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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