(2019) Smuggled Notes - Dimaampao Lecture on Tax Principles and Remedies.pdf

TAX PRINCIPLES AND REMEDIES By: JUSTICE JAPAR B. DIMAAMPAO Transcribed by: Abunales, Bernardo, Bernardo, Evidente, Pabalay, Pabalay, Rafael, Ramos Updated by: Anonymous Lawyer (2019) House Rules: 1. Do not come to class unprepared. 2. Class recitations will include probable bar questions and recent jurisprudence. 3. Do not pull a sleep in class, or else, you will be asked to step ou t of the room. 4. Do not talk to your seatmate or classmate. Listen to your classmate’s recitation instead. 5. Observe proper court decorum in class as if you are already a lawyer. 6. Raise your hand if you want to go to the restroom. 7. Answer the questions briefly, concisely, and with legal basis. 8. I am only here to guide you, not to terrorize you.

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GENERAL PRINCIPLES Part I

TAXATION Taxation Taxation is a mode of raising revenue for public purpose. Taxes, Taxes, on the other hand, are enforced proportional contributions from persons and property, levied by the state by virtue of its sovereignty for the support of the government and for all its public needs. NATURE OF THE TAXING POWER The taxing power has two natures; 1. Taxation as an inherent Attribute of Sovereignty; 2. Taxation is Legislative in Character Inherent Attribute of Sovereignty The power of taxation is an incident of sovereignty as it is inherent in the state, state , belonging as a matter of right to every independent government. It does not need constitutional conferment. Constitutional provisions do not give rise to the power to tax but merely impose limitations on what would otherwise be an invincible power. Legislative in Character The power to tax is inherent in the State, and the state is free to select the object of taxation, such as being exclusively vested in the legislature, except where the constitution provides otherwise. [1] Q: What is the Life Blood Doctrine A: The lifeblood doctrine is one that is enunciated by the Supreme Court in Commissioner of Internal Revenue v. Pineda, [2] as follows: taxes are the lifeblood of the government and their prompt and certain availability is an imperi ous need.” This means that, without taxes, the State can neither exist nor endure. Taxes should be collected without unnecessary hindrance. Q: What is the Necessity Theory? A: A: The necessity theory, as pronounced by the Supreme Court in Philippine Guaranty Co., Inc. v. Commissioner of Internal Revenue, Revenue , [3] states that taxation is a power predicated upon necessity. It is a necessary burden to preserve the State’s sovereignty and a means to give the citizenry an army to resist aggression, a navy to defend its

serve, public improvements for the enjoyment of the citizenry, and those which come within the State’s territory and facilities and protection which a government is supposed to provide. Q: What is the Symbiotic Theory? A: The A: The doctrine of symbiotic relationship is a term culled from the ruling of the Supreme Court in Commissioner of Internal Revenue v Algue, Inc. , 4which stressed that: “ Taxes are what we pay for a civilized society. Without taxes, the government would be paralyzed for lack of the m otive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one’s hard-earned income to the taxing authorities, every person who is able to must contribute his share in the burden of running 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 enhance their material and moral values.” LIFEBLOOD THEORY Dimaampao: Now, holistic approach --- interplay of lifeblood theory and tax remedies. This happened in the last bar exams. In enunciating certain rule, the court cited lifeblood theory and you must mark this with Sec. 112 of NIRC. Sec. 112 was asked in the bar for three consecutive bar exams. It will come out again. Now you must know how the court mentioned lifeblood theory here. Sec. 112 is about tax remedy on value-added tax. Sec. 112 provides for remedies on tax refund or tax credit involving VAT. There are three prescriptive periods there: the 2year period, the 90-day period under the TRAIN Law (no longer 120 days), and the 30-day period. Explain how they are applied. The 2-year period must be observed in filing tax refund with the BIR, reckoned from the close of taxable year. The 90-day period refers to the period within which the BIR Commissioner must render decision from the submission of the claim. The 30-day period must be observed in appealing the decision of the BIR Commissioner to the Court of Tax Appeals from the receipt of the adverse decision.

















Q:What does lifeblood doctrine dictate regarding the application of these rules in Section 112? What is the ruling in CIR v. San Roque Power Corporation? [1] A: The lifeblood doctrine dictates that the rules in Section 112 must be applied strictly. Tax refunds are in the nature of tax exemptions which must be strictly construed against the taxpayers and liberally in favor of the government. This is so because taxes are the lifeblood of the nation. Dimaampao: Camp John Hay Development Corporation v. CBAA,[2] also appeared in the bar exam. It is about the interplay of the lifeblood theory and another tax remedy - one of the rules under real property taxation. Mentioned therein is the provision of Sec. 252 of R.A. No. 7160, which is denominated as payment under protest. Q:When must the payment under protest be lodged? A: It A: It must be lodged within 30 days from payment of the tax.

DIMAAMPAO: DIMAAMPAO: The ruling means that no one should interfere with the remedy availed of by the BIR to collect taxes because it has the discretion to do so. Q: What was the administrative remedy resorted to by the BIR in that case, which may in effect bring about speedy collection of taxes? A: Enforcement of tax lien was resorted to by the BIR. Q: Why is enforcement of a tax lien the most expeditious way to collect taxes? A: It is the most expeditious way to collect taxes because it is an administrative remedy which may require no judicial proceedings. DIMAAMPAO: Davao Gulf Lumber Corporation v. CIR, CIR,[4] came out in the bar exam in 199 8.

Q: What does the lifeblood doctrine dictate or require regarding the application of Sec. 252? A: Before you can protest, you must first pay the real property tax.

Q: Why are tax exemptions strictly construed against the taxpayer and liberally construed in favor of the government? government? A: A: Tax exemptions are strictly construed against the taxpayer and liberally construed in favor of the government because taxes are the lifeblood of the government. This is so because by the government’s relinquishment relinquishment of its power to tax, it loses revenue. Thus, exemptions from taxation are highly disfavored, so much so that th ey may almost be said to be odious to the law.

Q: What does lifeblood doctrine require regarding the rule of payment under protest? A: A: The lifeblood doctrine requires strict compliance of this rule.

Q: What is the principle of strictissimi juris? A: This principle states that tax exemptions are strictly construed against the taxpayer and liberally construed in favor of the government.

Dimaampao: Payment under protest is thus consistent with the lifeblood doctrine, and as such their collection cannot be curtailed by injunction or any like action; otherwise, the state or, in this case, the local government unit, shall be crippled in dispensing the needed services to the people, and its machinery gravely disabled.

