tax reviewer 1

7/25/2019 Tax Reviewer 1

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General Principles of Taxation

MEANING OF TAXATION

1. Taxation is the process or means by whichthe sovereign, through its law-making body,

raises income to defray the necessary

expenses of the government.

. Taxation is the power of the !tate to impose

charge or burden upon persons, property, or

property rights, for the use and support of

the government and to enable it to discharge

its appropriate functions. "t is the act of

levying tax.

PURPOSE OF TAXATION

Revenue:

The primary purpose of taxation is to raise

revenue to finance government expenditures. #lways

remember this purpose.

$ote%%%%

"t applies to all taxes, whether income,

donor&s, estate, '#T, etc. !o when you are asked why

'#T is levied, your answer should be (to raise

revenue to finance government expenditures),

sigurado check na yan. *owever, there are times that

taxes are levied for regulatory purposes. #lways

remember to check the intent why such tax was

levied as in the case of +smena vs +rbos, where it

was held that the tax is levied with a regulatory

purpose which is for the stabiliation of the petroleum

products industry.

Non-Revenue:

a. Promotion of General Welfare Taxation may

be used as an implement of police power in order

to promote the general welfare of the people.

This is illustrated in the cases of +smena vs

+rbos and epublic vs /acolod-0urcia.

Osmea vs! Or"os

GR No ##$$%& Mar'( )*& *##)

acts2 The +il Price !tabiliation und 3+P!4 was

created by President 0arcos to reimburse oil

companies for cost increases in crude oil.

!ubse5uently, the +P! was reclassified into a 6trust

liability account,6 and ordered released from the

$ational Treasury to the 0inistry of 7nergy. "t is

contended that the creation of trust fund violates the

8onstitution on the reason that if a special tax is

collected for a specific purpose, the revenue

generated as a special fund to be used only for the

purpose indicated.

"ssue2 9hether the creation of the trust fund is

unconstitutional.

*eld2 $o. The tax collected is not in pure exercise of

the taxing power. "t is levied with a regulatory

purpose, to provide a means for the stabiliation of

the petroleum products industry. The levy is primarily

in the exercise of the police power of the !tate.

Re+u"li' of t(e P(ili++ines vs! ,a'olo-Mur'ia

GR No! .-*#$/0& .-*#$/1& .-*#$/%

2ul3 #& *#%%


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acts2 # :; created the Philippine !ugar "nstitute,

a semi-public corporation. "t ac5uired the "nsular

!ugar efinery from the proceeds of the !ugar tax to

be collected under # :;. The operation of the

refinery was disastrous. /acolod-0urcia refused to

pay its contribution to the said fund contending that

the purchase of refinery with money from the

"nstitute&s fund was not authoried under # :; and

that the continued operation of the refinery is inimical

to its interest.

"ssue2 9hether /acolod- 0urcia is liable.

*eld2


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#ccordingly, the obligation to pay taxes is a

statutory liability.

/! "t is an enfor'e 'ontri"ution

# tax is not a voluntary payment or donation.

"t is not dependent on the will or contractual

assent, express or implied, of the person

taxed. Taxes are not contracts but positive

acts of the government.

Take note na ang source ng obligation to pay

taxes is ?#9, hindi sya based on contract

kasi consent is not essential. *indi kailanganna pumayag ka munang magbayad ng tax

bago ka maging liable.

)! "t is 4enerall3 +a3a"le in mone3

Tax is a pecuniary burden an exaction to

be discharged alone in the form of money

which must be in legal tender, unless

5ualified by law.

!o you cannot pay your taxes with chickens,

properties, etc., only in money. 9hy@

0ahihirapan si /" nyan, isipin mo

mapupuno ng baboy ang /".

0agkakaobligasyon pa sila na pakainin ang

mga ito, kasi kung hindi, paano kung

pumayat ang baboy. /umaba ang timbang.

!igurado bababa ang value neto. $alugi na

nga sila, nangamoy baboy pa. emember,

nagfufluctuate ang value ng properties unlike

money.

Auestion2 !hould the money be in legal

tender@#nswer2


4/32

1. Ne'essit3 T(eor3 - The power of taxation

proceeds upon the theory that the existence

of the government is a necessity. The state

cannot continue to exist without the means

to pay its expenses, and that for these

means it has a right to compel all its citiens

and property within its limits to contribute.

Take note that what is necessary under this

theory is the 7C"!T7$87 of the

G+'7$07$T, not the 7C"!T7$87 of

T#C7!.

. ,enefits-Prote'tion T(eor3 - The basis oftaxation is found in the reciprocal duties of

protection and support between the !tate

and its inhabitants. "n return for the citien&s

contribution for the support of the

government, the !tate is supposed to make

ade5uate and full compensation in the form

of benefits and protection which it gives to

his life, liberty, and property.

Qualifications of Benefits-Protection Theory:

a. "t does not mean that only those

who are able to pay and do pay

taxes can en>oy the privileges and

protection given to a citien by the

government.b. rom the contributions received, the

government renders no special orcommensurate benefit to any

particular property or person.c. The only benefit to which the

taxpayer is entitled is that derived

from his en>oyment of the privileges

of living in an organied society

established and safeguarded by the

devotion of taxes to public

purposes.

d. # taxpayer cannot ob>ect to or resistthe payment of taxes solely

because no personal benefit to him

can be pointed out as arising from

the tax.

;. .ife"loo T(eor3 -Taxes are the lifeblood

of the government. Thus, their prompt and

certain availability is an imperious need.

9ithout taxes, the government would be

paralyed for lack of motive power to

activate and operate it.

Dnder this theory, the 7C"!T7$87 of T#C is

a necessity, not the 7C"!T7$87 of the

G+'7$07$T.

NATURE OF T8E POWER OF TAXATION

1. In(erent in soverei4nt3 The power of

taxation is inherent in sovereignty as an

incident or attribute thereof, being essential

to the existence of every government. "t can

be exercised by the government even if the

8onstitution is entirely silent on the sub>ect.

. .e4islative in '(ara'ter The power to tax

is exclusively legislative and cannot be

exercised by the executive or >udicial branch

of the government.

;. Su">e't to 'onstitutional an in(erent

limitations ? 0ost of these limitations are


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specifically provided in the 8onstitution or

implied there from while the rest are inherent

and they are those which spring from the

nature of the taxing power itself although,

they may or may not be provided in the

8onstitution.

Though taxes are the lifeblood of the

government, the power of taxation is not

absolute as held in the case of 8" vs.

#lgue, "nc.

