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

CABANEIRO) A2011 1
Chapter 2: LIMITATIONS ON THE TAXING POWER B. NON-DELEGABILITY OF THE TAXING POWER
Power of taxation is exclusively legislative
INHERENT LIMITATIONS ON THE TAXING POWER General Rule: Taxing Power may not be delegated
Taxing power has very distinct and positive limitations some of Exceptions:
which inhere in its very nature and exists whether declared or not 1. Delegation to the President (Flexible Tariff Clause)
declared in the constitution. Authority given to the President in case of
Inherent limitations are so called because they proceed from the emergency upon the recommendation of the
very nature of the taxing power itself. NEDA to increase or to decrease or to amend
These inherent limitations are: (PENTI indispensable for women tariff rates, wharfage dues or quotas.
kaya inherent limitation) 2. Delegation to the local government
1. Public purpose of taxes Basis: Sec 5 Art. X, Constitution w/c mandates
2. Exemption of the government from taxes that local government should be autonomous.
3. Non-delegability of the taxing power They were given the power to exact their own
4. Territoriality or the situs of taxation source of revenue.
5. International comity 3. Delegation to the administrative body
What is delegated to the administrative body is
A. PUBLIC PURPOSE OF TAXES the duty of implementation.
Public purpose in taxation is important because of all the powers Dept. of Finance has the task of regulating or
of government, that of taxation is said to be the strongest as it clarifying the law because the law that comes
can be readily employed against one class of individuals in favor out of Congress is not really complete.
of another so as to ruin one class and give unlimited wealth and Without the regulation, taxpayer has the best
property to another, if there is no implied limitation on the uses defense not to pay because you cannot be
for which such taxing power may be exercised. compelled to pay based on ambiguous law.
Public purpose may be interpreted to be that kind of purpose Certain aspects of the taxing process that are
that inures to great majority of inhabitants and needs to be not really legislative in nature are vested in
addressed by the government. administrative agencies. In these cases, there
TESTS FOR DETERMINING THE PUBLIC PURPOSE IN A really is no delegation, to wit:
TAX: a. power to value property
b. power to assess and collect taxes
1. Whether the thing to be furthered by the appropriation of
c. power to perform details of computation,
public revenue is something which is the duty of the State, appraisement or adjustments.
as a government, to provide.
2. Whether the proceeds of the tax will directly promote the POWERS WHICH CANNOT BE DELEGATED
welfare of the community in equal measure. 1. Determination of the subjects to be taxed
What is being violated if a tax is being collected for a private 2. Purpose of the tax
purpose? 3. Amount or rate of the tax
1. Inherent limitation 4. Manner, means and agencies of collection
2. Due process of law 5. Prescription of the necessary rules with respect thereto

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 2
C. TERRITORIALITY OR THE SITUS OF TAXATION EXCEPTIONS TO THE TERRITORIALITY RULE
Place of taxation 1. Where the tax laws operate outside territorial jurisdiction
It is a determinant or criteria to determine which governmental a. TAXATION of resident citizens on their incomes
entity has the power to tax. derived from abroad
The government cannot tax a particular object of taxation which 2. Where tax laws do not operate within the territorial
is not within its territorial jurisdiction. jurisdiction of the State
Some Basic Considerations Affecting Situs of Taxation a. When exempted by treaty obligations
1. Protection a basic consideration that justifies the situs of b. When exempted by international comity
taxation
2. Double taxation and the situs of taxation D. EXEMPTION OF THE GOVERNMENT FROMTAXES
Double taxation is never invalid where it is Is the government subject to tax?
imposed by different states. No, but it covers only govt entities engaged in sovereign
3. The maxim of Mobilia Sequuntur Personam and Situs of function.
Taxation BUT in the case of Bisaya Land Transportation Corp, SC held
Movables follow the person. that there is no impediment for the given to tax even govt
The situs of personal property is the domicile of entities engaged in governmental function.
the owner. Cabans opinion: If the legislature says lets not tax the govt
The doctrine of Mobilia Sequuntur Personam is entity engaged in governmental function, SC cannot do anything
not allowed to stand in the way of taxation of because the limitation of the SC is only to interpret and that
personalty in the place where it has its actual congress being the decision maker as to who will be taxed.
