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ABLM A216
A. CLASSIFICATIONS AND DISTICNTIONS individual income tax system is
1. Classification of Taxes designed to be progressive, with
- Taxes are classified, according to higher-income earners subject to
subject matter or object, into 3 groups: higher tax rates. Additionally, the
i. Personal - capitation or poll taxes estate tax and donor's tax in the
which are fixed amounts imposed Philippines are also structured to be
upon residents or persons of a progressive, with higher rates applied
certain class without regard to to larger estates or donations.
their property or business, ex.
Basic Community Tax. 3. Power of taxation as distinguished from
ii. Property tax – assessed on Police Power and Eminent Domain
property or things of a certain - The power to tax is an attribute of
class, whether real or personal, in sovereignty. It is a power emanating
proportion to their value or other from necessity. It is a necessary
reasonable method of burden to preserve the State’s
apportionment, ex. Estate Tax. sovereignty and a means to give the
iii. Excise or License tax – imposed citizen an army to resist an aggression,
upon the performance of an act, a navy to defend its shores from
the enjoyment of a privilege, or the invasion, a corps of civil servants to
engaging in an occupation, serve, public improvements designed
profession, or business. for the enjoyment of the citizenry and
those which come within the State’s
2. Regressive/ Progressive System of territory, and facilities and protection
Taxation which a government is supposed to
- Regressive System of Taxation: In a provide.
regressive system of taxation, the tax
burden falls more heavily on lower- - The power to tax is the strongest of all
income individuals or households powers of Government.
compared to higher-income
individuals or households. This often 4. Similarities among Taxation, Eminent
occurs when taxes are imposed Domain, and Police Power
uniformly or disproportionately on - Inherent Powers of the State
goods and services that comprise a - Taking of property for public use
larger portion of the spending of those - Regulatory Power
with lower incomes. In the Philippine
context, examples of regressive taxes 5. Tax as distinguished from:
include value-added tax (VAT) on basic
The sanggunian concerned
commodities, which affects all may prescribe the terms
consumers regardless of income level, and conditions and fix the
and excise taxes on certain goods like rates for the imposition of
petroleum products and tobacco. toll fees or charges for the
use of any public road, pier,
or wharf, waterway, bridge,
- Progressive System of Taxation: In ferry or telecommunication
contrast, a progressive system of Toll system funded and
constructed by the local
taxation imposes a greater tax burden government unit
on higher-income individuals or concerned: Provided, That
households relative to their lower- no such toll fees or charges
shall be collected from
income counterparts. This is typically
officers and enlisted men of
achieved through graduated tax rates, the Armed Forces of the
where tax rates increase as income Philippines and members
levels rise. In the Philippines, the of the Philippine National
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Police on mission, post from voluntary agreements
office personnel delivering or transactions involving
mail, physically- borrowing money or
handicapped, and disabled obtaining goods or services
citizens who are sixty-five on credit. Debt may involve
(65) years or older the payment of interest or
Sanction or punishment other charges in addition to
imposed by law for the the principal amount
violation of rules, borrowed.
regulations, or obligations
prescribed by statutes or
administrative authorities.
Penalties are distinct from
Penalty taxes in that they are B. SITTUS OF TAXATION AND DOUBLE
punitive in nature and are
TAXATION
imposed as a consequence
of non-compliance with 1. Meaning of Situs of taxation
legal requirements, rather - refers to the place or jurisdiction where
than as a means of raising a particular tax is imposed or deemed
revenue.
to arise. It determines the authority of
Demand for contribution to a government to impose and collect
help defray the cost of taxes on specific transactions,
Special improvement from real
activities, or entities within its
property owners benefited
Assessment territory.
by such improvement.
Assessed not on the owners
but on the real property 2. Situs of Subjects of Taxation
itself.
Imposed for the regulation
- location or circumstances that make a
of lawful business or person, property, or income subject to
License Fee occupation in the exercise taxation. It specifies the criteria used
and Regulatory of police power, the amount to determine whether an individual,
of which is limited to cover
Fee the expenses of issuing the entity, or income falls within the
license and the cost of jurisdiction for tax purposes.
inspection or supervision
by the government
3. Multiplicity of situs
Charges imposed on
imports and exports of - refers to the situation where an item of
goods crossing property, income, or transaction may
international borders. They be subject to taxation in more than one
are levied by customs
authorities to regulate jurisdiction or under more than one
Tariff and trade, protect domestic set of laws. It arises when different
Customs industries, generate jurisdictions claim the right to tax the
Duties revenue, or achieve other
same economic activity or entity.
policy objectives. While
tariffs and customs duties
resemble taxes in their 4. Meaning of Double Taxation
revenue-raising function, - Double taxation occurs when the same
they are distinct in their income, transaction, or property is
application to international
trade transactions and subject to taxation by more than one
regulation of cross-border taxing authority or jurisdiction. It can
commerce. happen either within the same country
Refers to an obligation (domestic double taxation) or between
owed by an individual,
business, or government different countries (international
entity to repay borrowed double taxation).
funds or fulfill contractual
commitments. Unlike
taxes, which are
5. Instances of double taxation in its
compulsory payments broadest sense
Debt imposed by law, debt arises
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- Direct taxes: Taxation of the same their scope, intent, and effect on
income or property by both the specific situations.
national government and local
government within a country. 3. Application of Tax Law
- Indirect taxes: Taxation of the same - The application of tax law involves the
transaction at multiple stages of practical implementation of tax
production or distribution. statutes, regulations, and principles to
- International taxation: Taxation of the assess and collect taxes, determine tax
same income or transaction by two or liabilities, and enforce compliance with
more countries due to conflicting tax tax obligations.
laws or treaties.
