TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF.

CABANEIRO) A2011 1

Chapter 1: GENERAL PRINCIPLES

Thus:
TAXATION DEFINED a. Taxes are enforced contributions
 Taxation is the inherent power of the sovereign, exercised through It operates in invitum which means that it is in no way
the legislature, to impose burdens upon the subjects and objects dependent on the will or contractual assent, express or implied,
within its jurisdiction, for the purpose of raising revenues to carry of the person taxed. They are positive acts of the government
out the legitimate objects of the government. (Rochester vs Bloss).
 It is also defined as the act of levying a tax, i.e. the process or b. Taxes are proportional in character, since taxes are based on
means by which the sovereign, through its law-making body, raises one’s ability to pay.
income to defray the necessary expenses of government. It is a c. Taxes are levied by authority of law.
method of apportioning the cost of government among those who, The power to impose taxes is a legislative power; it cannot be
in some measure, are privileged to enjoy its benefits and must imposed by the executive department nor by the courts.
therefore bear its burdens. d. Taxes are for the support of the government and all its public
 It is a mode of raising revenue for public purposes, (Cooley) needs.
 Symbiotic relationship between the government and the citizens. e. Taxes are pecuniary burden payable in money, such that a tax
is not necessarily confined to those payable in money (e.g. a
RATIONALE OF TAXATION: DOCTRINE OF SYMBIOTIC backpay cert may be used to pay real estate taxes).
RELATIONSHIP f. Taxes are imposed by the State on persons, property or
 This doctrine is enunciated in CIR v. Algue, Inc. [158 SCRA 9], services within its jurisdiction.
which states that “Taxes are what we pay for civilized society.
Without taxes, the government would be paralyzed for lack of IMPORTANCE OF TAXES
the motive power to activate and operate it. Hence, despite the  Taxes are importants because they the lifeblood of the government
natural reluctance to surrender part of one’s hard-earned and so should be calculated without unnecessary hindrance (CIR vs
income to the taxing authorities, every person who is able must Algue).
contribute his share in the burden of running the government.
The government for its part, is expected to respond in the form LIFEBLOOD DOCTRINE
of tangible and intangible benefits intended to improve the lives  The lifeblood theory constitutes the theory of taxation, which
of the people and enhance their material and moral values.” provides that the existence of government is a necessity; that
government cannot continue without means to pay its expenses;
TAXES DEFINED and that for these means it has a right to compel its citizens and
 Taxes are the enforced proportional contributions from persons and property within its limits to contribute.
property levied by the law-making body of the State by virtue of its  Without revenue raised from taxation, the government will not
sovereignty for the support of the government and all public needs, survive, resulting in detriment to society. Without taxes, the
[Cooley] government would be paralyzed for lack of motive power to activate
 They are not arbitrary exactions but contributions levied by authority and operate it. (CIR vs. ALGUE)
of law, and by some rule of proportion which is intended to ensure  Taxes are the lifeblood of the government and there prompt and
uniformity of contribution and a just apportionment of the burdens certain availability is an imperious need. (CIR vs Goodrich
of government. International Rubber Co.)

