By: Atty. Gregorio B. Austral, CPA
Taxes, Due Process, and the Rule of Law
Taxation is the State’s most practical expression of sovereignty: it funds roads, schools, hospitals, and the day-to-day machinery that keeps the Republic running. The familiar line—taxes are the lifeblood of government—captures the urgency of collection, but it can also tempt officials to treat procedure as a technical nuisance rather than the essence of legality. In a constitutional democracy, however, the State’s power to tax is not a license to take; it is an authority to collect according to law, and that “according to law” is where the rule of law truly lives. (Fish2Go Corporation v. Commissioner of Internal Revenue et al., CTA Case No. 10286, 2025)
What we sometimes forget is that behind every tax return is a person—a small business owner trying to stay afloat, a family stretching a budget, a professional who files honestly because it is the right thing to do. The taxpayer is not a mere “source of revenue,” but a rights-bearing citizen protected by the Constitution. Courts have been consistent: no one may be deprived of property without due process, and when the tension between revenue collection and individual rights becomes sharp, the balance must tilt toward constitutional protections. This is not defiance; it is discipline. It reminds government that power, especially the power to tax, must be exercised with care. (iSCALE SOLUTIONS, INC. v. CIR, CTA Case No. 9845, 2021)
That discipline is clearest in the basic architecture of assessments. Before the government can insist that a taxpayer owes anything, it must notify, explain, and give a fair chance to respond. These are not empty rituals. They are the very steps that separate lawful collection from arbitrary taking. When the taxing authority fails to strictly comply with statutory and regulatory requirements—especially on service of notices and the factual or legal basis of the assessment—courts do not treat the lapse as a harmless error. They treat it as a denial of due process. And rightly so. A void assessment produces no legal effects, and any collection effort anchored on it collapses. (Fortune Plastic Processing & Chemical Corp. v. CIR, CTA Case No. 10984, 2025)
But the rule of law protects the State as well. Taxpayers who dispute assessments must act with promptness and seriousness. If they sleep on their remedies, the assessment may become final, executory, and demandable. Courts will not reopen what the law considers settled—unless the supposed “final” assessment is void for violating due process. Finality cannot cure a nullity. This is the balance we often forget: the government must follow the rules in assessing, and the taxpayer must follow the rules in contesting. (Ortiz Memorial Chapel, Inc. v. CIR, CTA En Banc No. 2651, 2024)
The same balance appears even earlier, at the audit stage. An audit is not an open-ended expedition. It must rest on lawful authority, and the officers who examine a taxpayer must be properly empowered. When an audit is conducted by someone not specifically named in a valid authority, the process is compromised at its root. The resulting assessment is void because the State’s power is being exercised by the wrong hands, in the wrong way. This protects taxpayers from arbitrary intrusion, but it also protects the government from having its own work invalidated. (CIR v. Manila Medical Services, Inc., G.R. No. 255473, 2023)
And finally, the rule of law is not only about restraining the State; it is also about ensuring that disputes are resolved through responsible channels. Some tax laws even require taxpayers to “pay first under protest” before courts will hear a challenge—an acknowledgment that government cannot be paralyzed while cases drag on. Yet even these restrictions are framed to preserve substantial rights. Courts will not strike down taxes for mere irregularities unless substantial rights are impaired, and they may require payment of the “just amount” as determined in the case. The message is steady and reassuring: the State must collect, the citizen must contribute, and both must submit to law. Only then does taxation become not an arbitrary exaction, but a lawful contribution to the common good. (Act No. 3995, Sec. 59; RA 409, Sec. 76; RA 5495, Sec. 64)