ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY

CPA Review Batch 48  October 2024 CPA Licensure Examination

TAX-1801
TAXATION Prepared by: Asser S. Tamayo
For #TeamTax: TAMAYO  CAIGA  GARCIA  LIM  MANUEL TAGLE

BASIC PRINCIPLES 1:
INHERENT POWERS & LIMITATIONS ON THE POWER OF TAXATION
INHERENT POWERS OF THE STATE
1. Inherent powers
a. Inherent powers 1) Taxation – The power by which the sovereign raises revenue to defray the necessary expenses of
the government.
2) Power of Eminent Domain – The power of the State or those to whom the power has been
delegated to take private property for public use upon paying the owners a just compensation
to be ascertained according to law.
3) Police Power – 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 general welfare of the people.
b. Similarities Among 1) They are inherent in the State;
the Three Inherent 2) They exist independently of the Constitution;
Powers 3) They constitute the three methods by which the State interferes with private rights and
property;
4) They are legislative in nature and character;
5) Each presupposes an equivalent compensation.
2. Taxation
a. Taxation Defined 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.
b. Purposes of a. The principal (primary) purpose is to raise revenue for governmental needs. This is also called
Taxation revenue purpose.
b. The secondary purposes of taxation are:
1) Compensatory purposes
a. To reduce excessive inequalities of wealth
b. To maintain high level of employment
c. To control inflation
2) Sumptuary or regulatory purpose - To implement the police power of the State to
promote the general welfare.
c. Theory and Basis a. The power of taxation proceeds upon the theory that the existence of the government is a
of Taxation 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
inhabitants. 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).
d. 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.
e. Scope of the The power of taxation is comprehensive, plenary, unlimited and supreme . This power is,
Power of Taxation however, subject to inherent and constitutional limitations.
f. Characteristics (or a. It is inherent in sovereignty, hence, it may be exercised although not expressly granted by the
Nature) of the Constitution.
State’s Power to b. It is legislative in character, hence, only the legislature can impose taxes (high prerogative of
Tax sovereignty).
c. It is subject to Constitutional and inherent limitations, hence, it is not an absolute power
than can be exercised by the legislature anyway it pleases.
g. Processes included a. Levying or imposition of tax which is a legislative act.
or Embodied in the b. Collection of the tax levied which is essentially administrative in character.
Term Taxation
h. Matters within the a. The subject matter or object to be taxed.
Competence of the b. The purpose of the tax so long as it is a public purpose.
Legislature to c. The amount or rate of the tax.
Determine d. Manner or means of collecting taxes
i. Basic Principles of a. Fiscal Adequacy – This means that the sources of revenue should be sufficient to meet the
a Sound Tax demands of public expenditures.
System (Canons of b. Equality or Theoretical Justice – This means that the tax burden should be proportionate to
Taxation) the taxpayer’s ability to pay (ability to pay principle).
c. Administrative Feasibility – This means that the laws should be capable of convenient, just
and effective administration.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BASIC PRINCIPLES 1: INHERENT POWERS & LIMITATIONS on the POWER of TAXATION TAX-1801
3. Distinctions Among the Three Inherent Powers
a. As to Purpose
Taxation Support of government
Police power Promote general welfare
Power of eminent domain Public purpose
b. As to Authority which exercises the power
Taxation Government only
Police power Government only
Power of eminent domain Government, public service companies and public utilities
c. As to Persons Affected
Taxation Community or class of individuals
Police power Community or class of individuals
Power of eminent domain Individual as owner of a particular property
d. As to Benefits Received
Taxation Equivalent of tax in the form of protection and benefit
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
e. As to Effect
Taxation Taxes become part of public funds
Police power No transfer of title, there is restraint on the injurious use of property
Power of eminent domain There is transfer of the right to property, either ownership or a lesser right
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 Obligations Clause of the Constitution
Taxation Inferior to the clause
Police power Superior to the clause
Power of eminent domain Inferior to the clause

INHERENT AND CONSTITUTIONAL LIMITATIONS

1. Distinction Between Inherent and Constitutional Limitations
a. Inherent limitations Inherent limitations are those which restrict the power although they are not embodied in
the Constitution.
b. Constitutional Constitutional limitations are those which are expressly found in the Constitution or
limitations implied from its provisions.

