IMPLICATION OF THE LIFEBLOOD DOCTRINE OF TAXATION

The Lifeblood Doctrine of Taxation is a fundamental principle in taxation that

emphasizes the importance of taxes as the "lifeblood" of the government, providing
the necessary funds for public services and functions. Here’s how the points you
mentioned relate to this doctrine:

1.​ Tax is imposed even in the absence of a Constitutional grant: This means
that the government's power to tax is inherent and does not need to be
explicitly stated in the Constitution. It highlights the essential nature of taxation
to the functioning of the government.
2.​ Claims for tax exemption are construed against taxpayers: Because
taxes are vital for the government's survival, any claim for exemption is strictly
interpreted. Unless a law clearly and expressly grants an exemption, the
default position is that taxes must be paid.
3.​ The government reserves the right to choose the objects of taxation:
The government has the discretion to determine what entities, activities, or
properties will be subject to taxation. This flexibility ensures that the
government can raise revenue efficiently.
4.​ The courts are not allowed to interfere with the collection of taxes: This
principle underscores the importance of uninterrupted tax collection. The
judicial system generally refrains from interfering with tax collection
processes, allowing the government to continue its operations without delays
caused by legal challenges.
5.​ In income taxation:
○​ Income received in advance is taxable upon receipt: This ensures
that the government collects taxes as soon as possible, maintaining a
steady flow of revenue.

Example: A construction company in the Philippines receives an

advance payment of ₱1,000,000 in December 2023 for a project that
will start in January 2024. Even though the work hasn't begun, the
Bureau of Internal Revenue (BIR) will require the company to report
this income in its 2023 tax return, ensuring that the government collects
the tax as soon as the income is received.

○​ Deduction for capital expenditures and prepayments is not

allowed as it effectively defers the collection of income tax: By
limiting these deductions, the doctrine ensures that income is taxed
 when it is earned rather than when expenses are incurred, preventing
delays in tax collection.

Example: A Filipino manufacturing firm purchases new machinery for

₱5,000,000 in 2024. Instead of allowing the entire amount to be
deducted as an expense in 2024, the BIR may require the firm to
depreciate the machinery over its useful life, say 10 years. This means
only ₱500,000 per year can be deducted, preventing a large reduction
in taxable income in the first year and ensuring the government collects
consistent tax revenue over time.

○​ A lower amount of deduction is preferred when a claimable

expense is subject to limit: This minimizes the reduction in taxable
income, maximizing the government's tax revenue.

Example: A taxpayer in the Philippines claims medical expenses as a

deduction. If the expenses are only deductible to the extent they
exceed a certain percentage of gross income, the BIR might closely
scrutinize the claimed amount. For instance, if the taxpayer's medical
expenses are ₱200,000 but only ₱50,000 exceeds the limit for the
deduction, the BIR may allow only the ₱50,000 deduction to ensure
more taxable income remains.

○​ A higher tax base is preferred when the tax object has multiple tax
bases: A larger tax base increases the amount of revenue collected,
aligning with the principle that the government needs adequate funds
to function.

Example: A Philippine corporation has both gross income from sales

and rental income. If the corporation is subject to both the regular
corporate income tax and the minimum corporate income tax (MCIT),
the BIR may assess the tax based on the higher base—whether that is
gross income or net taxable income. For instance, if the MCIT based
on gross income results in higher tax revenue compared to the regular
income tax, the BIR might prefer the MCIT calculation to maximize the
tax collection.

The Inherent Powers of the State

Taxation Power:

●​ Definition: Taxation is the power of the state to enforce a proportional

contribution from its citizens to finance government operations and services.
 ●​ Example: Income tax, sales tax, and property tax are all forms of taxation that
the state imposes to generate revenue.

Police Power:

●​ Definition: Police Power is the general power of the state to enact and
enforce laws that protect the health, safety, morals, and general welfare of the
people.
●​ Example: Laws requiring businesses to follow safety standards, regulations
prohibiting harmful substances, and zoning laws that designate areas for
residential or commercial use are all exercises of Police Power.

Eminent Domain:

●​ Definition: Eminent Domain is the power of the state to take private property
for public use, provided that the government pays just compensation to the
property owner.
●​ Example: For example, your house is situated in an area wherein the road
widening will take place. -You cannot do anything about it because it is the
right of the government to take that. Provided that that property will be used
for public purposes and the owner of the private property shall be entitled to a
payment equivalent to the fair value of the property that is taken away by the
government or what we call the just compensation.