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 2

civil servants to serve, public improvements for the enjoyment of

ILLUSTRATION OF LIFEBLOOD THEORY the citizenry, and those which come within the State’s territory
1. Collection of taxes cannot be enjoined by injunction. and facilities and protection which a government is supposed to
2. Taxes could not be the subject of compensation or set off. provide.
3. A valid tax may result in the destruction of the taxpayer’s 2) BENEFITS – PROTECTION THEORY
property.  This theory bases the power of the State to demand and receive
4. Taxation is an unlimited and plenary power. taxes on the reciprocal duties of support and protection. The
citizen supports the State by paying the portion from his
TAXES,PERSONAL TO TAXPAYER property that is demanded in order that he may, by means
 A corporation’s tax delinquency cannot be enforced against its thereof, be secured in the enjoyment of the benefits of an
stockholders except for unpaid taxes of a dissolved corporation if it organized society.
appears that the corporate assets have passed into their hands (Tan  No one is allowed to object to or resist payment of taxes solely
Tiong Bio vs CIR). because no personal benefit to him can be pointed out as arising
 Estate taxes accruing upon transmission of the decedent’s estate to from the tax, [Lorenzo v. Posadas].
his heirs are not liabilities which can be enforced against heirs.
SCOPE OF THE LEGISLATIVE TAXING POWER
NATURE OF THE TAXING POWER 1) The persons, property and excises to be taxed, provided it is within
1) Inherent in sovereignty its jurisdiction
2) Legislative in character 2) Amount or rate of tax
3) Purposes for its levy, provided it be for a public purpose
PURPOSES AND OBJECTIVES OF TAXATION 4) Kind of tax to be collected
PRIMARY 5) Apportionment of the tax
1. To raise revenue in order to support the government (Revenue) 6) Situs of taxation
SECONDARY 7) Method of collection
2. Used for regulatory purposes (Regulation)
3. Used to reduce social inequality (Reduction of Social Inequality) IS THE POWER TO TAX THE POWER TO DESTROY? /
4. Utilized to implement the police power of the State (Promotion of CONSTITUTIONAL RESTRAINTS RE: TAXATION IS THE POWER TO
General Welfare) DESTROY
5. Used to protect our local industries against unfair competition  The power to tax "is an attribute of sovereignty". In fact, it is the
(Protectionism) strongest of all the powers of government. But for all its plenitude,
6. Utilized by the government to encourage the growth of local the power to tax is not unconfined as there are restrictions.
industries (Encourage Economic Growth) Adversely effecting as it does property rights, both the due process
and equal protection clauses of the Constitution may properly be
THEORY AND BASIS OF TAXATION invoked to invalidate in appropriate cases of a revenue measure. If it
1) NECESSITY THEORY were otherwise, there would be truth to the 1903 dictum of Chief
 Taxation as stated in the case of Phil. Guaranty Co., Inc. v. Justice Marshall that "the power to tax involves the power to
Commissioner [13 SCRA 775], is a power predicated upon destroy." The web or unreality spun from Marshall's famous dictum
necessity. It is a necessary burden to preserve the State’s was brushed away by one stroke of Mr. Justice Holmes' pen, thus:
sovereignty and a means to give the citizenry an army to resist "The power to tax is not the power to destroy while this Court sits."
aggression, a navy to defend its shores from invasion, a corps of

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 3

"So it is in the Philippines." It is because of the constitutional 

There is no law that requires compliance with this principle,
restraints placed on a taxing power that violates fundamental rights. so even if the tax law violates this principle; such tax law is
 The power to tax includes the power to destroy if it is used as an valid.
implement of the police power (regulatory) of the State. However, it TAXATION DISTINGUISHED FROM POLICE POWER AND EMINENT
does not include the power to destroy if it is used solely for the DOMAIN
purpose of raising revenue. (ROXAS vs. CTA) TAXATION POLICE POWER EMINENT
 If the purpose of taxation is regulatory in character, taxation is used DOMAIN
AS TO PURPOSE For the purpose To promote For public use
to implement the police power of the state
raising revenue general welfare
 If the power of taxation is used to destroy things, businesses, or through
enterprises and the purpose is to raise revenue, the court will come regulations
in because there will be violation of the inherent and constitutional AS TO Protection and The maintenance Just compensation,
limitations and it will be declared invalid. COMPENSATION benefits received of a healthy not to exceed the
from the economic standard market value by the
government. of society owner or
POWER OF JUDICIAL REVIEW IN TAXATION
(damnum absque administrator or
 Courts cannot inquire into the wisdom of a taxing act. (CIR vs injuria) anyone having legal
Lingayen Gulf Electric Power Co) interest in the
 Court’s power in taxation is limited only to the application and property, or as
interpretation of the law. determined by the
 It is not within the province of the court to inquire into the assessor, whichever
is lower.
wisdom of the law for indeed courts are bound by the words in
AS TO PERSONS Operate upon community or a class of Operates on the
the mouth of the lawmaker. “A verbo legis non est recedendum” AFFECTED individuals individual property
(Commissioner of Customs vs Manila Star Ferry inc.) owner
AS TO AUTHORITY Exercised only by the government or its May be exercised
BASIC PRINCIPLE OF A SOUND TAX SYSTEM WHICH EXERCISES political subdivisions. by public services
1) FISCAL ADEQUACY THE POWER corp or public
utilities if granted
 The sources of revenues must be adequate to meet gov’t by law
expenditures. (Chavez v. Ongpin, 186 SCRA 331). AS TO AMOUNT OF Generally no limit Limited to the cost There is no
 Even if a tax law violates the principle of Fiscal Adequacy IMPOSITION to the amount of of regulation imposition; rather,
and the proceeds may not be sufficient to satisfy the needs tax that may be it is the owner of
of the government, still the tax law is valid imposed the property taken
2) THEORETICAL JUSTICE who is paid just
compensation.
 The tax burden should be in proportion to the taxpayers AS TO THE Subject to certain Relatively free Subject to certain
ability to pay (ABILITY TO PAY PRINCIPLE) RELATIONSHIP TO constitutional from constitutional constitutional
 Equitable taxation has been mandated by our constitution; THE CONSTITUTION limitations, limitations and limitations, NOT
as if taxes are unjust and unreasonable then they are not including the superior to the including the
equitable, thus invalid. prohibition against non-impairment prohibition against
impairment of the provisions impairment of the
3) ADMINISTRATIVE FEASIBILITY
obligation of obligation of
 The tax law must be capable of effective or efficient contracts contracts
enforcement. AS TO TRANSFER Taxes paid become No transfer, but