2. Inherent Limitations
a. Public purpose This is the purpose affecting the inhabitants of the State as a community and not merely as
individuals.
b. International comity The property of a foreign state or government may not be taxed by another.
c. Territorial jurisdiction The tax laws of a State are enforceable only within its territorial limits.
d. Double taxation This means taxing a person, property or right twice within the same year by the same taxing
authority.
e. Exemption from taxation Government agencies performing governmental functions are exempt from tax unless
of government entities expressly taxed while those performing proprietary functions are subject to tax unless
expressly exempted.
f. Non – delegation of the The power to tax being legislative cannot be delegated to the other branches.
power to tax

3. Inherent Limitations (Amplified and Illustrated)

a. Public Purpose
1) Test of rightful The best test of rightful taxation is that proceeds of the tax must be used:
taxation a) for the support of the government, or
b) for any of the recognized objects of government, or
c) to promote the welfare of the community
2) Tax levied for private A tax levied for a private, not public, purpose constitutes taking of property without due
purpose process of law as it is beyond the power of the government to impose.
3) Instances of public a) Financing of educational activities and programs;
purpose b) Promotion of science;
c) Erection and maintenance of roads, bridges and piers;
d) Aid for victims of a public calamity;
e) Relief of the poor and unemployed and to provide for unemployment benefits;
f) Payment of pensions and bonuses for services rendered by public officers and employees;
g) The construction of experimental stations to seek increases of efficiency in sugar production
and the improvement of living and working conditions in sugar mills or plantation.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BASIC PRINCIPLES 1: INHERENT POWERS & LIMITATIONS on the POWER of TAXATION TAX-1801
b. Territorial Jurisdiction
1) Tax laws operate The tax laws (and this is true of all laws) do not operate beyond a country’s territorial limits.
within territorial limit
2) Property wholly or Property which is wholly or exclusively within the jurisdiction of another state receives none of
exclusively in other the protection for which a tax is supposed to be compensation.
countries
3) Taxability of a person A person may be taxed where there is between him and the taxing state a privity of
relationship justifying the levy.
4) Situs of Taxation
a) Meaning of situs of Situs of taxation literally means place of taxation.
taxation
b) Basic rule on situs The situs is in the state which has jurisdiction or which exercise dominion over the subject in
question.
c) Situs of taxation Subject Situs
1) Poll tax on persons Residence of the person
2) Real property tax State where the property is located whether the owner is
resident or not
3) Tax on tangible personal State where it is physically located although the owner
properties resides in another jurisdiction (lexi rei sitae)
4) Tax on intangible Domicile of the owner (mobilia sequntur personam)
personal property
5) Income tax State where the taxpayer is a resident or citizen
6) Business, occupation and Place where the business is done, or the occupation is
transaction tax engaged in or the transaction took place
7) Tax on gratuitous State where the transferor is/was a citizen or resident, or
transfer of property where the property is located

d) Multiplicity of situs Income or intangible personal properties may be subject to taxation in several taxing
jurisdiction.
e) Remedies against 1) Provision of exemptions;
multiplicity of situs 2) Allowance of deduction or tax credit for foreign taxes;
3) Treaties with other states.

