Limitations on The Power of Taxation

The power of taxation, is however, subject to constitutional and inherent

limitations.

Constitutional limitations are those provided for in the constitution or

implied from its provisions, while inherent limitations are restrictions to
the power to tax attached to its nature.

The following are the inherent limitations.

1. Purpose. Taxes may be levied only for public purpose;

2. Territoriality. The State may tax persons and properties under its
jurisdiction;
3. International Comity. the property of a foreign State may not be taxed
by another.
4. Exemption. Government agencies performing governmental functions
are exempt from taxation
5. Non-delegation. The power to tax being legislative in nature may not
be delegated. (subject to exceptions)

Constitutional limitations.

1. Observance of due process of law and equal protection of the laws.

(sec, 1, Art. 3) Any deprivation of life , liberty or property is with due
process if it is done under the authority of a valid law and after
compliance with fair and reasonable methods or procedure prescribed.
The power to tax, can be exercised only for a constitutionally valid
public purpose and the subject of taxation must be within the taxing
jurisdiction of the state. The government may not utilize any form of
assessment or review which is arbitrary, unjust and which denies the
taxpayer a fair opportunity to assert his rights before a competent
tribunal. All persons subject to legislation shall be treated alike under
like circumstances and conditions, both in the privileges conferred in
liabilities imposed. Persons and properties to be taxed shall be group,
 and all the same class shall be subject to the same rate and the tax
shall be administered impartially upon them.
2. Rule of uniformity and equity in taxation (sec 28(1)Art VI) All taxable
articles or properties of the same class shall be taxed at the same
rate. Uniformity implies equality in burden not in amount. Equity
requires that the apportionment of the tax burden be more or less just
in the light of the taxpayers ability to bear the tax burden.
3. No imprisonment for non-payment of poll tax (sec. 20, Art III) A
person cannot be imprisoned for non-payment of community tax, but
may be imprisoned for other violations of the community tax law, such
as falsification of the community tax certificate, or for failure to pay
other taxes.
4. Non-impairment of obligations and contracts, sec 10, Art III . the
obligation of a contract is impaired when its terms and conditions are
changed by law or by a party without the consent of the other, thereby
weakening the position or the rights of the latter. IF a tax exemption
granted by law and of the nature of a contract between the taxpayer
and the government is revoked by a later taxing law, the said law shall
not be valid, because it will impair the obligation of contract.
5. Prohibition against infringement of religious freedom Sec 5, Art III, it
has been said that the constitutional guarantee of the free exercise
and enjoyment of religious profession and worship, which carries the
right to disseminate religious belief and information, is violated by the
imposition of a license fee on the distribution and sale of bibles and
other religious literatures not for profit by a non-stock, non-profit
religious corporation.
6. Prohibition against appropriations for religious purposes, sec 29, (2)
Art. VI, Congress cannot appropriate funds for a private purpose, or
for the benefit of any priest, preacher or minister or for the support of
any sect, church except when such priest, preacher, is assigned to the
armed forces or to any penal institutions, orphanage or leprosarium.
7. exemption of all revenues and assets of non-stock, non-profit
educational institutions used actually, directly, and exclusively for
 educational purposes from income, property and donor’s taxes and
custom duties (sec. 4 (3 and 4) art. XIV.
8. Concurrence by a majority of all members of Congress in the passage
of a law granting tax exemptions. Sec. 28 (4) Art. VI.
9. Congress may not deprive the Supreme Court of its jurisdiction to
review, revise, reverse, modify or affirm on appeal or certiorari, final
judgments and orders of lower courts in all cases involving the legality
of any tax, impost, assessment or any penalty imposed in the relation
thereto.