taxation law- Tax Avoidance
Content
MEANS OF AVOIDING OR MINIMIZING THE BURDEN OF
TAXATION
Six basic forms of escape from taxation
1. Evasion
2.Capitalization
3. Shifting
4.Exemption
5.Transformation
6.Avoidance
Note: With the exception of evasion, all are legal means of
escape.
TAX EVASION
Tax evasion is the use by the taxpayer of illegal or fraudulent
means to defeat or lessen the payment of a tax. It is also known as
“tax dodging.” It is punishable by law.
2.Backward shifting
When the burden of the tax is transferred from the consumer or
purchaser through the factors of distribution to the factor of
production.
Example: Consumer or purchaser may shift tax imposed on him
to retailer by purchasing only after the price is reduced, and from
the latter to the wholesaler, and finally to the manufacturer or
producer.
3.Onward shifting
When the tax is shifted two or more times either forward or
backward.
Thus, a transfer from the seller to the purchaser involves one
shift; from the producer to the wholesaler, then to retailer, we
have two shifts; and if the tax is transferred again to the purchaser
by the retailer, we have three shifts in all.
Impact and incidence of taxation
Example: Deliberate failure to report a taxable income or
property; deliberate reduction of income that has been received.
Impact of taxation is the point on which a tax is originally
imposed. In so far as the law is concerned, the taxpayer is the
person who must pay the tax to the government. He is also termed
as the statutory taxpayer – the one on whom the tax is formally
assessed. He is the subject of the tax.
Incidence of taxation is that point on which the tax burden finally
rests or settle down. It takes place when shifting has been effected
from the statutory taxpayer to another.
Elements of tax evasion
Statutory taxpayer
Tax evasion connotes the integration of three factors:
The statutory taxpayer is the person required by law to pay the
tax or the one on whom the tax is formally assessed. In short, he
or she is the subject of the tax.
In direct taxes, the statutory taxpayer is the one who shoulders the
burden of the tax while in indirect taxes, the statutory taxpayer is
the one who pay the tax to the government but the burden can be
passed to another person or entity.
Tax evasion is a term that connotes fraud through the use of
pretenses or forbidden devices to lessen or defeat taxes. [Yutivo
v. Court of Tax Appeals, 1 SCRA 160]
1.The end to be achieved. Example: the payment of less than that
known by the taxpayer to be legally due, or in paying no tax
when such is due.
2.An accompanying state of mind described as being “evil,” “in
bad faith,” “willful” or “deliberate and not accidental.”
3.A course of action (or failure of action) which is unlawful.
Relationship between impact, shifting, and incidence of a tax
Evidence to prove evasion
Since fraud is a state of mind, it need not be proved by direct
evidence but may be proved from the circumstances of the case.
In Republic v. Gonzales [13 SCRA 633], the Supreme Court
affirmed the assessment of a deficiency tax against Gonzales, a
private concessionaire engaged in the manufacturer of furniture
inside the Clark Air Base, for underdeclaration of his income. SC
held that the failure of the taxpayer to declare for taxation
purposes his true and actual income derived from his business for
two (2) consecutive years is an indication of his fraudulent intent
to cheat the government if its due taxes.
SHIFTING
Shifting is the transfer of the burden of a tax by the original payer
or the one on whom the tax was assessed or imposed to someone
else.It should be borne in mind that what is transferred is not the
payment of the tax but the burden of the tax.
Taxes that can be shifted
Only indirect taxes may be shifted; direct taxes cannot be shifted.
Ways of shifting the tax burden
1.Forward shifting
When the burden of the tax is transferred from a factor of
production through factors of distribution until it finally settles on
the ultimate purchaser or consumer.
Example: Manufacturer or producer may shift tax assessed to
wholesaler, who in turn shifts it to the retailer, who also shifts it
to the final purchaser or consumer.
The impact is the initial phenomenon, the shifting is the
intermediate process, and the incidence is the result. Thus, the
impact in a sales tax (i.e. VAT) is on the seller (manufacturer)
who shifts the burden to the customer who finally bears the
incidence of the tax.
Impact is the imposition of the tax; shifting is the transfer of the
tax; while incidence is the setting or coming to rest of the tax.
TAX AVOIDANCE
Tax avoidance is the exploitation by the taxpayer of legally
permissible alternative tax rates or methods of assessing taxable
property or income in order to avoid or reduce tax liability. It is
politely called “tax minimization” and is not punishable by law.
