General Principles - Part III

This post is a sequel to the limitations of the taxing power of the state. This time let us proceed to the CONSTITUTIONAL LIMITATIONS - those limitations on the state's exercise of the taxing power specifically provided by the particular provisions of the Philippine Constitution.

a. Due process of law. As provided for, no person shall be deprived of life, liberty or property without due process of law. This covers two types: substantive, and procedural. Substantive due process relates to the circumstances and procedures in the passage of tax laws and ordinances, while the other relates to the procedural aspects in the implementation of the tax laws and ordinances. Applied to taxation, due process mandates that there should be a valid law imposing a tax to a particular taxpayer, and should the taxpayer failed to pay the same, it must be given each and every opportunity to explain itself and justify. No law imposing a tax, then the taxpayer shall not be collected such tax. On the other hand, granting that the taxpayer failed to pay in full but was not issued as assessment notice informing the facts and the law of the assessment, still, the taxpayer could not be held to pay. These are the essence of due process. The taxing authority, while implementing the necessary mandates of its office must give due respect to the established procedures the way it works in an organized society.

b. Equal protection of law. "...nor shall any person be denied equal protection of law". Equal protection relates to how a particular tax measure or ordinance is being applied to persons or class of persons similarly situated. Thus, if two entities falling on the same classification shall be taxed similarly. Example, if an ordinance imposes a tax on technicians and it happened that in a locality there was a single technician, such technician cannot complain for unequal application because the ordinance is made applicable to all technicians belonging to the same class.

c. Non-imprisonment for non-payment of debt or poll tax. Debt refers to a civil obligation that is payable in money or in kind, while poll tax or community tax refers to an charge or imposition administered by the local government unit (LGU) where the taxpayer is located. The prohibition admits the fact of inequality of distribution of wealth in the society and provides for instances in extreme poverty. This is likewise in furtherance of the basic doctrine in civil law that civil liability does not put the person liable behind bars. Applied to tax, while poll tax is a basic mandate in the Local Government Code, its non-payment does not entitle imprisonment.

d. Non-impairment of obligations of contracts. To impair is to damage or to harm and obligation referred to is the duty or commitment imposed upon by the valid contract entered into by the contracting parties. Applied to tax, a new tax law shall not be passed in such a way as to impair or to prejudice the obligation of a contracting party by virtue of a contract entered into with the state. This is to give due respect to the contractual terms the state is bind with respect to its contract with private individuals. A theoretical example of this is, if an exemption is granted by the state by virtue of a contract with a private entity for which a valuable consideration is involved, then no new law could later be passed to prejudice said exemption.

e. Rule of taxation shall be uniform and equitable. As stated in uniform application above, uniformity relates to classification of taxpayers to be subjected to tax. Equitable on the other hand relates to the ability to pay the tax of those that belong to the same class. In other words, it refers to how much will each pay and the constitution requires that there must be a reasonable classification and justification for the unequal imposition.

f. Separation of church and state. This is based on the sad experiences during the Spanish regime where the church had much to say about the governance of state. Applied to tax, no public money from taxes shall be spent for furtherance of religious activities. Thus, a municipality cannot spend public funds for the celebration of its municipal fiesta.

g. Exemption of educational, charitable, and religious institutions. The state acknowledges the valuable contribution of educating its inhabitants, benefits brought about by charities on various programs for general welfare, and the religious well-being of its inhabitants to the success and development of the society as a whole. Thus, to encourage private individuals and entities for the furtherance of this objectives, the constitution provided certain tax exemptions from income, real property and customs duties and taxes under specific circumstances and limitations. There must be showing of an actual, direct, and exclusive use and furtherance of such objectives in order to be exempt to prevent abuse and capitalization of such objectives to escape from tax.

h. Concurrence of the majority members of Congress in granting tax exemption. Tax exemptions are immunity from a particular tax that is being imposed to others similarly situated. The more exemptions, the less collections. Accordingly, in order to control and to see to it that only those necessarily entitled must be provided exemptions, the constitution require that such grant of tax exemption shall be concurred by the vote of the majority of the membership in the Congress. It should be noted that Philippines is on a bicameral congress, the senate and the lower house, thus, granting tax exemptions are not quite easy to legislate.

i. Non-impairment of the jurisdiction of the Supreme Court on tax cases. This is in furtherance of the principles of check and balances. The jurisdiction of the lower courts are based on the mercy of the laws passed for the purpose, thus, may be modified and revised from time to time. However, in the case of the Supreme Court, no law can take its power to become the final arbiter of tax cases.

j. Veto power of the President in tax bills. Generally, on bills passed by Congress, the President is empowered to either approve or disapprove a bill as a whole. If approved or not acted upon within a certain period of time, it becomes a law, and if vetoed, it does not become a law in its entirety. Tax bills however, can be granted either fully or partially. If a bill is granted partially, provisions which are approved becomes part of the law while those provisions vetoed upon becomes ineffective.

Please click here for Part II of the General Principles.

Please click here for Part I of the General Principles.


"Taxes affect lives, care for taxes and save lives"

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