situs and the requisite legislative jurisdiction Agencies performing governmental functions: TAX EXEMPT
exists. Agencies performing proprietary functions: SUBJECT TO TAX
4. Legislative power to fix situs Those with ORIGINAL CHARTERS (incorporated agencies)
If no constitutional provisions are violated, the Those created by SPECIAL CHARTER (incorporated agencies) are
power of the legislature to fix situs is not covered by the exemption
undoubted. The exemption applies only to governmental entities through
which the government immediately and directly exercises its
Factors Affecting Territoriality sovereign powers.
a. Kind or classification of the tax being levied Tax exemption of property owned by the Republic of the
b. Situs of the thing or property taxed Philippines refers to the property owned by the government and
c. Domicile or residence of the person taxed its agencies which do not have separate and distinct personality.
d. Citizenship or nationality of the person taxed
e. Source of the income taxed GOVERNMENT ENTITIES EXEMPT FROM INCOMING TAX
f. Situs of the excise, privilege, business or occupation 1. GSIS
being taxed. 2. SSS
RULE: 3. PHIC
The State where the subject to be taxed has a situs may 4. PCSO
rightfully levy and collect the tax 5. PAGCOR

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 3
REASON FOR EXEMPTIONS DUE PROCESS IN TAXATION DOES NOT REQUIRE
1. Government will be taxing itself to raise money for itself. 1. Determination through judicial inquiry of
2. Immunity is necessary in order that governmental functions a. property subject to tax
will not be impeded. b. amount of tax to be imposed
2. Notice of hearing as to:
GROUNDS FOR TAX EXEMPTION OF FOREIGN GOVERNMENT a. amount of the tax
PROPERTY b. manner of apportionment
1. Sovereign equality of States
2. Usage among States REQUISITES OF DUE PROCESS OF LAW
3. Immunity from suit of a State 1. There must be a valid law
2. Tax measure should not be unconscionable and unjust as to
E. INTERNATIONAL COMITY amount to confiscation of property
What is international comity? 3. Tax statute must not be arbitrary as to find no support in the
The way to answer this accdg to Atty. Caban is, well constitution
international comity is one of the inherent limitations on
taxation (I know). This is a limitation that says that there A tax law which denies a taxpayer a fair opportunity to assert his
are bilateral arrangements among countries whereby certain substantial rights before a competent tribunal is invalid
activities of persons will not be taxed by one country A taxpayer must not be deprived of his property for non-payment of
because they are neighbors; they are friends subject to the taxes without
principles of international law. 1) notice of liability
Based on tradition, practice or custom 2) sale of property at public auction

DOCTRINE OF INCORPORATION The validity of statute maybe contested only by one who will sustain
The Philippines adopts the generally accepted principles of a direct injury in consequence of its enforcement
international law as part of the law of the land
If a tax law violates certain principles of international law, INSTANCES WHEN THE TAX LAW MAYBE DECLARED AS
then it is not only invalid but also unconstitutional UNCONSTITUTIONAL (CUNO pag constitutional cuno, eh di
unconstitional yun.)
CONSTITUTIONAL LIMITATIONS ON THE TAXING POWER 1) If it amounts to Confiscation of property without due
process
A. DUE PROCESS OF LAW (Sec. 1, Art. III) 2) If a tax law which is applied retroactively, imposes Unjust
Due process of law in taxation: Before a tax can be collected, and oppressive taxes.