Q: What are the exceptions to the principle of strictissimi juris? A: The exceptions exceptions to the principle principle of strictissimi juris are: juris are: 1. When the law expressly provides for liberal interpretation or construction construction of tax exemptions; 2. When the grantee of tax exemption is a religious or charitable institution; 3. When the grantee of tax exemption is the government, its political subdivisions or instrumentalities; [5] 4. When the taxpayer falls within the purview of exemption by clear legislative intent; [6]

Q: Explain the rule of payment under protest? A: Payment under protest means payment of real property tax before filing a protest.

CIR v. Pineda, Pineda,[3] came out in the difficult bar exam in 1999 where only 5% passed taxation. Q: What is the ruling of the Court in this c ase? A: This case enunciates that the Bureau of Internal Revenue has the necessary discretion to avail itself of the most expeditious way to collect taxes because taxes are the lifeblood of the government and their prompt and certain availability is an

















5.

6.

When the grantee is a municipal corporation with respect to its public property only; [1] and When the imposition is special taxes relating to special cases and affecting only special classes of persons.

Q: What is a political subdivision? A: Political subdivisions include municipalities, cities, and barangays.

provinces,

Q: Is GSIS an instrumentality or GOCC? A: GSIS is a government instrumentality. Q: Why does the principle of strictissimi juris not apply to government, its political subdivisions or instrumentalities? A: It is because it will result in the absurd situation of the government taking money from one pocket and putting it in another.

When do you apply this rule; that “tax exemption is the general rule and taxation is the exemption” ? A: The general rule is that that taxation is the rule and exemption is the exemption. It shall apply when the grantee is a municipal corporation, and the property is not held in private ownership but a public property. Dimaampao: Dimaampao: This case is asked thrice already in the bar examinations. Q: What is the jurisprudential ruling of the Court in Ferdinand Marcos II v. Court of Ap peals, [2] ? A: The A: The Court ruled therein that the approval of the court, sitting in probate or as a settlement tribunal over the deceased’s estate, is not a mandatory requirement in the collection of estate taxes. Explanation: The collection of taxes does not necessitate the approval of the probate court because taxes are the lifeblood of the government and should be collected without unnecessary hindrance. To require the approval of the probate court is a cause of delay to the collection of taxes. Q: Is there a provision that before the BIR can collect taxes there must be approval of the probate court? A: No. There is none.

DIMAAMPAO: Philex Mining Corporation v. CIR ,[3], was also asked in the bar exam. It is about setoff of taxes. Q: What is the ruling of the Court in that case? A: The Court did not allow the setoff of taxes. The lifeblood doctrine disfavors the setoff of taxes because it will reduce tax collection and there will be less revenue for the government. Q: May the taxes be the subject of setoff or compensation? No. Taxes may not be the subject of setoff or compensation because: (1) Taxes are not ordinary obligations which may be governed by the Civil Code; (2) Taxes are not based on a contract, debt or judgment, but on legal impositions; and (3) The government and the taxpayer are not creditors and debtors of each other. [4] Q: Is there an exception to this rule? A: Yes, A: Yes, that is the case of Domingo Domingo v. Garlitos. [5] The peculiar circumstance therein is the enactment of R.A. No. 2700 appropriating certain amount of money for the taxpayer’s claim that made such claim due and demandable or liquidated. Thus, the Court allowed compensation. Dimaampao: YMCA v. CIR, [6] also came out in the bar exams. YMCA claimed that as a non -stock, nonprofit organization, it should be exempt from income taxation with regard to its profits on leasing its facilities to non-exempt entities. Q: What is ruling in that landmark case? A: YMCA is taxable on its rental income. The exemption provided in Section 30(e) of the NIRC must be strictly construed against YMCA. Moreover, it is taxable because the Tax Code provides that the income of charitable organizations, such as YMCA, from any of their properties, real or personal, or from any of their activities conducted for profit regardless of the disposition made of such income, shall be subject to tax. Q: What does YMCA stand for? A: YMCA is short for Young Men’s Christian Association. Read Section 30(e) of the NIRC;

Q: Is there a revenue regulation to that effect? A: No. A: No. There is none.

Non-stock corporation or association organized and operated exclusively for

















religious, charitable, scientific, athletic, or cultural purposes, or for the rehabilitation of veterans, no part of its net income or asset shall belong to or inures to the benefit of any member, organizer, officer or any specific person.

Q: How is assessment under the internal revenue taxation? A: In Adamson v. Court of Appeals, Appeals, assessment under the internal revenue taxation is defined as the written notice and demand made by the BIR on “ the the taxpayer for the settlement of a tax due liability that is definite, final and fixed . .”

Read the last paragraph of Section 30 of the NIRC. That is the YMCA doctrine;

Q: Is the letter of the BIR to the taxpayer qualified? A: No, because the assessment must contain final assessment or determination .

Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing organizations from any of their properties, real or personal, or from any of their activities conducted for profit regardless of the disposition made of such income, shall be subject to tax imposed under this Code. (Emphasis supplied) Stages, Aspects, and Phases of taxation Explain the stages or aspects of taxation. These aspects do not refer to the fundamental principles of taxation. This is so basic. The stages of taxation are; (L-A-P ( L-A-P)) (1) Levy or imposition, imposition, which refers to the enactment of tax laws; (2) Assessment and collection, which collection, which provides for the implementation, enforcement or administration of tax laws; and (3) Payment, Payment, which is defined as the compliance by the taxpayer. Q: What is the nature of levy or imposition? A: It is legislative in nature. Q: What is the nature of assessment and collection? A: They are administrative in nature. Q: What is the technical term for levy or imposition? A: It A: It is the impact of taxation. taxation . Q: What is the technical term for payment? A: It is the incidence of taxation. taxation. DIMAAMPAO: You take note of these cases: 1. Adamson v. Court of Appeals; Appeals; [1] Narvales ; [2] 2. Meralco v. Narvales; 3. Pilipinas Shell Petroleum Corporation v. Commissioner of Customs [3]

