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Income Tax (RECITATION FORMAT) > Ch.1 Introduction to Taxation > Flashcards

Ch.1 Introduction to Taxation Flashcards

1
Q

3 components that define taxation

A

Taxation as a state power, as a (legislative) process, and a mode of government cost distribution

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2
Q

Taxation as a state power

A

Taxation is an inherent power of the state to enforce a proportional contribution from its subjects for public purpose

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3
Q

Taxation as a process

A

Taxation is a process of levying taxes by the legislature of the State to enforce proportional contributions from its subjects for public purpose

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4
Q

As a mode of cost contribution

A

Taxation is a mode by which the state allocates its costs or burden to its subjects who are benefited by its spending

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5
Q

Explain to me the theory of taxation

A

Every government provides a vast array of public services. However, a government cannot exist without a system of funding. The government necessity for funding is the theory of taxation

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6
Q

Basis of taxation

A

Government provides benefits to people in the form of public services, and the people provide the funds that finance the government

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7
Q

Explain to me the concept of receipt of benefits is conclusively presumed

A

In taxation, the receipt of benefits by the people is conclusively presumed. The direct receipt or actual availment of government services is not a precondition to taxation

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8
Q

What are the theories of Cost Alllocation?

A

Benefit received theory and Ability to pay theory

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9
Q

Explain to me the benefit received theory

A

The benefit received theory presupposes that the more benefit one receives from the government, the more taxes he should pay

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10
Q

Explain to me ability to pay theory

A

The ability to pay theory presupposes that taxation should also consider the taxpayer’s ability to pay. In short the people who have more should be taxed more even if they receive less benefits from the government.

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11
Q

What are the two aspects of the ability to pay theory

A

Vertical Equity and Horizontal Equity

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12
Q

Explain to me Vertical Equity

A

Vertical equity proposes that the extent of one’s ability to pay is directly proportional to the level of his tax baseE

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13
Q

Explain to me Horizontal Equity

A

Horizontal equity requires consideration of the particular circumstance of the taxpayer

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14
Q

Vertical Equity is a ______ concept; Horizontal Equity is a _________ concept

A

Gross; Net

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15
Q

Explain to me the lifeblood doctrine

A

Taxes are essential and indispensable to the continued subsistence of the government. Taxes are the lifeblood of the government, upon taxation depends the government’s ability to serve the people.

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16
Q

Explain to me the inherent powers of state

A

A government has its basic rights and needs that co-exist with its creation. It has rights to sustenance, protection and properties. These powers are naturally exercisable by the government even in the absence of an express grant of power in the constitution

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17
Q

What are the inherent powers of state

A

Taxation power, Police power, Eminent domain

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18
Q

Explain to me what is taxation power

A

is the power of the state to enforce proportional contributions from its subjects to sustain itself

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19
Q

Explain to me what is police power

A

Is the general power of the state to enact laws to protect the well-being of the people

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20
Q

Explain to me what is eminent domain

A

is the power of the state to take private property for public use after paying just compensation

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21
Q

Scope of taxation

A

The scope of taxation is widely regarded as comprehensive, plenary, unlimited and supreme. However, taxation has its own inherent limitations and limitations imposed by the constitution

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22
Q

Explain to me territoriality of taxation

A

Public services are normally provided within the boundaries of the state. Thus, the government can only demand tax obligations upon subjects or residents within its territorial jurisdiction

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23
Q

What are the exception to the territoriality of taxation

A

In income taxation, resident citizens and domestic corporations are taxable on income derived both within and outside the Philippines. In transfer taxation, residents or citizens are taxable on transfer of properties located within or outside the Philippines

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24
Q

Explain to me international comity

A

Basically, governments do not tax the income and properties of other governments and they give primacy to their treaty obligations over their own domestic tax laws

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25
Q

Explain to me public purpose

A

Tax should be intended for the common good. Taxation must be exercised absolutely for public purpose

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26
Q

Explain to me exemption of the government

A

Taxing the government will not raise additional funds but instead incur additional costs. Under NIRC, government properties and activities are not subject to tax, except those properties and activities conducted for profit.

