TAXATION LAW REVIEW

Prof. Geoff Lyn D. San Agustin

Second Semester, SY 2017-2018
Manuel S. Enverga University Foundation
Enverga Law School

I. General Principles of Taxation

A. Definition and concept of taxation

Commissioner v. Algue, 158 SCRA 9 (1988)

B. Nature of taxation

C. Characteristics of taxation

D. Power of taxation compared with other powers

1. Police power
2. Power of eminent domain

E. Purpose of taxation
1. Revenue-raising

Osmeña v. Orbos, 220 SCRA 703 (1993)

PAL v. Edu, 164 SCRA 320 (1988)

2. Non-revenue/special or regulatory

Republic v. Bacolod Murcia, 12 SCRA 632 (1966)

Tio v. Videogram Regulatory Board, 151 SCRA 208 (1987)
Caltex v. Commissioner, 208 SCRA 754 (1992)

F. Principles of sound tax system

1. Fiscal adequacy
2. Administrative feasibility
3. Theoretical justice

Chavez v. Ongpin, 186 SCRA 331 (1990)

G. Theory and basis of taxation

1. Lifeblood theory
2. Necessity theory

Phil. Guaranty Co., Inc. v. CIR, GR No. L-22074, April 30, 1965
Commissioner v. Algue, supra

3. Benefits-protection theory (Symbiotic relationship)

Gomez v. Palomar, GR No. L-23645, October 29, 1968

Lorenzo v. Posadas, 63 Phil 353 (1937)

H. Doctrines in taxation
1. Prospectivity of tax laws
2. Imprescriptibility
3. Double taxation
a. Strict sense
b. Broad sense
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 Villanueva v. City of Iloilo, 26 SCRA 528 (1968)

c. Constitutionality of double taxation

City of Baguio v. De Leon, 25 SCRA 528 (1968)
Pepsi Cola Bottling Co. v. City of Butuan, 24 SCRA 788 (1968)

d. Modes of eliminating double taxation

4. Escape from taxation

a. Shifting of tax burden

i. Ways of shifting the tax burden
ii. Taxes that can be shifted
iii. Meaning of impact and incidence of taxation

b. Tax avoidance

Delpher Traders Corp. v. IAC, 157 SCRA 349 (1988)

Yutivo v. CTA, 1 SCRA 160 (1961)

c. Tax evasion

Republic v. Gonzales, 13 SCRA 633 (1965)

5. Exemption from taxation

a. Meaning of exemption from taxation

Greenfield v. Meer, 77 Phil 394 (1946) *

b. Nature of tax exemption

Tolentino v. Sec. of Finance (1994)

Maceda v. Macaraig,
Philippine Acetylene v. Com.,
Wonder Mech. v. CTA, 64 SCRA 555 (1975)

c. Kinds of tax exemption

Atlas Fertilizer v. Commissioner, 100 SCRA 556 (1980) *

Commissioner v. Phil. Ace Line, 25 SCRA 913 (1968) *
Caltex v. Com., 208 SCRA 751 (1992)

d. Rationale/grounds from exemption

Tolentino v. Sec. of Finance (1994)

Maceda v. Macaraig,
Davao Light v. Com., 22 SCRA 122 (1972)
Tam Kim Kee v. CTA, 7 SCRA 122 (1963)
NPC v. Presiding Judge, 190 SCRA477 (1930)
Abra Valley College v. Aquino (1988)
Lung Center of the Philippines vs. Quezon City (2004)

e. Revocation of tax exemption

6. Compensation and set-off

7. Compromise
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 8. Tax amnesty

a. Definition
b. Distinguished from tax exemption

Republic v. IAC, 196 SCRA 335 (1991)

People v. Castañeda, 165 SCRA 327 (1988)
Pascual v. Com., 166 SCRA 560 (1988)
Com. v. Marubeni, G.R. No. 137377, December 18, 2001

9. Construction and interpretation of:

a. Tax laws
i. General rule
ii. Exception

b. Tax exemption and exclusion

i. General rule

Commissioner v. CA, G.R. No. 115349, April 18, 1997 *

Misamis Oriental Asso. v. Dept. of Finance, 238 SCRA 63 (1994) *
Com. of Customs v. Phil. Acetylene Co., 39 SCRA 70 (1971) *
Manila Electric Company v. Tabios, 67 SCRA 352 (1975) *
Benguet Corporation v. CBAA, 210 SCRA 579 (1992) *
PLDT v. City of Davao (2003)

ii. Exceptions

Maceda v. Macaraig, 196 SCRA 771 (1991)

