TAX ~ CH 1

⚖ What is Taxation?

🔹 Taxation is how the government collects money from people and property to pay for public needs (like roads, schools, hospitals, etc.).
🔹 The law-making group of the government (called the legislature) makes rules (laws) to collect taxes from:
🧍 People
🏠 Things they own (like land, house, etc.)
🛒 Things they buy
🔹 This is done so the government can function and do its job.

🧠 In simpler words: What is Taxation?

Taxation means the government asks everyone to pay money (taxes) so we can all enjoy things like roads, clean water, schools, and safety. If you enjoy what the government gives, you also help pay for it.

🏛 Is this power written in the Constitution?

❌ No, it doesn’t have to be written.
✅ The power to collect taxes is natural and automatic for all independent governments.
📜 If the Constitution talks about taxation, it’s only to set limits, not to give permission.

💰 What are Taxes?

Taxes are the money people are forced to pay by law.
They are used to:
👷 Support the government
🏥 Provide services and solve public needs

🇺🇸 American Law View (Under American Jurisprudence)

📌 The power to tax is automatic for any real government because:
🧱 A government can’t survive without money.
🧾 That’s why the government can make everyone pay, whether you're a person or own property.
🗣 "No money, no government. That’s why they have the right to collect from everyone."
📖 Source: 51 Am. Jur., Taxation 40

🧑‍⚖ RELATED CASE: Can lawmakers create tax laws even if the Constitution doesn’t say they can

Pepsi-Cola Bottling Company of the Philippines, Inc. v. Municipality of Tanauan, Leyte
📅 G.R. No. L-31156, February 27, 1976
✅ Yes! Lawmakers can make tax laws even if it’s not written in the Constitution.
That’s because the power to tax is already part of being a government. It’s not something the people have to give—it’s something the government naturally has.

⚔ The Three (3) Inherent Powers of the State

These are powers that every government automatically has, even if they’re not written in any law:

1. 👮‍♂ Police Power

2. 💸 Power of Taxation

3. 🏗 Power of Eminent Domain

👮‍♂ Police Power

🔹 The power to protect the people by making rules for safety, health, and general welfare.
🔹 It can limit what people can do with their things if it’s dangerous or harmful.
🧨 Examples:
Destroying fake medicine
Stopping people from building unsafe houses

💸 Power of Taxation

🔹 The power to collect money from people to pay for government services.
🔹 Used to cover all expenses needed to run the country, city, etc.

🏗 Power of Eminent Domain

🔹 The power of the government to take private property (like land or houses)
🔹 But only if:
✅ It’s for a public purpose (like roads, schools)
💵 The owner gets fair payment

🔍 What does “INHERENT POWER” mean?

📌 Inherent means something that is:
🧬 Naturally part of something
💪 Built-in or automatic
👑 A natural right of the government, just because it is the government
🧠 Think of it like:
Just like birds are born with wings, a government is born with the power to tax, protect, and build.

🎯 Similarities of the 3 Inherent Powers

⭐ All are automatically part of being a government
📜 They exist even without being written in the Constitution
🏚 All affect private property or rights in some way
🏛 They are made into laws by lawmakers (they have legislative nature)
💵 They all give or assume there will be some kind of payment or benefit in return:
🟢 Direct: Like actual money (in eminent domain)
🟢 Indirect: Like public safety or government services

💸 TAXATION - Simple Explanation

• Nature — The power to collect money (taxes) from people and property to fund the government 💰🏛

• Authority — Only the government can do this 👑

• Purpose — To support the government (pay for services, roads, hospitals, etc.) 🏥🚧

• Persons Affected — Many people—a group or the whole community. Applies to anyone or anything that can be taxed 🧍‍♂🏠

• Scope — Very wide power—covers a lot, very powerful 💪🌍

• Effect — The money becomes part of the government’s funds (used for public expenses) 💼📊

• Benefits Received — You get government services and protection in return (like roads, police, fire dept) 🚔🚒