Q: What is assessment in real property taxation? A: Assessment under real property taxation is the act or process of determining the value of a property, or proportion thereof subject to tax, including the discovery, listing, classification, and appraisal of properties. [4] Q: What are the requisites or conditions for a valid assessment of real property tax? There are five requisites. A: In Meralco v. Narvales, Narvales , the Supreme Court enumerated the following guideline: (K-A-L-M-A) 1. The assessment must contain the kind of property; 2. It must set forth the assessed value of the real property; 3. It must indicate the level of assessment; 4. It must specify the fair market value of the property; 5. It must clearly indicate the actual use of property. Q:What is assessment in customs law? A: In Pilipinas Shell Petroleum Corporation v. Commissioner of Customs, Customs, [5] the Supreme Court ruled that assessment in customs law is known as liquidation. It refers to the final computation and ascertainment of the collector of duties on imported merchandise, based on official reports as to the quantity, character and value thereof, and the applicable rate of duty. the collector’s finding of the Taxation as Inherent Power of the state Q: Why is the power to tax inherent in a sovereign State? A: It is considered inherent in a sovereign State because it is a necessary attribute of sovereignty. Without this power, no sovereign State can exist nor endure. The power to tax proceeds upon the theory that the existence of a government is a necessity and this power is an essential and

















matter of right to every independent State or government. No sovereign State can continue to exist without the means to pay its expenses, and that for those means, it has the right to compel all citizens and property within its limits to contribute, hence, the emergence of the power to tax. Q: Explain the two-fold nature of taxation? A: Taxation is an (1) inherent attribute of sovereignty, and it is also (2) legislative in character. Such power is exclusively vested in the Congress. This is based upon the principle that “taxes are a grant of the th e people who are taxed, and the grant must be made by the immediate representatives of the people. And where the people have laid the power, there it must remain and be exercised.” Dimaampao: If you can cite that, the bar examiner will surely be impressed. Try to memorize. NON-DELEGATIONS OF POWER The power to tax is exclusively vested in the legislative body. Q: What are the exceptions to the principle of non-delegation of powers? A: Delegation of the powers of the Congress is allowed in: 1. Article VI, Section 28(2) of the Constitution, which states that “The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national development program of the Government .” .” 2. Article X, Section 5 of the Constitution, which states that “Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments.” Flexible Tariff Clause Q: What is the law allowing the exercise by the President of tariff power?

DIMAAMPAO: Read the Customs Modernization and Tariff Act or R.A. No. 10863, Sec. 102 in relation to Section 1608. Legal parameters where the President may exercise its tariff powers; Sec. 102(u). 102(u). Flexible Clause refer to the power of the President upon recommendation of the National Economic and Development Authority (NEDA): (1) to increase, reduce or remove existing protective tariff rates of import duty, but in no case shall be higher than one hundred percent (100%) ad valorem; valorem; (2) to establish import quota or to ban importation of any commodity as may be necessary; and (3) to impose additional duty on all import not exceeding ten percent (10%) ad valorem, whenever necessary. Sec. 1608. Flexible Clause. – a) In the interest of the general welfare and national security, and, subject to the limitations prescribed under this Act, the President, upon the recommendation of the NEDA, is hereby empowered to: 1. Increase, reduce, or remove existing rates of import duty including any necessary change in classification. The existing rates may be increased or decreased to any level, in one or several stages, but in no case shall the increased rate of import duty be higher than a maximum of one hundred percent (100%) ad valorem; 2. Establish import quotas or ban imports of any commodity, as may be necessary; and 3. Impose an additional duty on all imports not exceeding ten percent (10%) ad valorem whenever necessary: Provided, That upon periodic investigations by the Commission and recommendation of the NEDA, the President may cause a gradual reduction of rates of import duty granted in Section 1611 of this Act, including those subsequently granted pursuant



















section, except in the imposition of an additional duty not exceeding ten percent (10%) ad valorem, the Commission shall conduct an investigation and shall hold public hearings wherein interested parties shall be afforded reasonable opportunity to be present, to produce evidence and to be heard. The Commission shall also hear the views and recommendations of any government office, agency, or instrumentality. The Commission shall submit its findings and recommendations to the NEDA within thirty (30) days after the termination of the public hearings; c) The power of the President to increase or decrease rates of import duty within the limits fixed in subsection (a) hereof shall include the authority to modify the form of duty. In modifying the form of duty, the corresponding ad valorem or specific equivalents of the duly with respect to imports from the principal competing foreign country for the most recent representative period shall be used as basis; d) Any order issued by the President pursuant to the provisions of this section shall take effect thirty (30) days after promulgation, except in the imposition of additional duty not exceeding ten percent (10%) ad valorem which shall take effect at the discretion of the President. e) The power delegated to the President as provided for in this section shall be exercised only when Congress is not in session. f) The power herein delegated may be withdrawn or terminated by Congress through a joint resolution. The NEDA shall promulgate rules and regulations necessary to carry out the

1.

Be equitable and based as far as practicable on the taxpayer's ability to pay; 2. Be levied and collected only for public purposes; 3. Not be unjust, excessive, oppressive, or confiscatory; 4. Not be contrary to law, public policy, national economic policy, or in the restraint of trade; c. The collection of local taxes, fees, charges and other impositions shall in no case be let to any private person; d. The revenue collected pursuant to the provisions of this Code shall inure solely to the benefit of, and be subject to the disposition by, the local government unit levying the tax, fee, charge or other imposition unless otherwise specifically provided herein; and, e. Each local government unit shall, as far as practicable, evolve a progressive system of taxation. Section 133. Common Limitations on the Taxing Powers of Local Government Units. - - Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: a. Income tax, except when levied on banks and other financial institutions; b. Documentary stamp tax; c. Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided herein; d. Customs duties, registration fees of vessel and wharfage on wharves, tonnage dues, and all other kinds of customs fees, charges and dues except wharfage on wharves constructed and maintained by the



















g.

h.

i.

j.

k. l.

m.

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when sold by marginal farmers or fishermen; Taxes on business enterprises certified to by the Board of Investments as pioneer or non pioneer for a period of six (6) and four (4) years, respectively from the date of registration; Excise taxes on articles enumerated under the national Internal Revenue Code, as amended, and taxes, fees or charges on petroleum products; Percentage or value-added tax (VAT) on sales, barters or exchanges or similar transactions on goods or services except as otherwise provided herein; Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire and common carriers by air, land or water, except as provided in this Code; Taxes on premiums paid by way or reinsurance or retrocession; Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof, except tricycles; Taxes, fees, or other charges on Philippine products actually exported, except as otherwise provided herein; Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No. 6938) otherwise known as the "Cooperative Code of the

a.

