a&it* of an* pena&t* i'pose$ in re&ation thereto+ IN5ERENT LI.ITATIONS NOTES4 P6,LIC P6RPOSE B GOVERN.ENTAL P6RPOSE R6LE4 OThe Le!is&at%re is witho%t the power to appropriate re en%es for an*thin! (%t for p%(&i# p%rposes+P R6LE4 OP%(&i# 'one* #an on&* (e spent for a p%(&i# p%rpose+P P6,LIC P6RPOSE B A p%rpose affe#tin! the inha(itants of the State or taxin! $istri#t as a #o''%nit* an$ not 'ere&* as in$i i$%a&s - P%(&i# p%rpose in#&%$es not on&* $ire#t (enefits or a$ anta!e" it a&so in#&%$es in$ire#t (enefits or a$ anta!e TIO s+ VIDEOGRA. - It is not the i''e$iate res%&t (%t the %&ti'ate res%&t that $eter'ines" whether the p%rpose is p%(&i# or not - It is not the n%'(er of persons (enefite$ (%t it is the #hara#ter of the p%rpose that $eter'ines the p%(&i# #hara#ter of s%#h tax &aw - What is not a&&owe$ is that if it has no &in; to p%(&i# we&fare - P%(&i# p%rpose is $eter'ine$ (* the %se to whi#h the tax 'one* is $e ote$ - If it (enefits the #o''%nit* in !enera& then it is for a p%(&i# p%rpose no 'atter who #o&&e#ts it TEST If the p%(&i# a$ anta!e or (enefit is 'ere&* in#i$enta& in the pro'otion of a parti#%&ar enterprise" that wi&& ren$er the &aw INVALID If what is in#i$enta& is the pro'otion of a pri ate enterprise" the tax &aw is sti&& for a p%(&i# p%rpose1VALID3 - A tax &e ie$ for a pri ate" not p%(&i# p%rpose #onstit%tes ta;in! of propert* witho%t $%e pro#ess of &aw as it is (e*on$ the powers of the !o ern'ent to i'pose it+ - A&tho%!h pri ate in$i i$%a&s are $ire#t&* (enefite$" the tax wo%&$ sti&& (e a&i$" pro i$e$ s%#h (enefit is on&* in#i$enta& - If what is in#i$enta& is the pro'otion of a pri ate enterprise" as &on! as there is a &in; to the p%(&i# we&fare" the p%rpose is sti&& p%(&i# - The test is not as to who re#ei es the 'one*" (%t the #hara#ter of the p%rpose for whi#h it is expen$e$ - Not the i''e$iate res%&t of the expen$it%re" (%t rather the %&ti'ate - The test that '%st (e app&ie$ in $eter'inin! whether the p%rpose is p%(&i# or pri ate The #hara#ter of the $ire#t o()e#t The %&ti'ate res%&t not the i''e$iate res%&t The !enera& we&fare for p%(&i# !oo$ TEST OF RIG5TF6L TAXATION Pro#ee$s of a tax '%st (e %se$ for the s%pport of the !o ern'ent for an* of the re#o!ni8e$ o()e#ts of the !o ern'ent to pro'ote the we&fare of the #o''%nit* LEGISLATIVE PREROGATIVE R6LE4 It is Con!ress whi#h has the power to $eter'ine whether the p%rpose is p%(&i# or pri ate - /o% #an a&wa*s @%estion the a&i$it* of s%#h tax 'eas%re on the !ro%n$ that it is not for a p%(&i# p%rpose (efore the #o%rts+ ,%t on#e it is sett&e$ that it is for a p%(&i# p%rpose" *o% #an no &on!er in@%ire on s%#h tax 'eas%re TAXPA/ERS S6IT

a #ase where the a#t #o'p&aine$ of $ire#t&* in o& es the i&&e!a& $is(%rse'ent of p%(&i# f%n$s $eri e$ fro' taxation - #o%rts $is#retion to a&&ow - Taxpa*ers ha e s%ffi#ient interest of pre entin! the i&&e!a& expen$it%res of 'one* raise$ (* taxation 1NOT DONATIONS AND CONTRI,6TIONS3 - A taxpa*er is not re&ie e$ fro' the o(&i!ation of pa*in! a tax (e#a%se of his (e&ief that it is (ein! 'isappropriate$ (* #ertain offi#ia&s - A taxpa*er has no &e!a& stan$in! to @%estion exe#%ti e a#ts that $o not in o& e the %se of p%(&i# f%n$s+ 1GON9ALES s+ .ARCOS3 LO9ADA s+ CO.ELEC - It is on&* when an a#t #o'p&aine$ of whi#h 'a* in#&%$e a &e!is&ati e ena#t'ent of a stat%te" in o& es the i&&e!a& expen$it%re of p%(&i# 'one* that the so:#a&&e$ taxpa*ers s%it 'a* (e a&&owe$+ CALTEX s+ COA - Taxpa*ers 'a* (e &e ie$ with a re!%&ator* p%rpose to pro i$e 'eans for the reha(i&itation an$ sta(i&i8ation of a threatene$ in$%str* whi#h is affe#te$ with the p%(&i# interest as to (e within the po&i#e power of the State+ - A &aw i'posin! (%r$ens 'a* (e (oth a tax 'eas%re an$ an exer#ise of the po&i#e power in whi#h #ase the &i#ense fee 'a* ex#ee$ the ne#essar* expenses of po&i#e s%r ei&&an#e an$ re!%&ation+ RE<6ISITES FOR A TAXPA/ERS PETITION That 'one* is (ein! extra#te$ an$ spent in io&ation of spe#ifi# #onstit%tiona& prote#tions a!ainst a(%ses of &e!is&ati e power That p%(&i# 'one* is (ein! $ef&e#te$ to an* i'proper p%rpose That the petitioner see;s to restrain respon$ents fro' wastin! p%(&i# f%n$s thro%!h the enfor#e'ent of an in a&i$ or %n#onstit%tiona& &aw+ CILOS ,A/AN s+ G6INGONA - The S%pre'e Co%rt has $is#retion whether or not to entertain taxpa*ers s%it an$ #o%&$ (r%sh asi$e &a#; of &o#%s stan$i CONCEPTS RELATIVE TO P6,LIC P6RPOSE Ine@%a&ities res%&tin! fro' the sin!&in! o%t of one parti#%&ar #&ass for taxation or exe'ption infrin!e no #onstit%tiona& &i'itation It is inherent in the power to tax that the &e!is&at%re is free to se&e#t the s%()e#t of taxation An in$i i$%a& taxpa*er nee$ not $eri e $ire#t (enefits fro' the tax The para'o%nt #onsi$eration is the we&fare of the !reater portion of the pop%&ation P%(&i# p%rpose is #ontin%a&&* expan$in!+ Areas for'er&* &eft to pri ate initiati e now &oose their (o%n$aries an$ 'a* (e %n$erta;en (* the !o ern'ent" if it is to 'eet the in#reasin! so#ia& #ha&&en!es of the ti'es P%(&i# p%rpose is $eter'ine$ at the ti'e of ena#t'ent of the tax &aw an$ not at the ti'e of i'p&e'entation NOTES4 INTERNATIONAL CO.IT/ ,ase$ on tra$ition" pra#ti#e or #%sto' DOCTRINE OF INCORPORATION - The Phi&ippines a$opts the !enera&&* a##epte$ prin#ip&es of internationa& &aw as part of the &aw of the &an$ - If a tax &aw io&ates #ertain prin#ip&es of internationa& &aw" then it is not on&* in a&i$ (%t a&so %n#onstit%tiona& GRO6NDS FOR TAX EXE.PTION OF FOREIGN GOVERN.ENT PROPERT/ So erei!n e@%a&it* of States 6sa!e a'on! States I''%nit* fro' s%it of a State NOTES4 NON:DELEGATION OF T5E POWER TO TAX GENERAL R6LE4

The power of taxation is pe#%&iar&* an$ ex#&%si e&* &e!is&ati e" therefore" it 'a* not (e $e&e!ate$ EXCEPTIONS4 De&e!ation to the Presi$ent De&e!ation to &o#a& !o ern'ent %nits De&e!ation to a$'inistrati e %nits POWERS W5IC5 CANNOT ,E DELEGATED Deter'ination of the s%()e#ts to (e taxe$ P%rpose of the tax A'o%nt or rate of the tax .anner" 'eans an$ a!en#ies of #o&&e#tion Pres#ription of the ne#essar* r%&es with respe#t thereto DELEGATION TO T5E PRESIDENT - Con!ress 'a* a%thori8e" (* &aw" the Presi$ent to fix" within spe#ifie$ &i'its an$ s%()e#t to s%#h &i'itations an$ restri#tions as it 'a* i'pose Tariff rates I'port an$ export @%otas Tonna!e an$ wharfa!e $%es Other $%ties an$ i'port within the nationa& $e e&op'ent pro!ra' of the !o ern'ent - There '%st (e a &aw a%thori8in! the Presi$ent to fix tariff rates - The $e&e!ation of power '%st i'pose &i'itations an$ restri#tions an$ spe#if* the 'ini'%' as we&& as the 'axi'%' tariff rates+ FLEXI,LE TARIFF CLA6SE 1SEC+ JQ7 TCC3 In the interest of nationa& e#ono'*" !enera& we&fare an$Nor nationa& se#%rit*" the Presi$ent %pon the re#o''en$ation of the Nationa& E#ono'i# an$ De e&op'ent A%thorit* is e'powere$4 To in#rease" re$%#e or re'o e existin! prote#ti e rates of i'port $%t*" pro i$e$ that the in#rease sho%&$ not (e hi!her than 7QQR a$ a&ore' To esta(&ish i'port @%ota or to (an i'ports of an* #o''o$it* To i'pose a$$itiona& $%t* on a&& i'ports not ex#ee$in! 7QR a$ a&ore' DELEGATION TO LOCAL GOVERN.ENT 6NITS - Ea#h &o#a& !o ern'ent %nit has the power to #reate its own re en%e an$ to &e * taxes" fees an$ #har!es s%()e#t to s%#h !%i$e&ines an$ &i'itations as the Con!ress 'a* pro i$e 1ART X Se# I3 - Lo#a& !o ern'ent %nits ha e no power to f%rther $e&e!ate sai$ #onstit%tiona& !rant to raise re en%e" (e#a%se what is $e&e!ate$ is not the ena#t'ent or the i'position of a tax" it is the a$'inistrati e i'p&e'entation ,ASCO s+ PAGCOR - The power of &o#a& !o ern'ent %nits to i'pose taxes an$ fees is a&wa*s s%()e#t to the &i'itations whi#h Con!ress 'a* pro i$e" the for'er ha in! no inherent power to tax+ - .%ni#ipa& #orporations are 'ere #reat%res of Con!ress whi#h has the power to #reate an$ a(o&ish '%ni#ipa& #orporations+ Con!ress therefore has the power to #ontro& o er &o#a& !o ern'ent %nits+ If Con!ress #an !rant to a '%ni#ipa& #orporation the power to tax #ertain 'atters" it #an a&so pro i$e for exe'ptions or e en ta;e (a#; the power DELEGATION TO AD.INISTRATIVE AGENCIES - For the $e&e!ation to (e #onstit%tiona&&* a&i$" the &aw '%st (e #o'p&ete in itse&f an$ '%st set forth s%ffi#ient stan$ar$s - Certain aspe#ts of the taxin! pro#ess that are not rea&&* &e!is&ati e in nat%re are este$ in a$'inistrati e a!en#ies+ In these #ases" there rea&&* is no $e&e!ation" to wit4 power to a&%e propert* power to assess an$ #o&&e#t taxes power to perfor' $etai&s of #o'p%tation" appraise'ent or a$)%st'ents+ NOTES4 EXE.PTION OF GOVERN.ENT AGENCIES

A!en#ies perfor'in! !o ern'enta& f%n#tions - TAX EXE.PT A!en#ies perfor'in! proprietar* f%n#tions - S6,>ECT TO TAX 0 - The exe'ption app&ies on&* to !o ern'enta& entities thro%!h whi#h the !o ern'ent i''e$iate&* an$ $ire#t&* exer#ises its so erei!n powers+ NDC s+ CE,6 CIT/ - Tax exe'ption of propert* owne$ (* the Rep%(&i# of the Phi&ippines refers to the propert* owne$ (* the !o ern'ent an$ its a!en#ies whi#h $o not ha e separate an$ $istin#t persona&it*+ - Those with ORIGINAL C5ARTERS 1in#orporate$ a!en#ies3 - Those #reate$ (* SPECIAL C5ARTER 1in#orporate$ a!en#ies3 are not #o ere$ (* the exe'ption GOVERN.ENT ENTITIES EXE.PT FRO. INCO.ING TAX GSIS SSS P5IC PCSO PAGCOR REASON FOR EXE.PTIONS Go ern'ent wi&& (e taxin! itse&f to raise 'one* for itse&f+ I''%nit* is ne#essar* in or$er that !o ern'enta& f%n#tions wi&& not (e i'pe$e$+ NOTES4 TERRITORIAL >6RISDICTION R6LES4 - Tax &aws #annot operate (e*on$ a StateAs territoria& &i'its - The !o ern'ent #annot tax a parti#%&ar o()e#t of taxation whi#h is not within its territoria& )%ris$i#tion+ - Propert* o%tsi$e ones )%ris$i#tion $oes not re#ei e an* prote#tion of the State - If a &aw is passe$ (* Con!ress" Con!ress '%st a&wa*s see to it that the o()e#t or s%()e#t of taxation is within the territoria& )%ris$i#tion of the taxin! a%thorit* SIT6S OF TAXATION P&a#e of taxation R6LE4 The State where the s%()e#t to (e taxe$ has a sit%s 'a* ri!htf%&&* &e * an$ #o&&e#t the tax - In $eter'inin! the sit%s of taxation" *o% ha e to #onsi$er the nat%re of the taxes Exa'p&e4 POLL TAX" CAPITATION TAX" CO..6NIT/ TAX - Resi$en#e of the taxpa*er REAL PROPERT/ TAX OR PROPERT/ TAX - Lo#ation of the propert* - We #an on&* i'pose propert* tax on the properties of a person whose resi$en#e is in the Phi&ippines+ EXCEPTIONS TO T5E TERRITORIALIT/ R6LE Where the tax &aws operate o%tsi$e territoria& )%ris$i#tion 73 TAXATION of resi$ent #iti8ens on their in#o'es $eri e$ fro' a(roa$ Where tax &aws $o not operate within the territoria& )%ris$i#tion of the State When exe'pte$ (* treat* o(&i!ations When exe'pte$ (* internationa& #o'it* SIT6S OF TAX ON REAL PROPERT/ : LEX REI SIT6S or where the propert* is &o#ate$ REASON4

