[Type here]

[Link] PRINCIPLES In addition, taxes are only levied by the state which has
jurisdiction over the person or property. Thus, the object to be taxed,
A. CONCEPT AND PURPOSE OF TAXATION must be subject to the jurisdiction of the taxing state before it can be
(By: Alonto and Binayao) enforced. The power to tax cannot reach over into another jurisdiction
to seize upon person or property for purposes of taxation.
1. Definition
Further, it can only be levied by the law-making body of the
state, being a legislative power, through the enactment of tax statutes.
Taxation is the act of laying a tax. It is a process or means by
Hence, it cannot be imposed by the executive department nor by the
which the sovereign, through its law-making body, raises income to
courts. Also, as taxation involves a charge or burden imposed to
defray the necessary expenses of government. Further, it is an
provide income for public purposes, the revenues derived from taxes
enforced proportional contribution imposed by the State by its
should be for the exclusive benefit of the public and not for private
sovereign capacity, to support the government.
persons.

As a power, taxation refers to the inherent power of the state

Basically, there are three elements of taxation.
to demand enforced contributions for public purposes. Being inherent
to the State, the right to impose taxes exists apart from the constitution.
The power of taxation is a symbiotic relationship whereby, in exchange (1) It is an enforced proportional contribution from persons and
for the protection that the citizens get from the government, taxes are properties;
paid.
(2) It is imposed by the State by virtue of its sovereignty;
Taxes, on the other hand, are enforced proportional
contributions from persons and property, levied by the state by virtue of (3) It is levied for the support of the government.
its sovereignty for the support of the government and for all its public
needs. Also, one of its nature and characteristic is that, (1) the State
is free to select the subjects of taxation and the court has repeatedly
They are not arbitrary exactions but contributions levied by held that inequalities which result from a singling out of a particular
authority of law, and by some rule of proportion which is intended to class for taxation or exemption infringe no constitutional exemption, (2)
insure uniformity of contribution and a just apportionment of the As the State has the power to determine subjects of taxation, it is also
burdens of government. They are also pecuniary in nature and payable free to select who will be exempt from Taxation.
in money.
Lastly, taxes are personal to the tax payer. Hence, a
Also, taxes are obligations created by law. Taxes are never company’s delinquency for instance, cannot be enforced against its
founded on contract or agreement, and are not dependent for their stakeholders as a corporation is given a distinct and separate
validity upon the individual consent of the persons taxed. Taxes are personality by the law form those persons who are composing it.
proportional in character, since taxes are based on one's ability to pay.
2. Purpose
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Taxes are considered as the lifeblood of the State through tax exemptions, and the jurisdiction of the Court of Tax Appeals. If an
which the government and its agencies continue to operate and with exaction is not a tax, then the defense of a taxpayer, of double taxation
which the State effects its functions for the welfare of the constituents. will necessarily fail. A tax-exempt individual or corporation is generally
Thus, their prompt and certain availability is an imperious need. It only exempt from paying tax; if the exaction is not tax, then the
should be calculated without necessary hindrance. individual or corporation must then still pay tax

The rationale of taxation is graphically described by the Tax as against license/regulatory fees
Supreme Court in these words: “It is said that taxes are what we pay for
a civilized society. Without taxes, the government would be paralyzed TAX LICENSE FEE
for lack of the motive power to activate and operate. Hence, despite the Source Taxing Power Police power of the
natural reluctance to surrender part of one’s hard-earned income to the State
taxing authorities, every person who is able must contribute his share in
Purpose Raise revenues Regulation
the running of the government. The government for its part is expected
Object Persons, property, and Right to exercise a
to respond in the form of tangible and intangible benefits to improve the
lives of the people and enhance their moral and material values.” privilege privilege
As to amount No limit Only necessary to
carry out regulation
Primarily, the following are the purpose of taxation:

A. Revenue ¾ Basically the purpose of taxation is to provide funds or

property with which the state promotes the general welfare and
protection of its citizens. o The primary purpose of tax is generating revenue.

B. Regulation ¾ It had also a regulatory purpose as in the case of Tax is imposed for revenue purposes, whereas a license fee is
taxes levied on excise or privilege taxes like those imposed on tobacco imposed for regulatory purposes. The imposition is tax when the
and alcoholic products or amusement places like night clubs and generating revenue is the primary purpose and regulation is merely
cockpits. incidental; the imposition is not tax when the regulation is the primary
purpose and the revenue is obtained incidentally only. A tax is an
C. Promotion of General Welfare ¾ In one case, the Supreme Court exercise of the taxing power of the state, whereas a license free is a
ruled that taxation may be used as an implement of the police power in police power of the state. It is noteworthy that Supreme Court ruled that
order to promote the general welfare of the people. the registration fees for motor vehicles are in the nature of taxes rather
than fees. The legislative intent is mainly to raise funds for the
construction and maintenance of highways and only to a lesser degree
to pay for the expenses of the land.

