(TAX) Republic Vs Soriano

A.
Definition and Concept of Taxation
Q: Define taxation.
A: It is an inherent power by which the sovereign:
1. through its law-making body
2. raises income to defray the necessary expenses of government
3. by apportioning the cost among those who, in some measure are privileged to enjoy its benefits and,
therefore, must bear its burdens. (51 Am.Jur. 34)
B. Charateristics of Taxation
A: CUPS
1. Comprehensive - It covers persons, businesses, activities, professions, rights and privileges.
2. Unlimited - It is so unlimited in force and searching in extent that courts scarcely venture to declare
that it is subject to any restrictions, except those that such rests in the discretion of the authority which
exercises it. (Tio v. Videogram Regulatory Board, G.R. No. 75697, June 18, 1987)
3. Plenary - It is complete. Under the NIRC, the BIR may avail of certain remedies to ensure the collection
of taxes.
4. Supreme - It is supreme insofar as the selection of the subject of taxation is concerned.
C. POWER OF TAXATION COMPARED WITH OTHER POWERS OF THE STATE
A: TAXATION POLICE POWER EMINENT

DOMAIN
Authority who exercises the power
Government or Government or Government or
its political its political public service
subdivision subdivision companies and
public utilities
Purpose
To raise Promotion of To facilitate the
revenue in general welfare taking of
order to through private
support of the regulations property for
Government public purpose
Persons affected
Upon the Upon On an
community or community or individual as
class of class of the owner of a
particular
individuals individuals property
Amount of monetary imposition
No ceiling Limited to the No imposition,
except cost of the owner is
inherent regulation, paid the fair
limitations issuance of market value
license or of his property
surveillance
D. Theory and Basis of Taxation
Q: What are the theories in taxation?

A: The theories underlying the power of taxation are the following:
1. Lifeblood theory (Necessity theory)
2. Benefits-protection theory (Doctrine of Symbiotic Relationship)
Lifeblood Theory/Necessity Theory

Q: Discuss the meaning and the implications of the statement: “Taxes are the lifeblood of the government and their prompt
and certain availability is an imperious need.”
A: The phrase expresses the underlying basis of taxation which is governmental necessity, for indeed, without taxation, a
government can neither exist nor endure.
Taxation is a principal attribute of sovereignty. The exercise of the taxing power derives its source from the very existence of the
State whose social contract with its citizens obliges it to promote public interest and the public good.
In the case of Valley Trading Co. v. CFI G.R. No. 495529, March 31, 1989, the Supreme Court ruled that the damages that may be
caused a taxpayer by being made to pay the taxes cannot be said to be as irreparable as it would negate the Government ability
to collect taxes. (1991 Bar Question)
Benefits-Protection Theory/
Symbiotic Relationship Doctrine
Q: What is the Benefits-Protection Theory (Symbiotic Relationship Doctrine) in taxation?
A: It involves the power of the State to demand and receive taxes based on the reciprocal duties of support and protection
between the State and its citizen.
Every person who is able 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. (CIR v. Algue, G.R. No. L-28896, February 17, 1988)
Special benefits to taxpayers are not required. A person cannot object to or resist the payment of taxes solely because no
personal benefit to him can be pointed out arising from the tax. (Lorenzo v. Posadas, 64 Phil. 353)
E. Nature of Taxing Power

Inherent Attribute of Sovereignty
Q: Why is the power of taxation considered inherent in nature?
A: It is inherent in character because its exercise is guaranteed by the mere existence of the state. It could be exercised even in
the absence of a constitutional grant. The power to tax proceeds upon the theory that the existence of a government is a
necessity and this power is an essential and inherent attribute of sovereignty, belonging as a matter of right to every
independent state or government (Pepsi-Cola Bottling Co. of the Philippines V. Municipality of Tanauan, Leyte, G.R. No. L-31156,
February 27, 1976).
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. (51 Am. Jur. 42)
The moment a state exists, the power to tax automatically exists.
Basis: The Life-blood Doctrine.
“Without taxes, the government would be paralyzed for lack of motive power to activate and operate it. Hence, despite the
natural reluctance to surrender part of one’s earned income to the taxing authorities, every person who is able must contribute
his share in the running of the government.” (CIR v. Algue, G.R. No. L-28896, February 17, 1988)
Manifestations:
1. Imposition even in the absence of constitutional grant
2. State’s right to select objects and subjects of taxation
3. No injunction to enjoin collection of taxes.
4. Taxes could not be the subject of compensation and set-off.
5. A valid tax may result in destruction of property.
Q: May a legislative body enact laws to raise revenues in the absence of constitutional provisions granting said body the
power of tax? Explain.
A: Yes. It must be noted that Constitutional provision relating to the power of taxation do not operate as grants of the power of
taxation to the government, but instead merely constitute a limitation upon a power which would otherwise be practically
without limit. (2005 Bar Question)
Q: Distinguish National Government from Local Government Unit as regards the exercise of power of taxation.
A:
1. National Government – inherent
2. Local Government Unit – not inherent since it is merely an agency instituted by the State for the purpose of carrying out in
detail the objects of the government; can only impose taxes when there is:
a. Constitutionally mandated grant
b. Legislative grant, derived from the 1987 Constitution, Section 5, Article X.
Legislative in Character
Q: Why is the power of taxation legislative in nature?
A: It is legislative in nature since it involves promulgation of laws. It is the Legislature which determines the coverage, object,
nature, extent and situs of the tax to be imposed.
F. Purpose of Taxation
Q: What are the purposes of taxation?

A:
1. Revenue – to raise funds or property to enable the State to promote the general welfare and protection of the people.
2. Non-revenue [PR2EP]
a. Promotion of general welfare – taxation may be used as an implement of police power to promote the general welfare of the
people.
b. Regulation of activities/industries
c. Reduction of Social inequality – a progressive system of taxation prevents the undue concentration of wealth in the hands of
few individuals. Progressivity is based on the principle that those who are able to pay more should shoulder the bigger portion
of the tax burden.
d. Encourage economic growth – the grant of incentives or exemptions encourage investment thereby stimulating economic
activity.
e. Protectionism – In case of foreign importations, protective tariffs and customs are imposed to protect local industries.
G. Definition, Nature, and Characteristics of Taxes

(TAX) Republic Vs Soriano

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A.

Definition and Concept of Taxation

A: It is an inherent power by which the sovereign:

1. through its law-making body

2. raises income to defray the necessary expenses of government

1. Comprehensive - It covers persons, businesses, activities, professions, rights and privileges.

4. Supreme - It is supreme insofar as the selection of the subject of taxation is concerned.

C. POWER OF TAXATION COMPARED WITH OTHER POWERS OF THE STATE

A: TAXATION POLICE POWER EMINENT

Q: What are the theories in taxation?

Lifeblood Theory/Necessity Theory

E. Nature of Taxing Power

Q: What are the purposes of taxation?

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