Tax Laws

Question 1

Inherent Limitations of Tax Laws

Answer 1

1. Territoriality or Situs of taxation
2. Public purpose of taxes
3. International comity
4. Non-delegability of the taxing power
5. Tax Exemption of the government

Question 2

General or Indirect Constitutional Limitations

Answer 2

1. Due Process Clause
2. Equal Protection Clause
3. Freedom Of Speech And Of The Press
4. Non-Infringement Of Religious Freedom And
   Worship
5. Non-Impairment Of Contracts
6. Presidential power to grant reprieves, commutations
   and pardons and remit fines and forfeitures after
   conviction

Question 3

Specific or Direct Constitutional Limitations

Answer 3

1. Non-Imprisonment For Debt Or Non-Payment
   Of Poll Tax
2. Rule Requiring That Appropriations, Revenue
   And Tariff Bills Shall Originate Exclusively From
   The House Of Representatives
3. Uniformity, Equitability And Progressivity Of
   Taxation
4. Limitations On The Congressional Power To
   Delegate To The President The Authority To Fix
   Tariff Rates, Import And Export Quotas, Etc.
5. Tax Exemption Of Properties Actually, Directly
   And Exclusively Used For Religious, Charitable
   And Educational Purposes.
6. Voting Requirement In Connection With The
   Legislative Grant Of Tax Exemption
7. Non-Impairment Of The Jurisdiction Of The Supreme
   Court In Tax Cases
8. Exemption From Taxes Of The Revenues And Assets
   Of Educational Institutions, Including Grants,
   Endowments, Donations And Contributions

Question 4

Other Specific Tax Provisions in the Constitution

Answer 4

1. Power of the President to veto any particular
   item or items in an appropriation, revenue, or
   tariff bill.
2. Necessity of an appropriation before money
   may be paid out of the public treasury.
3. Non-appropriation of public money or property
   for the use, benefit, or support of any sect,
   church, or system of religion.
4. Treatment of taxes levied for a special purpose.
5. Internal revenue allotments to local government
   units.

Question 5

The process by which the tax burden
is transferred from the statutory taxpayer
(impact of taxation) to another (incident of
taxation) without violating the law.

Answer 5

Shifting

Question 6

a mere increase in the value of
the property is not income but merely an
unrealized increase in capital. No income until
after the actual sale or other disposition of the
property in excess of its original cost

Answer 6

Capitalization

Question 7

the manufacturer or producer
upon whom the tax has been imposed, fearing the
loss of his market if he should add the tax to the
price, pays the tax and endeavors to recoup
himself by improving his process of production,
thereby turning out his units at a lower cost.

Answer 7

Transformation

Question 8

the public represented by the government is
supposed to receive the full equivalent; the provisions of
the contract of exemption from taxation are contained in
the charter of the corporation.

Answer 8

Contract as a ground for Grant

Question 9

to encourage new and necessary industries; 
foster charitable and other benevolent institutions or at 
least make the public at large interested in the class or 
interest in whose behalf the exemption is made.

Answer 9

Public policy as a ground for Grant

Question 10

to lessen the rigors of
international double or multiple taxation of income and
intangible personal property.

Answer 10

Treaty on grounds of reciprocity

Question 11

Sources of Tax Laws

Answer 11

• Statutes
• Presidential Decrees
• Executive Orders
• Constitution
• Court Decisions
• Tax Codes
• Revenue Regulations
• Administrative Issuances
• BIR Rulings
• Local Tax Ordinance
• Tax treaties and 
Conventions

Question 12

T or F
An optimal tax policy should RAISE sufficient REVENUE while MINIMIZING the COST of collection, subject to distributional concerns.
-Joel Slemrod, 1989

Answer 12

T