They are:
(1) Fiscal adequacy. – It means that the sources of the revenue, that is, receipts therefrom, taken as a whole, should be sufficient to meet the demands of public expenditure. It means also that the revenues should be elastic or capable of expanding or contracting annually in response to variations in public expenditures.
The alternatives are (a) to incur the risk of a series of deficits or surpluses due to inelastic revenues; or (b) to adjust the amount of public expenditures to fit the flow of funds probably or curtailing certain activities so that the budget may be balanced. Elasticity may be obtained without creating any new tax machinery but merely by changes in the rates applicable to existing taxes. Views may differ, of course, as to the means of attaining elasticity in tax revenues.
(2) Equality or theoretical justice. – It means that the tax burden should be in proportion to the taxpayer’s ability to pay. This is the so-called ability-to-pay principle. It also connotes that the contribution of each person towards the expense of the government should be so apportioned such that he would feel neither more nor less inconvenienced from his share of the payment than every other person experiences from his.
In other words, taxation should be uniform as well as equitable; and
(3) Administrative feasibility. – It means that the tax laws should be capable of convenient, just and effective administration.
No tax, however ideally just and fair, is better that its actual operation. Each tax in the system should be clear and plain to the taxpayer, capable of uniform enforcement by government officials, convenient as to the time, place, and manner of payment, and not unduly burdensome upon, or discouraging to business activity. Tax laws should close up loopholes for tax evasion and deter the unscrupulous officials from committing frauds in the assessment and collection of taxes.
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Friday, May 5, 2017
Thursday, May 4, 2017
Non-revenue objectives of taxation
The primary purpose of taxation is, of course, to raise revenue for the support of the government. However, taxation is often employed as a device for regulation by means of which certain effects or conditions envisioned by governments may be achieved. Thus:
(1) Taxation can strengthen anemic enterprises or provide incentive to greater production through grant of tax exemptions or the creation of conditions conducive to their growth.
(2) Taxes on imports may be increased to protect local industries against foreign competition or decreased to encourage foreign trade.
(3) Taxes on imported goods may also be used as a bargaining tool by a country by setting tariff rates first at a relatively high level before trade negotiations are entered into with another country to enhance its bargaining power.
(4) Taxes may be increased in periods of prosperity to curb spending power and halt inflation or lowered in periods of slump to expand business and ward off depression.
(5) Taxes may be levied to reduce inequalities in wealth and incomes, as for instance, the state, donor’s and income taxes, their payers being the recipients of unearned wealth or mostly in the higher income brackets.
(6) Taxes may be levied to promote science and invention or to finance educational activities or to improve the efficiency of local police forces in the maintenance of peace and order through grant of subsidy.
(7) Taxation may be made as an implement of the police power to promote the general welfare. By way of illustration, it has been held that the Sugar Adjustment Act is an act enacted primarily under the police power and designed to obtain of the readjustment of the benefits derived by people interested in the sugar industry which constitutes on e of the great sources of the country’s wealth and, therefore, affects a great portion of the population of the country.
As long as a tax is for a public purpose, its validity is not affected by collateral purposes or motives of the legislature in imposing the levy, or by the fact that it has a regulatory effect or it discourages or even definitely deters the activities taxed. The principle applies even though the revenue obtained from the tax appears very negligible or the revenue purpose is only secondary.
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(1) Taxation can strengthen anemic enterprises or provide incentive to greater production through grant of tax exemptions or the creation of conditions conducive to their growth.
(2) Taxes on imports may be increased to protect local industries against foreign competition or decreased to encourage foreign trade.
(3) Taxes on imported goods may also be used as a bargaining tool by a country by setting tariff rates first at a relatively high level before trade negotiations are entered into with another country to enhance its bargaining power.
(4) Taxes may be increased in periods of prosperity to curb spending power and halt inflation or lowered in periods of slump to expand business and ward off depression.
