Constitutional and Inherent Limitations of the Power to Tax

Taxation Law Cecille Carmela T. de los Reyes Philippine Christian University – College of Law Professor: Atty. Antonio Bonilla

1. ENFORCED as it involves the mandate of the law so that its imposition is mandatory to those covered by it. Unreasonable deviation from the mandate is subject to penalties imposable by an organized society w/c gives due respect to each and every humanly right.

It is the act of levying tax, the process or means by which the sovereign, through its law-making body, raises income to defray (provide for) the necessary expenses of the government.

2. PROPORTIONAL as theoretically, tax is proportioned upon a taxpayer’s ability to pay.

WHAT IS TAXATION Enforced proportional contribution levied by the law making body of the state to raise revenue to support the indispensable and all the necessary expenses of the government.

3. RAISE REVENUE goes with the very heart of taxation, to earn income for the government. Secondary to this primary purpose is that tax is being seconded to serve some other concerns for the majority.

It is merely a way of apportioning the cost if the government among those who in some measures are privileged to enjoy its benefits and therefore must bear its burdens.

The lifeblood of the government.

TAXATION LAW

4. SUPPORT THE EXPENSES of the government is related to public purpose of imposition of taxation. While the govt is empowered to collect from its inhabitants, proceeds are bound to serve the public needs and expenditure only.

WHAT IS TAX

Major revenue (income) is sourced from taxation so that in the most pressing times of financial and economic crisis, the agency authorized to administer taxes—the Bureau of Internal Revenue should always be on the front line.

By simple definition— WHAT IS TAX Enforced proportional contribution levied by the law making body of the state to raise revenue to support the indispensable and all the necessary expenses of the government.

ELEMENTS OF THE STATE in relation to the inherent limitations of the power to tax ·

PEOPLE

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TERRITORY

SOVEREIGNTY

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GOVERNMENT ·

INTERNATIONAL RECOGNITION

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The State cannot tax the people who are not citizens of the Philippines.

The State cannot tax the people who are not in its territory—with the exception of those non-citizens who may have a particular undertaking in the country subject to tax laws. (Example; J. Lo’s concert in the PH is subject to tax, applying the nexus to the situs principle) The state cannot tax the people for other purposes—it must be for people; as the republic is a government for the people, by the people and of the people. The state cannot tax government agencies—as they are subject to tax exemption. (exception of GOCCs) The power to tax is lodged within the legislative government only—with the exception of (1) President’s tariff powers and (2) local government unit’s fiscal autonomy. The state cannot tax other states

Power to tax is inherent in a sovereign state so that the grant of which is not necessary but the exercise is provided safeguards and limitations. This means that the state needs not to be empowered by the Constitution or any mandate for it to be allowed to tax.

THE POWER TO TAX

Power to tax is: (1) unlimited, and (2) plenary x x x which means a state can tax on anything, anytime and at any amount. / provided, due process is complied with, and that It is intended for public purpose.

What are being provided for by the supreme law of the land, the Constitution, are the guidelines and the limit on the exercise of the power. Reason: So that it cannot be abused and misused said power to the detriment of the majority and to the advantage of the selected few.

Levy for public purpose

Non-delegation of legislative power to tax

Exemption of government entities

NATURE OF THE POWER TO TAX AS AN INHERENT POWER

INHERENT LIMITATIONS—these limitations are those that emanate from the very nature of the power of taxation. They are very basic and built in with that power.

International Comity

Territorial Jurisdiction

Non-delegation of legislative power to tax

Levy for public purpose

To levy a tax means to impose to or charge to collect a tax from those to whom it is addressed. To levy is to pass on laws or ordinances imposing a tax or duty upon specific group of taxpayers. The impelling reason for the imposition of tax must be the welfare of the public in general.

Gaston v. Republic—In this case, a certain imposition was successfully passed for the purpose of upholding the welfare of the sugar industry. It was questioned on the ground that there is no public purpose since the sugar industry does not represent the entire public as the proceeds would not add to the general budget of the national government, nevertheless, the industry itself admits of a public nature whose circumstances and effects directly affect the public. The requirement of direct purpose does not admit of a direct public benefit from the imposition.

Power to tax is lodged within the legislative powers only. Rationale: Legislative branch is theoretically the representative of the people and are directly aware and in common contact with the instances and situations of their districts General Rule: Legislative department alone exercises the taxing power Exceptions: (1) President’s tariff powers (2) local government unit’s fiscal autonomy.

International Comity

With regard to the taxing power, the state is limited on the grounds of international comity because based on the principle of comity; the state is subject to compliance of certain international rules and standards for mutual benefits and enjoyment of states and its inhabitants.

Exemption of government entities

Government is the people, by the people and for the people. Government exists for the people and whatever amount it makes came from the people and such amount it use to finance its various activities to address the general welfare of its inhabitants. It is not constituted to engage in any trade or business but to deliver basic services and serve everyone within. Analytically—taxing the government itself will not generate more revenue. The money will only rotate so no effect at all would be made.

Territorial Jurisdiction Relates to the area of jurisdiction and responsibility of a particular estate. Independent states power of taxation is generally confined only within its jurisdiction to give due respect and as courtesy to other states. A state as a rule can only impose and implement tax laws and rules within its jurisdiction in accordance with its wishes. But then, it can tax citizens or entities of other states doing a trade or business or deriving income within the jurisdiction of its state.

