the 

CONSTITUTIONAL LIMITATIONS - those limitations and limitations. There must be showing of an actual,
on the state's exercise of the taxing power specifically direct, and exclusive use and furtherance of such
provided by the particular provisions of the Philippine objectives in order to be exempt to prevent abuse and
Constitution. capitalization of such objectives to escape from tax.

a. Due process of law. , no person shall be deprived of h. Concurrence of the majority members of Congress
life, liberty or property without due process of law. in granting tax exemption. Tax exemptions are immunity
Substantive due process relates to the circumstances from a particular tax that is being imposed to others
and procedures in the passage of tax laws and ordinances similarly situated. The more exemptions, the less
Procedural aspects in the implementation of the tax laws collections. Accordingly, in order to control and to see to it
and ordinances. Applied to taxation, due process that only those necessarily entitled must be provided
mandates that there should be a valid law imposing a tax exemptions, the constitution require that such grant of tax
to a particular taxpayer, and should the taxpayer failed to exemption shall be concurred by the vote of the majority of
pay the same, it must be given each and every opportunity the membership in the Congress. It should be noted that
to explain itself and justify. No law imposing a tax, then the Philippines is on a bicameral congress, the senate and the
taxpayer shall not be collected such tax. On the other lower house, thus, granting tax exemptions are not quite
hand, granting that the taxpayer failed to pay in full but easy to legislate.
was not issued as assessment notice informing the facts
and the law of the assessment, still, the taxpayer could not i. Non-impairment of the jurisdiction of the Supreme
be held to pay. These are the essence of due process. Court on tax cases. This is in furtherance of the
The taxing authority, while implementing the necessary principles of check and balances. The jurisdiction of the
mandates of its office must give due respect to the lower courts are based on the mercy of the laws passed
established procedures the way it works in an organized for the purpose, thus, may be modified and revised from
society. time to time. However, in the case of the Supreme Court,
no law can take its power to become the final arbiter of tax
b. Equal protection of law. "...nor shall any person be cases.
denied equal protection of law". Equal protection relates to
how a particular tax measure or ordinance is being applied j. Veto power of the President in tax bills. Generally, on
to persons or class of persons similarly situated. Thus, if bills passed by Congress, the President is empowered to
two entities falling on the same classification shall be either approve or disapprove a bill as a whole. If approved
taxed similarly. Example, if an ordinance imposes a tax on or not acted upon within a certain period of time, it
technicians and it happened that in a locality there was a becomes a law, and if vetoed, it does not become a law in
single technician, such technician cannot complain for its entirety. Tax bills however, can be granted either fully
unequal application because the ordinance is made or partially. If a bill is granted partially, provisions which
applicable to all technicians belonging to the same class. are approved becomes part of the law while those
provisions vetoed upon becomes ineffective.
c. Non-imprisonment for non-payment of debt or poll
Freedom Of Speech And Of The Press (Art. III, Sec. 4,
tax. Debt refers to a civil obligation that is payable in
money or in kind, while poll tax or community tax refers to 1987 Constitution)
an charge or imposition administered by the local There is curtailment of press freedom and freedom of
government unit (LGU) where the taxpayer is located. The
prohibition admits the fact of inequality of distribution of thought and expression if a tax is
wealth in the society and provides for instances in extreme levied in order to suppress this basic right and impose a
poverty. This is likewise in furtherance of the basic
doctrine in civil law that civil liability does not put the prior restraint. (Tolentino vs.
person liable behind bars. Applied to tax, while poll tax is Secretary of Finance, GR No. 115455, August 25, 1994)
a basic mandate in the Local Government Code, its non-
payment does not entitle imprisonment. Non-Infringement Of Religious Freedom And Worship
(Art. III, Sec. 5, 1987 Constitution)
d. Non-impairment of obligations of contracts. To
A license tax or fee constitutes a curtailment of religious
impair is to damage or to harm and obligation referred to is
the duty or commitment imposed upon by the valid freedom if imposed as a condition for its exercise.
contract entered into by the contracting parties. Applied to
tax, a new tax law shall not be passed in such a way as to Differences between Tax Avoidance and Tax Evasion
impair or to prejudice the obligation of a contracting party
by virtue of a contract entered into with the state. This is to Tax avoidance
give due respect to the contractual terms the state is bind
with respect to its contract with private individuals.  is generally the legal exploitation of the tax regime to
A theoretical example of this is, if an exemption is granted
one's own advantage, to attempt to reduce the
by the state by virtue of a contract with a private entity for
which a valuable consideration is involved, then no new amount of tax that is payable by means that are within
law could later be passed to prejudice said exemption. the law whilst making a full disclosure of the material
information to the tax authorities. Examples of tax
e. Rule of taxation shall be uniform and equitable. As
stated in uniform application above, uniformity relates to avoidance involve using tax deductions, changing
classification of taxpayers to be subjected to tax. Equitable one's business structure through incorporation or
on the other hand relates to the ability to pay the tax of establishing an offshore company in a tax haven.
those that belong to the same class. In other words, it
refers to how much will each pay and the constitution  may be considered as either the amoral dodging of
requires that there must be a reasonableclassification and one's duties to society, part of a strategy of not
justification for the unequal imposition. supporting violent government activities or just the
right of every citizen to find all the legal ways to avoid
f. Separation of church and state. This is based on the
sad experiences during the Spanish regime where the paying too much tax
church had much to say about the governance of state.
Applied to tax, no public money from taxes shall be spent
for furtherance of religious activities. Thus, a municipality
cannot spend public funds for the celebration of its
municipal fiesta.