• Amount of Imposition — 💰 No limit—the law decides how much taxes to collect

👮‍♀ POLICE POWER - Simple Explanation

• Nature — The power to make and enforce rules to protect people’s safety and welfare 📜🛡

• Authority — Only the government can use this power 🏛

• Purpose — To keep everyone safe and promote public welfare 👨‍👩‍👧‍👦💚

• Persons Affected — Also affects the community or groups of people. Can apply to many persons or property 🏘🧑‍🤝‍🧑

• Scope — Very broad. It covers all kinds of rules for health, safety, peace, etc. 🌐⚖

• Effect — 🛑 Doesn’t take away property, but may limit how you use your property (if it’s harmful) 🏠🔒

• Benefits Received — You don’t always get a direct reward, but it helps society stay healthy and stable 🧠🌱

• Amount of Imposition — Just enough to cover cost of monitoring, licenses, and making sure rules are followed 🧾🔍

🏗 EMINENT DOMAIN - Simple Explanation

• Nature — The power to take private property for public use, but the owner gets fair payment 🏡➡🏛

• Authority — ✅ Given to government and some private service companies (like water or electricity) ⚙💡

• Purpose — To take land or property for a public use like roads, schools, etc. 🛣🏫

• Persons Affected — Usually affects one person (the property owner), not a group 👤🏠

• Scope — Only used when needed to take private land for public use—not a broad power 🎯📏

• Effect — The property title/ownership is transferred to the government 📝➡🏛

• Benefits Received — The owner gets fair market value or price of the property 💵🏠

• Amount of Imposition — ❌ No amount is imposed—the owner gets paid, not the other way around 💰✅

🧾 🔍 AUTHORITY (Who can use the power?)

Taxation — Only the government 👑
Police Power — Only the government 🏛
Eminent Domain — ✅ Government and some private companies (like water or electricity providers) can be allowed to use this

🧪 EXAMPLE of Eminent Domain Given to a Private Company

🏢 Manila Water under RA 11601 (December 10, 2021)
🛠 The law allowed Manila Water to use eminent domain so it can:

• Build and upgrade water and sewer systems 🚿🚰

• Install pipelines, equipment, and infrastructure 🔧🏗

• Use public and private land if really needed
  But they must file a case in court and pay fair compensation to the property owner ⚖💰

🎯 PURPOSES OF TAXATION
1⃣ Primary Purpose: To Raise Revenue (Fiscal Purpose)

The main reason the government collects taxes is to get money to fund its projects and services 🏗💵
This money helps:
• Protect citizens
• Build public facilities
• Pay for government workers and services
🔸 Examples of taxes for revenue:
🧾 Income tax (from your salary or business)
🏢 Business tax (for running a business)

🎯 PURPOSES OF TAXATION
2⃣ Secondary Purpose: For Regulation (Regulatory Purpose)

Also called: Sumptuary or Compensatory purpose
Even though raising money is the main goal, sometimes the government uses taxes to:
🛡 Control or influence behavior
📊 Achieve goals like:
a) 📈 Promote public welfare
b) ⚖ Lessen inequality between rich and poor
c) 🌱 Encourage economic growth

🔸 Examples of regulatory taxes:

💨 Excise taxes
For products like:
🚬 Cigarettes
🍺 Alcohol
👉 These are "sin taxes" to discourage harmful habits.

🎉 Amusement taxes
For places like:
💃 Nightclubs
🐓 Cockpits
🏇 Racetracks

🔸 Examples of taxes used to help the economy or solve problems:

💹 When economy is strong:
Raise taxes to stop people from overspending and avoid inflation

💼 When government wants to support local industries:
Lower taxes or give tax incentives to attract businesses

🦠 When economy is suffering (like during COVID-19 pandemic):
Lower taxes to help people and businesses survive

➡ Example: CREATE Law (signed March 26, 2021)

⚖ RELATED CASES ON PURPOSE
📌 CALTEX v. COMMISSIONER (208 SCRA 755)

🧠 Ruling:
Taxes can be used not just to collect money, but also to help and protect important industries.
📌 Example:
➡ The oil industry was protected using taxes because it’s very important to public welfare.