c. International Comity
1) Meaning of International comity means courteous and friendly agreement and interaction between
international comity nations.
2) Grounds of International comity is based on any of the following grounds:
international comity a) Sovereign equality among states under international law by virtue of which one state
cannot exercise its sovereign power over another.
b) The usage among states that when one enters the territory of another, there is an
implied understanding that the former does not intend to degrade its dignity by placing
itself under jurisdiction of the latter.
c) The rule of international law that a foreign government may not be sued without
its consent so that it is useless to assess tax since anyway it cannot be collected.
3) International law is Our Constitution has adopted the generally accepted principles of international law as part of
part of the law of the the law of our country.
country

d. Non – Delegation of the Power to Tax

1) Power of taxation purely The power of taxation being purely legislative, Congress cannot delegate the power to others.
legislative The limitation arises from the doctrine of separation of powers among the three branches of
the government.
2) Exceptions to the rules The following are exceptions to the rules against the delegation of the taxing power.
against the delegation a) Delegation to the President to fix within specified limits tariff rates, import or export
of the tax power quotas, tonnages and wharfage dues and other duties or imposts.
b) Delegation to local governments the power to create its own sources of revenues and to
levy taxes, subject to such limitations as may be provided by law.
c) Delegation to administrative agencies certain aspects of the taxing process that are not
legislative such as:
1) The power to fix value of property for purposes of taxation pursuant to fixed rules.
2) The power to assess and collect taxes.
3) The power to perform any of the innumerable details of computation, appraisement,
and adjustments, and the delegation of such duties.

e. Exemption of Government Agencies

1) Government agencies Government agencies performing governmental functions are exempt from tax unless
performing government expressly taxed.
functions
2) Government agencies Government agencies performing proprietary functions are subject to tax unless expressly
performing proprietary exempted.
function

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BASIC PRINCIPLES 1: INHERENT POWERS & LIMITATIONS on the POWER of TAXATION TAX-1801
f. Double Taxation
1) Meaning of double a) Double taxation referred to is direct double taxation or direct duplicate taxation.
taxation b) Direct double taxation means taxing twice, by the same taxing authority, within the same
jurisdiction or taxing district, for the same purpose, in the same year (or taxing period)
some of the property in the territory.
2) Instances where there There is no direct double taxation in the following:
is no direct double a) A tax on a mortgage as personal property when the mortgaged property is also taxed at
taxation its full value as real estate.
b) A tax upon the same property imposed by two differing states.

4. Constitutional Limitations
1) Rules a) Due Process of Law (Art. III, Sec. 1);
b) Equal Protection of the Laws (Art. III, Sec. 1);
c) Rule of Uniformity and Equity in Taxation [Art. VI, Sec. 28 (1)].
2) Negatives a) Non–Imprisonment for Non – Payment of Poll Tax (Art. III, Sec. 20);
b) Non–Impairment of the Obligation of Contracts (Art. III, Sec. 10);
c) Non–Infringement of Religious Freedom (Art. III, Sec. 5);
d) No Appropriation for Religious Purposes) [Art. VI, Sec. 29 (2)];
e) Non–Impairment of the Jurisdiction of Supreme Court in Tax Cases [Art. VIII, Sec. 5 (2) (b)].
3) Exemptions a) Exemption from taxation of charitable institutions, churches and parsonages or convents
appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and
improvements, actually, directly, and exclusively used for religious, charitable or educational
purposes [Art. VI, Sec. 28 (3)];
b) Exemption of Revenues and Assets of Non–Stock, Non–Profit Educational Institutions and
Donations for Educational Purposes from taxes and Duties [Art. XIV, Sec. 4 (3)];
c) Exemption from Tax of All Grants, Endowments, Donations or Contributions Used Actually,
Directly and Exclusively for Educational Purposes [Art. XIV, Sec. 4 (4)].