3. Tax v. other forms of exactions, distinction

 Gerochi vs. Department of Energy, G.R. No.
159796, July 17, 2007
It is important to differentiate taxes from other exactions
especially when it comes to problems and issues on double taxation,
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Universal Charge imposed through the Electric o The imposition must also bear a reasonable relation to the
Power Industry Reform (EPIRA) was held to be a probable expenses of regulation, taking into account the costs
regulatory fee as it was imposed to ensure the of direct regulation and incidental consequences. A charged of
viability of the Philippines’ electric power fixed sum which bears no relation at all to the cost of
industry. inspection and regulation may well be considered a tax.

 Smart Communications v. Municipality of Malvar  Chevron Philippines, Inc. v Bases

Batangas, G.R. No. 20449, February 18, 2014 Conversion Development Authority, G.R.
No. 173863, September 15, 2010
Fees for the construction of special projects such
as cell sites were held as regulatory fees Fees imposed on a per liter basis on fuel
because the main purpose of the ordinance entering the Clark Special Economic Zone were
imposing such fees was to regulate certain held to be regulatory fees because there was a
construction activities like telecommunication reasonable relation between the high volume of
towers and telephone lines. fuel brought into the zone and the greater extent
of supervision and inspection needed to monitor
o A license fee’s imposition must relate to the occupation or the fuel.
activity that so engages the public interest in health, morals,
safety and development as to require regulation for the
Tax as against special assessments
protection and promotion of such public interest.
TAX SPECIAL
 Compania general de Tabacos de Filipinas ASSESSMENT
v City of Manila, G.R. No. L-16619, June 29, Imposed on Persons, properties, Only on land
1963 etc
Why imposed Regardless of public Public improvements
The fee imposed by a city on liquor vendors for improvement benefits the land and
the privilege of selling liquor is a license fee. increases its value
Purpose Support of Contribution to cost of
 Angeles University Foundation v City of government public improvement
Angeles, G.R. No. 189999, June 27, 2012 When imposed Regular exaction Exception as to time
and locality
Building fees are not taxes or impositions upon Basis Necessity Benefits obtained
property, but regulatory fees imposed by a city
for the activity of building or repairing a structure.
Hence, a foundation which is exempt from taxes
is not exempt from the payment of building fees, o Local government units may impose a special levy on lands
as these are not taxes in the first place.
specially benefited by the public works projects or
improvements funded by the local government unit.
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Indirect tax – is one burden of which may be shouldered by a person

o The purpose of special levies/assessment is to finance the other than him to whom the tax is imposed.
improvement of particular properties, with the benefits of the
improvement accruing or inuring to the owners thereof who, Example: Value added tax (VAT) – the seller shifts the burden
after all, pay the assessment. of paying the tax to the consumer.

Tax as against toll fees

Tax Toll Fees B. THEORY AND BASIS OF TAXATION

Imposed by State Private Persons (By: Ching and Daradar)
Purpose Raise revenues Reimbursement of
costs and expenses 1. Lifeblood Theory
incurred in the
construction of toll The lifeblood theory constitutes the theory of taxation, which
ways, and to assure provides that the existence of government is a necessity; that
reasonable margin of government cannot continue without means to pay its expenses; and
income that for these means it has a right to compel its citizens and property
Basis State’s sovereign Attribution of ownership within its limits to contribute.
power
Taxes are the lifeblood of the government and so should be
collected without unnecessary hindrance. It is said that taxes are what
we pay for civilized society. Without taxes, the government would be
o Toll fees are not taxes. These are exactions which end up as paralyzed for lack of the motive power to activate and operate it [CIR
earnings of toll way operators, not the government. [Link], G.R. No. L-28896 (1988)].

