Constitutional and Inherent Limitations of the Power to Tax

Taxation Law

Cecille Carmela T. de los Reyes

Philippine Christian University College of LawProfessor: Atty. Antonio Bonilla

TAXATION

LAW

It is the act of levying tax, the process or

means by which the sovereign, through

its law-making body, raises income to

defray (provide for) the necessary

expenses of the government.

It is merely a way of apportioning the

cost if the government among those

who in some measures are privileged to

enjoy its benefits and therefore must

bear its burdens. WHAT IS

TAXATION

The lifeblood of the government.

Major revenue (income) is sourced

from taxation so that in the most

pressing times of financial and

economic crisis, the agency

authorized to administer taxesthe Bureau of Internal Revenue should

always be on the front line.

WHAT IS

TAX

Enforced proportional

contribution levied by the

law making body of the

state to raise revenue to

support the indispensable

and all the necessary

expenses of the

government.

By simple definitionWHAT IS TAX

Enforced proportional

contribution levied by the

law making body of the

state to raise revenue to

support the

indispensable and all the

necessary expenses of

the government.

1. ENFORCED as it involves the

mandate of the law so that its

imposition is mandatory to those

covered by it. Unreasonable deviation

from the mandate is subject to

penalties imposable by an organized

society w/c gives due respect to each

and every humanly right.

2. PROPORTIONAL as

theoretically, tax is

proportioned upon a

taxpayers ability to pay.

3. RAISE REVENUE goes

with the very heart of

taxation, to earn income

for the government.

Secondary to this primary

purpose is that tax is being

seconded to serve some

other concerns for the

majority.

4. SUPPORT THE EXPENSES

of the government is related to

public purpose of imposition of

taxation. While the govt is

empowered to collect from its

inhabitants, proceeds are bound

to serve the public needs and

expenditure only.

THE POWER TO

TAX

Power to tax is inherent in a

sovereign state so that the grant of

which is not necessary but the

exercise is provided safeguards

and limitations.

This means that the state needs

not to be empowered by the

Constitution or any mandate for it

to be allowed to tax.

What are being provided for by the

supreme law of the land, the

Constitution, are the guidelines

and the limit on the exercise of the

power.

Reason: So that it cannot be

abused and misused said power to

the detriment of the majority and to

the advantage of the selected few.

Power to tax is:

(1) unlimited, and

(2) plenary

x x x which means a state can

tax on anything, anytime and

at any amount. / provided, due

process is complied with, and

that It is intended for public

purpose.

ELEMENTS OF THE STATE in relation to the

inherent limitations of the power to tax

PEOPLE

TERRITORY

SOVEREIGNTY

GOVERNMENT

INTERNATIONAL

RECOGNITION

The State cannot tax

the people who are not

citizens of the

Philippines.

The State cannot tax the people who

are not in its territorywith the exception of those non-citizens who

may have a particular undertaking in

the country subject to tax laws.

(Example; J. Los concert in the PH is subject to tax, applying the nexus to

the situs principle)

The state cannot tax the people

for other purposesit must be for people; as the republic is a

government for the people, by the

people and of the people.

The state cannot tax government

agenciesas they are subject to tax exemption. (exception of GOCCs)

The power to tax is lodged within the

legislative government onlywith the exception of (1) Presidents tariff powers and (2) local government units fiscal autonomy.

The state

cannot tax other

states

NATURE OF THE

POWER TO TAX

AS AN INHERENT

POWER

INHERENT LIMITATIONSthese limitations are those that emanate

from the very nature of the power

of taxation. They are very basic

and built in with that power.

Levy for public

purpose

Non-delegation

of legislative

power to tax

Exemption of

government

entities

International

Comity

Territorial

Jurisdiction

Levy for public

purpose

To levy a tax means to impose to

or charge to collect a tax from

those to whom it is addressed.

To levy is to pass on laws or

ordinances imposing a tax or duty

upon specific group of taxpayers.

