BMGT 28 Flashcards
defined as the process by which the sovereign, through its law-making body raises revenues used to defray government expenses
It is the mean of the government in increasing its revenue under the authority of the law, purposely used to promote welfare and protection of its citizenry.
Process of government to raise revenue
Protection of general people
Taxation
it is an imposed contribution from person and properly levied by the law-making body purposely to support the government and all public needs.
Tax
Inherent power of the state to imposed and demand contributions upon person and properties or rights for the purpose of generating the revenues for public purposes.
Concept of Taxation
The individual should be taxed in proportion to the benefits they receive from the government and that taxes should be paid by those people who receive the direct benefit of the government programs and projects out of the taxed paid
The benefit principle
That taxes should relate with people’s income or the ability to pay that is greater income or wealth and can afford to pay more taxes should be taxed at higher rate than people with low wealth and low income
Ability to pay principle
That income wealth and transaction should be taxed at a fixed percentage, that is people who earn more and buy more will not pay higher rate of taxes.
Example: value added tax or VAT
The equal distribution principle
Meaning the government takes an amount of
money from a person which is indirect proportion to his income. Ex. Ben salary is 10,000pesos and the government is deducting 10% of his salary for tax. After a year his income increases to 15,000pesos and the
governments now deducts 12% of his salary for tax.
Tax is proportional
regardless of your status in life, you will pay higher rate of tax
Tax is regressive
all wealthy people have higher tax; when importation in the country rises.
Tax is progressive
What is the significance of taxation?
Primary purpose: generates funds or revenues use to defray
expenses incurred by the government in promoting the general
welfare of its citizenry.
Other purposes:
■ to equitably contribute to the wealth of the nation
■ to protect new industries
■ to protect local producers
What is the characteristics of taxation?
It is an enforced contribution – mandatory
It is generally payable in cash
It is proportionate in character
It is levied by the state which has jurisdiction over the person or property
It is levied by the law-making body of the state
It is levied for public purposes
means that the sources of the revenues taken as a whole should be sufficient to meet the expanding expenditures of the government regardless of business conditions, export conditions, trade balances and problem of economic adjustments
Fiscal Adequacy
means that taxes levied must be based upon the ability of the citizen to pay
Equitably or theoretical justice
the tax system should be capable of being properly and efficiently administered by the government and enforced with the least inconvenience to the tax payer. (Tax payer should have clear understanding about the tax his or her paying.)
Administrative feasibility
refers to the tax laws that should be consistent with economic goals and programs of the government.
Consistency and compatibility with economic goals
literally means the place of taxation or the country that has jurisdiction to leux a particular tax on person, property, rights or business.
Situs of Taxation
what will be taxed?
Example: income and property
Subject matter
Examples of these are income tax, property tax
Nature of tax
Examples of these are foreign/alien or local citizen
Citizenship of the tax payer
territorial boundaries; issuing cedula
Residence of the taxpayer
What are the classifications of taxes?
- As to subject matter
- As to who bears the burden
- As to determination of account
- As to purpose
- As to scope
that there is fix amount upon all person’s residence with a specified territory regardless to their property or occupation
Ex: cedula or community tax certificate
Personal poll or capitation tax
refers to one assessed on owned property located within a certain territory on a specified data in proportion to the value in accordance with reasonable methods of apportionment, the obligation to pay is absolutely and avoidable and is not based upon any voluntary action of an individual assessment
Property tax
refers to pay any tax which does not fall under the classification of a poll tax or a property tax and embraces every form of burden not load directly upon person or property.
Excise tax
refers to tax which is demand from an individual who tends to buy or purchase a goods and services
Direct tax
refers to tax paid primarily by a person who can shift the burden upon someone else or who is underknown legal obligation
Indirect tax
is a fixed tax or determinate some imposed by the need, number or some standard of weight and measurement and requires no assessment beyond in listing and qualification of the project to be tax
Specific tax
is a tax of a fixed proportion of the value of the property with respect to which the tax is assessed and requires the intervention of assessor or appraisers to estimate the value of the property.