SIMILARITIES:
1. They are all necessary attributes of sovereignty:

●​ Explanation: Each power is fundamental to the sovereignty of the state,

meaning they are essential for the state to function and fulfill its
responsibilities. Sovereignty implies the state’s authority to make and enforce
laws, collect revenues, regulate behavior, and manage resources, all of which
are enabled by these powers.

2. They are all inherent to the State:

●​ Explanation: These powers are inherent in the state’s existence and

authority. They are not granted by the Constitution but are intrinsic to the
state’s ability to govern effectively. They arise from the state’s nature as a
governing body with ultimate authority.

3. They are all legislative in nature:

 ●​ Explanation: Each power involves the creation and enforcement of laws or
regulations. Taxation requires laws to impose and collect taxes, Police Power
involves legislative measures to regulate conduct for public welfare, and
Eminent Domain requires laws to acquire property for public use. This
legislative aspect reflects the state's role in law-making and regulation.

4. They are all ways in which the State interferes with private rights and
properties:

●​ Explanation: Each power affects individuals’ rights and properties. Taxation

involves compulsory contributions from private citizens, Police Power
regulates personal behavior and property use, and Eminent Domain involves
taking private property for public use. These interferences are justified by the
need to serve public interests and maintain order.

5. They all exist independently of the Constitution and are exercisable by the
government even without a Constitutional grant. However, the Constitution
may impose conditions or limits for their exercise:

●​ Explanation: These powers do not originate from the Constitution but are
recognized as essential to state governance. While the Constitution does not
create these powers, it often sets limits or conditions on their exercise to
protect individual rights and ensure fairness. For example, the Constitution
may dictate the procedures for exercising Eminent Domain or require fair
taxation practices.

6. They all presuppose an equivalent form of compensation received by the

persons affected by the exercise of the power:

●​ Explanation: Each power involves a form of compensation or mitigation for

those affected. In Taxation, individuals receive public services in return for
their taxes. In Eminent Domain, property owners receive just compensation.
In the context of Police Power, while direct compensation may not always
apply, there is an implicit understanding that regulations aim to balance public
welfare with individual rights.

7. The exercise of these powers by local government units may be limited by

the national legislature:

●​ Explanation: While local government units (LGUs) have the authority to

exercise these powers, their scope and methods can be regulated by national
laws. For example, national legislation may set guidelines for how LGUs can
impose taxes, enforce regulations, or use Eminent Domain. This ensures a
uniform application of laws across the country and maintains national
oversight.
DIFFERENCES:

7. Limitation

●​ Taxation:
○​ Limitation: Constitutional and inherent limitations
○​ Explanation: Taxation is subject to constitutional provisions (e.g., due
process, equal protection) and inherent principles (e.g., fairness,
non-discrimination).
●​ Police Power:
○​ Limitation: Public interest and due process
○​ Explanation: Police power is limited by the need to balance public
interest with individual rights and ensure due process in the
enforcement of regulations.
○​ A city passes a law that requires businesses to close at a certain time
to reduce crime. However, if the law is enforced without giving
businesses a fair opportunity to comply or challenge it, it could violate
due process. The law must also genuinely serve the public interest
and not be arbitrary or oppressive.
●​ Eminent Domain:
○​ Limitation: Public purpose and just compensation
○​ Explanation: The use of eminent domain is limited to public purposes,
and the government must provide fair compensation to property
owners.

1. Exercising Authority

●​ Taxation:
○​ Authority: Government
○​ Explanation: The power to tax is exercised by the government at
various levels (national, regional, and local) to fund its operations and
services. This power is central to the government’s ability to function
and provide public services.
●​ Police Power:
○​ Authority: Government
○​ Explanation: Police power is also exercised by the government,
including local authorities, to enact and enforce laws and regulations
aimed at safeguarding public welfare. This includes activities like
zoning, health regulations, and safety laws.
●​ Eminent Domain:
○​ Authority: Government and private utilities (if delegated)
 ○​ Explanation: The power of eminent domain is primarily exercised by
the government. In some cases, private utilities with government
authorization can also exercise this power, such as when acquiring
land for infrastructure projects.

