ARAULLO UNIVERSITY

College of Law

TAXATION LAW I

OUTLINE
[STUDY GUIDE]

FUNDAMENTAL PRINCIPLES

I. Taxation, Defined
II. Essential Elements of Taxation
a.) Taxation is a NECESSARY POWER of the State
i. What principles follow from the necessity of taxation
1. Courts may not enjoin collection of taxes
2. Tax exemption laws are strictly construed against
the taxpayer...
3. Tax assessments are presumed correct
4. Doctrine of Equitable Recoupment not applicable
5. Taxes are not subject to compensation or set-off
6. Public funds are not subject to execution
7. Government cannot be estopped by acts or
omissions of its tax collectors
8. Taxes are payable even if it displeases the
taxpayer
9. Mere retroactivity does not invalidate a taxing
statute

CASE STUDY:
Importance of taxation and the Lifeblood Doctrine
Commissioner vs. Algue, 17 February 1988

b.) Taxation is INHERENT, or is an attribute of sovereignty

i. What principles follow from the fact that taxation is
inherent in sovereignty?
1. A sovereign state has the power of taxation even
if there is no provision in its constitution...
2. Refunds for taxes generally do not earn interest
3. The right to collect taxes is generally
imprescriptible
ii. Compare Taxation with the other inherent powers
1. Police Power
2. Eminent Domain
iii. Do Local Governments have the power of taxation?
iv. How do the other government branches participate
in the power of taxation?

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c.) Taxation is ESSENTIALLY LEGISLATIVE
i. How does the sovereign exercise the power to tax?
ii. Power to Destroy vis--vis Power to Build

CASE STUDY:
a.) Sison vs. Ancheta, 130 SCRA 654
b.) Philippine Health Care Providers, Inc. vs.
CIR, 18 September 2009

iii. Distinguish taxes from other payments to

governments
1. Tax vs. License
CASE STUDY:
i. Victorias Milling Co. vs. Municipality of
Victorias, L-21183, September 27, 1968)
ii. Cu Unjeng vs. Patstone, 42 Phil. 818;
iii. City of Iloilo vs. Villanueva, 105 Phil. 337
iv. PDC vs. Quezon City, 172 SCRA 629
2. Tax vs. Debt
CASE STUDY:
i. When Compensation is allowed
Melecio R. Domingo vs. Lorenzo C. Garlitos,
G.R. No. L-18994, June 29, 1963
ii. Philex Mining Corp. vs. CIR, 294 SCRA 68

** No imprisonment of for debt has no application

to taxes...

3. Tax vs. Special Assessment

4. Tax vs. Penalty
CASE STUDY
Republic vs. Patanao, L-22356, July 21 1967
5. Tax vs. Tolls
6. Tax vs. Customs Duties
iv. What are the classification of taxes?
1. As to Subject Matter
i. Personal, capitation or poll tax
ii. Property
iii. Excise
2. As to Purpose
i. General
ii. Specific
3. As to Incidence
i. Direct
ii. Indirect
4. As to the Nature of the Tax Base
i. Ad valorem

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 ii. Specific
5. As to the Stucture of the Tax Rate
i. Progressive
ii. Regressive
iii. Proportionate

d.) Taxation is intended to RAISE REVENUE

1. Primary Purpose
2. Secondary Purpose
RIPE

CASE STUDY:
a.) PAL vs. Edu, 15 August 1988
b.) Tio vs. Videogram, 151 SCRA 208
c.) Lutz vs. Araneta, 98 Phil 148

e.) Taxation is on PERSONS, PROPERTIES AND

ACTIVITIES
f.) Taxation is limited TERRITORY within the sovereigns
jurisdiction
g.) Taxation is to DEFRAY THE EXPENSES OF THE
GOVERNMENT

III. Stages in the Tax Process

a.) Levy/Imposition
b.) Collection
c.) Payment

IV. Principles of a Sound Tax System

FAT

V. Concepts and Characteristics of Taxes

a.) Enforced
b.) Proportionate Contribution
c.) Levied by law-making body
d.) Having Territorial Jurisdiction
e.) Personal in nature
f.) Purpose: raising money and other public needs

VI. Limitations on the Exercise of the Taxing Power

A.) INHERENT LIMITATIONS

1. Public Purpose
CASE STUDY:
i. Pascual vs. Secretary of Public Works, 110 Phil 331
ii. Lutz vs. Araneta, supra
iii. Gomez vs. Palomar, 25 SCRA 827

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2. Inherently Legislative
a. Coverage, Object, Nature, Extent, Situs
CASE STUDY:
i. Pepsi vs. Municipality of Tanauan, 69 SCRA 460
ii. Pepsi vs. City of Butuan, 24 SCRA 789

b. Exceptions to Non Delegation

i. LGUs
ii. Allowed by the Constitution
iii. Purely Administrative Functions

3. Territoriality
4. International Comity
5. Tax Exemption of the Government
CASE STUDY
a. LRTA vs. CBAA, 12 October 2000
b. MCIAA vs. Marcos, 11 Septemer 1996
c. MIAA vs. Paranaque, GR No. 155650, 20 July 2006
d. MIAA vs. Pasay City (2009)

