B.

CLASSIFICATIONS
AND DISTINCTIONS

CLASSIFICATION OF TAXES
THEY ARE :
(1)As to subject matter or object:
Personal, poll, or capitation tax of a fixed amount imposed
on persons residing within a specified territory, whether
citizens or not, without regard to their property or the
occupation or business in which they may be engaged. Taxes
of a specified amount imposed upon each person performing a
certain act or engaging in certain business or profession are
not, however, poll taxes. (71 Am. Jur. 2d 357)
Example: Community (formerly residence) tax

CLASSIFICATION OF TAXES
Property tax imposed on property, whether real or personal,
in proportion either to its value or in accordance with some
other reasonable methods of apportionment. The obligation to
pay the tax is absolute and unavoidable and is not based upon
the voluntary action of the person assessed. (see IBID., 358)

Examples: real estate tax

Excise any tax which does not fall within the classification
of a poll tax or a property tax. Thus, it is said that an excise tax is a
charge imposed upon the performance of an act, the enjoyment of
a privilege, or the engaging in an occupation(Ibid., 360-361),
profession, or business. The obligation to pay this tax is based on
the voluntary action of the person taxes in performing the act or
engaging in the activity which is subject to the excise.

CLASSIFICATION OF TAXES
The term excise tax is synonymous with privilege tax and
the two are often used interchangeably.
Examples : Income tax, value-added tax, estate tax, donors
tax
Note: Excise tax, as used above, is not to be confused with
excise tax imposed on certain specified articles manufactured
of produced in, or imported info, the Philippines, for domestic
sale or consumption or for any other disposition. (see No. [3],
infra)

CLASSIFICATION OF TAXES
(2) As to who bears the burden:
Direct- tax which is demanded from the person who
also shoulders the burden of the tax; or tax for which the
taxpayer is directly or primarily liable or which he cannot
shift to another. (see F, infra.)
Indirect- tax which is demanded from one person in
the expectation and intention that he shall indemnify
himself at the expense of another (J.S. Mills, Principles of
Political Economy [1909], p 823.) falling finally upon the
ultimate purchaser or consumer; or tax imposed upon
goods before they reach the consumer who ultimately

CLASSIFICATION OF TAXES
Thus, the person who absorbs or bears the burden of
the tax is other the one whim it is in imposed and
required by law to pay the tax. Practically all business
taxes are indirect.
Examples: value-added tax; excise tax on certain specific
goods; percentage taxes; customs duties.

CLASSIFICATION OF TAXES
(3) As to determination of amount:
Specific tax of a fixed amount imposed by the head
or number, or by some standard of weight or
measurement; it requires no assessment (valuation)
other than a listing or classification of the objects to be
taxed.
Examples: Taxes on distilled spirits, wines, and
fermented liquors; cigars and cigarettes, and others.

CLASSIFICATION OF TAXES
Ad valorem tax of a fixed proportion of the value of the
property with respect to which the tax is assessed; it requires
the intervention of assessors or appraisers to estimate the
value of such property before the amount due from each
taxpayer can be determined. The phrase ad valorem means
literally, according to value (71 Am. Jur. 2d 355)
Examples: Real estate tax; excise taxes on automobiles, non-essential
goods such as jewelry and perfumes, and others; customs duties (except
on cinematographic films).
Note: excise taxes imposed under our National Internal Revenue Code on
certain specified articles (see Chap. II-G) are either specific or ad
valorem. The term excise tax is used in the Tax Code as a kind of
property tax applicable to particular articles mentioned in the law. Real
estate tax is an ad valorem tax but while it is also a property tax, but
while it is also a property tax, it is not an excise tax in the sense used

CLASSIFICATION OF TAXES
(5) As to scope for authority imposing the tax
National tax imposed by the national government.
Examples: National internal revenue taxes; customs
duties, and national taxes imposed by special laws.
Municipal or Local tax imposed by municipal
corporatios or local government units.
Examples: real estate tax; professional tax.

