Second

Taxation Law Review Semester 2020

Law on Taxation Review

Chapter 1: GENERAL PRINCIPLES

TAXATION DEFINED

 Taxation is the inherent power of the sovereign, exercised through

the legislature, to impose burdens upon the subjects and objects
within its jurisdiction, for the purpose of raising revenues to carry out
the legitimate objects of the government.
 It is also defined as the act of levying a tax, i.e. the process or
means by which the sovereign, through its law-making body, raises
income to defray the necessary expenses of government. It is a
method of apportioning the cost of government among those who, in
some measure, are privileged to enjoy its benefits and must
therefore bear its burdens.
 It is a mode of raising revenue for public purposes, (Cooley)
 Symbiotic relationship between the government and the citizens.

RATIONALE OF TAXATION: DOCTRINE OF SYMBIOTIC RELATIONSHIP

 This doctrine is enunciated in CIR v. Algue, Inc. [158 SCRA 9], which
states that “Taxes are what we pay for civilized society. Without
taxes, the government would be paralyzed for lack of the motive
power to activate and operate it. Hence, despite the natural
reluctance to surrender part of one’s hard-earned income to the
taxing authorities, every person who is able must contribute his
share in the burden of running the government. The government for
its part, is expected to respond in the form of tangible and
intangible benefits intended to improve the lives of the people and
enhance their material and moral values.”

TAXES DEFINED

 Taxes are the enforced proportional contributions from persons and

property levied by the law-making body of the State by virtue of its
sovereignty for the support of the government and all public needs,
[Cooley]
 They are not arbitrary exactions but contributions levied by authority
of law, and by some rule of proportion which is intended to ensure

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uniformity of contribution and a just apportionment of the burdens of

government.

Thus:
a. Taxes are enforced contributions
It operates in invitum which means that it is in no way dependent
on the will or contractual assent, express or implied, of the
person taxed. They are positive acts of the government
(Rochester vs. Bloss ).
b. Taxes are proportional in character, since taxes are based on
one’s ability to pay.
c. Taxes are levied by authority of law.
The power to impose taxes is a legislative power; it cannot be
imposed by the executive department nor by the courts.
d. Taxes are for the support of the government and all its public
needs.
e. Taxes are pecuniary burden payable in money, such that a tax is
not necessarily confined to those payable in money (e.g. a
backpay cert may be used to pay real estate taxes).
f. Taxes are imposed by the State on persons, property or services
within its jurisdiction.

IMPORTANCE OF TAXES

• Taxes are important because they the lifeblood of the government

and so should be calculated without unnecessary hindrance (CIR vs
Algue).

LIFEBLOOD DOCTRINE

• The lifeblood theory constitutes the theory of taxation, which

provides that the existence of government is a necessity; that
government cannot continue without means to pay its expenses;
and that for these means it has a right to compel its citizens and
property within its limits to contribute.
• Without revenue raised from taxation, the government will not
survive, resulting in detriment to society. Without taxes, the
government would be paralyzed for lack of motive power to activate
and operate it. (CIR vs. ALGUE)

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• Taxes are the lifeblood of the government and there prompt and
certain availability is an imperious need. (CIR vs Goodrich
International Rubber Co.)

ILLUSTRATION OF LIFEBLOOD THEORY

1. Collection of taxes cannot be enjoined by injunction.

2. Taxes could not be the subject of compensation or set off.
3. A valid tax may result in the destruction of the taxpayer’s
property.
4. Taxation is an unlimited and plenary power.

TAXES, PERSONAL TO TAXPAYER

• A corporation’s tax delinquency cannot be enforced against its

stockholders except for unpaid taxes of a dissolved corporation if it
appears that the corporate assets have passed into their hands (Tan
Tiong Bio vs CIR).
• Estate taxes accruing upon transmission of the decedent’s estate to
his heirs are not liabilities which can be enforced against heirs.

