Chapter 1 Flashcards
This may be defined as a State power, a legislative process, and a mode of government cost distribution.
Taxation
What kind of process is taxation?
Legislative
What is the theory of taxation?
The government’s necessity for funding.
What is the basis of taxation?
The mutuality between the people who fund the government and the government who provides benefits for the people.
The receipt of benefits in taxation is conclusively presumed. What does this mean?
This means that every taxpayer does not necessarily need to have an actual receipt or proof of benefit. It is enough that each taxpayer has the absolute possibility of the receipt of the same.
This theory presupposed that the more benefit one receives from the government, the more taxes he should pay.
Benefit received theory
This theory presupposes that taxation should also consider the taxpayer’s ability to pay. Taxpayers should be required to contribute according to their relative capacity to sacrifice for the support of the government.
Ability to pay theory
What is the root concept for the ability to pay theory?
Equity
What are the aspects of the ability to pay theory?
Vertical equity
Horizontal equity
Differentiate vertical equity from horizontal equity. (Discuss their concept)
Vertical equity proposes that the ability of one to pay is directly proportionate to the level of his tax base. It supports progressive taxation. This is a gross concept.
Horizontal equity requires consideration of the particular circumstance of the taxpayer. It upholds the idea of “equal treatment for equals.” This is a net concept.
What is the lifeblood doctrine?
It says that taxes are indispensable to the continued subsistence of the government. Without it, the government will be paralyzed.
Can tax be imposed even in the absence of a Constitutional grant?
Yes
Why are claims for tax exemption construed against taxpayers?
Because it is against the lifeblood doctrine and every tax exemption should be valid.
Can the courts interfere with the collection of taxes?
No. Taxation has the right to judicial non-interference.
What are the inherent powers of the state?
Police power (Power of the sword)
Taxation (Power of the purse)
Eminent Domain (Power of expropriation)
This is the power of the state to enforce proportional contribution from its subjects.
Taxation power
This is the power of the state to enact laws to protect the well-being of the people.
Police power
This is the power of the state to take private property for public use after paying just compensation.
Eminent domain
In what department is the police power of the state lodged with?
The legislative (but also the President upon valid delegation)
In which department does the power of eminent domain be subjected to?
Judiciary
Which department primarily exercises the power of taxation?
The legislative
Once taxes are legislated, whose responsibility is it to implement and collect?
The Executive (specifically the BIR and the BOC)
What is the scope of taxation?
It is comprehensive, plenary, supreme, and unlimited.
Explain taxation as being comprehensive.
Taxation covers all persons, entities, properties, and transactions within the state’s jurisdiction unless specifically exempted by law. A state can pretty much tax everything.
Explain taxation as being plenary.
The authority to tax is complete and absolute within the limitations set by the Constitution and the law. The government does not need specific grants to exercise this power.
Explain taxation as being unlimited.
The power to tax is without limits on its subjects, the amount, and what kind of tax can be imposed.
Explain taxation as being supreme.
The power to tax is superior to other powers and rights. It can override individual rights and property rights when necessary. It can also supersede contractual obligations.
What are the inherent limitations of the state?
Territoriality of taxation
International comity
Public purpose
Exemption of the government
Non-delegation of the power to tax
Explain the territoriality of taxation.
The government can only demand tax obligations upon its subjects within its territorial jurisdiction, meaning it cannot tax foreign objects as this is tantamount to encroachment of foreign sovereignty.
This means outside the territory. It is when something is bound by foreign laws.
Extraterritoriality
What are the exceptions to the territoriality principle?
- Resident citizens and domestic corporations are both taxable on income derived both within and outside the Philippines.
- RCs, NRCs, and DAs are taxable on property transfers both within and outside the Philippines.
Can non-resident citizens be taxed on income earned in the Philippines?
Yes
These are foreign nationals residing in the Philippines legally.
Resident aliens
This is a citizen of the Philippines not residing in the Philippines.
Non-resident citizen
Explain international comity.
This is the mutual courtesy or the reciprocity between nations that presupposes that no country is superior over another.
What happens if a country entered into a treaty and the same conflicts with its domestic tax laws?
The treaty is superior and must be honored.
Are embassies and consular offices taxed in the Philippines?