CLASSIFICATION OF TAXES
(6) As to graduation or rate:
Proportional tax based on a fixed percentage of the
amount of the property, receipts, or other basis to be taxed.
Examples: Real estate taxes; value-added tax; and other
percentage taxes.
Progressive or graduated tax the rate of which
increases as the tax base of bracket increases.
Examples: Income tax; estate tax; donors tax.
Regressive tax the rate of which decreases as the tax
base or bracket increases, i.e., the tax rate and the tax base
move in opposite directions. We have no regressive taxes.

Regressive system of taxation

A regressive tax must not be confused with regressive system of
taxation.
In a society where the majority of the people have low incomes, it
exist when there are more indirect taxes imposed than dire teaxes.
Since the low-income sector of the population as a whole buys more
consumption goods on which the indirect taxes are collected, the
burden of indirect taxes rests more on them than on the more affluent
groups. There should be no objection if indirect taxes are raised on
luxury items consumed mainly by the higher income groups and
reduces on basic commodities consumed by the lower income
segments of society.
Studies reveal that the progressive elements of the income and other
direct taxes have not sufficiently offset the regressive effects of the
indirect taxes as a whole.
A progressive tax is, therefore, also different from progressive system
of taxation. (see C, infra.)

Tax distinguished from toll

Toll has been defined as a sum of money for the use of
something, generally applied to the consideration which
is paid for the use of a road, bridge or the like, of a
public nature. (1 Cooley 77.)
(1)A toll is a demand of proprietorship, while a tax is a demand
of sovereignty;
(2)A toll is paid for the use of anothers property, while tax is
paid for the support of the government;
(3)The amount of toll depends upon the cost of construction or
maintenance of the public improvement used, while there is
generally no limit on the amount of tax that may be
imposed; and
(4)A toll ma be imposed by the government or private

Tax distinguished from penalty

Penalty is any sanction imposed as a punishment for
violation of law or acts deemed injurious. Thus, the
violation of tax laws may give rise to imposition of
penalty.
(1)A penalty is designed to regulate conduct, while a tax is
generally intended to raise revenue; and
(2)A penalty may be imposed by the government or private
individuals or entities, while a tax may be imposed only by
the government.

Tax distinguished from special

assessment
Special assessment is an enforced proportional contribution from

owners of lands especially or peculiarly benefited by public

improvements. Under the Local Government Code ( R.A. No. 7160.),
a province, city, or municipality, or the National Government, may
impose a special levy on lands especially benefited by public works
or improvements financed by it. ( see Sec. 240 thereof; Chap. IV-L,
5.)
A tax can be distinguished from a special assessment by considering the
characteristics of the latter, namely:
(1)A special assessment is levied only on land;
(2)It is not a personal liability of the person assessed, i.e., his liability is
limited only to the land involved;
(3)It is based wholly on benefits(not necessity); and
(4)It is exceptional both as the time and place. A tax, on the other hand, has
generally application. (see Apostolic Prefect vs. Treas. Of Baguio, 71 Phil.
547; 1 Cooley 106-107.)

Tax distinguished from special

assessment
A charged imposed only on property owners benefited is
a special assessment rather than a tax notwithstanding
that the statute calls it a tax. The rule is that an
exemption from taxation does not include exemption
from special assessment. But the power to tax carries
with it the power to levy a special assessment. (Ibid.)
Note: The term special levy is the name used in the former
Real Property Tax Code and the present Local Government
Code.

Tax distinguished from license or

permit fee.
License or permit fee is a charge imposed under the
police power (infra.) for purposes of regulation. License
is rather in the nature of a special privilege, of a
permission of authority to do what is within its terms. It
makes lawful an act which would otherwise be unlawful.
A license granted by the State is always revocable. (Sy
vs. Central Bank of the Phil., L-41480, April 30, 1976.)

