Chap 1 Flashcards
What is taxation?
Taxation may be defined as a state power, a legislative process, and a mode of government cost distribution.
What does taxation represent as a state power?
Taxation is an inherent power of the state to enforce a proportional contribution from its subjects for public purposes.
How is taxation levied?
Taxation is a process of levying taxes by the legislature of the state to enforce proportional contribution.
What is the mode of taxation?
Taxation is a mode by which the state allocates costs or burdens to its subjects who benefit from spending.
What is the primary goal of taxation?
The primary goal of taxation is to raise revenue.
What is the basis of taxation?
The basis of taxation refers to the mutuality of support between the people and the government.
What is presumed regarding the receipt of benefits in taxation?
Receipt of benefits is conclusively presumed.
What are the theories of cost allocation in taxation?
The theories of cost allocation are the benefit received theory and the ability to pay theory.
What is the benefit received theory?
More benefit received = more tax paid
This theory suggests that individuals should pay taxes in proportion to the benefits they receive from public services.
What is the ability to pay theory?
Consider circumstances of the taxpayer
This theory emphasizes that taxes should be based on the taxpayer’s ability to pay.
What is vertical equity in the context of taxation?
Directly proportional tax base; gross concept
Vertical equity means that individuals with a greater ability to pay should contribute more in taxes.
What is horizontal equity in taxation?
Particular circumstance; net concept
Horizontal equity refers to the principle that individuals in similar financial circumstances should pay similar amounts in taxes.
What is the life blood doctrine?
Taxes are essential & indispensable to the continued subsistence of government.
What is one implication of the life blood doctrine?
Tax can be imposed even in the absence of constitutional grants.
How are claims for tax exemptions construed?
Claims for tax exemptions are construed against the taxpayer.
What right does the government reserve regarding taxation?
The government reserves the right to choose the object of taxation.
What is not allowed in relation to tax collection?
Chords are not allowed to interfere with the collection of taxes.
When is income received in advance taxable?
Income received in advance is taxable upon receipt.
What is preferred regarding claimable expenses?
A lower amount of deduction is preferred when the claimable expense is subject to limit.
What happens when a tax object has multiple tax bases?
A higher tax base is prepared when the tax object has multiple tax bases.
What are the three inherent powers of the state?
- Taxation - unlimited; most important; inferior
- Police power - limited; most superior; superior
- Eminent domain - no amount; important; superior
What is the scope of taxation?
The scope of taxation is comprehensive, plenary, unlimited, and supreme (CPLUS).
What are the inherent limitations of the taxation power?
- Territoriality of taxation
- International comity
- Public purpose
- Exemption of the government
What are the constitutional limitations on taxation?
- Non-delegation of the taxing power
- Due process of law
- Equal protection of the law
- Uniformity rule in taxation
- Progressive system of taxation
- Non-imprisonment for non-payment of debt or poll tax (basic community tax)
- Free worship rule
- Non-impairment of obligation and contract
- Exemption of religious or charitable entities, non-profit cemetery churches and mosques from property taxes
9.1 exemption from taxes of revenues and assets of non-profit non-stock educational institution including grants and endowments and donation - Non-diversification of tax collections
- Concurrence of a majority of all members of Congress for the passes law granting tax exemption
- Non-delegation of the power of taxation Cases
- Non-impairment of the jurisdiction of the Supreme Court to review tax cases
- The requirement that appropriation revenue or talent bill should originate exclusively in the house of representatives
- The delegation of taxing power to local government units
Who is taxable on income derived within and outside the Philippines?
Resident citizens and domestic corporations are taxable on income derived within and outside the Philippines.
Who is taxable on the transfer of properties within or outside the Philippines?
Residents or citizens are taxable on the transfer of properties within or outside the Philippines.
Are embassies or employees of foreign governments in the Philippines subject to income tax or property tax?
No, embassies or employees of foreign governments in the Philippines are not subject to income tax or property tax.
Is government income from its properties and activities conducted for profit subject to income tax?
Yes, government income from its properties and activities conducted for profit or GOCC is subject to income tax.
Who has the exclusive delegation of taxing power?
The delegation of taxing power is vested exclusively in Congress.
What power do local government units have regarding taxation?
Local government units are allowed to exercise power to tax to exercise fiscal autonomy.
Who can fix the amount of tariffs under the Tariff and Customs Code?
The President can fix the amount of tariffs under the Tariff and Customs Code.
What are the two aspects of due process?
- Substantive due process - public purpose; legal basis
- Procedural due process - right to notice and hearing
What is equal protection of law in taxation?