7OMMISSIONER v! A.GUE& IN7!

GR No! .-/$$#%& Fe"ruar3 *@& *#$$*1$ S7RA #

Fa'ts2 #lgue "nc. filed its income tax returns showing

deductions, for promotional fees paid, from their gross

income. The /" assessed #lgue based on such

deductions contending that the promotional fees are

not ordinary, reasonable and necessary expenses,

thus, disallowed. #lgue was able to prove that the

professional fees were necessary and reasonable in

the light of the efforts exerted by the payees in

inducing investors and prominent businessmen to

venture in an experimental enterprise and involve

themselves in a new business re5uiring millions of

pesos.

Issue2 9hether the /" correctly disallowed the

deduction.

8el2 $o, because #lgue was able to prove that the

professional fees were ordinary, necessary and

reasonable. "t is well-settled that taxes are the

lifeblood of the government and so should be

collected without unnecessary hindrance +n the other

hand, such collection should be made in accordance

with law as any arbitrariness will negate the very

reason for government itself. "t is therefore necessary

to reconcile the apparently conflicting interests of the

authorities and the taxpayers so that the real purpose

of taxation, which is the promotion of the common

good, may be achieved.

/ut even as we concede the inevitability and

indispensability of taxation, it is a re5uirement in all

democratic regimes that it be exercised reasonably

and in accordance with the prescribed procedure. "f it

is not, then the taxpayer has a right to complain and

the courts will then come to his succor. or all the

awesome power of the tax collector, he may still be

stopped in his tracks if the taxpayer can demonstrate,

as it has here, that the law has not been observed.

Roas v 7TA

GR No .-/1B0)& A+ril /%& *#%$

acts2 The oxas brothers inherited from their

grandparents several properties which included

farmlands. The government, in l ine with the

constitutional mandate to ac5uire big landed estates

and apportion them among landless tenants-farmers,

persuaded the oxas brothers to part with their

landholdings The brothers agreed to sell the lots to

the government. Dnfortunately, the government did

not have funds so the brothers agreed to a purchase

by installment. !ubse5uently, the 8" demanded from

the brothers the payment of deficiency income taxes

resulting from the sale.


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"ssue2 whether the brothers are liable.

*eld2 $o. "t should be borne in mind that the sale of

the farmlands to the very farmers who tilled them for

generations was not only in consonance with, but

more in obedience to the re5uest and pursuant to the

policy of our Government to allocate lands to the

landless. "n order to maintain the general public&s trust

and confidence in the Government this power must

be used >ustly and not treacherously. "t does not

conform with the sense of >ustice for the Government

to persuade the taxpayer to lend it a helping hand and

later on penalie him for duly answering the urgent

call.

ASPE7TS OF TAXATION

1. .ev3 determination of the persons,

property or excises to be taxed, the sum or

sums to be raised, the due date thereof and

the time and manner of levying and

collecting taxes 3strictly speaking, such

refers to taxation4

. 7olle'tion consists of the manner of

enforcement of the obligation on the part of

those who are taxed. 3this includes payment

by the taxpayer and is referred to as tax

administration4

The two processes together constitute the

(taation s3stem).

EXTENT OF T8E .EGIS.ATICE POWER TO

TAX

1. !ub>ects or ob>ects to be taxed. Purpose of the tax

;. #mount or rate of the taxE. 0anner, means and agencies of collection of

the tax

,ASI7 PRIN7IP.ES OF A SOUN; TAX

SSTEM

1. Fis'al Ae5ua'3 ? the sources of tax

revenue should coincide with, and

approximate the needs of government

expenditure. $either an excess nor a

deficiency of revenue vis-F-vis the needs of

government would be in keeping with the

principle.

7(aveD v On4+in

GR No @%@@$& 2une %& *##B

Fa'ts: President 8oraon #5uino issued 7+ B;

increasing the basis for assessment of real property

tax. 8have, a taxpayer and landowner, 5uestioned

the constitutionality of 7+ BE. *e alleged that it will

bring unreasonable increase in real property taxes.

Issue: 9hether 7+ B; is constitutional.

*eld2


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of real properties that have occurred since then is not

in consonance with a sound tax system.

iscal ade5uacy, which is one of the characteristics of

a sound tax system, re5uires that sources of revenue

must be ade5uate to meet government expenditures

and their variations.

. Aministrative Feasi"ilit3 ? tax laws

should be capable of convenient, >ust and

effective administration.

;. T(eoreti'al 2usti'e the tax burden should

be in proportion to the taxpayer&s ability to

pay (ability-to-pay principle). The 1HB

8onstitution re5uires taxation to be e5uitable

and uniform.

$ote%%%%%%%

$on-observance of these principles will not

necessarily render the tax imposed invalid except to

the extent that specific constitutional limitations are

violated.

7.ASSIFI7ATION OF TAXES

As to Su">e't matter

1. Personal& 'a+itation or +oll taes taxes

of fixed amount upon all persons of a certain

class within the >urisdiction of the taxing

power without regard to the amount of their

property or occupations or businesses in

which they may be engaged in.

7xample2 community tax

. Pro+ert3 Taes taxes on things or

property of a certain class within the

>urisdiction of the taxing power.

7xample2 real estate tax

;. E'ise Taes charges imposed upon the

performance of an act, the en>oyment of a

privilege, or the engaging in an occupation.

7xamples2 income tax, value-added tax,

estate tax or donor&s tax

As to ,uren

1. ;ire't Taes taxes wherein

the incidenceas well as the impactor

burden of the tax faces on one person.

7xamples2 income tax, community tax,

donor&s tax, estate tax

. Inire't Taes taxes wherein the

incidence of or the liability for the payment of

the tax falls on one person, but the burden

thereof can be shifted or passed to another

person.

7xamples2 '#T, percentage taxes, customs

duties excise taxes on certain specific

goods.

$ote%%%%%%%%%

Im+a'tmeans the point on which a tax is originally

imposed. In'ien'e is the point on which the tax

burden settles down. Tandaan itong mabuti. ?et&s take


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for example the case of income tax.