(5) Taxes may be levied to reduce inequalities in wealth and incomes, as for instance, the state, donor’s and income taxes, their payers being the recipients of unearned wealth or mostly in the higher income brackets.
(6) Taxes may be levied to promote science and invention or to finance educational activities or to improve the efficiency of local police forces in the maintenance of peace and order through grant of subsidy.
(7) Taxation may be made as an implement of the police power to promote the general welfare. By way of illustration, it has been held that the Sugar Adjustment Act is an act enacted primarily under the police power and designed to obtain of the readjustment of the benefits derived by people interested in the sugar industry which constitutes on e of the great sources of the country’s wealth and, therefore, affects a great portion of the population of the country.
As long as a tax is for a public purpose, its validity is not affected by collateral purposes or motives of the legislature in imposing the levy, or by the fact that it has a regulatory effect or it discourages or even definitely deters the activities taxed. The principle applies even though the revenue obtained from the tax appears very negligible or the revenue purpose is only secondary.
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Wednesday, May 3, 2017
Extent of the legislative power to tax
The power of taxation being legislative, all its incidents are naturally within the control of the legislature. Subject to constitutional and inherent restrictions (infra.), the legislature has discretion to determine the matters mentioned subsequently.
(1) The subjects or objects to be taxed. – These refer to the coverage and the kind of nature of the tax. They may be persons, whether natural or juridical; property, whether real or personal, tangible or intangible: business, transactions, rights, or privileges. A state is free to select the subject of taxation and it has been repeatedly held that the inequalities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation so long as such exemption is reasonable and not arbitrary. Thus, the power to tax carries with it the power to grant exemption therefrom.
(2) The purpose or object of the tax as long as it is a public purpose. – The legislative body can levy a tax or make an appropriation provided it is for a public purpose. Its determination, however, on the question of what is a public purpose is not conclusive. The courts can inquire into whether the purpose is really public or private. In the final analysis, therefore, the decision on the question is not a legislative but a judicial function. But once it is settled that the purpose is public, the courts can make no other inquiry into the objective of the legislative in imposing a tax, or the wisdom, advisability, or expediency of the tax.
Judicial action is limited only to a review where it involves:
(a) The determination of the validity of the tax in relation constitutional precepts or provisions. Thus, a tax may be declared invalid because it violates the constitutional requirement of uniformity and equity; or
(b) The determination in an appropriate case of the application of a la. Thus, a court may be decide that a tax has been illegally collected where the taxpayer is entitled to tax exemption or his liability has already been extinguished by reason of prescription.
(3) The amount of rate of the tax. – As a general rule, the legislature may levy a tax of any amount or rate it sees fit. If the taxes are oppressive or unjust, the only remedy is the ballot box and the election of new representatives.
(a) According to Chief Justice John Marshall, “the power to tax involves the power to destroy.” To say. However, that the power to tax is the power to destroy is to describe not the purposes for which the taxing power may be used but the extent to which it may be employed in order to raise revenues. Thus, even if a tax should destroy a business, such fact alone could not invalidate the tax.
As long as the power is exercised within the bounds of constitutional limitations, a tax cannot be held invalid merely because the power which is manifested by its imposition may involve the power to destroy.
(b) Incidentally, our Constitution mandates that “the rule of taxation shall be uniform and equitable.” In a case, our Supreme Court said “The power of taxation is sometimes called also the power to destroy. Therefore, it should be exercised with the caution to minimize injury to the proprietary rights of the taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kills the ‘hen that lays the golden eggs’! And in order to maintain the general public’s trust and confidence in the government, this power must be used justly and treacherously.”
(4) The manner, means, and agencies of collection of the tax. – These refer to the administration of the tax or the implementation of tax laws. Having the sole power to tax, the legislature must equally possess the sole power to prescribe the mode or method by which the tax shall be collected, and to designate the officers through whom its will shall be enforced, as well as the remedies which the State or the taxpayer may avail in connection therewith.
While it is true that executive officials enforce tax laws, this does not involve the choice of the subjects to be taxed, the fixing of the measure or amount of the tax, or the definition of the purpose for which the tax is levied.