Real property shall be appraised at its current and fair market value; b. Real property shall be classified for assessment purposes on the basis of its actual use; c. Real property shall be assessed on the basis of a uniform classification within each local government unit; d. The appraisal, assessment, levy and collection of real property tax shall not be let to any private person; and e. The appraisal and assessment of real property shall be equitable. Dimaampoa: These Dimaampoa: These all came out in the bar. Power to Tax is the Power to Destroy DIMAAMPAO: Reconcile these seemingly conflicting views. Chief Justice Marshall opines that the power to tax is the power to destroy. Justice Malcolm opines that the power to tax does not include the power to destroy. This is worth 5 points. The conflict is more apparent than real. Chief “ The Justice Marshall is correct in the sense that the power to tax is the power to destroy if it is used validly as an implement of the police power of the State. Justice Malcolm is likewise correct in this perspective: where the power to tax is used solely for the purpose of raising revenues, it cannot be allowed to confiscate or destroy.” (J. (J. Isagani Cruz) Q: What is the meaning of the p hrase “the conflict is more apparent than real”? A: It means that there is no real confl ict here. Q: What does this mean: “the power to tax is not the power to destroy, so long as the Supreme Court sits”? A: In the case of Sison v. Ancheta, [1], the Supreme Court held that, “While taxation is said to be the power to destroy, it is by no means unlimited. If so



















Scope of taxation (C-U-P-S) Taxation is said to be comprehensive, unlimited, plenary and supreme. It is comprehensive as comprehensive as it covers p ersons, businesses, activities, professions, rights and privileges. It is unlimited because because the tax does not cease to be valid merely because it regulates, discourages or even definitely deters the activities taxed, and the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest in the discretion of th e authority which exercises it. It is plenary is plenary in in the sense that it is complete. It is supreme insofar supreme insofar as the selection of the subject of taxation is concerned. Dimaampao: J. Malcolm stresses that taxation is the strongest of all the powers of the government. Q: What does that mean? It is strongest in what sense? A: The police power of the State is supreme under the principle of salus populi est suprema lex . The power of eminent domain is supreme under the concept of expropriation. Taxation thus, although referred to as the strongest of all the powers of the government, cannot cannot be interpreted interpreted to mean that it is superior to the other inherent powers of the government. It is supreme insofar as the selection of the subject of taxation is concerned. Fundamental Principles of a Sound Tax System Q: What are the three fundamental principles of a sound taxation taxation system? Briefly explain each. A: The three fundamental principles of a sound taxation are fiscal adequacy, theoretical justice, and administrative feasibility. Fiscal adequacy dictates that sources of revenue must be sufficient to meet government expenditures.

validity even if it is not in consonance with the principles of fiscal adequacy and administrative feasibility because the Constitution does not expressly require so. However, if a tax law runs contrary to the principle of theoretical justice, such violation will render the law unconstitutional considering that under the Constitution, the rule of taxation should be uniform and equitable . (Section 28(1), Article VI) Secondary Purpose of Taxation Q: What are the non-revenue /regulatory /secondary purposes of taxation? taxation? There are four. Explain each. A:The A:The secondary purposes of taxation are as follows; (R-I-P-E) 1. Reduction of social inequality; 2. Implement of the police power of the State: 3. Protection of the local industry against unfair competition; 4. Encouragement of the growth of local industries. Taxation is used to reduce the inequality in the distribution of wealth by preventing its undue concentration in the hands of a few individuals. It is likewise used in the form of exemptions and reliefs to serve as incentives to encourage investment in the local industry and thereby promote economic growth. It protects the local industry by imposing certain taxes upon imported goods or articles. It may be used as an implement of the police power of the State through the imposition of taxes with the end in view of regulating a particular activity. Dimaampao: The Supreme Court ruled in CIR v. Central Luzon Drug Corporation, [1] that in recent years, the power to tax has become the most effective tool to realize social justice, public



















welfare of senior citizens who, at their age, are less likely to be gainfully employed, more prone to illnesses and other disabilities, and thus, in need of subsidy in purchasing basic commodities. The 20% discount may be properly viewed as belonging to the category of price regulatory measures which affect the profitability of establishments subjected thereto. On this face, the subject regulation is a police power measure. (Manila Memorial Park Park v. DSWD Secretary) Dimaampao: Dimaampao: We really look for keywords. The keyword here is price regulatory measures. TAXES ARE NOT SUBJECT OF SET OFF As a rule, taxes cannot be subject to compensation because the government and the taxpayer are not creditors and debtors of each other. However, the Supreme Court allowed offsetting of taxes only because the determination of the taxpayer’s liability is intertwined with the resolution of the claim for tax refund of erroneously or illegally collected taxes under Section 229 of the NIRC.

13. Cebu Port Authority Republic of the Philippines v. City of Parañaque, 677 SCRA 246 There is only one mentioned in this case. This is the one asked in the bar. 14. Philippine Reclamation Authority, formerly Public Estates Authority Authority 

City of Lapu-Lapu v. Philippine Economic Zone Authority, 742 SCRA 524 The remaining two instrumentalities can be found in this case. 15. Philippine Economic Zone Authority 16. Government Service Insurance System 3. Learn why the instrumentalities in those cases are exempt from taxation by determining their distinct characteristics or features in the following case: Manila International Airport Authority v. City of Lapu-Lapu, 757 SCRA 323. These are the reasons why instrumentalities are exempt from tax. 

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Start from the inherent and constitutional limitations of taxation. Exemption of the government from taxation is an emerging favorite bar question. Find the 16 instrumentalities exempt from taxation in the following cases: 

2.



Manila International Airport Authority v. Court of Appeals, 495 SCRA 591, 618, 632, 633

MIAA is one. On page 618, there are four other instrumentalities enumerated by the Supreme Court. On pages 632-633, there are eight more. 1. Manila International Airport Authority

Instrumentality refers to any agency of the National Government, 1. not integrated within the department framework, 2. vested with special functions or jurisdiction by law, 3. endowed with some if not all corporate powers, 4. administering special funds, and 5. enjoying operational autonomy, usually through a charter. (Section 2(10) of the Introductory Provisions of the Administrative Code) Research about technical smuggling. 

4.