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$P8 has been exempted from both direct and indirect

taxation, the $P8 must be held exempted from

absorbing the economic burden of indirect taxation

a !cetylene case, an" sabi n" #, $apa" e%empt

da& si #onsumer sa ta%, e%empt lan" sya doon sa

m"a ta% na sya ay '*#T+ +!B+* a case na

ito, hindi directly liable si .apocor at /0! sa sales

ta% i Philippine !cetylene #o nc an" directly liable

1anun din sa 2aceda case 'ahil e%empt si

consumer, hindi p&ede ipasa ni seller an" ta% $ay

consumer

3alos pareho rin an" situation sa case ni 4ohn

1otamco and ons, an" e%empt ay si #0.52*,

pero sabi ni # hindi rin liable si *++* sa ta%

7IR v Gotam'o

GR No .-)*B#/& Fe"ruar3 /@& *#$@

acts2 The contract for the construction of the building

of 9*+ in 0anila was awarded to Gotamco. 9*+

en>oys tax exemptions. 9*+ received an opinion

from the 8" stating that the ;M contractor&s tax is an

indirect tax, and thus 9*+ is exempt. !ubse5uently,

the 8" reversed his opinion stating that the ;M

contractor&s tax is not a direct or indirect tax due on

9*+, but a tax primarily due from the contractor.

"ssue2 9hether Gotamco is liable for the tax.

*eld2 $o. 9here the exemption from indirect tax is

given to the contractee, but the evident intention is to

exempt the contractor so that such contractor may no

longer shift or pass on any tax to the contractee, the

contractor may claim tax exemption on the

transaction.

!a case na ito, hindi liable si 8+$T#8T+

3!7??74 sa tax dahil daw ang intention ay i-exempt

si 9*+ sa pagbayad ng tax, whether direct or

indirect. 0as mabuting i-exempt na rin si G+T#08+

sa contractor&s tax para wala na itong maipasa kay

9*+. 9*+&s exemption from (indirect taxes) implies

that Gotamco is exempt from contractor&s tax.

7IR v Ameri'an Ru""er 7om+an3

GR No .-*#%%@& Novem"er /#& *#%%

acts2 #merican ubber sold its rubber products

locally and declared the same for tax purposes in

which the 8ommissioner accordingly assessed. The

company paid under protest claiming that its rubber

products were agricultural products exempt from

sales tax under !ection 1HHb of the Tax 8ode.

"ssue2 whether #merican rubber is entitled to recover

the sales tax paid by it.

*eld2


10/32

*! GeneralFis'alRevenue tax imposed for

the general purposes of the government, i.e.,

to raise revenues for governmental needs.

7xamples2 income taxes, '#T, and almost all

taxes

/! S+e'ialRe4ulator3 tax imposed for

special purposes, i.e., to achieve some

social or economic needs.

7xamples2 !pecial 7ducational fund tax

under eal Property Taxation. 31M ito ng

#!!7!!7= '#?D7 ng real property, >ust incase na tanungin sa recit4

As to Measure of A++li'ation

1. S+e'ifi' Ta tax imposed per head, unit or

number, or by some standard of weight or

measurement and which re5uires no

assessment beyond a listing and

classification of the sub>ects to be taxed.

6un&ari, piso per bottle

7xamples2 taxes on distilled spirits, wines,

and fermented li5uors

. A Calorem Ta tax based on the value of

the article or thing sub>ect to tax. 6un&ari,

789 n" value n" property

7xample2 real property taxes, customs duties

As to Rate

1. Pro4ressive Ta the rate or the amount of

the tax increases as the amount of the

income or earning 3tax base4 to be taxed

increases.

7xamples2 income tax, estate tax, donor&s

tax

. Re4ressive Ta the tax rate decreases as

the amount of income or earning 3tax base4

to be taxed increases. alan" re"ressive

ta% sa pinas

;. Mie Ta tax rates are partly progressiveand partly regressive.

E. Pro+ortionate Ta tax rates are fixed on a

flat tax base.

7xamples2 real estate tax, '#T, and other

percentage taxes

As to S'o+e or aut(orit3 im+osin4 t(e ta

1. National Ta ?tax imposed by the $ational

Government.

7xamples2 national internal revenue taxes,

customs duties

. Muni'i+al.o'al Ta tax imposed by ?ocal

Government units.

7xamples2 real estate tax, professional tax

TAXES ;ISTINGUIS8E; FROM OT8ER

IMPOSITIONS


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Toll vs! Ta

Toll sum of money for the use of something,

generally applied to the consideration which is paid

for the use of a road, bridge of the like, of a public

nature.

Ta vs! Toll

demand of sovereignty demand of proprietorship

paid for the support of

the government

paid for the use of

another&s property

generally, no limit as to

amount imposed

amount depends on the

cost of construction or

maintenance of the public

improvement used

imposed only by the

government

imposed by the

government or private

individuals or entities

Penalt3 vs! Ta

Penalt3 any sanctions imposed as a punishment for

violations of law or acts deemed in>urious.

Ta vs Penalt3

generally intended to raise revenue designed to regulate conduct

imposed only by the government imposed by the government or private

individuals or entities

S+e'ial Assessment vs Ta

S+e'ial Assessment an enforced proportional

contribution from owners of lands especially or

peculiarly benefited by public improvements.

Ta vs S+e'ial Assessment

imposed on persons, property and excise levied only on la

personal liability of the person assessed not a persona

assessed, i.e. h

the land involved

based on necessity as well as on benefits

received

based wholly on

general in application 3#postolic Prefect

vs Treas. +f /aguio, B1 Phil IEB4

exceptional both

Im+ortant Points to 7onsier Re4arin4 S+e'ial

Assessments:

1. !ince special assessments are not taxes

within the constitutional or statutory

provisions on tax exemptions, it follows that

the exemption under !ec. H3;4, #rt. '" of

the 8onstitution does not apply to special

assessments.. *owever, in view of the exempting proviso

in ec ;


12/32

enforced contribution assessed by

sovereign authority to defray public

expenses

legal compensation or reward of an officer

for specific purposes

for revenue purposes for regulation purposes

an exercise of the taxing power an exercise of the police power

generally no limit in the amount of tax to

be paid

amount is limited to the necessary

expenses of inspection and regulation

imposed also on persons and property imposed on the right to exercise privilege

non-payment does not necessarily make

the act or business illegal

non-payment makes the act or business

illegal

Im+ortan'e of t(e istin'tions "et6een ta an

li'ense fee:

1. !ome limitations apply only to one and not to

the other, and that exemption from taxes

may not include exemption from license

fees.

. The power to regulate as an exercise of

police power does not include the power to

impose fees for revenue purposes.

0insan nakakalito kasi ang tawag sakanya ay (tax)

pero ang purpose nya naman ay regulatory. 0insan

ang tawag sakanya ay (license) o (fee) pero ang

purpose nya naman is to raise revenue. That is why it

is very important to identify whether it is a tax or a

license fee.

