DAYANGHIRANG
CONSTITUTIONAL LIMITATIONS
1. DUE PROCESS OF LAW
- may be invoked where a taxing statute is so
arbitrary that it finds no support in the Constitution,
as where it can be shown to amount to a
confiscation of property. - - - There must be a clear
and unequivocal breach of the Constitution; there
must be proof of arbitrariness. The law must be
unreasonable and unjust, not merely hypothetical,
argumentative or of doubtful implication.
Situations are illustrative of violations of the due
process clause:
. If the tax amounts to a confiscation of property
. If the subject of confiscation is outside the
jurisdiction of the taxing authority;
. If the law is imposed for a purpose other than a
public purpose;
. If the law which is applied retroactively imposes
unjust and oppressive taxes;
. Where the law is in violation of inherent
limitations.
Requisites:
a. The interests of the public generally as
distinguished from those of a particular
class require the intervention of the
State; and
b. The means employed must be
reasonably necessary to the
accomplishment of the purpose and not
unduly oppressive.
the SC held that in order that due process of
law will not be violated, the imposition of the
tax must not be done in an arbitrary,
despotic, capricious, or whimsical manner.
2. Equal Protection of the Law
The constitution requires uniformity, not equality. It
merely requires that all persons subject to such
legislation shall be treated alike, under like
circumstances and conditions both in the privileges
conferred and in the liabilities imposed.
Equality among equals as determined
according to a valid classifications
Equality of taxation when the burden of
the tax falls equally and impartially upon all
persons and property subject to it, so that
no higher rate or greater levy in proportion
to value is imposed upon one person than
upon others similarly situated or of like
character.
Requisites for a valid classification:
a. Must not be arbitrary;
b. Must be based upon substantial
distinctions;
c. Must be germane to the purposes of
law;
d. Must not be limited to existing conditions
only; and
e. Must apply equally to all members of a
class.
3. UNIFORMITY, EQUITABILITY, AND
PROGRESSIVITY OF TAXATION
Uniformity: All taxable articles or kinds of property
of the same class shall be taxed at the same rate. A
tax is uniform when it operates with the same force
and effect in every place where the subject of it is
found.
Equitability: Taxation is said to be equitable when
its burden falls to those better able to pay.
4. PROGRESSIVITY: Rate increases as the tax
base increases. When its rate goes up
depending on the resources of the person
affected.
The Constitutions does not prohibit the
imposition of regressive taxes.
5. NON-IMPAIRMENT OF CONTRACTS
6. NON-IMPRISONMENT FOR NON-PAYMENT
OF POLL TAX
A person may not be imprisoned for non- payment
of a cedula or poll tax (People v. Linsangan, 62
Phil. 646), he may be imprisoned for non-payment
of other kinds of taxes where the law so expressly
provides.
7. BILLS TO ORIGINATE FROM THE HOR
All appropriation, revenue or tariff bills, bills
authorizing the increase of the public debt, bills of
local application and private bills, shall originate
exclusively in the House of Representatives, but
the Senate may propose or concur with
amendments. (Art. Ill, Section 24, Constitution)
Both Houses of Congress may initiate bills, but only
the Lower House may propose tax measures.
8. VETO POWER OF THE PRESIDENT
The President shall have the power to veto any
particular item or items in an appropriation, revenue
or tariff bill but the veto shall not affect the item or
items to which he does not object.
The item or items vetoed shall be returned to the
Lower House of Congress together with the
objections of the President. If after reconsideration
2 / 3 of all the members of such House shall agree
to pass the bill, it shall be sent, together with the
objection, to the other House by which it shall
likewise be reconsidered, and if approved by 2 / 3
of all the Members of that House, it shall become a
law.
9. PRESIDENTS POWER TO TAX
President is vested with authority by law to
increase tariff rates, even for revenue purposes
only.
The term "flexible tariff clause" refers to the
authority given to the President to adjust tariff rates
under Section 401 of the Tariff and Customs Code,
which is the enabling law that made effective the
delegation of the taxing power to the President
under the Constitution.
10. TAXATION AND THE FREEDOM OF THE
PRESS
No law shall be passed abridging the
freedom of speech, of expression, or of the
press... (Article III, Section 4, Constitution)
11. TAXATION AND FREEDOM OF RELIGION
In the case of American Bible Society v.
