CHAPTER 1 Flashcards
may be defines as a State power, a legislative
process, and a mode of government cost distribution
TAXATION
Taxation is a process of levying taxes by the
legislature of the state to enforce proportional
contributions from its subjects for public purpose.
A. As a state power
B. As a process
C. As a model of cost distribution
B. As a process
Taxation is an inherent power of the state to enforce
a proportional contribution from its subjects for
public purpose.
A. As a state power
B. As a process
C. As a model of cost distribution
A. As a state power
Taxation is a mode of allocating government costs or
burden to the people. In distributing the cost or burden,
the government regards the following general
considerations in the exercise of its taxation power:
theories of ____________________
Theories of Cost Allocation
Taxation is a mode by which the state allocates its
cost or burden to its subjects who are benefited by
its spending
A. As a state power
B. As a process
C. As a model of cost distribution
C. As a model of cost distribution
The benefit received theory presupposes that the more
benefit one receives from the government, the more
taxes he should pay
Benefit Received Theory
The ability to pay theory presupposes that taxation
should also consider the taxpayer’s ability to pay.
Taxpayers should be required to contribute based on
their relative capacity to sacrifice for the support of the
government.
Ability to Pay Theory
proposes that the extent of one’s ability
to pay is directly proportional to the level of his tax base.
Vertical equity
requires consideration of the particular
circumstances of the taxpayer.
Horizontal equity
it is the power to enact laws to promote the general
welfare of the people.
Police Power
it is the power to take private property for public use
upon payment of just compensation.
Eminent Domain
It is the power to take property (generally money) for the
support of the government and the public purpose
Taxation Power
scope: Regulates both liberty and property
A. police power
B. eminent domain
c. taxation
A. police power
scope: Affect only property
rights
A. police power
B. eminent domain
c. taxation
B. eminent domain
c. taxation
Authority : Exercised only by the Government
A. police power
B. eminent domain
c. taxation
A. police power
c. taxation
Authority : May be exercised by private entities
A. police power
B. eminent domain
c. taxation
B. eminent domain
Purpose: For public use
A. police power
B. eminent domain
c. taxation
B. eminent domain
Purpose: Promotion of general
welfare
A. police power
B. eminent domain
c. taxation
A. police power
Purpose: For the support of
the government
A. police power
B. eminent domain
c. taxation
c. taxation
Persons Affected : Community or a
class of individuals
A. police power
B. eminent domain
c. taxation
A. police power
c. taxation
Persons Affected :Only the owner of a private property
A. police power
B. eminent domain
c. taxation
B. eminent domain
Effect: There is a transfer of
title to property
A. police power
B. eminent domain
c. taxation
B. eminent domain
Effects: No transfer of title;
there may just be a
restraint on the
injurious use of
property
A. police power
B. eminent domain
c. taxation
A. police power
effect: Contribution
becomes part of
public fund
A. police power
B. eminent domain
c. taxation
c. taxation
Type of property Property is wholesome and is devoted to public use or purpose.
A. police power
B. eminent domain
c. taxation
B. eminent domain
c. taxation
Type of property : Property is noxious
or intended for a
noxious purpose and
as such taken and
destroyed.
A. police power
B. eminent domain
c. taxation
A. police power
Benefits received:
Compensation is the
full and fair
equivalent (FMV) of
the property taken.
A. police power
B. eminent domain
c. taxation
B. eminent domain
Benefits received:
Compensation is the
protection and public
improvement
instituted by the
government for the
taxes paid.
A. police power
B. eminent domain
c. taxation
c. taxation
Benefits received:
Compensation is the
intangible, altruistic
feeling that the
individual has
contributed to the
public good.
A. police power
B. eminent domain
c. taxation
A. police power
Amount of imposition:
No imposition. The
owner is paid FMV of
his property.
A. police power
B. eminent domain
c. taxation
B. eminent domain
Amount of imposition:
Sufficient to cover
cost of the license
and the necessary
expenses of police
surveillance and
regulation
A. police power
B. eminent domain
c. taxation
A. police power
Amount of imposition:
No limit
A. police power
B. eminent domain
c. taxation
c. taxation
To raise revenue/funds to defray the necessary expenses of the government (also called Revenue Purpose).
primary purpose
– As a tool for general, social and economic welfare (also called regulatory/Sumptuary/Compensatory Purpose).