P(ili++ine Airlines& In'! C! Eu

G!R! No! .- 0*)$)& Au4ust *1& *#$$

acts2 Dnder its franchise, P#? is exempt from the

payment of taxes. The ?and Transportation

8ommissioner issued a regulation re5uiring all tax

exempt entities, among them P#? to pay motor

vehicle registration fees. The money collected from

the motor vehicle registration fees are intended for

the construction and maintenance of public roads,

streets and bridges.

"ssue2 9hether or not motor vehicle registration fees

are considered as taxes.

*eld2


13/32

is in reality a tax on income which the city cannot

impose.

"ssue2 whether the supervision fee is a tax on income.

*eld. $o. The general rule is that the imposition is a

tax if its primary purpose is to generate revenue and

regulation is merely incidentalK but if regulation is the

primary purpose, the fact that incidentally revenue is

also obtained does not make the imposition of a tax.

!ince the supervision fee is for regulatory purpose, it

is not a tax.

;e"t vs! Ta

=ebt is based upon >uridical tie, created by law,

contracts, delicts or 5uasi-delicts between parties for

their private interest or resulting from their own acts or

omissions.

Ta vs ;e"t

based on law based on contracts, express or impliedgenerally, cannot be assigned assignable

generally payable in money may be paid in kind

generally not sub>ect to set-off or

compensation

may be sub>ect to set-off or compensation

imprisonment is a sanction for non-

payment of tax except poll tax

no imprisonment for non-payment of debt

governed by special prescriptive periods

provided for in the Tax 8ode

governed by the ordinary periods of

prescriptions

does not draw interest except only when

delin5uent

draws interest when so stipulated, or in

case of default

General Rule:Taxes are not sub>ect to set-off or legal

compensation.

P(ile Minin4 7or+oration v 7IR

GR No */1@B0& Au4ust /$& *##$

acts2 /" demanded from Philex the payment of its

tax liabilities. Philex protested the demand stating that

it has pending claims for '#T inputOrefund, which

should be applied against it tax liabilities.

"ssue2 whether legal compensation can take place.

*eld2 $o. The government and the taxpayer are not

creditors and debtors or each other. +bligations in the

nature of debts are due to the government in its

corporate capacity, while taxes are due to the

government in its sovereign capacity.

Fran'ia v Intermeiate A++ellate 7ourt

GR No .-%@%0#& 2une /$& *#$$

acts2 rancia was the registered owner of a house

and lot a portion of which was expropriated by the

epublic of the Philippines. /ecause he was not able

to pay real property taxes from 1:; to 1BB, his

property was sold in a public auction. rancia

contends that his tax delin5uency has been

extinguished by legal compensation. *e claims that

the government owed him when a portion of his land

was expropriated.

"ssue2 whether the expropriation payment

compensate for the real estate taxes due.

*eld2 $o. There can be no offsetting of taxes against

the claims that the taxpayer may have against the

government. # person cannot refuse to pay a tax on

the ground that the government owes him an amount

e5ual to or greater than the tax being collected.


14/32

The collection of a tax cannot await the results of a

lawsuit against the government. "nternal revenue

taxes cannot be the sub>ect of compensation. The

Government and the taxpayer are not mutually

creditors and debtors of each other under #rticle 1BH

of the 8ivil 8ode and a claim of taxes is not such a

debt, demand, contract or >udgment as is allowed to

be set-off.

E'e+tion: 9here both the claims of the government

and the taxpayer against each other have already

become due and demandable as well as fully

li5uated.

;omin4o Cs Garlitos

G!R! NO! *$##) 2une /#& *#%)

acts2 "n =omingo vs 0oscoso, the !8 declared as

final and executor the order for the payment of the

estate and inheritance taxes, charges and penalties

by the estate of the of the late 9alter Price. "t appears

that the Government is indebted to the estate of

Price. !uch claim has been recognied and the

amount has been appropriated by a corresponding

law 3# BJJ4.

"ssue2 whether legal compensation may take place in

the case at bar.

*eld2


15/32

corresponding duties to be paid for

the same.. #s duties payable on goods

imported or exported 3P= $o. ;J4;. #s the system or principle of

imposing duties on the

importationOexportation of goods.

I. Internal Revenue refers to taxes imposed

by the legislative other than duties or imports

and exports.

:. Mar4in Fee a currency measure designed

to stabilie the currency.

B. Tri"ute synonymous with taxK taxation

implies tribute from the governed to some

form of sovereignty.

H. Im+ost in its general sense, it signifies any

tax, tribute or duty. "n its limited sense, it

means a duty on imported goods and

merchandise.

IN8ERENT POWERS OF T8E STATE

1. Police Power

. Power of 7minent =omain

;. Power of Taxation

;istin'tions

Taation Poli'e Po6er Eminent

;omain

P5P0*

- levied for the - exercised to - taking of

purpose of

raising

revenue

promote public

welfare thru

regulations

property for

public use

!205.T 0> *?!#T0.

- no limit - limited to the

cost of

regulations,

issuance of the

license or

surveillance

- no exaction,

compensation

paid by the

government

B*.*>T *#*/*'

- no special or

direct benefits

received but

the en>oyment

of the

privileges of

living in an

organied

society

- no direct benefits

but a healthy

economic

standard of

society or

damnum abs@ue

inAuria is attained

- direct benefit

results in the

form of >ust

compensation

.0.-2P!2*.T 0> #0.T!#T

- the

impairment

rule subsist

- contract may be

impaired

- contracts may

be impaired

T!.>* 0> P0P*T 13T

- taxes paid

become part

of public

funds

- no transfer but

only restraint on

the exercise of

property right

exists

- property is

taken by the

gov&t upon

payment of >ust

compensation

#0P*

- affects all

persons,

property and

excise

- affects all

persons, property,

privileges, and

even rights

- affects only

the particular

property

comprehended

B!

- public - public necessity -public


16/32

necessity and the right of

the state and the

public to self-

protection and

self-preservation

necessity,

private

property is

taken for public

use!5T30T 3#3 *?*#* T3* P0*

- only by the

government

or its political

subdivisions

- only by the

government or its

political

subdivisions

- may be

granted to

public service,

companies, or

public utilities

There are situations where taxation was used asan implement of police power.

Tio Cs! Cieo4ram Re4ulator3 ,oar

*1* S7RA /B$ G!R! No! .-@1%#@ *$ 2un *#$@

Fa'ts: Tio assails the validity of P= 1HB entitled (#ct

8reating the 'ideogram egulatory /oard) which

imposes a ;JM tax on gross receipts. Tio contends

that the imposition is harsh, confiscatory, oppressive

andOor unlawfully restraints trade in violation of the

due process clause of the 8onstitution.

