Limitations of taxing power
While the power does not emanate from a grant, as the same is necessarily inherent upon the existence of the state, exercise of the power is subject to those limitations inherent upon it and those expressly provided for by the Constitution as follows:
Inherent limitations. These limitations are those limitations that emanates from the very nature of the power of taxation. They are very basic and are built-in with the power. Some may be similar to the constitutional limitation but the constitutional limitation seems to be supreme as they are the most specific, thus, specifically intended to rule the application or exercise of the power of taxation. Hereunder are the INHERENT LIMITATIONS:
• Levy for public purpose. To levy a tax means to impose or to charge or to collect a tax from those to whom it is addressed. Technically however, to levy is to pass on laws or ordinances imposing a tax or duty upon specific group of taxpayers. Under this concept, the impelling reason for the imposition of the tax must be the welfare of the public, in general. This follows that the proceeds from such imposition shall inure to the benefit of the public.
In one 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 allegedly represent the public. The issue was resolved in favor of the validity of the imposition. While 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.
• Non-delegation of legislative power to tax. To delegate is to pass on or to entrust to another a certain duty or obligation. Power to tax is lodged with the legislative department. To my mind, this is because the legislative branch is theoretically the representative of the people and they are directly aware and in common contact with the instances and situations of their districts making them the ones knowledgeable of how best their district could be affected by the new taxes imposed. Likewise, this is premised on the legal maxim “delegate potestas, non delegari potest” which means, what has been delegated cannot be re-delegated so as not to hamper the objective of the delegation. However, there are at least two (2) instances where delegation is possible (a) delegation to the President of some tariff powers, and (b) Local government unit’s fiscal autonomy for their self serving needs.
• Exemption of government entities. Government is the people, by (not BUY) the people, for (not POOR) 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 and so no effect, at all, would be made. Suffice it to say however, there exist no express prohibition
• International comity has something to do with the friendly interaction and participation of different estates. This adheres to some amount of submission and compliance of certain international rules and covenants for mutual benefits and enjoyment of the states and its inhabitants. Bilateral agreements, conventions and international treaties fall under this category.
• 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. Outside its jurisdiction, it is without power to do so. But then, it can tax on citizens or entities of other states doing a trade or business or deriving income within the jurisdiction of its state. See the case of Spratley islands for better picture. Issue on who owns spratley had long been outstanding for each party claims jurisdiction in accordance with its of the parties belief that it rightfully belongs to it.
Please click here for Part I of the General Principles.
Taxes affect lives, dare to care on taxes and save lives!