Secondary Purpose
- Regulation
- Promotion of General Welfare
- Reduction of Social Inequality
- Encourages Economic Growth
is example of what?
secondary purpose
The existence of government is necessity, it cannot continue
without means to pay its expenses, for this reason, it has the right to compel all its
citizens and property to continue.
Necessity Theory
– Taxes are the lifeblood of the government without it can neither
exist nor endure.
Lifeblood Doctrine
Taxes are what we pay for a civilized society. The government and the people have a reciprocal and mutual duties of support and
protection to one another (symbolic relationship between the government and the
taxpayer).
The benefits - Protection Theory
Are enforced proportional contributions from persons and property, levied by the State by virtue of its sovereignty for the support of the government and for all its public needs.
tax
The process involves the passage of tax law or ordinance through
the legislature.
Levy or Imposition
This process involves the act of administration and
implementation of tax laws by the executive through its administrative agencies such
as the bureau of Internal Revenue or Bureau of Customs.
Assessment and Collection
– This process involves the act of compliance by the taxpayer on
contributing his share to pay the expenses of the government.
Payment of Tax
The sources of government revenue must be sufficient to meet
government expenditures and other public needs.
Fiscal Adequacy
Tax laws must be capable of convenient, just and effective
administration- free from confusion and uncertainty.
Administrative Feasibility –
proceed from the very nature of the taxing
power itself. The taxing power has very distinct and positive limitations some of which
inherit in its very nature and exist whether declared or not declared in the written
constitution.
(D-PINES)
Inherent Limitations
A good tax system must be based on the taxpayer’s ability to
pay. This suggests that taxation must be progressive conformably with the
constitutional mandate that congress shall evolve a progressive system of taxation.
Theoretical Justice –
this is objectionable and prohibited because of violates the constitutional provision on uniformity and equality. It means:
- Taxing twice
- By the same taxing authority
- Within the same jurisdiction or taxing distinct
- For the same purpose
- In the same yea or taxing period
- Same kind or character of tax
Direct Duplicate taxation,
is not legally objectionable. It extends to all cases
in which imposition but imposed by different taxation authorities.
Indirect Duplicate Taxation
a State cannot tax another State based on the on the
principle of the Sovereign imposing taxes on foreign ambassadors is not valid law.
International comity or treaty
– of taxation is purely legislative, hence the power
cannot be delegated either to the executive or judicial department. The limitation arises
from the doctrine of separation of powers among the three branches of the
Government.
Non- dilatability of the Taxing power
Exceptions to the rule against the delegation of the taxation power;
(2)
- Delegation to the President,
- Constitutional Limitations on the Taxing Power
subject to some limitations and restriction, to fix within
specified limits, tariff rates and tonnage or wharfage duties and other duties and
Imposts.
Note:
a. __________ – where the occupation is engaged in.
b. _________ – where the transaction took or citizenship of the taxpayer; or
location of property
Delegation to the President,
Occupation
Transaction
the following provisions may be said to be limitations prescribed in the Constitution on the taxing power of the Government.
a) Observance of due process of law
b) Equal protection of law
c) Uniformity in taxation
d) Progressive scheme of taxation
e) Non-imprisonment for non-payment of poll tax
f) Non-impairment of the obligations of contracts
g) Free-worship clause
h) Exemption of charitable institutions, churches, parsonages, or convents appurtenant thereto, mosques, and non-profit cemeteries, and all lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes.
i) Exemption from taxes of the revenues and assets of non-profit, non-stock educational institutions including grants, endowments, donations or contributions for educational purposes.
j) Non-appropriation of public funds or property for the benefit of any church, sector system of religion, etc.
k) No money shall be paid out of the Treasury except in pursuance of an appropriation made by law.
l) Concurrence of a majority of ALL members of Congress for the passage of law granting tax exemption
m) Non-diversification of tax collections
n) The President shall gave the power to veto any particular item (s) in an approximation, revenue or tariff, but the veto shall not affect the item (s) to which no objection has been made.
o) Non-impairment of the jurisdiction of the Supreme Court to review tax cases
p) Appropriations, revenue or tariff bills shall originate exclusive in the House of Representatives but the Senate may propose or concur with amendments.
q) Each local government unit shall exercise the power to create its own sources
of revenue and shall have a just share in the national taxes
Constitutional Limitations on the Taxing Power
Tax laws are civil and not penal in nature, although there are penalties provided for their violation. The purpose of tax
NATURE OF INTERNAL REVENUE LAWS –
laws in imposing penalties for delinquencies is to compel the timely payment of taxes or to punish evasion or neglect of duty in respect thereof.