Issue: 9hether P= 1HB is a valid exercise of the

power of taxation@

*eld2


17/32

1. $on-impairment of the !upreme 7ourts&

>urisdiction in Tax 8ases1;. Tax exemption of Revenuesand #ssets,

including Grants, 7ndowments, =onations or

8ontributions to 7ducation "nstitutions

Ot(er 7onstitutional Provisions relate to

Taation

1. Su">e'tand Title of /ills. Power of the Presientto 'eto an items in

an #ppropriation, evenue or Tariff /ill;. $ecessity of an A++ro+riationmade before

moneyE. A++ro+riationof Public 0oneyI. Taxes ?evied for S+e'ialPurposes:. #llotment to .G7

IN8ERENT .IMITATIONS

Pu"li' Pur+ose of Taes

a. "f taxation is for a public purpose, the tax

must be used2

1. for the support of the state or. for some recognied ob>ects of

governments or;. directly to promote the welfare of

the community 3taxation as an

implement of police power4

b. The term public purposeis synonymous

with "overnmental purposea purpose

affecting the inhabitants of the state or taxing

district as a community and not merely as

individuals.

c. # tax levied for a private purpose constitutes

a taking of property without due process of

law.

d. The purposes to be accomplished by

taxation need not be exclusively public.

#lthough private individuals are directly

benefited, the tax would still be valid

provided such benefit is only incidental.

e. The test is not as to who receives the

money, but the character of the purpose for

which it is expendedK not the immediate

result of the expenditure but rather the

ultimate.

f. "n the imposition of taxes, public purpose is

presumed.

Test in eterminin4 Pu"li' Pur+oses inta

a. ;ut3 Test whether the thing to be

threatened by the appropriation of public

revenue is something which is the duty of the

!tate, as a government, to protect.

b. Promotion of General Welfare Test

whether the law providing the tax directly

promotes the welfare of the community in

e5ual measure.


18/32

Pas'ual vs Se'retar3 of Pu"li' Wor9s an

7ommuni'ations

**B P(il! ))*

Fa'ts: Pascual assailed the validity of # J

appropriating PHI,JJJ.JJ for the construction,

reconstruction, repair, extension and improvement

Pasig feeder road terminals). *e claimed that the

appropriation was actually going to be used for

private use for the terminals sought to be improved

were part of the #ntonio !ubdivision. The said

!ubdivision is owned by !enator Lose Sulueta who

was a member of the same !enate that passed and

approved # J.

"ssue2 9hether or not the appropriation is valid.

*eld2 $o, the appropriation is void for being an

appropriation for a private purpose. ("n accordance

with the rule that the taxing power must be exercised

for public purposes only, money raised by taxation

can be expanded only for public purposes and not for

the advantage of private individuals.) "nasmuch as

the land on which the pro>ected feeder roads were to

be constructed belonged then to Sulueta, the result is

that said appropriation sought a private purpose, and,

hence, was null and void.

Non-ele4a"ilit3 of Tain4 Po6er

Rationale: =octrine of !eparation of PowersK

Taxation is purely legislative, 8ongress cannot

delegate the power to others.

E'e+tions:

a 'ele"ation to the President (!rt/ ec

;C(;) 7DCE #onstitution)

The power granted to

8ongress under this constitutional

provision to authorie the President to

fix within specified limits and sub>ect to

such limitations and restrictions as it

may impose, tariff rates and other duties

and imposts include tariffs rates even for

revenue purposes only. 8ustoms dutieswhich are assessed at the prescribed

tariff rates are very much like taxes

which are fre5uently imposed for both

revenue-raising and regulatory

purposes (1arcia vs *%ecutive

ecretary, et al, 1 .o 787;E


19/32

Bottlin" #o of the Phil, nc vs #ity of

Butuan, et al, +-;;C7=, !u" ;C, 7DGC)

c 'ele"ation to !dministrative !"encies &ith

respect to aspects of Ta%ation not

le"islative in character

.imitations on ;ele4ation

1. "t shall not contravene any

8onstitutional provisions or inherent

limitations of taxationK

. The delegation is effected either bythe 8onstitution or by validly

enacted legislative measures or

statuteK and;. The delegated levy power, except

when the delegation is by an

express provision of 8onstitution

itself, should only be in favor of the

local legislative body of the local or

municipal government concerned.

Ta .e4islation vis-H-vis Ta Aministration

7very system of taxation consists of two parts2

a. the elements that enter into the

imposition of the tax, or tax

regulationK andb. the steps taken for its assessment

and collection or tax administration

"f what is delegated is tax legislation, the

delegation is invalidK but if what is involved is only tax

administration, the non-delegability rule is not

violated.

Territorialit3 or Situs of Taation

1. Territoriality or !itus of Taxation

means place of ta%ationdepending on the

nature of taxes being imposed.. "t is an inherent mandate that taxation shall

only be exercised on persons, properties,

and excise within the territory of the taxing

power because2

a. Tax laws do not operate beyond a

country&s territorial limit.b. Property which is wholly and

exclusively within the >urisdiction of

another state receives none of the

protection for which a tax is

supposed to be compensation.

;. *owever, the fundamental basis of the right

to tax is the capacity of the government to

provide benefits and protection to the ob>ect

of the tax. # person may be taxed, even if he

is outside the taxing state, where there is

between him and the taxing state, a privity of

relationship >ustifying the levy.

Fa'tors to 7onsier in eterminin4 Situs of

Taation

1. kind and 8lassification of the Tax. location of the sub>ect matter of the tax;. domicile or residence of the personE. citienship of the person


20/32

I. source of income:. place where the privilege, business or

occupation is being exercised

Eem+tion of t(e Government from Taes

Reasons for Eem+tions:

1. To levy tax upon public property would render

necessary new taxes on other public property for

the payment of the tax so laid and thus, the

government would be taxing itself to raise money

to pay over to itselfK. "n order that the functions of the government

shall not be unduly impedeK and;. To reduce the amount of money that has to be

handed by the government in the course of its

operations.

Dnless otherwise provided by law, the exemption

applies only to government entities through which the

government immediately and directly exercises its

sovereign powers (nfantry Post *%chan"e vs

Posadas, F= Phil CGG)$otwithstanding the immunity,

the government may tax itself in the absence of any

constitutional limitations. Government-owned or

controlled corporations, when performing proprietary

functions are generally sub>ect to tax in the absence

of tax exemption provisions in their charters or law

creating them.