g. Exemption of educational, charitable,

and religious institutions. The state acknowledges the
valuable contribution of educating its inhabitants, benefits
brought about by charities on various programs for general
welfare, and thereligious well-being of its inhabitants to the
success and development of thesociety as a whole. Thus,
to encourage private individuals and entities for the
furtherance of this objectives, the constitution provided
certain tax exemptions from income, real property and
customs duties and taxes under specific circumstances
Tax evasion person is taxed more than once by the same
jurisdiction for the same reason.
 is the general term for efforts by individuals, firms,
trusts and other entities to evade the payment of The Philippine government’s imposition of the value
added tax (VAT) on professionals in January 2003
taxes by illegal means. Tax evasion usually entails has made double taxation an even more interesting
taxpayers deliberately misrepresenting or concealing issue. Among the questions that have been raised
the true state of their affairs to the tax authorities to include the legality and fairness of subjecting a
professional employee’s gross income to two taxes.
reduce their tax liability, and includes, in particular,
dishonest tax reporting (such as underdeclaring
There are two forms of double taxation --juridical and
income, profits or gains; or overstating deductions). economic.
 is a crime in almost all countries and subjects the
guilty party to fines or even imprisonment. Juridical, arises when comparable taxes are imposed
Switzerland is one notable exception: tax fraud by two or more taxing jurisdictions on the same
taxpayer in respect of the same taxable income or
(forging documents, for example) is considered a capital.
crime, tax evasion (like underdeclaring assets) is
not. Economic double taxation, on the other hand,
 Indicia of Fraud in Taxation happens when more than one person is taxed on the
same item of income. A good example of this is the
a.Failure to declare for taxation purposes taxation of corporate income at the level of the
trueand actual income derived from business for corporation and at the level of the shareholder when
twoconsecutive years, and distributed in the form of dividend.
b.Substantial underdeclaration of income tax
Our fundamental law does not specifically forbid
returns of the taxpayer for four consecutive double taxation. The 1986 Philippine Constitution,
years however, implies that double taxation if allowed may
violate public policy against excessive taxes. When
coupled with overstatement of deduction. double taxation is not generally applied to all subjects,
→Evasion of the tax takes place only when it would go against the constitutional guarantees of
there are no proceeds. Evasion of Taxation uniformity of taxation and equal protection.
istantamount, fiscally speaking, to the
In the present tax system, there are a number of
absenceof taxation. instances where the national and local governments
seem to practice and tolerate double taxation,
Doctrine of Imprescriptibility specifically in relation to VAT, professional tax and the
Imprescriptibility local business tax. A professional is liable to pay VAT
- That cannot be lost or impaired by non-user, or by to the national government and, at the same time,
professional tax to the province. Businesses,
the claims of another founded on prescription. meanwhile, are subjected to VAT at the national level
Rights of mere ability which a man may use or not and to a local business tax that is payable to the
at pleasure, without any person's having a right to municipality or city. In these two examples, a tax is
imposed on the same taxable base, for the same
prescribe to me on that subject, are
reason, and by two sovereign levels of government.
imprescriptible. The rights of navigation, fishing,
and others that may be exercised on the sea, The community tax is another example of double
belonging to the right of mere ability, are taxation. This type of tax is imposed on income or
imprescriptible property value that is also subject to other forms of
taxes such as the income tax and VAT at the national
- level, and the local business tax and real property tax
Imprescriptibility of Taxes at the sub-national level.
General Rule: Taxes are imprescriptible
Exception: When provided otherwise by the tax law It is also argued that the taxes imposed on property
such as estate tax, gift tax, capital gains tax and real
itself. property tax result in double taxation. Observers
contend that the assets belonging to an estate have
already been subject to income tax before and
Example: NIRC provides for statutes of therefore, should not be taxed again.
limitation in the assessment and collection of
taxes therein imposed Important Point to Consider Another instance of alleged double taxation is on
1.The law on prescription, being a remedial dividends. The tax on dividends was reintroduced in
the 1997 income tax system after it was abolished in
measure, should be liberally construed to
1986 together with the intercorporate dividends tax. It
affordprotection as a corollary, the exceptions to was earlier argued that there was only one income
thelaw on prescription be strictly construed. (CIR vs stream being subjected to both the corporate tax and
CA. G.R. No. 104171, Feb. 24, 1999) the tax on dividends. The Department of Finance,
however, maintains that a tax on dividend promotes
Taxpayer’s suit progressivity of the tax system since individuals
belonging to the two topmost income classes receive
dividend income.
Taxpayer’s Suit - It is only when an act
complained of, which may include legislative The imposition of a VAT on the sale of services by
enactment, directly involves the illegal disbursement professionals like doctors, accountants and lawyers,
is also deemed as an instance of double taxation. To
of public funds derived from taxation that the professionals, their "value-added" upon which the
taxpayer’s suit may be allowed. VAT is levied, is measured by their gross income that
is likewise subject to the income tax. Some believe
Double Taxation that this practice of taxing the same income twice is
excessive and burdensome.

There is said to be double taxation when the same

taxable item is taxed more than once by different The 1986 Philippine Constitution requires that the rule
government agencies. Double taxation or direct of taxation be uniform and equitable to prevent undue
duplicate taxation as described in Philippine discrimination and the imposition of excessive taxes.
jurisprudence exists when the same property is taxed
twice when it should be taxed just once, or the same