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27
Q

Explain to me non-delegation of power

A

The legislative taxing power is vested exclusively in Congress and is non-delegable. The power of lawmaking, including taxation, is delegated by the people to the legislature.

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28
Q

What are the exceptions to the rule of non-delegation

A

LGU’s are allowed to exercise the power to tax to enable them to exercise their fiscal autonomy; The president is empowered to fix the amount of tariffs to be flexible in trade conditions under the Tariffs and Customs code; Other special cases that require expedient and effective administration and implementation of assessment and collection of taxes

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29
Q

Enumerate to me the Inherent Limitations of Taxation

A
  1. Territoriality of Taxation
  2. International Comity
  3. Public Purpose
  4. Exemption of the government
  5. Non-delegation of the taxing power
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30
Q

Explain to me the observance of due process of law

A

No one should be deprived of his life, liberty or property without due process of law. Tax laws should neither be harsh nor oppressive

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31
Q

Explain to me Substantive Due Process

A

Tax must be imposed only for public purpose, collected only under authority of a valid law and only by the taxing power having jurisdiction

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32
Q

What are the two aspects of due process

A
  1. Substantive Due Process
  2. Procedural Due Process
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33
Q

Explain to me Procedural Due Process

A

There should be no arbitrariness in assessment and collection of taxes, and the government shall observe the taxpayer’s right to notice and hearing.

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34
Q

Explain to me equal protection of law

A

Tax payer should be treated equally both in terms of rights conferred and obligations imposed. This rule applies when taxpayers are under the same conditions

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35
Q

Explain to me uniformity rule in taxation

A

The rule of taxation shall be uniform and equitable. Each class is taxed differently, but taxpayers falling under the same class are taxed the same. Hence, uniformity is relative equality

36
Q

Explain to me progressive system of taxation

A

Basically the tax rate increases as the tax base increases. You pay more as you earn more, not because you all have the same percentages, but because you have a higher percentage than those with lower income

37
Q

Explain to me non-imprisonment for non-payment of debt or poll tax

A

No one shall be imprisoned for mere inability to pay debt. However, the constitutional guarantee on non-imprisonment for non-payment of debt does not extend to non-payment of tax except poll tax. And only the basic community tax, additional community tax can still lead to imprisonment

38
Q

Explain to me non-impairment of obligation and contract

A

The state should set an example of good faith among its constituents. Tax exemptions granted under contract should be honored and should not be cancelled by a unilateral government action

39
Q

Explain to me the free worship rule

A

The government adopts free exercise of religion. Consequently, the properties and revenues from tithes and offerings are not subject to tax. However, it does not extend to income from properties or activities of religious institutions that are proprietary or commercial in nature

40
Q

Explain to me the Exemption of religious, charitable or educational entities, non-profit cemetaries, churces and mosques, lands, buildings, and improvements from property taxes

A

The Philippines follow the doctrine of use wherein only properties ACTUALLY devoted for religious, charitable or educational activities are exempt from real property tax.

41
Q

Explain to me the Non-appropriation of public funds or property for the benefit of any church, sect, or system of religion

A

To support the freedom of religion, the government should not favor any particular system of religion by appropriating public funds or properties in support thereof. However, compensation to priests, imams, or religious ministers working with the military, penal institutions, orphanages, or leprosarium is not considered religious appropriation

42
Q

Explain to me exemption of taxes of the revenues and assets of non-profit, non-stock educational institutions

A

The constitution recognizes the necessity of education in state building by granting tax exemption on revenues and assets of non-profits educational institutions. However, it only applies on revenues and assets are actually, directly, and exclusively devoted for educational purposes. NIRC also exempts government educational institutions from income tax and subjects private educational institutions to a minimal income tax

43
Q

Explain to me the concurrence of a majority of all members of congress for the passage of a law granting tax exemption

