General Principles of Taxation Flashcards
Refers to the inherent power of the state to demand enforced contribution for public purpose to support the government
Taxation as a power
The legislative act of laying a tax to raise income for the government to defray its necessary expenses
Taxation as a process
Taxation is a means of allocating government burden to the people
Taxation as a mode of cost allocation
The power to take property for the support of the government and for public purpose
Power of Taxation
The power to enact laws to promote the general welfare of the people.
It is wider in application because it is the general power to make laws
Police Power
The power to take private property for public use upon payment of just compensation
Power of Eminent Domain
Exercising Authority: Government only
Choices: Taxation, Police Power or Eminent Domain
Taxation & Police Power
Exercising Authority for each:
- Taxation
- Police Power
- Eminent Domain
- Taxation & Police Power: Government only
- Eminent Domain: Government and Public/ Utility entities
Necessity of Delegation for each:
- Taxation
- Police Power
- Eminent Domain
- Taxation: Delegation is not necessary since it is inherent
- Police Power & Eminent Domain: Delegation is necessary
Persons affected for each:
- Taxation
- Police Power
- Eminent Domain
- Taxation & Police Power: Community or class of individuals
- Eminent Domain: Operates on the owner of the property
Effect of transfer of property rights:
- Taxation
- Police Power
- Eminent Domain
- Taxation: Money paid as taxes becomes part of the public fund
- Police Power: There is no transfer of title, only restraint on the injurious use of property
- Eminent Domain: There is transfer of right to property whether it be of ownership or lesser right
Amount of Imposition for each:
- Taxation
- Police Power
- Eminent Domain
- Taxation: Unlimited
- Police Power: Sufficient to cover the costs of regulation
- Eminent Domain: No imposition, the owner is paid the fair market value of his property
Importance for each:
- Taxation
- Police Power
- Eminent Domain
- Taxation: Most Important
- Police Power: Most Superior
- Eminent Domain: Important only
Relationship with the Constitution for each:
- Taxation
- Police Power
- Eminent Domain
- Taxation: Inferior to the “Non- Impairment Clause” of the Constitution
- Police Power: Superior to the
“Non- Impairment Clause” of the Constitution - Eminent Domain: Superior and may override the “Non- Impairment Clause
Limitation for each:
- Taxation
- Police Power
- Eminent Domain
- Taxation: Constitutionally and inherently restricted
- Police Power: Public interest and the requirement of due process
- Eminent Domain: Public purpose and just compensation
Stages of Taxation:
- Levy or imposition
- Assessment of Tax
Aspects of Taxation:
- Levy: Impact
- Assessment: Incidence
Tax Process
How is the Tax Process exercised?
- Legislation of Laws: Congess (National Tax)
- Tax ordinances: Local Sanggunian (Local Tax)
- Tax Collection: Administrative branch of Govt.
Purposes of Taxation
- Primary purpose: to raise revenue
- Secondary purposes: Regulatory and Compensatory
Theory that states:
Tax Payment should be based on benefits received and
Everyone is conclusively presumed to be receiving benefits from Govt.
Benefit Received Theory
Theory that states:
Tax Payment should be based on ability of taxpayers to pay
Ability to Pay Theory
This can be:
- Vertical equity
- Horizontal equity
______ states:
The existence of the government is a necessity and it cannot continue without means to support itself.
Theory of Taxation
______ states:
The government and the people have the reciprocal and mutual duties of support and protection.
Basis of Taxation
Scope of Taxation
Hint: CPUS
CPUS
- Comprehensive
- Plenary
- Unlimited
- Supreme
Limitations of Taxation Power
- Constitutional Limitations &
- Inherent Limitations: (TIP END) Territoriality
International comity and treaty
Public purpose
Exemption
Non-Delegation
Situs of Taxation
- Persons- residence of taxpayer
- Community Development tax- residence or domicile of taxpayer
- Business taxes- where business was conducted or transactions took place
- Privilege or occupation tax- where privilege is exercised
- Real property tax- where property is located
-
Personal property tax
- Tangible
- Intangible - Income- income is earned or residence or citizenship of taxpayer
- Transfer taxes- residence or citizenship or location of property
- Franchise taxes- state that grants the franchise
- Corporate taxes- depend on law of incorporation
Double Taxation
- Same object or subject
- Same period
- Same kind of tax
- Same taxing authority
This objectionable and prohibited because it violates the constitutional provision on uniformity and equality
Direct Double Taxation
A double taxation caused by two different taxing authorities, one domestic and foreign
International Double Taxation
Remedies to Double Taxation
- Provision for Tax exemption
- Allowance for Tax credit
- Allowance for Principle of reciprocity
- Enter into treaties with foreign govt.