Tax distinguished from license or

permit
fee
(1)License fee is the legal compensation or reward of an officer for specific
services, while tax is an enforced contribution assessed sovereign
authority to defray public expenses (Manila Electric Co. vs. Auditor
General, 75 Phil. 128)
(2)It is imposed for regulation, while a tax is levied for revenue;
(3)It involves an exercise of police power (infra.), while a tax involves the
exercise of taxing power (Compania General de Tabacos de Filipinas vs
City of Manila, L16619, June 29, 1963.);
(4)Its amount should be limited to the necessary expenses of inspection and
regulation, while there is generally no limit on the amount of tax that
may be imposed;
(5)It is imposed on the right to exercise a privilege, while a tax is imposed
also on persons and property; and
(6)Failure to pay a license fee makes the act of business illegal while failure
to pay a tax does not necessarily make that act or business illegal. (see
Saldana vs. City of Iloilo, 104 Phil. 28.)

Importance of the distinctions

(1)It is necessary to determine whether a particular imposition is a
tax or a license fee because some limitations apply only to one
and not to other, and for the reason that exemption from taxes
may not include exemption from license fee.
(2)The power to regulate as an exercise of police power does not
include the power to impose fees for revenue purposes. The
amount of tax bears no relation at all to the probable cost of
regulating the activity, occupation or property being taxed.
(3)An exaction, however, may be considered both a tax and a
license fee. This is true in the case of car registration fees which
may be regarded as taxes even as they also serve as an
instrument of regulation. If the purpose is primarily revenue, or if
revenue, is, at least, one of the real and substantial purposes,
then the exaction is properly called a tax.

Importance of the distinctions

(4) But a tax may have only a regulatory purpose. The
general rule, however, is that the imposition is a tax if its
primary purpose is to generate revenue, and regulation is
merely incidental; but if regulation is the primary
purpose, the fact that incidentally revenue is also
obtained does not make the imposition of a tax.

Tax distinguished from debt

A tax is not a debt in the ordinary sense of the word and the two
are distinguished as follows:
(1)A debt is generally based on contract, express of implied, while a tax
is based on law;
(2)A debt is assignable, while a tax cannot generally be assigned;
(3)A debt may be paid in kind, while a tax is generally payable in money;
(4) a debt may be the subject of set-off or compensation
(5)A person cannot be imprisoned for non-payment of debt (except when
it arises from a crime) while imprisonment is a sanction for nonpayment of tax (except poll tax).
(6)A debt is governed by the ordinary periods of prescription, while tax is
governed by special prescriptive periods provided for in the Tax Code;
and
(7)A debt draws interest when it is so stipulated or when there is default,
while

Tax distinguished from debt

A tax, however, like a debt, is a liability or obligations.
(Art. 1157 [1]1, Civil Code.)
The exception to the general rule regarding set-off is
where both the claims of the government and the
taxpayer against each other have already become due
and demandable as well as fully liquidated. Thus, a
taxpayer who has been assessed municipal taxes may
assign in favor of the municipality to cover the
assessment.

Tax distinguished from other terms

(1)Subsidy it is a pecuniary aid directly granted by the government to an
individual or private commercial enterprise deemed beneficial to the
public. A subsidy, therefore, is not a tax although, a tax may have to be
imposed to pay it.
(2)Revenue it refers to all the funds or income derived by the
government, whether from tax of from whatever source and whatever
manner. The term, however, refers more to income derived from the
regular system of taxation and, as such, accrues more or less regularly
every year. While revenue refers to the amount collected, tax refers to
the amount imposed.
Examples of receipts other than from taxes are those derived from
grants (financial assistance by one government to another), donations (if
from a non-governmental source), loans, commercial revenues(those
received by government-owned or controlled enterprises, e.g., tolls,
interest on funds borrowed, water, rents etc.) and administrative revenues.
(e.g., fines, penalties, and forfeitures.)

Tax distinguished from other terms

(3) Internal revenue it refers to taxes imposed by the legislature
other than duties on imports and exports.
(4) Customs duties (or simply duties) they are taxes imposed on
goods exported from or imported into a country. The term
taxes is broader in scope as in includes customs duties.
(5) Tariff the term may be used in one of three (3) senses:
As a book of rates drawn usually in alphabetical order containing the
names of several kinds of merchandise with the corresponding duties to
be paid for the same;
As the duties payable on goods imported or exported; or
As the system or principle of imposing duties on the importation (or
exportation) of goods.
However, this terms tariff and customs duties are used
interchangeably in the Tariff and Customs Code. (Pres. Decree No. 1464.)

