limitations to the Power to Tax Flashcards

1
Q

Territoriality / Situs of Taxation

A

The taxing power of a country is limited to persons and property within and subject to its jurisdiction

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2
Q

What is the basis / What are the bases of territoriality?

A
  1. Taxation is an act of sovereignty which could only be exercised within a country’s territorial limits; and
  2. This is based on the theory that taxes are paid for the protection and services provided by the taxing authority which could not be provided outside the territorial boundaries of the taxing state.
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3
Q

What are the exceptions to the rule of territoriality?

A
  1. Where tax laws operate outside territorial jurisdiction. Example: Resident citizens are taxed on their income derived abroad;
  2. Exempted by treaty obligations or international comity;
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4
Q

What are the factors that determine the situs of taxation?

A
  1. Residence of the taxpayer
  2. Citizenship of the taxpayer
  3. Nature of the tax
  4. Subject matter of the tax
  5. Source of income
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5
Q

Inherent limitation to the power of tax

A
  1. Territoriality
  2. Public Purpose
  3. International comity
  4. Nondelegation of the taxing power
  5. Immunity of the government
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6
Q

General Constitutional Limitations

A
  1. Due Process
  2. Equal Protection
  3. Religious freedom
  4. Press Freedom
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7
Q

Specific Constitutional Limitations

A
  1. Taxation shall be uniform and equitable
  2. Progressive system of taxation
  3. Non-imprisonment for non payment of poll taxes
  4. Origin of revenue/tariff bills
  5. Flexible Tariff Clause
  6. Tax exemption from Property Taxes
  7. Authority of the LGUS to Tax
  8. Tax exemption of non stock, non profit educational institutions
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8
Q

How do we determine if a certain tax legislation is for a public purpose?

A
  1. It is for the welfare of the nation and/or for the greater portion of the population;
  2. It affects the area as a community rather than as individuals;
  3. It is designed to support the services of the government for some of its recognized objects.
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9
Q

Public Purpose

A

an elastic concept that can be hammered to fit modern standards.

It does not only pertain to those purposes which are traditionally viewed as essentially government functions such as building roads and delivery of basic services

but also include those services designed to promote social justice.

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10
Q

The public purpose of the tax law must

A

exist at the time of its enactment.

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11
Q

Public Purpose EXAMPLE

A

Tax on sugar for the purpose of helping sugar manufacturers. Legislative discretion, free to determine the object of taxation, subject to the test of reasonableness.

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12
Q

International Comity

A

Refers to the respect accorded by nations to each other because they are sovereign equals. Thus, the property or income of a foreign state may not be the subject of taxation by another state.

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13
Q

How does International Comity become a limitation to the power to tax?

A

Because the Philippines, through the 1987 Constitution adopted the generally accepted principles of international law as part of the law of the land (Section 2, Article II of the 1987 Constitution)

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14
Q

International Comity EXAMPLE

A

Real properties on which embassies are built.

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15
Q

Non delegation of the taxing power

A

The power to tax is exclusively vested in the legislature. Hence, it may not be delegated.

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16
Q

Exceptions to the nondelegation of taxing power

A
  1. Delegation to Local Government – Refers to the power of local government units to create their own sources of revenue and to levy taxes, fees and charges (Section 5, Article X of the 1987 Constitution);
  2. Delegation to the President the authority of the President to fix tariff rates, import and export quotas, tonnage and wharfage dues and other duties and imposts (Section 28, Article XI);
  3. Delegation to administrative agencies
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17
Q

Why can’t the government tax itself?

A

Since sovereignty is absolute and taxation is an act of high sovereignty, taxing the government or any of its political subdivisions is like taking money from one pocket and putting it in another.

18
Q

What is the exception to the immunity of the government?

A

When the government itself chooses to tax itself. Nothing prevents Congress from decreeing that even instrumentalities or agencies of the government performing government functions may be subject to tax.

19
Q

Rules to the immunity of the government

A
  1. Government agencies performing governmental functions are tax exempt unless expressly taxed;
  2. Government agencies performing proprietary functions are subject to tax unless expressly exempted;
  3. Local government units are prohibited from levying taxes on the National Government.
20
Q

Due Process

A

The Constitution provides, no person shall be deprived of life, liberty and property without due process of law. An opportunity to be heard, satisfaction of two requirements, Substantive and Procedural due process.

21
Q

substantive due process

A

under authority of the law that is valid or under authority of the constitution

22
Q

procedural due process

A

fair and reasonable methods of procedure prescribed by law

23
Q

Requirements of substantive due process

A
  1. Tax must be for a public purpose
  2. It must be imposed within territorial jurisdiction
24
Q

Requirements of procedural due process

A
  1. No arbitrariness or oppression either in the assessment or collection
25
Q

What is equal protection?

A

It means that all persons subjected to such legislation shall be treated alike, under like circumstances and conditions, both in the privileges conferred and liabilities imposed.

26
Q

How does equal protection apply to Taxation?

A

Applies to the subject of Taxation, as to which persons or object the taxes will be imposed. There is no violation of equal protection if the selection of the subject of taxation is based on a valid classification.

27
Q

Classification (of the subject of taxation) must be based on _______________

A

real and substantial differences between the persons, property, or privileges

28
Q

What are the requisites for a valid classification?

A
  1. Apply to both present and future conditions;
  2. Apply equally to all members of the same class;
  3. The classification must be germane to the purpose of the law;
  4. Must be based on substantial distinctions.
29
Q

What constitutional provisions related to religious freedom are considered as a limitation to the power to tax?

A

Section 5, Article III [NON ESTABLISHMENT CLAUSE]

No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof. The free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall forever be allowed. No religious test shall be required for the exercise of civil or political rights

30
Q

RELIGIOUS FREEDOM EXAMPLE

A

Tax exemption for INC

31
Q

Section 28 (3), Article VI

A

Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements, actually, directly, and exclusively used for religious, charitable, or educational purposes shall be exempt from taxation.

32
Q

Does Section 28 (3), Article VI mean that charitable institutions, churches, parsonages, etc are exempt from all kinds of taxes?

A

Only real property tax.

33
Q

Does Congress have to enact a law to implement this exemption?

A

No

34
Q

What is the constitutional provision of press freedom?

A

Section 4, Article III

No law shall be passed abridging the freedom of speech, of expression, or of the press, or the right of the people peaceably to assemble and petition the government for redress of grievances.

35
Q

Uniformity

A

it means all subject or object of taxation of the same class shall be taxed at the same rate. Tax is uniform if it operates with the same force and effect in every place where the subject is found.

36
Q

Equitable

A

it means the burden of paying taxes should fall on those better able to pay

37
Q

Taxation shall be uniform and equitable EXAMPLE

A

Income tax exemption of minimum wage earners

38
Q

a. Taxation shall be uniform and equitable

A

What the constitution requires is equality among equals as determined according to a valid classification.

39
Q

Where should revenue/ tariff bills originate?

A

Lower house

40
Q

why should revenue/ tariff bills originate from the lower house?

A

Elected as they are from the districts, they are expected to be more sensitive to the local needs and problems.

41
Q

revenue/ tariff bills

A

required to originate in the House of Representatives is not the law but the revenue bill which must exclusively originate in the lower house. The bill may undergo such extensive changes that the result may be a rewriting of the whole. The senate may not only concur with amendments but also to propose amendments. The two houses are of co-equal power.

42
Q

h. Tax exemption of non stock, non profit educational institutions

A

All revenues and assts of non-stock, non-profit educational institutions used actually, directly and exclusively for educational purposes shall be exempt from taxes and duties.