Taxation Law Review - General Principles Flashcards
Describe the power of Taxation. May a legislative body enact laws to raise revenues in the absence of a constitutional provision granting said body the power to tax? Explain.
The power of taxation is inherent in the State, being an attribute of sovereignty.
As an incident of sovereignty, the power to tax has been described as unlimited in its range, acknowledging in its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay it. (Mactan Cebu Int’l Airport Authority v Marcos)
Why the power of taxation is an attribute of sovereignty?
The power of taxation is an essential and inherent attribute of sovereignty, belonging as a matter of right to every independent government, wihtout being expressly conferred by the people. (Pepsi-Cola Bottling Co v Municipality of Tanauan, Leyte)
Why is the power to tax is considered inherent in a sovereign State?
The power to tax is considered inherent in a sovereign State because it is a necessary attribute of sovereignty. Without this power, no sovereign State can exist.
The power to tax proceeds upon the theory that the existence of a government is a necessity.
The power to tax is an essential and inherent attribute of sovereignty, belonging as a matter of right to every independent State. No sovereign State can continue to exist without the means to pay its expenses, and for those means, it has the right to compel all citizens and property within its limits to contribute, hence, the emergence of power to tax.
May Congress under the 1987 Constitution, abolish the power to tax of local governments?
No, Congress cannot abolish what is expressly granted by the Constitution.
The only authority conferred to Congress is to provide guidelines and limitations on the local government’s exercise of the power to tax. (Sec. 5, Art. X, 1987 Constitution)
In our jurisdiction, which of the following statements may be erroneous?
- Taxes are pecuniary in nature
- Taxes are enforced charges and contributions
Taxes are imposed on persons and property within the territorial jurisdiction of a State
- Taxes are levied by the executive branch of government
- Taxes are assessed according to a reasonable rule of apportionment
Taxes are levied by the executive branch of government. This statement is erroneous because “levy” refers to the act of imposition by the legislature which is done through the enactment of a tax law.
Levy is an exercise of the power to tax, which is exclusively legislative in nature and character. Clearly, taxes are not levied by the executive branch of government.
Enumerate the 3 stages or aspect of taxation. Explain each.
The 3 stages or aspects of taxation are:
1) Levy - this refers to the enactment of a law by Congress imposing a tax;
2) Assessment and collection - this is the act of administration and implementation of the tax law by the executive department through the administrative agencies; and
3) Payment - this is the act of compliance by the taxpayer including such options, schemes or remedies as may be legally available to him.
Discuss the meaning and implications of the following statement:
“Taxes are the lifeblood of government and their prompt and certain availability is an imperious need.”
The phrase “taxes are the lifeblood of government, etc.” expresses the underlying basis of taxation which is governmental necessity, for indeed, without taxation, a government can neither exist nor endure. Taxation is the indispensable and inevitable price for civilized society; without taxes, the government would be paralyzed. This phrase has been used to justify the validity of the laws providing for summary remedies in the collection of taxes. In Valley Trading vs CFI, when the Supreme Court ruled that the damages that may be caused to the taxpayer by being made to pay the taxes cannot be said to be irreparable as it would be against the government’s inability to collect taxes.
Justice Holmes once said:
“The power to tax is not the power to destroy while this Court (Supreme Court) sits.”
Describe the power to tax and its limitations.
The power to tax is an inherent power of the sovereign, which is exercised through the legislature, to impose burdens upon subjects and objects within its jurisdiction for the purpose of raising revenues to carry out the legitimate objects of government.
The underlying basis for its exercise is governmental necessity for without it no government can exist nor endure. Accordingly, it has the broadest scope of all the powers of government because in the absence of limitations, it is considered as unlimited, plenary, comprehensive and supreme.
The two limitations which are intended to prevent abuse on the exercise of the otherwise plenary and unlimited power. It is the Court’s role to see to it that the exercise of the power does not transgress these limitations.
For failure to comply with certain corporate requirements, the stockholders of ABC Corp. were notified by the SEC that the corporation would be subject to involuntary dissolution. The stockholders did not do anything to comply with the requirements, and the corporation was dissolved. Can the stockholders be held personally liable for the unpaid taxes of the dissolved corporation? Explain briefly.
No. As a general rule, stockcholders cannot be held liable for the unpaid taxes of a dissolved corporation. The rule prevailing under our jurisdictin is that a corporation is vested by law with a personality that is separate and distinct from those persons composing it (Sunio vs NLRC).
However, stockholders may be liable for the unpaid taxes of a dissolved corporation, if it appears that the corporate assets have passed into their hands (Tan Tiong Bio vs CIR).
Likewise, when the stockholders have unpaid subscriptions to the capital of the corporation, they can be made liable for unpaid taxes of the corporation.
Among these taxes imposed by the BIR are income tax, estate tax and donor’s tax, value added tax, excise tax, other percentage taxes and documentary stamp tax. Classify these taxes into direct and indirect taxes, and differentiate direct from indirect taxes.
Income tax, estate tax and donor’s tax are considered as direct taxes. On the other hand, VAT, excise tax, OPT and DST are indirect taxes.
A direct tax is demanded from the very person who, as an intended should pay the tax which he cannot shift to another, while an indirect tax is demanded in the first instance from one person with the expectation that he can shift the burden to someone else, not as a tax but as part of the purchase price.
(Maceda vs Macaraig)
