General Principles of Taxation Flashcards
What is taxation?
Taxation is the power by which the sovereign, through its lawmaking body, raises revenue to defray the necessary expenses of the government. As a power, taxation refers to the inherent power of the state to demand enforced contributions for public purpose or purposes.
What is the rationale of taxation?
It is said that taxes are what we pay for
civilized society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one’s hard -earned income to the taxing authorities, every person who is able must contribute his share in the running of the government. The government for its part is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. The symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power.
What are the purposes and objectives of taxation?
Revenue and non-revenue
Define Taxes
Taxes are the enforced proportional contributions from persons and property levied by the law-making body of the State by virtue of its sovereignty for the support of government and for public needs
Basic Principles of a Sound Tax System
1.Fiscal Adequacy – the sources of tax revenue should coincide with, and approximate the needs of government expenditure. Neither an excess nor a deficiency of revenue vis-à-vis the needs of government would be in keeping with the principle.
2. Administrative Feasibility – tax laws should be capable of convenient, just and effective administration. 3. Theoretical Justice – the tax burden should be in proportion to the taxpayer’s ability to pay (ability- to-pay principle). The 1987 Constitution requires taxation to be equitable and uniform.
May the courts review taxes?
The courts cannot review the wisdom or
advisability or expediency of a tax. The court’s power is limited only to the application and interpretation of the law.
Judicial action is limited only where involves:
1.The determination of validity on the tax in relation to constitutional precepts or provisions.
2.The determination, in an appropriate case, of the
application of the law.
What are the aspects of taxation?
Levy _the determination of the subject, the amount and due date
Collection - manner of enforcement of the obligation by the taxpayer ( tax administration)
Classify tax as to burden
- Direct - where both the incidence and impact of tax falls on one person
- Indirect - where the incidence and liability of the tax falls on one person but the burden can be shifted or passed on to another person
Classify tax as to purpose
- General revenue - tax imposed for general purposes
- Specific revenue - tax imposed fo special purposes
As to measure of application
- Specific tax - imposed per head or unit
- Ad Valorem tax - based on value of the article or things which is subject to tax
Classify tax as to date
- Progressive Tax – the rate or the amount of the tax increases as the amount of the income or earning (tax base) to be taxed increases.
examples: income tax, estate tax, donor’s tax - Regressive Tax – the tax rate decreases as the amount of income or earning (tax base) to be taxed increases.
Note: We have no regressive taxes (this is
according to De Leon) 3. Mixed Tax – tax rates are partly progressive and partly regressive. 4. Proportionate Tax – tax rates are fixed on a flat tax base.
examples: real estate tax, VAT, and other
percentage taxes
Classify tax as to scope or authority
National tax
Municipal or local tax
a.Toll vs Tax
- Tax is a demand of sovereignty while toll is a demand proprietorship
- Tax is paid for the support of the government while toll is paid for the use of another’s property
- Tax generally, no limit as to amount imposed while toll depends on the amount imposed on the the cost of construction or maintenance of the public improvement used
4.Tax imposed only by the government toll is imposed by the government or private individuals or entities
Penalty vs tax
1.tax is generally intended to raise revenue penalty is designed to regulate conduct
2.tax is imposed only by the government while penalty imposed by the government or private individuals or entities
c.Special Assessment vs Tax
1.tax is imposed on persons, property and excise
While special assessment is levied only on land
2.tax is a personal liability of person assessed while special assessment is not a personal liability the of the person assessed, i.e. his liability is limited only to the land involved
3.tax is based on necessity as well as on benefits received special assessment is based wholly on benefits
4.tax is of general application while special assessment is exceptional both as time and place