Smuggling refers Smuggling refers to the fraudulent act of importing any goods into the Philippines, or the act of assisting in receiving, concealing, buying, selling, disposing or transporting such goods, with full knowledge that the same has been fraudulently imported, or the fraudulent exportation of goods. Goods referred to



















GENERAL PRINCIPLES Part II

DIMAAMPAO: You must know the prevailing jurisprudence here on pages 33-34 of your book. You must have noticed the decided cases there. There are mentioned 1,2,3,4. These were asked twice already in the bar exams. In Progressive Development Corp. vs Quezon City , [1] the case involves a market in Cubao – the Farmers’ Market. So, there is this issue whether the market stall fee collected by the city government is a tax or a license. What is the prevailing jurisprudence? Q: Is market stall fee a license or a tax? A: The market stall fees are considered as license because the objective of imposing market stall fees is regulation and not revenue generation . Tax is imposed in the exercise of police power primarily for purposes of regulation, while the latter is imposed under the taxing power primarily for purposes of raising revenues. Thus, if the generating of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax. Q: What is the reason behind this ruling? A: Tax is imposed in the exercise of police power primarily for purposes of regulation, while while the latter is imposed under the taxing power primarily for purposes of raising revenues. revenues. Thus, Thus, if the generating of revenue is the primary purpose and regulation is merely incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that incidentally revenue is also obtained does not make the imposition a tax. Dimaampao: Based on my experience as bar examiner for two bar exams, some examinees

1. As to the exercise of power – a tax is levied in the exercise of the taxing power, while license fees emanate from the police power of the State; 2. As to purpose – the primary purpose of taxation is to generate revenues, while license fees are imposed primarily for regulation; 3. As to subject – the subject of taxation is persons, properties, activities, while the subject of license is limited to the right to engage in a business or activity; 4. As to consequence in case of non-payment – failure to pay tax makes your business illegal. While failure to pay does not have that effect as it is merely a regulatory fee. DIMAAMPAO: Let’s have another case. This has yet to be asked in the bar exam. This is about the charge imposed under the EPIRA Law (Electric Power Industry Reform Act of 2001) called the Universal Charge. Q: Is that a license or a tax? A: It is a license. In Gerochi v. Department of Energy , [2] the Supreme Court held that the Universal Charge is a license. It is imposed and can be amply discerned as regulatory in character because in the EPIRA Law, the State’s police power, particularly its regulatory dimension, is invoked. Q: Is the Coco Levy Fund a tax or a license? Is it a regulatory imposition or tax? A: It is a tax. In Cojuangco, Jr. vs. Republic, [3] the Court ruled that the coco levy funds are taxes since the purpose of its imposition is to raise revenue for the rehabilitation of the coconut industry. Q: Is the building permit fee a tax or a license? A: NO. It is a regulatory fee. [4] Q: Why is a building permit a regulatory fee? A: A: That a building permit fee is a regulatory imposition is highlighted by the fact that: 1. In processing an application for a building





















Q: Is the Socialized Housing Tax a tax or a regulatory fee? A: A: NO. It is not a tax imposed by the local government but a license/regulatory fee. Its name is misleading. [1] Q: What is the reason behind this ruling? A: It A: It is levied with a regulatory purpose. The l evy is primarily in the exercise of the police po wer for the general welfare of the entire city. It is greatly imbued with public interest. Removing slum areas in Quezon City is not only beneficial to the underprivileged and homeless constituents but advantageous to the real property owners as well. The situation will improve the value of the their property investments, fully enjoying the same in view of an orderly, secure, and safe community, and will enhance the quality of life of the poor, making them law-abiding constituents and better consumers of business products. INHERENT LIMITATIONS The inherent limitations on taxation are as follows; 1. Public purpose; 2. Territoriality; 3. International comity; 4. Exemption from taxation of government agencies and instrumentalities; 5. Non-delegation of the power to tax; Public purpose The Supreme Court ruled that the term “public is not defined. It is an elastic concept that purpose” is can be hammered to fit modern standards. It should be given a broad interpretation. [2]

goods and services only in the country where these are consumed. [4] Q: What is the tax situs of VAT? A: Its tax situs is the place where the transaction is made. Q: What is the situs of real property tax? A: Its situs is the state or country where it is located, regardless whether its owner is a resident or a non-resident. Q: What about income tax? Can we tax income derived from sources without? Whose income derived from sources without is subject to Philippine income tax? So, when we tax the income of a resident citizen derived from sources without, what is the criterion? A: The situs of income tax depends upon the nationality and residence of the taxpayer. If the taxpayer is both a resident and a national of the Philippines, the income is taxed upon sources derived from within and without the Philippines. Otherwise, the taxpayer is taxed upon sources derived from within the Philippines only. Q: What about community tax? A: Community taxes are imposed on the residence of the taxpayer. Q: Can estate tax be imposed upon property situated outside the Philippines? A: Yes, if the decedent is a citizen of the Philippines. Dimaampao: The same is true in case of donor’s tax. Provided that the donor is a citizen, even if the





















A: Export processing zones are to be managed as a separate customs territory from the rest of the Philippines and, thus, for tax purposes, are effectively considered as foreign territory. For this reason, sales by persons from the Philippine customs territory to those inside the export processing zones are effectively zero-rated.

A: The Supreme Court explained in the case of PEZA vs Lapu-Lapu City [1] that they must possess the characteristics of an instrumentality of the national government.

INTERNATIONAL COMITY

Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA) Complex in Parañaque City under E xecutive Order No. 903, otherwise known as the Revised Charter of the Manila International Airport Authority ("MIAA Charter").

Q: Can the income of the Ambassador of the United States derived from sources within the Philippines be subject to income tax? A: NO, because it is one of the inherent limitations – international comity. Subjecting their income to income tax will violate the internationally accepted principle of sovereign equality among nations. Q: Does it have a constitutional basis? A: YES. Article 2, Section 2 of the Constitution states that the Philippines adopts the generally accepted principles of international law as the law of the land. Such generally accepted principle pertains to the sovereign equality of nations. Neither can we impose real property tax on the foreign embassies as these are extension of territories of sovereign states. EXEMPTION FROM TAXATION OF GOVERNMENT AGENCIES AND INSTRUMENTALITIES Q: What are the 16 Exempt Instrumentalities of the National Government? A: The following instrumentalities are exempt from tax;

Manila International Airport Authority Authority v. CA G.R. No. 155650. July 20, 2006 CARPIO, J.: Facts:

On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061 withdrawing the exemption from real estate tax granted to MIAA under Section 21 of the MIAA Charter. The City of Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport Lands and Buildings. MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for preliminary injunction or or temporary restraining order. MIAA argues that the Airport Lands and Buildings are for the benefit of the general public thus, the ownership of these properties remains with the State and are not subject to real estate tax by local governments. Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax exemption privileges of "government-owned and-controlled corporations" upon the effectivity of the Local Government Code. Respondents also argue that a basic rule of statutory construction is that the express mention of one person, thing, or act excludes all others. An international airport is not among the exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax. ISSUE: whether

the Airport Lands and Buildings of MIAA are exempt from real estate tax under existing laws.

HELD:

Yes. First, MIAA is not a government-owned or controlled





















agriculture and like chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use. MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. When local governments invoke the power to tax on national government instrumentalities, such power is construed strictly against local governments. The rule is that a tax is never presumed and there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule applies with greater force when local governments seek to tax national government instrumentalities. Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor of the national government instrumentality.