The p&a#e where the rea& propert* is &o#ate$ !i es prote#tion to the rea& propert*" hen#e the propert* or its owner sho%&$ s%pport the !o ern'ent of that p&a#e SIT6S OF PROPERT/ TAX ON PERSONAL PROPERT/ : .O,ILIA SE<6NT6R PERSONA. S 'o a(&es fo&&ow the owner S 'o a(&es fo&&ow the $o'i#i&e of the owner R6LES4 TANGI,LE PERSONAL PROPERT/ : Where &o#ate$" %s%a&&* the owners $o'i#i&e INTANGI,LLE PERSONAL PROPERT/ G+ R+ B Do'i#i&e of the owner EXCEPTION4 The sit%s &o#ation not $o'i#i&e - Where the intan!i(&e persona& propert* has a#@%ire$ a (%siness sit%s in another )%ris$i#tion 0 - The prin#ip&e of O.o(i&ia Se@%nt%r Persona'P is on&* for p%rposes of #on enien#e+ It '%st *ie&$ to the a#t%a& sit%s of s%#h propert*+ 0 - Persona& intan!i(&e properties whi#h a#@%ires (%siness sit%s here in the Phi&ippines 73 Fran#hise whi#h is exer#ise$ within the Phi&ippines 23 Shares" o(&i!ations" (on$s iss%e$ (* a $o'esti# #orporation H3 Shares" o(&i!ations" (on$s iss%e$ (* a forei!n #orporation" KIR of its (%siness is #on$%#te$ in the Phi&ippines J3 Shares" o(&i!ations" (on$s iss%e$ (* a forei!n #orporation whi#h shares of sto#; or (on$s a#@%ire sit%s here I3 Ri!hts" interest in a partnership" (%siness or in$%str* esta(&ishe$ in the Phi&ippines - These intan!i(&e properties a#@%ire (%siness sit%s here in the Phi&ippines" *o% #annot app&* the prin#ip&e of O.o(i&ia Se@%nt%r Persona'P (e#a%se the properties ha e a#@%ire$ sit%s here+ SIT6S OF INCO.E TAX DO.ICILLAR/ T5EOR/ : The &o#ation where the in#o'e earner resi$es in the sit%s of taxation NATIONALIT/ T5EOR/ : The #o%ntr* where the in#o'e earner is a #iti8en is the sit%s of taxation SO6RCE R6LE : The #o%ntr* whi#h is the so%r#e of the in#o'e or where the a#ti it* that pro$%#e$ the in#o'e too; p&a#e is the sit%s of taxation+ SIT6S OF SALE OF PERSONAL PROPERT/ - The p&a#e where the sa&e is #ons%''ate$ an$ perfe#te$ SIT6S OF TAX ON INTEREST INCO.E - The resi$en#e of the (orrower who pa*s the interest irrespe#ti e of the p&a#e where the o(&i!ation was #ontra#te$ CIR s+ ,OAC - Re en%e $eri e$ (* an of:&ine internationa& #arrier witho%t an* f&i!ht fro' the Phi&ippines" fro' ti#;et sa&es thro%!h its &o#a& a!ent are s%()e#t to tax on !ross Phi&ippine (i&&in!s SIT6S OF EXCISE TAX - Where the transa#tion perfor'e$ 5OPEWELL s+ CO.+ OF C6STO.S - The power to &e * an ex#ise %pon the perfor'an#e of an a#t or the en!a!in! in an o##%pation $oes not $epen$ %pon the $o'i#i&e of the person s%()e#t to the exer#ise" nor %pon the ph*si#a& &o#ation of the propert* or in #onne#tion with the a#t or o##%pation taxe$" (%t $epen$s %pon the p&a#e on whi#h the a#t is perfor'e$ or o##%pation en!a!e$ in+ Th%s" the !a%!e of taxa(i&it* $oes not $epen$ on the &o#ation of the offi#e" (%t atta#hes %pon the p&a#e where the respe#ti e transa#tion is perfe#te$ an$ #ons%''ate$

CONSTIT6TIONAL LI.ITATIONS I+ D6E PROCESS - D%e pro#ess 'an$ates that no person sha&& (e $epri e$ of &ife" &i(ert*" or propert* witho%t $%e pro#ess of &aw+ PEPSI COLA s+ .6N+ OF TANA6AN : RE<6IRE.ENTS OF D6E PROCESS IN TAXATION 73 Tax '%st (e for a P%(&i# p%rpose 23 I'pose$ within the Territoria& )%ris$i#tion H3 No ar(itrariness or oppression in A3 assess'ent" an$ ,3 #o&&e#tion D6E PROCESS IN TAXATION DOES NOT RE<6IRE Deter'ination thro%!h )%$i#ia& in@%ir* of propert* s%()e#t to tax a'o%nt of tax to (e i'pose$ Noti#e of hearin! as to4 a'o%nt of the tax 'anner of apportion'ent RE<6ISITES OF D6E PROCESS OF LAW There '%st (e a a&i$ &aw Tax 'eas%re sho%&$ not (e %n#ons#iona(&e an$ %n)%st as to a'o%nt to #onfis#ation of propert* Tax stat%te '%st not (e ar(itrar* as to fin$ no s%pport in the #onstit%tion - When is $epri ation of &ife" &i(ert* or propert* $one in a##or$an#e with $%e pro#ess of &awT If $one %n$er a%thorit* of a &aw that is a&i$ or of the #onstit%tion itse&f After #o'p&ian#e with fair an$ reasona(&e 'etho$s of pro#e$%re pres#ri(e$ (* &aw+ - If properties are taxe$ on the (asis of an in a&i$ &aw" s%#h $epri ation is a io&ation of $%e pro#ess RE.ED/ B as; for ref%n$ - To )%stif* the n%&&ifi#ation of a tax &aw" there '%st (e a #&ear an$ %ne@%i o#a& (rea#h of the #onstit%tion - There '%st (e proof of ar(itrariness INSTANCES W5EN T5E TAX LAW .A/,E DECLARED AS 6NCONSTIT6TIONAL =C" O" N" 6? If it a'o%nts to #onfis#ation of propert* witho%t $%e pro#ess If the s%()e#t of taxation is o%tsi$e of the )%ris$i#tion of the taxin! state The &aw 'a*(e $e#&are$ as %n#onstit%tiona& if it is i'pose$ not for a p%(&i# p%rpose If a tax &aw whi#h is app&ie$ retroa#ti e&*" i'poses %n)%st an$ oppressi e taxes+ 1 A tax &aw whi#h $enies a taxpa*er a fair opport%nit* to assert his s%(stantia& ri!hts (efore a #o'petent tri(%na& is in a&i$ 1 A taxpa*er '%st not (e $epri e$ of his propert* for non:pa*'ent of taxes witho%t noti#e of &ia(i&it* sa&e of propert* at p%(&i# a%#tion 1 The a&i$it* of stat%te 'a*(e #onteste$ on&* (* one who wi&& s%stain a $ire#t in)%r* in #onse@%en#e of its enfor#e'ent 1 A io&ation of the inherent &i'itations on taxation wo%&$ #ontra ene the #onstit%tiona& in)%n#tions a!ainst $epri ation of propert* witho%t $%e pro#ess of &aw 1 There '%st (e proof of ar(itrariness" otherwise app&* the pres%'ption of #onstit%tiona&it* 1 D%e pro#ess re@%ires hearin! (efore a$option of &e!is&ati e r%&es (* a$'inistrati e (o$ies of interpretati e r%&in!s+ 1.isa'is s+ DFA3 1 Co'p&ian#e with stri#t pro#e$%ra& re@%ire'ents '%st (e fo&&owe$ effe#ti e&* to a oi$ a #o&&ision #o%rse (etween the states power to tax an$ the in$i i$%a& re#o!ni8e$ ri!hts 1CIR s+ A&!%e3 1 The $%e pro#ess #&a%se 'a* #orre#t&* (e in o;e$ on&* when there is a #&ear #ontra ention of inherent or #onstit%tiona& &i'itations in the exer#ise of tax power+ 1Tan s+ $e& Rosario3

1 S6,STATNTIVE D6E PROCESS re@%ires that a tax stat%te '%st (e within the #onstit%tiona& a%thorit* of Con!ress to pass an$ that it (e reasona(&e" fair an$ )%st 1 PROCED6RAL D6E PROCESS re@%ires noti#e an$ hearin! or at &east an opport%nit* to (e hear$ II+ E<6AL PROTECTION CLA6SE 1 A&& persons" a&& properties" a&& (%sinesses sho%&$ (e taxe$ at the sa'e rate 1 prohi(its #&ass &e!is&ation 1 prohi(its %n$%e $is#ri'ination E<6ALIT/ IN TAXATION 16NIFOR.IT/3 1 E@%a&it* in taxation re@%ires that a&& s%()e#ts or o()e#ts of taxation si'i&ar&* sit%ate$ sho%&$ (e treate$ a&i;e or p%t on e@%a& footin! (oth on the pri i&e!e #onferre$ an$ &ia(i&ities i'pose$ 1 A&& taxa(&e arti#&es of the sa'e #&ass sha&& (e taxe$ at the sa'e rate 1 The Do#trine $oes not re@%ire that persons or properties $ifferent in fa#t (e treate$ in &aw as tho%!h there were the sa'e+ What it prohi(its is #&ass &e!is&ation whi#h $is#ri'inates a!ainst so'e an$ fa ors others 1 As &on! as there are rationa& or reasona(&e !ro%n$s for $oin! so" Con!ress 'a* !ro%p persons or properties to (e taxe$ an$ it is s%ffi#ient if a&& 'e'(ers of the sa'e #&ass are s%()e#t to the sa'e rate an$ the tax is a$'inistere$ i'partia&&* %pon the'+ RE<6ISITES OF A VALID CLASSIFICATION 1S A G E 3 73 It '%st (e (ase$ on s%(stantia& $istin#tion 23 It '%st app&* not on&* to the present #on$ition" (%t a&so to f%t%re #on$itions H3 It '%st (e !er'ane to the p%rpose of the &aw J3 It '%st app&* e@%a&&* to a&& 'e'(ers of the sa'e #&ass S6,STANTIAL DISTINCTION 1 It '%st (e rea&" 'ateria& an$ not s%perfi#ia& $istin#tion 1 What is not a&&owe$ is ine@%a&it* res%&tin! fro' sin!&in! o%t of a parti#%&ar #&ass whi#h io&ates the re@%isites of a a&i$ #&assifi#ation 1 There 'a*(e ine@%a&it* (%t as &on! as it $oes not io&ate the re@%isites of a a&i$ #&assifi#ation that s%#h 'ere ine@%a&it* is not eno%!h to )%stif* the n%&&ifi#ation of a tax &aw or tax or$inan#e 1 Taxation is e@%ita(&e when its (%r$en fa&&s on those (etter a(&e to pa* 1A&tho%!h the e@%a& prote#tion #&a%se $oes not for(i$ #&assifi#ation" it is i'perati e that the s%(stantia& $ifferen#es ha in! a reasona(&e re&ation to the s%()e#t of the parti#%&ar &e!is&ation 1 Taxes are %nifor' an$ e@%a& when i'pose$ %pon a&& propert* of the sa'e #&ass or #hara#ter within the taxin! a%thorit* 1 Tax exe'ptions are not io&ati e of the e@%a& prote#tion #&a%se" as &on! as there is a&i$ #&assifi#ation+ TI6 s+ CA The Constit%tiona& ri!ht to e@%a& prote#tion of the &aw is not io&ate$ (* an exe#%ti e or$er" iss%e$ p%rs%ant to &aw" !rantin! tax an$ $%t* in#enti es on&* to (%siness within the Ose#%re$ areaP of the S%(i# Spe#ia& E#ono'i# 9oneP an$ $en*in! the' to those who &i e within the 8one (%t o%tsi$e s%#h Ofen#e$ inP territor*+ The Constit%tion $oes not re@%ire the a(so&%te e@%a&it* a'on! resi$ents+ It is eno%!h that a&& persons %n$er &i;e #ir#%'stan#es or #on$itions are !i en the sa'e pri i&e!es an$ re@%ire$ to fo&&ow the sa'e o(&i!ations+ In short" a #&assifi#ation (ase$ on a&i$ an$ reasona(&e stan$ar$s $oes not io&ate the e@%a& prote#tion #&a%se+ We fin$ rea& an$ s%(stantia& $istin#tions (etween the #ir#%'stan#es o(tainin! insi$e an$ those o%tsi$e the S%(i# Na a& ,ase" there(* )%stif*in! a a&i$ an$ reasona(&e #&assifi#ation+ TWO WA/S E<6AL PROTECTION CLA6SE CAN ,E VIOLATED 73 When #&assifi#ation is 'a$e where there sho%&$ (e none ex+ When the #&assifi#ation $oes not rest %pon s%(stantia& $istin#tions that 'a;e for rea& $ifferen#e 23 When no #&assifi#ation is 'a$e where a #&assifi#ation is #a&&e$ for ex+ When s%(stantia& $istin#tions exist (%t no #orrespon$in! #&assifi#ation is 'a$e on the (asis thereof OR.OC S6GAR CENTRAL s+ CIR