4. Sources of Tax Law
6. Constitutionality of Double Taxation - Sources of tax law include statutes
- In the Philippines, the enacted by the legislative branch (e.g.,
constitutionality of double taxation is National Internal Revenue Code),
evaluated based on whether it violates regulations promulgated by the
constitutional principles such as executive branch (e.g., BIR issuances),
uniformity and equality before the law. judicial decisions (e.g., rulings by the
Double taxation may be deemed Supreme Court), and administrative
constitutional if it does not unduly issuances (e.g., Revenue
burden taxpayers, if it serves a Memorandum Orders).
legitimate public purpose, and if it
conforms to the principles of due 5. Authority of the DOF Secretary to
process and equal protection under promulgate rules and regulations.
the law as prescribed by the Philippine - The Secretary of the Department of
Constitution and relevant laws. Courts Finance (DOF) has the authority to
may review double taxation cases to promulgate rules and regulations to
implement tax laws effectively. These
regulations provide guidelines and
C. NATURE, CONSTRUCTION, APPLICATION, procedures for the administration and
SOURCE OF TAX LAWS AND DOCTRINES IN enforcement of tax laws.
TAXATION
1. Nature of Internal Revenue Law 6. Nature and power to make regulations.
- body of statutes, regulations, and legal - Regulations issued by the DOF
principles governing the assessment, Secretary have the force and effect of
collection, and administration of taxes law, as long as they are consistent with
in the Philippines. It encompasses the provisions of the Tax Code and
laws such as the National Internal other relevant statutes. The power to
Revenue Code (NIRC) and related make regulations enables the
regulations promulgated by the government to clarify ambiguities in
Bureau of Internal Revenue (BIR). the law, provide procedural rules, and
ensure uniform application of tax
2. Construction and Interpretation of tax laws.
laws, rules, and regulations
- the process of analyzing and 7. Validity and effectivity of regulations
understanding the meaning and - Regulations issued by the DOF
application of tax laws, rules, and Secretary are valid if they are within
regulations. Courts and administrative the scope of authority granted by law
bodies interpret tax laws to determine and do not contravene constitutional
or statutory provisions. Their
effectivity depends on compliance with
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procedural requirements and
publication in the Official Gazette or 13. Escape from Taxation
other authorized channels. - refers to situations where income or
transactions are not properly
8. Force and effectivity of regulations subjected to tax due to legal loopholes,
- Regulations issued by the DOF evasion, or inadvertent oversight. Tax
Secretary have the force of law and are authorities may address tax evasion
binding on taxpayers and government through enforcement actions and
agencies. They supplement the legislative measures to close loopholes.
provisions of the Tax Code and provide
detailed guidance on the application a.) Shifting of Tax Burdens
and interpretation of tax laws. - practice of transferring the economic
burden of taxation from one taxpayer
9. Administrative and interpretations and to another. This can occur when a
opinions taxpayer, such as a seller or producer,
- refer to official explanations or passes on the incidence of a tax to
clarifications issued by tax authorities, another party, such as consumers or
such as the BIR, regarding the employees, through adjustments in
application of tax laws to specific prices, wages, or other economic
factual situations. While not legally transactions. While legal, shifting of
binding, they provide guidance to tax burden can have distributional
taxpayers and tax administrators. effects and impact economic behavior.

10. Power of the DOF Secretary to revoke b.) Tax Avoidance

rulings. - involves the use of legal means or
- The DOF Secretary has the authority strategies by taxpayers to minimize
to revoke or modify administrative their tax liabilities within the
rulings or opinions previously issued if framework of the law. Taxpayers
they are found to be erroneous, engage in tax avoidance to take
inconsistent with law, or no longer advantage of available deductions,
reflective of current policies. credits, exemptions, loopholes, or
favorable interpretations of tax laws to
11. Prospectivity of Tax Laws reduce their tax obligations. Unlike tax
- Tax laws generally apply prospectively, evasion, tax avoidance does not
meaning they govern transactions, involve illegal or fraudulent conduct
events, or activities that occur after but rather strategic tax planning to
their effective date. However, certain optimize tax outcomes.
provisions may have retroactive
c.) Tax Evasion
application if expressly provided by
- the illegal and intentional act of
law.
evading or escaping the payment of
taxes by deliberately misrepresenting
12. Imprescriptivity of Tax Laws
or concealing income, assets,
- Tax laws have no statute of limitations
transactions, or other relevant
or prescriptive period within which tax
information from tax authorities. It
liabilities may be enforced. Taxes, once
involves willful non-compliance with
assessed, remain collectible
tax laws through fraudulent practices,
indefinitely until paid or settled,
such as underreporting income,
subject to certain exceptions.