Article III: Bill of Rights Sec. 1. No person shall be deprived of life, liberty or property without due process of the law, nor shall any person be denied the equal protection of the laws.

Article II: Declaration of Principles and State Policies Sec. 6. The separation of church and the State shall be inviolable.

Article II: Declaration of Principles and State Policies Sec. 25. The State shall ensure the autonomy of the local governments.

CONSTITUTIONAL LIMITATIONS OF THE POWER TO TAX Those limitations on the state’s exercise of the taxing power specifically provided by the particular provisions of the Constitution.

Article III: Bill of Rights Sec. 10. No law impairing the obligations of contracts shall be passed.

Article III: Bill of Rights Sec. 20. No person shall be imprisoned for debt or nonpayment of a poll tax.

Article VI. Legislative Department Article VI. Legislative Department Sec. 25(1). The Congress may not increase the appropriations by the President for the operation of the Government as specified in the budget. The form, content and manner of preparation of the budget shall be prescribed by the law.

Sec. 25(7). If by the end of the fiscal year, the Congress shall have failed to pass the general appropriations bill for the ensuing fiscal year, the general appropriations law for the preceding fiscal year shall be deemed re-enacted and shall remain in force and effect until the general appropriations bill is passed by the Congress.

Article VI. Legislative Department

Article VI. Legislative Department

Sec. 25(2). No provision or enactment shall be embraced in the general appropriations bill unless it relates specifically to some particular appropriation therein. Any such provision shall be limited in its operation to the appropriation to which it relates.

CONSTITUTIONAL LIMITATIONS OF THE POWER TO TAX (Section 25, Article VI Legislative Department)

Sec. 25(6). Discretionary funds appropriated for particular officials shall be disbursed only for public purposes to be supported by appropriate vouchers and subject to such guidelines as may be prescribed by law.

Article VI. Legislative Department Article VI. Legislative Department

Article VI. Legislative Department

Sec. 25(3). The procedure in approving appropriations for the Congress shall strictly follow the procedure for approving appropriations for other departments and agencies.

Sec. 25(4). A special appropriations bill shall specify the purpose for which it was intended, and shall be supported by funds actually available as certified by the National Treasurer, or to be raised by a corresponding revenue proposal therein.

Sec. 25(5). No law shall be passed authorizing any transfer of appropriations; however, the President of the Senate, the Speaker of the House of Representatives, the Chief Justice of the Supreme Court, and the heads of the Constitutional Commission, may, by law, be authorized to augment any item in the general appropriations law for their respective offices from savings in other items of their respective appropriations.

Article VI. Legislative Department Sec. 27(1). Every bill passed by the Congress shall, before it becomes law, be presented to the President. If he approves the same he shall sign it; otherwise he shall veto it and return the same with his objections to the House where it originated, which shall enter the objections at large in its Journal and proceed to reconsider it. If after such reconsideration 2/3 of the members of the Congress of such House shall agree to pass the bill, it shall be sent, together with the objections, to the House by which it shall likewise be reconsidered;

Article VI. Legislative Department Sec. 29. All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. If the purpose of which a special fund has been created or has been fulfilled or abandoned; the balance, if any, shall be transferred to the general funds of the Government.

CONSTITUTIONAL LIMITATIONS OF THE POWER TO TAX Sec. 27, 28 & 29; Article VI Legislative Department

Article VI. Legislative Department Sec. 27(2). The President shall have the power to veto any particular item or items in an appropriation, revenue or tariff bill, but the veto shall not affect the item or items to which he does not object.

Sec. 28 (4). No law granting any tax exemption shall be passed without the concurrence of a majority of all members of the Congress.

Article VI. Legislative Department

And if approved by 2/3 of all the members of that House, it shall become a law. In such cases, votes of each house shall be determined by yeas or nays, and the names of the Members voting for or against shall be entered in its Journal.

Article VI. Legislative Department

Sec. 28 (3). Charitable institutions, churches and personages or convents appurtenant thereto; mosques, non-profit cemeteries and all lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purpose shall be exempt from taxation.

Article VI. Legislative Department Article VI. Legislative Department Sec. 28 (1). The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation.

Sec. 28 (2). The Congress may, by law, authorize the President to fix, within specified limits, and subject to such limitations and restrictions 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.

Sec. 5 (1)—Exercise original jurisdiction over cases affecting ambassadors, other public ministers and consuls, and over petitions for certiorari, prohibition, mandamus, quo warranto and habeas corpus.

Article VI. Legislative Department Sec. 5. The Supreme Court shall have the following powers:

CONSTITUTIONAL LIMITATIONS OF THE POWER TO TAX Article VIII Judicial Department

Sec. 5 (2)—Review, revise, reverse, modify or affirm on appeal or certiorari, as the law or the Rules of Court may provide; final judgments and orders of lower courts in: ·

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All cases which the constitutionality or validity of any treaty, international or executive agreement, law, presidential decree, proclamation, order, instruction, ordinance or regulation is in question. All cases involving legality of any tax, impost, assessment or toll, or any penalty imposed in relation thereto. All cases in which the jurisdiction of any lower court is in issue. All cases in which only an error or question of law is involved.

Sec. 5. Each local government unit shall have the power to create its own sources or 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.

CONSTITUTIONAL LIMITATIONS OF THE POWER TO TAX Article X Local Government Sec. 6. Local government units shall have a just share as determined by law in the national taxes which shall be automatically released to them.