No, both their property taxes and income taxes are not taxed. This is due to the international comity principle.
What is par in parem non habet imperium?
An equal has no power over an equal.
What is pacta sunct servanda?
Literal translation: Agreements must be kept
It can also mean compliance in good faith.
What is the NIRC?
National Internal Revenue Code
Explain public purpose as an inherent limitation of taxation.
Taxes must be used for public purpose and public purpose only.
Why is the government exempt in paying taxes?
It only imputes additional costs.
If the government-owned property or corporations are proprietary or are conducted for profit, is it taxable?
Yes
Explain the non-delegation of the taxing power.
The power of taxation cannot be delegated. It is vested exclusively in the Congress.
What doctrine does the non-delegation of the taxing power support?
Doctrine of separation of powers of the government
What are the exemptions to the rule of non-delagation?
- LGUs can exercise the power to tax as an exercise of their fiscal autonomy.
- The President may fix the amount of tariffs.
- Other cases that require expedient administration or implementation of tax laws.
What are the twin aspects of due process? Differentiate
Substantive due process
Procedural due process
Substantive due process means that the tax must be imposed only for public purpose, collected only under authority of a valid law and only by the taxing power having jurisdiction. It is based on the substance of the law.
Procedural due process is based on the process or the implementation of the laws. There should be no arbitrariness in the collection and assessment of taxes. The tax laws must be adhered to accordingly.
According to the NIRC, when does assessments done and when should taxes be collected?
Assessments - made 3 years from the due date of filing of return
Collection - made within 5 years from the due date of assessment.
Explain the equal protection of the law.
No one should be denied of the equal protection of the law. If the law does not call for classification, we, too, must not classify.
What kind of equality is uniformity?
Relative equality
What are the elements of valid classification?
- Based on substantial distinction
- Germane to the purpose of the law
- Classification is not limited to existing conditions.
- The classification must apply equally to all members of the same class.
Explain the uniformity rule in taxation.
Those who are similarly situated must be taxed the same.
What is the progressive system of taxation?
As the tax base increases, so does the tax rate.
Can a person who did not pay his taxes be imprisoned?
It depends.
Non-payment of basic poll tax does not lead to imprisonment.
In other cases, it may lead to imprisonment.
Can a person who did not pay his debt be imprisoned?
As policy, no one should be imprisoned for mere poverty. If the debt is acquired in good faith, is not punishable by imprisonment.
If acquired in bad faith, it constituted estafa, a crime punishable by imprisonment.
As a general rule, the exercise of religion is not taxable. Can religious institutions that are proprietary in nature be taxed?
Yes. The Philippines adopts the doctrine of use, not of ownership, where only properties and activities actually for religious purposes are exempt from tax.
is the rule of accommodation applied to religious groups tantamount to appropriation of funds for its benefit?
No.
What is the due process in exempting entities from tax?
The Constitution requires an absolute majority vote from the Congress.
Differentiate absolute majority from relative majority.
Absolute majority means 51% or more from all members of the Congress.
Relative majority (or simple majority or quorum majority) is the majority only from members present.
Which body handles tax cases?
Supreme Court
What are the stages of the exercise of taxation power?
- Levy or imposition
- Assessment and collection
This process involves the enactment of a tax law by the Congress. It is called the impact of taxation and the legislative act of taxation.
Levy or imposition
The general rule is that tax bills must originate from the House of Representatives. Can it originate exclusively from the Congress?
No
This process is the incidence of taxation. It is the determination of the tax liability of the taxpayers and the collection of the same.
Assessment and Collection
This is the place of taxation.
Situs
What is the situs of business tax?
Where the business is conducted.
What is the situs of income tax on services?
Where the service is rendered
What is the situs of income tax on sale of goods?
Place of sale
What is the situs of property tax?
Where the property is located
What is the situs of personal tax?
In the place of residence (not domicile)
Differentiate residence from domicile.
Residence is temporary.
Domicile is the permanent home. The person must have the principle of animus revertende or the intent to return.
What is the situs of royalty, interest, and dividend tax?
Where the debtor or the payer located.
This doctrine states that “the power to tax involves the power to destroy,” meaning that taxation can be used as an instrument of police power.