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(1) The subjects or objects to be taxed. – These refer to the coverage and the kind of nature of the tax. They may be persons, whether natural or juridical; property, whether real or personal, tangible or intangible: business, transactions, rights, or privileges. A state is free to select the subject of taxation and it has been repeatedly held that the inequalities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation so long as such exemption is reasonable and not arbitrary. Thus, the power to tax carries with it the power to grant exemption therefrom.
(2) The purpose or object of the tax as long as it is a public purpose. – The legislative body can levy a tax or make an appropriation provided it is for a public purpose. Its determination, however, on the question of what is a public purpose is not conclusive. The courts can inquire into whether the purpose is really public or private. In the final analysis, therefore, the decision on the question is not a legislative but a judicial function. But once it is settled that the purpose is public, the courts can make no other inquiry into the objective of the legislative in imposing a tax, or the wisdom, advisability, or expediency of the tax.
Judicial action is limited only to a review where it involves:
(a) The determination of the validity of the tax in relation constitutional precepts or provisions. Thus, a tax may be declared invalid because it violates the constitutional requirement of uniformity and equity; or
(b) The determination in an appropriate case of the application of a la. Thus, a court may be decide that a tax has been illegally collected where the taxpayer is entitled to tax exemption or his liability has already been extinguished by reason of prescription.
(3) The amount of rate of the tax. – As a general rule, the legislature may levy a tax of any amount or rate it sees fit. If the taxes are oppressive or unjust, the only remedy is the ballot box and the election of new representatives.
(a) According to Chief Justice John Marshall, “the power to tax involves the power to destroy.” To say. However, that the power to tax is the power to destroy is to describe not the purposes for which the taxing power may be used but the extent to which it may be employed in order to raise revenues. Thus, even if a tax should destroy a business, such fact alone could not invalidate the tax.
As long as the power is exercised within the bounds of constitutional limitations, a tax cannot be held invalid merely because the power which is manifested by its imposition may involve the power to destroy.
(b) Incidentally, our Constitution mandates that “the rule of taxation shall be uniform and equitable.” In a case, our Supreme Court said “The power of taxation is sometimes called also the power to destroy. Therefore, it should be exercised with the caution to minimize injury to the proprietary rights of the taxpayer. It must be exercised fairly, equally and uniformly, lest the tax collector kills the ‘hen that lays the golden eggs’! And in order to maintain the general public’s trust and confidence in the government, this power must be used justly and treacherously.”
(4) The manner, means, and agencies of collection of the tax. – These refer to the administration of the tax or the implementation of tax laws. Having the sole power to tax, the legislature must equally possess the sole power to prescribe the mode or method by which the tax shall be collected, and to designate the officers through whom its will shall be enforced, as well as the remedies which the State or the taxpayer may avail in connection therewith.
While it is true that executive officials enforce tax laws, this does not involve the choice of the subjects to be taxed, the fixing of the measure or amount of the tax, or the definition of the purpose for which the tax is levied.
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Tuesday, May 2, 2017
Aspects of taxation
The exercise of the power of taxation involves two (2) aspects and, they are:
(1) Levying or imposition of the tax which is legislative act; and
(2) Collection of the tax levied which is essentially administrative in character.
The first is taxation, strictly speaking, while the second (including payment by the taxpayer) may be referred to as tax administration. The two processes together constitute the “taxation system.”
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(1) Levying or imposition of the tax which is legislative act; and
(2) Collection of the tax levied which is essentially administrative in character.
The first is taxation, strictly speaking, while the second (including payment by the taxpayer) may be referred to as tax administration. The two processes together constitute the “taxation system.”
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Sunday, April 30, 2017
Nature of the power of taxation.
(1) It’s inherent in sovereignty. – The power of taxation is inherent in sovereignty as an incident or attribute thereof, being essential to the existence of every government. It exists apart from constitutions and without being expressly conferred by the people. Hence, it can be exercised by the government even if the Constitution is entirely silent on the subject.
