Concepts Taxation Flashcards
Define taxation
the process or means by which the sovereign, through its lawmaking body, raises income to defray the necessary expenses of the government
What is “lifeblood of the government and their prompt and certain availability are an imperious need” and its meaning?
Taxes, government cannot continue to exist and operate without financial means.
What is “indispensable and inevitable price for civilized society” and its meaning?
Taxation, without taxes, the government would be paralyzed.
What are the objectives of taxation?
a. raising of revenue for the government
b. achieve various economic and social objectives that includes:
- shifting wealth from the rich to the poor
- maintain price stability
- stimulate economic growth
- encourage full employment
State Powers
- Taxation
- Eminent Domain
- Police Power
The power of the state by which the sovereign raises revenue to defray the necessary expenses of the government.
Taxation
The power of the state to take private property for public use. upon payment of just compensation.
Eminent Domain
The power of the state to enact laws to promote public health, public morals, public safety and the general welfare of the people.
Police Power
Aspects of Taxation
- Levying of the tax.
- Collection of the tax levied.
The imposition of tax requires legislative intervention. In the Philippines, it is Congress that levies taxes
Levying of the tax
This is essentially an administrative function.
Collection of the tax levied.
Basic Principles of a Sound Tax System
- Fiscal adequacy.
- Equality or theoretical justice.
- Administrative feasibility.
Sources of revenue are sufficient to meet government expenditures
Fiscal adequacy
The tax imposed must be proportionate to taxpayer’s ability to pay
Equality or theoretical justice.
The law must be capable of convenient, just and effective administration
Administrative feasibility
Limitations on the Power of Taxation
constitutional and inherent limitations
limitations are those provided for in the constitution or implied from its provisions
Constitutional Limitations
Restrictions to the power to tax attached to its nature.
inherent limitations
Purpose
Taxes may be levied only for public purpose
Territoriality
The State may tax persons and properties under its jurisdiction
International comity
The property of a foreign State may not be taxed by another
Exemption
Governmental agencies performing governmental functions are exempt from taxation
Non-delegation
The power to tax being legislative in nature may not be delegated
Give some doctrines in taxation and its meaning.
- Prospectivity of Tax Laws
- Taxes must be imposed prospectively. - Double Taxation
- Same taxpayer is taxed the same tax jurisdiction for the same thing. - Set-off of Taxes
- Taxes are not subject to set-off or legal compensation under Article 1279 of the Civil Code. - Escape from Taxation
- Available to the taxpayer to limit or even avoid the impact of taxation.
Types of Double Taxation
- Direct Double Taxation
- Indirect Double Taxation
Categories of Escape from Taxation
-Tax Avoidance/ Tax Minimization/ Tax Planning
- Tax Evasion/ Tax Dodging
Situs of Taxation
place of taxation
Situs of Persons
Residence of the taxpayer
Situs of Real property or tangible personal property
Location of the property
Situs of Intangible personal property
Situs is the domicile of the owner unless he has acquired a situs elsewhere
Situs of Business, occupation and transaction
Place where business is being operated, occupation being practiced and transaction completed
Situs of Income earned
Taxpayer’s residence or citizenship, or place where the income was earned
Situs of Gratuitous transfer of property
Taxpayer’s residence or citizenship, or location of the property
Enforced proportional contributions from persons and property levied by the lawmaking body of the State by virtue of its sovereignty for the support of the government and all public needs
Taxes
Any contribution imposed by the government upon individuals
Tax
Essential Characteristics of a Tax
- enforced contribution
- levied by the lawmaking body
- proportionate in character
- generally payable in money
- imposed for the purpose of raising revenues
- to be used for public purpose.
Types of Tax Rate Structures
- regressive
- proportional
- progressive
The average rate decreases as the tax base increases.
Regressive Tax
The average rate of tax remains, constant for all levels of the tax base.
Proportional Tax
The average rate increases as the amount of the tax bases increases.
Progressive Tax
clarified the constitutional provision on progressive system of taxation
Republic Act (R.A.) 9337 or VAT Reform Act
Tax of a fixed amount imposed on individuals, whether citizens or not, residing within a specified territory without regard to their property or the occupation in which they may be engaged. Example: community tax.
Personal Tax/ Poll Tax/ 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.
Property Tax
Tax imposed upon the performance of an act, the enjoyment of a privilege or the engaging in an occupation
Excise Tax
Tax demanded from persons who are intended or bound by law to pay the tax
Direct Tax
Tax which the taxpayer can shift to another
Indirect Tax
Tax imposed based on a physical unit of measurement, as by head or number, weight, or length or volume.
Specific Tax
Tax of a fixed proportion of the value of property; needs an independent appraiser to determine its value
Ad valorem Tax
Tax with no particular purpose or object for which the revenue is raised, but is simply raised for whatever need may arise.
General Tax/ Fiscal Tax/ Revenue Tax
Tax imposed for a special purpose regardless of whether revenue is raised or not, and is intended to achieve some social or economic end
Special Tax/ Regulatory Tax
Tax imposed by the national.
National Tax
Tax imposed by municipal governments for specific needs.
Municipal Tax/ Local Tax
three branches of the national government are
- President and his administration (executive)
- Congress (legislative)
- Courts (judicial)
Statutory Law
Republic Act 8424, The National Internal Revenue Code (NIRC) of 1997
types of administrative tax authorities
- Revenue Regulations
- Revenue Rulings
administrative interpretations of the statutes enacted by Congress and tend to be somewhat more detailed than the Code itself
Revenue Regulations
more detailed, as they are issued in order to explain the tax results of very specific transactions
Revenue Rulings
tax ‘law,’ in general, is composed of all three elements:
(1) the Code
(2) Regulations and Rulings,
(3) decisions of various courts that hear tax cases
Sources of Tax Laws
- Constitution
- Statutes and Presidential Decrees
- Revenue Regulations
- Rulings by the Commissioner of Internal Revenue and Opinions by the Secretary of Justice
- Decisions of the Supreme Court and the Court of Tax Appeals
- Provincial, city, municipal, and barangay ordinances
- Treaties or international agreements
First Philippine Internal Revenue Law was approved by (1)______________ on (2)______________ as (3)______________ effective on (4)______________
- Philippine Commission
- July 2, 1904
- Act 1189
- August 4, 1904
The Bureau was created by (1)______________, approved by the (2)______________ on (3)______________, effective on (4)______________.
- Commonwealth Act 466
- National Assembly
- June 15,1939
- July 1, 1939
(1)______________ an act amending the National Internal Revenue Code, known as (2)______________
- RA 8424
- Tax Reform Act of 1997