4) Congress a) Concurrence by a Majority of all Members of the Congress for the Passage of a Law
Granting Tax Exemptions [Art. VI, Sec. 28 (4)];
b) All Appropriation, Revenue or Tariff Bills Shall Originate Exclusively from the House of
Representatives, but the Senate may Propose or Concur with Amendments (Art. VI, Sec. 24);
c) The Congress may Authorize the President to Fix Tariff Rates, Import and Export Quotas,
Tonnage and Wharfage Dues and other Duties or Imposts [Art. VI, Sec. 28 (2)];
d) Congress May Provide for Incentives Including Tax Deductions to Encourage Private
Participation in Programs of Basic and Applied Scientific Research (Art. XIV, Sec. 11).
5) President a) Power of the President to Veto Any Particular Item or Items in a Revenue or Tariff Bill [Art.
VI Sec. 27 (2)]
6) Special Fund a) All Money Collected on Any Tax Levied for Special Purpose Shall Be Treated as a Special
Fund [Art. VI, Sec 29 (3)].
7) Local Governments a) Each Local Government Unit Shall Have the Power to Create its Own Sources of Revenue
and to Levy Taxes, Fees and Charges (Art. X, Sec. 5);
b) Local Government Units Shall Have a Just Share in the National Taxes (Art. X, Sec. 6).

5. Constitutional Limitations (Amplified)

a. Due Process of Law
1) Constitutional provision “No person shall be deprived of life, liberty or property without due process of law….” (Art. III
Sec. 1a)
2) Deprivation with due Any deprivation of life, liberty, or property is with due process if it is done:
process of law a) Under the authority of law that is valid or of the Constitution itself, and
b) After compliance with fair and reasonable methods or procedures prescribed by law.
3) Procedural due process Procedural due process in judicial proceedings requires “opportunity to be heard before
judgment is rendered affecting one’s person or property.”
4) Requirement of due Due process in taxation requires:
process a) Tax must be for public purpose;
b) Imposed within the territorial jurisdiction;
c) No arbitrariness or oppression in assessment and collection.

b. Equal Protection of the Laws

1) Constitutional provision No person shall be deprived of life, liberty or property without due process of law, nor shall
any person be denied equal protection of the laws.” (Art. III Sec. 1)
2) Persons subject to All persons subject to legislation shall be treated alike under circumstances and conditions both
legislation in the privileges conferred and liabilities imposed.
3) Absolute equality not The Constitution does not require things which are different in fact to be treated in law as
required though they were the same.
4) Classification is allowed Classification is allowed. It is valid when:
a) There is substantial distinction;
b) The classification is germane (relevant) to the issue;
c) The classification applies not only to existing conditions but future conditions as well;
d) The classification is applicable to all members of the same class.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BASIC PRINCIPLES 1: INHERENT POWERS & LIMITATIONS on the POWER of TAXATION TAX-1801
5) Examples of denial of There is denial of equal protection in the following cases:
equal protection a) Where an ordinance imposes a property tax on motor vehicles using the streets of
Manila, such being payable only by owners of vehicles residing in Manila but those outside
Manila who also use the streets are not made to share the corresponding burden.
b) Where a tax provision is enforced against manufacturers of filled milk only, but not
against persons similarly situated such as manufacturers of condensed skimmed milk.

c. Rule of Uniformity and Equity in Taxation

1) Constitutional provision “The rule of taxation shall be uniform and equitable.” [Art. VI, Sec. 28 (1)].
2) Properties of the same All taxable articles or properties of the same class shall be taxed at the same rate.
class
3) When is a tax uniform A tax is considered uniform when it operates with the same force and effect in every place
where the subject may be found.
4) Concept of equity in The concept of equity in taxation requires that apportionment of the tax burden be more or
taxation less just in the light of the taxpayer’s ability to shoulder the tax burden and, if warranted, on
the basis of the benefits he receives from the government.
5) Congress to evolve a To ensure and enhance the equity objective, the Constitution enjoins Congress to evolve a
progressive system of progressive system of taxation.
taxation
6) Progressive system of Progressive system of taxation means that tax shall place emphasis on direct rather than
taxation indirect taxation, with ability to pay as the principal criterion. A system that places emphasis
on indirect taxes is said to be a regressive tax system.
7) Difference between Equal protection refers more to like treatment of persons in like circumstances, uniformity and
equal protection and equity refer to the proper relative treatment for tax purposes of persons in unlike
uniformity and equity circumstances.