there must be a law. 3) The law maybe declared as unconstitutional if it is imposed
Before a tax is to be paid for: Not for a public purpose
1. There must be a law 4) If the subject of taxation is Outside of the jurisdiction of the
2. It must not be arbitrary taxing state

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 4
A violation of the inherent limitations on taxation would contravene TWO WAYS EQUAL PROTECTION CLAUSE CAN BE
the constitutional injunctions against deprivation of property without VIOLATED
due process of law 1. When classification is made where there should be none
There must be proof of arbitrariness, otherwise apply the ex. When the classification does not rest upon
presumption of constitutionality substantial distinctions that make for real difference
Due process requires hearing before adoption of legislative rules by 2. When no classification is made where a classification is
administrative bodies of interpretative rulings. ( Misamis vs. DFA) called for
Compliance with strict procedural requirements must be followed ex. When substantial distinctions exist but no
effectively to avoid a collision course between the states power to corresponding classification is made on the basis
tax and the individual recognized rights (CIR vs. Algue) thereof
The due process clause may correctly be invoked only when there is
a clear contravention of inherent or constitutional limitations in the C. FREEDOM OF SPEECH AND OF THE PRESS (Sec. 4, Art. III)
exercise of tax power. (Tan vs. del Rosario) The press is not exempt from taxation
SUBSTATANTIVE DUE PROCESS requires that a tax statute must be The sale of magazines or newspapers, maybe the subject of
within the constitutional authority of Congress to pass and that it be taxation
reasonable, fair and just What is not allowed is to impose tax on the exercise of an
PROCEDURAL DUE PROCESS requires notice and hearing or at least activity which has a connection with freedom of the press
an opportunity to be heard (license fee)
The imposition of tax on persons before they can deliver or
B. EQUAL PROTECTION OF THE LAW (Sec. 1, Art. III) broadcast a particular news or information is the one which
Taxation should be uniform and equitable. cannot be taxed.
Equal protection of law means that under this guaranty, all What is prohibited by the constitutional guarantee of free press
taxable objects or subjects of the same footing, should be are laws which single out the press or target a group belonging
treated ALIKE. to the press for special treatment or which in any way
Class legislation is abhorred unless it is supported by substantial discriminates against the press on the basis of the content of the
distinction. publication. TOLENTINO vs. SEC. OF FINANCE
It is inherent in the power to tax that a state be free to select
the subjects of taxation, and it has been repeatedly held that D. NON-INFRINGEMENT OF RELIGIOUS FREEDOM (Sec. 5, Art. III)
inequalities which result from a singling out of one particular Religion is a constitutional guaranty that any person can join to
class for taxation or exemption infringe no constitutional any form of religion, for as long as the religion you joined in
limitation. The rule of uniformity does not call for perfect does not disturb public order.
uniformity or perfect equality, because this is hardly attainable. A municipal license tax on the sale of bibles and religious articles
The taxing power has the authority to make reasonable and by a non-stock, non-profit missionary organization at a little
natural classifications for purposes of taxation. In this regard, profit constitutes a curtailment of religious freedom and worship
the Court constantly held that classification, if rational in which is guaranteed by the Constitution. (American Bible Society
character, is allowable.(Sison vs Ancheta) vs City of Manila)
It is the activity which cannot be taxed
activities which have connection with the exercise of religion

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 5
The payment of license fees for the distribution and sale of The non-impairment clause applies only to contracts and not to
bibles suppresses the constitutional right of free exercise of a franchise.
religion. AMERICAN BIBLE SOCIETY vs. MANILA Franchise is a privilege given to a private person to
The Free Exercise of Religion Clause does not prohibit imposing engage in an activity that affects the public, whether
a generally applicable sales and use tax on the sale of religious it is electrification, water system, telecommunication
materials by a religious organization. JIMMY SWAGGART vs. or water utilities.
BOARD OF EQUALIZATION Franchise is a unilateral grant at the pleasure of the
The Sale of religious articles can be the subject of the VAT granting power.
What cannot be taxed is the exercise of religious worship or The non-impairment clause applies to taxation but not to police
activity power and eminent domain. Furthermore, it applies only where
The income of the priest derived from the exercise of religious one party is the government and the other, a private individual.