1 If the or$inan#e is inten$e$ to s%pp&* to a spe#ifi# taxpa*er an$ to no one e&se re!ar$&ess of whether or not other entities (e&on!in! to the sa'e #&ass are esta(&ishe$ in the f%t%re" it is a io&ation of the e@%a& prote#tion #&a%se" (%t if it is inten$e$ to app&* a&so to si'i&ar esta(&ish'ents whi#h 'a*(e esta(&ishe$ in the f%t%re" then the tax or$inan#e is a&i$ e en if in the 'eanti'e" it app&ies to on&* one entit* or taxpa*er for the si'p&e reason that there is so far on&* one 'e'(er of the #&ass s%()e#t of the tax 'eas%re 6NIFOR.IT/ IN TAXATION 1 The #on#ept of %nifor'it* in taxation i'p&ies that a&& taxa(&e arti#&es or properties of the sa'e #&ass sha&& (e taxe$ at the sa'e rate+ It re@%ires the %nifor' app&i#ation an$ operation" witho%t $is#ri'ination" of the tax in e er* p&a#e where the s%()e#t of the tax is fo%n$+ It $oes not" howe er" re@%ire a(so&%te i$entit* or e@%a&it* %n$er a&& #ir#%'stan#es" (%t s%()e#t to reasona(&e #&assifi#ation+ E<6IT/ IN TAXATION 1 The #on#ept of e@%it* in taxation re@%ires that the apportion'ent of the tax (%r$en (e 'ore or &ess" )%st in the &i!ht of the taxpa*erAs a(i&it* to sho%&$er to tax (%r$en an$ if warrante$" on the (asis of the (enefits re#ei e$ fro' the !o ern'ent+ Its #ornerstone is the taxpa*ers a(i&it* to pa*+ CRITERIA OF E<6AL PROTECTION 73 When the &aws operate %nifor'&* A3 on a&& persons ,3 %n$er si'i&ar #ir#%'stan#es 23 A&& persons are treate$ in the sa'e 'anner A3 The #on$itions not (ein! $ifferent ,3 ,oth in pri i&e!es #onferre$ an$ &ia(i&ities i'pose$ C3 Fa oritis' an$ preferen#e not a&&owe$ RE/ES s+ AL.A9OR 1 Taxation is e@%ita(&e when its (%r$en fa&&s on those (etter a(&e to pa* CAPATIRAN s+ TAN 1 It is inherent in the power to tax that the state (e free to se&e#t the s%()e#ts of taxation an$ it has (een repeate$&* he&$ that ine@%a&ities whi#h res%&t fro' a sin!&in! o%t of one parti#%&ar #&ass of taxation or exe'ption infrin!e no #onstit%tiona& &i'itation III+ FREEDO. OF T5E PRESS 1 The press is not exe'pt fro' taxation 1 The sa&e of 'a!a8ines or newspapers" 'a*(e the s%()e#t of taxation 1 What is not a&&owe$ is to i'pose tax on the exer#ise of an a#ti it* whi#h has a #onne#tion with free$o' of the press 1&i#ense fee3 1 If we i'pose tax on persons (efore the* #an $e&i er or (roa$#ast a parti#%&ar news or infor'ation" that is the one whi#h #annot (e taxe$+ TOLENTINO s+ SEC+ OF FINANCE 1 What is prohi(ite$ (* the #onstit%tiona& !%arantee of free press are &aws whi#h sin!&e o%t the press or tar!et a !ro%p (e&on!in! to the press for spe#ia& treat'ent or whi#h in an* wa* $is#ri'inates a!ainst the press on the (asis of the #ontent of the p%(&i#ation+ IV+ FREEDO. OF RELIGION 1 It is the a#ti it* whi#h #annot (e taxe$ 1 a#ti ities whi#h ha e #onne#tion with the exer#ise of re&i!ion A.ERICAN ,I,LE SOCIET/ s+ .ANILA 1 The pa*'ent of &i#ense fees for the $istri(%tion an$ sa&e of (i(&es s%ppresses the #onstit%tiona& ri!ht of free exer#ise of re&i!ion+ >I../ SWAGGART s+ ,OARD OF E<6ALI9ATION 1 The Free Exer#ise of Re&i!ion C&a%se $oes not prohi(it i'posin! a !enera&&* app&i#a(&e sa&es an$ %se tax on the sa&e of re&i!io%s 'ateria&s (* a re&i!io%s or!ani8ation+

1 The Sa&e of re&i!io%s arti#&es #an (e the s%()e#t of the VAT 1 What #annot (e taxe$ is the exer#ise of re&i!io%s worship or a#ti it* 1 The in#o'e of the priest $eri e$ fro' the exer#ise of re&i!io%s a#ti it* #an (e taxe$+ V+ NON:I.PAIR.ENT CLA6SE 1 The parties to the #ontra#t #annot exer#ise the power of taxation+ 1 The* #annot a!ree or stip%&ate that this parti#%&ar transa#tion 'a* (e exe'pt fro' tax: not a&&owe$ 1ex#ept if !o ern'ent3 OPOSA s+ FACTORAN 1 Po&i#e power pre ai&s o er the non:i'pair'ent #&a%se LA INS6LAR s+ .ANC56CA 1 A &awf%& tax on a new s%()e#t or an in#rease$ tax on an o&$ one" $oes not interfere with a #ontra#t or i'pairs its o(&i!ation+ 1 The #onstit%tiona& !%arantee of the non:i'pair'ent #&a%se #an on&* in o;e$ in the !rant of tax exe'ption+ R6LES4 73 If the exe'ption was !rante$ for a&%a(&e #onsi$eration an$ it is !rante$ on the (asis of a #ontra#t+ 1 #annot (e re o;e$ 23 If the exe'ption is !rante$ (* irt%e of a #ontra#t" wherein the !o ern'ent enters into a #ontra#t with a pri ate #orporation 1 #annot (e re o;e$ %ni&atera&&* (* the !o ern'ent H3 If the (asis of the tax exe'ption is a fran#hise !rante$ (* Con!ress an$ %n$er the fran#hise or the tax exe'ption is !i en to a parti#%&ar ho&$er or person 1 #an (e %ni&atera&&* re o;e$ (* the !o ern'ent 1Con!ress3 1 The non:i'pair'ent #&a%se app&ies on&* to #ontra#ts an$ not to a fran#hise+ 1 The non:i'pair'ent #&a%se app&ies to taxation (%t not to po&i#e power an$ e'inent $o'ain+ F%rther'ore" it app&ies on&* where one part* is the !o ern'ent an$ the other" a pri ate in$i i$%a&+ 1 As a r%&e" the o(&i!ation to pa* tax is (ase$ on &aw+ ,%t when" for instan#e" a taxpa*er enters into a #o'pro'ise with the ,IR" the o(&i!ation of the taxpa*er (e#o'es one (ase$ on #ontra#t PROVINCE OF .ISA.IS s+ CAGA/AN ELECTRIC 1 Fran#hises with 'a!i# wor$s" Osha&& (e in &ie% of a&& taxesP $es#ripti e of the pa*'ent of a fran#hise tax on their !ross earnin!s are exe'pt fro'4 a&& taxes the fran#hise tax %n$er the NIRC the fran#hise tax %n$er the &o#a& tax #o$e >6ARE9 s+ CA 1 As &on! as the #ontra#t affe#ts the p%(&i# we&fare one wa* or another so as to re@%ire the interferen#e of the state" then '%st the po&i#e power (e asserte$ an$ pre ai& o er the i'pair'ent #&a%se R6LES ON TAX A.NEST/ 1 Tax a'nest*" &i;e tax exe'ption" is ne er fa ore$ nor pres%'e$ in &aw an$ if !rante$ (* stat%te '%st (e #onstr%e$ stri#t&* a!ainst the taxpa*er" who '%st show #o'p&ian#e with the &aw+ 1The !o ern'ent is not estoppe$ fro' @%estionin! the tax &ia(i&it* e en if a'nest* tax pa*'ents were a&rea$* re#ei e$ REASON4 Erroneo%s app&i#ation an$ enfor#e'ent of the &aw (* p%(&i# offi#ers $o not (&o#; s%(se@%ent #orre#t app&i#ation of the stat%te+ The !o ern'ent is ne er estoppe$ (* 'ista;es or errors (* its a!ents+ PP s+ CASTAUEDA 1 Defense of tax a'nest*" &i;e a'nest*" is a persona& $efense REASON4 It re&ates to the #ir#%'stan#es of a parti#%&ar a##%se$ an$ not the #hara#ter of the a#ts #har!e$ in the infor'ation

REP6,LIC s+ IAC 1In #ase of $o%(t" tax a'nest* is to (e stri#t&* #onstr%e$ a!ainst the !o ern'ent REASON4 Taxes are not #onstr%e$" for taxes (ein! (%r$ens are not to (e pres%'e$ (e*on$ what the tax a'nest* express&* an$ #&ear&* $e#&ares VI+ LAW .ACING PROCESS A3 ONE S6,>ECT B ONE TITLE R6LE 1 E er* (i&& passe$ (* the Con!ress sha&& e'(ra#e on&* one s%()e#t whi#h sha&& (e expresse$ in the tit&e thereof 1Se#+ 2G 173 ART II3 ,3 T5REE READING R6LE 1 No (i&& passe$ (* either 5o%se sha&& (e#o'e a &aw %n&ess it has passe$ three rea$in!s on separate $a*s an$ printe$ #opies thereof in its fina& for' ha e (een $istri(%te$ to its 'e'(ers three $a*s (efore its passa!e" EXCEPT when the Presi$ent #ertifies to the ne#essit* of its i''e$iate ena#t'ent to 'eet a p%(&i# #a&a'it* or e'er!en#*+ 1Se#+ 2G 123 ART II3 P5IL+ >6DGES ASSOC+ s+ PRADO 1 A presi$entia& #ertifi#ation $ispenses with the re@%ire'ent not on&* of printin! (%t a&so that of rea$in! the (i&& on separate $a*s+ 1It is within the power of a ,i#a'era& Conferen#e Co''ittee to in#&%$e in its report an entire&* new pro ision that is not fo%n$ either in the 5o%se ,i&& or Senate ,i&&" so &on! as s%#h a'en$'ent is !er'ane to the s%()e#t of the (i&&s (efore the #o''ittee+ After a&& its report was not fina& (%t nee$e$ the appro a& of (oth ho%ses of Con!ress to (e#o'e a&i$ as an a#t of the &e!is&ati e $epart'ent+ ENROLLED ,ILL DOCTRINE G+R+ B An enro&&e$ #op* of a (i&& is #on#&%si e not on&* of its pro isions (%t a&so of its $%e ena#t'ent EXCEPTION4 In ASTORGA s+ VILLEGAS" the S%pre'e Co%rt Owent (ehin$P the enro&&e$ (i&& an$ #ons%&te$ the )o%rna& to $eter'ine whether #ertain pro isions of a state ha$ (een appro e$ (* the Senate Presi$entAs a$'ission of a 'ista;e an$ with$rawa& of his si!nat%re+ VII+ PARDONING POWER OF T5E PRESIDENT 1 The Presi$ent has the power to !rant reprie es" #o''%tations an$ par$ons an$ re'it fines an$ forfeit%res after #on i#tion (* fina& )%$!'ent+ 1Se#+ 7M" ART VII3 NAT6RE OF TAX A.NEST/ B A !enera& par$on or intentiona& o er&oo;in! (* the state of its a%thorit* to i'pose pena&ties on persons otherwise !%i&t* of e asion or io&ation of a re en%e or tax &aw a(so&%te for!i eness or wai er to #o&&e#t VIII+ NO I.PRISON.ENT FOR NON:PA/.ENT OF POLL TAX No person sha&& (e i'prisone$ for $e(t or non:pa*'ent of po&& tax 1Se#+ 2Q ART III3 1 The non:i'prison'ent r%&e app&ies to non:pa*'ent of po&& tax whi#h is p%nisha(&e on&* (* a s%r#har!e" (%t not to other io&ations &i;e fa&sifi#ation of #o''%nit* tax #ertifi#ate or non:pa*'ent of other taxes POLL TAX B tax of fixe$ a'o%nt i'pose$ %pon resi$ents within a spe#ifi# territor* re!ar$&ess of #iti8enship" (%siness or profession Ex+ Co''%nit* tax IX+ TAXATION S5ALL ,E 6NIFOR. AND E<6ITA,LE The r%&e of taxation sha&& (e %nifor' an$ e@%ita(&e+ The Con!ress sha&& e o& e a pro!ressi e s*ste' of taxation+ 1Se#+ 2K 173 ART VI3 6NIFOR.IT/ 'eans that a&& taxa(&e arti#&es ;in$s of propert* of the sa'e #&ass sha&& (e taxe$ at the sa'e rate - A tax is %nifor' when it operates with the sa'e for#e an$ effe#t in e er* p&a#e where the s%()e#t of it is fo%n$ E<6ITA,ILIT/ - Taxation is sai$ to (e e@%ita(&e when its (%r$en fa&&s on those (etter a(&e to pa*

