The document discusses the basic concepts and principles of taxation. It states that taxation is an inherent power of sovereign states to raise revenue to fund necessary government expenses. Taxation imposes a levy on persons, property, and property rights. It is an inherent power of the state derived from its sovereignty within its territorial jurisdiction. The document outlines other inherent state powers like police power, eminent domain, and taxation. It distinguishes taxation from eminent domain and police powers. Constitutional and inherent limitations on taxation powers are also discussed. Finally, the document outlines basic principles of a sound tax system including fiscal adequacy, administrative feasibility, consistency with economic goals, and equality and theoretical justice.

1. BASIC CONCEPT &
PRINCIPLE OF TAXATION

2. Nature of taxation
• Taxation is the power by which the sovereign state raises revenue to
defray necessary expenses of government. It is the life and strength of
government, it is permanently attached to the state. It is the taxpaying
population that revitalizes it. Taxation is one of the inherent powers
of the sovereign state.

3. Nature of taxation
Taxation impose a levy upon persons, properties, and
property rights for purpose of rising revenue to support the
necessary expenses of the government. It is the inherent
power of the state to raise from its territorial jurisdiction
income or revenue to defray the necessary government or
public expenses. Being “inherent” means that the power of
taxation is a necessary consequence of sovereignty.

4. Inherent Power o the State
Police power
Refers to the power of the state to enact laws to promote
public health, public morals, public safety and the general
welfare of the people.
Power of eminent domain
Refers to the power of the state to take private property for
public use upon payment of just compensation. It is also known
as expropriation.

5. Inherent Power o the State
Power of taxation
Refers to the authority of the government to impose
taxes, charges and fees from its taxpayers under its
sovereignty and/or territorial jurisdiction, to support its
necessary expenses.

6. Basis of the power of taxation
The power of taxation originates from the theory that
the existence of a government is necessary. It cannot
operate without the means to pay its expenses. On
the basis, it has acquired the right to compel all the
citizen and inhabitants within its territories to
contribute.

7. Scope of the power of taxation
Although it is essentially a legislative function,
the power of taxation in the absence of a
constitutional restriction is regarded as
unlimited, plenary, comprehensive and
supreme. The principal check for its abuse lies
in the hands of the legislature.

8. Power of taxation compared with other powers
of the state
• They are inherent in every government.
• They exist independently of the constitution.
• They constitute the three ways by which the state
interferes with private rights and properties.
• They are legislative in nature and character.
• Each presupposes an equivalent compensation.

9. Power of taxation distinguished from power
of Eminent Domain
• As to compensation
In taxation, the compensation is the protection and benefits
received from the government. In eminent domain, the
compensation is the payment received (usually in monetary terms)
for the property taken.
• As to persons affected
In taxation, it operates on classes of persons, according to some
principle of apportionment; in eminent domain, its operate on
case-to-case basis depending on the owner(s) of the property.

10. Power of taxation distinguished from power
of Eminent Domain
• As to purpose
In taxation, the taxpayer has the obligation to pay or give his
share to the public burden; In eminent domain, the citizen’s
contribution is primarily for public purposes.
• As to manner of exercise
In taxation, it is the public in general that is required to pay, and
normally, no complaint is filed in court; in eminent domain, the
property owner is made the defendant in the complaint.

11. Power of taxation distinguished from power of
Eminent Domain
• As to the authority exercising the power
The power of taxation can be exercised only by the government.
The power of eminent domain may be exercised by private
persons performing public functions if the power is granted by law.
• As to amount of imposition
In taxation, there is generally no limit on the amount of tax that
may be imposed. In eminent domain, there is no imposition. The
owner of the property is the one paid just compensation for the
property taken

12. Power of taxation distinguished from police
power
• As to purpose
The of taxation is to raise revenue; the purpose of police
power is to promote public welfare
• As to compensation
In taxation, compensation is the protection and benefits
received from the government; in police power, the
compensation is the maintenance of a healthy economic
standard of society

13. Power of taxation distinguished from police
power
• As to amount paid
In taxation, the amount collected is generally unlimited; in
police power, the amount collected is just sufficient for the
maintenance of regulation.
• As to relation to the impairment clause of the constitution
The power of taxation is inferior to the impairment clause of
the constitution; police power is superior to the impairment
clause.

14. Limitations on the power of taxation
Inherent limitation:
• It must be for public purpose;
• It must be applied within its territorial jurisdiction;
• It is legislative in character and may not be delegated;
• It is subject to international comity;
• It provide safeguards on double taxation; and
• It allows exemption to government agencies & instrumentalities.

15. Constitutional limitation
• Ne person shall be deprived of his life, property, or liberty, without due process of
law, nor shall any person be denied the equal protection of the law;
• The rule of taxation shall be uniform and equitable
• No law impairing the obligation of contracts shall be passed;
• No person shall be imprisoned for nonpayment of a poll tax;
• Charitable institutions, churches and parsonages or convents appurtenant
thereto, mosques, nonprofit cemeteries, and all lands, buildings, and
improvements, actually, directly and exclusively used for religious, charitable, or
educational purposes shall be exempt from taxation;
• No law granting tax exemption may be passed without the concurrence of
majority of all the members of the legislature.

16. Basic principles of a sound tax system
Fiscal Adequacy
Which requires that the sources of revenue as a whole must be sufficient to
meet the expanding governmental expenses regardless of business
condition, exchange rate, trade balance and other problems of economic
adjustment
Administrative Feasibility
Which demands that the tax system must be clear to the taxpayers, rules
reasonably enforceable, is convenient and not burdensome or discouraging
to a business activity.

17. Basic principles of a sound tax system
Consistency or compatibility with economic goals
Which necessitates that tax law should be consistent with the economic
goals and the state.
Equality & Theoretical Justice
Refers to the uniformity of the application of tax laws and the imposition
of taxes based on the relative ability of taxpayers to shoulder the burden
which are primarily made to depend on the level of the taxable basis and
the proportionate benefits they receive from the maintenance of an
orderly society.