NATURE OF THE TAXING POWER

1) Inherent in sovereignty
2) Legislative in character

PURPOSES AND OBJECTIVES OF TAXATION

PRIMARY
1. To raise revenue in order to support the government (Revenue)
SECONDARY
2. Used for regulatory purposes (Regulation)
3. Used to reduce social inequality (Reduction of Social Inequality)
4. Utilized to implement the police power of the State (Promotion of
General Welfare)
5. Used to protect our local industries against unfair competition
(Protectionism)
6. Utilized by the government to encourage the growth of local
industries (Encourage Economic Growth)

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THEORY AND BASIS OF TAXATION

1) NECESSITY THEORY
• Taxation as stated in the case of Phil. Guaranty Co., Inc. v.
Commissioner [13 SCRA 775], is a power predicated upon
necessity. It is a necessary burden to preserve the State’s
sovereignty and a means to give the citizenry an army to resist
aggression, a navy to defend its shores from invasion, a corps of
civil servants to serve, public improvements for the enjoyment of
the citizenry, and those which come within the State’s territory
and facilities and protection which a government is supposed to
provide.

2) BENEFITS – PROTECTION THEORY

• This theory bases the power of the State to demand and receive
taxes on the reciprocal duties of support and protection. The
citizen supports the State by paying the portion from his property
that is demanded in order that he may, by means thereof, be
secured in the enjoyment of the benefits of an organized society.
• No one is allowed to object to or resist payment of taxes solely
because no personal benefit to him can be pointed out as arising
from the tax, [Lorenzo v. Posadas].

SCOPE OF THE LEGISLATIVE TAXING POWER

1) The persons, property and excises to be taxed, provided it is within

its jurisdiction
2) Amount or rate of tax
3) Purposes for its levy, provided it be for a public purpose
4) Kind of tax to be collected
5) Apportionment of the tax
6) Situs of taxation
7) Method of collection

IS THE POWER TO TAX THE POWER TO DESTROY?

/CONSTITUTIONAL RESTRAINTS RE: TAXATION IS THE POWER TO
DESTROY

• The power to tax "is an attribute of sovereignty". In fact, it is the

strongest of all the powers of government. But for all its
plenitude, the power to tax is not unconfined as there are
restrictions. Adversely effecting as it does property rights, both

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the due process and equal protection clauses of the Constitution

may properly be invoked to invalidate in appropriate cases of a
revenue measure. If it were otherwise, there would be truth to
the 1903 dictum of Chief Justice Marshall that "the power to tax
involves the power to destroy." The web or unreality spun from
Marshall's famous dictum was brushed away by one stroke of Mr.
Justice Holmes' pen, thus: "The power to tax is not the power to
destroy while this Court sits." "So it is in the Philippines." It is
because of the constitutional restraints placed on a taxing power
that violates fundamental rights.
• The power to tax includes the power to destroy if it is used as an
implement of the police power (regulatory) of the State.
However, it does not include the power to destroy if it is used
solely for the purpose of raising revenue. (ROXAS vs. CTA)
• If the purpose of taxation is regulatory in character, taxation is
used to implement the police power of the state
• If the power of taxation is used to destroy things, businesses, or
enterprises and the purpose is to raise revenue, the court will
come in because there will be violation of the inherent and
constitutional limitations and it will be declared invalid.

POWER OF JUDICIAL REVIEW IN TAXATION

• Courts cannot inquire into the wisdom of a taxing act. (CIR vs

Lingayen Gulf Electric Power Co)
• Court’s power in taxation is limited only to the application and
interpretation of the law.
• It is not within the province of the court to inquire into the
wisdom of the law for indeed courts are bound by the words in
the mouth of the lawmaker. “A verbo legis non est recedendum”
(Commissioner of Customs vs Manila Star Ferry inc.)

BASIC PRINCIPLE OF A SOUND TAX SYSTEM

1) FISCAL ADEQUACY
• The sources of revenues must be adequate to meet government
expenditures. (Chavez v. Ongpin, 186 SCRA 331).
• Even if a tax law violates the principle of Fiscal Adequacy and the
proceeds may not be sufficient to satisfy the needs of the
government, still the tax law is valid

2) THEORETICAL JUSTICE
• The tax burden should be in proportion to the taxpayers
ability to pay (ABILITY TO PAY PRINCIPLE)

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• Equitable taxation has been mandated by our constitution; as

if taxes are unjust and unreasonable then they are not
equitable, thus invalid.

3) ADMINISTRATIVE FEASIBILITY
• The tax law must be capable of effective or efficient
enforcement.
• There is no law that requires compliance with this principle, so
even if the tax law violates this principle; such tax law is valid.