X+ CONGRESS S5ALL EVOLVE A PROGRESSIVE S/STE. OF TAXATION PROGRESSIVIT/ - Taxation is pro!ressi e when its rate !oes %p $epen$in! on the so%r#es of the person affe#te$ S/TE.S OF TAXATION 73 PROPORTIONAL TAXATION where the tax in#reases or $e#reases in re&ation to the tax (ra#;et 23 PROGRESSIVE or GRAD6ATED S/STE. where the tax in#reases as the in#o'e of the taxpa*er !oes hi!her H3 REGRESSIVE S/STE. where the tax $e#reases as the in#o'e of the taxpa*er in#reases PROGRESSIVIT/ IS NOT REP6GNANT TO 6NIFOR.IT/ an$ E<6ALIT/ A3 6nifor'it* $oes not re@%ire the thin!s whi#h are not $ifferent (e treate$ in the sa'e 'anner ,3 Differentiation" whi#h is not ar(itrar* an$ #onfor's to the $i#tates of )%sti#e an$ e@%it* is a&&owe$+ Pro!ressi it* is one wa* of #&assifi#ation+ C3 The State has the inherent ri!ht to se&e#t s%()e#ts of taxation TOLENTINO s+ SEC+ OF FINANCE - RA FF7G 1EVAT3" $oes not io&ate the #onstit%tiona& 'an$ate that Con!ress sha&& Oe o& e a pro!ressi e s*ste' of taxationP - The Constit%tion $oes not rea&&* prohi(it the i'position of in$ire#t taxes" whi#h &i;e the VAT" are re!ressi e+ The #onstit%tiona& pro ision 'eans si'p&* that in$ire#t taxes sha&& (e 'ini'i8e$+ - The 'an$ate to Con!ress is not to pres#ri(e" (%t to e o& e" a pro!ressi e s*ste' of taxation - Resort to in$ire#t taxes sho%&$ (e 'ini'i8e$ (%t not to (e a oi$e$ entire&* (e#a%se it is $iffi#%&t" if not i'possi(&e to a oi$ the' (* i'posin! s%#h taxes a##or$in! to the taxpa*ers a(i&it* to pa*+ XI+ ORIGIN OF REVEN6E" TARIFF or TAX ,ILLS A&& appropriation" re en%e or tariff (i&&s" (i&&s a%thori8in! in#rease of the p%(&i# $e(t" (i&&s of &o#a& app&i#ation" an$ pri ate (i&&s sha&& ori!inate ex#&%si e&* in the 5o%se of Representati es" (%t the Senate 'a* propose or #on#%r with a'en$'ents+ 1Se#tion 2J" Arti#&e VI3 R6LE4 It is not the re en%e stat%te (%t the re en%e (i&& whi#h is re@%ire$ (* the #onstit%tion to ori!inate ex#&%si e&* in the 5o%se of Representati es REASON4 To insist that a re en%e stat%te an$ not on&* the (i&& whi#h initiate$ the &e!is&ati e pro#ess #%&'inatin! in the ena#t'ent of the &aw '%st s%(stantia&&* (e the sa'e as the 5o%se (i&& wo%&$ (e to $en* the SenateAs power not on&* to O#on#%r with a'en$'entsP (%t a&so to Opropose a'en$'ents+P It wo%&$ (e to io&ate the #o:e@%a&it* of &e!is&ati e power of the two ho%ses of Con!ress an$ in fa#t 'a;e the 5o%se s%perior to the Senate+ 1To&entino s+ Se#+ of Finan#e3 - The Constit%tion si'p&* re@%ires that there '%st (e that initiati e #o'in! fro' the 5o%se of Representati es re&ati e to appropriation" re en%e an$ tariff (i&&s+ -The Constit%tion $oes not a&so prohi(it the fi&in! in the Senate of a s%(stit%te (i&& in anti#ipation of its re#eipt of the (i&& fro' the 5o%se" as &on! as a#tion (* the Senate is withhe&$ %nti& re#eipt of sai$ (i&& 1To&entino s+ Se#+ of Finan#e3 XII+ PRESIDENTIAL VETO - OThe Presi$ent sha&& ha e the power to eto an* parti#%&ar ite' or ite's in an appropriation" re en%e or tariff (i&&" (%t the eto sha&& not affe#t the ite' or ite's to whi#h he $oes not o()e#tP 1Se#+ 2F 123" ART VI3 XIII+ TARIFF POWER OF T5E PRESIDENT OThe Con!ress 'a*" (* &aw" a%thori8in! the Presi$ent to fix within spe#ifi# &i'its" an$ s%()e#t to s%#h &i'itations an$ restri#tions as it 'a* i'pose" tariff rates" i'port an$ export @%otas" tonna!e an$ wharfa!e $%es" the other $%ties or i'ports within the fra'ewor; of the nationa& $e e&op'ent pro!ra' of the Go ern'entP 1Se#+ 2K 123" ART VI3 RE<6ISITES4

73 There '%st (e a &aw passe$ (* Con!ress a%thori8in! the Presi$ent to i'pose tariff rates an$ other fees+ 23 6n$er the &aw" there '%st (e &i'itations an$ restri#tions on the exer#ise of s%#h power H3 The taxes that 'a* (e i'pose$ (* the Presi$ent are &i'ite$ to4 Tariff rates I'port an$ export @%otas Tonna!e an$ wharfa!e $%es Other $%ties 1#%sto's $%ties3 The i'position of these tariff an$ $%ties '%st (e within the fra'ewor; of the Nationa& De e&op'ent pro!ra' of the !o ern'ent - Con!ress O'a* not passP a &aw a%thori8in! the Presi$ent to i'pose in#o'e tax" $onors tax" an$ other taxes whi#h are not in the nat%re of #%sto's $%ties+ - The Constit%tion a&&ows on&* the i'position (* the Presi$ent of these #%sto' $%ties XIV+ TAX EXE.PTION OF REAL PROPERT/ OCharita(&e instit%tions" #h%r#hes an$ persona!es or #on ents app%rtenant thereto" 'or!%es" non: profit #e'eteries an$ a&& &an$s" (%i&$in!s an$ i'pro e'ents" a#t%a&&* $ire#t&* an$ ex#&%si e&* %se$ for re&i!io%s" #harita(&e" or e$%#ationa& p%rposes sha&& (e exe'pt fro' taxation+P 1Se#+ 2K 1H3 ART VI3 APPLICATION4 - The exe'ption on&* #o ers propert* taxes an$ not other taxes TEST OF EXE.PTION4 - It is the 6SE of the propert* an$ not ownership of the propert* A,RA VALLE/ COLLEGE s+ A<6INO 17G2 SCRA 7QG3 - The exe'ption $oes not on&* exten$ to in$ispensa(&e fa#i&ities (%t a&so #o ers in#i$enta& fa#i&ities whi#h are reasona(&* ne#essar* to the a##o'p&ish'ent of sai$ p%rpose - A propert* &ease$ (* the owner to another who %ses it ex#&%si e&* for re&i!io%s p%rposes is exe'pt fro' propert* tax" (%t the owner is s%()e#t to in#o'e tax or rents re#ei e$+ - Rea& propert* p%r#hase$ (* an* re&i!io%s se#t to (e %se$ ex#&%si e&* for re&i!io%s p%rposes are s%()e#t to the tax on the transfer of ownership or of tit&e to rea& propert* 1a&so if $onate$: $onorAs tax3 - Propert* he&$ for f%t%re %se is not tax exe'pt XV+ LAW GRANTING TAX EXE.PTIONS O No &aw !rantin! an* tax exe'ptions sha&& (e passe$ witho%t the #on#%rren#e of a 'a)orit* of a&& 'e'(ers of the Con!ressP 1Se#+ 2K 1J3 ART VI3 R6LES ON VOTE RE<6IRE.ENT 73 Law !rantin! an* tax exe'ption - a(so&%te 'a)orit* 23 Law with$rawin! an* tax exe'ption - Re&ati e 'a)orit* - Tax exe'ption" a'nesties" ref%n$s are #onsi$ere$ in the nat%re of tax exe'ptions - A &aw !rantin! s%#h nee$s appro a& of the a(so&%te 'a)orit* of the Con!ress

XVI+ NO 6SE OF P6,LIC .ONE/ OR PROPERT/ FOR P6,LIC P6RPOSES - O No p%(&i# 'one* or propert* sha&& (e appropriate$" app&ie$" pai$" or e'p&o*e$" $ire#t&* or in$ire#t&*" for the %se" (enefit" or s%pport of an* se#t" #h%r#h" $eno'ination" se#tarian" instit%tion or s*ste' of re&i!ion" or of an* priest" prea#her" 'inister or other re&i!io%s tea#her or $i!nitar* as s%#h" EXCEPT when s%#h priest" prea#her" 'inister or $i!nitar* is assi!ne$ to the ar'e$ for#es" or to an* pena& instit%tion" or !o ern'ent orphana!e or &eprosari%' as s%#hP 1Se#+ 2M 123 ART VI3 - P%(&i# propert* 'a* (e &ease$ to a re&i!io%s !ro%p pro i$e$ that the &ease wi&& (e tota&&* %n$er the sa'e #on$itions as that to pri ate persons 1a'o%nt of rent3

- Con!ress is witho%t power to appropriate f%n$s for a pri ate p%rpose+ XVII+ TAX LEVIED FOR SPECIAL P6RPOSES O A&& 'one* #o&&e#te$ or an* tax &e ie$ for a spe#ia& p%rpose sha&& (e treate$ as a spe#ia& f%n$ an$ pai$ o%t for s%#h p%rpose on&*+ If the p%rpose for whi#h a spe#ia& f%n$ was #reate$ has (een f%&fi&&e$ or a(an$one$" the (a&an#e" if an*" sha&& (e transferre$ to the !enera& f%n$s of the Go ern'ent+P 1Se#+ 2M 1H3 ART VI3 - If a Presi$ent of the Phi&ippines spent a spe#ia& f%n$ for a !enera& p%rpose" he #an (e #har!e$ with #%&pa(&e io&ation of the Constit%tion+ XVIII+ S6PRE.E CO6RTAS POWER OF REVIEW OThe S%pre'e Co%rt sha&& ha e the power to re iew" re ise" re erse" 'o$if* or affir' on appea& or #ertiorari" a&& #ases in o& in! the &e!a&it* of an* tax i'pose$" assess'ent" or to&&" or an* pena&t* i'pose$ in re&ation thereto+P 1Se#+ I 12,3 ART VIII3 - Con!ress #annot ta;e awa* fro' the S%pre'e Co%rt the power !i en to it (* the Constit%tion as the fina& ar(iter of the tax #ases+ XIX+ DELEGATED A6T5ORIT/ TO LOCAL GOVERN.ENT 6NITS O Ea#h &o#a& !o ern'ent %nit sha&& ha e the power to #reate its own so%r#es of re en%es an$ to &e * taxes" fees" an$ #har!es s%()e#t to s%#h !%i$e&ines an$ &i'itations as the Con!ress 'a* pro i$e" #onsistent with the (asi# po&i#* of &o#a& a%tono'*+ S%#h taxes" fees" #har!es sha&& ha e ex#&%si it* to the &o#a& !o ern'ent+P 1Se#+ I" ART X3 LI.ITATIONS ON POWER TO TAX 1L+G+6+3 73 It is s%()e#t to s%#h !%i$e&ines an$ &i'itations pro i$e$ (* Con!ress+ 23 It '%st (e #onsistent with the (asi# po&i#* of &o#a& a%tono'*+ H3 S%#h taxes" fees" an$ #har!es sha&& a##r%e ex#&%si e&* to the &o#a& !o ern'ent+ R6LES4 NATIONAL GOVAT s+ LG6 I.POSITION OF TAXES 73 The Nationa& Go ern'ent 'a* i'pose &o#a& taxes on arti#&es or s%()e#ts whi#h are within the territoria& )%ris$i#tion of the &o#a& !o ern'ent %nit+ 23 The Lo#a& Go ern'ent %nit #annot i'pose tax on the nationa& !o ern'ent+ - /o% #an on&* tax those arti#&es" whi#h are within *o%r )%ris$i#tion SEC+ G" ART X O &o#a& !o ern'ent %nits sha&& ha e a )%st share" as $eter'ine$ (* &aw" in the nationa& taxes whi#h sha&& (e a%to'ati#a&&* re&ease$ to the'+P XX+ TAX EXE.PTIONS OF ED6CATIONAL INSTIT6TIONS O A&& re en%es an$ assets of non:sto#;" non:profit e$%#ationa& instit%tions %se$ a#t%a&&*" $ire#t&*" an$ ex#&%si e&* for e$%#ationa& p%rposes sha&& (e exe'pt fro' taxes an$ $%ties+P 1Se#+ J 1H3 ART XIV3 RE<6ISITES FOR EXE.PTION4 73 It '%st (e a pri ate e$%#ationa& instit%tion 23 It '%st (e non:sto#; an$ non:profit H3 ItAs assets 1propert*3 an$ re en%es 1in#o'e3 '%st (e %se$ a#t%a&&*" $ire#t&* an$ ex#&%si e&* for e$%#ationa& p%rposes R6LES4 73 If the first re@%isite is a(sent 1'eanin!" itAs a !o ern'ent e$%#ationa& instit%tion3" it is nonethe&ess exe'pt fro' in#o'e tax 23 If the se#on$ re@%ire'ent is a(sent 1'eanin!" it is sto#; an$ profit3 as &on! as the thir$ re@%ire'ent is present" it is nonethe&ess exe'pt fro' rea& estate tax H3 If the thir$ re@%ire'ent is a(sent" as &on! as it is non:sto#; an$ non:profit" it is nonethe&ess exe'pt fro' in#o'e tax J3 If the thir$ re@%ire'ent is a(sent" (%t it is pri ate an$ non:profit" it is s%()e#t to in#o'e tax" (%t at the preferentia& rate of ten per#ent 17QR3 - 6n$er the present tax #o$e" for a pri ate e$%#ationa& instit%tion to (e exe'pt fro' the pa*'ent of in#o'e tax" a&& it has to (e is non:sto#; an$ non:profit+ 5owe er" a !o ern'enta& e$%#ationa& instit%tion is exe'pt fro' in#o'e tax witho%t an* #on$ition