City of Manila,"' the Supreme Court ruled
that a municipal license tax on the sale of
bibles and religious articles by a non-stock,
non-profit missionary organization at
minimal profit constitutes a curtailment of
religious freedom and worship which is
guaranteed by the Constitution.
However, the income of such organizations from
any activity conducted for profit or from any of their
property, real or personal, regardless of the
disposition made of such income, is taxable.
12. TAX EXEMPTION OF PROPERTIES
ACTUALLY, DIRECTLY, EXCLUSIVELY USED
FOR RELIGIOUS, CHARITABLE AND
EDUCATIONAL PURPOSES
Charitable institutions, churches and
parsonages or convents appurtenant thereto,
mosques, non-profit cemeteries, and all lands,
buildings and improvements actually, directly,
and exclusively used for religious, charitable, or
educational purposes shall be exempt from
taxation. (Article VI, Section 28[3], Constitution)
Cemeteries are exempt from the payment of taxes
because of the difficulty of collecting a tax thereon
and the obvious impropriety of selling the graves of
the dead to defray the expenses of carrying on the
government of the living.
Churches and parsonages or convents appurte-
nant thereto, etc., are exempt from taxation
because such institutions perform work which
would other- wise have to be carried on by the
public at the expense of the taxpayers and that the
expenses of such insti- tutions from taxation
lessens rather than increases the burden upon
other taxpayers.
"exclusively used" does not necessarily mean total
or absolute use for religious, charitable and
educational purposes. Even if the property is
incidentally used for said purposes, the tax
exemption will apply.
What is exempted is not the institution itself;
those exempted from real estate taxes are
lands, buildings and improvements actually,
directly and ex- clusively used for religious,
charitable or educational purposes.
real property is used for one or more
commercial purposes, it is not exclusively used
for the exempted purposes but is subject to
taxation, the Supreme Court concluded that
"What is meant by actual, direct and exclusive
use of the property for charitable institutions is
the direct and immediate and actual application
of the property itself to the purposes for which
the charitable institution is organized. It is not
the use of the income from the real property
that is determinative of whether the property is
used for tax-exempt purposes.
"Actually is opposed to seemingly, pretendedly,
or feignedly, as actually engaged in farming
means, truly in fact."
"Directly. In a direct way without anything
intervening; not by secondary, but by direct
means."
"Exclusively. Apart from all others; without
admission of others to participation; in a
manner to exclude.
13. TAX EXEMPTIONS GRANTED FOR NON
STOCK, NON PROFIT EDUCATIONAL
INSTITUTIONS
Section 4. (3) All revenues and assets of
non- stock, non-profit educational
institutions used actually, directly and
exclusively for educational purposes shall
be exempt from taxes and duties. Upon the
dissolution and cessation of the corporate
existence of such institutions, their assets
shall be disposed of in the manner provided
by law.
Proprietary educational institutions,
including those cooperatively owned may
likewise be entitled to such exemptions,
subject to the limitations provided by law,
including restrictions on dividends and
provisions for reinvestments.
14. APPRORIATION OF PUBLIC MONEY
No public money or property shall be appropri-
ated, applied, paid or employed directly or
indirect- ly for the use, benefit or support of any
sect, church, denomination, sectarian
institution, or system of reli- gion or of any
priest, preacher, minister, or other reli- gious
teacher or dignitary as such EXCEPT when
such priest, preacher, minister or dignitary is
assigned to the
armed forces or to any penal institution or
government orphanage or leprosarium. (Article
VI, Section 29[l] Constitution)
This is in consonance with the inviolable
principle of separation of the Church and State.
The rule is subject to an exception. A particular
money may be set aside for a particular sect,
priest or religious minister or dignitaries if they
are assigned to the following institutions:
leprosarium, orphanage, penal institution and
the armed forces.
15. GRANT OF TAX EXEMPTIONS
The inherent power of the state to impose
taxes naturally carries with it the power to
grant tax exemptions. The power to exempt
from taxation, as well as the power to tax, is
an essential attribute of sovereignty, and
may be exercised in the constitution, or in a
statute, unless the Constitution expressly or
by implication prohibits action by the
legislature on the subject.