Tax as distinguished from customs duties 2. Necessity theory

o Tax is broader than customs duties because the latter is The power of taxation proceeds upon theory that the existence
limited only to taxes levied upon commodities imported into or of government is a necessity; that is cannot continue without means to
exported out of the country. pay its expenses; and that for those means it has the right to compel all
citizens and property within its limits to contribute. (71 Am. Jur. 2d 346.)
Direct tax – is one burden of which is shouldered by the person whom
the tax is directly imposed. The power to tax is an attribute of sovereignty. 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
Example: Income tax – paid by the person himself who derives aggression, a navy to defend its shores from invasion, a corps of civil
the income servants to serve, public improvements for the enjoyment of the
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citizenry, and those which come within the State’s territory and facilities enforced. This is so because it is only within the confines of its territory
and protection which a government is supposed to provide. [Phil. that a country, state or sovereign may give protection
Guaranty v. CIR, G.R. No. L-22074 (1965)]
These refer to the coverage and the kind or nature of the tax. They
may be persons, whether natural or juridical; property, whether real or
personal, tangible or intangible; businesses, transactions, rights, or
3. Benefits received theory 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
This principle serves as the basis of taxation and is founded on the
constitutional limitation so long as such exemption is reasonable and
reciprocal duties of protection and support between the State and its
not arbitrary.
inhabitants. In return for his contribution, the taxpayer receives the
general advantages and protection which the government affords the
taxpayer and his property. One is compensation or consideration for the The object to be taxed must be subject to the jurisdiction of the taxing
other: protection for support and support for protection. state. 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, yet its taxing power necessarily stops
Despite the natural reluctance to surrender part of one's hard
at the state boundary lines. It cannot reach over into another jurisdiction
earned income to the taxing authorities, every person who is able to
to seize upon person or property for purposes of taxation.
must contribute his share in the running of the government. 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 A state may not tax property lying outside its borders or lay an excise
enhance their moral and material values. This symbiotic relationship is or privilege tax upon the exercise or enjoyment of a right or privilege
the rationale of taxation and should dispel the erroneous notion that it is derived from the laws of another state and therein exercised and
an arbitrary method of exaction by those in the seat of power. [CIR enjoyed. The reason is that tax laws do not operate beyond a country’s
[Link], G.R. No. L-28896 (1988)] territorial limits. Furthermore, Property which is wholly and exclusively
within the jurisdiction of another state receives none of the protection
for which a tax is supposed to be a compensation.

The fundamental basis of the right to tax is the capacity of the

C. JURISDICTION OVER SUBJECTS AND OBJECTS
government to provide benefits and protection to the object of the tax. A
(By: Dela Cerna and Deloso)
person may be taxed where there is between him and the taxing state,
a privity of relationship justifying the levy.
Jurisdiction is a reason why citizens must provide support to
the state so the latter could continue to give protection. It is the country,
The Jurisdiction referred to which among the basic/bases or rationale
state or sovereign that gives protection that has the right to demand the
of taxation is basically territorial in character. Unless the state could
payment of taxes with which to finance activities so it could continue to
exercise jurisdiction over persons and property, then it could not
give protection. The basis or rationale of taxation is also used to explain
enforce and implement tax measures. The basis of taxation is the
why taxation is basically territorial in character because it is only within
reason why the Philippine government could impose taxes:
the territorial boundaries of the taxing authority where tax laws may be
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1. On the income of resident citizens derived from sources purpose to provide means for the rehabilitation, control and/or
outside of the Philippines. stabilization of a threatened industry which is affected with public
2. On aliens residing in the Philippines. interest as to be within the police power of the State.

The Philippine Taxation laws has jurisdiction over all tangible and Non-revenue or regulatory employment of taxation includes: Imposition
intangible objects which are capable of pecuniary estimation and shall of tariffs on imported goods to protect local industries, adoption of
include, among others: progressively higher tax rates to reduce inequalities in wealth and
income and the increase or decrease of taxes to prevent inflation or
ward off depression.
1. Real properties held primarily for sale to customers or held for
lease in the ordinary course of trade or business;
Taxation is a destructive power which interferes with the personal and
property rights of the people and takes from them a portion of their
2. The right or the privilege to use patent, copyright, design or property for support of the government. Therefore it should be
model, plan, secret formula or process, goodwill, trademark, exercised with caution to minimize injury to the proprietary rights of a
trade brand or other like property or right; taxpayer. It must be exercised fairly, equally and uniformly, lest the tax
collector kill the "hen that lays the golden egg". And, in order to
3. The right or the privilege to use any industrial commercial or maintain the general public's trust and confidence in the Government
scientific equipment; this power must be used justly and not treacherously.

