INC TAX Assignment PDF

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Assignment 1...

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A. Please discuss the Lifeblood Doctrine. Give some illustrations of this Doctrine. 

“Taxes are the lifeblood of the government, and their prompt and certain availability are an imperious need. Upon taxation depends the government’s ability to serve the people for whose benefit taxes are collected.” (Vera vs. Fernandez) This means that the power of taxation is essential because the government cannot continue to perform its basic functions of serving and protecting the people without means to pay its expenses.

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The Supreme Court held that taxes are the lifeblood of the government and should be collected without unnecessary hindrance. They are what we pay for a civilized society. Without taxes, the government would be paralyzed for lack of motive power to activate and operate it. The government, for it 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 value. (Commissioner vs Algue)

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Taxes could not be the subject of compensation or set-of  Taxes cannot be subject to set-of or compensation since claim for taxes is not a debt or contract. A distinguishing feature of a tax is that it is compulsory rather than a matter of bargain. If taxes could be a subject of compensation or set-of, it can easily give rise to confusion and abuse, depriving the government of authority over the manner by which taxpayers can credit and ofset their tax liabilities. Rule of “No Estoppel against the Government.”  The government is not bound by the errors committed by its agents. In the performance of its governmental functions, the State cannot be estopped by the neglect of its agents and officers. Taxes are the lifeblood of the nation through which the government agencies continue to operate and with which the state efects its functions for the welfare of its constituents. The errors of certain administrative officers should never be allowed to jeopardize the government’s financial position. Collection of taxes cannot be enjoined by injunction  Under section 218 of the Tax Code, no court, except the Court of Tax Appeals, shall have the authority to grant an injunction to restrain the collection of any national internal revenue tax, fee or charge imposed by the tax code. Right to select objects of taxation  The power to tax is essentially legislative in nature. Hence, the right to select the objects/subjects of taxation rests with the Congress. A valid tax may result in the destruction of the taxpayer’s property.  The power to tax includes the “power to destroy”, where the tax is valid. This is so because a taxpayer could not seek the nullification of the valid tax solely upon the premise that the tax will impoverish him.

B. Distinguish the three powers of the state and enumerate their similarities. 1. Police Power

It is the power of the state for promoting public welfare by restraining and regulating the use of liberty and property. The property taken in the exercise of this power is destroyed because it is noxious or intended for a noxious purpose. 2. Power of Taxation  It is the power by which the State raises revenue to defray the necessary expenses of the government. 3. Power of Eminent Domain  It is the power of the State to acquire private property for public purpose upon payment if just compensation. 

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Similarities:  They are inherent in the state.  They exist independently of the constitution although the conditions for their exercise may be prescribed by the constitution.  Ways by which the State Interfere with private rights and property.  Legislative in nature and character  Presuppose an equivalent compensation received, directly or indirectly, by the persons afected.

C. Enumerate the diferent Constitutional limitations as well as the inherent limitations of Taxation. Cite an illustration for each example. 

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Inherent Limitation o Purpose must be public in nature  A tax must always be imposed for a public purpose, otherwise, it will be declared as invalid. o Prohibition against delegation of the taxing power  What cannot be delegated is the legislative “enactment/imposition/levying” of tax measure. However, as regards to administrative implementation of a tax law, that can be delegated. o Territorial Limitation  Public services are normally provided within the boundaries of the State. Thus, the government can only demand tax obligations upon its subjects or residents within its territorial jurisdiction. Constitutional Limitation o Due process of law  There must be a valid law and the measure should not be unconscionable and unjust as to amount to confiscation of property. o Equal Protection of laws  All persons subject to legislation shall be treated alike under similar circumstances and conditions both in the privileges conferred and liabilities imposed. o Rule of uniformity and equity taxation  It requires the uniform application and operation, without discrimination, of the tax in every place where the subject of the tax is found. o Prohibition against imprisonment for non-payment if “poll tax”

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 No person shall be imprisoned for debt or non-payment of poll tax. Prohibition against impairment of obligation of contracts  No law impairing the obligation of contracts shall be passed. Prohibition against infringement of religious freedom  No law shall be made respecting an establishment of religion or prohibiting the free exercise thereof. Prohibition against appropriation of proceeds of taxation for the use, or support of any church.  No public money or property shall be appropriated, applied, paid, or employed directly or indirectly, for the use, benefit, or support of ay church, denomination, sectarian institution or system of religion, or of any priest, preacher, minister or other religious teacher, or dignitary as such except when such priest, preacher, minister or dignitary is assigned to the armed forced, or to any penal institution, or government orphanage or leprosarium. Prohibition against taxation of religious, charitable and educational entities.  Charitable institutions, churches and parsonages and all lands, buildings, and improvements, actually, directly, and exclusively used for religious, charitable, or educational purposes shall be exempt from taxation. Prohibitions against taxation of non-stock, non-profit educational institutions.  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.

D. What are the categories of escapes from taxation? Enumerate and explain each means of escape under each category. 

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Those that result to loss of government revenue o Tax Evasion  Refers to any act or trick that tends to illegally reduce or avoid the payment of tax. o Tax Avoidance  Refers to any act or trick that reduces or totally escapes taxes by any legally permissible means. o Tax Exemption  Refers to the immunity, privilege or freedom from being subject to tax which others are subject to. Those that do not result to loss of government revenue o Shifting  This is the process of transferring tax burden to other taxpayers o Capitalization  This pertains to the adjustment of the value of an asset caused by changes in tax rates. o Transformation  This pertains to the elimination of wastes or losses by the taxpayer to for savings to compensate for the tax imposition or increase in taxes....