overstating deductions, maintaining
secret bank accounts, falsifying
records, or engaging in other deceptive
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tactics to evade taxes. Tax evasion is a - The power to grant tax exemption is
criminal offense punishable under vested in the legislative branch of the
Philippine tax laws. government, specifically the Congress
of the Philippines. It is derived from
14. Equitable recoupment the Constitution and delegated to
- Equitable recoupment allows Congress through specific laws or
taxpayers to offset overpaid taxes in statutes. Tax exemptions may also be
one year against taxes owed in another granted by local government units
year when there is a related issue or within the scope of their authority as
error that spans multiple tax periods. provided by law.
It aims to prevent unjust enrichment
or double taxation. 3. Grounds for tax exemption
- Tax exemptions may be granted based
15. Prohibition on compensation and set-off on various grounds, including:
- The Tax Code generally prohibits a.) Economic or social policy objectives.
taxpayers from compensating or b.) Promotion of certain industries,
setting off tax liabilities against other activities, or investments.
obligations owed to the government, c.) Non-profit status or charitable
except as provided by law. This purposes.
ensures that taxes are collected d.) International agreements or treaties.
separately and not offset against
unrelated debts. 4. Nature of Tax Exemption
- Tax exemption is a privilege conferred
16. Compromise and Tax Amnesty by law and is not inherent or
- Operates as a general pardon or automatic. It is subject to the
intentional overlooking by the State of conditions, limitations, and
its authority to impose penalties on qualifications specified in the enabling
persons otherwise guilty of evasion or law or regulation. Tax exemptions may
violation of a revenue or tax law. It is be absolute, partial, or conditional,
an absolute waiver by the government depending on the legislative intent and
of its right to collect what is due and to policy objectives.
give tax evaders who wish to relent a
chance to star with a clean slate. It is 5. Kinds of Tax Exemption
never favored or presumed in law. - Tax exemptions in the Philippines can
be categorized into several types,
including:
D. EXEMPTIONS FROM TAXATION i. Statutory exemptions: Granted by
1. Meaning of Exemption from Taxation specific provisions of the Tax Code
- Exemption from taxation refers to the or other tax laws enacted by
exclusion or relief granted to certain Congress.
individuals, entities, transactions, or
properties from the obligation to pay • Income Tax Exemptions: Certain
taxes imposed under the provisions of types of income may be exempt
the Tax Code or other tax laws. It may from income tax, such as:
apply to income, transactions, - Income of religious, charitable,
educational, and other non-profit
properties, or specific types of
institutions, subject to certain
taxpayers.
conditions and limitations
(Section 30 of the NIRC).
- Gains from the sale of shares of
stock listed and traded on the
2. Nature and Power to grant tax exemption. Philippine Stock Exchange (PSE),
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subject to certain requirements - Non-Profit Educational
(Section 28(B)(5)(b) of the NIRC). Institutions [Art. XIV, Sec.
- Prizes and awards received by 4(3)]
athletes and sports persons in
- Non-Stock, Non-Profit
local and international sports
Organizations [Art. XIV, Sec.
competitions (Section 32(B)(7)(f)
of the NIRC). 4(4)]
- Non-Stock Corporations
• Value-Added Tax (VAT) Exemptions: [Art. XIV, Sec. 4(5)]
Certain transactions may be exempt - Cooperatives [Art. XII,
from VAT, such as: Section 15]
- Sales or importation of agricultural
and marine food products in their iii. Administrative exemptions:
original state (Section 109(1) of the
Granted by the executive branch,
NIRC).
such as the President or relevant
- Sale or importation of certain drugs
and medicines prescribed for
government agencies, through
diabetes, high cholesterol, and administrative orders,
hypertension, among others (Section regulations, or rulings.
109(1) of the NIRC).
- Services rendered by hospitals, iv. Local exemptions: Granted by
medical, dental, optical, and other local government units within
similar services (Section 109(1)(B) of their territorial jurisdiction,
the NIRC).
subject to limitations prescribed
by law and consistent with
• Estate Tax and Donor's Tax
national policies.
Exemptions:
- Transfers for public purposes, such
as to the Philippine government,
political subdivisions, educational v. International exemptions: Arising
and charitable institutions, among from treaties, agreements, or
others, may be exempt from estate conventions between the
tax and donor's tax (Section 86 and Philippines and foreign
Section 101 of the NIRC). governments or international
organizations, providing for
• Excise Tax Exemptions: Certain
exemptions from certain taxes for
products may be exempt from excise
taxes, such as:
qualified individuals, entities, or
- Medicines prescribed for diabetes, transactions.
high cholesterol, and hypertension
(Section 150(a)(2) of the NIRC).
- LPG used for household
consumption (Section 148 of the
NIRC).

ii. Constitutional exemptions:

Arising from provisions of the
Philippine Constitution that
grant certain entities or
activities immunity from
taxation.
- Charitable and Religious
Institutions [Art. VI, Sec.
28(3)]