📌 TIO v. VIDEOGRAM (151 SCRA 208)

🧠 Ruling:
A 30% tax on video rentals was allowed, not just to collect money, but to regulate the video industry and stop piracy and pornographic content.

📌 The law (PD1987) created the Videogram Regulatory Board and used taxes as a tool to clean up the industry 🎬🔒

🧠 THEORY and BASIS OF TAXATION
⚙ What’s the Theory Behind Taxation?

There are 2 main theories that explain why the government has the right to tax:

1⃣ NECESSITY THEORY
Taxation is needed because the government can’t exist without money.
📌 In Phil. Guaranty Co., Inc. v. CIR [13 SCRA 775], the Supreme Court said:
It’s a necessary burden we all share so the government can:
🪖 Pay soldiers
⚓ Defend the seas
🧑‍💼 Pay public servants
🏗 Build public facilities
🛡 Provide protection
✅ If people or companies benefit, they must help pay

2⃣ LIFEBLOOD THEORY

Taxes are the lifeblood of the government 💉🏛
Without taxes, the government will die (it can’t function at all)

📌 In Commissioner v. Algue, the Court said:
Taxes are what we pay for a civilized society 🏙
• They must be collected without delay or problems
• In return, we get benefits like safety, roads, education, etc.

🧾 RELATED CASES ON THEORY
📌 COMMISSIONER v. ALGUE

🧠 Ruling:
Taxes are like the fuel that makes the government work 🔋
Without them, it would stop functioning. In exchange, the government gives services and tries to improve everyone’s life.

📌 PHIL. GUARANTEE CO., INC. v. CIR (13 SCRA 775)

🧠 Ruling:
The power to tax comes from the need to protect and serve the people.
It’s only fair that people and companies who are protected by the government also help pay for that protection.

BASIS OF TAXATION: BENEFITS RECEIVED THEORY (or Reciprocity Theory) - What does this mean?

This means that taxes are based on give and take between the people and the government.
The State (government) protects and helps its people.
In return, people support the government by paying taxes.
It’s like a teamwork deal: the government helps you live safely and comfortably, and you help the government keep running.

What is the Doctrine of Symbiotic Relationship?

✅ This idea is called the Doctrine of Symbiotic Relationship
💬 "Taxes are what we pay for a civilized society" – Commissioner v. Algue

Why do we pay taxes?

🛡 To enjoy security, protection, public services, and order from the government.
If the government gives us these benefits, we should give back by paying taxes.
Example (FRIENDS 🛋):
Imagine Monica cooks and cleans the apartment (like the gov’t giving services). Joey and Chandler must pay rent and bills (like taxes) to keep it going.

Symbiotic Relationship (Benefits-Protection Theory)

📌 If you're earning or able to, you must help fund the government.
In return, the government gives you:
🏥 Services (like healthcare, education)
🛣 Infrastructure (roads, bridges)
👮 Protection (laws, police, military)
📈 Support to improve your quality of life

LIFEBLOOD THEORY: HOW IT SHOWS UP IN REAL LIFE

These are rules that come from the idea that taxes are the lifeblood of the government.
If taxes stop, the government can't function.

a) No Estoppel Against the Government

🧠 The government can’t be stopped from correcting a mistake in tax collection, even if one of its officers made an error before.
💡Example (FRIENDS):
If Ross wrongly tells Joey he doesn’t need to pay rent, the landlord (gov’t) can still ask Joey to pay the correct amount later.

b) Tax Collection Can't Be Stopped by Court (Injunction)

🧠 You usually can’t ask a court to stop the government from collecting taxes (except in very special cases and only by the Court of Tax Appeals).

b) Tax Collection Can't Be Stopped by Court - Reason

📌 Reason: Taxes must be collected right away to keep the government running. No delays.
🛑 What’s included:
💸 Collection of taxes
🧾 Issuing orders to get money/property (distraint/garnishment)
🏠 Selling property to settle taxes

c) No Compensation or Set-Off Allowed

🧠 You can’t deduct what the government owes you from the taxes you owe them.

