San Beda College of LAW – ALABANG
I. Concepts, Nature and Characteristics of
Taxation and Taxes.
As a process, it is a means by which the
sovereign, through its law-making body, raises
revenue to defray the necessary expenses of the
government. It is merely a way of apportioning
the costs of government among those who in
some measures are privileged to enjoy its
benefits and must bear its burdens.
As a power, taxation refers to the inherent
power of the state to demand enforced
contributions for public purpose or purposes.
Rationale of Taxation - The Supreme Court
“It is said that taxes are what we pay for
civilized society. Without taxes, the government
would be paralyzed for lack of the motive 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 must contribute his
share in the running of 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 moral and material values. The
symbiotic relationship is the rationale of
taxation and should dispel the erroneous notion
that it is an arbitrary method of exaction by those
in the seat of power.
Taxation is a symbiotic relationship,
whereby in exchange for the protection that the
citizens get from the government, taxes are
paid.” (Commissioner of Internal Revenue vs
Allegre, Inc.,et al., L-28896, Feb. 17, 1988)
Purposes and Objectives of Taxation
1.Revenue – to provide funds or property with
which the State promotes the general welfare and
protection of its citizens.
a.Promotion of General Welfare – Taxation
may be used as an implement of police power in
order to promote the general welfare of the
people. [see Lutz vs Araneta (98 Phil 148) and
Osmeňa vs Orbos (G.R. No. 99886, Mar. 31,
b.Regulation – As in the case of taxes levied on
excises and privileges like those imposed in
tobacco or alcoholic products or amusement
places like night clubs, cabarets, cockpits, etc.
In the case of Caltex Phils. Inc. vs COA
(G.R. No. 92585, May 8, 1992), it was held that
taxes may also be imposed for a regulatory
purpose as, for instance, in the rehabilitation and
stabilization of a threatened industry which is
affected with public industry like the oil industry.
c.Reduction of Social Inequality – this is
made possible through the progressive system of
taxation where the objective is to prevent the
under-concentration of wealth in the hands of few
d.Encourage Economic Growth – in the realm
of tax exemptions and tax reliefs, for instance,
the purpose is to grant incentives or exemptions
in order to encourage investments and thereby
promote the country’s economic growth.
e.Protectionism – in some important sectors of
the economy, as in the case of foreign
importations, taxes sometimes provide protection
to local industries like protective tariffs and
contributions from persons and property levied by
the law-making body of the State by virtue of its
sovereignty for the support of government and
for public needs.
Essential Characteristic of Taxes [ LEMP3S ]
1.It is levied by the law-making body of the
The power to tax is a legislative power
which under the Constitution only Congress can
exercise through the enactment of laws.
Accordingly, the obligation to pay taxes is a
2.It is an enforced contribution
A tax is not a voluntary payment or
donation. It is not dependent on the will or
contractual assent, express or implied, of the
person taxed. Taxes are not contracts but positive
acts of the government.
3.It is generally payable in money
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