Q: What are the 5 characteristics of an instrumentality of the national government under Sec. 2 (10) of the 1987 Administrative Code? A: The reasons are as follows; 1. They are not integrated within the department network; 2. They are vested with special functions or jurisdiction by law; 3. They are endowed with some if not all corporate powers; 4. They are administering special fund; 5. hey are enjoying operational autonomy, usually through a charter MCIAA vs. City of Lapu-Lapu G.R. No. 181756. June 15, 2015 Leonardo-De Castro, J;

Respondents point out that petitioner and MIAA are two very different entities. Respondents argue that petitioner is a GOCC contrary to its assertions, based on its Charter and on DOJ Opinion No. 50. Respondents argue that MCIAA properties such as the terminal building, taxiway and runway are not exempt from real property taxation. As discussed in the 1996 MCIAA case, Section 234 of the LGC omitted GOCCs such as MCIAA from entities enjoying tax exemptions. Said decision also provides that the transfer of ownership of the land to petitioner was absolute and petitioner cannot evade payment payment of taxes. ISSUE: Whether or not Mactan International Airport is exempt from real estate tax. HELD: YES. The petitioner is an instrumentality of the government; thus, its properties actually, solely and exclusively used for public purposes, consisting of the airport terminal building, airfield, runway, taxiway and the lots on which they are situated, are not subject to real property tax and respondent City is not justified in collecting taxes from petitioner over said properties. While it is true, as respondents allege, that the 1996 MCIAA case was cited in a long line of cases, still, in 2006, the Court en banc decided a case that in effect reversed the 1996 Mactan ruling. The 2006 MIAA case had, since the promulgation of the questioned Decision and Resolution, reached finality and had in fact be en either affirmed or cited in numerous cases by the Court. The decision became final and executory on November 3, 2006. Furthermore, Furthermore, the 2006 MIAA case was decided by the Court en banc while the 1996 MCIAA case was decided by a Division. Hence, the 1996 MCIAA case should be read in light of the subsequent and unequivocal ruling in the 2006 MIAA case. Petitioner MCIAA is vested with corporate powers but it is not a stock or non-stock corporation, which is a necessary condition before an agency or instrumentalityis deemed a government-owned or controlled corporation. Like MIAA, petitioner MCIAA has capital under its charter but it is not divided into shares of stock. It also has no stockholders or voting shares. Like in MIAA, the airport lands and buildings of MCIAA are properties of public dominion because they a re intended for public use. As properties of public dominion, they indisputably belong to the State or the Republic of the Philippines, and are outside the commerce of man. This, unless petitioner leases its real property to





















that properties of public dominion are not subject to execution or foreclosure sale.

NON-DELEGATION OF POWER TO TAX Q: What underlying settled doctrine/principle will be violated if we allow the delegation of power to tax? A: Delegation of power to tax violates the principle of separation of powers. Delegation is allowed when expressly authorized by the Constitution. Under the Constitution, there are two provisions; 1. Art. VI, Sec. 28 (2) – Tariff powers of the President; 2. Art. X, Sec. 5 – Delegation to Local Government Congress passed a law authorizing the President to impose income tax on certain items of income. Q: Is that covered by that constitutional provision? A: NO. NO. It is not covered by that constitutionally delegated power. Q: So, what are the taxes covered by that constitutionally delegated power? A: It made no mention about income tax, donor’s tax, estate tax, value-added tax. The taxes covered are customs duties. Dimaampao: Dimaampao: The constitutional provision says that the Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may

Government,” meaning in the interest of the national economy. Unfortunately, this is now deleted. I could not understand why it was deleted! It’s what the Constitution says! That’s how brilliant our Congressmen are. The most important criterion is deleted. What are left are “in the interest of national security,” “in the interest of the general welfare of the people.” Read Sec. 1608, you will not find therein this constitutional criterion “within the national development program of the Government.” Q: What is that provision in the Constitution that likewise allow the delegation of the power to tax? A: Art. X, Sec. 5. Delegation to Lo cal Government. Dimaampao: The Constitution made mention of these two striking words: guidelines and limitations. Q: What do you understand by the word guidelines? A: R.A. No. 7160 does not use the word guidelines. It uses “fundamental principles.” These principles are found in two sections: 1. Sec. 130 – Fundamental principles of local government taxation; and 2. Sec. 198 – Fundamental principles of real property taxation. SECTION 130. Fundamental Principles. - The following fundamental principles shall govern the exercise of the taxing and other revenue-raising powers of local government unit





















5.

Each local government unit shall, as far as practicable, evolve a progressive system of taxation.

Section 198. Fundamental Principles. Principles. - The appraisal, assessment, levy and collection of real property tax shall be guided by the following fundamental principles: principles: a. Real property shall be appraised at its current and fair market value; b. Real property shall be classified for assessment purposes on the basis of its actual use; c. Real property shall be assessed on the basis of a uniform classification within each local government unit; d. The appraisal, assessment, levy and collection of real property tax shall not be let to any private person; and e. The appraisal and assessment of real property shall be equitable. equitable. Dimaampao: Dimaampao: Tax ordinance is valid if complies with these fundamental principles of local government taxation. Assessment, or appraisal or collection or real property tax is valid if it complies with these fundamental principles of real pro perty taxation. Q: What are the common principles? A: (1) A: (1) Rule on uniformity; (2) That taxes must be equitable; (3) No let principle. Q: What is the “no let principle”? pri nciple”? A: The appraisal, assessment, levy and collection of real property tax cannot be delegated to any

charges which could not be imposed by local government units. Can you mention some of them? SECTION 133. Common Limitations on the Taxing Powers of Local Government Units. Units. - Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and Barangays shall not extend to the levy of the following: 1. Income tax, except when levied on banks and other financial institutions; 2. Documentary stamp tax; 3. Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided herein; 4. Customs duties, registration fees vessels and wharfage on wharves, tonnage dues, and all other kinds of customs fees, charges and dues except wharfage on wharves constructed and maintained by the local government unit concerned; 5. Taxes, fee and charges and other impositions upon goods carried into or out of, or passing through, the territorial jurisdictions of local government units in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes, fees or charges in any form whatsoever upon such goods or merchandise; 6. Taxes, fees, or charges on agricultural and aquatic products when sold by marginal farmers or fishermen;























12. Taxes, fees or charges for the registration of motor vehicle and for the issuance of all kinds of licenses or permits for the driving thereof, except tricycles; 13. Taxes, fees or charges on Philippine products actually exported, except as otherwise provided herein; 14. Taxes, fees, or charges, on Countryside and Barangay Business Enterprises and cooperatives duly registered under R.A. No. 6810 and Republic Act Numbered Sixty-nine hundred thirtyeight (R.A. No. 6938) otherwise known as the "Cooperatives Code of the Philippines" respectively; and 15. Taxes, fees or charges, of any kind on the National Government, its agencies and instrumentalities, and local government units. Dimaampao: Dimaampao: You note here that all national internal revenue taxes are not within the taxing authority of the local government units. You must memorize these.