END

Adversity causes some men to break; others to break record. – William Arthur Ward

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 ReSA - THE REVIEW SCHOOL OF ACCOUNTANCY
CPA Review Batch 48  October 2024 CPA Licensure Examination
TAX-1802
TAXATION Prepared by: Asser S. Tamayo
For #TeamTax: TAMAYO  CAIGA  GARCIA  LIM  MANUEL TAGLE

BASIC PRINCIPLES 2: TAX & OTHER CHARGES

1. Tax defined and essential characteristics of tax
a. Tax defined Tax is an enforced contribution levied by the State by virtue of the sovereignty on persons and property
within its jurisdiction for the support of the government and all public needs.
b. Essential 1) It is an enforced contribution;
Characteristics 2) It is levied pursuant to legislative authority;
of Tax 3) It is proportionate in character;
4) It is payable in money;
5) It is levied on persons and property within the jurisdiction of the State;
6) It is levied and collected for the purpose of raising revenue to be used for public purpose;
7) It is commonly required to be paid at regular intervals (not all taxes).
2. Classification of taxes
a. As to Scope 1) National – imposed by the National Government (e.g., income tax, estate tax, donor’s tax, value
added tax, other percentage taxes, documentary stamp tax.)
2) Local or Municipal – imposed by municipal corporations (e.g., real estate tax, community tax.)
b. As to who bears 1) Direct – Tax which is demanded from the person who also shoulders the burden of tax or tax which
the burden the taxpayer cannot shift to another (e.g., income tax, estate tax, donor’s tax).
2) Indirect – Tax which is demanded from one person in the expectation and intention that he shall
indemnify himself at the expense of another or tax which can be shifted to another
person (e.g., value-added tax, other percentage taxes)
c. As to the 1) Specific – Tax of fixed amount imposed by the head or number, or by some standard of weight or
determination of measurement. It requires no assessment other than a listing or classification of the
the amount subjects to be taxed (e.g., excise tax on cigar, cigarettes and liquors).
2) Ad valorem – Tax of 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 (e.g., VAT,
income tax, donor’s tax and estate tax).
d. As to purpose 1) General/Fiscal/Revenue – Tax imposed solely for the general purpose of the government, i.e., to
raise revenue for government expenditures (e.g., income tax, donor’s tax and estate
tax).
2) Special/Regulatory – Tax imposed for a specific purpose, i.e., to achieve some social or economic
ends irrespective of whether revenue is actually raised or not (e.g., tariff and certain
duties on imports).
e. As to Object or 1) Personal/Poll/Capitation – Tax of a fixed amount imposed on individual, whether citizens or not,
subject matter residing within a specified territory without regard to their property or the occupation in
which he may be engaged (e.g., community tax).
2) Property – Tax imposed on property, whether real or personal, in proportion either to its value, or in
accordance with some other reasonable method of apportionment (e.g., real estate tax).
3) Excise – Any tax which does not fall within the classification of a poll tax or a property tax. This is a
tax on the exercise of certain rights or privileges (e.g., income tax, estate tax, donor’s tax,
VAT other percentage taxes)
Note: This is different from the excise tax which is a business tax imposed on items such as cigars,
cigarettes, wines, liquors, fireworks, mineral products, etc.
f. As to rates or 1) Proportional – Tax based on a fixed percentage of amount of the property, receipts, or other basis
gradation to be taxed (e.g., VAT, other percentage taxes).
2) Progressive – Tax the rate of which increases as the tax base or bracket increases (e.g., income
tax, estate tax and donor’s tax).
3) Regressive – Tax the rate of which decreases as the tax base or bracket increases.
3. Regressive System of Taxation
a) A regressive tax must not be confused with regressive system of taxation. In a society where the majority of the
people have low income, it exists when there are more indirect taxes imposed that direct taxes.
b) The low – income sector of the population as a whole buys more consumption goods on which indirect taxes are collected.
The burden of indirect taxes rests more on them than on the more affluent groups.
c) Studies reveal that the progressive elements of the income and other direct taxes have not sufficiently offset the regressive
effects of the indirect as a whole.
4. Distinction of Tax from Other Charges
a. From toll
1) Toll defined Toll is a sum of money collected for the use of something, generally applied to the consideration
which is paid for the use of road, bridge or the like, of a public nature.
2) Distinction Toll Tax
between toll and a) Whose demand Demand of proprietorship Demand of sovereignty
tax b) Paid for what Paid for use of another person’s Paid for the support of the
property Government
c) Basis Amount is based on the cost of Amount is based on the
construction or maintenance of the necessities of the State
public improvements used