EXE.PTION DOES NOT EXTEND TO4 73 In#o'e $eri e$ (* these e$%#ationa& instit%tions fro' their propert*" rea& or persona&" an$ 23 Fro' a#ti ities #on$%#te$ (* the' for profit re!ar$&ess of the $isposition 'a$e on s%#h in#o'e .ANILA POLO CL6, s+ CTA - Pro#ee$s of the sa&e of rea& propert* (* the Ro'an Catho&i# #h%r#h is exe'pt fro' in#o'e tax (e#a%se the transa#tion was an iso&ate$ one ST+ PA6L 5OSPITAL of ILOILO s+ CIR - In#o'e $eri e$ fro' the hospita& phar'a#*" $or'itor* an$ #anteen was exe'pt fro' in#o'e tax (e#a%se the operation of those entities was 'ere&* in#i$enta& to the pri'ar* p%rpose of the exe'pt #orporation - Where the e$%#ationa& instit%tion is pri ate an$ non:profit 1(%t a sto#; #orporation3 it is s%()e#t to in#o'e tax (%t at the preferentia& rate of ten per#ent 17QR3 RE<6ISITES for APPLICATION of 7QR PREFERENTIAL RATE 73 It is pri ateD 23 It has per'it to operate fro' the DECS" or C5ED or TESDAD H3 It is non:profitD J3 Its !ross in#o'e fro' %nre&ate$ tra$e or (%siness '%st not ex#ee$ fift* per#ent 1IQR3 of its tota& !ross in#o'e fro' a&& so%r#es+ 7QR PREFERENTIAL TAX RATE DOES NOT APPL/ TO T5E FOLLOWING4 73 Passi e in#o'es $eri e$ (* the e$%#ationa& instit%tion 1s%()e#t to fina& in#o'e tax3 an$ 23 Where the e$%#ationa& instit%tion is en!a!e$ in %nre&ate$ tra$e" (%siness or other a#ti it*" an$ the !ross in#o'e fro' s%#h %nre&ate$ tra$e" (%siness or other a#ti ities ex#ee$s fift* per#ent 1IQR3 of the tota& !ross in#o'e $eri e$ (* the s#hoo& fro' a&& so%r#es - Where a $onation is 'a$e in fa or of an e$%#ationa& instit%tion p%rs%ant to sports #o'petition an$ to%rna'ents" the $onor is exe'pt fro' the pa*'ent of $onorAs tax CIR s+ CA 12MK SCRA KH3 - In#o'e $eri e$ (* /.CA fro' &easin! o%t a portion of its pre'ises to s'a&& shop owners" &i;e resta%rant an$ #anteen operators" an$ fro' par;in! fees #o&&e#te$ fro' non:'e'(ers are taxa(&e in#o'e /.CA is not an e$%#ationa& instit%tion XXI+ TAX EXE.PTION OF DONATIONS for ED6CATIONAL P6RPOSES - OS%()e#t to #on$itions pres#ri(e$ (* &aw" a&& !rants en$ow'ents" $onations" or #ontri(%tions %se$ a#t%a&&*" $ire#t&* an$ ex#&%si e&* for e$%#ationa& p%rposes sha&& (e exe'pt fro' tax+P 1Se#+ J 1J3 ART XIV3 XXII+ NO EXPOST FACTO LAW PRO5I,ITION IN TAXATION FERNANDE9 s+ FERNANDE9 - The prohi(ition a!ainst Oex post fa#to &awsP app&ies on&* to #ri'ina& &aws an$ not to those that #on#ern #i i& 'atters O%r tax &aws are #i i& in nat%re - The #o&&e#tion of interest on taxes is not pena& in nat%re an$ the ex post fa#to &aw prohi(ition $oes not app&* to it+ DO6,LE TAXATION - Taxin! sa'e propert* twi#e when it sho%&$ (e taxe$ (%t on#e+ Taxin! the sa'e person twi#e (* the sa'e )%ris$i#tion o er the sa'e thin!+ A&so ;nown as $%p&i#ate taxation PEPSI COLA s+ CIT/ OF ,6T6AN - There is no #onstit%tiona& prohi(ition a!ainst $o%(&e taxation in the Phi&ippines+ It is so'ethin! not fa ore$ (%t is per'issi(&e" pro i$e$ that the other #onstit%tiona& re@%ire'ents is not there(* io&ate$

CINDS OF DO6,LE TAXATION 73 DIRECT DO6,LE TAXATION Do%(&e taxation in the o()e#tiona(&e or prohi(ite$ sense Sa'e propert* is taxe$ twi#e RE<6ISITES4 A3 The sa'e propert* is taxe$ twi#e when it sho%&$ on&* (e taxe$ on#eD ,3 ,oth taxes are i'pose$ on the sa'e propert* or s%()e#t 'atter for the sa'e p%rposeD C3 I'pose$ (* the sa'e taxin! a%thorit*D D3 Within the sa'e )%ris$i#tionD E3 D%rin! the sa'e perio$D an$ F3 Co erin! the sa'e ;in$ or #hara#ter of tax 23 INDIRECT DO6,LE TAXATION Not &e!a&&* o()e#tiona(&e If taxes are not of the sa'e ;in$" or the i'position are i'pose$ for $ifferent taxin! a%thorit* an$ this 'a* in o& e the sa'e s%()e#t 'atter EXA.PLES4 A3 The taxpa*ers wareho%sin! (%siness a&tho%!h #arrie$ on in re&ation to the operation of its s%!ar #entra& is a $istin#t an$ separate taxa(&e (%siness ,3 A &i#ense tax 'a* (e &e ie$ %pon a (%siness or o##%pation a&tho%!h the &an$ or propert* %se$ in #onne#tion therewith is s%()e#t to propert* tax C3 ,oth a &i#ense fee an$ a tax 'a* (e i'pose$ on the sa'e (%siness or o##%pation for se&&in! the sa'e arti#&e an$ this is not in io&ation of the r%&es a!ainst $o%(&e taxation D3 When e er* (ott&e or #ontainer of intoxi#atin! (e era!es is s%()e#t to &o#a& tax an$ at the sa'e ti'e the (%siness of se&&in! s%#h pro$%#t is a&so s%()e#t to &i@%ors &i#ense E3 A tax i'pose$ on (oth on the o##%pation of fishin! an$ of the fishpon$ itse&f F3 A &o#a& or$inan#e i'poses a tax on the stora!e of #opra where it appears that the finishe$ pro$%#ts 'an%fa#t%re$ o%t of the #opra are s%()e#t to VAT

.EANS E.PLO/ED TO AVOID DO6,LE TAXATION 73 Tax $e$%#tions 23 Tax #re$its H3 Pro i$e for exe'ption J3 Enter into treatise with other states I3 A&&owan#e on the prin#ip&e of re#ipro#it* TAX CREDIT An a'o%nt a&&owe$ as a $e$%#tion of the Phi&ippine In#o'e tax on a##o%nt of in#o'e taxes pai$ or in#%rre$ to forei!n #o%ntries+ It is !i en to a taxpa*er in or$er to pro i$e a re&ief fro' too onero%s a (%r$en of taxation in #ase where the sa'e in#o'e is s%()e#t to a forei!n in#o'e tax an$ the Phi&ippine In#o'e tax+ W5O CAN CLAI. TAX CREDIT 73 Citi8ens of the Phi&ippines 23 Do'esti# #orporations CIT/ OF ,AG6IO s+ DE LEON - The ar!%'ent a!ainst $o%(&e taxation 'a* not (e in o;e$ where one tax is i'pose$ (* the state an$ the other i'pose$ (* the #it*" it (ein! wi$e&* re#o!ni8e$ that there is nothin! inherent&* o(noxio%s in the re@%ire'ent that &i#ense fees or taxes (e exa#te$ with respe#t to the sa'e o##%pation" #a&&in! or a#ti it* (* (oth the state an$ a po&iti#a& s%($i ision thereof+ An$ where the stat%te or or$inan#e in @%estion app&ies e@%a&&* to a&& persons" fir's an$ #orporations p&a#e$ in a si'i&ar sit%ation" there is no infrin!e'ent of the r%&e on e@%a&it*+ VILLAN6EVA s+ CIT/ OF ILOILO - An or$inan#e i'posin! a '%ni#ipa& tax on tene'ent ho%ses was #ha&&en!e$ (e#a%se the owners a&rea$* pa* rea& estate taxes an$ a&so in#o'e taxes %n$er the NIRC+ The S%pre'e Co%rt he&$ that there was no $o%(&e taxation+ The sa'e tax 'a* (e i'pose$ (* the Nationa& Go ern'ent as we&& as the &o#a& !o ern'ent+ There is nothin! inherent&* o(noxio%s in the exa#tion of &i#ense fees or taxes

with respe#t to the sa'e o##%pation" #a&&in! or a#ti it* (* (oth the state an$ a po&iti#a& s%($i ision thereof+ F%rther" a &i#ense tax 'a* (e &e ie$ %pon a (%siness or o##%pation a&tho%!h the &an$ %se$ in #onne#tion therewith is s%()e#t to propert* tax+ DOCTRINES ON DO6,LE TAXATION 73 Dire#t Do%(&e Taxation 1DDT3 is not a&&owe$ (e#a%se it a'o%nts to #onfis#ation of propert* witho%t $%e pro#ess of &aw 23 /o% #an @%estion the a&i$it* of $o%(&e taxation if there is a io&ation of the E@%a& prote#tion #&a%se or E@%a&it* or 6nifor'it* of Taxation H3 A&& $o%(ts as to whether $o%(&e taxation has (een i'pose$ sho%&$ (e reso& e$ in fa or of the taxpa*er

ESCAPE FRO. TAXATION ,ASIC FOR.S OF ESCAPE FRO. TAXATION 73 S5IFTING 23 CAPITALI9ATION H3 TRANSFOR.ATION J3 AVOIDANCE I3 EXE.PTION G3 EVASION I+ S5IFTING Shiftin! is the transfer of the (%r$en of a tax (* the ori!ina& pa*er or the one on who' the tax was assesse$ or i'pose$ to so'eone e&se Pro#ess (* whi#h s%#h tax (%r$en is transferre$ fro' stat%tor* taxpa*er to another witho%t io&atin! the &aw - It sho%&$ (e (orne in 'in$ that what is transferre$ is not the pa*'ent of the tax" (%t the (%r$en of the tax - On&* in$ire#t taxes 'a* (e shifte$D $ire#t taxes #annot (e shifte$ WA/S OF S5IFTING T5E TAX ,6RDEN 73 FORWARD S5IFTING When the (%r$en of the tax is transferre$ fro' a fa#tor of pro$%#tion thro%!h the fa#tors of $istri(%tion %nti& it fina&&* sett&es on the %&ti'ate p%r#haser or #ons%'er+ Exa'p&e4 .an%fa#t%rer or pro$%#er 'a* shift tax assesse$ to who&esa&er" who in t%rn shifts it to the retai&er" who a&so shifts it to the fina& p%r#haser or #ons%'er 23 ,ACCWARD S5IFTING When the (%r$en of the tax is transferre$ fro' the #ons%'er or p%r#haser thro%!h the fa#tors of $istri(%tion to the fa#tors of pro$%#tion Exa'p&e4 Cons%'er or p%r#haser 'a* shift tax i'pose$ on hi' to retai&er (* p%r#hasin! on&* after the pri#e is re$%#e$" an$ fro' the &atter to the who&esa&er" or fina&&* to the 'an%fa#t%rer or pro$%#er ONWARD S5IFTING When the tax is shifte$ two or 'ore ti'es either forwar$ or (a#;war$ Exa'p&e4 Th%s" a transfer fro' the se&&er to the p%r#haser in o& es one shiftD fro' the pro$%#er to the who&esa&er" then to retai&er" we ha e two shiftsD an$ if the tax is transferre$ a!ain to the p%r#haser (* the retai&er" we ha e three shifts in a&&+ I'pa#t an$ In#i$en#e of Taxation I'pa#t of taxation is the point on whi#h a tax is ori!ina&&* i'pose$+ In so far as the &aw is #on#erne$" the taxpa*er is the person who '%st pa* the tax to the !o ern'ent+ 5e is a&so ter'e$ as the stat%tor* taxpa*er:the one on who' the tax is for'a&&* assesse$+ 5e is the s%()e#t of the tax In#i$en#e of taxation is that point on whi#h the tax (%r$en fina&&* rests or sett&e $own+ It ta;es p&a#e when shiftin! has (een effe#te$ fro' the stat%tor* taxpa*er to another+