Why not allowed?

📌 Why not?
Taxes are not like a regular debt.
You can’t bargain with taxes. They are required by law.

🧠 Only Exception:
✅ If both:

• The gov’t owes you money, and

• You owe them taxes, and

• Both are final, due, and clearly settled,
  👉 Then it can cancel out.

Francia v. IAC - Case Summary

📎 X had land taken by gov’t (expropriation) and wasn’t paying taxes.
X said: "Gov’t owes me, I owe them. Let’s cancel it out."
✋ Court said: NO. Tax is not like a loan. They are not regular debts.

Philex Mining v. CIR - Case Summary

📎 Philex had VAT refund claim but still had taxes to pay.
They wanted to use the refund to cover taxes.
✋ Court said: NO. The refund wasn’t final yet. You can’t set-off taxes unless both sides are clearly finalized.

d) Congress Chooses What to Tax (Right to Select Tax Subjects)

🧠 Only Congress (the lawmakers) can decide:
👥 What or who to tax
🎯 Why they’re taxing it (must be for public good)
💰 How much to tax
🏷 What kind of tax
📍 Where it applies
🧾 How to collect it

Congress as the Tax Decision Maker - Example

Congress is like Monica deciding:
Joey pays rent
Rachel pays electricity
Chandler pays groceries

e) Tax Can Even Destroy Property (If It’s Legal)

🧠 Even if a tax is heavy and makes you poor, you still have to pay it if it’s legal.
But if the tax is unfair or against the Constitution, then courts can stop it ❌

Roxas v. CTA & McCulloch v. Maryland

📎 Roxas v. CTA:
Even if tax destroys your business, it’s still allowed if it’s valid.
Only courts can say if it’s invalid.

💬 McCulloch v. Maryland –
"The power to tax is the power to destroy."

Tax Can Destroy Property - Example

If the government taxes cigarettes heavily to stop people from smoking 🚬, it can even shut down the cigarette industry – and that’s legal.

🟡 SCOPE OF THE POWER TO TAX
📚 Sison v. Ancheta – The Supreme Court said:
👉 Taxation is the strongest and widest power of the government.
If there are no rules to limit it, it can cover almost everything. It is:

🧷 Comprehensive – It includes people, businesses, jobs, rights, and more.
🔓 Unlimited – If no law or Constitution limits it, it can go very far.
💯 Plenary – It’s complete and full. The BIR can use all legal ways to collect taxes.
👑 Supreme – The government can choose what to tax (subject of tax).

💬 Example (FRIENDS 🛋) for SCOPE OF TAXATION

Imagine Monica (as the gov’t) can make rules for anything in her apartment. She can make Joey pay a pizza tax, Chandler a couch-sitting tax, and Rachel a coffee-drinking tax — as long as there's no rule stopping her.

🟡 ESSENTIAL ELEMENTS OF TAX 🧩
These are the basic parts that make something a real tax:

a. 🚨 Enforced Contribution – You have to pay, it’s not a choice or a donation.
b. 💵 Payable in Money – You must pay in legal money (not goods or services).
c. ⚖ Proportionate – Based on your ability to pay.
d. 📍 Levied on People, Property, Rights – People, property, activities.
e. 🏛 Made by the Lawmakers – Only Congress can create taxes.
f. 🧑‍🤝‍🧑 For Public Purpose – Used for things that benefit everyone.

🟡 ASPECTS (PHASES) OF TAXATION 🧾

📌 Step | 👩‍⚖ Function | 🔎 Who Does It
1⃣ Levying | Law-making | Legislative (Congress)
2⃣ Assessment | Checking tax due | Executive (BIR)
3⃣ Collection | Getting payment | Executive (BIR)

🛋 FRIENDS Example for TAXATION PHASES

Monica makes the rule that Joey must pay pizza tax (Levying).
She checks how many pizzas he ate (Assessment).
Then she knocks on his door and asks him to pay (Collection).