activity can be taxed. As a rule, the obligation to pay tax is based on law. But when,
for instance, a taxpayer enters into a compromise with the BIR,
E. NON-IMPERMAINT OF CONTRACTS (Sec. 10, Art. III) the obligation of the taxpayer becomes one based on contract
The parties to the contract cannot exercise the power of
taxation. F. NON-IMPRISONMENT FOR DEBT OR NON-PAYMENT OF
They cannot agree or stipulate that this particular transaction POLL TAX (Sec. 20, Art. III)
may be exempt from tax- not allowed (except if government) The non-imprisonment rule applies to non-payment of poll tax
Police power prevails over the non-impairment clause. OPOSA which is punishable only by a surcharge, but not to other
vs. FACTORAN violations like falsification of community tax certificate or non-
A lawful tax on a new subject or an increased tax on an old one payment of other taxes
does not interfere with a contract or impairs its obligation. LA POLL TAX tax of fixed amount imposed upon residents within
INSULAR vs. MANCHUCA a specific territory regardless of citizenship, business or
The constitutional guarantee of the non-impairment clause can profession. A.K.A : community tax, residence tax, cedula
only be invoked in the grant of tax exemption. Community tax certificate proof of payment of poll tax
RULES:
1. If the exemption was granted for valuable consideration and G. ORIGIN OF APPROPRIATION, REVENUE AND TARIFF BILLS
it is granted on the basis of a contract. (Sec. 24, Art. VI)
cannot be revoked It is not the revenue statute but the revenue bill which is
2. If the exemption is granted by virtue of a contract, wherein required by the constitution to originate exclusively in the House
the government enters into a contract with a private of Representatives
corporation REASON:
cannot be revoked unilaterally by the government 1. To insist that a revenue statute and not only the bill which
3. If the basis of the tax exemption is a franchise granted by initiated the legislative process culminating in the enactment
Congress and under the franchise or the tax exemption is of the law must substantially be the same as the House bill
given to a particular holder or person would be to deny the Senates power not only to concur
can be unilaterally revoked by the government with amendments but also to propose amendments. It
(Congress) would be to violate the co-equality of legislative power of

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 6
the two houses of Congress and in fact make the House SYTEMS OF TAXATION
superior to the Senate. (Tolentino vs. Sec. of Finance) 1. PROPORTIONAL TAXATION - where the tax increases or
2. The Constitution simply requires that there must be that decreases in relation to the tax bracket
initiative coming from the House of Representatives relative 2. PROGRESSIVE or GRADUATED SYSTEM - where the tax
to appropriation, revenue and tariff bills. increases as the income of the taxpayer goes higher
3. The Constitution does not also prohibit the filing in the 3. REGRESSIVE SYSTEM - where the tax decreases as the
Senate of a substitute bill in anticipation of its receipt of the income of the taxpayer increases
bill from the House, as long as action by the Senate is
withheld until receipt of said bill (Tolentino vs. Sec. of PROGRESSIVITY IS NOT REPUGNANT TO UNIFORMITY
Finance) and EQUALITY
1. Uniformity does not require the things which are not
H. UNIFORMITY, EQUITABILITY AND PROGRESSIVITY OF different be treated in the same manner
TAXATION (Sec. 28[1], Art. VI) 2. Differentiation, which is not arbitrary and conforms to the
Differentiate uniformity from equal protection of law? dictates of justice and equity is allowed. Progressivity is one
In equal protection of the law, all taxpayers or subjects way of classification.
or properties that are standing in equal footing should 3. The State has the inherent right to select subjects of
be treated alike while in uniformity, all taxable articles of taxation.
the same class shall be taxed at the same rate.
The rule on uniformity means that for as long as all those Resort to indirect taxes should be minimized but not to be
subjects and persons in the same class are taxed in the same avoided entirely because it is difficult, if not impossible to avoid
rate, it is uniform. them by imposing such taxes according to the taxpayers ability
to pay.
UNIFORMITY The mandate to Congress is not to prescribe, but to evolve, a
means that all taxable articles kinds of property of the progressive system of taxation
same class shall be taxed at the same rate
A tax is uniform when it operates with the same force TOLENTINO vs. SEC. OF FINANCE
and effect in every place where the subject of it is found RA 7716 (EVAT), does not violate the constitutional mandate
that Congress shall evolve a progressive system of
EQUITABILITY taxation
Taxation is said to be equitable when its burden falls on The Constitution does not really prohibit the imposition of
those better able to pay indirect taxes, which like the VAT, are regressive. The
constitutional provision means simply that indirect taxes
PROGRESSIVITY shall be minimized.
Taxation is progressive when its rate goes up depending on
the sources of the person affected

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 7
I. DELEGATION OF LEGISLATIVE AUTHORITY TO FIX TARIFF are incidental to and reasonably necessary for the
RATES, IMPORT AND EXPORTS QUOTAS, etc (Sec. 28[2], Art. accomplishment of said purpose. [Abra Valley College v. Aquino,
VI) 162 SCRA 106].