Ad valorem tax
refers to tax levied to an individual for a general-public purposes
General tax
a tax to an individual for a particular or specific purpose
Special tax
tax imposed by the state and is effective within the entire jurisdiction
National tax
tax imposed by the political subdivision of the state and is effective only within the territorial boundaries
Local tax
What are the entities exempted from taxation
Religious institutions
Charitable institutions
Non-profit, non-stock educational institutions
Non-profit cemeteries (public cemeteries)
Government institutions
Foreign diplomats (foreign representatives
passing the burden of tax from one person to another
Shifting
occurs when the burden of tax is transfer from a factor of production to the factor of distribution
Forward shifting
burden of taxes is transfer from consumer to the producer or manufacturer
Backward shifting
tax is shifted to 2 or more times either forward or backward
Onward shifting
refers to the reduction in price of the taxed object to the capitalize value of future taxes which the purchaser expected to be called upon to pay
Capitalization
when the manufacturer or producer upon whom the taxes has been imposed pays the tax and endeavor to himself by improving the process of production
Transformation
practiced by the tax payer through illegal or fraudulent means to deceit or lessen the amount of tax
Tax evasion
the exploitation by the tax payer of legally permissible methods in order to avoid
Tax avoidance
is the grant of immunity or freedom from a financial charge obligations or burden to which others are subjective
Tax exemptions
What are the grounds of exemptions
Contract wherein the government is the contracting party. (partnership in government to be able to free from tax)
Public policy – law that says that you are exempted from tax
Reciprocity – exist commonly on the income from dead person
What are the kinds of tax under existing laws?
National taxes – taxes imposed by the National Government
National Internal Revenue Code
Tariffs and customs code of the Philippines
Sugar Adjustment Act
Travel Tax
Energy Tax
Republic Acts numbers
Presidential Decrees through Public Acts
What are the KINDS OF TAXES UNDER EXISITING LAWS under local taxes?
Local tax code
Real property tax code
Tax ordinance of respective barangays, municipality and provinces
What are the AUTHORITIES IN IMPOSING TAX IN THE PHILIPPINES
National Government
Municipal/local government
What are the individual tax payers?
• Citizens
- resident citizen
- non-resident citizen
• Alien
- resident alien
- non-resident alien
What are the corporate taxpayers?
- Domestic corporation
- Foreign corporation
a. Resident foreign corporation
b. Non-resident foreign corporation
under the constitutions, they are:
Those who are the citizens of the Philippines at the time of adaptation of the Constitution on Feb 2, 1987
Those whose father and mother are citizens of the Philippines
Those born before January 17,1973 of Filipino mothers who elected Filipino citizenship upon reaching the age of majority
Those who are naturalized in accordance with the law
Citizens
a Filipino citizen residing in the Philippines
Resident citizen
A citizen of the Philippines who establishes to the satisfaction of the commissioner the fact of his physical presence abroad with a definite intention to reside therein
A citizen of the Philippines who leaves the Philippines during the taxable year to reside abroad, either as an immigrant or for an employment on a permanent basis
A citizen of the Philippines who works and derive income from abroad and whose employment thereat requires him to be physically present abroad most of the time during the taxable year
Non resident citizen
an individual who is residing in the Philippines but not a citizen, like:
An person who lives in the Philippines without definite intention as to his stay
One who comes to the Philippines for a definite purpose which in its nature would require an extended stay and to that end makes his intention at all times to return to his domicile abroad
Alien
an individual who is not residing in the Philippines and who is not a citizen thereof
Engaged in trade or business (NRA-ETB) alien who stayed in the Philippines for an aggregate period of more than 180 days during the year
Not engaged in trade or business (NRA-NETB) include
Aliens who come to the Philippines for a definite purpose which in his nature may be promptly accomplished
Aliens who shall come to the Philippines and stay therein for an aggregate period of not more than 180 days during the taxable year
Non-resident alien
covers all except those subject to final tax and capital gains tax
General in coverage
Tax on residual profit
Net income tax
Applies on year profits or gains
Annual tax
required advance taxes (CWT)
Creditable withholding tax
uses progressive tax on individual tax and flat rate on corporation (30%)
Progressive or proportional tax
means the pertinent items of gross income specified in the Tax code, less the deductions, if any, authorized for such types of income, by the tax code or other special laws
Taxable income