🟡 NATURE or CHARACTERISTICS of the Power to Tax 🧠

• 👑 It Comes with Being a Sovereign (Powerful) State – Gov’t can tax even without Constitution.

• 🧾 It’s Legislative in Nature – Only lawmakers can create taxes.

🔹 EXCEPTIONS to the Rule That Tax Power Can’t Be Given to Others 🧠

✅ a. Congress Can Let the President Set Rates – Sec. 28, Art. VI
✅ b. Congress Can Let LGUs Collect Taxes – Sec. 5, Art. X
🛋 FRIENDS: Like Monica letting Phoebe charge people ₱20 for singing.

🟡 SCOPE of the Power to Tax 🧾 – More Examples

🔹 Comprehensive – Monica’s business, Ross’s job, Joey’s acting – all taxed.
🔹 Unlimited – Chandler’s salary and Rachel’s shopping could be taxed.
🔹 Plenary – BIR can take steps if Phoebe doesn't pay.
🔹 Supreme – Can choose to tax gasoline, not books.

🟡 ESSENTIAL ELEMENTS of a Tax 🧩 – Examples

🔸 Enforced – Joey can’t just “donate” instead of paying tax.
🔸 Payable in money – Rachel can’t pay in store credit.
🔸 Proportionate – Ross pays more than Gunther.
🔸 Charged on people, property, rights – Monica’s house, Joey’s job.
🔸 Created by law – Only lawmakers can do it.
🔸 For public use – Roads, schools, not yachts.

🟡 ASPECTS of TAXATION 📊

Stage | What it Means | Who Does It

1. Levying ✍ | Making the tax law | Congress

2. Assessment 📄 | Figuring out how much | BIR

3. Collection 💰 | Collecting the money | BIR

🟡 NATURE / CHARACTERISTICS of State’s Power to Tax 💼

✅ It is inherent – State can tax without it being written.
✅ It is legislative – Only lawmakers can make taxes.

🟡 EXCEPTIONS to the No-Delegation Rule ⚖

✅ a. Delegation to President – Adjust tariffs, quotas, dues.
✅ b. Delegation to LGUs – Local tax power via Constitution.
✅ c. Delegation to Admin Agencies – Valuing property, computing tax.
❌ Can’t change tax base (Ex: from net to gross income).

🟡 LIMITATIONS on Taxation 📌

✅ Constitutional & Inherent Limits – Must follow Constitution.
✅ Tax Exemption for Gov’t Entities – No taxing itself.
✅ International Comity – No tax on foreign embassies.
✅ Territorial Limitation – Only tax within PH territory.
✅ Tax = Strongest Inherent Power (Sison v. Ancheta)

🧠 Case Examples on Limits

❌ Congress can’t remove LGU’s power to tax (Constitutional guarantee).
✅ Gov’t agencies taxed only if law says so (GSIS, SSS, etc.).
📌 PCSO – Taxable from Jan 1, 2018 (TRAIN Law).
📌 Pag-IBIG – Exempt from Apr 11, 2021 (CREATE Law).

🧾 CLASSIFICATION OF TAXES

AS TO SCOPE (Where the tax comes from) - National Tax

➤ Tax made by the National Government (the main government of the whole country)
✅ Examples:

• Income tax

• Estate tax

• Donor’s tax

• Value-added tax (VAT)

• Percentage taxes

• Documentary stamp tax

🧾 CLASSIFICATION OF TAXES

AS TO SCOPE (Where the tax comes from) - Local Tax

➤ Tax made by local government (like your city or town)
📍 Their power to tax comes from a special law, not automatically.
✅ Examples:

• Real estate tax

• Professional tax receipt (PTR)

🧾 CLASSIFICATION OF TAXES

AS TO SUBJECT MATTER / OBJECT (What is being taxed?) - Personal / Poll / Capitation Tax

➤ A fixed amount paid by each person, no matter their job or property
✅ Example: Community Tax Certificate (CTC)