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BASIC PRINCIPLES 2: TAX & OTHER CHARGES TAX-1802
d) Authority that May be imposed by the Imposed by Government only
imposes Government or by private entities
b. From special assessment
1) Special assessment Special assessment is an enforced proportional contribution from owners of lands for special
Defined benefits resulting from public improvements.
2) Distinction Special assessment Tax
between special a) Levied on what Levied on land only Levied on persons, property or
assessment and the exercise of privilege
tax b) Whose personal Not a personal liability of the Personal liability of the person
liability person assessed taxed
c) Basis Based wholly on the special Based on the necessities of the
benefits to the property assessed government without any special
benefit directly accruing to the
taxpayer
d) Application Exceptional both as to time and Has general application
place
c. From license fee
1) License fee Defined License fee or permit is a charge imposed under the police power for the purpose of regulations.
2) Distinction License fee Tax
between license a) Imposed for what Imposed for regulation Imposed for revenue
fee and tax b) Exercise of what Involves an exercise of police Involves exercise of taxing
power power power
c) Amount of Amount is limited to the necessary Amount is generally not limited
imposition expenses of regulations
d) Subject of Imposed on the right to exercise a Imposed on persons, property
imposition privilege and the right to exercise a
privilege
e) Purpose Legal compensation or reward of Enforced contribution assessed
an officer for specific services by sovereign authority to defray
public expenses
f) Consequence for Failure to pay makes the act or Failure to pay does not
failure to pay business illegal necessarily make the business
illegal
d. From debt
Distinction between Debt Tax
debt and tax a) Basis Based on contract Based on law
b) Assignability Assignable Generally not assignable
c) Payment mode May be paid in kind Generally payable in money
d) Set-off or May be subject to set-off or Generally not subject to set-off
compensation compensation or compensation
e) Consequence for No imprisonment for non-payment Imprisonment for non-payment
failure to pay except poll tax
f) Prescriptive Governed by ordinary prescriptive Governed by special prescriptive
period period period
g) Interest Draws interest when stipulated or Does not draw interest except
when there is default when delinquent
e. From penalty
Distinction between Penalty Tax
penalty and tax a) Purpose Designed to regulate conduct Aimed at raising revenue
b) Authority that Imposed by Government or private Imposed by Government only
imposes entities
f. Other charges/related terms
a. Subsidy A subsidy is pecuniary aid directly granted by the government to an individual or private commercial
enterprise deemed beneficial to the public.
b. Revenue Revenue refers to all the funds or income derived by the government, whether from tax or any other
sources.
c. Internal revenue Internal revenue refers to taxes imposed by the legislature other than duties on imports and
exports.
d. Customs duties Customs duties (or simply duties) are taxes imposed on goods exported to or imported from a
(or simply country. Customs duties are really taxes but the latter is broader.
duties)
e. Tariff Tariff may be used in one of the following three senses:
1) 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.
2) The duties payable on goods imported or exported.
3) The system or principles of imposing duties on the importation or exportation of goods.