CONSTITUTIONAL LIMITATIONS These are provisions affecting the power of taxation. Q: How do you classify these constitutional provisions? A: The A: The classifications are as follows; 1. Constitutional Limitations Limitations these provisions involve restrictions, direct or indirect; 2. Constitutional Conferment; (delegation) Conferment; (delegation) 3. Constitutional Exemptions; EQUAL PROTECTION CLAUSE Equal Protection Clause – There are so many cases here. It boils down to the application of the requisites of a valid classification. Q: What are these requisites? A: The A: The requisites are as follows; 1. It must be based on substantial distinctions; 2. It must apply to both present and future conditions; 3. It must be germane to the purpose of the























Q: How do you cure the defect in the Ormoc Sugar Co. case? A: If an ordinance was passed imposing tax on installation manager conditioned on the ground that it singled out a particular group of people, will you challenge that claiming that you were singled out and therefore it violates the equal protection clause. This is where the Supreme Court applies this- inequality or inequity, resulting from singling out a particular class for taxation or exemption infringe no constitutional limitation. The mere fact that he is singled out does not necessarily infringe constitutional limitations since all the requisites are present. Differential tax treatment or classification that will result in singling out a particular class provided that all the requisites of a valid classification are present. In other words, differential tax treatment is allowed as long as the classification is valid, meaning it must have all the requisites of a valid classification. classification. UNIFORMITY IN TAXATION Equal protection clause, Art. 3, Sec. 1, you cannot avoid equality here that’s why you jump to Art. VI, Sec. 28 (1) (Question No. 1 in Bar Exam 1996).

Q: Now what does evolve mean? Definitely it does not mean prescribe, it means to develop. So it’s not mandatory. Dimaampao: That’s why this Value Added Tax Law, which is a regressive tax, has been chall enged for no less than 4 times before the Court. The Court consistently held that it does not violate this because it is not mandatory upon Congress to prescribe or impose direct tax. That’s why as much as possible, indirect taxes must be minimized. It is not a directive to Congress to pass a law imposing progressive tax. To pass a law imposing progressive tax, is that a legally enforceable or justiciable right? No! It is just a moral incentive. This is where you apply the art of articulation. Pagalingan yan ng English! We are impressed by answers that contain no grammatical error. Q: What do you understand by progressive system of taxation? A: It is a system of taxation that imposes progressive rates, which provides that the tax rates increase as the tax base increases. It m eans that the























Rental Control Law. So here, the Court ruled that there is a violation of due process. The assessment of real property tax is unjust, oppressive, and confiscatory. It is in this case that the Supreme Supreme Court recognized two (2) methods of making an assessment – comparable sales approach method and income approach method.

A: Yes. Congress can unilaterally revoke a franchise it granted because the provision says “subject to amendment or repeal.” Q: When will the revocation of tax exemption constitute impairment of contract? When the exemption is based on contract whereby valuable consideration has been given. (Casanova ruling).

So, when a local government unit will make an assessment, it must be governed by this. It must observe either comparable sales approach method and income approach method. It turned out that the real property tax exceeded the income derived from the lease of the property, that’s why it is unjust, oppressive and confiscatory. So, if the property is leased, income is derived therefrom, this jurisprudence tells us that if the real property tax is more than the income d erived from the lease of the property, is unjust, oppressive and confiscatory and is a violation of the due pro cess of law.

In the case of Tolentino et al. vs. Secretary of Finance, it was an imposition of Value Added Tax on the sale of real property. At the time of the passage of that Act, VAT, which imposes VAT on the sale of real property, there were contracts executed for the sale of real estate. The parties argued it is a violation of non-impairment. Is there a violation? No. There can only be a violation when it involves revocation of tax exemption based on contract whereby valuable consideration has been given. That’s the settled jurisprudence.

This question came out in Political Law. The question in taxation has something to do with Value Added Tax. These are the two cases: (1) Tolentino et al vs. Secretary of Finance [1] and (2)

That where contracts were executed before the passage of a law, a subsequent tax law may be filed by Congress imposing tax on these certain contracts, that is allowed. Because it does not























Court construe that Article VI, Sec. 24? So please read that case and let us pre-em pt the ruling of the Court. Let us discuss this in the light of the TRAIN Act. Is there a violation of Art. VI, Sec. 24? --xXx—























GENERAL PRINCIPLES Part III

Dimaampao: We will finish General Principles today, so that next week we will start with Tax Remedies. TOLENTINO V. SECRETARY OF FINANCE So we will start with a very interesting case, the case of Tolentino, et.al., vs. Secretary of Finance . Two prominent senators of the Republic questioned the constitutionality of the Expanded Value Added Tax (VAT) Law, on the ground that the same fails to comply with the constitutional requirement under Art. 6, Sec. 2 of the Constitution. Q:What was the main argument of Senators’ Tolentino & Salonga? A: In that case they are questioning the constitutionality of RA 7716 or the Expanded Value Added Tax Law because according to them it did not follow the procedural requirement in the constitution regarding the tax bills, which should

Q: What was the reason? A: The reason for that, what was required by the Constitution, is that the bill and not the law which must originate exclusively in the HOR, to insist that the bill must originate exclusively in the HOR, would undermine the power of the Senate. Dimaampao: There are two reasons cited by the Supreme Court. Q: What are they? A: The first The first is is that, to insist that the revenue statute must be substantially the same as that of the HOR’s version would be to deprive the Senate of their power not only to concur but also to propose amendments. Second, this will violate the principle of co-equality of legislative powers as it would make the House superior to the Senate. In other words, what the constitution simply requires is that the initiative or the filing of the Revenue and Tariff bills must originate from the HOR. (as synthesized by J. Dimaampao) Q: Why does the constitution require that the initiative of filing the revenue and tariff bill originate from the House of Representatives?

























that the initiative or the filing of the Revenue and Tariff bills must originate from the HOR. TAX EXEMPTIONS Another favorite question of Bar Examiners is that which is found in Art. 6, Sec. 28 par. 3 of the Constitution as discussed there in your book. Compare this with another constitutional provision Art. provision Art. 14, Sec. 4, par. 3. 3 . Now, point out the distinctions. ART. VI, Sec. 28(3) Institution Exempt

Religious, Charitable, and Educational

ART. XIV Sec. 4(3) Non-stock and NonProfit

2. 3.