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 4

OF PROPERTY part of the public only restraint on State by virtue of its sovereignty for the support of the government
RIGHTS funds the exercise, of and all public needs.
property right
exists
 Toll is a demand of proprietorship; tax is a demand of sovereignty.
ASPECTS OF TAXATION
 Toll is paid for the used of another’s property; tax is paid for the
1) LEVY or IMPOSITION support of government.
 enactment of tax laws  The amount paid as toll depends upon the cost of construction or
maintenance of the public improvements used; while there is no
 legislative in character
limit on the amount collected as tax as long as it is not excessive,
2) ASSESSMENT
unreasonable, or confiscatory.
 collection
 Toll may be imposed by the government or by private individuals or
 administrative in character
entities; tax may be imposed only by the government.
TAXES DISTINGUISHED FROM OTHER IMPOSITIONS
Penalty v. Tax
1) toll – amount charged for the cost and maintenance of property
 Penalty is any sanction imposed as a punishment for violation of law
used;
or for acts deemed injurious; taxes are enforced proportional
2) penalty – punishment for the commission of a crime
contributions from persons and property levied by the State by
3) compromise penalty – amount collected in lieu of criminal
virtue of its sovereignty for the support of the government and all
prosecution in cases of tax violations;
public needs.
4) special assessment – levied only on land based wholly on the
 Penalty is designed to regulate conduct; taxes are generally
benefit accruing thereon as a result of improvements of public works
undertaken by government within the vicinity. intended to generate revenue.
5) license fee – regulatory imposition in the exercise of the police  Penalty may be imposed by the government or by private individuals
power of the State; or entities; taxes only by the government.
6) margin fee – exaction designed to stabilize the currency
7) debt – a tax is not a debt but is an obligation imposed by law. Special assessment v. Tax
8) regulatory fees – exaction designed to regulate industries  A special assessment tax is an enforced proportional contribution
9) subsidy – legislative grant of money in aid of a private enterprise from owners of lands especially benefited by public improvements
deemed to promote the public welfare.  A special assessment is levied only on land; tax is imposed on
10) custom duties and fees – duties charged upon commodities on persons, property and excises.
their being imported into or exported from a country;  A special assessment is not a personal liability of the person
11) revenue – broad term that includes not only taxes but income from assessed; it is limited to the land.
other sources as well.  A special assessment is based wholly on benefits, not necessity.
12) Tribute – synonymous with tax  A special assessment is exceptional both as to time and place; a tax
13) Impost – signifies any tax, tribute or duty. has general application.
Some rules:
Toll v. Tax  An exemption from taxation does not include exemption
 Toll is a sum of money for the use of something. It is the from a special assessment.
consideration which is paid for the use of a road, bridge, or the like,  The power to tax carries with it the power to levy a special
of a public nature. Taxes, on the other hand, are enforced assessment.
proportional contributions from persons and property levied by the