D. PRINCIPLES OF A SOUND TAX SYSTEM

4. The right or the privilege to use motion picture films, films,
By: (Edma and Gabutina)
tapes and discs;

The basic principles of an ideal or a sound tax system are the

5. Radio, television, satellite transmission and cable television
following:
time.

1. Fiscal adequacy
Such is not an exclusive list. Additionally, objects being taxed in income
taxation are the following:
The source of government revenue must be
sufficient to meet governmental expenditures and other public
1. Fruit of Capital needs.1 This is essential in order to avoid budgetary deficits
and to minimize foreign and local borrowings. It means also
2. Fruit of Labor that the revenues should be elastic or capable of expanding or
contracting annually in response to variations in public
3. Fruit of Labor and Capital combined expenditures.2

The alternatives are to incur the risk of a series of deficits or

Taxation is no longer a measure merely to raise revenue to support the
surpluses due to inelastic revenues or to adjust the amount of
existence of government. Taxes may be levied with a regulatory
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public expenditures to fit the flow of funds probably by E. INHERENT AND CONSTITUTIONAL LIMITATIONS ON
curtailing certain activities so that the budget may be TAXATION
balanced.2 (By: Hallazgo)

2. Theoretical justice The power to tax is subject to limitations. These are classified into;
inherent limitations and constitutional limitations.
A good tax system must be based on the taxpayer’s
ability to pay. The burden should be distributed in the portion a. Inherent limitations- these are limitations or
and that it should be fair to average taxpayer and based upon restrictions that spring from its very own power. While the
his ability to pay. It is also called as the ability to pay principle power of taxation is inherent in sovereignty, there are also
which holds that similarly situated taxpayers should pay equal limitations or safeguards which spring from its own inherent
taxes, while those who have more should pay more.3 power.

This suggests that, taxations should be uniform as b. Constitutional limitations- these are restrictions in
well as equitable.4 Further, it must be progressive conformably the exercise of the power of taxation as expressly provided in
with the constitutional mandate that Congress shall evolve a the Philippine Constitution.
progressive system of taxation.
The following are the inherent limitations:
2. Administrative feasibility
1. Purpose. Taxes may be levied only for public purpose.
The tax system should be capable of being properly Purpose affecting the inhabitants of the state as a community and not
and efficiently administered by the government and enforced merely as individuals. These includes financing educational activities,
with the least inconvenience to the taxpayer. It means that the promotion of science, maintenance of roads and bridges, and aid for
tax must be plain and clear to the tax payer and should be victims of calamities among others.
capable of efficient enforcement by government officials.
2. Territorial Jurisdiction. The State may tax persons and
Administrative feasibility must be one that is capable properties only under its jurisdiction. The tax laws of the state are
of uniform enforcement by government officials, convenient as enforceable only within its territorial limits. Tax laws do not operate
to time and manner of payment, and not unduly burdensome beyond the country’s territorial limits.
upon, or discouraging to business activity. As stated in the
Report of Tax Commission, No tax however ideally just and 3. International Comity. The property of a foreign State may not
fair, is better than its actual operation. Every tax must be be taxed by another. Courteous and friendly agreement and interaction
capable of being enforced universally and uniformly under between nations.
such standards of administration as the government can
command and under such conditions, political and moral, as 4. Exemption. Government agencies performing essential
exist at the time and place.5 governmental functions are exempt from taxation unless expressly
taxed while those performing proprietary functions are subject to tax
unless expressly exempted. The government cannot tax itself.
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5. Non-delegation. The power to tax being legislative in nature Regulations No. 12-99) explicitly require “the written details on the
may not be delegated. (subject to exceptions) nature, factual and legal bases of the deficiency tax assessments.”

[Link] OF TAXATION
o In a July 24, 2017 case docketed as CTA EB Case No. 1444,
(By: Macalos) the Court of Tax Appeals (CTA) struck down a deficiency tax
assessment on the basis that the taxpayer did not receive the
assessment notice. In the said case, the taxpayer did not get
1. Levy the assessment notice since it was addressed and delivered to
the taxpayer’s old address. Under existing jurisprudence, in
Levy is the act of imposition by the Legislature, such as by enactment case of denial of receipt of the assessment notice by the
of the law. The term is understood to include not only the mandate on taxpayer, the BIR has the burden to prove that such
when and how the tax is imposed, but also, whenever it may be assessment was indeed received by the taxpayer. In this case,
appropriate, to grant tax exemptions, tax amnesties or tax donations. the court noted that the BIR failed to prove that the taxpayer
had received the assessment notice.
2. Assessment and Collection