🧾 CLASSIFICATION OF TAXES

AS TO SUBJECT MATTER / OBJECT (What is being taxed?) - Property Tax

➤ Tax on things you own — land, house, car, etc.
✅ Example: Real estate tax

🧾 CLASSIFICATION OF TAXES

AS TO SUBJECT MATTER / OBJECT (What is being taxed?) - Excise Tax

➤ Tax on special activities, goods, or privileges
✅ Examples:

• Income tax

• Donor’s tax

• Estate tax

• “Sin taxes” like tax on alcohol or cigarettes
  🧾 Excise tax has 2 types:

• Specific tax = fixed amount per item (ex: ₱52 per liter of liquor)

• Ad valorem tax = based on the value of the item (ex: 22% of price)

🧾 CLASSIFICATION OF TAXES

AS TO WHO BEARS THE BURDEN (Who actually pays for it?) - Direct Tax

➤ You pay the tax and feel the burden yourself. You can’t pass it to someone else.
✅ Examples:

• Income tax

• Donor’s tax

• Estate tax

🧾 CLASSIFICATION OF TAXES

AS TO WHO BEARS THE BURDEN (Who actually pays for it?) - Indirect Tax

➤ You pay first, but you pass the burden to someone else (like your customer).
✅ Examples:

• VAT

• Excise tax

• Percentage tax
  📌 Example: A seller pays VAT but adds it to the price, so the buyer ends up paying.

🧾 CLASSIFICATION OF TAXES

AS TO DETERMINATION OF AMOUNT (How is the tax amount decided?) - Specific Tax

➤ Tax based on quantity or measurement
✅ Example: ₱52 per proof liter of liquor (no matter the price)

🧾 CLASSIFICATION OF TAXES

AS TO DETERMINATION OF AMOUNT (How is the tax amount decided?) - Ad Valorem Tax

➤ Tax based on value or price of item
✅ Examples:

• VAT

• Income tax

• Donor’s tax

• Estate tax

SAMPLE EXCISE TAX TABLE (For Alcohol 🍷) - Distilled Spirits (2022–2024)

Ad Valorem Tax: 22%
Specific Tax: ₱52 → ₱59 → ₱66 per liter

SAMPLE EXCISE TAX TABLE (For Alcohol 🍷) - Distilled Spirits (2025 onwards)

Ad Valorem Tax: 22%
Specific Tax: +6% increase yearly

SAMPLE EXCISE TAX TABLE (For Alcohol 🍷) - Fermented Liquors (2022–2024)

Ad Valorem Tax: 22%
Specific Tax: ₱39 → ₱41 → ₱43 per liter

SAMPLE EXCISE TAX TABLE (For Alcohol 🍷) - Fermented Liquors (2025 onwards)

Ad Valorem Tax: 22%
Specific Tax: +6% increase yearly

🧾 CLASSIFICATION OF TAXES

AS TO PURPOSE (Why is the tax made?) - Primary / Fiscal / Revenue Purpose

➤ Tax made to raise money for government expenses
✅ Examples:

• Income tax

• Donor’s tax

• Estate tax

🧾 CLASSIFICATION OF TAXES

AS TO PURPOSE (Why is the tax made?) - Secondary / Regulatory / Special / Sumptuary Purpose

➤ Tax made to control certain behaviors or help the economy, not just for money
✅ Example: Import duties (tax on things from other countries)

🧾 CLASSIFICATION OF TAXES

AS TO GRADUATION OR RATE (How the rate works) - Proportional Tax

➤ Tax rate is the same for everyone, no matter how much money or value
✅ Example: VAT (12% for all)

🧾 CLASSIFICATION OF TAXES

AS TO GRADUATION OR RATE (How the rate works) - Progressive / Graduated Tax

➤ Tax rate gets higher as your income gets bigger
✅ Example: Income tax on individuals

🧾 CLASSIFICATION OF TAXES

AS TO GRADUATION OR RATE (How the rate works) - Regressive Tax

➤ Tax rate gets lower as your income or spending gets higher
⚠ Often seen as unfair to poorer people

