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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
The power to tax can be resorted to only for a constitutionally valid public purpose. (Planters Products, Inc. v. Fertiphil Corporation, G.R. No. 1660006, March 14, 2008)
The power of taxation is one of the inherent powers of the State. It refers to the power to levy taxes to be used for public purpose. The main purpose of taxation is revenue generation.
As with any other power of the State, the power of taxation is circumscribed by inherent and constitutional limitations. One of the inherent limitations on the power of taxation is public purpose.
Taxes are exacted only for a public purpose. The proceeds of taxes must be used (1) to support the State, or (2) for some recognized objects of government or directly to promote the welfare of the community.
They cannot be used for purely private purposes or for the exclusive benefit of private persons due to the simple reason that the power to tax exists for the general welfare, hence, implicit in its power is the limitation that it should only be used for a public purpose.
As held in the case of Planters Products, Inc. v. Fertiphil Corporation (G.R. No. 1660006, March 14, 2008), it would be robbery for the State to tax its citizens and use the funds generated for a private purpose:
“To lay with one hand, the power of the government on the property of the citizen, and with the other to bestow it upon favored individuals to aid private enterprises and build up private fortunes, is nonetheless a robbery because it is done under the forms of law and is called taxation.”
The term public purpose should be given a broad interpretation and does not only pertain to those purposes which are traditionally viewed as essentially government functions, such as building roads and delivery of basic services, but also includes those purposes designed to promote social justice.
While the categories of what may constitute a public purpose are continually expanding in light of the expansion of government functions, the inherent requirement that taxes can only be exacted for a public purpose still stands.
What is the test to determine if the purpose of taxation is for public use or not?
The test public purpose is whether the statute is designed to promote public interest, as opposed to the furtherance of the advantage of individuals, although each advantage to individuals might incidentally serve the public. (Wenceslao Pascual v. Secretary of Public Works and Communication, et al., G.R. No. L-10405, December 29, 1960)
It must be noted that public use is no longer confined to the traditional notion of use by the public but held synonymously with public interest, public benefit, public welfare, and public convenience. (Commissioner of Internal Revenue v. Central Luzon Drug Corporation, G.R. No. 159647, April 15, 2005)
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Tax Deficiency vs. Tax Delinquency – ALBURO ALBURO AND ASSOCIATES LAW OFFICES (alburolaw.com)
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