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 5

 A debt is governed by the ordinary periods of prescription, while a

tax is governed by the special prescriptive periods provided for in
the NIRC.
 A debt draws interest when it is so stipulated or where there is
License fee v. Tax default, while a tax does not draw interest except only when
 PURPOSE: Tax imposed for revenue WHILE license fee for delinquent.
regulation. Tax for general purposes WHILE license fee for
regulatory purposes only. TAXES CLASSIFIED
 BASIS: Tax imposed under power of taxation WHILE license fee AS TO SUBJECT MATTER OR OBJECT
under police power. 1. Personal, poll or capitation tax
 AMOUNT: In taxation, no limit as to amount WHILE license fee Tax of a fixed amount imposed on persons residing within a
limited to cost of the license and expenses of police surveillance and specified territory, whether citizens or not, without regard to their
regulation. property or the occupation or business in which they may be
 TIME OF PAYMENT: Taxes normally paid after commencement of engaged, i.e. community tax.
business WHILE LF before. 2. Property tax
 EFFECT OF PAYMENT: Failure to pay a tax does not make the Tax imposed on property, real or personal, in proportion to its value
business illegal WHILE failure to pay license fee makes business or in accordance with some other reasonable method of
illegal. apportionment.
 SURRENDER: Taxes, being lifeblood of the state, cannot be 3. Excise tax
surrendered except for lawful consideration WHILE a license fee may A charge imposed upon the performance of an act, the enjoyment of
be surrendered with or without consideration. privilege, or the engaging in an occupation.
 IMPORTANCE OF DISTINCTION BETWEEN TAXES AND LICENSE
FEES: AS TO PURPOSE
 It is necessary to determine whether a particular imposition is a 4. General/fiscal revenue tax is that imposed for the purpose of
tax or a license fee, because some limitations apply only to one raising public funds for the service of the government.
and not to the other. 5. Special or regulatory tax is imposed primarily for the regulation
 Furthermore, exemption from taxes does not include exemption of useful or non-useful occupation or enterprises and secondarily
from license fees only for the purpose of raising public funds.

Obligation to pay debt v. obligation to pay tax AS TO WHO BEARS THE BURDEN
 A debt is generally based on contract, express or implied, while a tax 6. Direct tax
is based on laws. A direct tax is demanded from the person who also shoul,ders the
 A debt is assignable, while a tax cannot generally be assigned. burden of the tax. It is a tax which the taxpayer is directly or
 A debt may be paid in kind, while a tax is generally paid in money. primarily liable and which he or she cannot shift to another.
 A debt may be the subject of set off or compensation, a tax cannot. 7. Indirect tax
 A person cannot be imprisoned for non-payment of tax, except poll An indirect tax is demanded from a person in the expectation and
tax. intention that he or she shall indemnify himself or herself at the
expense of another, falling finally upon the ultimate purchaser or
consumer. A tax which the taxpayer can shift to another.

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AS TO THE SCOPE OF THE TAX  Taxpayers have sufficient interest of preventing the illegal
8. National tax expenditures of money raised by taxation (NOT DONATIONS AND
A national tax is imposed by the national government. CONTRIBUTIONS)
9. Local tax  A taxpayer is not relieved from the obligation of paying a tax
A local tax is imposed by the municipal corporations or local because of his belief that it is being misappropriated by certain
government units (LGUs). officials
 A taxpayer has no legal standing to question executive acts that do
AS TO THE DETERMINATION OF AMOUNT not involve the use of public funds. (GONZALES vs. MARCOS)
10. Specific tax  It is only when an act complained of which may include a legislative
A specific tax is a tax of a fixed amount imposed by the head or enactment of a statute, involves the illegal expenditure of public
number or by some other standard of weight or measurement. It money that the so-called taxpayers suit may be allowed. LOZADA vs.
requires no assessment other than the listing or classification of the COMELEC
objects to be taxed.  Taxpayers may be levied with a regulatory purpose to provide
11. Ad valorem tax means for the rehabilitation and stabilization of a threatened
An ad valorem tax is a fixed proportion of the value of the property industry which is affected with the public interest as to be within the
with respect to which the tax is assessed. It requires the police power of the State. CALTEX vs. COA
intervention of assessors or appraisers to estimate the value of such  The Supreme Court has discretion whether or not to entertain
property before due from each taxpayer can be determined. taxpayers suit and could brush aside lack of locus standi. KILOS
12. Customs Duties BAYAN vs. GUINGONA
Duties charged upon the commodities on theor being imported into
or exported from a country. REQUISITES FOR A TAXPAYERS PETITION
1) That money is being extracted and spent in violation of specific
AS TO GRADUATION OR RATE constitutional protections against abuses of legislative power
13. Proportional tax 2) That public money is being deflected to any improper purpose
Tax based on a fixed percentage of the amount of the property 3) That the petitioner seeks to restrain respondents from wasting
receipts or other basis to be taxed. Example: real estate tax. public funds through the enforcement of an invalid or
14. Progressive or graduated tax unconstitutional law.
Tax the rate of which increases as the tax base or bracket increases.
Digressive tax rate: progressive rate stops at a certain point. CASES:
Progression halts at a particular stage.
15. Regressive tax Commissioner vs. Algue
Tax the rate of which decreases as the tax base or bracket GRL-28890, 17 February [Link] Division, Cruz (J); 4 concur
increases. There is no such tax in the Philippines.
Facts: The Philippine Sugar Estate Development Company (PSEDC)
TAXPAYER’S SUIT appointed Algue Inc. as its agent, authorizing it to sell its land, factories, and
 One where a taxpayer who feels aggrieved by the implication of a oil manufacturing process. The Vegetable Oil Investment Corporation
tax law goes now via judicial review to the SC and asks for a (VOICP) purchased PSEDC properties. For the sale, Algue received a
nullification of the law. commission of P125,000 and it was from this commission that it paid
 In availing judicial review as a taxpayer, the only option one can Guevara, et. al. organizers of the VOICP, P75,000 in promotional fees. In
look into are the inherent and constitutional limitations on taxation. 1965, Algue received an assessment from the Commissioner of Internal