International 7omit3

1. The property of a foreign state or

government may not be taxed by another.

. The grounds for the above rule are2

a. sovereign e5uality among statesb. usage among states that when one

enter into the territory of another, there

is an implied understanding that the

power does not intend to degrade its

dignity by placing itself under the

>urisdiction of the latterc. foreign government may not be sued

without its consent so that it is useless

to assess the tax since it cannot be

collectedd. reciprocity among states

7ONSTITUTIONA. .IMITATIONS

;ue Pro'ess of .a6

,asis: ec 7 !rt < .o person shall be deprived oflife, liberty or property &ithout due process of la& % x

x.)

1. The interest of the public generally as

distinguished from those of a particular class

re5uire the intervention of the stateK. The means employed must be reasonably

necessary to the accomplishment for the

purpose and not unduly oppressiveK;. The deprivation was done under the

authority of a valid law or of the constitutionK

and


21/32

E. The deprivation was done after compliance

with fair and reasonable method of

procedure prescribed by law.

"n a string of cases, the !upreme 8ourt held that

in order that due process of law must not be done in

an arbitrary, despotic, capricious, or whimsical

manner.

E5ual Prote'tion of t(e .a6

,asis: ec7 !rt < %%% .or shall any person be

denied the e@ual protection of the la&s

1. 75ual protection of the laws signifies that all

persons sub>ect to legislation shall be treated

under circumstances and conditions both in

the privileges conferred and liabilities

imposed. This doctrine prohibits class legislation which

discriminates against some and favors

others.

e5uisites for a 'alid 8lassification

1. 0ust not be arbitrary. 0ust not be based upon substantial

distinctions;. 0ust be germane to the purpose of law.E. 0ust not be limited to existing conditions

onlyK andI. 0ust play e5ually to all members of a class.

Uniformit3& E5uita"ilit3 an Pro4ressivit3 of

Taation

,asis:!ec. H314 #rt. '". The rule of taxation shall be

uniform and e5uitable. The 8ongress shall evolve a

progressive system of taxation.

1. Uniformit3 3e5uality or e5ual protection of

the laws4 means all taxable articles or kinds

or property of the same class shall be taxed

at the same rate. # tax is uniform when the

same force and effect in every place where

the sub>ect of it is found.. E5uita"lemeans fair, >ust, reasonable and

proportionate to one&s ability to pay.;. Pro4ressive s3stem of Taationplaces

stress on direct rather than indirect taxes, or

on the taxpayers& ability to payE. "ne5uality which results in singling out one

particular class for taxation or exemption

infringes no constitutional limitation. (see

#ommissioner vs +in"ayen 1ulf *lectric,

7G= #! ;E)I. The rule of uniformity does not call for

perfect uniformity or perfect e5uality,

because this is hardly attainable.

Freeom of S+ee'( an of t(e Press

,asis:!ec. E #rt. """. $o law shall be passed

abridging the freedom of speech, of expression or of

the pressx x x (

1. There is curtailment of press freedom and

freedom of thought if a tax is levied in order

to suppress the basic right of the people

under the 8onstitution.


22/32

. # business license may not be re5uired for

the sale or contribution of printed materials

like newspaper for such would be imposing a

prior restraint on press freedom

;. *owever, an annual registration fee on allpersons sub>ect to the value-added tax does

not constitute a restraint on press freedom

since it is not imposed for the exercise of a

privilege but only for the purpose of

defraying part of cost of registration.

Non-infrin4ement of Reli4ious Freeom

,asis: !ec. I #rt. """. ($o law shall be made

respecting an establishment of religion or prohibiting

the free exercise thereof. The free exercise and

en>oyment of religious profession and worship,

without discrimination or preference, shall be forever

be allowed.)

1. ?icense feesOtaxes would constitute a

restraint on the freedom of worship as they

are actually in the nature of a condition or

permit of the exercise of the right.. *owever, the 8onstitution or the ree

7xercise of eligion clause does not prohibit

imposing a generally applicable sales and

use tax on the sale of religious materials by

a religious organiation. (see Tolentino vs

ecretary of >inance, ;


23/32

amenmentsJ but also (to propose

amendments). (Tolentino vs ec of >inance)

;ele4ation of .e4islative Aut(orit3 to Fi Tariff

Rates& Im+orts an E+ort uotas

,asis:!ec. H34 #rt. '" (x x x The 8ongress may, by

law, authorie the President to fix within specified

limits, and sub>ect to such limitations and restrictions

as it may impose, tariff rates, import and export

5uotas, tonnage and wharfage dues, and other duties

or imposts within the framework of the national

development program of the government.

Ta Eem+tion of Pro+erties A'tuall3& ;ire'tl3 an

E'lusivel3 use for Reli4ious& 7(arita"le an

Eu'ational Pur+oses

,asis:!ec. H3;4 #rt. '". (8haritable institutions,

churches and parsonages or convents appurtenant

thereto, mos5ues, non-profit cemeteries, and all

lands, building, and improvements actually, directly

and e%clusivelyused for religious, charitable or

educational purposes shall be exempt from taxation.)

1. Test of the tax exemption2 the use and not

ownership of the property. To be tax-exempt, the property must be

actually, directly and exclusively used for the

purposes mentioned.

;. The word (exclusively) means (primarily&.E. The exemption is not limited to property

actually indispensable but extends to

facilities which are incidental to and

reasonably necessary for the

accomplishment of said purposes.

I. The constitutional exemption applies only to

property tax.

Cotin4 Re5uirements in 'onne'tion 6it( t(e

.e4islative Grant for ta eem+tion

,asis:!ec. H3E4 #rt. '". ($o law granting any tax

exemption shall be passed without the concurrence of

a ma>ority of all the members of the 8ongress.) The

provision re5uires the concurrence of a ma>ority not of

attendees constituting a 5uorum but of all members of

the 8ongress.

Non-im+airment of t(e Su+reme 7ourtsK

>urisi'tion in Ta 7ases

,asis:!ec. I 34 #rt. '""". (The 8ongress shall have

the power to define, prescribe, and apportion the

>urisdiction of the various courts but may not deprive

the !upreme 8ourt of its >urisdiction over cases

enumerated in !ec. I hereof.) !ec. I 3b4 #rt. '""".