2. Purpose

●​ Taxation:
○​ Purpose: For the support of the government
○​ Explanation: Taxes are imposed to provide the government with the
financial resources needed to operate and deliver public services,
including education, health care, and infrastructure.
●​ Police Power:
○​ Purpose: To protect the general welfare of the people
○​ Explanation: Police power is used to regulate and control various
aspects of life to ensure public safety, health, and moral standards.
This includes laws and regulations that affect behavior and property
use.
●​ Eminent Domain:
○​ Purpose: For public use
○​ Explanation: Eminent domain is exercised to acquire private property
for public projects, such as roads, schools, or utilities, which benefit the
community at large.

3. Persons Affected

●​ Taxation:
○​ Persons Affected: Community or class of individuals
○​ Explanation: Taxes are levied on a broad group, including individuals
and businesses, according to their income, transactions, or property.
●​ Police Power:
○​ Persons Affected: Community or class of individuals
○​ Explanation: Police power affects individuals and businesses by
regulating behavior and property use to promote public welfare.
●​ Eminent Domain:
○​ Persons Affected: Owner of the property
○​ Explanation: Eminent domain specifically affects individual property
owners whose land or property is taken for public use.

4. Amount of Imposition

●​ Taxation:
○​ Amount: Unlimited (Tax is based on government needs.)
 ○​ Explanation: The amount of tax imposed is generally determined by
the government's financial needs and can vary widely. There is no fixed
limit, and taxes can be adjusted as required.
●​ Police Power:
○​ Amount: Limited (Imposition is limited to cover the cost of regulation.)
○​ Explanation: Regulations imposed under police power are designed to
be reasonable and necessary to achieve public welfare goals. They are
limited to what is necessary for regulation and enforcement.
●​ Eminent Domain:
○​ Amount: No amount imposed (The government pays just
compensation.)
○​ Explanation: There is no imposition of an amount on the property
owner. Instead, the government must provide fair compensation for the
property taken.

5. Importance

●​ Taxation:
○​ Importance: Most important
○​ Explanation: Taxation is crucial for the functioning of the government,
as it provides the primary source of revenue for all governmental
activities and services.
●​ Police Power:
○​ Importance: Most superior
○​ Explanation: Police power is considered superior in terms of its broad
and impactful regulation of behavior and property to ensure public
welfare and safety.
●​ Eminent Domain:
○​ Importance: Important
○​ Explanation: Eminent domain is important for public infrastructure and
development but is considered less central compared to taxation and
police power.

6. Relationship with the Constitution

●​ Taxation:
○​ Relationship: Inferior to the "Non-impairment Clause" of the
Constitution
○​ Explanation: Taxation must adhere to constitutional principles, but the
government’s power to tax is broad and not explicitly limited by the
"Non-impairment Clause," which protects contractual obligations.
●​ Police Power:
○​ Relationship: Superior to the "Non-impairment of Contracts" Clause of
the Constitution
 ○​ Explanation: Police power can supersede contractual obligations if
necessary for public welfare, as regulations aimed at protecting public
health and safety may override individual agreements.
●​ Eminent Domain:
○​ Relationship: Superior to the "Non-impairment of Contracts" Clause of
the Constitution
○​ Explanation: Eminent domain can override property rights, but it must
be exercised within constitutional limits, ensuring public use and just
compensation.

Scope of the Power of Taxation

1.​ Comprehensive:
○​ Description: The power of taxation extends to all types of property,
income, transactions, and activities. It covers a wide range of tax
bases, including personal income, corporate profits, real estate, sales,
and various other forms of economic activity. This broad scope allows
the government to generate revenue from diverse sources.
2.​ Plenary:
○​ Description: Taxation power is complete and absolute within its
bounds. The government has the authority to tax as it sees fit, subject
to legal and constitutional constraints. This plenary nature means that
the government can determine the types of taxes, rates, and methods
of collection.
3.​ Unlimited:
○​ Description: In theory, the power of taxation is not restricted in
amount. The government can impose taxes to the extent necessary to
meet its financial needs. This means there is no upper limit on how
much revenue the government can seek through taxation, although
practical considerations and political constraints often play a role in
determining tax levels.
4.​ Supreme:
○​ Description: The power of taxation is supreme over other powers of
the state. It is essential for the operation of government functions and
is often prioritized in ensuring the government’s ability to perform its
duties. The government’s ability to levy taxes is considered a
fundamental aspect of its sovereignty and authority.