Maceda v. Macaraig, 223 SCRA 217 (1993)

c. Tax rules and regulations

d. Penal provisions of tax laws
e. Non-retroactive application to taxpayers
i. Exceptions

I. Scope and limitation of taxation

1. Inherent limitations

Roxas v. CTA, 23 SCRA 276 (1968)

a. Public Purpose

Pascual v. Secretary of Public Works, 110 Phil 331 (1960) *

Caltex v. Commissioner, supra
Tio v. Videogram Regulatory Board, 151 SCRA 208 (1987)
Gaston v. Republic Planter, 158 SCRA 626 (1988) *

b. Inherently legislative

i. General rule

Tan v. Del Rosario, 237 SCRA 324 (1994)

Sison v. Ancheta, 130 SCRA 654 (1984) *
Kapatiran v. Tan, 163 SCRA 372 (1988) *

ii. Exceptions
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 1. Delegation to local governments

Sec. 5, Art. X, Phil. Constitution

Book II, Local Government Code
Basco v. PAGCOR, 197 SCRA 52 (1991) *
NPC v. City of Cabanatuan, G.R. No. 149110, April 9, 2003 *

2. Delegation to the President

Sec. 28(2), Art. VI, Phil. Constitution

Sec. 401, Tariff and Customs Code
Garcia v. Executive Secretary, 210 SCRA 219 (1992) *

3. Delegation to administrative agencies

Maceda v. Macaraig, 197 SCRA 771 (1991)

Maceda v. ERB, 192 SCRA 365 (1990)

c. Territorial
i. Situs of taxation
1. Meaning
2. Situs of income tax
a. From sources within the Philippines

Commissioner v. BOAC (1987)

CIR v. Japan Air Lines, Inc. (1991)

b. From sources without the Philippines

Wells Fargo v. Collector (1940)

3. Situs of property taxes

a. Taxes on real property
b. Taxes on personal property
4. Situs of excise tax
a. Estate tax
b. Donor’s tax
5. Situs of business tax
a. Sale of real property
b. Value-Added Tax (VAT)

d. International comity

Sec. 2, Art. II, Phil. Constitution

Sec. 159, Local Government Code

e. Exemption of government entities, agencies and instrumentalities

Sec. 24 (c), NIRC

Maceda v. Macaraig, supra

2. Constitutional limitations

a. Provisions directly affecting taxation

i. Prohibition against imprisonment for non-payment of poll tax

Sec. 20, Art. III, Phil. Constitution

Community tax v. Poll tax
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 Sec. 156-164, Local Government Code

ii. Uniformity and equality of taxation

Sec. 28 (1), Art. VI, Phil. Constitution

- Adoption of a progressive system of taxation

Tolentino v. Sec. of Finance, supra

- Valid classification of taxpayers/subject or items to be taxed

Pepsi Cola v. City of Butuan, 24 SCRA 787 (1968)

Manila Race Horse v. Dela Fuente, 88 Phil 60 (1951) *
Eastern Theatrical v. Alfonso, 83 Phil 852 (1949) *
Shell v. Municipality of Cordova, 94 Phil 387 (1954) *

iii. Grant by Congress of authority to the president to impose tariff

rates

iv. Prohibition against taxation of religious, charitable entities, and

educational entities

Sec. 28 (3), Art. VI, Phil. Constitution

Abra Valley College v. Aquino, 162 SCRA 106 (1988)
Lung Center v. Quezon City, G.R. No. 144104, June 29, 2004

v. Prohibition against taxation of non-stock, non-profit institutions

Sec. 4 (3), Art. XIV, Phil. Constitution

Sec. 4 (4), Art. XIV, Phil. Constitution
Sec. 28 (3), Art. VI, Phil. Constitution
Sec. 24 (b), NIRC

vi. Majority vote of Congress for grant of tax exemption

Sec. 28 (4), Art. VI, Phil. Constitution

vii. Prohibition on use of tax levied for special purpose

Sec. 29, Art. VI, Phil. Constitution

viii. President’s veto power on appropriation, revenue, tariff bills

Gonzales v. Macaraig, 191 SCRA 452 (1990)

ix. Non-impairment of jurisdiction of the Supreme Court

Sec. 2 and 5 (b), Art. III, Phil. Constitution

San Miguel Corp. v. Avelino, 89 SCRA 70 (1979) *

x. Grant of power to the local government units to create its own

sources of revenue

xi. Flexible tariff clause

xii. Exemption from real property taxes

xiii. No appropriation or use of public money for religious purposes

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 b. Provisions indirectly affecting taxation

i. Due process

Tan v. Del Rosario, 237 SCRA 324 (1994)