Stat%tor* Taxpa*er The Stat%tor* taxpa*er is the person re@%ire$ (* &aw to pa* the tax or the one on who' the tax is for'a&&* assesse$+ In short" he or she is the s%()e#t of the tax+ In $ire#t taxes" the stat%tor* taxpa*er is the one who sho%&$ers the (%r$en of the tax whi&e in in$ire#t taxes" the stat%tor* taxpa*er is the one who pa* the tax to the !o ern'ent (%t the (%r$en #an (e passe$ to another person or entit*+ Re&ationship (etween i'pa#t" shiftin!" an$ in#i$en#e of a tax The i'pa#t is the initia& pheno'enon" the shiftin! is the inter'e$iate pro#ess" an$ the in#i$en#e is the res%&t+ Th%s" the i'pa#t in a sa&es tax 1i+e+ VAT3 is on the se&&er 1'an%fa#t%rer3 who shifts the (%r$en to the #%sto'er who fina&&* (ears the in#i$en#e of the tax+ I'pa#t is the i'position of the taxD shiftin! is the transfer of the taxD whi&e in#i$en#e is the settin! or #o'in! to rest of the tax+ II+ CAPITALI9ATION Re$%#tion is the pri#e of the taxe$ o()e#t e@%a& to the #apita&i8e$ a&%e of f%t%re taxes on the propert* so&$ - This is a spe#ia& for' of (a#;war$ shiftin!" where the (%r$en of f%t%re taxes whi#h the (%*er 'a* ha e to pa* is shifte$ (a#; to the se&&er in the for' of re$%#tion in the se&&in! pri#e III+ TRANSFOR.ATION The 'an%fa#t%rer in an effort to a oi$ &osin! his #%sto'ers" 'aintains the sa'e se&&in! pri#e an$ 'ar!in of profit" not (* shiftin! the tax (%r$en to his #%sto'ers" (%t (* i'pro in! his 'etho$ of pro$%#tion an$ #%ttin! $own or other pro$%#tion #ost" there(* transfor'in! the tax into or earn thro%!h the 'e$i%' of pro$%#tion+ IV+ TAX AVOIDANCE A&so ;nown as Otax 'ini'i8ationP not p%nishe$ (* &aw Tax a oi$an#e is the exp&oitation of the taxpa*er of &e!a&&* per'issi(&e a&ternati e tax rates or 'etho$s of assessin! taxa(&e propert* or in#o'e in or$er to a oi$ or re$%#e tax &ia(i&it* DELP5ERS TRADERS CORP s+ IAC 17IF SCRA HJM3 - The S%pre'e Co%rt %phe&$ the estate p&annin! s#he'e resorte$ to (* the Pa#he#o fa'i&* in #on ertin! their propert* to shares of sto#; in a #orporation whi#h the* the'se& es owne$ an$ #ontro&&e$+ ,* irt%e of the $ee$ of ex#han!e" the Pa#he#o #o:owners sa e$ on inheritan#e taxes+ The S%pre'e Co%rt sai$ the re#or$s $o not point an*thin! wron! an$ o()e#tiona(&e a(o%t this estate p&annin! s#he'e resorte$ to+ The &e!a& ri!ht of the taxpa*er to $e#rease the a'o%nt of what otherwise #o%&$ (e his taxes or a&to!ether a oi$ the' (* 'eans whi#h the &aw per'its #annot (e $o%(te$+ Exa'p&e4 Fo&&owin! the Oho&$in! perio$ r%&eP in #apita& !ains transa#tion" (* postponin! the sa&e of the #apita& asset %nti& after twe& e 'onths fro' $ate of a#@%isition *o% #an re$%#e the tax on the #apita& !ains (* IQR V+ TAX EXE.PTION Tax Exe'ption It is the !rant of i''%nit* to parti#%&ar persons or #orporations or to persons or #orporations of a parti#%&ar #&ass fro' a tax whi#h persons an$ #orporations !enera&&* within the sa'e state or taxin! $istri#t are o(&i!e$ to pa*+ It is an i''%nit* or pri i&e!eD it is free$o' fro' a finan#ia& #har!e or (%r$en to whi#h others are s%()e#te$+ Exe'ption is a&&owe$ on&* if there is a #&ear pro ision there for+ It is not ne#essari&* $is#ri'inator* as &on! as there is a reasona(&e fo%n$ation or rationa& (asis+ Exe'ptions are not pres%'e$" (%t when p%(&i# propert* is in o& e$" exe'ption is the r%&e an$ taxation is the exe'ption+ Rationa&e for !rantin! tax exe'ptions Its a owe$ p%rpose is so'e p%(&i# (enefit or interests whi#h the &aw'a;in! (o$* #onsi$ers s%ffi#ient to offset the 'onetar* &oss entai&e$ in the !rant of the exe'ption+

The theor* (ehin$ the !rant of tax exe'ptions is that s%#h a#t wi&& (enefit the (o$* of the peop&e+ It is not (ase$ on the i$ea of &essenin! the (%r$en of the in$i i$%a& owners of propert*+ Gro%n$s for !rantin! tax exe'ptions 73 .a* (e (ase$ on #ontra#t+ In s%#h a #ase" the p%(&i#" whi#h is represente$ (* the !o ern'ent is s%ppose$ to re#ei e a f%&& e@%i a&ent therefor" i+e+ #harter of a #orporation+ 23 .a* (e (ase$ on so'e !ro%n$ of p%(&i# po&i#*" i+e+" to en#o%ra!e new in$%stries or to foster #harita(&e instit%tions+ 5ere" the !o ern'ent nee$ not re#ei e an* #onsi$eration in ret%rn for the tax exe'ption+ H3 .a* (e (ase$ on !ro%n$s of re#ipro#it* or to &essen the ri!ors of internationa& $o%(&e or '%&tip&e taxation Note4 E@%it* is not a !ro%n$ for tax exe'ption+ Exe'ption is a&&owe$ on&* if there is a #&ear pro ision therefor+ Nat%re of tax exe'ption 73 It is a 'ere persona& pri i&e!e of the !rantee+ 23 It is !enera&&* re o#a(&e (* the !o ern'ent %n&ess the exe'ption is fo%n$e$ on a #ontra#t whi#h is #ontra#t whi#h is prote#te$ fro' i'pair'ent+ H3 It i'p&ies a wai er on the part of the !o ern'ent of its ri!ht to #o&&e#t what otherwise wo%&$ (e $%e to it" an$ so is pre)%$i#ia& thereto+ J3 It is not ne#essari&* $is#ri'inator* so &on! as the exe'ption has a reasona(&e fo%n$ation or rationa& (asis+ I3 It is not transfera(&e ex#ept if the &aw express&* pro i$es so+ Cin$s of tax exe'ption a##or$in! to 'anner of #reation 73 Express or affir'ati e exe'ption When #ertain persons" propert* or transa#tions are" (* express pro ision" exe'pte$ fro' a&& #ertain taxes" either entire&* or in part+ 23 I'p&ie$ exe'ption or exe'ption (* o'ission When a tax is &e ie$ on #ertain #&asses of persons" properties" or transa#tions witho%t 'entionin! the other #&asses+ E er* tax stat%te 'a;es exe'ptions (e#a%se of o'issions+ No tax exe'ption (* i'p&i#ation It '%st (e expresse$ in #&ear an$ %n'ista;a(&e &an!%a!e CALTEX s+ COA - In #&ai'in! tax exe'ption" the (%r$en of proof &ies %pon the #&ai'ant It #annot (e #reate$ (* 'ere i'p&i#ation It #annot (e pres%'e$ that *o% are entit&e$ to tax exe'ption /o% '%st pro e it R6LE4 Taxation is the r%&e an$ exe'ption is the ex#eption PROPERT/ TAX B GOVERN.ENT PROPERT/ - Properties owne$ (* the !o ern'ent whether in their proprietar* or !o ern'enta& #apa#it* are exe'pt fro' rea& estate tax TEST4 : OWNERS5IP - On#e esta(&ishe$ that it (e&on!s to the !o ern'ent" the nat%re of the %se of the propert* whether proprietar* or so erei!n (e#o'es i''ateria&+ - Exe'ption of p%(&i# propert* fro' taxation $oes not exten$ to i'pro e'ents therein 'a$e (* o##%pants or #&ai'ants at their own expense+ CINDS OF TAX EXE.PTIONS ACCORDING TO SCOPE OR EXTENT 73 TOTAL

When #ertain persons" propert* or transa#tions are exe'pte$" express&* or i'p&ie$&* fro' a&& taxes 23 PARTIAL When #ertain persons" propert* or transa#tions are exe'pte$" express&* or i'p&ie$&* fro' #ertain taxes" either entire&* or in part+ H3 There #an (e no si'%&taneo%s exe'ptions %n$er two &aws" when one !rants partia& exe'ption whi&e other !rants tota& exe'ption+ Does pro ision in a stat%te !rantin! exe'ption fro' Oa&& taxesP in#&%$e in$ire#t taxesT NO+ As a !enera& r%&e" in$ire#t taxes are not in#&%$e$ in the !rant of s%#h exe'ption %n&ess it is express&* state$+ Nat%re of power to !rant tax exe'ption 73 Nationa& !o ern'ent The power to !rant tax exe'ptions is an attri(%te of so erei!nt* for the power to pres#ri(e who or what persons or propert* sha&& not (e taxe$+ It is inherent in the exer#ise of the power to tax that the so erei!n state (e free to se&e#t the s%()e#ts of taxation an$ to !rant exe'ptions therefro'+ 6n&ess restri#te$ (* the Constit%tion" the &e!is&ati e power to exe'pt is as (roa$ as its power to tax+ 23 Lo#a& !o ern'ents .%ni#ipa& #orporations are #&othe$ with no inherent power to tax or !rant tax exe'ptions+ ,%t the 'o'ent the power to i'pose a parti#%&ar tax is !rante$" the* a&so ha e the power to !rant exe'ption therefro' %n&ess for(i$$en (* so'e pro ision of the Constit%tion or the &aw The &e!is&at%re 'a* $e&e!ate its power to !rant tax exe'ptions to the sa'e extent that it 'a* exer#ise the power to exe'pt+ ,as#o s+ PAGCOR 17MG SCRA I234 The power to tax '%ni#ipa& #orporations '%st a&wa*s *ie&$ to a &e!is&ati e a#t whi#h is s%perior" ha in! (een passe$ (* the State itse&f+ .%ni#ipa& #orporations are 'ere #reat%res of Con!ress whi#h has the power to #reate an$ a(o&ish '%ni#ipa& #orporations $%e to its !enera& &e!is&ati e powers+ If Con!ress #an !rant the power to tax" it #an a&so pro i$e for exe'ptions or e en ta;e (a#; the power+ Cha e8 + PCGG" G+R+ No+ 7HQF7G" QM De#e'(er 7MMK In a #o'pro'ise a!ree'ent (etween the Phi&ippine Go ern'ent" represente$ (* the PCGG" an$ the .ar#os heirs" the PCGG !rante$ tax exe'ptions to the assets whi#h wi&& (e apportione$ to the .ar#os heirs+ The S%pre'e Co%rt r%&e$ that the PCGG has a(so&%te&* no power to !rant tax exe'ptions" e en %n$er the #o er of its a%thorit* to #o'pro'ise i&& !otten wea&th #ases+ The !rant of tax exe'ptions is the ex#&%si e prero!ati e of the Con!ress+ In fa#t" the S%pre'e Co%rt e en state$ that Con!ress itse&f #annot !rant tax exe'ptions in the #ase at (ar (e#a%se it wi&& io&ate the e@%a& prote#tion #&a%se of the Constit%tion+ Interpretation of the &aws !rantin! tax exe'ptions Genera& r%&e In the #onstr%#tion of tax stat%tes" exe'ptions are not fa ore$ an$ are #onstr%e$ stri#tissi'i )%ris a!ainst the taxpa*er+ The f%n$a'enta& theor* is that a&& taxa(&e propert* sho%&$ (ear its share in the #ost an$ expense of the !o ern'ent+ Taxation is the r%&e an$ exe'ption is the exe'ption+ 5e who #&ai's exe'ption '%st (e a(&e to )%stif* his #&ai' or ri!ht thereto (* a !rant express in ter's Otoo p&ain to (e 'ista;en an$ too #ate!ori#a& to (e 'isinterprete$+P If not express&* 'entione$ in the &aw" it '%st (e at &east within its p%r iew (* #&ear &e!is&ati e intent+ Ex#eptions 73 When the &aw itse&f express&* pro i$es for a &i(era& #onstr%#tion thereof+

23 In #ases of exe'ptions !rante$ to re&i!io%s" #harita(&e an$ e$%#ationa& instit%tions or to the !o ern'ent or its a!en#ies or to p%(&i# propert* (e#a%se the !enera& r%&e is that the* are exe'pt fro' tax+ Stri#t interpretation $oes not app&* to the !o ern'ent an$ its a!en#ies Petitioner #annot in o;e the r%&e on stritissi'i )%ris with respe#t to the interpretation of stat%tes !rantin! tax exe'ptions to the NPC+ The r%&e on stri#t interpretation $oes not app&* in the #ase of exe'ptions in fa or of a po&iti#a& s%($i ision or instr%'enta&it* of the !o ern'ent+ =.a#e$a + .a#arai!? Da ao G%&f + Co''issioner" 2MH SCRA FG 17MMK3 A tax #annot (e i'pose$ %n&ess it is s%pporte$ (* the #&ear an$ express &an!%a!e of a stat%teD on the other han$" on#e the tax is %n@%estiona(&* i'pose$" Oa #&ai' of exe'ption fro' tax pa*ers '%st (e #&ear&* shown an$ (ase$ on &an!%a!e in the &aw too p&ain to (e 'ista;en+P Sin#e the partia& ref%n$ a%thori8e$ %n$er Se#tion I" RA 7JHI" is in the nat%re of a tax exe'ption" it '%st (e #onstr%e$ stri#tissi'i )%ris a!ainst the !rantee+ 5en#e" petitionerAs #&ai' of ref%n$ on the (asis of the spe#ifi# taxes it a#t%a&&* pai$ '%st express&* (e !rante$ in a stat%te state$ in a &an!%a!e too #&ear to (e 'ista;en+ - Exe'ption of the (%*er $oes not exten$ to the se&&er Exe'ption of the prin#ipa& $oes not exten$ to the a##essor* S6RIGAO s+ COLLECTOR of C6STO.S - Tax ref%n$s" #on$onations an$ a'nesties" the* (ein! in the nat%re of tax exe'ptions '%st (e stri#t&* #onstr%e$ a!ainst the taxpa*er an$ &i(era&&* in fa or of the !o ern'ent+ Tax re'ission or tax #on$onation The wor$ Ore'itP 'eans to $esist or refrain fro' exa#tin!" inf&i#tin! or enfor#in! so'ethin! as we&& as to restore what has a&rea$* (een ta;en+ The re'ission of taxes $%e an$ pa*a(&e to the ex#&%sion of taxes a&rea$* #o&&e#te$ $oes not #onstit%te %nfair $is#ri'ination+ S%#h a set of taxes is a #&ass (* itse&f an$ the &aw wo%&$ (e open to atta#; as #&ass &e!is&ation on&* if a&& taxpa*ers (e&on!in! to one #&ass were not treate$ a&i;e+ =>%an L%na S%($+ V+ Sar'iento" M7 Phi& HFQ? The #on$ition of a tax &ia(i&it* is e@%i a&ent to an$ is in the nat%re of a tax exe'ption+ Th%s" it sho%&$ (e s%staine$ on&* when express&* pro i$e$ in the &aw+ =S%ri!ao Conso&i$ate$ .inin! + Co''issioner of Interna& Re en%e" M SCRA F2K? Tax a'nest* Tax a'nest*" (ein! a !enera& par$on or intentiona& o er&oo;in! (* the State of its a%thorit* to i'pose pena&ties on persons otherwise !%i&t* of e asion or io&ation of a re en%e to #o&&e#t what otherwise wo%&$ (e $%e it an$" in this sense" pre)%$i#ia& thereto+ It is !rante$ parti#%&ar&* to tax e a$ers who wish to re&ent an$ are wi&&in! to refor'" th%s !i in! the' a #han#e to $o so an$ there(* (e#o'e a part of the new so#iet* with a #&ean s&ate+ =Rep%(&i# + Inter'e$iate Appe&&ate Co%rt" 7MG SCRA HHI? Li;e tax exe'ption" tax a'nest* is ne er fa ore$ nor pres%'e$ in &aw+ It is !rante$ (* stat%te+ The ter's of the a'nest* '%st a&so (e #onstr%e$ a!ainst the taxpa*er an$ &i(era&&* in fa or of the !o ern'ent+ Tax a'nest* + tax #on$onation + tax exe'ption A tax a'nest*" (ein! a !enera& par$on or intentiona& o er&oo;in! (* the Stat%te of its a%thorit* to i'pose pena&ties on persons otherwise !%i&t* of e asion or io&ation of a re en%e or tax &aw" parta;es of an a(so&%te for!i eness or wai er (* the Go ern'ent of its ri!ht to #o&&e#t what otherwise wo%&$ (e $%e it an$" in this sense" pre)%$i#ia& thereto" parti#%&ar&* to tax e a$ers who wish to re&ent an$ are wi&&in! to refor' are !i en a #han#e to $o so an$ therefore (e#o'e a part of the so#iet* with a #&ean s&ate+ Li;e a tax exe'ption" a tax a'nest* is ne er fa ore$ nor pres%'e$ in &aw" an$ is !rante$ (* stat%te+ The ter's of the a'nest* '%st (e stri#t&* #onstr%e$ a!ainst the taxpa*er an$ &itera&&* in fa or of the !o ern'ent+ 6n&i;e a tax exe'ption" howe er" a tax a'nest* has &i'ite$ app&i#a(i&it* as to #o er a parti#%&ar taxin! perio$ or transa#tion on&*+

