Learn: Taxation Short Quiz

Overview

Welcome to our deep dive into the fundamental powers of the State as tested in the Philippine CPA Licensure Exam (CPALE) on Taxation. This session will help you master how and why the government can regulate, tax, and even take property, along with the key legal and ethical boundaries involved. By understanding the differences, purposes, and limitations of these powers, you’ll not only ace the quiz but also gain practical insight into their real-world application.

Concept-by-Concept Deep Dive

1. Fundamental Powers of the State

The Philippine government exercises three inherent powers to promote the general welfare: Police Power, Power of Eminent Domain, and Power of Taxation. Each power serves a distinct function and is subject to unique principles and limitations.

Police Power

• What It Is: Police power is the authority of the State to enact laws, ordinances, and regulations to promote public health, safety, morals, and general welfare.
• Components:
  • Scope: Very broad—includes regulations on business, health, public morals, and safety.
  • Exercise: Usually through statutes, ordinances, or executive orders.
• How to Identify: If the government is restricting or guiding behavior for the common good (regulating hours, sanitation, curfews, bans), it’s likely police power.
• Misconception: It does NOT entail taking property for public use with compensation; that’s eminent domain.

Power of Eminent Domain

• What It Is: This is the State’s authority to take private property for public use, provided just compensation is paid.
• Components:
  • Public Purpose: The property must be used for something that benefits the community (roads, parks, schools, hospitals).
  • Just Compensation: The owner must be paid a fair value for the property.
  • Due Process: The owner has the right to contest the taking or the compensation in court.
• How to Identify: Look for government actions involving compulsory acquisition of private property for public projects, always with compensation.
• Common Error: Forgetting that compensation is required, or confusing public regulation (police power) with taking ownership (eminent domain).

Power of Taxation

• What It Is: The State’s power to collect revenues from individuals or businesses to fund public expenditures.
• Components:
  • Imposition: Taxes are imposed by law, must be for public purpose, and should be uniform and equitable.
  • Scope: Includes income tax, property tax, excise tax, and more.
  • Local vs. National: Both the national government and local government units (LGUs) can levy certain taxes.
• How to Identify: If the scenario involves imposing a financial charge on citizens or businesses for public spending, it’s taxation.
• Key Principle: No taking of property—only a portion of income or wealth is collected as tax.

2. Limitations and Safeguards on State Powers

Powers of the State are not absolute; they are checked by constitutional and statutory limits.

For Police Power

• Limits: Must not violate constitutional rights (e.g., due process, equal protection).
• Test of Reasonableness: Measures must be appropriate and not unduly oppressive.

For Eminent Domain

• Just Compensation: The government cannot take property without paying its fair market value.
• Due Process: Owners must be given a chance to be heard.
• Public Use Requirement: Property must be used for a legitimate public purpose.

For Taxation

• Uniformity and Equity: Taxes must be applied fairly, not arbitrarily.
• Legality: Only legislatures (or authorized LGUs) can impose taxes.
• Non-impairment: Taxes should not violate existing contracts or constitutional protections.

3. Local Government Authority

Local government units (LGUs) have specific powers delegated by law.

Taxation by LGUs

• Authority: Under the Local Government Code, provinces, cities, municipalities, and barangays can impose certain taxes, fees, and charges.
• Community Tax: Often imposed by LGUs as a form of local revenue.

Ordinances and Police Power