TARIFF POWER OF THE PRESIDENT To be exempt from realty taxation, there must be proof of
REQUISITES: actual, direct and exclusive use of lands, buildings and
1. There must be a law passed by Congress authorizing the improvements for religious or charitable purposes, [Province of
President to impose tariff rates and other fees. Abra v. Hernando 107 SCRA 104].
2. Under the law, there must be limitations and restrictions on
the exercise of such power K. VOTING REQUIREMENTS IN CONNECTION WITH THE
3. The taxes that may be imposed by the President are limited LEGISLATIVE GRANT OF TAX EXEMPTION (Sec. 28[4], Art. VI)
to: LAW GRANTING TAX EXEMPTIONS
a. Tariff rates RULES ON VOTE REQUIREMENT
b. Import and export quotas 1. Law granting any tax exemption
c. Tonnage and wharfage dues absolute majority
d. Other duties (customs duties) 2. Law withdrawing any tax exemption
4. The imposition of these tariff and duties must be within the Relative majority
framework of the National Development program of the Tax exemption, amnesties, refunds are considered in the nature
government of tax exemptions
A law granting such needs approval of the absolute majority of
Congress may not pass a law authorizing the President to the Congress
impose income tax, donors tax, and other taxes which are not in
the nature of customs duties. L. NON-IMPAIRMENT OF THE SUPREME COURTS
The Constitution allows only the imposition by the President of JURISDICTION IN TAX CASES (Secs. 2 & 5, Art. VIII)
these custom duties SUPREME COURTS POWER OF REVIEW
Congress cannot take away from the Supreme Court the power
J. TAX EXEMPTION OF PROPERTIES ACTUALLY, DIRECTLY AND given to it by the Constitution as the final arbiter of the tax
EXCLUSIVELY USED FOR RELIGIOUS, CHARITABLE AND cases.
EDUCATIONAL PURPOSES (Sec. 28[3], Art. VI)
TAX EXEMPTION OF REAL PROPERTY M. TAX EXEMPTION OF REVENUE AND ASSETS, INCLUDING
APPLICATION: GRANTS, ENDOWMENTS, DONATIONS OR CONTRIBUTION
The exemption only covers property taxes and not other TO EDUCATIONAL INSTITUTIONS (Sec. 4[3] & [4], Art. XIV)
taxes TAX EXEMPTIONS OF EDUCATIONAL INSTITUTIONS
TEST OF EXEMPTION: REQUISITES FOR EXEMPTION:
It is the USE of the property and not ownership of the 1. It must be a private educational institution
property 2. It must be non-stock and non-profit
The exemption in favor of property used exclusively for 3. Its assets (property) and revenues (income) must be used
charitable or educational purpose is not limited to property actually, directly and exclusively for educational purposes
actually indispensable therefore, but extends to facilities which

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 8
RULES: REQUISITES for APPLICATION of 10% PREFERENTIAL
1. If the first requisite is absent (meaning, its a government RATE
educational institution), it is nonetheless exempt from 1. It is private;
income tax 2. It has permit to operate from the DECS, or CHED or TESDA;
2. If the second requirement is absent (meaning, it is stock and 3. It is non-profit;
profit) as long as the third requirement is present, it is 4. Its gross income from unrelated trade or business must not
nonetheless exempt from real estate tax exceed fifty percent (50%) of its total gross income from all
