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Taxation is the process by which a government imposes financial burdens on its subjects to raise revenue for public services and welfare. It serves primary purposes of revenue generation and secondary regulatory goals, while being grounded in theories like the Lifeblood Doctrine and Necessity Theory. Constitutional limitations ensure due process, equal protection, uniformity, and prohibit impairing contractual obligations in the exercise of taxation powers.

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Ma. Christina Palermo
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6 views

Untitled Document 4

Taxation is the process by which a government imposes financial burdens on its subjects to raise revenue for public services and welfare. It serves primary purposes of revenue generation and secondary regulatory goals, while being grounded in theories like the Lifeblood Doctrine and Necessity Theory. Constitutional limitations ensure due process, equal protection, uniformity, and prohibit impairing contractual obligations in the exercise of taxation powers.

Uploaded by

Ma. Christina Palermo
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Taxation

●​ Taxation is the process or means by which the sovereign (independent state), through its law
making body (the legislature), imposes burdens upon subjects and objects within its jurisdiction for the
purpose of raising revenues to carry out the legitimate objects of government.

●​ In simple terms, it is the act of levying a tax to apportion the cost of government among those
who, in some measure, are privileged to enjoy its benefits and must therefore share its burden.

Aspects of Taxation
1.​ Levying (Legislative Function)
2.​ Assessment (Executive Function)
3.​ Collection (Executive Function)

Purposes of Taxation

1.​ Primary: Revenue/Fiscal


-​ The primary purpose of taxation on the part of the government is to provide funds or property
with which to promote the general welfare and the protection of its citizens and to enable it to finance its
multifarious activities.

2.​ Secondary: Regulatory (Sumptuary/Compensatory)


-​ While the primary purpose of taxation is to raise revenue for the support of the government,
taxation is often employed as a devise for regulation or control (implementation of State's police power)
by means of which certain effects or conditions envisioned by the government may be achieved such as:

a)​ Promotion of General Welfare


b)​ Reduction of Social Inequality
c)​ Economic Growth

THEORY of Taxation
●​ Lifeblood Doctrine
●​ Necessity Theory

Lifeblood Doctrine
Without taxes, the government would be paralyzed for lack of the motive power to activate and
operate it.

The government, for its part, is expected to respond in the form of tangible and intangible benefits
intended to improve the lives of the people and enhance their moral and material values. (Commissioner
vs. Algue)
Necessity Theory
It is a power emanating from necessity. It is a necessary burden to preserve the state's sovereignty
and a means to give the citizenry an army to resist an aggression, a navy to defend its shores from
invasion, a corps of civil servants to serve, public improvements designed for the enjoyment of the
citizenry and those which come within the state's territory, and facilities and protection which a
government is supposed to provide. (Phil. Guarantee Co., Inc. vs. CIR, 13 SCRA 775)

Lifeblood Doctrine
The power of taxation is essential because the government can neither exist nor endure without
taxation. "Taxes are the lifeblood of the government and their prompt and certain availability is an
imperious need" (Lifeblood Doctrine). The government cannot continue to perform its basic functions of
serving and protecting its people without means to pay its expenses. Consequently, the state has the right
to compel all its citizens and property within its limits to contribute.

BASIS of Taxation
●​ Benefits Received or Reciprocity Theory

The basis is the reciprocal duties of protection and support between the state and its inhabitants.
The state collects taxes from the subjects of taxation in order that it may be able to perform the functions
of government. The citizens, on the other hand, pay taxes in order that they may be secured in the
enjoyment of the benefits of organized society. This theory spawned the Doctrine of Symbiotic
Relationship which means, taxes are what we pay for a civilized society (Commissioner v. Algue).

The 3 Inherent Powers of the State


1.​ Power of Taxation. It is the power by which the State raises revenue to defray the necessary
expenses of the government.

2.​ Police Power. It is the power of the state for promoting public welfare by restraining and
regulating the use of liberty and property.

3.​ Power of Eminent Domain. It is the power of the State to acquire private property for public
purpose upon payment of just compensation.

Similarities among the three (3) Inherent powers of the State

1. They are inherent in the state.


2. They exist independently of the constitution although the conditions for their exercise may be
prescribed by the constitution.
3. Ways by which the State Interfere with private rights and property.
4. Legislative in nature and character.
5. Presuppose an equivalent compensation received, directly or indirectly, by the persons affected.

Elements/Characteristics of Tax
1. It is an enforced contribution
2. It is generally payable in money
3. It is proportionate in character
4. It is levied on persons, property or exercise of a right or privilege
5. It is levied by the law making of the State
6. It is levied for public purpose

Nature of the State's power to Tax


1. It is inherent in sovereignty
2. It is legislative in character
3. Exemption of government entities, agencies and instrumentalities
4. International comity
5. Limitation on territorial jurisdiction
6. Strongest among the inherent powers of the State

Constitutional Limitations
Due process of law
-​ There must be a valid law and the measure should not be unconscionable and unjust as to amount
to confiscation of property. Tax statute must not be arbitrary as to find no support in the Constitution. The
power to tax should not be harsh, oppressive or confiscatory. This limitation is also known as the right to
notice and hearing.

Equal protection of law


-​ All persons subject to legislation shall be treated alike under similar circumstances and conditions
both in the privileges conferred and liabilities imposed. The doctrine does not require that persons or
properties different in fact be treated in law as though they were the same. What it prohibits is class
legislation which discriminates against some and favors others. As long as…

Uniformity and Equity in Taxation


-​ "The rule of taxation shall be uniform and equitable." It requires the uniform application and
operation, without discrimination, of the tax in every place where the subject of the tax is found. It does
not, however, require absolute identity or equality under all circumstances, but subject to reasonable
classification.

For classification to be valid, the following must concur:


●​ It must be based on substantial distinction
●​ It must apply both to present and future conditions
●​ It must be germane to the purposes of the law
●​ It must apply equally to all members of the same class
Prohibition for non-payment of poll tax
-​ No person shall be imprisoned for debt or non-payment of poll tax. The non-imprisonment rule
applies to non-payment of poll tax which is punishable only by a surcharge, but not to other violations
like falsification of community tax certificate and non-payment of other taxes. Poll tax is a tax of fixed
amount imposed on residents within a specific territory regardless of citizenship, business or profession.

Prohibition against impairment of obligation of contracts


-​ The power of taxation cannot be exercised in a manner that would impair the obligation of
contracts. What is prohibited is that a taxing statute be passed that would alter the relative rights of the
parties with each other.

Prohibition against impairment of obligation of contracts


-​ No law impairing the obligation of contracts shall be passed. The obligation of a contract is
impaired when its terms or conditions are changed by law or by a party' without the consent of the other,
thereby weakening the position or rights of the latter. An example of impairment by law is when a later
taxing statute revokes a tax exemption based on a contract. But this only applies when the tax exemption
has been granted for a valid consideration. If the tax exemption pertains, for instance, to a franchise tax, a
later statute may revoke such exemption because the constitution provides that a franchise tax is subject to
amendment, alteration or repeal.

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