Concept of power of eminent

domain
The power of eminent domain is the power of the state
or those to whom the power has been delegated to take
private property for public use upon paying to the
owner a just compensation to be ascertained according
to law.
The conditions imposed by the Constitution for its exercise
are:
(1)The existence of public use for the taking;
(2)The payment of just compensation (see Sec. 9, Art. III,
Consitution.); and
(3)The observance of due process in the taking (see Sec. 1,
Ibid; C, infra.)

Concept of police power

Police power has been referred to as the power of the
state to enact such laws in relation to persons and
property as may promote public health, public morals,
public safety and the general prosperity and welfare of
its inhabitants. This power springs from the obligation of
the State to protect its citizens and provide for the
safety and welfare of society.
Illustrations of police power laws are those requiring a
license for the practice of medicine; punishing vagrancy
and prostitution; regulating the use of traffic on roads;
requiring a license for the right to drive motor vehicles;
providing for zoning regulations; regulating prices of
commodities and rents of apartments; and authorizing

Similarities among taxation,

eminent domain, and police power
The similarities are as follows:
(1)They all rest upon necessity because there can be no effective government
without them;
(2)They all underlie and exist independently of the Constitution although the
conditions for their exercise may be prescribed by the Constitution and by
law;
(3)They are ways by which the state interferes with private rights and
properties;
(4)They are legislative in nature and character, although the actual exercise of
the powers is given to the executive authorities, national or local; and
(5)They all presuppose an equivalent compensation received, directly or
indirectly, by the persons affected by the exercise of these powers by the
government.

Distinctions among the three

powers
They are the following
(1)As to authority which exercise the power:
taxation and police power may be exercised only by the
government or its political subdivisions; and
the exercise of the power of eminent domain may be granted to
public service companies or public utilities.
(2) As to purpose:
in taxation, the property (generally in the form of money) is taken
for the support of the government;
in eminent domain, the property is taken for public use; hence,
it must be compensated; and
in police power, the use of property is regulated for the purpose
of promoting the general welfare; hence, it is not compensable.

Distinctions among the three

powers
(3) As to persons affected:
taxation and (usually) police power operate upon a community or
a class of individuals; and
eminent domain operates on an individual as the owner of a
particular property
(4) As to effect:
in taxation, the money contributed in the concept of taxes
becomes part of the public funds;
in eminent domain, there is a transfer of the right to property
whether it be of ownership or a lesser right. (e.g., possession); and
in the police power, there is no transfer title; at most there is
restraint on the injurious use of property.

Distinctions among the three

powers
(5) As to benefits received:
in taxation, it is assumed that the individual receives
the equivalent of the tax in the form of protection and
benefits he receives from the government as such;
In eminent domain, he receives the market value of
the property taken from him; and
in police power, the person affected receives no
direct and immediate benefit but only such as may arise
from the maintenance of a healthy economic standard of
society and is often referred to as damnum absque

Distinctions among the three

powers
(6) As to amount of imposition:
in taxation, there is generally no limit on the amount
of tax that may be imposed;
in eminent domain, there is no amount imposed but
rather the owner is paid the market value of the property
taken; and
in police power, the amount imposed should not be
more than sufficient to cover the cost of the license and
the necessary expenses of police surveillance and
inspection, examination, or regulation as nearly as the

Distinctions among the three

powers
(7) As to relationship to the Constitution:
the taxing power is subject to certain constitution
limitations including the prohibition against impairment
of the obligation of contracts.
eminent domain is also inferior to the impairment
prohibition so that the government cannot expropriate
property which under a contract it had previously bound
itself to purchase from the other contracting party; and
police power is relatively free from constitutional
limitations and is superior to the impairment provisions.
In appropriate case, the constitutional injunction against
impairment of the obligation of contracts cannot be

Taxation and public finance

Public finance refers to the financial operations of all
levels of the government. Such operations include
budgeting, taxing, appropriating, purchasing, borrowing,
disbursing funds, and regulating the currency.
So, taxation is merely a part of public finance.