There is a tax #on$onation or re'ission when the State $esists or refrains fro' exa#tin!" inf&i#tin! or enfor#in! so'ethin! as we&& as to re$%#e what has a&rea$* (een ta;en+ The #on$onation of a tax &ia(i&it* is e@%i a&ent to an$ is in the nat%re of a tax exe'ption+ Th%s" it sho%&$ (e s%staine$ on&* when expresse$ in the &aw+ Tax exe'ption" on the other han$" is the !rant of i''%nit* to parti#%&ar persons or #orporations of a parti#%&ar #&ass fro' a tax of whi#h persons an$ #orporations !enera&&* within the sa'e state or taxin! $istri#t are o(&i!e$ to pa*+ Tax exe'ptions are not fa ore$ an$ are #onstr%e$ stri#tissi'i )%ris a!ainst the taxpa*er+ CIR s+ RIO T6,A - Law !rantin! partia& ref%n$ parta;es the nat%re of a tax exe'ption an$ therefore '%st (e stri#t&* #onstr%e$ a!ainst the taxpa*er CIR s+ TO6R SPECIALIST - Gross re#eipts s%()e#t to tax %n$er the tax #o$e $o not in#&%$e 'onies or re#eipts entr%ste$ to the taxpa*er whi#h $o not (e&on! to it an$ $oes not re$o%n$ to the taxpa*ers (enefit" an$ it is not ne#essar* that there '%st (e a &aw or re!%&ation whi#h wo%&$ exe'pt s%#h 'onies an$ re#eipts within the 'eanin! of !ross re#eipts+ CONSTIT6TIONAL RESTRICTION4 ONo &aw !rantin! an* tax exe'ption sha&& (e passe$ witho%t the #on#%rren#e of a 'a)orit* of a&& 'e'(ers of Con!ress+P 1Se#+ 2K 1J3 ART VI3 PROV+ OF N6EVA ECI>A s+ I.PERIAL .INING - ,asis or test for rea& propert* taxation is %se an$ not ownership+ Th%s" it $oes not 'atter who the owner of the propert* is e en if it is not tax exe'pt entit*" as &on! as it is (ein! %se$ for re&i!io%s" #harita(&e or e$%#ationa& p%rposes" then it is tax exe'pt+ Con erse&*" e en if the propert* taxation is owne$ (* the !o ern'ent if the (enefi#ia& %se has (een !rante$" for #onsi$eration or otherwise" to a taxa(&e person" then the propert* is s%()e#t to tax+ VI+ TAX EVASION It is a&so ;nown as Otax $o$!in!P It is p%nisha(&e (* &aw Tax e asion is the %se (* the taxpa*er of i&&e!a& or fra%$%&ent 'eans to $efeat or &essen the pa*'ent of tax+ /6TIVO s+ CTA - Tax e asion is a ter' that #onnotes fra%$ thro%!h the %se of pretenses or for(i$$en $e i#es to &essen or $efeat taxes ELE.ENTS OF TAX EVASION Tax e asion #onnotes the inte!ration of three 1H3 fa#tors4 73 The en$ to (e a#hie e$" i+e+ pa*'ent of &ess than that ;nown (* the taxpa*er to (e &e!a&&* $%e" or pa*in! no tax when it is shown that tax is $%e 23 An a##o'pan*in! state of 'in$ whi#h is $es#ri(e$ as (ein! Oe i&P" Oin (a$ faithP" Owi&&f%&P" or O$e&i(erateP an$ not Oa##i$enta&P H3 A #o%rse of a#tion 1or fai&%re of a#tion3 whi#h is %n&awf%& INDICIA of FRA6D IN TAX EVASION 73 Fai&%re to $e#&are for taxation p%rposes tr%e an$ a#t%a& in#o'e $eri e$ fro' (%siness for two 123 #onse#%ti e *earsD or 23 S%(stantia& %n$er$e#&aration of in#o'e tax ret%rns of the taxpa*er for fo%r 1J3 #onse#%ti e *ears #o%p&e$ with %nintentiona& o erstate'ent of $e$%#tions EVIDENCE TO PROVE TAX EVASION - Sin#e fra%$ is a state of 'in$" it nee$ not (e pro e$ (* $ire#t e i$en#e (%t 'a* (e pro e$ fro' the #ir#%'stan#es of the #ase+ REP6,LIC s+ GON9ALES 17H SCRA GHK3 - Fai&%re of the taxpa*er to $e#&are for taxation p%rposes his tr%e an$ a#t%a& in#o'e $eri e$ fro' his (%siness for two 123 #onse#%ti e *ears is an in$i#ation of his fra%$%&ent intent to #heat the !o ern'ent of its $%e taxes+

TAX ENFORCE.ENT AND AD.INISTRATION SO6RCES OF TAX LAWS4 73 Stat%tes 23 Presi$entia& $e#rees H3 Exe#%ti e or$ers J3 Constit%tion I3 Co%rt $e#isions G3 Tax #o$e F3 Re en%e re!%&ations K3 A$'inistrati e iss%an#es M3 ,IR r%&in!s 7Q3 Lo#a& tax or$inan#es 773 Tax treaties an$ #on entions with forei!n #o%ntries PROSPECTIVIT/ OF TAX LAWS 1APPLICATION3 GENERAL R6LE4 Tax &aws sho%&$ (e app&ie$ prospe#ti e&* EXCEPTION4 It 'a* (e app&ie$ retroa#ti e&* when the &aw express&* pro i$es for s%#h retroa#ti e app&i#ation EXCEPTION TO T5E EXCEPTION4 It 'a* not (e !i en retroa#ti e app&i#ation e en if the tax &aw express&* so pro i$es if it i'poses %n)%st an$ oppressi e taxes+ I.PRESCRIPTI,ILIT/ OF TAXES GENERAL R6LE4 Taxes are i'pres#ripti(&e EXCEPTION4 The* are pres#ripti(&e if the tax &aws pro i$e for stat%te of &i'itations PRESCRIPTIVE PERIODS4 73 Pres#ripti e perio$s for the assess'ent an$ #o&&e#tion of taxes 7Q *ears if ret%rn is tainte$ with fa&sit* or fra%$ H *ears if there is no fra%$ 23 TARIFF AND C6STO.S CODE : After the expiration of 7 *ear fro' the pa*'ent of fina& $%ties+ - /o% sho%&$ i'pose those #%sto' $%ties that are s%ppose$ to (e i'pose$ on the i'porte$ arti#&es within the 7 *ear perio$" ex#ept if it is in the nat%re of partia& &i@%i$ation" if there is fra%$ or protest H3 LOCAL GOVERN.ENT CODE : Pres#ripti e perio$s for &o#a& taxes an$ rea& propert* tax - I *ears - 7Q *ears if fra%$ has (een e'p&o*e$ INTERPRETATION AND APPLICATION OF TAX LAWS Nat%re of Interna& re en%e &aws 73 Interna& re en%e &aws are not po&iti#a& in nat%re+ 23 Tax &aws are #i i& an$ not pena& in nat%re+ Not po&iti#a& in nat%re Interna& re en%e &aws are not po&iti#a& in nat%re+ The* are $ee'e$ to (e &aws of the o##%pie$ territor* an$ not of the o##%p*in! ene'*+ Th%s" o%r tax &aws #ontin%e$ in for#e $%rin! the >apanese o##%pation+ 5i&a$o + Co&&e#tor" 7QQ Phi&+ 2KK34 It is we&& ;nown that o%r interna& re en%e &aws are not po&iti#a& in nat%re an$" as s%#h" #ontin%e$ in for#e $%rin! the perio$ of ene'* o##%pation an$ in effe#t were a#t%a&&* enfor#e$ (* the o##%pation !o ern'ent+ In#o'e tax ret%rns that were fi&e$ $%rin! that perio$ an$ in#o'e tax pa*'ents 'a$e were #onsi$ere$ a&i$ an$ &e!a&+ S%#h tax &aws are $ee'e$ to (e the &aws of the o##%pie$ territor* an$ not of the o##%p*in! ene'*+ Ci i& not pena& in nat%re Tax &aws are #i i& an$ not pena& in nat%re" a&tho%!h there are pena&ties pro i$e$ for their io&ation+

The p%rpose of tax &aws in i'posin! pena&ties for $e&in@%en#ies is to #o'pe& the ti'e&* pa*'ent of taxes or to p%nish e asion or ne!&e#t of $%t* in respe#t thereof+ Rep%(&i# + Oasan" MM Phi& MHJ4 The war profits tax is not s%()e#t to the prohi(ition on ex post fa#to &aws as the &atter app&ies on&* to #ri'ina& or pena& 'atters+ Tax &aws are #i i& in nat%re+ Constr%#tion of tax &aws 73 R%&e when &e!is&ati e intent is #&ear Tax stat%tes are to re#ei e a reasona(&e #onstr%#tion with a iew to #arr*in! o%t their p%rpose an$ intent+ The* sho%&$ not (e #onstr%e$ as to per'it the taxpa*er easi&* to e a$e the pa*'ent of taxes+ 23 R%&e when there is $o%(t No person or propert* is s%()e#t to taxation %n&ess within the ter's or p&ain i'port of a taxin! stat%te+ In e er* #ase of $o%(t" tax stat%tes are #onstr%e$ stri#t&* a!ainst the !o ern'ent an$ &i(era&&* in fa or of the taxpa*er+ Taxes" (ein! (%r$ens" are not to (e pres%'e$ (e*on$ what the stat%te express&* an$ #&ear&* $e#&ares+ H3 Pro isions !rantin! tax exe'ptions S%#h pro isions are #onstr%e$ stri#t&* a!ainst the taxpa*er #&ai'in! tax exe'ption+ App&i#ation of tax &aws Genera& r%&e4 Tax &aws are prospe#ti e in operation (e#a%se the nat%re an$ a'o%nt to the tax #o%&$ not (e foreseen an$ %n$erstoo$ (* the taxpa*er at the ti'e the transa#tions whi#h the &aw see;s to tax was #o'p&ete$ Ex#eption4 Whi&e it is not fa ore$" a stat%te 'a* ne erthe&ess operate retroa#ti e&* pro i$e$ it is express&* $e#&are$ or is #&ear&* the &e!is&ati e intent+ ,%t a tax &aw sho%&$ not (e !i en retroa#ti e app&i#ation when it wo%&$ (e harsh an$ oppressi e+ Dire#tor* an$ 'an$ator* pro isions of tax &aws Dire#tor* pro isions are those $esi!ne$ 'ere&* for the infor'ation or $ire#tion of offi#e or to se#%re 'etho$i#a& an$ s*ste'ati# 'o$es of pro#ee$in!s+ .an$ator* pro isions are those inten$e$ for the se#%rit* of the #iti8ens or whi#h are $esi!ne$ to ens%re e@%a&it* of taxation or #ertaint* as to the nat%re an$ a'o%nt of ea#h personAs tax+ The o'ission to fo&&ow 'an$ator* pro isions ren$ers in a&i$ the a#t or pro#ee$in! to whi#h it re&ates whi&e the o'ission to fo&&ow $ire#tor* pro isions $oes not in o& e s%#h #onse@%en#e+ =Roxas + Raffert*" HF Phi& MIK? RE<6ISITES OF TAX REG6LATIONS reasona(&e within the a%thorit* #onferre$ not #ontrar* to &aw '%st (e p%(&ishe$ EXCEPTIONS TO NON:RETROACTIVIT/ OF R6LINGS Re o#ation" 'o$ifi#ation of re en%e of an* r%&es an$ re!%&ations pro'%&!ate$ (* the Se#+ of Finan#e or CIR sha&& not ha e retroa#ti e effe#t if it wi&& (e pre)%$i#ia& to the taxpa*er" ex#ept4 where the taxpa*er $e&i(erate&* 'isstates or o'its 'ateria& fa#ts fro' his ret%rn or in an* $o#%'ent re@%ire$ of hi' (* the ,IR where the fa#ts s%(se@%ent&* !athere$ (* the ,IR are 'ateria&&* $ifferent fro' the fa#ts on whi#h the r%&in! is (ase$ where the taxpa*er a#te$ in (a$ faith AGENCIES INVOLVED IN TAX AD.INISTRATION ,IR ,%rea% of C%sto's Pro in#ia&" #it*" an$ '%ni#ipa& assessors an$ treas%rers POWERS AND D6TIES OF T5E ,IR Assess'ent an$ #o&&e#tion of a&& nationa& interna& re en%e taxes" fees an$ #har!es Gi e effe#t to an$ a$'inister the s%per isor* an$ po&i#e power #onferre$ to it (* the Tax Co$e or other &aws