The impelling reason for the

imposition of tax must be the

welfare of the public in general.

Non-delegation

of legislative

power to tax

Gaston v. RepublicIn this case, a certain imposition was successfully

passed for the purpose of upholding the

welfare of the sugar industry. It was

questioned on the ground that there is no

public purpose since the sugar industry

does not represent the entire public as

the proceeds would not add to the

general budget of the national

government, nevertheless, the industry

itself admits of a public nature whose

circumstances and effects directly affect

the public. The requirement of direct

purpose does not admit of a direct public

benefit from the imposition.

Power to tax is lodged within the legislative

powers only.

Rationale: Legislative branch is theoretically

the representative of the people and are

directly aware and in common contact with

the instances and situations of their districts

General Rule: Legislative department alone

exercises the taxing power

Exceptions: (1) Presidents tariff powers (2) local government units fiscal autonomy.

Exemption of

government

entities

Government is the people, by the people and

for the people. Government exists for the

people and whatever amount it makes came

from the people and such amount it use to

finance its various activities to address the

general welfare of its inhabitants.

It is not constituted to engage in any trade or

business but to deliver basic services and

serve everyone within.

Analyticallytaxing the government itself will not generate more revenue. The money will

only rotate so no effect at all would be made.

International

Comity

With regard to the taxing

power, the state is limited on

the grounds of international

comity because based on the

principle of comity; the state is

subject to compliance of

certain international rules and

standards for mutual benefits

and enjoyment of states and

its inhabitants.

Territorial

JurisdictionRelates to the area of jurisdiction and

responsibility of a particular estate. Independent

states power of taxation is generally confined

only within its jurisdiction to give due respect and

as courtesy to other states.

A state as a rule can only impose and implement

tax laws and rules within its jurisdiction in

accordance with its wishes. But then, it can tax

citizens or entities of other states doing a trade

or business or deriving income within the

jurisdiction of its state.

CONSTITUTIONAL

LIMITATIONS OF

THE POWER TO

TAX

Those limitations on the

states exercise of the taxing power specifically provided

by the particular provisions

of the Constitution.

Article II: Declaration of

Principles and State Policies

Sec. 25. The State shall ensure the

autonomy of the local governments.

Article III: Bill of Rights

Sec. 1. No person shall be

deprived of life, liberty or property

without due process of the law, nor

shall any person be denied the

equal protection of the laws.


Sec. 20. No person shall be

imprisoned for debt or non-

payment of a poll tax.


Sec. 10. No law impairing

the obligations of contracts

shall be passed.

Article II: Declaration of

Principles and State Policies

Sec. 6. The separation of

church and the State shall be

inviolable.

Article VI. Legislative Department

Sec. 25(1). The Congress may not

increase the appropriations by the

President for the operation of the

Government as specified in the

budget. The form, content and

manner of preparation of the budget

shall be prescribed by the law.


Sec. 25(2). No provision or

enactment shall be embraced in the

general appropriations bill unless it

relates specifically to some particular

appropriation therein. Any such

provision shall be limited in its

operation to the appropriation to

which it relates.

Article VI. Legislative

Department

Sec. 25(3). The procedure in

approving appropriations for the

Congress shall strictly follow the

procedure for approving

appropriations for other

departments and agencies.


Sec. 25(4). A special appropriations

bill shall specify the purpose for which

it was intended, and shall be supported

by funds actually available as certified

by the National Treasurer, or to be

raised by a corresponding revenue

proposal therein.


Sec. 25(5). No law shall be passed

authorizing any transfer of appropriations;

however, the President of the Senate, the

Speaker of the House of

Representatives, the Chief Justice of the

Supreme Court, and the heads of the

Constitutional Commission, may, by law,

be authorized to augment any item in the

general appropriations law for their

respective offices from savings in other

items of their respective appropriations.

