IX. No. BIR is not correct. Taxes and debts are of two different nature and character.

ter. Taxes cannot

be subject to compensation for the simple reason that the Government and the taxpayers are not
creditors and debtors of each other. Debts are due to the government in its corporate capacity while
taxes are due to the government in its sovereign capacity. (South African Airways vs CIR)

The taxes assessed or the obligation of the taxpayer arising from law while the money judgment
against the government is an obligation arising from contract whether express or implied. Inasmuch as
taxes are not debts it follows the two obligations are not susceptible to set-off or legal compensation.
Hence no set-off or compensation between the two different classes is allowed. (Francia vs. IAC)

X. Yes I agree with Atty. Romero. The constitutional provisions relating to the power of taxation do
not operate as grants of the power of taxation to the government but instead merely constitute a
limitation upon a power which would otherwise be practically without limit. Moreover it is inherent in
nature being an attribute of sovereignty. There is thus no need for a constitutional grant for the State to
exercise this power.

XI. Double taxation in its strict sense pertains to direct double taxation wherein the same property
is taxed twice when it should only be taxed once; that both taxes are imposed on the same subject
matter, for the same purpose, by the same taxing authority, within the same jurisdiction, during the
same taxing period, and the taxes is of the same kind and character. It is indirect double taxation when
some of the abovementioned elements are absent.

XII. Tax minimization vs tax dodging

Tax minimization or tax avoidance is a scheme where the taxpayer uses legally permissible alternative
method of assessing taxable property or income in order to avoid or reduce tax liability. (i.e. VAT;
percentage tax; excise tax ; ad valorem tax)

Tax dodging or tax evasion is a scheme where the taxpayer uses illegal or fraudulent means to defeat or
lessen payment of tax. This is payment of less than that known to the taxpayer to be legally due or non-
payment of tax when it is shown that the tax is due.