Taxpayers in the same circumstances and conditions should be treated equally in taxation.
Example: Taxing balut and penoy similarly.
What is the uniformity rule in taxation?
Taxpayers under dissimilar circumstances should not be taxed the same.
What is a progressive system of taxation?
A taxation system that taxes the rich more than the poor.
What are the requirements for a property to be exempt from property tax?
Properties must be actually, directly, and exclusively used for charitable, religious, and educational purposes.
What does the exemption apply to?
Exemption applies only on revenues and assets that are actually, directly, and exclusively devoted for educational purposes.
What is required for the approval of an exemption law?
Approval requires an absolute majority or majority of all members of Congress.
What is required for the withdrawal of a tax exemption?
Withdrawal of tax exemption requires a relative majority.
What are the two bodies of Congress?
- House of Representatives - tax bills must originate.
- Senate - may propose amendments.
What are the stages of the exercise of taxation power?
- Levy or imposition - enactment of tax law by Congress.
- Assessment and collection - implemented by the administrative branch.
What is the first stage of taxation power?
Levy or imposition - enactment of tax law by Congress, also called impact of taxation or legislative act in taxation.
What is the second stage of taxation power?
Assessment and collection - implemented by the administrative branch, also called incidence of taxation or administrative act of taxation.
What are the situs rules for business tax?
Business tax is based on where business is conducted.
What are the situs rules for services tax?
Services tax is based on where services are rendered.
What are the situs rules for sale of goods tax?
Sale of goods tax is based on the place of sale.
What are the situs rules for property tax?
Property tax is based on location.
What are the situs rules for personal tax?
Personal tax is based on the place of residence.
Power to tax involve power to destroy; instrument of police power; used to discourage
Marshall doctrine
Taxation powers not the power to destroy while the court sits; can be used to encourage
Holme’s doctrine
Ex post factor law that retroacts r prohibited by constitution
Prospectivity of tax laws
Are taxes subject to automatic set off or compensation?
No. Taxpayer cannot delay payment of tax except this cases of obvious over payment of taxes or it is a local taxes
Can taxes be assigned or transferred to another entity by contract
No. Tax obligation cannot be assigned or transferred to another entity by contract
It is the lapsing of a right due to the passage of time
Prescription
Does government’s right to collect taxes prescribed?
No. Unless the law except provides for such prescription – imprescriptibility in taxation
Assessment shall be made within ___ from the due date of filing of return or actual filing which ever is later. Collection should be made within ____ from date of assessment
3 years; 5 years
Under this doctrine any misrepresentation made by one part toward another in good faith will be held true and binding against that person who made the misrepresentation
Doctrine of estoppel- error of government employee does not bind government
Are courts allowed to interfere in collection of taxes of government
No. This rule is anchored on life blood doctrine
Maxim for strict construction of tax law
Taxation is the rule exemption is the exception
Vague tax laws are construed against the_________; no tax laws
Vague exemption law are construed against the_______; no exemption law
Government; taxpayer
Same tax payer tax twice by the same tax jurisdiction for the same thing
Double taxation
What are the elements of double taxation?
Primary element; same object
Secondary elements:
Same type of tax
Same purpose of tax
Same taxing jurisdiction
Same tax period
Types of double taxation
Direct double taxation - all element of double taxation exist for both imposition
Indirect double taxation-at least one of secondary elements of double taxation is not common for both imposition
How can double taxation be minimized?
Provision of tax exemption
Allowing foreign tax credit
Allowing reciprocal tax treatment
Entering into treaties or bilateral agreements
Escape from taxation that results loss of government revenue
- Tax evasion- also called tax dodging; illegal
- Tax avoidance- also called tax minimization; legal
- Tax exemption- also called tax holidays;
Notes: all tax exemption can be revoked by congress except granted by constitution or contract
Escape from taxation that do not result loss of government revenue
Shifting- transfer in tax burden to another taxpayer
A) forward - normal flow ;essential commodities
B) backward - commodities with numerous substitute
C) onward-
Capitalization -adjustment of value of asset caused by change in tax rate
Transformation- elimination of waste or losses by taxpayer to form savings to compensate for tax imposition
It is the general pardon granted by government for in taxpayer to give them a chance to reform and enable them to have a fresh start to be part of a society with a clean slate;
Tax amnesty- administrative civil criminal liabilities
-Retrospectively
-conditional paying government a portion of the tax
It is a forgiveness of the state obligation of a certain taxpayer under certain justifiable grounds ; also called tax remission
Tax condonation- civil liabilities
- prospectively
-no payment