(a) Constitutional provisions relating to the power of taxation do not operate as grants of the power to the government. They merely constitute limitations upon a power which would otherwise be practically without limit.
(b) While the power to tax is not expressly provided for in our Constitution, its existence is recognized by the provisions relating taxation.
(2) It is legislative in character. – The power to tax is peculiarly and exclusively legislative and cannot be exercised by the executive or judicial branch of the government. Hence, only Congress, our national legislative body can impose taxes. The levy of a tax, however, may also be made by a local legislative body subject to such limitations as may be provided by law.
(3) It is subject to constitutional and inherent limitations. – The power of taxation is subject to certain limitations. Most of these limitations are specifically provided in the Constitution or implied therefrom, while the rest are inherent and they are those which spring from the nature of the taxing power itself although they may or may not be provided in the Constitution.
Individual equities or inequities, however, are not considered in the exercise of the power; and, therefore, the mere fact that the taxation is unjust or oppressive with respect to a particular taxpayer does not of itself render a tax law invalid, where no constitutional provision has been violated.
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(a) Constitutional provisions relating to the power of taxation do not operate as grants of the power to the government. They merely constitute limitations upon a power which would otherwise be practically without limit.
(b) While the power to tax is not expressly provided for in our Constitution, its existence is recognized by the provisions relating taxation.
(2) It is legislative in character. – The power to tax is peculiarly and exclusively legislative and cannot be exercised by the executive or judicial branch of the government. Hence, only Congress, our national legislative body can impose taxes. The levy of a tax, however, may also be made by a local legislative body subject to such limitations as may be provided by law.
(3) It is subject to constitutional and inherent limitations. – The power of taxation is subject to certain limitations. Most of these limitations are specifically provided in the Constitution or implied therefrom, while the rest are inherent and they are those which spring from the nature of the taxing power itself although they may or may not be provided in the Constitution.
Individual equities or inequities, however, are not considered in the exercise of the power; and, therefore, the mere fact that the taxation is unjust or oppressive with respect to a particular taxpayer does not of itself render a tax law invalid, where no constitutional provision has been violated.
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Wednesday, April 26, 2017
Theory and basis of taxation
(1) The power of taxation proceeds upon the theory that the existence of government is a necessity; that it cannot continue without means to pay its expenses; and that for these means it has a right to compel all its citizens and property within its limits to contribute. As said in case:
“The power to tax is an attribute of sovereignty x x x 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 States territory, and facilities and protection which a government is supposed to provide.”
(2) The basis of taxation is found in the reciprocal duties of protection and support between the state and its inhabitants. In return for his contribution, the tax payer receives the general advantages and protection which the government affords the taxpayer and his property. This is the so-called benefits-received principle. One is compensation or consideration for the other: protection for support and support for protection.
The foregoing statements, however, must be qualified.
(a) It does not mean that only those who are able to and do pay taxes can enjoy the privileges and protection given to a citizen by the government. Both are enjoyed as well as by those who do not, because they are not able to pay taxes. The reason is that protection in the enjoyment of his rights is a duty owed by the State to every citizen.
(b) From the contribution received, the government renders no special or commensurate benefit to any particular property or person. A tax is a “compulsory payment to the government in return for which the payer gets no definite, specific commodity or service.” (Caulery Public Finance and the General Welfare [1960].) It is not imposed on the basis of a special or peculiar benefit accruing to each citizen in proportion to the tax paid.
(c) The only benefit to which the taxpayer is entitled is that derived from his enjoyment of the privileges of living in an organized society established and safeguarded by the devotion of taxes to public purposes. The government promises nothing to the person taxed beyond that may be anticipated from an administration of the laws for the general good.
A person, therefore, cannot object to or resist the payment of taxes solely because no personal benefit to him can be pointed out as arising from the tax or he is benefited less than others who pay the same or smaller amount of tax. What matters in taxation is that the tax imposition is for a public purpose.