3. If the third requirement is absent, as long as it is non-stock sources.
and non-profit, it is nonetheless exempt from income tax
4. If the third requirement is absent, but it is private and non- 10% PREFERENTIAL TAX RATE DOES NOT APPLY TO THE
profit, it is subject to income tax, but at the preferential rate FOLLOWING:
of ten percent (10%) 1. Passive incomes derived by the educational institution
(subject to final income tax) and
Under the present tax code, for a private educational institution 2. Where the educational institution is engaged in unrelated
to be exempt from the payment of income tax, all it has to be is trade, business or other activity, and the gross income from
non-stock and non-profit. However, a governmental educational such unrelated trade, business or other activities exceeds
institution is exempt from income tax without any condition fifty percent (50%) of the total gross income derived by the
school from all sources
EXEMPTION DOES NOT EXTEND TO:
1. Income derived by these educational institutions from their Income derived by YMCA from leasing out a portion of its
property, real or personal, and premises to small shop owners, like restaurant and canteen
2. From activities conducted by them for profit regardless of operators, and from parking fees collected from non-members
the disposition made on such income are taxable income. YMCA is not an educational institution. CIR
vs. CA (298 SCRA 83)
Proceeds of the sale of real property by the Roman Catholic Subject to conditions prescribed by law, all grants
church is exempt from income tax because the transaction was endowments, donations, or contributions used actually, directly
an isolated one. MANILA POLO CLUB vs. CTA and exclusively for educational purposes shall be exempt from
Income derived from the hospital pharmacy, dormitory and tax. (Sec. 4 (4) ART XIV)
canteen was exempt from income tax because the operation of Where a donation is made in favor of an educational institution
those entities was merely incidental to the primary purpose of pursuant to sports competition and tournaments, the donor is
the exempt corporation. ST. PAUL HOSPITAL of ILOILO vs. CIR exempt from the payment of donors tax
Where the educational institution is private and non-profit (but a
stock corporation) it is subject to income tax but at the
preferential rate of ten percent (10%)

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 9
OTHER CONSTITUTIONAL PROVISIONS RELATED TO TAXATION B. POWER OF THE PRESIDENT TO VETO ANY PARTICULAR
ITEMS IN AN APPROPRIATION, REVENUE OR TARIFF BILL
The following are not actually limitations on the taxing PRESIDENTIAL VETO (Sec. 27 (2), ART VI)
power but which have bearing on taxation: The President shall have the power to veto any particular item
or items in an appropriation, revenue or tariff bill, but the veto
A. CONSTITUTIONAL REQUIREMENT ON THE SUBJECT AND shall not affect the item or items to which he does not object
TITLE OF BILLS (Sec 26 [1], Art VI)
1. SUBJECT ONE TITLE RULE C. PROVISION WHICH REQUIRES THAT NO MONEY SHALL BE
Every bill passed by the Congress shall embrace only one PAID OUT OF THE TREASURY EXCEPT IN PURSUANCE OF AN
subject which shall be expressed in the title thereof ( Sec. 26 (1) APPROPRIATION MADE BY LAW (Sec 29 [1] Art VI)
ART II) No money shall be paid out of the treasury except in pursuance
2. THREE READING RULE of an appropriation made by law.
No bill passed by either House shall become a law unless it has
passed three readings on separate days and printed copies D. PROVISION AGAINST THE APPROPRIATION OF PUBLIC
thereof in its final form have been distributed to its members MONEY OR PROPERTY FOR THE BENEFIT OF ANY CHURCH,
three days before its passage, EXCEPT when the President SECT OR SYSTEM OF RELIGION, etc. (Sec 29 [2] Art VI)
certifies to the necessity of its immediate enactment to meet a Public property may be leased to a religious group provided that
public calamity or emergency. (Sec. 26 (2) ART II) the lease will be totally under the same conditions as that to
A presidential certification dispenses with the private persons (amount of rent)
requirement not only of printing but also that of Congress is without power to appropriate funds for a private
reading the bill on separate days. PHIL. JUDGES purpose.
ASSOC. vs. PRADO
It is within the power of a Bicameral Conference E. PROVISIONS WHICH MANDATES THAT MONEY COLLECTED
Committee to include in its report an entirely new ON A TAX LEVIED FOR A PUBLIC PURPOSE SHALL BE PAID
provision that is not found either in the House Bill or OUT FOR SUCH PURPOSE ONLY (Sec 29 [3] Art VI)
Senate Bill, so long as such amendment is germane All money collected or any tax levied for a special purpose shall
to the subject of the bills before the committee. be treated as a special fund and paid out for such purpose only.