In Delphers Traders Corp. v. Intermediate Appellate Court [157
SCRA 349], the Supreme Court upheld the estate planning
scheme resorted to by the Pacheco family in converting their
property to shares of stock in a corporation which they
themselves owned and controlled. By virtue of the deed of
exchange, the Pachecho co-owners saved on inheritance taxes.
The Supreme Court said the records do not point to anything
wrong and objectionable about this estate planning scheme
resorted to. The legal right of the taxpayer to decreased the
amount of what otherwise could be his taxes or altogether avoid
them by means which the law permits cannot be doubted.
TAX REMISSION OR TAX CONDONATION
The word “remit” means to desist or refrain from exacting,
inflicting or enforcing something as well as to restore what has
already been taken. The remission of taxes due and payable to the
exclusion of taxes already collected does not constitute unfair
discrimination. Such a set of taxes is a class by itself and the law
would be open to attack as class legislation only if all taxpayers
belonging to one class were not treated alike. [Juan Luna Subd.
V. Sarmiento, 91 Phil 370]
The condonation of a tax liability is equivalent to and is in the
nature of a tax exemption. Thus, it should be sustained only when
expressly provided in the law. [Surigao Consolidated Mining v.
Commissioner of Internal Revenue, 9 SCRA 728]
It is not necessarily discriminatory as long as there is a reasonable
foundation or rational basis.
Rationale for granting tax exemptions
Its avowed purpose is some public benefit or interest which the
lawmaking body considers sufficient to offset the monetary loss
entailed in the grant of the exemption.
The theory behind the grant of tax exemptions is that such act
will benefit the body of the people. It is not based on the idea of
lessening the burden of the individual owners of property.
TAX AMNESTY
Grounds for granting tax exemptions
Tax amnesty, being a general pardon or intentional overlooking
by the State of its authority to impose penalties on persons
otherwise guilty of evasion or violation of a revenue or tax law,
partakes of an absolute forgiveness or waiver by the government
of its right to collect what otherwise would be due it and, in this
sense, prejudicial thereto. It is granted particularly to tax evaders
who wish to relent and are willing to reform, thus giving them a
chance to do so and thereby become a part of the new society
with a clean slate. [Republic v. Intermediate Appellate Court,
196 SCRA 335]
Like tax exemption, tax amnesty is never favored nor presumed
in law. It is granted by statute. The terms of the amnesty must
also be construed against the taxpayer and liberally in favor of the
government.
1.May be based on contract. In such a case, the public which is
represented by the government is supposed to receive a full
equivalent therefor, i.e. charter of a corporation.
2.May be based on some ground of public policy, i.e., to
encourage new industries or to foster charitable institutions. Here,
the government need not receive any consideration in return for
the tax exemption.
3.May be based on grounds of reciprocity or to lessen the rigors
of international double or multiple taxation
2005 Notes: Equity is not a ground for tax exemption. Exemption
is allowed only if there is a clear provision therefor.
Nature of tax exemption
Tax amnesty v. tax condonation v. tax exemption
A tax amnesty, being a general pardon or intentional overlooking
by the State of its authority to impose penalties on persons
otherwise guilty of evasion or violation of a revenue or tax law,
partakes of an absolute forgiveness or waiver by the Government
of its right to collect what otherwise would be due it and, in this
sense, prejudicial thereto, particularly to tax evaders who wish to
relent and are willing to reform are given a chance to do so and
therefore become a part of the society with a clean slate.
1.It is a mere personal privilege of the grantee.
2.It is generally revocable by the government unless the
exemption is founded on a contract which is protected from
impairment.
3.It implies a waiver on the part of the government of its right to
collect what otherwise would be due to it, and so is prejudicial
thereto.
4.It is not necessarily discriminatory so long as the exemption has
a reasonable foundation or rational basis.
Kinds of tax exemption according to manner of creation
Like a tax exemption, a tax amnesty is never favored nor
presumed in law, and is granted by statute. The terms of the
amnesty must be strictly construed against the taxpayer and
liberally in favor of the government. Unlike a tax exemption,
however, a tax amnesty has limited applicability as to cover a
particular taxing period or transaction only.
There is tax condonation or remission when the State desists or
refrains from exacting, inflicting or enforcing something as well
as to restore what has already been taken. The condonation of a
tax liability is equivalent to and is in the nature of a tax
exemption. Thus, it should be sustained only when expressed in
the law.
1.Express or affirmative exemption
When certain persons, property or transactions are, by express
provision, exempted from all or certain taxes, either entirely or in
part.
