Constitutional and Inherent Limitations of the Power to Tax

Full text

(1)

Taxation Law

Cecille Carmela T. de los Reyes

Philippine Christian University – College of Law

Professor: Atty. Antonio Bonilla

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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 taxes—the

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 definition—

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.

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 taxpayer’s 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.

(3)

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 territory—with the exception of those non-citizens who may have a particular undertaking in the country subject to tax laws.

(Example; J. Lo’s concert in the PH is subject to tax, applying the nexus to the situs principle)

· The state cannot tax the people for other purposes—it 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 agencies—as they are subject to tax exemption. (exception of GOCCs)

· The power to tax is lodged within the legislative government only—with the exception of (1) President’s tariff powers and (2) local government unit’s fiscal autonomy.

· The state

cannot tax other states

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NATURE OF THE

POWER TO TAX

AS AN INHERENT

POWER

INHERENT LIMITATIONS—these

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

(5)

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. Republic—In 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) President’s tariff powers (2) local government unit’s 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.

Analytically—taxing 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

Jurisdiction

Relates 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.

(6)

CONSTITUTIONAL

LIMITATIONS OF

THE POWER TO

TAX

Those limitations on the

state’s 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.

Article III: Bill of Rights Sec. 20. No person shall be

imprisoned for debt or non-payment of a poll tax.

Article III: Bill of Rights 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.

(7)

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.

Article VI. Legislative Department 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.

Article VI. Legislative Department 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.

Article VI. Legislative Department 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)

Article VI. Legislative 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.

Article VI. Legislative Department 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

(8)

CONSTITUTIONAL

LIMITATIONS OF THE

POWER TO TAX

Sec. 27, 28 & 29; Article VI

Legislative Department

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.

Article VI. Legislative 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.

Article VI. Legislative Department

Sec. 28 (1). The rule of taxation

shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.

Article VI. Legislative Department 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.

Article VI. Legislative 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.

Article VI. Legislative 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.

Article VI. Legislative Department 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

(9)

CONSTITUTIONAL

LIMITATIONS OF THE

POWER TO TAX

Article VIII Judicial

Department

Article VI. Legislative 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.

(10)

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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