(The !upreme 8ourt shall have the following powers2

x x x34 eview, revise, modify or affirm on appeal or

certiorari x x x final >udgments and orders of lower

courts in x x x all cases involving the legality of any

tax, impost, assessment, or toll or any penalty

imposed in relation thereto.)

Ta Eem+tions of Revenues an Assets&

in'luin4 4rants& eno6ments& onations or'ontri"utions to Eu'ational Institutions

,asis:!ec. E3E4 #rt. C"'. (!ub>ect to the conditions

prescribed by law, all grants, endowments, donations


24/32

or contributions used actually, directly and exclusively

for educational purposes shall be exempt from tax.)

1. The exemption granted to non-stock, non-

profit educational institution covers income,

property, and donor&s taxes, and custom

duties.. To be exempt from tax or duty, the revenue,

assets, property or donation must be used

actually, directly and exclusively for

educational purpose.;. "n the case or religious and charitable

entities and non-profit cemeteries, the

exemption is limited to property tax.E. The said constitutional provision granting tax

exemption to non-stock, non-profit

educational institution is self-executing.I. Tax exemptions, however, of proprietary 3for

profit4 educational institutions re5uire prior

legislative implementation. Their tax

exemption is not self-executing.:. ?ands, /uildings, and improvements

actually, directly, and exclusively used for

educational purposed are exempt from

property tax, whether the educational

institution is proprietary or non-profit.

Ot(er 7onstitutional Provisions relate to

Taation

Su">e't an Title of ,ills


25/32

(#ll money collected or any tax levied for a special

purpose shall be treated as a special fund and paid

out for such purpose only. "t the purpose for which a

special fund was created has been fulfilled or

abandoned the balance, if any, shall be transferred to

the general funds of the government.)

#n example is the +il Price !tabiliation und created

under P.=. 1I: to stabilie the prices of imported

crude oil. "n a decide case, it was held that where

under an executive order of the President, this special

fund is transferred from the general fund to a (trust

liability account,) the constitutional mandate is not

violated. The +P!, according to the court, remains

as a special fund sub>ect to 8+# audit 30smeHa vs

0rbos, et al, 1 .o DDCCG, 2ar ust share,

as determined by law, in the national taxes which

shall be automatically released to them.)

SITUS OF TAXATION AN; ;OU,.E

TAXATION

Situs of Taationliterally means the Pla'e of

Taation!

,asi' Rule state where the sub>ect to be taxed has

a situs may rightfully levy and collect the tax

Persons Poll tax may be levied upon persons who

are residents of the !tate.

Real Pro+ert3 is sub>ect to taxation in the !tate in

which it is located whether the owner is a resident or

non-resident, and is taxable only there

Tan4i"le Personal +ro+ert3 taxable in the state

where it has actual situs where it is physically

located. #lthough the owner resides in another

>urisdiction.

Intan4i"le Personal Pro+ert3 situs or personal

property is the domicile of the owner, in accordance

with the principle MO,I.IA SEUUNTUR

PERSONAMJ, said principle, however, is not

controlling when it is inconsistent with express

provisions of statute or when >ustice demands that it

should be, as where the property has in fact a situs

elsewhere. 3ells >ar"o Ban$ v #ollector E8 P3+

isher +-77G;;, 4anuary, 7DG7)

In'ome properly exacted from persons who are

residents or citiens in the taxing >urisdiction and even

those who are neither residents nor citiens provided

the income is derived from sources within the taxing

state.

,usiness& O''u+ation& an Transa'tion power tolevy an excise tax depends upon the place where the

business is done, of the occupation is engaged in of

the transaction not place.


26/32

Gratuitous Transfer of Pro+ert3 transmission of

property from donor to donee, or from a decedent to

his heirs may be sub>ect to taxation in the state where

the transferor was a citien or resident, or where the

property is located.

Multi+li'it3 of Situs

There is multiplicity of situs when the same sub>ect of

taxation, like income or intangible, is sub>ect to

taxation in several taxing >urisdictions. This happens

due to2

1. 'ariance in the concept of (domicile) for tax

purposesK. 0ultiple distinct relationship that may arise

with respect to intangible personalityK and;. The use to which the property may have

been devoted, all of which may receive the

protection of the laws of >urisdiction other

than the domicile of the owner

Reme3 taxation >urisdiction may provide2

a. 7xemption or allowance of deductions or tax

credit for foreign taxesb. 7nter into treaties with other states

=ouble Taxation

Two Ninds

O"noious or ;ire't ;u+li'ate Taation ('ouble

ta%ation in its strict sense) - "n the ob>ectionable or

prohibited sense means that the same property is

taxed twice when it should be taxed only once.

Re5uisites:

1. !ame property is taxed twice. !ame purpose;. !ame taxing authorityE. 9ithin the same >urisdiction

I. =uring the same taxing period:. !ame kind or character of tax

Permissive or Inire't ;u+li'ate Taation('ouble

ta%ation in its broad sense) This is the opposite of

direct double taxation and is not legally

ob>ectionable. The absence of one or more of the

foregoing re5uisites of the obnoxious direct tax makes

it indirect.

Instan'es of ;ou"le Taation in its ,roa Sense

1. # tax on the mortgage as personal property

when the mortgaged property is also taxed

at its full value as real estateK. # tax upon a corporation for its capital stock

as a whole and upon the shareholders for

their sharesK;. # tax upon a corporation for its capital stock

as a whole and upon the shareholders for

their sharesKE. # tax upon depositions in the bank for their

deposits and a tax upon the bank for their

property in which such deposits are investedI. #n excise tax upon certain use of property

and a property tax upon the same propertyK

and:. # tax upon the same property imposed by

two different states.

Means to Reu'e t(e 8ars( Effe't of Taation


27/32

1. Ta ;eu'tion ? subtraction from gross income

in arriving a taxable income. Ta 7reit ? an amount subtracted from an

individual&s or entity&s tax liability to arrive at the

total tax liability

# deduction differ from a tax credit in that a

deduction reduces taxable income while credit

reduces tax liability

;. Eem+tionsE. Treatieswith other !tatesI. Prin'i+le of Re'i+ro'it3

7onstitutionalit3

=ouble Taxation in its strictersense is undoubtedly

unconstitutional but that in the broadersense is not

necessarily so.

General Rule: +ur 8onstitution does not prohibit

double taxationK hence, it may not be invoked as a

defense against the validity of tax laws.

1. 9here a tax is imposed by the $ational

Government and another by the city for the

exercise of occupation or business as the

taxes are not imposed by the same public

authority 3#ity of Ba"uio vs 'e +eon, 0ct


28/32

Im+a't of taation is the point at which a tax is

originally imposed.