2.Implied exemption or exemption by omission
When a tax is levied on certain classes of persons, properties, or
transactions without mentioning the other classes.
Every tax statute makes exemptions because of omissions.
Kinds of tax exemptions according to scope or extent
Tax exemption, on the other hand, is the grant of immunity to
particular persons or corporations or to person or corporations of
a particular class from a tax which persons and corporations
generally within the same state or taxing district are obliged to
pay. Tax exemption are not favored and are construed
strictissimi juris against the taxpayer.
TAX EXEMPTION
It is the grant of immunity to particular persons or corporations or
to persons or corporations of a particular class from a tax which
persons and corporations generally within the same state or taxing
district are obliged to pay. It is an immunity or privilege; it is
freedom from a financial charge or burden to which others are
subjected.
Exemption is allowed only if there is a clear provision therefor.
1.Total
When certain persons, property or transactions are exempted,
expressly or implied, from all taxes.
2.Partial
When certain persons, property or transactions are exempted,
expressly or implied, from certain taxes, either entirely or in part.
Does provision in a statute granting exemption from “all
taxes” include indirect taxes?
NO. As a general rule, indirect taxes are not included in the grant
of such exemption unless it is expressly stated.
Nature of power to grant tax exemption
1.National government
The power to grant tax exemptions is an attribute of sovereignty
for the power to prescribe who or what persons or property shall
be taxed implies the power to prescribe who or what persons or
property shall not be taxed.
It is inherent in the exercise of the power to tax that the sovereign
state be free to select the subjects of taxation and to grant
exemptions therefrom.Unless restricted by the Constitution, the
legislative power to exempt is as broad as its power to tax.
2.Local governments
Municipal corporations are clothed with no inherent power to tax
or to grant tax exemptions. But the moment the power to impose
a particular tax is granted, they also have the power to grant
exemption therefrom unless forbidden by some provision of the
Constitution or the law.
The legislature may delegate its power to grant tax exemptions to
the same extent that it may exercise the power to exempt.
Basco v. PAGCOR (196 SCRA 52): The power to tax municipal
corporations must always yield to a legislative act which is
superior, having been passed by the State itself. Municipal
corporations are mere creatures of Congress which has the power
to create and abolish municipal corporations due to its general
legislative powers. If Congress can grant the power to tax, it can
also provide for exemptions or even take back the power.
Chavez v. PCGG, G.R. No. 130716, 09 December 1998
In a compromise agreement between the Philippine Government,
represented by the PCGG, and the Marcos heirs, the PCGG
granted tax exemptions to the assets which will be apportioned to
the Marcos heirs. The Supreme Court ruled that the PCGG has
absolutely no power to grant tax exemptions, even under the
cover of its authority to compromise ill gotten wealth cases. The
grant of tax exemptions is the exclusive prerogative of Congress.
In fact, the Supreme Court even stated that Congress itself cannot
grant tax exemptions in the case at bar because it will violate the
equal protection clause of the Constitution.
Interpretation of laws granting tax exemptions
In the construction of tax statutes, exemptions are not favored and
are construed strictissimi juris against the taxpayer. The
fundamental theory is that all taxable property should bear its
share in the cost and expense of the government.
Taxation is the rule and exemption is the exemption.
He who claims exemption must be able to justify his claim or
right thereto by a grant express in terms “too plain to be mistaken
and too categorical to be misinterpreted.” If not expressly
mentioned in the law, it must be at least within its purview by
clear legislative intent.
Exceptions
1.When the law itself expressly provides for a liberal construction
thereof.
2.In cases of exemptions granted to religious, charitable and
educational institutions or to the government or its agencies or to
public property because the general rule is that they are exempt
from tax.
Strict interpretation does not apply to the government and its
agencies
Petitioner cannot invoke the rule on stritissimi juris with respect
to the interpretation of statutes granting tax exemptions to the
NPC. The rule on strict interpretation does not apply in the case
of exemptions in favor of a political subdivision or
instrumentality of the government. [Maceda v. Macaraig]
Davao Gulf v. Commissioner, 293 SCRA 76 (1998)
A tax cannot be imposed unless it is supported by the clear and
express language of a statute; on the other hand, once the tax is
unquestionably imposed, “a claim of exemption from tax
payments must be clearly shown and based on language in the
law too plain to be mistaken.” Since the partial refund authorized
under Section 5, RA 1435, is in the nature of a tax exemption, it
must be construed strictissimi juris against the grantee. Hence,
petitioner’s claim of refund on the basis of the specific taxes it
actually paid must expressly be granted in a statute stated in a
language too clear to be mistaken.