Public; and Non-stock non-profit.

Q: Which of these 3 are exempt? A: Non-stock non-profit educational institutions. Dimaampao: You must read Sec. 30 (e) of the NIRC (National Internal Revenue Code), because it likewise provides exemptions for religious and charitable institutions from corporate income tax. SECTION 28. (1) The rule of taxation shall be uniform and equitable. equitable. The Congress shall evolve a progressive system of taxation.

























because you might be asked why we grant exemptions.

derived from that transaction, only half of it will be subjected to capital gains tax.

Q: What is the rationale of granting tax exemptions? A: A: Charitable institutions provide for free goods and services to the public which would otherwise fall on the shoulders of the government. Thus, as a matter of efficiency, the government forgoes taxes which should have been spent to address public needs, because certain private entities already assume a part of the burden. This is the rationale for the tax exemption of charitable institutions. The loss of taxes by the government is compensated by its relief from doing public works which would have been funded from the appropriations from the Treasury.

So, this is a legally available tax opportunity. You can take advantage of that. So when are you going to sell your capital asset, within what period? Sell it after twelve months. Dimaampao: What about a classic example of tax evasion? Have you read the case of CIR v. Toda, Jr. [2] case? The mother of all tax evasion cases according to one author. There the Court cited the elements of Tax evasion, what are the elements? I must pressure you to memorize this. Q: What are the elements of tax evasion? A: Tax evasion connotes three factors;

























A: Through Long Term deposits. The term of which is 5 years are exempt from tax. [1] Dimaampao: Double Taxation was asked in the last Bar Exam as we predicted. That’s a favorite bar question. There are two kinds of Double Taxation. Q: What are the two kinds of double taxation? A: Direct double taxation and indirect double taxation. Q: how do you distinguish one from the other? A: There is direct double taxation taxation when the same property is taxed twice when it should only be tax once, and both taxes are imposed; 1. On the same property or subject matter; 2. For the same purpose;

Q: What are its elements? A: The elements of International Juridical Double Taxation are; 1. There are two or more states; 2. There is one and the same taxpayer; 3. The same subject matter is taxed; 4. The same period; [3] Q: what are the ways enunciated by this case to eliminate/minimize double taxation? A: In order to eliminate double taxation, a tax treaty may be entered into, resorting to two methods; 1. Tax Exemption Method; 2. Tax Credit Method;

























A: The imposition of local business tax based on gross revenue will inevitably result in the constitutionally proscribed double taxation – taxing the same person twice by the same jurisdiction for the same thing- inasmuch as petitioner’s gross revenue or income for a taxable year will definitely include its gross receipts already reported during the previous year and for which local business tax has already been paid. Dimaampao: Sec. 143 of RA 7160 provides that the tax base for local business tax should be gross sales or gross receipts, not gross revenue. Gross Sales are derived from the sale of goods and properties, on the other hand, gross receipts are derived from sale o f services.

2. 3. 4. 5.

Identity of property; The same property is taxed; It was previously taxed; No previous vanishing deduction;

IMPRESCRIPTIBILITY OF TAXES As a general rule, taxes are imprescriptible as they are the life blood of the government. However, tax statutes may provide for statute of limitations. Dimaampao: You Dimaampao: You must bear in mind that there are four major tax statutes, namely; 1. National Internal Revenue Code, as amended by the TRAIN Act; [1] 2. Local Government Code; [2] 3. Real Property Taxation; [3] 4. Customs Modernization and Tariffs Act; [4]

























Local Government Code - Local taxes, fees, or charges shall be assessed within five (5) years from the date they became due. In case of fraud or intent to evade the payment of taxes, fees, or charges, the same may be assessed within ten (10) years from discovery of the fraud or intent to evade payment. They shall also be collected either by administrative or judicial action within five (5) years from date of assessment. [1] i. Local taxes, fees, or charges may be collected within five (5) years from the date of assessment by administrative or judicial action. No such action shall be instituted after the expiration of said period. [2] ii. The basic real property tax and any other tax levied under this Title shall be

application will impose harsh and oppressive tax or would amount to denial d enial of due process. That is the time when you will disregard the retroactive application of tax. TAX PAYER’S SUIT

There have been rulings in taxpayer’s suit. Q: What are the two indispensable requisites of taxpayer’s suit as held in Gonzales vs Marcos [4] ? A: The requisites of taxpayer’s suit under Gonzales vs Marcos are; 1. Illegal or unlawful disbursement of public funds; 2. The public funds must be derived from taxes;



























A: Yes, it applies to the TRAIN Act. Can you think of other tax cases that are of transcendental importance, that’s why that doctrine is now included in the coverage? E-Vat Law RA 7716. --xXx--

























2. TAX REMEDIES PART I

Dimaampao: Dimaampao: There are remedies that may be

Collection;

In the bar examination, this came out; Q: What is the difference between assessment and collection? A: Assessment is the written notice and demand to

























5.

It must be served on and duly received by the taxpayer; [58]

Example; The BIR wrote the taxpayer allowing him to counter or present his side, or asking him if the assessment is to be his final tax liability.

Q: What are the requisites of a valid assessment for purposes of customs duties? A: The requisites are as follows; 1. It must contain the final computation and ascertainment of duties on imported merchandise;

























3. 4.

When there is reason to believe that any such report is incomplete; When there is reason to believe that any such report is erroneous; [63]

1. Can you strictly apply the hearsay evidence rule in tax cases? No. Hearsay is

declared income therefor. If the amount spent is more than the amount earned for the same year, the excess is the unreported income. PRESCRIPTIVE PERIODS Sections 203, 222 and 223 of the NIRC provide for prescriptive periods. This clearly shows that

























Q: How about the ten-year period? A: The ten-year period is applied to both assessment and collection. It is reckoned from the discovery of the falsity, fraud or omission. This allows collection even without prior assessment. Grounds to suspend prescriptive period.

1.

2.

When in the opinion of the Court the collection by the government agency may jeopardize the interest of the Government or the taxpayer; and When the taxpayer is required either to deposit the amount claimed or to file a surety bond for not more than double the

































































































































































































































































































































































































































































































(2019) Smuggled Notes - Dimaampao Lecture on Tax Principles and Remedies.pdf

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