The terms refer to the act of administration and implementation of

the tax laws by the executive, through its administrative agencies. The 3. Payment
term “assessment,” which here means notice and demand of for
payment of a tax liability, should not be confused with the “assessment” This is the act of compliance by the taxpayer, including such options,
relative to real property taxation, which refers to the listing and schemes or remedies as may be legally open or available to him. Taxes
valuation of taxable real property. imposed at the national level are collected by the Bureau of Internal
Revenue (BIR), while those imposed at the local level (i.e., provincial,
city, municipal, barangay) are collected by a local treasurer's office.
An assessment is formalized through the issuance of the formal
assessment notice (FAN), which must be protested within 30 days from As a rule, both individual taxpayers and corporate taxpayers are
its receipt. Otherwise, the formal assessment notice shall become final required to file their quarterly and annual income-tax returns (ITRs).
and executory. The BIR can then enforce collection by issuing a The quarterly income tax returns for individual taxpayers are filed within
warrant of distraint of garnishment. 45 days from the close of each taxable quarter. On the other hand, the
quarterly ITRs for corporate taxpayers are filed within 60 days from the
close of the taxable quarter. After filing, it’s time to pay the taxes. Since
For an assessment to be valid, the corresponding assessment the Philippines adheres to the “pay as you file” system, the general rule
notice must be properly served and received by the taxpayer. This is in is that imposable taxes shall be paid by the person or corporation
accordance with Section 228 of the National Internal Revenue Code, subject thereto at the time the return is filed. The taxpayer, though, may
which provides that the taxpayer shall be informed in writing of the law ask for an extension of time to pay, which, at times, depends upon the
and the facts on which the assessment is made; otherwise, the discretion of the tax authority and only in meritorious cases.
assessment shall be void. The assessment regulations (i.e., Revenue
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4. Refund b) Property- tax imposed on property ,whether real or

personal, in proportion to either its value, or in accordance
Refund refers to the recovery of tax erroneously or illegally with some other reasonable methods of apportionment.
assessed or collected. The administration of taxes does not always end
upon the collection by the Bureau of Internal Revenue (BIR), but rather EXAMPLE: Real Estate Tax
upon refund or issuance of a tax-credit certificate. A taxpayer may ask
for a refund of erroneously, excessively or illegally assessed or
c) Excise- any tax which does not fall within the
collected taxes, whether as a liability or penalty, applying Section 229
of the Tax Code. On the other hand, the taxpayer may ask for a refund classification of poll tax or property tax. It is said an excise
of the creditable input taxes attributable to its zero-rated or effectively tax when it is charged upon the performance of an act,
zero-rated transactions, applying Section 112 of the Tax Code. the enjoyment of a privilege , or the engaging in an
occupation. May be used interchangeably with “privilege
tax”
In claiming tax refunds, the taxpayer must first file an
administrative claim before the BIR in a form of a letter, discussing the 2. As to who bears the burden:
grounds for the refund and submitting all supporting documents for
a. Direct- Tax which is demanded or exacted from the very
such claim. For refunds of erroneously or illegally paid taxes, the
taxpayer should file the administrative claim within two years from the person who also shoulders the burden of the tax; or tax
payment of the tax; while for input VAT refund, the claim should be filed for which the taxpayer is directly or primary liable or which
within two years from the close of the taxable quarter when the sale he cannot shift to another.
was made. The taxpayer has 30 days from receipt of the decision of the
BIR to elevate the claim to the Court of Tax Appeals (CTA) via a EXAMPLE: Corporate and individual income taxes;
petition for review. estate tax; donor’s tax

b. Indirect- tax which is demanded from, or are paid by one

person in the expectation and intention the he shall
indemnify himself at the expense of another by passing
[Link]/S CLASSIFICATION OF TAXES
on the burden to the latter, falling finally upon the the
ultimate purchaser or consumer; or tax imposed upon
(By: Mutia) goods before they reach the consumer who ultimately
pays for it not as tax but as part of the purchase price of
1. As to Subject Matter: goods sold or services rendered.
a) Personal, poll or capitation- tax of a fixed amount
imposed on persons residing within a specified territory EXAMPLE: Value-added tax, percentage tax,
, whether citizens or not , whether regard to their property customs duties
or the occupation or business in which they may be
engaged. 3. As to determination of amount:

EXAMPLE: Community Tax (formerly residence tax)

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A. Specific - tax of a fixed amount imposed by the b. Municipal or local- tax imposed local government
head or number, or by some standard of weight units
or measurement; it requires no assessment
(valuation)other than a listing or classification of EXAMPLE: Real property tax, professional
the objects to be taxed. tax
6. As to graduation or rate:
EXAMPLE: Taxes on distilled spirits, wines, and a. Proportional – tax based on a fixed percentage of
fermented liquiors the amount of the property, receipts, or other basis to
be taxed. The rate of the tax remains constant for all
levels of the tax base or any given income level. It is
B. Ad valorem tax – tax of a fixed proportion of the
also called flat or uniform tax.
value of property with respect to which the tax is
assessed; it requires the intervention of
assessors or appraisers to estimate the value of EXAMPLE: Real estate taxes , value-added
such property before the amount due from each tax and other percentage taxes
taxpayer can be determined. The phrase “ad
valorem” means literally, “according to value”. b. Progressive or graduated- the rate of which
increases as the tax base or bracket increases.
EXAMPLE: Real Estate Tax, excise tax on
automobiles, non-essential goods such as EXAMPLE: Income Tax, estate tax, donor’s
jewelry tax

4. As to purpose: c. Regressive- the rate of which decreases as the tax

a. General or fiscal, or revenue-- tax imposed for the base or bracket increases, i.e the tax rate and the tax
general purposes of government , i.e to raise revenue base move in opposite directions. We have no
for governmental needs. regressive taxes.