Marshall doctrine
Does taxation power that is solely for generating revenue have the power to destroy?
No.
Explain the Marshall doctrine in your own words.
So like it says na the taxation power can be used as an instrument of police power kasi it’s not only to generate funds pero para rin ma-regulate or ma-restrict ang activities ng tao. For example, young sin tax, it generated revenue while regulating yung consumption ng tao ng unhealthy food.
Who made up the Marshall doctrine?
Chief Justice John Marshall
Who made up the Holme’s Doctrine?
Oliver Wendell Holmes (a previous associate judge of the US Supreme Court)
This doctrine states that “taxation power is not the power to destroy while the court sits,” meaning it looks into invalid taxes, nature and the character of the right destroyed.
Holme’s doctrine
What is an ex post facto law?
A law that retroacts.
Is an ex post facto law legal?
No, it is prohibited by the Constitution
If retroactive laws are unconstitutional, can the Congress generate income tax laws that operate retrospectively?
Yes, under justifiable conditions (usually for income earned in belligerent occupations)
Can taxes be set-off?
No. Tax liability and government liability cannot offset each other as they are separate liabilities.
What are the exceptions of non set-off of taxes?
- Once the claim of the TP is due and demandable
- Cases of overpayment of taxes
- Local taxes
Can tax obligations be assigned or transferred to another entity through a contract?
No.
Can the tax burden be transferred?
Yes
This is the lapsing of a right due to the passage of time.
Prescription
Does the government’s right to collect taxes prescribe?
No unless the law provides for such prescription
Generally, taxes do not prescribe. What are the instances where they do?
- If tax is not collected within 5 years from the due date of assessment.
- In the absence of an assessment, if tax is not collected within 3 years from the due date of the filing of return.
Does the liability of fraudulent taxpayers, who did not file a return, prescribe?
No
Is the government subject to estoppel?
No. The error of a government employee is not binding to the government.
Are courts allowed to issue an injunction against the government’s pursuit to collect tax?
No
To whom are vague tax laws construed against?
The government. Vague tax laws means no tax laws.
To whom are vague tax exemption laws construed against?
The taxpayers
This occurs when the same taxpayer is taxed 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:
a. same type of tax
b. same purpose of tax
c. same taxing jurisdiction
d. same tax period
Differentiate direct double taxation from indirect double taxation?
Direct double taxation is in the strict sense where all elements of double taxation exists.
Indirect double taxation is in the broad sense where at least one of the secondary elements are not common for both tax impositions.
Is double taxation illegal?
No
These are the means available to the taxpayer to limit or even avoid the impact of taxation.
Escapes from taxation
What are the escapes from taxation that lead to a loss of government revenue?
Tax evasion
Tax exemption
Tax avoidance
This is also known as tax dodging and it is any act or trick that tends to illegally reduce or avoid the payment of tax.
Tax evasion
This is also known as tax minimization. It is any act or trick that reduces or totally escapes taxes by any legally permissible means.
Tax avoidance
This is also known as tax holiday and it is the immunity, privilege, or freedom from. being subject to tax which others are subject to.
Tax exemption
Who can gran tax exemptions?
The Constitution, law, contracts
What are the escapes from taxation that do not result in loss of government revenue?
Shifting
Capitalization
Transformation
This is the process of transferring the tac burden to other taxpayers.
Shifting
Differentiate forward, backward, and onward shifting.
Forward shifting is the shifting of tax which follows the normal flow of distribution (manufacturer to merchandiser).
Backward shifting is the reverse of forward shifting.
Onward shifting is one that exhibits forward or backward shifting or both.
This pertains to the adjustment of the value of an asset caused by changes in tax rates.
Capitalization
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.
Transformation
This is a general pardon granted by the government of erring taxpayers. to give them a fresh start. It is absolute forgiveness or waiver.
Tax amnesty
This is the forgiveness of tax obligation of a certain taxpayer on justifiable grounds.
Tax condonation
Differentiate tax amnesty from tax condonation.
Tax amnesty is absolute forgiveness so wala nang babayaran na tax or if nagbayad ka ng pauna, irerefund sayo. This is a retroactive effect kasi ifoforgive yung past violations na.
Tax condonation covers only civil liability and it acts prospectively by forgiving any unpaid balance.