TAXATION
Six basic forms of escape from taxation
1. Evasion
2.Capitalization
3. Shifting
4.Exemption
5.Transformation
6.Avoidance
Note: With the exception of evasion, all are legal means of
escape.
TAX EVASION
Tax evasion is the use by the taxpayer of illegal or fraudulent
means to defeat or lessen the payment of a tax. It is also known as
“tax dodging.” It is punishable by law.
2.Backward shifting
When the burden of the tax is transferred from the consumer or
purchaser through the factors of distribution to the factor of
production.
Example: Consumer or purchaser may shift tax imposed on him
to retailer by purchasing only after the price is reduced, and from
the latter to the wholesaler, and finally to the manufacturer or
producer.
3.Onward shifting
When the tax is shifted two or more times either forward or
backward.
Thus, a transfer from the seller to the purchaser involves one
shift; from the producer to the wholesaler, then to retailer, we
have two shifts; and if the tax is transferred again to the purchaser
by the retailer, we have three shifts in all.
Impact and incidence of taxation
Example: Deliberate failure to report a taxable income or
property; deliberate reduction of income that has been received.
Impact of taxation is the point on which a tax is originally
imposed. In so far as the law is concerned, the taxpayer is the
person who must pay the tax to the government. He is also termed
as the statutory taxpayer – the one on whom the tax is formally
assessed. He is the subject of the tax.
Incidence of taxation is that point on which the tax burden finally
rests or settle down. It takes place when shifting has been effected
from the statutory taxpayer to another.
Elements of tax evasion
Statutory taxpayer
Tax evasion connotes the integration of three factors:
The statutory taxpayer is the person required by law to pay the
tax or the one on whom the tax is formally assessed. In short, he
or she is the subject of the tax.
In direct taxes, the statutory taxpayer is the one who shoulders the
burden of the tax while in indirect taxes, the statutory taxpayer is
the one who pay the tax to the government but the burden can be
passed to another person or entity.
Tax evasion is a term that connotes fraud through the use of
pretenses or forbidden devices to lessen or defeat taxes. [Yutivo
v. Court of Tax Appeals, 1 SCRA 160]
1.The end to be achieved. Example: the payment of less than that
known by the taxpayer to be legally due, or in paying no tax
when such is due.
2.An accompanying state of mind described as being “evil,” “in
bad faith,” “willful” or “deliberate and not accidental.”
3.A course of action (or failure of action) which is unlawful.
Relationship between impact, shifting, and incidence of a tax
Evidence to prove evasion
Since fraud is a state of mind, it need not be proved by direct
evidence but may be proved from the circumstances of the case.
In Republic v. Gonzales [13 SCRA 633], the Supreme Court
affirmed the assessment of a deficiency tax against Gonzales, a
private concessionaire engaged in the manufacturer of furniture
inside the Clark Air Base, for underdeclaration of his income. SC
held that the failure of the taxpayer to declare for taxation
purposes his true and actual income derived from his business for
two (2) consecutive years is an indication of his fraudulent intent
to cheat the government if its due taxes.
SHIFTING
Shifting is the transfer of the burden of a tax by the original payer
or the one on whom the tax was assessed or imposed to someone
else.It should be borne in mind that what is transferred is not the
payment of the tax but the burden of the tax.
Taxes that can be shifted
Only indirect taxes may be shifted; direct taxes cannot be shifted.
Ways of shifting the tax burden
1.Forward shifting
When the burden of the tax is transferred from a factor of
production through factors of distribution until it finally settles on
the ultimate purchaser or consumer.
Example: Manufacturer or producer may shift tax assessed to
wholesaler, who in turn shifts it to the retailer, who also shifts it
to the final purchaser or consumer.
The impact is the initial phenomenon, the shifting is the
intermediate process, and the incidence is the result. Thus, the
impact in a sales tax (i.e. VAT) is on the seller (manufacturer)
who shifts the burden to the customer who finally bears the
incidence of the tax.
Impact is the imposition of the tax; shifting is the transfer of the
tax; while incidence is the setting or coming to rest of the tax.
TAX AVOIDANCE
Tax avoidance is the exploitation by the taxpayer of legally
permissible alternative tax rates or methods of assessing taxable
property or income in order to avoid or reduce tax liability. It is
politely called “tax minimization” and is not punishable by law.