TAXATION DISTINGUISHED FROM POLICE POWER AND EMINENT

DOMAIN

TAXATION POLICE POWER EMINENT DOMAIN

AS TO For the purpose To promote general For public use
PURPOSE raising revenue welfare
through regulations
AS TO Protection and The maintenance of a Just compensation not to
COMPENSATIO benefits healthy economic exceed the market value
N received from standard of society by the owner or
the (damnum absque administrator or anyone
government. injuria) having legal interest in
property, or determined
by the assessor,
whichever is lower.
AS TO Operate upon community or a class of Operates on the
PERSONS individual property
individuals
AFFECTED owner
AS TO Exercised only by the government or its May be exercised by
AUTHORITY public services corp or
political subdivisions.
WHICH public utilities if
EXERCISES granted by law
THE POWER
AS TO Generally no limit Limited to the cost of There is imposition;
AMOUNT OF to the amount of regulation rather it is the owner o
IMPOSITION tax that may be the property taken who
imposed is paid just
compensation.
AS TO Subject to certain Relatively free from Subject to certain
THE constitutional constitutional constitutional
RELATIONSHIP limitations, limitations and limitations, NOT
TO THE including the superior to the non- including prohibition
CONSTITUTIO prohibition impairment against impairment of
N against provisions the obligation on
impairment of the contracts
obligation of
contracts
AS TO Taxes paid No transfer, but only
TRANSFER become part of restraint on the
OF the public funds exercise, of
PROPERTY property right
RIGHTS exists

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ASPECTS OF TAXATION

1) LEVY or IMPOSITION
• enactment of tax laws
• legislative in character

2) ASSESSMENT
• collection
• administrative in character

TAXES DISTINGUISHED FROM OTHER IMPOSITIONS

1) toll – amount charged for the cost and maintenance of property
used;
2) penalty – punishment for the commission of a crime
3) compromise penalty – amount collected in lieu of criminal
prosecution in cases of tax violations;
4) special assessment – levied only on land based wholly on the
benefit accruing thereon as a result of improvements of public works
undertaken by government within the vicinity.
5) license fee – regulatory imposition in the exercise of the police
power of the State;
6) margin fee – exaction designed to stabilize the currency 7) debt –
a tax is not a debt but is an obligation imposed by law.
8) regulatory fees – exaction designed to regulate industries
9) subsidy – legislative grant of money in aid of a private enterprise
deemed to promote the public welfare.
10) custom duties and fees – duties charged upon commodities
on their being imported into or exported from a country;
11) revenue – broad term that includes not only taxes but income
from other sources as well.
12) Tribute – synonymous with tax
13) Impost – signifies any tax, tribute or duty.

Toll v. Tax
• Toll is a sum of money for the use of something. It is the
consideration which is paid for the use of a road, bridge, or the like,
of a public nature. Taxes, on the other hand, are enforced
proportional contributions from persons and property levied by the
State by virtue of its sovereignty for the support of the government
and all public needs.
• Toll is a demand of proprietorship; tax is a demand of sovereignty.

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• Toll is paid for the use of another’s property; tax is paid for the
support of government.
• The amount paid as toll depends upon the cost of construction or
maintenance of the public improvements used; while there is no
limit on the amount collected as tax as long as it is not excessive
unreasonable, or confiscatory.
• Toll may be imposed by the government or by private individuals or
entities; tax may be imposed only by the government.

Penalty v. Tax
• Penalty is any sanction imposed as a punishment for violation of law
or for acts deemed injurious; taxes are enforced proportional
contributions from persons and property levied by the State by
virtue of its sovereignty for the support of the government and all
public needs.
• Penalty is designed to regulate conduct; taxes are generally
intended to generate revenue.
• Penalty may be imposed by the government or by private
individuals or entities; taxes only by the government.

Special assessment v. Tax

• A special assessment tax is an enforced proportional contribution
from owners of lands especially benefited by public improvements
• A special assessment is levied only on land; tax is imposed on
persons, property and excises.
• A special assessment is not a personal liability of the person
assessed; it is limited to the land.
• A special assessment is based wholly on benefits, not necessity.
• A special assessment is exceptional both as to time and place; a tax
has general application.

Some rules:
• An exemption from taxation does not include exemption from a
special assessment.
• The power to tax carries with it the power to levy a special
assessment.

License fee v. Tax

• PURPOSE: Tax imposed for revenue WHILE license fee for regulation.
Tax for general purposes WHILE license fee for regulatory purposes
only.