CONSTITUTIONAL

LIMITATIONS OF THE

POWER TO TAX

(Section 25, Article VI

Legislative Department)


Department

Sec. 25(6). Discretionary funds

appropriated for particular officials

shall be disbursed only for public

purposes to be supported by

appropriate vouchers and subject

to such guidelines as may be

prescribed by law.


Sec. 25(7). If by the end of the fiscal

year, the Congress shall have failed to

pass the general appropriations bill for

the ensuing fiscal year, the general

appropriations law for the preceding fiscal

year shall be deemed re-enacted and

shall remain in force and effect until the

general appropriations bill is passed by

the Congress.

CONSTITUTIONAL

LIMITATIONS OF THE

POWER TO TAX

Sec. 27, 28 & 29; Article VI

Legislative Department


Sec. 27(1). Every bill passed by the Congress shall, before it

becomes law, be presented to the President. If he approves the

same he shall sign it; otherwise he shall veto it and return the same

with his objections to the House where it originated, which shall enter

the objections at large in its Journal and proceed to reconsider it.

If after such reconsideration 2/3 of the members of the Congress

of such House shall agree to pass the bill, it shall be sent,

together with the objections, to the House by which it shall likewise

be reconsidered;

And if approved by 2/3 of all the members of that House, it shall

become a law.

In such cases, votes of each house shall be determined by yeas or

nays, and the names of the Members voting for or against shall be

entered in its Journal.


Department

Sec. 27(2). 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.


Department

Sec. 28 (1). The rule of taxation

shall be uniform and equitable.

The Congress shall evolve a

progressive system of taxation.


Sec. 28 (2). The Congress may, by

law, authorize the President to fix,

within specified limits, and subject to

such limitations and restrictions it

may impose, tariff rates, import and

export quotas, tonnage and

wharfage dues; and other duties or

imposts within the framework of the

national development program of

the Government.


Department

Sec. 28 (3). Charitable institutions,

churches and personages or

convents appurtenant thereto;

mosques, non-profit cemeteries

and all lands, buildings and

improvements actually, directly and

exclusively used for religious,

charitable or educational purpose

shall be exempt from taxation.


Department

Sec. 28 (4). No law granting

any tax exemption shall be

passed without the

concurrence of a majority of

all members of the

Congress.


Sec. 29. All money collected on any

tax levied for a special purpose shall

be treated as a special fund and paid

out for such purpose only. If the

purpose of which a special fund has

been created or has been fulfilled or

abandoned; the balance, if any, shall

be transferred to the general funds of

the Government.

CONSTITUTIONAL

LIMITATIONS OF THE

POWER TO TAX

Article VIII Judicial

Department


Department

Sec. 5. The Supreme

Court shall have the

following powers:

Sec. 5 (1)Exercise original jurisdiction over cases affecting

ambassadors, other public

ministers and consuls, and over

petitions for certiorari, prohibition,

mandamus, quo warranto and

habeas corpus.

Sec. 5 (2)Review, revise, reverse, modify or affirm on appeal or certiorari, as the law or the Rules of Court may provide; final

judgments and orders of lower courts in:

All cases which the constitutionality or validity of any treaty,

international or executive agreement, law, presidential

decree, proclamation, order, instruction, ordinance or

regulation is in question.

All cases involving legality of any tax, impost, assessment

or toll, or any penalty imposed in relation thereto.

All cases in which the jurisdiction of any lower court is in

issue.

All cases in which only an error or question of law is

involved.

CONSTITUTIONAL

LIMITATIONS OF THE

POWER TO TAX

Article X Local

Government

Sec. 5. Each local government unit shall have

the power to create its own sources or

revenues and to levy taxes, fees and charges

subject to such guidelines and limitations as

the Congress may provide; consistent with

the basic policy of local autonomy. Such

taxes, fees and charges shall accrue

exclusively to the local governments.

Sec. 6. Local government units

shall have a just share as

determined by law in the national

taxes which shall be

automatically released to them.

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Constitutional and Inherent Limitations of the Power to Tax