Recently, boxing pound-for-pound king Manny Pacquiao had run into trouble with the

BIR for alleged failure to pay taxes in the Philippines for a fight held in the United
States. The BIR had threatened the boxer with seizure of property until Pacquiao
agreed to settle the tax problem.
The P3.2 billion tax evasion case before the CTA was filed by the BIR after assessing
that Pacquiao had incurred deficiency income and value-added tax from 2008 to 2009,
worth P2.2 billion. Penalties and surcharges caused the deficiency to balloon to P3.2
billion. CTA ordered Pacquiao to post a bond requirement amounting to P3.3B,
however, Pacman persuaded the court to lift the bond requirement, hence, a TRO has
been granted by the SC.
Pacquiao is contending that he paid his income taxes for 2008 and 2009 in the US, and
that a treaty protects him from being taxed twice. The United States imposes a 40% tax
on earnings from the fight, while the Philippines collects 32% from the same. However,
in order to be entitled to a tax exemption, a tax payer must report to the Philippines
through authenticated documents that he paid US taxes, for which Pacquiao failed to
do.
Double taxation arises when a person is subjected to tax on the same income by both
the country where he resides and the country where he derives the income. This
happens because a resident citizen is taxed based on his worldwide income. A tax
treaty resorts to several methods to prevent double taxation. Under the NIRC, the
amount of income taxes paid during the taxable year to any foreign country may be
used as tax credits against Philippine income taxes. Tax credits that may be claimed in
the Philippines are compensation income tax withheld by the employer and income
taxes paid by citizens to any foreign country.
Treaties are considered as one of the primary sources of international law. The general
rule is that for a treaty to be considered a direct source of international law, it must be
concluded by sizable number of states and thus reflect the will or at least the
consensus of the family of nations. However not all treaties are considered direct
source of international law in cases where the treaty was not concluded by great
body of states, such as bilateral treaties. Nevertheless, a bilateral treaty is binding
between the parties especially if a dispute arose between them.
The SUBJECT of international law is an entity that has rights and responsibilities under
that law. It has an international personality in that it can directly assert rights and be held
directly responsible under the law of nations. In tax treaties, the subject are the states,
hence in the given case, the Philippines and US. A Filipino private citizen is generally
regarded not as a subject but as an object. An OBJECT of international law is merely
indirectly vested with rights and obligations in the international sphere.
The ESSENTIAL REQUISITES OF A VALID TREATY

1.
2.
3.
4.
5.

be entered into by parties with the treaty making capacity;

through their authorized representatives;
without the attendance of duress, fraud, mistake or other vice of consent;
on any lawful subject matter;
in accordance with their respective constitutional processes

The Constitution of the Philippines authorizes the President to make treaties, subject to the
concurrence of two-thirds of all the members of the Senate.

Treaty
Executive Agreement
Mun. Law v. Int'l Law
Sovereignty
Sovereignty is the supreme power of the state to command and enforce obedience; it is
the power to which, legally speaking, all interests are practically subject and all wills
subordinate.
Principle of Contingent Sovereignty- sovereignty is dependent upon the fulfillment of
the state of certain fundamental obligations particularly to its own people.
2 Aspects of Sovereignty
1. Internal Sovereignty refers to the power of the state to direct its domestic affairs, as
when it establishes its government, enacts laws for observance within its territory, or adopts
economic policies.
2. External Sovereignty signifies the freedom of the state to control its own foreign
affairs, as when it concludes treaties, makes war or peace, and maintains diplomatic and
commercial relations. (also referred to as independence)

Kinds of Sovereignty
State
Elements of the State
State

A STATE may be defined as a group of people living together in a definite territory under an
independent government organized for political ends and capable of entering into
international relations.
The state is a legal concept; nation is only a racial or ethnic concept.
The term nation, strictly speaking, as evidenced by its etymology (nasci, to be born),
indicates a relation of birth or origin and implies a common race, usually characterized by
community of language and customs.
The State (or nation) should possess the following elements in order to be regarded as an
international person: (P GIST)
1. A permanent population
2. A defined territory
3. Government
4. Sovereignty or independence
GOVERNMENT is defined as the agency through which the will of the state is formulated,
expressed and realized.