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1. Taxation. Taxation is the act of laying a tax, i.e. the process or means by which the sovereign, through its
lawmaking body, raises income to defray the necessary expenses of government.
a. Purposes of Taxation
1) The principal (primary) purpose is to raise revenue for governmental needs. This is also called
revenue purpose.
2) The secondary purposes of taxation are:
a) Compensatory purposes
a. To reduce excessive inequalities of wealth
b. To maintain high level of employment
c. To control inflation
b) Sumptuary or regulatory purpose -To implement the police power of the State to promote the
general welfare.
b. Theory and Basis of Taxation
a. The power of taxation proceeds upon the theory that the existence of the government is a
necessity, that it cannot continue without means to pay its expenses and that for this means it has
a right to compel all its citizens and property within its limits to contribute.
b. The basis is the reciprocal duties of protection and support between the State and its citizens. The
State collects taxes from the subjects of taxation in order that it may be able to perform the
functions of government. The citizens on the other hand, pays taxes in order that they may be
secured in the enjoyment of the benefits of organized society (benefits received theory)
c. Lifeblood Theory
a. Taxes are the lifeblood of the Government and their prompt and certain availability are imperious
(expecting obedience) need.
b. Upon taxation depends the government’s ability to serve the people for whose benefit taxes are
collected.
c. Manifestation of lifeblood theory:
1) Imposition of tax even in the absence of Constitutional grant.
2) Right to select objects of taxation.
3) No injunction to enjoin (or stop) tax collection
d. Scope of the Power of Taxation. The power of taxation is comprehensive, plenary, unlimited and
supreme. This power is, however, subject to inherent and constitutional limitations.
e. Characteristics (or Nature) of the State's Power to Tax
a. It is inherent in sovereignty, hence, it may be exercised although not expressly granted by the
Constitution.
b. It is legislative in character, hence, only the legislature can impose taxes (high prerogative of
sovereignty).
c. It is subject to Constitutional and inherent limitations, hence, it is not absolute power that can be
exercised by the legislature anyway it pleases.
f. Processes included or Embodied in the Term Taxation
a. Levying or imposition of tax which is a legislative act.
b. Collection of the tax levied which is essentially administrative in character.
g. Matters within the Competence of the Legislature to Determine
a. The subject matter or object to be taxed.
b. The purpose of the tax so long as it is a public purpose.
c. The amount or rate of the tax.
Police power No direct and immediate benefit, only such as may arise from the
maintenance of a healthy economic standard of society (damnum
absque injuria or damage without injury)
Power of eminent domain Market value of the property taken from him
f. As to Amount of Imposition
Taxation No limit
Police power Limited to the cost of the license and the necessary expenses of
police surveillance and regulation
Power of eminent domain No imposition, the owner is paid the fair market value of his
property
g. As to Relationship to the Non-Impairment of Obligation Clause of the Constitution
Taxation Inferior to the clause
Police power Superior to the clause
Power of eminent domain Inferior to the clause