Taxation Part 1 Flashcards
What are the 3 Inherent Powers of the state?
- Police Power
- Power of Eminent Domain
- Power of Taxation
What is Police Power?
The Power of Promoting Public Welfare
by Restraining and Regulating the use of Liberty and Property
What is the most Pervasive, Least Limitable, and the most demanding power of the 3
Police Power
Lodged in National Legislature
What are the 2 Tests of Police Power
- Lawful Subject - Activity regulated must affect public welfare
- Lawful Means - Lawful subject must be pursued through a lawful method
Eg: They can’t shoot you for jaywalking
Who can exercise the power of eminent domain?
- Congress
- President
- Various local legislative bodies
- Certain Public Corporations like land authority and housing authority
- Quasi-Public Corporations like electric companies, telecompanies, etc.
What is the other name for Eminent Domain?
Power of Expropriation
Basically they take private property for the benefit of the public
Is a compulsory sale
What are the 3 Aspects of Taxation?
- Levying - Congress Decides the Tax Laws
- Assessment - BIR computes the tax you’re supposed to pay
- Collection - Tax building collects the computed tax
Secret 4th step inserted in some books is 4. Payment - Tax payer pays
What is the power of taxation?
Power to raise revenue, through the enactment of laws that impose charges upon persons, property and activity under its jurisdiction, to defray government expenses
What is Section 28 (2) of Article VI
“The Congress may, by law. authorize the President to fix, within specified limits, and subject to such limitations and restrictions as it may impose (a bunch of stuff) within the national development program of the Philippines”
What article is this? “Private Property shall not be taken for public use without just compensation”
Article 3. Section 9
(In the Bill of Rights)
What are the 2 Secondary Purposes of Taxation?
Regulatory - Control the stuff that can affect the public like sin taxes
Compensatory - Helps attain an end regardless of whether or not it generates revenue, like not imposing taxes on charitable donations.
What is the Primary Purpose of Taxation?
Revenue or Fiscal Purpose
Basically to finance government activities
What are the 4 scopes of taxation?
- Supreme - It can impose tax on anything (It can tax as long as there is a law) (It is supreme because the other 2 powers cannot last without taxation)
- Plenary - Avail remedies just to endure collection
- Unlimited - Without Restrictions
- Comprehensive - It covers persons, businesses, activities, professions, rights and services
What are the 5 requisites for valid exercise of eminent domain?
- Necessity of exercise
- Private Property
- Taking of the private property
- Public Use
- Just Compensation
What is the lifeblood theory of taxation?
Taxes are the lifeblood of a government
Without it the government can neither exist or survive, making the government paralyzed for a lack of motive power to activate and operate it which becomes a detriment to society
This is determination of the tax liabilities of the tax payer and collection
Incidence of Taxation or the administrative act of Taxation
Assessment and Collection
This is the enactment of a tax law by congress and is called “Impact of Taxation”
Levying or Imposition
(Legislative meaning it is a law)
What is a limit of taxation that come from the constitution
(remember that the constitution limits how much tax power can be exercised)
Constitutional Limit of Taxation
Some applications are:
1. You can’t be imprisoned if you don’t pay poll tax
2. Uniformity and Equitability
3. You can’t tax religious, educational, non stock, non profit entities. You also can’t use public money for religious reasons
4. Majority vote of congress for tax exemption grants
5. President veto power
More in the mind map
What is the Benefit Received or Reciprocity Theory of taxation.
The government provides benefits to the people in the form of public services and the public provides funds that finance the government
Aka: Support is mutual between both parties
What is a limit of taxation that comes with the power itself?
Inherent Limit of Taxation
1. It should be for Public Purpose
2. No improper delegation of taxing power
3. Territorial Jurisdiction
4. Exemption of Government Entities
5. International Comity (Respect between nations because they are equals)
If the tax is an excise tax, what is the situs that can enable a state to impose the tax?
The state where the right is exercised or the activity is conducted
Place or Authority that has the right to impose and collect tax
Situs of Taxation
If the tax is a Personal, Poll or Capitation tax, what is the situs that can enable a state to impose the tax?
The residence or citizenship of the payer.
If the tax is a real property tax, what is the situs that can enable a state to impose the tax?
Only the state where the property is located
If the tax is a tax on Tangible Personal Property, what is the situs that can enable a state to impose the tax?
The jurisdiction that can tax is where the property is located
If the tax is a tax on Intangible Personal Property, what is the situs that can enable a state to impose the tax?
May be imposed by the state where the intangible personal property is exercised
Is an act of the sovereign, through its agent, of taxing twice the same property of the same taxpayer for the same purpose during the same taxable year by the same taxing authorities.
Double Taxation
What things must be the same to be classified as double taxation?
- Same Taxing Purpose
- Same Taxing Authority
- Same Taxing Period
- Same Object
If all 4 are the same its direct double tax
If only some are the same then it is indirect double tax
Is Double Taxation allowed in the Philippines?
Direct Double Taxation is not directly prohibited, BUT it is considered a violation of the Uniformity and Equitability of taxation.
So it is unconstitutional
Same for Indirect Double Taxation
What are the 5 means of avoiding or minimizing tax burdens?
- Tax Shifting
- Tax Transformation
- Tax Evasion
- Tax Avoidance
- Tax Exemption
This method of tax avoidance is also known as Tax Dodging and uses Illegal or Fraudulent means to defeat or lessen the payment of tax
Tax Evasion
My favorite
This method of avoiding taxes transfers the economic burden of tax from the one who pays to the other.
Tax Shifting
Examples include VAT
To illustrate an example
7/11 buys 100 units of goods worth 1,000 from a supplier
The VAT is 12% so now 7/11 is paying 1,120 as input value added tax
This input value tax can now be used to offset the VAT 7/11 has to pay from selling the goods to the customers
So let’s say they sell all the goods and the total output VAT is 180,
That 180 from selling the goods, can now be deducted with the 120 from them buying the goods, so now they only need to pay 60 to the Government in VAT.
This method of avoiding taxes is an escape from taxation where the producer or manufacturer pays the tax and endeavors to recoup himself by improving his process of production thereby turning out his units of products at a lower cost
Transformation
This is quite literally just, changing your business to get taxed less, which could be upgrade or downgrade
This is a very hard method of avoiding taxes because the burden is all in the taxpayer to prove to the government their eligibility as use of this completely goes against the foundations of the Lifeblood theory of taxation
Tax Exemptions
- Not Presumed
- Must be strictly construed against the tax payer
- Constitutional grants of taxation are self executing
- Personal so it can’t be applied to others
This method of tax avoidance is also known as Tax Minimization and has exploitation by the taxpayer of legally permissible alternative tax rates or methods in order to avoid or reduce tax liability
Tax Avoidance
My beloved
What are the 3 principles of a sound tax system?
Fiscal Adequacy - Government should never run out of funds
Theoretical Justice - We should be able to pay reasonable taxes
Administrative Feasibility - Paying Taxes should be something we feel good doing
What are the 3 kinds of tax exemptions?
- As to Form
- As to Basis
- As to Content
What are the 2 types of Exemptions As to Basis?
- Constitutional
- Statutory
What are the 2 types of Exemptions As to Form?
- Expressed
- Implied
What are the 2 types of Exemptions As to Content?
- Total
- Partial
It is an enforced contribution levied by the lawmaking body of the state to raise revenue for public purpose
Tax
