limitations to the Power to Tax Flashcards
Territoriality / Situs of Taxation
The taxing power of a country is limited to persons and property within and subject to its jurisdiction
What is the basis / What are the bases of territoriality?
- Taxation is an act of sovereignty which could only be exercised within a country’s territorial limits; and
- 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.
What are the exceptions to the rule of territoriality?
- Where tax laws operate outside territorial jurisdiction. Example: Resident citizens are taxed on their income derived abroad;
- Exempted by treaty obligations or international comity;
What are the factors that determine the situs of taxation?
- Residence of the taxpayer
- Citizenship of the taxpayer
- Nature of the tax
- Subject matter of the tax
- Source of income
Inherent limitation to the power of tax
- Territoriality
- Public Purpose
- International comity
- Nondelegation of the taxing power
- Immunity of the government
General Constitutional Limitations
- Due Process
- Equal Protection
- Religious freedom
- Press Freedom
Specific Constitutional Limitations
- Taxation shall be uniform and equitable
- Progressive system of taxation
- Non-imprisonment for non payment of poll taxes
- Origin of revenue/tariff bills
- Flexible Tariff Clause
- Tax exemption from Property Taxes
- Authority of the LGUS to Tax
- Tax exemption of non stock, non profit educational institutions
How do we determine if a certain tax legislation is for a public purpose?
- It is for the welfare of the nation and/or for the greater portion of the population;
- It affects the area as a community rather than as individuals;
- It is designed to support the services of the government for some of its recognized objects.
Public Purpose
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.
The public purpose of the tax law must
exist at the time of its enactment.
Public Purpose EXAMPLE
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.
International Comity
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.
How does International Comity become a limitation to the power to tax?
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)
International Comity EXAMPLE
Real properties on which embassies are built.
Non delegation of the taxing power
The power to tax is exclusively vested in the legislature. Hence, it may not be delegated.
Exceptions to the nondelegation of taxing power
- 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);
- 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);
- Delegation to administrative agencies