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“The power to tax is an attribute of sovereignty x x x 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 States territory, and facilities and protection which a government is supposed to provide.”
(2) The basis of taxation is found in the reciprocal duties of protection and support between the state and its inhabitants. In return for his contribution, the tax payer receives the general advantages and protection which the government affords the taxpayer and his property. This is the so-called benefits-received principle. One is compensation or consideration for the other: protection for support and support for protection.
The foregoing statements, however, must be qualified.
(a) It does not mean that only those who are able to and do pay taxes can enjoy the privileges and protection given to a citizen by the government. Both are enjoyed as well as by those who do not, because they are not able to pay taxes. The reason is that protection in the enjoyment of his rights is a duty owed by the State to every citizen.
(b) From the contribution received, the government renders no special or commensurate benefit to any particular property or person. A tax is a “compulsory payment to the government in return for which the payer gets no definite, specific commodity or service.” (Caulery Public Finance and the General Welfare [1960].) It is not imposed on the basis of a special or peculiar benefit accruing to each citizen in proportion to the tax paid.
(c) The only benefit to which the taxpayer is entitled is that derived from his enjoyment of the privileges of living in an organized society established and safeguarded by the devotion of taxes to public purposes. The government promises nothing to the person taxed beyond that may be anticipated from an administration of the laws for the general good.
A person, therefore, cannot object to or resist the payment of taxes solely because no personal benefit to him can be pointed out as arising from the tax or he is benefited less than others who pay the same or smaller amount of tax. What matters in taxation is that the tax imposition is for a public purpose.
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Saturday, April 22, 2017
Essential characteristics of tax
As indicated above, they are enumerated below.
(1) It is an enforced contribution. – A tax is not a voluntary payment or donation (84 C.J.S. 32.) and its imposition is in no way dependent upon the will or assent, open or implied, of the person taxed. (71 Am. Jur. 2d 344.) To be sure, taxation without representation, or without the consent in some form of those who are to be taxed, is contrary to the fundamental principles of good government. The principle of representation, however, applies only to political communities, as such, and not to individuals. It is satisfied by their adequate representation in the legislative body which votes the tax. (83 C.J.S. 48.)
(2) It is generally payable in money. – Unless qualified by law (e.g., backpay certificates under Sec. 2, R.A No. 304, as amended.), the term “taxes” or “tax” is usually understood to be a pecuniary burden – an exaction to be discharged alone in the form of money which must be in legal tender.
(3) It is proportionate in character. – A tax is laid by some rule of apportionment according which persons share the public burden. It is ordinarily based on ability to pay. Thus, in practice, some people pay very high taxes; others, very small amounts or none at all.
(4) It is levied on persons or property. – A tax may also be imposed on acts, transactions, rights or privileges. In each case, however, it is only a person who pays the tax. The property is resorted to for the purpose of ascertaining the amount of tax that must be paid and of enforcing payment in case default of the taxpayer. (84 C.J.S. 36.) But not all who pay a tax shoulder the burden of the tax.
(5) It is levied by the state which has jurisdiction over the person or property. – The object to be taxed must be subject to the jurisdiction of the taxing state. (infra.) This is necessary in order that the tax can be enforced. Although a state can tax all persons subject to its jurisdiction for all their property left by them within its jurisdiction to seize upon person or property for purposes of taxation.
(6) It is levied by the law-making body of the state. – The power to tax is a legislative power which under the Constitution only Congress can exercise through the enactment of tax statutes. Accordingly, the obligation of a tax is statutory liability.
(a) The power to tax is granted by the Constitution to local government subject to such guidelines and limitations as may be provided by law.
(b) During the period of martial law, (Sept. 21, 1972 to Jan. 17, 1981), the then incumbent President exercised the executive powers vested under the 1973 Constitution in the Prime Minister (who was the Chief Executive before its amendment in 1981) as well legislative powers through the issuance of “presidential decrees”.