Escape from taxation that will not result in loss of revenue
- Shifting- transferring tax burden to another without violating the law.
- Capitalization- seller is willing to lower the price provided it will shouldered by the buyers
- Transformation- manufacturer absorbs additional taxes by increasing quantity of production
Escapes from taxation that will result to loss of revenue to Govt.
- Tax evasion- (Tax dodging) Illegal, prohibited and not subject to penalties.
- Tax avoidance- (Tax minimization) Legal, not prohibited and not subject to penalties.
- Tax exemption- immunity, privilege or freedom from payment to which others are obliged to pay.
Kinds of Exemptions
- Express- constitution, statute, treaties, ordinance, contracts or franchise.
- Implied- accidental or intentional omission.
- Total- from all taxes (OFWs)
- Partial- from certain taxes
Grounds for Exemption
May be based on:
- Contract
- Public Policy
- to foster Charitable and other benevolent institutions
- Treaty on grounds of Reciprocity
- to Lessen rigors of international double or multiple taxation
_______ is:
- Scheme used outside of lawful means and subjects taxpayer to penalties
- Accomplished by breaking the law
- Connotes fraud, deceit and malice
Tax Evasion
_______ is:
- Tax saving device within means sanctioned by law
- Accomplished by legal procesures
- No fraud involved
Tax Avoidance
Tax Exemption
- is not automatic
- is non-transferable
- is revocable by the government (except when granted under a valid contract or by the Constitution)
- rule shall be uniform
- does not contravene the Lifeblood Doctrine
- is always disfavored
- is allowed only under a clear and unequivocal provision of the law
- on Real property tax will be based on the Doctrine of Usage and not Doctrine of Ownership, except for real properties owned by the government which is absolutely exempt from taxation
- on Real property tax cannot be granted by local governments but can condone real property tax liabilities in special cases
- on Local taxes can be granted by local governments but they cannot condone existing liabilities on local taxes
Constitutional Limitations
- observance of due process of law
- equal protection of the law
- uniformity in taxation
- progressive scheme of taxation
- non-imprisonment for non-payment debt or poll tax
- non-impairment of obligation and contract
- free worship rule
- non-appropriation of public funds or property for the benefit of any church, sect or system of religion
- exemption of religious, charitable or educational entities, non-profit cemeteries, churches and mosque from property taxes.
- exemption from taxes of the revenues and assets of non-profit, non-stock educational institutions including grants, endowments, donations or contributions for educational purposes
- concurrence of a majority of all members of Congress for the passage of a law granting tax exemption
- non-diversification of tax collections
- non-delegation of the power of taxation
Exceptions:
a. power to tax was delegated to the President under the Flexibility Clause of the Tariff and Customs Code b. power to tax was delegated to the local government units under the Local Government Code c. matters involving the expedient and effective administration and implementations of assessment and collection of taxes or certain aspects of taxing process that are not legislative in character
- non-impairment of the jurisdiction of the Supreme Court to review tax cases
- appropriations, revenue or tariff bills shall originate exclusively in the House of Representatives but the Senate may propose or concur with amendments
- 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
Fundamental Doctrine in Taxation
- No court may enjoin the collection of taxes
- Claim for exemptions shall be interpreted strictly against the taxpayer
- A law that permit deduction from the tax base is strictly construed against the taxpayer 4. Tax assessment are presumed to be correct and done in good faith
- Tax laws are generally prospective in application
- Tax are not subject to compensation or set-off
- Refund of taxes do not earn interest because interest do not run against the government
Tax Amnesty
vs.
Tax Condonation
vs.
Tax Exemption
Tax Amnesty
- a general pardon or intentional overlooking by the state of its authority to impose penalties on persons otherwise guilty of tax evasion or violation of tax laws.
- The purpose is to give the erring taxpayer a chance to reform and become part of the society with a clean slate.
Tax Condonation
- means to refrain from exacting or imposing a tax. It cannot extend to refund of taxes already paid when obtaining condonation
Tax Exemption
- There is no tax liability at all.
- The grantee need not pay anything
- Can be availed of by any qualified taxpayer