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 7

Revenue in the amount of P83,183.85 as delinquency income tax for years Issue: Whether or not RA 7716 violates Art. VI, Secs. 24 and 26(2) of the
1958 amd 1959. Algue filed a protest or request for reconsideration which Constitution
was not acted upon by the Bureau of Internal Revenue (BIR). The counsel Held: The argument that RA 7716 did not originate exclusively in the House
for Algue had to accept the warrant of distrant and levy. Algue, however, of Representatives as required by Art. VI, Sec. 24 of the Constitution will not
filed a petition for review with the Coourt of Tax Appeals. bear analysis. To begin with, it is not the law but the revenue bill which is
required by the Constitution to originate exclusively in the House of
Issue: Whether the assessment was reasonable. Representatives. To insist that a revenuestatute and not only the bill which
Held: Taxes are the lifeblood of the government and so should be collected initiated the legislative process culminating in the enactment of the law must
without unnecessary hindrance. Every person who is able to pay must substantially be the same as the House bill would be to deny the Senate’s
contribute his share in the running of the government. The Government, for power not only to concur with amendments but also to propose
his part, is expected to respond in the form of tangible and intangible amendments. Indeed, what the Constitution simply means is that the
benefits intended to improve the lives of the people and enhance their moral initiative for filingrevenue, tariff or tax bills, bills authorizing an increase of
and material values. This symbiotic relationship is the rationale of taxation the public debt, private bills and bills of local application must come from the
and should dispel the erroneous notion that is an arbitrary method of House of Representatives on the theory that, elected as they are from
exaction by those in the seat of power. Tax collection, however, should be the districts, the members of the House can be expected to be more
made in accordance with law as any arbitrariness will negate the very reason sensitive to the local needs and problems. Nor does the Constitution
for government itself. For all the awesome power of the tax collector, he prohibit the filing in the Senate of a substitute bill in anticipation of its
may still be stopped in his tracks if the taxpayer can demonstrate that the receipt of the bill from the House, so long as action by the Senate as a body
law has not been observed. Herein, the claimed deduction (pursuant to is withheld pending receipt of the House bill.
Section 30 [a] [1] of the Tax Code and Section 70 [1] of Revenue Regulation
2: as to compensation for personal services) had been legitimately by Algue The next argument of the petitioners was that S. No. 1630 did not pass
Inc. It has further proven that the payment of fees was reasonable and 3 readings on separate days as required by the Constitution because the
necessary in light of the efforts exerted by the payees in inducing investors second and third readings were done on the same day. But this was because
(in VOICP) to involve themselves in an experimental enterprise or a business the President had certified S. No. 1630 as urgent. The presidential
requiring millions of pesos. The assessment was not reasonable. certification dispensed with the requirement not only of printing but also that
of reading the bill on separate days. That upon the certification of a bill by
Tolentino vs. Secetary of Finance the President the requirement of 3 readings on separate days and of printing
GR No. 115455. August 25, 1994 and distribution can be dispensed with is supported by the weight of
legislative practice.
Facts: The value-added tax (VAT) is levied on the sale, barter or exchange
of goods and properties as well as on the sale or exchange of services. RA EXERCISES:
7716 seeks to widen the tax base of the existing VAT system and enhance
its administration by amending the NationalInternal Revenue Code. There Discuss the importance of taxes
are various suits challenging the constitutionality of RA 7716 on various SUGGESTED ANSWER:
grounds. Taxes are the lifeblood of the government, for without taxes, the
One contention is that RA 7716 did not originate exclusively in the House of government can neither exist nor endure. A principal attribute of
Representatives as required by Art. VI, Sec. 24 of the Constitution, because sovereignty, the exercise of taxing power derives its source from the
it is in fact the result of the consolidation of 2distinct bills, H. No. 11197 and very existence of the state whose social contract with its citizens
S. No. 1630. There is also a contention that S. No. 1630 did not pass obliges it to promote public interest and common good. The theory
3 readings as required by the Constitution.