Enfor#e'ent of a&& forfeit%res" pena&ties an$ fines in #onne#tion therewith Exe#%tion of )%$!'ents in a&& #ases $e#i$e$ in its fa or (* the Co%rt of Tax Appea&s an$ the or$inar* #o%rts

CLASSIFFICATION OF ASSESS.ENTS Se&f:assess'ent B one in whi#h the tax is assesse$ (* the taxpa*er hi'se&f+ I&&e!a& an$ Voi$ assess'ent B one wherein the tax assessor has no power to a#t at a&&+ Defi#ien#* assess'ent B one 'a$e (* the tax assessor hi'se&f where(* the #orre#t a'o%nt of the tax is $eter'ine$ (* the exa'ination or in esti!ation is #on$%#te$+ The &ia(i&it* is $eter'ine$ an$ is thereafter assesse$ for the fo&&owin! reasons4 the a'o%nt as#ertaine$ ex#ee$s that whi#h is shown as the tax (* the taxpa*er in his ret%rn no a'o%nt of tax is shown in the ret%rn the taxpa*er $i$ not fi&e an* ret%rn at a&& Erroneo%s assess'ent B one wherein the assessor has the power to assess (%t errs in the exer#ise of the power+ PRINCIPLES GOVERNING TAX ASSESS.ENTS assess'ents are pri'a fa#ie pres%'e$ #orre#t an$ 'a$e in !oo$ faith assess'ent sho%&$ (e (ase$ on a#t%a& fa#ts assess'ent is $is#retionar* on the part of the Co''issioner to assess taxes 'a* (e $e&e!ate$ assess'ents '%st (e $ire#te$ to the ri!ht part*+ .EANS E.PLO/ED IN T5E ASSESS.ENT OF TAXES Exa'ination of tax ret%rns 6se of the (est e i$en#e o(taina(&e In entor* ta;in!" s%r ei&&an#e an$ %se of pres%'pti e !ross sa&es an$ re#eipts Ter'ination of taxa(&e perio$ Pres#ription of rea& propert* a&%es Exa'ination of (an; $eposits to $eter'ine the #orre#t a'o%nt of the !ross estate A##re$itation an$ re!istration of tax a!ents Pres#ription of a$$itiona& pro#e$%ra& or $o#%'entar* re@%ire'ents GENERAL R6LE4 In#o'e tax ret%rns are #onfi$entia& EXCEPTIONS4 when the inspe#tion of the ret%rn is a%thori8e$ %pon written or$er of the Presi$ent of the Phi&ippines when inspe#tion is a%thori8e$ %n$er Finan#e Re!%&ations no+ HH of the Se#retar* of Finan#e when the pro$%#tion of the tax ret%rn is 'ateria& e i$en#e in a #ri'ina& #ase wherein the Go ern'ent is intereste$ in the res%&t when the pro$%#tion or inspe#tion thereof is a%thori8e$ (* the taxpa*er hi'se&f CASES W5EN CO..ISSIONER .A/ ASSESS TAXES ON T5E ,ASIS OF T5E ,EST EVIDENCE O,TAINA,LE4 in #ase a person fai&s to fi&e a ret%rn or other $o#%'ent at the ti'e pres#ri(e$ (* &aw he wi&&f%&&* or otherwise fi&es a fa&se or fra%$%&ent ret%rn or other $o#%'ent GRO6NDS FOR TER.INATION OF TAXA,LE PERIOD4 the taxpa*er is retirin! fro' (%siness s%()e#t to tax he inten$s to &ea e the Phi&ippines or re'o e his propert* therefro' he hi$es or #on#ea&s his propert* he perfor's an* a#t ten$in! to o(str%#t the pro#ee$in!s for the #o&&e#tion of the tax for the past or #%rrent @%arter or *ear or ren$ers the sa'e tota&&* or part&* ineffe#ti e %n&ess s%#h pro#ee$in!s are (e!an i''e$iate&*+ INSTANCES W5EN T5E CO..ISSIONER .A/ IN<6IRE INTO ,ANC DEPOSITS4 for the p%rpose of $eter'inin! the !ross estate of a $e#e$ent where a taxpa*er offers to #o'pro'ise his tax &ia(i&it* on the !ro%n$ of finan#ia& ina(i&it* in whi#h #ase he '%st s%('it a wai er+

INSPECTION AND EXA.INATION OF ,OOCS AND RECORDS S5ALL ,E .ADE ONCE IN A TAXA,LE /EAR" EXCEPT4 in #ases of fra%$" irre!%&arit*" or 'ista;es when taxpa*er re@%ests a rein esti!ation to erif* #o'p&ian#e with withho&$in! tax &aws an$ re!%&ations to erif* #apita& !ains tax &ia(i&ities %pon or$er of the Co''issioner 2IR S6RC5ARGE ON T5E A.O6NT OF T5E TAX D6E IS I.POSED IN T5E FOLLOWING CASES4 fai&%re to fi&e an* ret%rn re@%ire$ %n$er the pro isions of the Tax Co$e or re!%&ations on the $ate pres#ri(e$ fi&in! a ret%rn with an interna& re en%e offi#er other than those with who' the ret%rn is re@%ire$ to (e fi&e$ fai&%re to pa* the tax within the ti'e pres#ri(e$ for its pa*'ent fai&%re to pa* the f%&& a'o%nt of tax shown on an* ret%rn re@%ire$ to (e fi&e$ %n$er the pro isions of the Tax Co$e or re!%&ations or the f%&& a'o%nt of tax $%e for whi#h no ret%rn is re@%ire$ to (e fi&e$" on or (efore the $ate pres#ri(e$ for its pa*'ent

REVEN6E R6LES AND REG6LATIONS AND AD.INISTRATIVE R6LINGS AND OPINIONS A%thorit* to pro'%&!ate r%&es an$ re!%&ations an$ r%&in!s an$ opinions The Se#retar* of Finan#e" %pon re#o''en$ation of the Co''issioner of Interna& Re en%e" sha&& pro'%&!ate nee$f%& r%&es an$ re!%&ations for the effe#ti e enfor#e'ent of the pro isions of the NIRC+ This is witho%t the pre)%$i#e to the power of the Co''issioner of Interna& Re en%e to 'a;e r%&in!s or opinions in #onne#tion with the i'p&e'entation of the pro isions of interna& re en%e &aws" in#&%$in! r%&in!s on the #&assifi#ation of arti#&es for sa&es tax an$ si'i&ar p%rposes+ P%rpose of r%&es an$ re!%&ations 7+ To proper&* enfor#e an$ exe#%te the &aws 2+ To #&arif* an$ exp&ain the &aw To #arr* into effe#t the &awAs !enera& pro isions (* pro i$in! $etai&s of a$'inistration an$ pro#e$%re Re@%isites for a&i$it* of r%&es an$ re!%&ations The* '%st not (e #ontrar* to &aw an$ the Constit%tion+ The* '%st (e p%(&ishe$ in the Offi#ia& Ga8ette or a newspaper of !enera& #ir#%&ation+ Co''issioner + Co%rt of Appea&s" 2JQ SCRA HGK The a%thorit* of the .inister of Finan#e" in #on)%n#tion with the Co''issioner of Interna& Re en%e" to pro'%&!ate r%&es an$ re!%&ations for the effe#ti e enfor#e'ent of interna& re en%e r%&es #annot (e #on erte$+ Neither #an it (e $isp%te$ that s%#h r%&es an$ re!%&ations" as we&& as a$'inistrati e opinions an$ r%&in!s" or$inari&* sho%&$ $eser e wei!ht an$ respe#t (* the #o%rts+ .%#h 'ore f%n$a'enta& than either of the a(o e" howe er" is that a&& iss%an#es '%st not o erri$e" (%t '%st re'ain #onsistent with" the &aw the* see; to app&* an$ i'p&e'ent+ A$'inistrati e r%&es an$ re!%&ations are inten$e$ to #arr* o%t" neither to s%pp&ant nor to 'o$if*" the &aw+ La S%erte + Co%rt of Tax App&ea&s" 7HJ SCRA 2M When an a$'inistrati e a!en#* ren$ers an opinion (* 'eans of a #ir#%&ar or 'e'oran$%'" it 'ere&* interprets existin! &aw an$ no p%(&i#ation is therefore ne#essar* for its a&i$it*+ Constr%#tion (* an exe#%ti e (ran#h of the !o ern'ent of a parti#%&ar &aw" a&tho%!h not (in$in! %pon #o%rts" '%st (e !i en wei!ht as the #onstr%#tion #a'e fro' the (ran#h of the !o ern'ent whi#h is #a&&e$ %pon to i'p&e'ent the &aw+ Effe#ti it* of re en%e r%&es an$ re!%&ations Re en%e .e'oran$%' Cir#%&ar 2Q:KG was iss%e$ to !o ern the $raftin!" iss%an#e an$ i'p&e'entation of re en%e tax iss%an#es in#&%$in!4

Re en%e Re!%&ationsD Re en%e an$ .e'oran$%' Or$ersD an$ Re en%e .e'oran$%' Cir#%&ars an$ Re en%e .e'oran$%' Or$ers+ Ex#ept when the &aw otherwise express&* pro i$es" the aforesai$ re en%e tax iss%an#es sha&& not (e!in to (e operati e %nti& after $%e noti#e thereof 'a* (e fair&* ass%'e$+ D%e noti#e of sai$ iss%an#es 'a* (e fair&* pres%'e$ on&* after the fo&&owin! pro#e$%res ha e (een ta;en4 Copies of tax iss%an#e ha e (een sent thro%!h re!istere$ 'ai& to the fo&&owin! (%siness an$ professiona& or!ani8ations4 Phi&ippine Instit%te of Certifie$ P%(&i# A##o%ntantsDD Inte!rate$ ,ar of the Phi&ippinesD Phi&ippine Cha'(er of Co''er#e an$ In$%str*D A'eri#an Cha'(er of Co''er#eD Fe$eration of Fi&ipino:Chinese Cha'(er of Co''er#eD an$ >apanese Cha'(er of Co''er#e an$ In$%str* in the Phi&ippines+ The ,%rea% of Interna& Re en%e sha&& iss%e a press re&ease #o erin! the hi!h&i!hts an$ feat%res of the new tax iss%an#e in an* newspaper of !enera& #ir#%&ation+ Effe#ti it* $ate for enfor#e'ent of the new iss%an#e sha&& ta;e p&a#e thirt* 1HQ3 $a*s fro' the $ate the iss%an#e has (een sent to the a(o e:en%'erate$ or!ani8ations+ ,IR r%&in!s A$'inistrati e r%&in!s" ;nown as ,IR r%&in!s" are the &ess !enera& interpretation of tax &aws (ein! iss%e$ fro' ti'e to ti'e (* the Co''issioner of Interna& Re en%e+ The* are %s%a&&* ren$ere$ on re@%est of taxpa*ers to #&arif* #ertain pro isions of a tax &aw+ These r%&in!s 'a* (e re o;e$ (* the Se#retar* of Finan#e if the &atter fin$s the' not in a##or$an#e with the &aw+ The Co''issioner 'a* re o;e" repea& or a(ro!ate the a#ts or pre io%s r%&in!s of his pre$e#essors in offi#e (e#a%se the #onstr%#tion of the stat%te (* those a$'inisterin! it is not (in$in! on their s%##essors if" thereafter" s%#h s%##essors are satisfie$ that a $ifferent #onstr%#tion of the &aw sho%&$ (e !i en+ R%&in!s in the for's of opinion are a&so !i en (* the Se#retar* of >%sti#e who is the #hief &e!a& offi#er of the Go ern'ent+ EFFECTIVIT/ AND VALIDIT/ OF A TAX ORDINANCE T%a8on + Co%rt of Tax App&ea&s" 272 SCRA FHM If the reso&%tion is to (e #onsi$ere$ as a tax or$inan#e" it '%st (e shown to ha e (een ena#te$ in a##or$an#e with the re@%ire'ents of the Lo#a& Go ern'ent Co$e+ These wo%&$ in#&%$e the ho&$in! of a p%(&i# hearin! on the 'eas%re an$ its s%(se@%ent appro a& (* the Se#retar* of Finan#e" in a$$ition to the %s%a& re@%isites for p%(&i#ation of or$inan#es in !enera&+

,ASIC POWERS OF T5E ,IR CO..ISSIONER : CODE4 =E R A P? 7+ Enfor#e'ent of forfeit%res" fines" an$ pena&ties i'pose$ in re&ation thereto" in#&%$in! the enfor#e'ent exe#%tion of )%$!'ent ren$ere$ (* the CTA or SC in fa or of the ,IR 2+ Re#o''en$ nee$f%& r%&es an$ re!%&ations to the Se#retar* of Finan#e for the effe#ti e i'p&e'entation of the pro isions of the NIRC an$ spe#ia& &aws H+ Assess'ent an$ #o&&e#tion of interna& re en%e taxes" fees an$ other taxes+ J+ Po&i#e power" to a$'inister or to !i e effe#t to the po&i#e power #onferre$ %pon it (* &aw+ CORROLAR/ POWERS OF T5E ,IR CO..ISSIONER CODE4 =S I E O T A A T ? 7+ S%''on persons on #ertain #ases pen$in! in esti!ation

2+ In@%ire into (an; $eposits : Ex#ept4 Se#re#* of (an; $eposits &aw - On&* to $eter'ine the !ross estate of $e#e$ent not to $eter'ine the in#o'e H+ Exa'ine (oo;s of the a##o%nts of the taxpa*er an$ other $o#%'ents J+ O(tain infor'ation I+ Ta;e testi'on* of persons G+ A$'inister oaths F+ Arrest persons who ha e io&ate$ the pro isions of the tax #o$e - sho%&$ ha e warrant of arrest K+ Ta;e in entor*