EXAMPLE: Income tax, value- ll. NATIONAL TAXATION

added tax
A. TAXING AUTHORITY
b. Special or regulatory- tax imposed for a special
purpose, i.e to achieve some social or economic
ends irrespective of whether revenue is actually 1. Jurisdiction, Power, and Functions of the Commissioner of Internal
raised or not Revenue

5. As to scope (or authority imposing the tax) : a. Powers and duties of the BIR: (Sec. 2)
a. National – tax imposed by the national government
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1. To assess and collect national internal revenue taxes, fees and 2. Refunds of internal revenue taxes, fees or other charges;
charges;
3. Penalties imposed in relation to the above; and
2. To enforce all forfeiture, penalties, and fines connected with the
assessment and collection of taxes, fees and charges; 4. Other matters arising under the NIRC.

3. To execute judgment in all cases decided in its favor by the CTA and
the ordinary courts; and6
Note: Decisions (quasi-judicial, such as decisions on
4. To effect and administer the supervisory and police powers conferred assessment, refunds, and other matters) of the CIR
upon it by the NIRC and other special laws. are subject to the exclusive appellate jurisdiction of
the CTA.
Those decided by the CIR/ other officers in the exercise of their
b. Powers of the Commissioner of Internal Revenue (CIR) interpretative (quasi-legislative) powers are appealable before the
Secretary of Finance. The decision then, of the Secretary, should
1. Power to interpret tax laws and decide tax cases (Sec. 4) it remain unfavorable, could fall under “other matters” and shall now be
appealable before the CTA. (See discussion under CTA)
Power of the CIR to suspend the business operation of a taxpayer
2. Power to obtain information and to summon/examine and take - See discussion under
testimony of persons (Sec. 5) remedies.
Other powers of the CIR:
1. Power to Prescribe Real Property Values
3. Power to make assessments and prescribe additional requirements
● Authorized to divide the Philippines into
for tax administration and enforcement (Sec. 6) different zones or areas
● Mandatory consultation with competent appraisers both from public
a. Interpreting Tax Laws and Deciding Tax Cases and private sectors
● With prior notice to affected taxpayers
● The fair market value is subject to automatic adjustment once every
The power to interpret the NIRC and other tax laws is under the
three years
exclusive and original jurisdiction of the CIR, subject to review by the ● No adjustments in zonal valuation is valid unless published in a
Secretary of Finance (Sec. 4)7 newspaper of general circulation in the province, city or municipality, or
in the absence thereof, shall be posted in the provincial capitol, city or
All rulings of first impression (i.e., without precedent) shall be signed by municipality and in two (2) other conspicuous public places.
the CIR. ● The basis of any valuation, including the records of consultations
done, shall be public records open to inquiry of any
taxpayer.
The power to decide tax cases includes the power to decide: 2. Power to Inquire into Bank Deposits The Commissioner is authorized
to inquire into the bank deposits and other related information held by
1. Disputed assessments; financial institution of:
● A decedent to determine his gross estate
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● Any taxpayer who has filed an application for compromise of his tax The Secretary of Finance, upon recommendation of the CIR, shall
liability under Section 204(A)(2) of this Code by reason of financial promulgate all needful rules and regulations for the effective
incapacity to pay his tax liability. enforcement of the provisions of this Code. (Sec. 244)
● In case a taxpayer In case a taxpayer files an application to The power of the Secretary of Finance to review rulings issued by
compromise the payment of his tax liabilities on his claim that his the CIR, which includes the power to reverse, revise or modify, is
financial position demonstrates a clear inability to pay the tax assessed, limited only to rulings that are adverse to the taxpayers.
his application shall not be considered unless and until he waives in
writing his privilege under Republic Act No. 1405 or under other general EXPLANATION