B.) CONSTITUTIONAL LIMITATIONS

1. Due Process Clause

CASE STUDY
a. CREBA vs. Exec. Sec. Romulo, March 9, 2010
b. Villegas v. Hiu Chiong Tsai Pao Ho, 10 November 1978
c. City of Bauio vs. De Leon, 25 SCRA 938
d. Sison vs. Ancheta, supra
e. CIR vs. CA and Fortune, GR No. 119761, 29 August 1996
f. CIR vs. M.J Lhuiller Pawnshop, Inc. G.R. No. 150947, July 15,
2003
2. Equal Protection Clause and the Rule on Uniformity of Taxation
CASE STUDY
a. ABAKAD Guro Party List vs. Purisima, 14 October 2008
b. Association of Customs Brokers vs. Manila, 93 Phil 107
c. Shell vs. Vano, 94 Phil 387
d. Kapatiran v. Tan, 30 June 1988
e. Tan vs. Del Rosario, 3 October 1994
f. Tio vs. Videogram, supra
g. Ormoc Sugar Central vs. Ormoc Treasurer, 17 February 1968
h. Philreca vs. DILG, 10 June 2003
i. Judy Anne Santos vs. People, G.R. No. 173176, 26 August
2008
3. Freedom of Religion
CASE STUDY
a. Free Exercise Clause
i. American Bible Society vs. City of Manila, 101 Phil 386

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 ii. Tolentino vs. Secretary of Finance

b. Non-establishment Clause

4. Uniformity, Equitablity and Progressivity of Taxation

a. Tolentino vs. Secretary of Finance, 25 August 1994
b. City of Baguio vs. De Leon, 25 SCRA 398

5. Non-imprisonment for non-payment of poll taxes

6. Non-Impairment Clause
CASE STUDY
a. Casanova v. Hord, 8 Phil 125
b. Cagayan Power and Light Co. v. CIR, G.R. No. 60126,
September 25, 1985
c. MERALCO vs. Province of Laguna, G.R. No. 131359, May 5, 1999
d. RCPI vs. Provincial Assessor of South Cotabato, G.R. No.
144486, 13 April 2005
e. City Government of Quezon City vs. Bayantel, G.R. No. 162015,
March 6, 2006
f. Compare: Smart Communications v.s City of Davao, 16
September 2008 and Quezon City vs. ABS-CBN Broadcasting, 6
October 2008

7. Tax Exemption of Traditional Exemptees

CASE STUDY
a. Department of Finance Order No. 137-87, dated Dec. 16,
1987
b. Abra Valley College vs. Aquino, 15 June 1988
c. Herrera vs. QC Board of Assessment Appeals, 30 September
1961
d. Bishop of Nueva Segovia vs. Provincial Board of Ilocos Norte,
51 Phil 352
e. Lung Center of the Philippines vs. QC, 29 June 2004

8. Tax exemption of non-stock, non-profit educational institutions

a. CIR v. CA, 14 October 1998 (YMCA)

9. Origin of Revenue, Appropriation and Tariff Bills

a. ABAKADA Guro Party List, et.al., vs. The Honorable Executive
Secretary, G.R. No. 168056, 1 September 2005

10. Flexible Tariff Clause

a. ABAKADA Guro Party List, et.al., vs. The Honorable Executive
Secretary, G.R. No. 168056, 1 September 2005

11. Non-impairment of SCs Jurisdiction

12. Taxation by LGUs

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 13. Voting Requirements re: Grant of Tax Exemptions
14. The Doctrine of Judicial Non-interference
15. Taxpayers Suit

VII. Forms of Escape from Taxation

a. Resulting to Losses of Governments revenue
1. Tax Evasion
2. Tax Avoidance
3. Tax Exemption

b. Not Resulting to Losses

1. Shifting
2. Capitalization
3. Transformation

CASE STUDY
1. Republic vs. Heirs of Cesar Jalandoni, 20 Sept. 1965
2. CIR vs. Yutivo and Sons (1961)
3. CIR vs. Norton and Harrison, 31 August 1964
4. Philippine Acetylene vs. CIR, 17 August 1967
5. CIR vs. American Rubber, 29 November 1966
6. CIR vs. John Gotamco and Sons, 27 February 1987
7. Maceda vs. Macaraig, 31 May 1991
8. CIR vs. PLDT, G.R. NO. 140230, 15 December 2005
9. Silkair Singapore vs. CIR, G.R. No. 173594, 6 February 2008
10. Contex vs. CIR, G.R. No. 151135, July 2, 2004
11. CIR vs. Seagate Technology, G.R. No. 153866, 11
February 2005
12. CIR vs. Estate of Benigno Toda Jr., G.R. No. 147188,
September 14, 2004
13. John Hay Peoples Alternative Coalition vs. Lim, et. al. G.R.
No. 119775, October 24, 2003

VIII. Rules of Construction of Tax Laws

CASE STUDY:
a. CIR vs. CA and Ateneo, 18 April 1997

IX. REVIEW: SOME PRINCIPLES/THEORIES INVOLVING TAXATION

a. Benefits-Received Theory/Benefits Protection Theory
b. Necessity Theory
c. Symbiotic Theory
d. Prospectivity
CASE STUDY
i. CIR vs. Acosta, G.R. No. 154068, 3 August 2007

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