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behind the exercise of the power to tax emanates from necessity; amount ultimately depends on the taxable base.
without taxes, government cannot fulfill its mandate of promoting the
general welfare and well-being of the people. (NAPOCOR v. City of Power of Taxation; Inherent in a Sovereign State (2005)Describe
Cabanatuan, G.R. No. 149110, April 9, 2003). the power of taxation. May a legislative body enact laws to raise
revenues in the absence of a constitutional provision granting said body
the power to tax? Explain.
Nature of the Power of Taxation (#1, 2000 Bar Exams)
SUGGESTED ANSWER:
Justice Holmes once said: “The power to tax is not the power to Yes, the legislative body may enact laws even in the absence
destroy while this Court (the SC) sits.” Describe the power to tax and its of a constitutional provision because the power to tax is inherent in the
limitations. government and not merely a constitutional grant. The power of taxation is
SUGGESTED ANSWER: an essential and inherent attribute of sovereignty belonging as a matter
The power to tax is an inherent power of the sovereignty which is of right to every independent government without being expressly granted
exercised through the legislature to impose burdens upon subjects and by the people. (Pepsi-Cola Bottling Company of the Philippines, Inc. v.
objects within its jurisdiction for the purpose of raising revenues to Municipality of Tanauan, Leyte, G.R. No. L-31156)
carry out the legitimate objects of gov’t. The underlying basis for its Taxation is the inherent power of a State to collect enforced proportional
exercise is governmental necessity for without it, no gov’t can exist nor contribution to support the expenses of government. Taxation is the
endure. Accordingly, it has the broadest scope of all the powers of power vested in the legislature to impose burdens or charges upon
government because in the absence of limitations, it is considered an persons and property in order to raise revenue for public purposes.
unlimited, plenary, comprehensive and supreme. The two limitations The power to tax is so unlimited in force and so searching in extent that
on the power of taxation are the inherent and constitutional courts scarcely venture to declare it is subject to any restrictions whatever,
limitations which are intended to prevent abuse on the exercise of the except such as rest in the discretion of the authority which exercises it. (Tio
otherwise plenary and unlimited power. It is the Court’s role to see to it v. Videogram Regulatory Board, G.R. No. L-75697, June 18, 1987) So
that the exercise of the power does not transgress these limitations. potent is the power to tax that it was once opined that "the power to tax
involves the power to destroy."(C.J. Marshall in McCulloch v. Maryland)
Power of Taxation: Legislative in Nature (Bar 1994)
The Secretary of Finance, upon recommendation of the Revocation of Exempting Statutes (Bar 1997)
Commissioner of Internal Revenue, issued a Revenue Regulation "X" Corporation was the recipient in 1990 of two tax exemptions both from
using gross income as the tax base for corporations doing business Congress, one law exempting the company's bond issues from taxes and
in the Philippines. Is the [Link]? the other exempting the company from taxes in the operation of its
SUGGESTED ANSWER: public utilities. The two laws extending the tax exemptions were revoked
The regulation establishing gross income as the tax base for by Congress before their expiry dates. Were the revocations constitutional?
corporations doing business in the Philippines (domestic as well as SUGGESTED ANSWER:
resident foreign) is not valid. This is no longer implementation of the Yes. The exempting statutes are both granted unilaterally by
law but actually it constitutes legislation because among the powers Congress in the exercise of taxing powers. Since taxation is the rule and
that are exclusively within the legislative authority to tax is the power tax exemption, the exception, any tax exemption unilaterally granted can be
to determine -the amount of the tax. (See 1 Cooley 176-184). withdrawn at the pleasure of the taxing authority without violating the
Certainly, if the tax is limited to gross income without deductions of Constitution (Mactan Cebu International Airport Authority v, Marcos,
these corporations, this is changing the amount of the tax as said G.R No. 120082, September 11, 1996).

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Neither of these were issued by the taxing authority in a contract lawfully

entered by it so that their revocation would not constitute an
impairment of the obligations of contracts.
ALTERNATIVE ANSWER:
No. The withdrawal of the tax exemption amounts to a
deprivation of property without due process of law, hence
unconstitutional.

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