In'ien'e of Taation is the point on which a tax

burden finally rests or settles down.

Relations amon4 S(iftin4& Im+a't an In'ien'e

of Taation the impact is the initial phenomenon,

the shifting is the intermediate process, and the

incidence is the result.

Lins of S(iftin4:

1. For6ar S(iftin4 the burden of tax is

transferred from a factor of production

through the factors of distribution until it

finally settles on the ultimate purchaser or

consumer. ,a'96ar S(iftin4 effected when the

burden of tax is transferred from the

consumer or purchaser through the factors

of distribution to the factor of production;. On6ar S(iftin4 this occurs when the tax

is shifted two or more times either forward or

backward

8apitaliation

The reduction in the price of the taxed ob>ect e5ual to

the capitalied value of future taxes which the

purchaser expects to be called upon to pay

Transformation

The method whereby the manufacturer or producer

upon whom the tax has been imposed, fearing the

loss of his market if he should add the tax to the price,

pays the tax and endeavors to recoup himself by

improving his process of production thereby turning

out his units of products at a lower cost.

Ta Evasion

The use of the taxpayer of illegal or fraudulent means

to defeat or lessen the payment of a tax.

Ini'ia of Frau in Taation

1. ailure to declare for taxation purposes

true and actual income derived from

business for two consecutive years,

and. !ubstantial underdeclaration of income

tax returns of the taxpayer for four

consecutive years coupled &ith

overstatement of deduction

7vasion of the tax takes place only when there are no

proceeds. 7vasion of Taxation is tantamount, fiscally

speaking, to the absence of taxation.

Ta Avoian'e

The use by the taxpayer of legally permissible

alternative tax rates or method of assessing taxable

property or income in order to avoid or reduce tax

liability.

Tax #voidance is not punishable by law, a taxpayer

has the legal right to decrease the amount of what

otherwise would be his taxes or altogether avoid by

means which the law permits.


29/32

EXEMPTION FROM TAXATION

Ta Eem+tion is a grant of immunity, express or

implied, to particular persons or corporations from the

obligations to pay taxes.

Nature of Ta Eem+tion

1. "t is merely a personal privilege of the

grantee. "t is generally revocable by the

government unless the exemption is

founded on a contract which is protected

from impairment, but the contract mustcontain the other essential elements of

contracts, such as, for example, a valid

cause or consideration.;. "t implies a waiver on the part of the

government of its right to collect what

otherwise would be due to it, and in this

sense is pre>udicial thereto.E. "t is not necessarily discriminatory so

long as the exemption has a reasonable

foundation or rational basis.

Rationale of ta Eem+tion

Public interest would be subserved by the

exemption allowed which the law-making body

considers sufficient to offset monetary loss entailed in

the grant of the exemption. (# vs Bothelo hippin"

#orp, +-;7G


30/32

. Im+lie Eem+tion ? 7xist whenever

particular persons, properties or excises are

deemed exempt as they fall outside the

scope of the taxing provision itself

#s to etent

1. Total Eem+tion ?8onnotes absolute

immunity. Partial Eem+tion ? +ne where collection

of a part of the tax is dispensed with

Prin'i+les Governin4 t(e Ta Eem+tion

1. 7xemptions from taxation are highlydisfavored by law, and he who claims an

exemption must be able to >ustify by the

clearest grant of organic or statute of

law. (!siatic Petroleum vs +lanes, =D

P3+ =GG #ollector of nternal evenue

vs 2anila 4oc$ey #lub, DC P3+ GE8). *e who claims an exemption must >ustify

that the legislative intended to exempt

him by words too plain to be

mistaken. (/isayan #ebu Terminal vs

#, +-7DFeb ;E, 7DGF);. *e who claims exemptions should

convincingly proved that he is exemptE. Tax exemptions must be strictly

construed (Phil !cetylene vs #, +-

7DE8E, !u" 7E, 7DGE)I. Tax 7xemptions are not

presumed. (+ealda *lectric #o vs #,

+-7G=;C, !pr


31/32

occupying enemy. (3ilado vs #ollector,

788 P3+ ;CC);. Tax laws not being penal in character, the

rule in the 8onstitution against the

passage of the ex post facto laws cannotbe invoked, e'e+tfor the penalty

imposed.

Im+res'ri+ti"ilit3 of Taes

General Rule: Taxes are imprescriptible

E'e+tion: 9hen provided otherwise by the tax lawitself.

7xample2 $"8 provides for statutes of limitation

in the assessment and collection of taxes therein

imposed

The law on prescription, being a remedial

measure, should be liberally construed to afford

protection as a corollary, the exceptions to the law on

prescription be strictly construed. (# vs #! 1

.o 78=7E7, >eb ;=, 7DDD)

;o'trine of E5uita"le Re'ou+ment

"t provides that a claim for refund barred by

prescription may be allowed to offset unsettled tax

liabilities should be pertinent only to taxes arising

from the same transaction on which an overpayment

is made and underpayment is due.

This doctrine, however, was re>ected by the !upreme

8ourt, saying that it was not convinced of the wisdom

and proprietary thereof, and that it may work to tempt

both the collecting agency and the taxpayer to delay

and neglect their respective pursuits of legal action

within the period set by law. (#ollector vs 5T, 78=

P3+ 78G;)

Ta+a3erKs Suit

"t is only when an act complained of, which may

include legislative enactment, directly involves the

illegal disbursement of public funds derived from

taxation that the taxpayer&s suit may be allowed.

Inter+retation an 7onstru'tion of Ta Statutes

1. +n the interpretation and construction of tax

statutes, legislative intention must be

considered.

. "n case of doubt, tax statutes are construed

strictly against the government and liberally

construed in favor of the taxpayer.

;. The rule of strict construction against the

government is not applicable where the

language of the tax law is plain and there isno doubt as to the legislative intent.

E. The exemptions 3or e5uivalent provisions,

such as tax amnesty and tax condonation4


32/32

are not presumed and when granted are

strictly construed against the grantee.

I. The exemptions, however, are construed

liberally in favor of the grantee in the

following2

a. 9hen the law so provides for such

liberal constructionKb. 7xemptions from certain taxes granted

under special circumstances to special

classes of personsK

c. 7xemptions in favor of the

Government, its political subdivisionsKd. 7xemptions to traditional exemptees,

such as, those in favor of charitable

institutions.

:. The tax laws are presumed valid.

B. The power to tax is presumed to exist.

tax reviewer 1

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