Exemptions from taxation may be created
directly by the Constitution, e.g., Art. VI,
Sec. 28(3) of the Constitution granting tax
exemptions to properties actually, directly
and exclusively used for religious, charitable
and educational purposes, or by an act of
the legislature, subject to the limitations as
the constitution may place, expressly or by
implication, upon the power of the
legislature.
No law granting any tax exemption shall be
passed without the concurrence of a.majority of
all the members of Congress.
Note that in granting tax exemptions, an
absolute majority vote of the Members of
Congress is required, while in cases of
withdrawal of such tax exemption, a relative
majority vote is sufficient.
Tax amnesties, tax condonations, and tax
refunds are in the nature of tax exemptions.
Such being the case, a law granting tax
amnesties, tax condonations, and tax refunds
requires the vote of an absolute majority of the
Members of Congress.
GENERAL RULE: NO EXEMPTION
A constitutional grant of exemption may be self-
executing or may require an act of Congress for
its operation. Where a constitutional provision
granting tax exemption is self-executing, the
legislature can neither add nor detract from it; it
may however, prescribe a procedure to
determine whether a claimant is entitled to the
constitutional exemption.
The intent to grant tax exemption must be clear,
otherwise the rule of construction applies that
exemption from taxation are to be strictly
construed against exemption and in favor of the
right to tax.
Where the Constitution confers upon the legis-
lature authority to grant exemptions within
certain limits, statutes granting such exemptions
shall be V ALID if they do not exceed the
constitutional limits, and VOID if they do.
However, there are exceptions to the strict con-
struction rule, to wit:
(1) The rule of strict construction does not apply
where the statute granting the exemption
expressly provides for a liberal interpretation;
(2) The rule of strict construction does not
apply to special taxes relating to special cases
and affecting only special classes of persons;
(3) While in some cases it is held that the strict
construction rule applies equally well to alleged
exemptions of municipal property, the better rule
is that strict construction of exemption statutes
applies to exemptions of property held in private
ownership but not to exemptions of public
property. In case of property owned by the state
or the city or other public corporation, an
express exemption should not be construed
with the same degree of strictness that applies
to exemptions contrary to the policy of the state,
since as to such property "exemption is the rule
and taxation the exemption;" (2 Cooley
Taxation, 1414-1415)
(4) Exemptions to traditional exemptees, such
as those in favor of religious and charitable
institu- tions; (Ibid.)
(5) Exemptions in favor of the government, its
poli- tical subdivisions or instrumentalities. In
Maceda v. Macaraig, Jr., 197 SCRA 771, the
Supreme Court held: "it is a recognized
principle that the rule on strict interpretation
does not apply in the case of exemptions in
favor of a governmental political subdivision or
instrumentality." The basis for applying the rule
of strict construction granting exemptions or
deductions, even more obvious than with
reference to the affirmative or levying provisions
of tax statutes, is to minimize differential
treatment and foster impartiality, fairness, and
equality of treatment among taxpayers. The
reason for the rule does not apply in the case of
exemptions running to the benefit of the
government itself or its agencies. In such a
case, the practical effect of an exemption is
merely to reduce the amount of money that has
to be handled by government in the course of
its operations;
(6) If the taxpayer falls within the purview of
exemption by clear legislative intent. (CIR v.
Arnoldus Carpentry Shop, G.R. No. 71122,
March 25, 1988)
Tax amnesty is an immunity from all criminal
and civil obligations arising from non-
payment of taxes. It is a general pardon
given to all taxpayers. It applies only to past
tax periods, hence of retroactive application.
(People v. Castaneda, G.R. No. L-46881, 1988)
On the other hand, tax exemption is an
immunity from the civil liability only. It is an
immunity or privilege, a freedom from a
charge or burden of which others are
subjected. (Florer v. Sheridan, 137 Ind. 28, 36
NE 365) It is generally prospective in
application.
16. LOCAL TAXATION
Each local government unit shall have the
power to create its own sources of revenues
and to levy taxes, fees and charges subject to
such guidelines and limitations as the Congress
may provide, consistent with the basic policy of
local autonomy. Such taxes, fees, and charges
shall accrue exclusively to the local
governments. (Article X, Section 5,
Constitution)
The general principle against the delegation
of legislative powers as a consequence of
the principle of separation of powers is
subject to one well-established exception:
legislative powers may be delegated to local
government units. (Pepsi Cola v. City of
Butuan,
Included in this grant of legislative power is
the grant of local taxing power.