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• BASIS: Tax imposed under power of taxation WHILE license fee

under police power.
• AMOUNT: In taxation, no limit as to amount WHILE license fee
limited to cost of the license and expenses of police surveillance and
regulation.
• TIME OF PAYMENT: Taxes normally paid after commencement of
business WHILE LF before.
• EFFECT OF PAYMENT: Failure to pay a tax does not make the
business illegal WHILE failure to pay license fee makes business
illegal.
• SURRENDER: Taxes, being lifeblood of the state, cannot be
surrendered except for lawful consideration WHILE a license fee may
be surrendered with or without consideration.

IMPORTANCE OF DISTINCTION BETWEEN TAXES AND LICENSE

FEES:

Ø It is necessary to determine whether a particular imposition is a

tax or a license fee, because some limitations apply only to one
and not to the other.
Ø Furthermore, exemption from taxes does not include exemption
from license fees

Obligation to pay debt v. obligation to pay tax

• A debt is generally based on contract, express or implied, while a

tax is based on laws.
• A debt is assignable, while a tax cannot generally be assigned.
• A debt may be paid in kind, while a tax is generally paid in money.
• A debt may be the subject of set off or compensation, a tax cannot.
• A person cannot be imprisoned for non-payment of tax, except poll
tax.
• 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
default, while a tax does not draw interest except only when
delinquent.

TAXES CLASSIFIED

AS TO SUBJECT MATTER OR OBJECT

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1. Personal, poll or capitation tax

Tax of a fixed amount imposed on persons residing within a
specified territory, whether citizens or not, without regard to their
property or the occupation or business in which they may be
engaged, i.e. community tax.

2. Property tax
Tax imposed on property, real or personal, in proportion to its value
or in accordance with some other reasonable method of
apportionment.
3. Excise tax
A charge imposed upon the performance of an act, the enjoyment of
privilege, or the engaging in an occupation.

AS TO PURPOSE
4. General/fiscal revenue tax is that imposed for the purpose of
raising public funds for the service of the government.

5. Special or regulatory tax is imposed primarily for the regulation

of useful or non-useful occupation or enterprises and secondarily
only for the purpose of raising public funds.

AS TO WHO BEARS THE BURDEN

6. Direct tax
A direct tax is demanded from the person who also shoul,ders the
burden of the tax. It is a tax which the taxpayer is directly or
primarily liable and which he or she cannot shift to another.

7. Indirect tax
An indirect tax is demanded from a person in the expectation and
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.

AS TO THE SCOPE OF THE TAX

8. National tax
A national tax is imposed by the national government.

9. Local tax
A local tax is imposed by the municipal corporations or local
government units (LGUs).

AS TO THE DETERMINATION OF AMOUNT

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10. Specific tax

A specific tax is a tax of a fixed amount imposed by the head or
number or by some other standard of weight or measurement. It
requires no assessment other than the listing or classification of the
objects to be taxed.
11. Ad valorem tax
An ad valorem tax is a fixed proportion of the value of the property
with respect to which the tax is assessed. It requires the
intervention of assessors or appraisers to estimate the value of such
property before due from each taxpayer can be determined.

12. Customs Duties

Duties charged upon the commodities on their being imported into
or exported from a country.

AS TO GRADUATION OR RATE
13. Proportional tax
Tax based on a fixed percentage of the amount of the property
receipts or other basis to be taxed. Example: real estate tax.

14. Progressive or graduated tax

Tax the rate of which increases as the tax base or bracket increases.
Digressive tax rate: progressive rate stops at a certain point.
Progression halts at a particular stage.

15. Regressive tax

Tax the rate of which decreases as the tax base or bracket
increases. There is no such tax in the Philippines.

TAXPAYER’S SUIT

• One where a taxpayer who feels aggrieved by the implication of a

tax law goes now via judicial review to the SC and asks for a
nullification of the law.
• In availing judicial review as a taxpayer, the only option one can
look into are the inherent and constitutional limitations on taxation.
• Taxpayers have sufficient interest of preventing the illegal
expenditures of money raised by taxation (NOT DONATIONS AND
CONTRIBUTIONS)