In Delphers Traders Corp. v. Intermediate Appellate Court [157
SCRA 349], the Supreme Court upheld the estate planning
scheme resorted to by the Pacheco family in converting their
property to shares of stock in a corporation which they
themselves owned and controlled. By virtue of the deed of
exchange, the Pachecho co-owners saved on inheritance taxes.
The Supreme Court said the records do not point to anything
wrong and objectionable about this estate planning scheme
resorted to. The legal right of the taxpayer to decreased the
amount of what otherwise could be his taxes or altogether avoid
them by means which the law permits cannot be doubted.
TAX REMISSION OR TAX CONDONATION
The word “remit” means to desist or refrain from exacting,
inflicting or enforcing something as well as to restore what has
already been taken. The remission of taxes due and payable to the
exclusion of taxes already collected does not constitute unfair
discrimination. Such a set of taxes is a class by itself and the law
would be open to attack as class legislation only if all taxpayers
belonging to one class were not treated alike. [Juan Luna Subd.
V. Sarmiento, 91 Phil 370]
The condonation of a tax liability is equivalent to and is in the
nature of a tax exemption. Thus, it should be sustained only when
expressly provided in the law. [Surigao Consolidated Mining v.
Commissioner of Internal Revenue, 9 SCRA 728]
It is not necessarily discriminatory as long as there is a reasonable
foundation or rational basis.
Rationale for granting tax exemptions
Its avowed purpose is some public benefit or interest which the
lawmaking body considers sufficient to offset the monetary loss
entailed in the grant of the exemption.
The theory behind the grant of tax exemptions is that such act
will benefit the body of the people. It is not based on the idea of
lessening the burden of the individual owners of property.
TAX AMNESTY
Grounds for granting tax exemptions
Tax amnesty, being a general pardon or intentional overlooking
by the State of its authority to impose penalties on persons
otherwise guilty of evasion or violation of a revenue or tax law,
partakes of an absolute forgiveness or waiver by the government
of its right to collect what otherwise would be due it and, in this
sense, prejudicial thereto. It is granted particularly to tax evaders
who wish to relent and are willing to reform, thus giving them a
chance to do so and thereby become a part of the new society
with a clean slate. [Republic v. Intermediate Appellate Court,
196 SCRA 335]
Like tax exemption, tax amnesty is never favored nor presumed
in law. It is granted by statute. The terms of the amnesty must
also be construed against the taxpayer and liberally in favor of the
government.
1.May be based on contract. In such a case, the public which is
represented by the government is supposed to receive a full
equivalent therefor, i.e. charter of a corporation.
2.May be based on some ground of public policy, i.e., to
encourage new industries or to foster charitable institutions. Here,
the government need not receive any consideration in return for
the tax exemption.
3.May be based on grounds of reciprocity or to lessen the rigors
of international double or multiple taxation
2005 Notes: Equity is not a ground for tax exemption. Exemption
is allowed only if there is a clear provision therefor.
Nature of tax exemption
Tax amnesty v. tax condonation v. tax exemption
A tax amnesty, being a general pardon or intentional overlooking
by the State of its authority to impose penalties on persons
otherwise guilty of evasion or violation of a revenue or tax law,
partakes of an absolute forgiveness or waiver by the Government
of its right to collect what otherwise would be due it and, in this
sense, prejudicial thereto, particularly to tax evaders who wish to
relent and are willing to reform are given a chance to do so and
therefore become a part of the society with a clean slate.
1.It is a mere personal privilege of the grantee.
2.It is generally revocable by the government unless the
exemption is founded on a contract which is protected from
impairment.
3.It implies a waiver on the part of the government of its right to
collect what otherwise would be due to it, and so is prejudicial
thereto.
4.It is not necessarily discriminatory so long as the exemption has
a reasonable foundation or rational basis.
Kinds of tax exemption according to manner of creation
Like a tax exemption, a tax amnesty is never favored nor
presumed in law, and is granted by statute. The terms of the
amnesty must be strictly construed against the taxpayer and
liberally in favor of the government. Unlike a tax exemption,
however, a tax amnesty has limited applicability as to cover a
particular taxing period or transaction only.
There is tax condonation or remission when the State desists or
refrains from exacting, inflicting or enforcing something as well
as to restore what has already been taken. The condonation of a
tax liability is equivalent to and is in the nature of a tax
exemption. Thus, it should be sustained only when expressed in
the law.
1.Express or affirmative exemption
When certain persons, property or transactions are, by express
provision, exempted from all or certain taxes, either entirely or in
part.
2.Implied exemption or exemption by omission
When a tax is levied on certain classes of persons, properties, or
transactions without mentioning the other classes.
