General Principles of Taxation

Question 1

Define Taxation.

Answer 1

1. As a power - the inherent power of the state to demand enforced contribution for public purpose to support the government.
2. As a process - the legislative act of laying a tax to raise income for the government to defray its necessary expenses.
3. As a mode of cost allocation - taxation is a means of allocating government burden to the people.

Question 2

Explain the Theory of Taxation.

Answer 2

A government cannot exist without a system of funding, The government’s necessity for funding is the theory of Taxation.

Question 3

What are the inherent powers of the state? Explain each.

Answer 3

1. Power of Taxation - the power to take property/dues from the people to support spending of the government for public purpose. (funds for necessities)
2. Police Power - 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. (sovereignty)
3. Power of Eminent Domain - the power to take private property for public use upon payment of just compensation. (properties for public service)

Question 4

What is sovereignty?

Answer 4

The power to compel people to follow.

Question 5

Which government has the necessity of delegation?

Answer 5

National government - not necessary for all three inherent powers.

Local government - if the three inherent powers are to be exercised by the local government, delegation is needed to be made by our legislature to avoid abuses.

Question 6

What is the purpose of Taxation, Police Power, and Eminent Domain?

Answer 6

1. Taxation - to raise money for the government. To provide income for the government.
2. Police Power - protection of well-being of the people.
3. Eminent Domain - property is taken for public use

Question 7

What are the effects of transfer of property rights on Taxation, Police Power, and Eminent Domain?

Answer 7

1. Taxation - money paid as taxes becomes part of the public fund
2. Police Power - no transfer of title, only restraint on the injurious use of property
3. Eminent Domain - transfer of right to property whether it be ownership or lessor right

Question 8

What is the amount of Imposition for Taxation, Police Power, and Eminent Domain?

Answer 8

1. Taxation - unlimited i.e. variable (no ceiling, no floor) (it depends on public spending)
2. Police Power - limited only to the cost of regulation (ex. licensing)
3. Eminent Domain - no imposition, the government will give money to the owner of property

Question 9

What is the Importance of Taxation, Police Power, and Eminent Domain?

Answer 9

1. Taxation - most important of the three (nagpapagalaw sa mga ibang powers)
2. Police Power - most superior

Question 10

What is the relationship of Taxation, Police Power, and Eminent Domain with the constitution?

Answer 10

1. Taxation - inferior to the “Non-Impairment Clause” of the Constitution
2. Police Power - superior to the “Non-Impairment Clause” of the Constitution
3. Eminent Domain - superior and may override the “Non-Impairment Clause” because the welfare of the state is superior to private contracts

Question 11

What is non-impairment clause?

Answer 11

hindi pwedeng i-set aside ni government ang kanyang obligasyon

Question 12

What are the limitations of Taxation, Police Power, and Eminent Domain?

Answer 12

1. Taxation - constitutionally and inherently restricted (ex. provisions, territory)
2. Police Power - public interest and the requirement of due process (right to be heard)
3. Eminent Domain - public purpose and just compensation

Question 13

What is just compensation?

Answer 13

The courts will determine the fair value of your property.

Question 14

What are the branches of the government?

Answer 14

Legislative, Executive, Judiciary (JEL)

Legislative - policy makers (congress) (the one who acts first)
Executive - implements RR/Rulings (agencies & bureaus of the gov’t w/ the President as their head)
Judiciary - guardians of the consti. - check the consistency of L and legality of E (supreme court)

Question 15

What are the similarities between the inherent powers of the state?

Answer 15

1. All necessary
2. Inherent
3. Legislative in nature
4. Way of interfering with private rights and property
5. Exists independently with the Constitution but is limited by the Constitution
6. Presuppose an equivalent compensation
7. LGU may be limited by national legislature

Question 16

What is Taxation as a process?

Answer 16

1. Legislative Act - impact of taxation
2. Administrative Act - incidence of taxation

Question 17

What is considered a Legislative act?

Answer 17

Anything that relates to the creation of a tax law.

• Determination of the object of taxation
• How much is the tax rate
• Sources of funds for tax

Question 18

What is considered an Administrative act?

Answer 18

These are matters that relate to implementation.

• Assessment on tax payer
• Collects tax
• BIR
• release of guidelines for revenue regulation
• levy/distraint/seizure of tax payers’ property to satisfy unpaid taxes

Question 19

What are the theories of allocation?

Answer 19

1. Benefit Received Theory - the more benefit you receive, the more you will pay. Receipt of benefit is conclusively presumed.
   (business tax - consumption - indirect tax)
2. Ability to Pay Theory - even though some groups are benefitting so much but they don’t have the capability to contribute for the support of the government, let them be.
   (income tax)

Taxation is based on the benefit received theory but is subject to ability to pay theory.

Question 20

What does “receipt of benefit is conclusively presumed” mean?

Answer 20

There is receipt of benefit if you are a citizen and a resident of the Philippines, regardless of your nationality.

Question 21

What are the 2 propositions/measures for ability to pay theory?

Answer 21

1. Vertical Equity - ability to pay is consistent with the value of the tax object.
2. Horizontal Equity - depends on the circumstance of the taxpayer. This is why there are deductions.