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• A taxpayer is not relieved from the obligation of paying a tax

because of his belief that it is being misappropriated by certain
officials
• A taxpayer has no legal standing to question executive acts that do
not involve the use of public funds. (GONZALES vs. MARCOS)
• It is only when an act complained of which may include a legislative
enactment of a statute, involves the illegal expenditure of public
money that the so-called taxpayers suit may be allowed. LOZADA
vs. COMELEC
• Taxpayers may be levied with a regulatory purpose to provide
means for the rehabilitation and stabilization of a threatened
industry which is affected with the public interest as to be within the
police power of the State. CALTEX vs. COA
• The Supreme Court has discretion whether or not to entertain
taxpayers suit and could brush aside lack of locus standi. KILOS
BAYAN vs. GUINGONA

REQUISITES FOR A TAXPAYERS PETITION

1) That money is being extracted and spent in violation of specific

constitutional protections against abuses of legislative power
2) That public money is being deflected to any improper purpose
3) That the petitioner seeks to restrain respondents from wasting
public funds through the enforcement of an invalid or
unconstitutional law.

CASES:

Commissioner vs. Algue

GRL-28890, 17 February 1988.First Division, Cruz (J); 4 concur

Facts: The Philippine Sugar Estate Development Company (PSEDC)

appointed Algue Inc. as its agent, authorizing it to sell its land, factories,
and oil manufacturing process. The Vegetable Oil Investment Corporation
(VOICP) purchased PSEDC properties. For the sale, Algue received a
commission of P125,000 and it was from this commission that it paid
Guevara, et. al. organizers of the VOICP, P75,000 in promotional fees. In
1965, Algue received an assessment from the Commissioner of Internal
Revenue in the amount of P83, 183.85 as delinquency income tax for
years 1958 amd 1959. Algue filed a protest or request for reconsideration
which was not acted upon by the Bureau of Internal Revenue (BIR). The
counsel for Algue had to accept the warrant of distrant and levy. Algue,
however, filed a petition for review with the Court of Tax Appeals.

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Issue: Whether the assessment was reasonable.

Held: Taxes are the lifeblood of the government and so should be

collected without unnecessary hindrance. Every person who is able to pay
must contribute his share in the running of the government. The
Government, for his part, is expected to respond in the form of tangible
and intangible benefits intended to improve the lives of the people and
enhance their moral and material values. This symbiotic relationship is the
rationale of taxation and should dispel the erroneous notion that is an
arbitrary method of exaction by those in the seat of power. Tax collection,
however, should be made in accordance with law as any arbitrariness will
negate the very reason for government itself. For all the awesome power
of the tax collector, he may still be stopped in his tracks if the taxpayer
can demonstrate that the law has not been observed. Herein, the claimed
deduction (pursuant to 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 Inc. It has further proven that the payment of fees was reasonable
and necessary in light of the efforts exerted by the payees in inducing
investors (in VOICP) to involve themselves in an experimental enterprise
or a business requiring millions of pesos. The assessment was not
reasonable.

Tolentino vs. Secetary of Finance

GR No. 115455. August 25, 1994

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
7716 seeks to widen the tax base of the existing VAT system and enhance
its administration by amending the National Internal Revenue Code. There
are various suits challenging the constitutionality of RA 7716 on various
grounds.
One contention is that RA 7716 did not originate exclusively in the House
of Representatives as required by Art. VI, Sec. 24 of the Constitution,
because it is in fact the result of the consolidation of 2distinct bills, H. No.
11197 and S. No. 1630. There is also a contention that S. No. 1630 did
not pass 3 readings as required by the Constitution.

Issue: Whether or not RA 7716 violates Art. VI, Secs. 24 and 26(2) of the
Constitution.

Held: The argument that RA 7716 did not originate exclusively in the
House of Representatives as required by Art. VI, Sec. 24 of the
Constitution will not bear analysis. To begin with, it is not the law but the
revenue bill which is required by the Constitution to originate exclusively

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in the House of Representatives. To insist that a revenue statute and not

only the bill which initiated the legislative process culminating in the
enactment of the law must substantially be the same as the House bill
would be to deny the Senate’s power not only to concur with amendments
but also to propose amendments. Indeed, what the Constitution simply
means is that the initiative for filing revenue, tariff or tax bills, bills
authorizing an increase of the public debt, private bills and bills of local
application must come from the House of Representatives on the theory
that, elected as they are from the districts, the members of the House can
be expected to be more sensitive to the local needs and problems. Nor
does the Constitution prohibit the filing in the Senate of a substitute bill in
anticipation of its receipt of the bill from the House, so long as action by
the Senate as a body is withheld pending receipt of the House bill.