A

The constitution requires the vote of the majority of all members of congress in the grant of tax exemption. In the approval of an exemption law, an absolute majority is required. However, in the withdrawal of a tax exemption, only a relative majority is required

44
Q

Explain to me the non-diversification of tax collections

A

Tax collections should only be used for public purpose. It should never be diversified or used for private purpose

45
Q

Explain to me the non-delegation of the power of taxation

A

The principle of checks and balances in a republican state requires that taxation power as part of lawmaking be vested exclusively in Congress. However, delegation may be made on matters involving the expedient and effective administration and implementation of assessment and collection of taxes. Certain aspects of the taxing process that are non-legislative in character are delegated

46
Q

Explain to me non-impairment of the jurisdiction of the Supreme Court to review tax cases

A

Notwithstanding the existence of the court of tax appeals, which is a special court, all cases involving taxes can be raised to and be finally decided by the Supreme Court of the Philippines

47
Q

Explain to me appropriations, revenue, or tariff bills shall originate exclusively in the House of the Representatives

A

Laws that add income to the national treasury and those that allows spending therein must originate from the House of Representatives while Senate may concur with amendments

48
Q

Explain the concept of LGU’s exercising the power to create its own sources of revenue and shall have a just share in the national taxes

A

This is a constitutional recognition of the local autonomy of local governments and an express delegation of the taxing power

49
Q

What are the stages of the exercise of taxation power

A
  1. Levy or Imprisonment
  2. Assessment and Collection
50
Q

Explain to me what is levy or imposition

A

This process involves the enactment of a tax law by Congress and is called impact of taxation. It is also referred to as the legislative act in taxation

51
Q

Congress is composed of two bodies which are?

A
  1. The House of Representatives
  2. The Senate
52
Q

Explain to me Assessment and Collection

A

The tax law is implemented by the administrative branch of the government. Implementation involves assessment or the determination of the tax liabilities of taxpayers and collection. This stage is referred to as incidence of taxation or the administrative act of taxation

53
Q

Explain to me situs of taxation

A

Situs is the place of taxation. It is the tax jurisdiction that has the power to levy taxes upon the tax object. Situs rules serve as frames of reference in gauging whether the tax object is within or outside the tax jurisdiction of the taxing authority

54
Q

Explain to me Business tax situs

A

Businesses are subject to tax in the place where the business is conducted

55
Q

Explain to me Income tax situs on services

A

Service fees are subject to tax where they are rendered

56
Q

Explain to me Income tax on Situs on sale of goods

A

The gain on sale is subject to tax in the place of sale

57
Q

Explain to me Property Tax Situes

A

Properties are taxable in their location

58
Q

Explain to me Personal Tax Situs

A

Persons are taxable in their place of residence

59
Q

Explain to me the Marshall doctrine

A

“The power to tax involves the power to destroy”. Taxation power can be used as an instrument of police power. However, the taxation power does not include the power to destroy if it is used solely for the purpose of raising revenue

60
Q

Explain to me Holme’s Doctrine

A

“Taxation power is not the power to destroy while the court sits”. Taxation power may be used to build or encourage beneficial activities or industries by the grant of tax incentives.

61
Q

Can Marshall Doctrine and Holme’s Doctrine co-exist with each other?

A

Yes, while they may seem contradictory with each other, they are both used in practice.

62
Q

Explain to me prospectivity of tax laws

A

Tax laws are generally prospective in operation. An ex post facto law or a law that retroacts is prohibited by the Constitution. Exceptionally, income tax laws may operate retrospectively if so intended by Congress under certain justifiable conditions

63
Q

Explain to me non-compensation or set-off

A

Taxpayer cannot delay payment of tax to wait for the resolution of a lawsuit involving his pending claim against the government. Tax is not a debt; hence, it is not subject to set-off. Exceptions are when the taxpayer’s claim has already become due and demandable such as when the government already recognized the same and an appropriation for refund was made; Cases of obvious overpayment of taxes; Local Taxes

64
Q

Explain to me non-assignment of taxes

A

Tax obligations cannot be assigned or transferred to another entity by contract

65
Q

Explain Imprescriptibility in taxation

A

Prescription is the lapsing of a right due to the passage of time. The government’s right to collect taxes does not prescribe unless the law itself provides for such prescription.