🧾 CLASSIFICATION OF TAXES

AS TO TAXING AUTHORITY (Who makes the tax?) - National Tax

➤ Taxes made by the national government
✅ Collected by:

• Bureau of Internal Revenue (BIR)

• Other national agencies
  ✅ Examples of National Taxes (not all from BIR):

• Customs duties (on imports)

• Taxes on drugs

• Energy tax (electricity, vehicles)

• Travel tax

• Motor vehicle tax

• Special education fund tax

🧾 CLASSIFICATION OF TAXES

AS TO TAXING AUTHORITY (Who makes the tax?) - Local Tax

➤ Taxes made and collected by local governments
✅ Examples:

• Real property tax

• Community tax

What are the 3 elements of a sound tax system?

1⃣ Fiscal Adequacy 💰
2⃣ Theoretical Justice or Equity ⚖
3⃣ Administrative Feasibility 🧾

What is Fiscal Adequacy?

Taxes should bring in enough money to pay for the things the government needs.
The income (taxes) must be enough to support services like roads, schools, hospitals, and more.

🛋 FRIENDS Example:
Imagine Monica is in charge of paying rent, groceries, and bills. She needs enough salary to cover all that. Just like the government needs enough taxes to pay for public services.

What is Theoretical Justice or Equity?

This is the “ability to pay” rule.
Richer people should pay more taxes than poorer people.
Taxes must be fair based on how much money someone has.

🛋 FRIENDS Example:
Joey earns less than Ross. So Joey pays less tax, while Ross, who earns more as a paleontologist, pays more.

What is Administrative Feasibility?

Tax rules should be easy to understand and easy to follow.
It should be clear who is taxed, how much, and how it works.
Complicated tax systems cause confusion, cheating, or loopholes.

🛋 FRIENDS Example:
If Chandler tries to do his taxes but the rules are too confusing, he might mess it up or give up. A simple system helps people like Chandler follow the rules easily.

What are the 2 types of limitations on the power to tax?

✅ 1. Inherent Limitations (Natural Limits) 🌱
✅ 2. Constitutional Limitations 📜

What are Inherent Limitations (Natural Limits) of taxation?

These are automatic restrictions that come with the power to tax, even if not written in the Constitution.

What is the "Public Purpose Only" limitation?

Taxes must be for the benefit of the public, not for personal or private use.
The money should support government services or help the community as a whole.

🛋 FRIENDS Example:
If the government collects taxes and gives it to just one rich family, that’s wrong. But if the taxes go to fixing public transport, even if Rachel benefits personally, it’s okay because it helps everyone too.

📚 Court Case: TIO vs. Videogram
Even if a tax helps a few people, as long as it benefits the community overall, it’s still valid.

What does "No Delegation of Taxing Power" mean?

Only Congress can create tax laws.
But carrying out the tax (like collecting or checking) can be given to agencies.

🛋 FRIENDS Example:
Only Monica (the boss) can make the house rules, but she can let Joey be in charge of cleaning duty.

What is Territorial Limitation in taxation?

The government can only tax things or people within its own borders.

What are Constitutional Limitations?

These are rules in the Constitution that protect people from unfair taxes.

What does "Due Process of Law" mean in taxation?

Taxes must follow a valid law, and can't be harsh or unfair.
People must be given a chance to be heard.

🛋 FRIENDS Example:
If the government suddenly takes Chandler’s money without warning, that’s unfair. He should be told why and given a chance to respond.

What is Equal Protection of the Laws?

People in similar situations should be treated the same.
But people in different situations can be treated differently, as long as there’s a good reason.

🛋 FRIENDS Example:
People who live in the fancy part of Subic get tax perks to attract investors. People outside that area don’t get perks — and that’s okay if the difference is reasonable.

📚 Court Case: TIU vs. CA
The rule did not violate equal protection because:

• There are real differences between groups.

• The rule applies fairly within each group.

• It has a good purpose (to help the economy).