Every tax statute makes exemptions because of omissions.
Kinds of tax exemptions according to scope or extent
Tax exemption, on the other hand, is the grant of immunity to
particular persons or corporations or to person or corporations of
a particular class from a tax which persons and corporations
generally within the same state or taxing district are obliged to
pay. Tax exemption are not favored and are construed
strictissimi juris against the taxpayer.
TAX EXEMPTION
It is the grant of immunity to particular persons or corporations or
to persons or corporations of a particular class from a tax which
persons and corporations generally within the same state or taxing
district are obliged to pay. It is an immunity or privilege; it is
freedom from a financial charge or burden to which others are
subjected.
Exemption is allowed only if there is a clear provision therefor.
1.Total
When certain persons, property or transactions are exempted,
expressly or implied, from all taxes.
2.Partial
When certain persons, property or transactions are exempted,
expressly or implied, from certain taxes, either entirely or in part.
Does provision in a statute granting exemption from “all
taxes” include indirect taxes?
NO. As a general rule, indirect taxes are not included in the grant
of such exemption unless it is expressly stated.
Nature of power to grant tax exemption
1.National government
The power to grant tax exemptions is an attribute of sovereignty
for the power to prescribe who or what persons or property shall
be taxed implies the power to prescribe who or what persons or
property shall not be taxed.
It is inherent in the exercise of the power to tax that the sovereign
state be free to select the subjects of taxation and to grant
exemptions therefrom.Unless restricted by the Constitution, the
legislative power to exempt is as broad as its power to tax.
2.Local governments
Municipal corporations are clothed with no inherent power to tax
or to grant tax exemptions. But the moment the power to impose
a particular tax is granted, they also have the power to grant
exemption therefrom unless forbidden by some provision of the
Constitution or the law.
The legislature may delegate its power to grant tax exemptions to
the same extent that it may exercise the power to exempt.
Basco v. PAGCOR (196 SCRA 52): The power to tax municipal
corporations must always yield to a legislative act which is
superior, having been passed by the State itself. Municipal
corporations are mere creatures of Congress which has the power
to create and abolish municipal corporations due to its general
legislative powers. If Congress can grant the power to tax, it can
also provide for exemptions or even take back the power.
Chavez v. PCGG, G.R. No. 130716, 09 December 1998
In a compromise agreement between the Philippine Government,
represented by the PCGG, and the Marcos heirs, the PCGG
granted tax exemptions to the assets which will be apportioned to
the Marcos heirs. The Supreme Court ruled that the PCGG has
absolutely no power to grant tax exemptions, even under the
cover of its authority to compromise ill gotten wealth cases. The
grant of tax exemptions is the exclusive prerogative of Congress.
In fact, the Supreme Court even stated that Congress itself cannot
grant tax exemptions in the case at bar because it will violate the
equal protection clause of the Constitution.
Interpretation of laws granting tax exemptions
In the construction of tax statutes, exemptions are not favored and
are construed strictissimi juris against the taxpayer. The
fundamental theory is that all taxable property should bear its
share in the cost and expense of the government.
Taxation is the rule and exemption is the exemption.
He who claims exemption must be able to justify his claim or
right thereto by a grant express in terms “too plain to be mistaken
and too categorical to be misinterpreted.” If not expressly
mentioned in the law, it must be at least within its purview by
clear legislative intent.
Exceptions
1.When the law itself expressly provides for a liberal construction
thereof.
2.In cases of exemptions granted to religious, charitable and
educational institutions or to the government or its agencies or to
public property because the general rule is that they are exempt
from tax.
Strict interpretation does not apply to the government and its
agencies
Petitioner cannot invoke the rule on stritissimi juris with respect
to the interpretation of statutes granting tax exemptions to the
NPC. The rule on strict interpretation does not apply in the case
of exemptions in favor of a political subdivision or
instrumentality of the government. [Maceda v. Macaraig]
Davao Gulf v. Commissioner, 293 SCRA 76 (1998)
A tax cannot be imposed unless it is supported by the clear and
express language of a statute; on the other hand, once the tax is
unquestionably imposed, “a claim of exemption from tax
payments must be clearly shown and based on language in the
law too plain to be mistaken.” Since the partial refund authorized
under Section 5, RA 1435, is in the nature of a tax exemption, it
must be construed strictissimi juris against the grantee. Hence,
petitioner’s claim of refund on the basis of the specific taxes it
actually paid must expressly be granted in a statute stated in a
language too clear to be mistaken.