or special laws, and such waiver shall constitute the authority of the
Commissioner to inquire into the bank deposits of the taxpayer.
Revenue Issuances I. GENERAL PRINCIPLES
Those issuances officially released by the CIR.
Different kinds of revenue issuances: A. CONCEPT AND PURPOSE OF TAXATION
1. Revenue Regulations
(RRs)
- 1. Definition
formal interpretations of the NIRC signed by the Secretary of Finance
upon the recommendation of the CIR; have the force and effect of law Ang taxation ay ang proseso ng gobyerno para kumuha ng pera sa
and can only be repealed, modified or amended by another regulation mga mamamayan at ari-arian. Ito ay isang enforced proportional
or law; specify, prescribe or define rules and regulations for effective
contribution na ipinapataw ng Estado sa kanyang sovereign capacity
enforcement of the provisions of the NIRC and related statutes
2. Rulings - less formal interpretations by the CIR or his authorized para suportahan ang gobyerno. It exists even without the constitution
representatives involving tax provisions and regulations; include: because it's an inherent power of the state.
a. BIR Rulings;
b. VAT Rulings; 2. Purpose
c. Rulings issued by International Tax Affairs
Division (ITAD); and
d. Rulings issued thru delegated authorities or Ang mga buwis ay tinatawag na "lifeblood of the State". Dahil dito, ang
unnumbered rulings gobyerno at mga ahensya nito ay patuloy na gumagana para sa
b. Non-Retroactivity of Rulings kapakanan ng mga mamamayan. Bukod sa pagpapagana ng
While a government is not bound by the error of its agents in issuing gobyerno, mayroon ding ibang layunin ang pagbubuwis:
rulings, in the interest of justice and fair play, such may not be given
retroactive effect. Hence, a VAT ruling subsequently issued to correct a
prior one cannot be applied retroactively when taxpayers have already Revenue: Ito ang pangunahing layunin—ang magbigay ng pondo sa
relied on the said erroneous ruling. (CIR v. Benguet Corporation, G.R. gobyerno para sa public welfare at proteksyon ng mga mamamayan.
Nos. 134587 & 134588, 2005)
2. Rule-Making Authority of the Regulation: Ginagamit din ang buwis para i-regulate ang ilang bagay,
Secretary of Finance tulad ng mga buwis sa tobacco at alcoholic products.
a. Authority of the Secretary of Finance to
promulgate rules and regulations
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Promotion of General Welfare: Ayon sa Supreme Court, ang taxation nakukuha ng mamamayan mula sa gobyerno, nagbabayad sila ng
ay pwedeng gamitin bilang implement ng police power para i-promote buwis.
ang general welfare ng mga tao.
C. JURISDICTION OVER SUBJECT AND OBJECTS
3. Tax and Other Forms of Exactions
Ang pagbubuwis ay territorial in character. Ibig sabihin, ang isang
Mahalagang malaman ang pinagkaiba ng buwis at iba pang singil. estado ay may karapatang magbuwis sa mga tao at ari-arian na nasa
Halimbawa, ang tax ay mula sa taxing power ng estado at ang layunin loob lang ng kanyang hurisdiksyon. Hindi pwedeng mag-reach over into
ay mag-raise ng revenue. Samantalang ang license fee ay mula sa another jurisdiction ang power to tax. Ang subject of taxation ay
police power ng estado at ang layunin ay regulation. Ang bayad para sa pwedeng mga tao, ari-arian, negosyo, transaksyon, at karapatan.
motor vehicle registration ay itinuturing na buwis dahil ang pangunahing
layunin ay mag-raise ng pondo para sa construction at maintenance ng D. PRINCIPLES OF A SOUND TAX SYSTEM
highways. Samantalang ang building fees naman ay regulatory fees,
hindi buwis, dahil ang layunin ay i-regulate ang construction activities.
Ang isang magandang tax system ay may tatlong basic principles:

B. THEORY AND BASIS OF TAXATION

Fiscal Adequacy: Ang revenue na nakukuha ng gobyerno ay dapat
sapat para sa expenditures at public needs nito.
1. Lifeblood Theory
Theoretical Justice: Ang tax system ay dapat base sa ability to pay ng
Sabi nga, ang taxes ay ang "lifeblood of the government" at dapat itong taxpayer. Dapat patas sa lahat, at ang may mas malaking kita ay dapat
kolektahin nang walang unnecessary hindrance. Without taxes, magbayad ng mas malaking buwis.
mapaparalisa ang gobyerno dahil wala itong pondo para gumana.
Administrative Feasibility: Ang sistema ay dapat madali at efficient na i-
2. Necessity Theory administer ng gobyerno at hindi masyadong pabigat sa taxpayers.