What is Uniformity and Equity in Taxation?

Taxes must be applied the same way in all places where the tax is used.
It's okay to group people into classes (rich, poor, businesses, etc.), but:

• The grouping must make sense

• It must apply now and in the future

• It must match the goal of the tax law

• Everyone in the group must be treated the same

  🛋 FRIENDS Example:
  If Ross and Rachel are both doctors, they should pay the same tax rate, even if one lives uptown and the other downtown.

  
  📚 Court Case: PLDT vs. Globe & Smart
  PLDT wanted the same perks as Globe and Smart.
  But the court said no, because PLDT and Globe/Smart are not the same kind of business (handheld vs. landline).
  So uniformity does not apply if the businesses are too different.

What is the difference between Regressive vs. Progressive Taxation?

Progressive Tax System = Rich people pay more (based on ability to pay)
Regressive Tax System = Poor people end up paying more because of too many indirect taxes (like VAT)

🛋 FRIENDS Example:
If Joey and Ross buy the same food, they both pay the same VAT (indirect tax), even though Ross earns more. That’s regressive. A progressive tax would make Ross pay more because he earns more.

What happens if you don't pay your poll tax? 🚫⛓

You can’t be jailed if you don’t pay your poll tax (like community tax).
But this rule only applies to poll tax, not to:

• Falsifying your community tax certificate ✍🚫

• Not paying other taxes (like income tax or property tax)
  ✅ Poll tax = fixed amount paid by all residents in a place, no matter their job or citizenship.

  
  🛋 Friends Example: Joey forgot to pay his community tax (poll tax) — he won’t go to jail. But if he fakes a certificate to avoid paying, then he’s in trouble!

What does Protection of Contracts mean in taxation? 📝❌

No law can change or ruin a contract between two people or parties.
If a law changes an agreement without both sides agreeing, that’s impairing the contract (which is not allowed).
Example: A tax exemption promised in a valid contract can’t just be removed by a new law— unless it’s a type like franchise tax, which can be legally changed.

🛋 Friends Example: Monica signs a contract saying her café won’t pay taxes for 5 years. A new law can’t cancel that unless it’s a franchise tax, which can be changed.

What does Freedom of Religion mean in tax law? 🙏📜

Government can’t make laws that:

• Favor one religion 🛐

• Stop people from practicing their religion 🧎‍♀
  Everyone can freely worship and believe what they want.
  You can’t be forced to take a religious test to vote or work.
  📚 Example: Charging a license fee for selling Bibles is not allowed — that would stop freedom of religion.

  
  🛋 Friends Example: Phoebe wants to hand out free Bibles — the city can’t charge her a fee for that, because it’s part of her religious freedom.

Can public money be used to support churches? 💸🚫

Public money cannot be used to:

• Help or support churches ⛪

• Pay religious leaders (unless they serve in special gov’t jobs)
  ✅ Exception: The gov’t can support religious leaders working in the army, prisons, orphanages, or leper centers.

  
  🛋 Friends Example: Ross can’t ask the government to give money to his church. But if his pastor works at a military base, then the gov’t can pay them.

When are religious, charitable, and educational properties exempt from real property tax? 🏫⛪❤

Actually and directly used for religion, charity, or education
This rule is only for real property tax, like land and buildings.
💡 "Used exclusively" means the property is mainly (not 100% only) used for those purposes.
It’s not about who owns the land, it’s about how it's used.

ILLUSTRATION: Mr. Ramos' Land — Is Mr. Ramos taxed on this land?

📍 Land: 5,000 sq. meters in Naga
👥 Owner: Mr. Ramos
🏢 Lease: Given to a religious group (2010–2025) for ₱50,000/year
🏗 What was built:

• 1,000 sq. m. = Seminary + Chapel (religious use)

• 4,000 sq. m. = 10-story building (rented to stores, used for funding seminaries)
  🔸 Q1: Is Mr. Ramos taxed on this land?
  ➡ No, he is exempt from real property tax on both parts of the land.