The next argument of the petitioners was that S. No. 1630 did not pass 3
readings on separate days as required by the Constitution because the
second and third readings were done on the same day. But this was
because the President had certified S. No. 1630 as urgent. The
presidential 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 the President the requirement of 3 readings on
separate days and of printing and distribution can be dispensed with is
supported by the weight of legislative practice.

EXERCISES:

Discuss the importance of taxes

SUGGESTED ANSWER:
Taxes are the lifeblood of the government, for without taxes, the
government can neither exist nor endure. A principal attribute of
sovereignty, the exercise of taxing power derives its source from the
very existence of the state whose social contract with its citizens obliges
it to promote public interest and common good. The theory behind the
exercise of the power to tax emanates from necessity; without taxes,
government cannot fulfil its mandate of promoting the general welfare
and well-being of the people. (NAPOCOR v. City of Cabanatuan, G.R. No.
149110, April 9, 2003).

Nature of the Power of Taxation (#1, 2000 Bar Exams)

Justice Holmes once said: “The power to tax is not the power to destroy
while this Court (the SC) sits.” Describe the power to tax and its
limitations.

SUGGESTED ANSWER:

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The power to tax is an inherent power of the sovereignty which is

exercised through the legislature to impose burdens upon subjects and
objects within its jurisdiction for the purpose of raising revenues to
carry out the legitimate objects of government. The underlying basis for
its exercise is governmental necessity for without it, no government can
exist nor endure. Accordingly, it has the broadest scope of all the
powers of government because in the absence of limitations, it is
considered an unlimited, plenary, comprehensive and supreme. The two
limitations on the power of taxation are the inherent and
constitutional limitations which are intended to prevent abuse on the
exercise of the otherwise plenary and unlimited power. It is the Court’s
role to see to it that the exercise of the power does not transgress these
limitations.

Power of Taxation: Legislative in Nature (Bar 1994)

The Secretary of Finance, upon recommendation of the Commissioner
of Internal Revenue, issued a Revenue Regulation using gross income
as the tax base for corporations doing business in the Philippines. Is
the Revenue Regulation valid?

SUGGESTED ANSWER:
The regulation establishing gross income as the tax base for
corporations doing business in the Philippines (domestic as well as
resident foreign) is not valid. This is no longer implementation of the
law but actually it constitutes legislation because among the powers
that is exclusively within the legislative authority to tax is the power to
determine -the amount of the tax. (See 1 Cooley 176-184). Certainly, if
the tax is limited to gross income without deductions of these
corporations, this is changing the amount of the tax as said amount
ultimately depends on the taxable base.

Power of Taxation; Inherent in a Sovereign State (2005) Describe

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.

SUGGESTED ANSWER:
Yes, the legislative body may enact laws even in the absence of a
constitutional provision because the power to tax is inherent in the
government and not merely a constitutional grant. The power of taxation
is an essential and inherent attribute of sovereignty belonging as a
matter of right to every independent government without being
expressly granted by the people. (Pepsi-Cola Bottling Company of the
Philippines, Inc. v. Municipality of Tanauan, Leyte, G.R. No. L-31156)

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Taxation is the inherent power of a State to collect enforced proportional

contribution to support the expenses of government. Taxation is the
power vested in the legislature to impose burdens or charges upon
persons and property in order to raise revenue for public purposes. The
power to tax is so unlimited in force and so searching in extent that
courts scarcely venture to declare it is subject to any restrictions
whatever, except such as rest in the discretion of the authority which
exercises it. (Tio v. Videogram Regulatory Board, G.R. No. L-75697, June
18, 1987) So 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)

Revocation of Exempting Statutes (Bar 1997)

"X" Corporation was the recipient in 1990 of two tax exemptions both
from Congress, one law exempting the company's bond issues from
taxes and the other exempting the company from taxes in the operation
of its public utilities. The two laws extending the tax exemptions were
revoked by Congress before their expiry dates. Were the revocations
constitutional?

SUGGESTED ANSWER:
Yes. The exempting statutes are both granted unilaterally by Congress in
the exercise of taxing powers. Since taxation is the rule and tax
exemption, the exception, any tax exemption unilaterally granted can be
withdrawn at the pleasure of the taxing authority without violating the
Constitution (Mactan Cebu International Airport Authority v, Marcos, G.R
No. 120082, September 11, 1996).
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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 Second
Taxation Law Review Semester 2020

Microsof| Chapter 1: General Principles 17