After all its report was not final but needed the If the purpose for which a special fund was created has been
approval of both houses of Congress to become fulfilled or abandoned, the balance, if any, shall be transferred
valid as an act of the legislative department. PHIL. to the general funds of the Government. (Sec. 29 (3) ART VI)
JUDGES ASSOC. vs. PRADO If a Pres. of the Philippines spent a special fund for a general
3. ENROLLED BILL DOCTRINE purpose, he can be charged with culpable violation of the Consti.
G.R. An enrolled copy of a bill is conclusive not only of its
provisions but also of its due enactment F. PROVISION REGARDING ALLOTMENTS TO LOCAL
EXCEPTION: In ASTORGA vs. VILLEGAS, the Supreme Court GOVERNMENTS
went behind the enrolled bill and consulted the journal to local government units shall have a just share, as determined
determine whether certain provisions of a state had been by law, in the national taxes which shall be automatically
approved by the Senate Presidents admission of a mistake and released to them. (Sec 6, Art X)
withdrawal of his signature.
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 10
EXERCISES: issuance, pawnshops would not be liable to pay the 5% percentage
tax, considering that they were not specifically included in the basic
Inherent Limitations of Territoriality and International Comity provisions of the law imposing such tax. In so doing, the CIR did not
May the Philippine government require tax withholding on the salaries of simply interpret the law. The due observance of the requirements of
Filipino employees working in the American Embassy in the Philippines? notice, hearing, and publication should not have been ignored. (CIR v.
Suggested Answer: M.J. Lhuiller Pawnshop, Inc. G.R. No. 150947)
No, because this will violate the principle of international comity. If the
Philippine government would impose the requirement of tax withholding Tax Avoidance vs. Tax Evasion (1996)
on the salaries of Filipino employees working in the American Embassy in Distinguish tax evasion from tax avoidance.
the Philippines, this would in effect require that the American SUGGESTED ANSWER:
government be constituted as the withholding agent of the Philippine Tax evasion is a scheme used outside of those lawful means
government insofar as the taxes on the salaries of the Filipino employees to escape tax liability and, when availed of, it usually subjects the
are concerned. This is obviously violative of the inherent limitation that taxpayer to further or additional civil or criminal liabilities. Tax
avoidance, on the other hand, is a tax saving device within the means
taxation is subject to the principle of international comity.
sanctioned by law, hence legal.
Due Process
Power of Taxation: Equal Protection of the Law (2000)
A law imposed a 5% percentage tax on the gross receipts of lending An executive Order was issued pursuant to law, granting tax and duty
investors. Without notice, hearing and publication, the CIR issued a incentives only to businesses and residents within the "secured area" of
Revenue Memorandum Order (RMO) applying the above-cited law to the Subic Economic Special Zone, and denying said incentives to those who
pawnshops, on the theory that the principal activity of pawnshops is live within the Zone but outside such "secured area". Is the
lending money at interest, and that such RMO is merely interpretative in constitutional right to equal protection of the law violated by the Executive
nature; thus, no notice, hearing and publication is required. Is the RMO Order? Explain.
valid? SUGGESTED ANSWER:
Suggested Answer: No. Equal protection of the law clause is subject to reasonable
It is not valid. When an administrative rule is merely interpretative classification. Classification, to be valid, must:(1) rest on substantial
in nature, its applicability needs nothing further than its bare distinctions, (2) be germane to the purpose of the law, (3) not be limited to
issuance, for it gives no real consequence more than what the law existing conditions only, (4) apply equally to all members of the same class.
itself has already prescribed. When, on the other hand, the
administrative rule goes beyond merely providing for the means that Taxpayer Suit; When Allowed (1996)
can facilitate or render least cumbersome the implementation of the law When may a taxpayer's suit be allowed?
but substantially increases the burden of those governed, it behooves SUGGESTED ANSWER:
the agency to accord at least to those directly affected a chance to A taxpayer's suit may only be allowed when an act complained of,
be heard, and thereafter to be duly informed, before that new issuance which may include a legislative enactment, directly involves the illegal
is given the force and effect of law. disbursement of public funds derived from taxation (Pascual vs. Secretary
The questioned RMO cannot be viewed simply as implementing rules of Public Works, 110 Phil. 331).
or corrective measures revoking in the process the previous rulings of
past Commissioners. Specifically, they would have been amendatory
provisions applicable to pawnshops. Without the disputed CIR

Chapter 2: LIMITATIONS ON THE TAXING POWER. Page 10 of 10