(c) By virtue of Amendment No. 6 to the 1973 Constitution, the President was given concurrent legislative authority under certain conditions, which he exercised even after the lifting of martial law.
(d) Pending the ratification of a new Constitution and in the absence of a legislative body in the Provisional Government installed on February 25,1986, the President exercised legislative power through the issuance of executive orders under the convening of Congress on July 27, 1987.
(7) It is levied for public purpose or purposes. – Taxation involves, and a tax constitutes, s charge or burden imposed to government, the administration of the law, or the payment of public expenses. Revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private persons. (Gaston vs. Republic Planters Bank, 158 SCRA 626, Mar. 15 1988.) The “public purpose or purposes” of the imposition is implied in the levy of tax.
It is also an important characteristic of most taxes that they are commonly required to be paid at regular periods or intervals every year.
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(1) It is an enforced contribution. – A tax is not a voluntary payment or donation (84 C.J.S. 32.) and its imposition is in no way dependent upon the will or assent, open or implied, of the person taxed. (71 Am. Jur. 2d 344.) To be sure, taxation without representation, or without the consent in some form of those who are to be taxed, is contrary to the fundamental principles of good government. The principle of representation, however, applies only to political communities, as such, and not to individuals. It is satisfied by their adequate representation in the legislative body which votes the tax. (83 C.J.S. 48.)
(2) It is generally payable in money. – Unless qualified by law (e.g., backpay certificates under Sec. 2, R.A No. 304, as amended.), the term “taxes” or “tax” is usually understood to be a pecuniary burden – an exaction to be discharged alone in the form of money which must be in legal tender.
(3) It is proportionate in character. – A tax is laid by some rule of apportionment according which persons share the public burden. It is ordinarily based on ability to pay. Thus, in practice, some people pay very high taxes; others, very small amounts or none at all.
(4) It is levied on persons or property. – A tax may also be imposed on acts, transactions, rights or privileges. In each case, however, it is only a person who pays the tax. The property is resorted to for the purpose of ascertaining the amount of tax that must be paid and of enforcing payment in case default of the taxpayer. (84 C.J.S. 36.) But not all who pay a tax shoulder the burden of the tax.
(5) It is levied by the state which has jurisdiction over the person or property. – The object to be taxed must be subject to the jurisdiction of the taxing state. (infra.) This is necessary in order that the tax can be enforced. Although a state can tax all persons subject to its jurisdiction for all their property left by them within its jurisdiction to seize upon person or property for purposes of taxation.
(6) It is levied by the law-making body of the state. – The power to tax is a legislative power which under the Constitution only Congress can exercise through the enactment of tax statutes. Accordingly, the obligation of a tax is statutory liability.
(a) The power to tax is granted by the Constitution to local government subject to such guidelines and limitations as may be provided by law.
(b) During the period of martial law, (Sept. 21, 1972 to Jan. 17, 1981), the then incumbent President exercised the executive powers vested under the 1973 Constitution in the Prime Minister (who was the Chief Executive before its amendment in 1981) as well legislative powers through the issuance of “presidential decrees”.
(c) By virtue of Amendment No. 6 to the 1973 Constitution, the President was given concurrent legislative authority under certain conditions, which he exercised even after the lifting of martial law.
(d) Pending the ratification of a new Constitution and in the absence of a legislative body in the Provisional Government installed on February 25,1986, the President exercised legislative power through the issuance of executive orders under the convening of Congress on July 27, 1987.
(7) It is levied for public purpose or purposes. – Taxation involves, and a tax constitutes, s charge or burden imposed to government, the administration of the law, or the payment of public expenses. Revenues derived from taxes cannot be used for purely private purposes or for the exclusive benefit of private persons. (Gaston vs. Republic Planters Bank, 158 SCRA 626, Mar. 15 1988.) The “public purpose or purposes” of the imposition is implied in the levy of tax.
It is also an important characteristic of most taxes that they are commonly required to be paid at regular periods or intervals every year.
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