66
Q

Explain to me doctrine of estoppel

A

Under doctrine of estoppel, any misrepresentation made by one party toward another who relied therein in good faith will be held and true and binding against that person who made the misrepresentation. The government is not subject to estoppel. The error of any government employee does not bind the government.

67
Q

Explain to me Juridical Non-Interference

A

Generally, courts are not allowed to issue injunction against the government’s pursuit to collect tax as this would unnecessarily defer tax collection. This rule is anchored on the Lifeblood Doctrine

68
Q

Explain to me Strict Construction of Laws

A

The fundamental principle behind this construction is that the text of a provision in a statute should be applied as it is written. When the law clearly provides for taxation, taxation is the general rule unless there is a clear exemption

69
Q

Explain to me Double Taxation

A

It occurs when the same taxpayer is taxed twice by the same tax jurisdiction for the same thing

70
Q

What are the elements of double taxation

A

Primary Element: Same Object
Secondary Element: Same type of tax; Same purpose of tax; Same taxing jurisdiction; Same tax period

71
Q

What are the types of double taxation

A
  1. Direct Double Taxation
  2. Indirect Double Taxation
72
Q

Explain to me Direct Double Taxation

A

This occurs when ALL the element of double taxation exists for both impositions

73
Q

Explain to me Indirect Double Taxation

A

This occurs when AT LEAST ONE of the SECONDARY elements of double taxation is NOT COMMON for both impositions

74
Q

Explain to me tax evasion

A

also known as tax dodging, refers to any act or trick that tends to illegally reduce or avoid the payment of tax

75
Q

Explain to me tax avoidance

A

also known as tax minimization, refers to any act or trick that reduces or totally escapes taxes by any legally permissible means

76
Q

Explain to me tax exemption

A

also known as tax holiday, refers to the immunity, privilege, or freedom from being subject to a tax which others are subject to.

77
Q

Explain to me shifting and it’s forms

A

This is the process of transferring tax burden to other taxpayers. The three forms are forward, backward, and onward shifting

78
Q

Explain to me Forward Shifting

A

This is the shifting of tax which follows the normal flow of distribution

79
Q

Explain to me Backward Shifting

A

Reverse of forward shifting, common with non-essential commodities where buyers have considerable market power and commodities with numerous substitute products

80
Q

Explain to me onward shifting

A

This refers to any tax shifting in the distribution channel that exhibits forward shifting or backward shifting; when the tax is shifted 2 or more times either forward or backward.

81
Q

Explain to me capitalization

A

Pertains to the adjustment of the value of an asset caused by changes in tax rates

82
Q

Explain to me transformation

A

This pertains to the elimination of wastes or losses by the taxpayer to form savings to compensate for the tax imposition or increase in taxes

83
Q

Explain to me tax amnesty

A

is a general pardon granted by the government for erring taxpayers to give them a chance to reform and enable them to have a fresh start to be a part of a society with a clean state. It is an absolute forgiveness or waiver by the government on its right to collect and is retrospective in application

84
Q

Explain to me what is Tax Condonation

A

is forgiveness of the tax obligation of a certain taxpayer under certain justifiable grounds. Also referred to as tax remission

85
Q

Explain to me the difference between Tax Amnesty and Tax Condonation

A

Amnesty covers both civil and criminal liabilities, condonation only covers civil liabilities of the taxpayer. Amnesty operates retrospectively by forgiving past violations, Condonation applies prospectively to any unpaid balance of the tax; hence the portion already paid will not be refunded. Amnesty is conditional upon the taxpayer paying the government a portion of the tax whereas condonation requires no payment

Income Tax (RECITATION FORMAT) (7 decks)

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