Ito ay halos kapareho ng Lifeblood Theory. Ang kapangyarihan sa E. INHERENT AND CONSTITUTIONAL LIMITATIONS ON TAXATION
pagbubuwis ay nanggagaling sa pangangailangan ng gobyerno na
mag-exist. Ito ay isang necessary burden para mapanatili ang
Kahit na powerful ang taxation, mayroon pa rin itong limitations.
sovereignty ng Estado.

Inherent Limitations: Ito ay mga limitations na natural lang sa power of

3. Benefits-received Theory
taxation. Kabilang dito ang Public Purpose, na nagsasabing ang buwis
ay dapat para sa pangkalahatang kapakanan ng komunidad at hindi
Ito ay parang symbiotic relationship. Ang prinsipyong ito ay base sa para sa mga indibidwal. Kasama rin ang Territorial Jurisdiction, na
reciprocal duties ng proteksyon at suporta sa pagitan ng Estado at ng nagsasaad na ang isang Estado ay pwedeng magbuwis sa mga tao at
mga mamamayan nito. Bilang kapalit sa proteksyon at benepisyong ari-arian sa loob lang ng kanyang teritoryo. Mayroon ding International
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Comity, na nagsasabing hindi pwedeng buwisan ang property ng ibang As to who bears the burden: Direct tax, kung saan ang taong
bansa, at Exemption, na nagsasabing ang government agencies na binubuwisan ang sumasagot sa burden (tulad ng Income tax); at
gumagawa ng essential functions ay exempt sa buwis. Lastly, ang Non- Indirect tax, kung saan ang burden ay pwedeng ipasa sa iba (tulad ng
delegation, na nagsasabi na ang power to tax ay legislative in nature Value-added tax).
kaya hindi ito pwedeng i-delegate sa iba.
As to determination of amount: Specific tax, na may fixed amount; at Ad
Constitutional Limitations: Ito naman ang mga restrictions sa pag- valorem tax, na ang amount ay base sa value ng property.
exercise ng power of taxation na nakasaad mismo sa Philippine
Constitution. As to purpose: General or revenue tax, para sa general purposes ng
gobyerno; at Special or regulatory tax, para maabot ang social or
F. STAGES OR ASPECTS OF TAXATION economic ends.

May tatlong stages ang taxation: As to scope: National tax, na ipinapataw ng national government; at
Municipal or local tax, na ipinapataw ng local government units.
Levy: Ito ang act of imposition ng buwis ng Legislature sa pamamagitan
ng pag-enact ng batas. As to graduation or rate: Proportional tax, na may fixed percentage
rate; Progressive or graduated tax, na tumataas ang rate habang
Assessment and Collection: Ito ang pag-administer at pag-implement tumataas ang tax base; at Regressive tax, na bumababa ang rate
ng tax laws ng executive department, sa pamamagitan ng habang tumataas ang tax base.
administrative agencies tulad ng BIR.
II. NATIONAL TAXATION
Payment: Ito ang act of compliance ng taxpayer, kung saan
binabayaran nila ang buwis na ipinataw sa kanila. Sa Pilipinas, A. TAXING AUTHORITY
sumusunod tayo sa "pay as you file" system.
1. Jurisdiction, Power, and Functions of the Commissioner of Internal
Maaari ding magkaroon ng Refund kung ang buwis ay na-assess o Revenue (CIR)
nakolekta nang mali o sobra.
Ang Bureau of Internal Revenue (BIR) ang may kapangyarihang mag-
G. KINDS OF TAXES assess at mag-collect ng national internal revenue taxes. Ang
Commissioner of Internal Revenue ang may kapangyarihang mag-
May iba't ibang klasipikasyon ng taxes: interpret ng tax laws at mag-decide ng tax cases.

As to Subject Matter: Personal, poll, or capitation tax (tulad ng Interpreting Tax Laws and Deciding Tax Cases: Ang CIR ang may
Community Tax); Property tax (tulad ng Real Estate Tax); at Excise tax. exclusive at original jurisdiction sa pag-interpret ng NIRC at iba pang
tax laws, na subject sa review ng Secretary of Finance.
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Non-retroactivity of Rulings: Kahit na hindi nakatali ang gobyerno sa

error ng agents nito sa pag-issue ng rulings, sa interest ng justice at fair
play, hindi ito pwedeng i-apply pabalik (retroactively).

2. Rule-making authority of the Secretary of Finance

Ang Secretary of Finance, sa rekomendasyon ng CIR, ay pwedeng

mag-promulgate ng rules and regulations para sa effective enforcement
ng provisions ng Code.

B. INCOME TAX

1. Gross income, inclusions and exclusions

Ang Gross Income ay tumutukoy sa lahat ng kita na nakuha mula sa

capital, labor, o pareho. Ito ang mga kita na pwedeng buwisan.