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ReSA – THE REVIEW SCHOOL OF ACCOUNTANCY
BASIC PRINCIPLES 2: TAX & OTHER CHARGES TAX-1802
5. National Taxes Under Special Laws, Sources of Tax Laws, Basic Tax Laws in the Philippines
a. National Taxes a) Customs duties; f) Energy taxes on aircraft, motorized watercraft
Imposed Under b) Sugar adjustment tax; and electric power consumption;
Special Laws c) Tax on narcotic drugs; g) Travel tax;
d) Specific educational fund tax; h) Private motor vehicle tax.
e) Science fund tax;
b. Sources of Tax a) Constitution; f) Judicial decisions;
Laws b) Statutes or laws; g) Provincial, city, municipal and barangay ordinances;
c) Presidential decrees; h) Treaties and international agreements.
d) Revenue regulations;
e) Administrative rulings and opinions;
c. Basic Tax Laws of a) National Internal Revenue Code;
the Philippines b) Tariff and Customs Code;
c) The Local Tax Code;
d) The Real Property Tax Code.
6. Exemptions from Taxation
a. Exemption from Exemption from taxation is a grant of immunity, express or implied, to particular persons, or
taxation defined corporations, or to persons or corporations of a particular class, from a tax upon property, or an
excise tax which persons and corporations generally within the same taxing district, are obliged to
pay.
b. Classification of 1) Express or affirmative – These are express provisions in the Constitution, statutes, treaties,
exemptions ordinances, franchises or contracts.
2) Implied or exemption by omission – This occurs when a tax is levied on certain classes of
persons, properties or transactions without mentioning
other classes. Those not mentioned are deemed
exempted by omission.
c. Interpretation of Exemption grants are strictly construed against the person, entity or property claiming exemption.
exemption grant One claiming must justify such claim by clear and positive grant
7. Tax Avoidance vs. Tax Evasion
a. Tax avoidance (tax Tax avoidance (tax minimization) is the use by the taxpayer of legally permissible methods in
minimization order to reduce tax liability.
b. Tax evasion (tax Tax evasion (tax dodging) is the use by the taxpayer of illegal means to defeat or lessen the
dodging) payment of tax.
8. Relationship Among Impact, Shifting and Incidence of Taxation
The impact of taxation corresponds to the imposition of the tax, shifting refers to the transfer of tax and incidence consists
of the payment of the tax.
9. Shifting
a. Shifting defined Shifting is the transfer of the burden of a tax by the original payer or the one to whom the tax was
assessed or imposed to another or someone else.
b. Kinds of shifting 1) Forward shifting – This takes place when the burden of the tax is transferred from a factor of
production through the factors of distribution until it finally settles on the
ultimate purchaser or consumer.
2) Backward shifting – This is effected when the burden of the tax is transferred from the
customer or purchaser through the factors of distribution to the factor of
production.
3) Onward shifting – This occurs when tax is shifted two or more time either forward or backward.
10. Legislation of Tax Laws
a. Concurrence by a Majority of Concurrence by a Majority of all Members of the Congress for the Passage of a Law
all Members of the Congress Granting Tax Exemptions [Art. VI, Sec. 28 (4)];
to Pass Tax Exemption
b. Appropriation, Re- venue or All Appropriation, Revenue or Tariff Bills Shall Originate Exclusively from the House
Tariff Bills Originate from of Representatives. (Art. VI, Sec. 24)
House of Representatives
c. Senate May Propose or The Senate may Propose or Concur with Amendments. (Art. VI, Sec. 24)
Concur
d. Conference Committee The Committee will harmonize the bill introduced by the House of Representative and a
parallel bill introduced in the Senate.
e. President’s Approval The harmonized bill signed by the President becomes a law.
f. President’s Veto The President shall have the power to veto any particular item or items in
an appropriation, revenue, or tariff bill, but the veto shall not affect the item or
items to which he does not object [Art. VI, Sec. 27 (2)].
d. Congress May Authorize The Congress may Authorize the President to Fix Tariff Rates, Import and Export Quotas,
President to Fix Certain Tonnage and Wharfage Dues and other Duties or Imposts [Art. VI, Sec. 28 (2)];
Items
e. Congress May Provide Congress May Provide for Incentives Including Tax Deductions to Encourage Private
Incentives Participation in Programs of Basic and Applied Scientific Research (Art. XIV, Sec. 11).

- END -
Life asks of every individual a contribution and it is up to that individual to discover what it should be. – Victor Frankl

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