NATURE OF INTERNAL REVENUE LAWS
General rule:
Tax laws are prospective in operation because the nature and amount of the tax could not be foreseen and understood by the taxpayer at the time the transactions which the law seeks to tax was completed.
APPLICATION OF TAX LAWS
– tax of a fixed amount imposed upon individual, whether citizens or not, residing within a specified territory without regard to their property or the occupation in which he may be engaged (e.g. basic community tax)
Personal, Poll or Capitation Tax
– tax imposed on property, whether real or personal, in
proportion either to its value, or in accordance with some other reasonable
method of apportionment (e.g. real estate tax)
Property Tax
– any tax which does not fall within the classification of a poll
tax or a property tax. This is a tax on the exercise of certain rights and
privileges (e.g. income tax, estate tax, donor’s tax, VAT)
Excise Tax
– imposed on the person obliged to pay the same and this
burden cannot be shifted or passed on to another. (e.g. income tax, estate
tax, donor’s tax)
Direct Tax
– the payment is demanded from a person who is allowed to
transfer the burden of taxation to another. (e.g. VAT)
Indirect Tax
this is fixed amount based on volume, weight or quality of
goods as measured by tools, instruments or standards. (e.g. excise tax on
cigars and liquors)
Specific Tax –
– this imposition is based on the value of the property
subject to tax. (e.g. VAT, income tax, donor’s tax and estate tax)
Ad Valorem Tax
levied without a specific or pre-determined purpose. (e.g. Income tax, donor’s tax and estate tax)
Fiscal/General/Revenue Tax –
hose intended to achieve some social or economic goals. (e.g. tariff and certain duties on imports)
Regulatory/Special/Sumptuary Tax
– imposed by the National Government
NATIONAL INTERNAL REVENUE TAXES UNDER THE
ADMINISTRATION OF THE BIR:
a) Income Tax
b) Estate and donor’s tax
c) Value-added tax
d) Other percentage taxes
e) Excise taxes
f) Documentary stamp taxes
B. Local Tax – imposed by municipal corporations (e.g. real estate tax)
6. According to Graduation or Rate
A. Proportional/Flat Rate Tax – unitary or single rate. (e.g. VAT)
B. Progressive/Graduated Tax – as the tax base grows, the tax rate increase.
(e.g. income tax on individuals)
C. Regressive Tax – the tax rate increases as the tax base decreases.
National Tax
imposed by municipal corporations (e.g. real estate tax)
Local Tax
unitary or single rate. (e.g. VAT)
Proportional/Flat Rate Tax –
as the tax base grows, the tax rate increase.
(e.g. income tax on individuals)
Progressive/Graduated Tax –
– the tax rate increases as the tax base decreases.
Regressive Tax
All items of gross income and deductions are reported in one
income tax return and the applicable tax rate is applied on the tax based.
Global System
Different types of income are subject to different sets of
graduated or flat income tax rates.
Schedular System –
Claim for refund which is prevented by prescription may be
allowed to be used as payment for unsettled tax liabilities if both taxes arise from the
same transactions in which overpayment is made and underpayment is due.
Equitable Recoupment –
– Taxes are not subject to set-off or legal compensation because the
government and the taxpayer are not mutual creditors and debtors of each other.
Set-off taxes
This provides that a taxpayer suit can only be allowed of the act
involves a direct and illegal disbursement of public funds derived from taxation.
Taxpayer Suit –
the taxpayer uses unlawful means to evade or lessen the
payment of tax.
Evasion or Dodging
Avoidance, also called
tax minimization,
it is the reduction or totally escaping payment
of tax through legally permissible means.
avoidance
Three (3) kinds shifting
forward shifting
backward shifting
nward shifting
, the seller is willing to lower the price of the commodity provided the
taxes will be shouldered by the buyer.
Capitalization
the manufactured absorbs the additional taxes imposed by the
government without passing it to the buyers for fear of lost his/its market. Instead, he/it
increase quantity of production, thereby turning their units of production at a lower cost
resulting to the transformation of tax into a gain through the medium of production.
Transactions
it is an immunity, privilege or freedom from payment of a charge or burden
to which others are obliged to pay.
Exemption