Sec. 1, Art. III, Phil. Consitution
Sison v. Ancheta, 130 SCRA 654 (1984) *

ii. Equal protection

Sec. 1, Art. III, Phil. Constitution

Sison v. Ancheta, supra
Villegas v. HiuChiong Tsai Pao, 86 SCRA 270 (1978) *
Tan v. Del Rosario, supra

iii. Religious freedom

Sec. 5, Art. III, Phil. Constitution

American Bible Society v. City of Manila, 101 Phil 386 (1957)
Tolentino v. Sec. of Finance, supra

iv. Non-impairment of obligations of contracts

Sec. 10, Art. III, Phil. Constitution

Sec. 11, Art. XII, Phil. Constitution
Tolentino v. Sec. of Finance, supra

J. Stages of taxation
1. Levy
2. Assessment and collection
3. Payment
4. Refund
K. Definition, nature and characteristics of taxes
L. Requisites of a valid tax
M. Tax as distinguished from other forms of exactions
1. Tariff
2. Toll
3. License fee
4. Special Assessment
5. Debt
N. Kinds of taxes
1. As to object
a. Personal, capitation, or poll tax
b. Property tax
c. Privilege tax
2. As to burden or incidence
a. Direct
b. Indirect
3. As to tax rates
a. Specific
b. Ad valorem
c. Mixed
4. As to purposes
a. General or fiscal
b. Special, regulatory or sumptuary
5. As to scope or authority to impose
a. National – internal revenue taxes
b. Local – real property tax, municipal tax
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 6. As to graduation
a. Progressive
b. Regressive
c. Proportionate

*** Philippine Tax Laws and Regulations

A. Nature of Laws
B. Sources of Tax Laws
a. Constitution
b. National Internal Revenue Code
c. Tariff and Customs Code
d. Local Government Code
e. Local tax ordinance
f. Tax treaties/international agreements
g. Special laws
h. Decisions of the SC/CTA
i. Revenue rules and regulations/ Administrative rulings and opinions

Sec. 245, Tax Code

Secs. 511 and 519 and the Customs Code

Misamis Oriental v. Department of Finance, G.R. No. 108524, November 10,

1994

1. Validity of revenue rules and regulations

Tan v. Del Rosario, 237 SCRA 324 (1994)

Commissioner v. CA, 240 SCRA 368 (1995)
Phil. Petroleum Corp. v. Municipality of Pililia, 198 SCRA
82 (1991)
Umali v. Estanislao, 209 SCRA 446 (1992)
La Suerte v. CTA 134 SCRA 29 (1985)

2. BIR Rulings

C. Interpretation of Tax Laws

i. Rules when legislative intent is clear

Umali v. Estanislao, supra
Lorenzo v. Posadas, supra

ii. Rule when there is doubt

Collector v. La Tondeña, 5 SCRA 665 (1962)

D. Application of Tax Laws/Revenue Regulations and Rulings

i. General

Art. 2, Civil Code

Umali v. Estanislao, supra
Lorenzo v. Posadas, supra
Hijo Plantation v. CB, 164 SCRA 192 (1988)
Commissioner v. Filipinas Cia de Seguros, 107 Phil 1055 (1965)
Cebu Portland v. Collector, 25 SCRA 789 (1968)
Commissioner v. Rio Tuba Nickel Mining, 202 SCRA 137 (1991)

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 ii. Application of revenue rules and regulations/rulings

Tuazon v. CA, 212 SCRA 739 (1992)

Com. v. Mega General, 166 SCRA (1988)
ABS-CBN v. CTA, 108 SCRA 143 (1992)
BPI c. Commissioner, G.R. No. 144653, August 28, 2001

iii. Effectivity and validity provisions of tax laws

E. Mandatory and directory provisions of tax laws

Roxas v. Rafferty, 37 Phil 958 (1918)

Aragon v. George, 85 Phil 246 (1949)
Pecson v. CA, 222 SCRA 580 (1993)

*** Tax Administration and Enforcement

A. Bureau of Internal Revenue

B. Bureau of Customs
C. Local Government units
D. Other government agencies

*** Tax Remedies

A. Remedies to the Government

B. Remedies of Taxpayers

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