Unit 4. Taxation Flashcards
_________ is the power of the state to demand proportionate contribution from persons and property in order to promote public welfare to defray the expenses of the government.
Taxation
Purpose of Taxation (2)
- Primary (fiscal purpose)
- Secondary (sumptuary/compensatory purpose)
___________ (_________ purpose) – to raise revenue and funds to defray the necessary expenses of the government.
Primary; fiscal
___________ (____________________- purpose) – to regulate, to promote general welfare, to reduce social inequality, and to promote economic growth.
Secondary; sumptuary/compensatory
Basic Principle of Sound Tax System (3)
- Fiscal Adequacy
- Administrative Feasibility
- Theoretical Justice
______________ – the sources of government revenue must be sufficient to meet government expenditures and other public needs.
Fiscal Adequacy
_________________ – tax law must be capable of convenient, just and effective administrative – free from confusion and uncertainty.
Administrative Feasibility
_________________ – A good tax system must be based on the taxpayer’s ability to pay. This suggests that taxation must be progressive conformably with the constitutional mandate that congress shall be evolve a progressive system of taxation.
Theoretical Justice
Theoretical Justice suggests that taxation must be ____________ conformably with the constitutional mandate that congress shall be evolve a ___________ system of taxation.
progressive; progressive
Philippine Tax Structure (2)
- Territorial tax system
- Progressive tax rates
The country imposes a ________________, meaning only Philippine-sourced income is subject to Philippine taxes.
territorial tax system
The country imposes a territorial tax system, meaning only __________________ income is subject to Philippine taxes.
Philippine-sourced
The Philippines taxes its resident citizens on their _____________ income.
worldwide
Non-resident citizens and aliens, whether or not resident in the Philippines, are taxed only on income from sources within the _______________.
Philippines
It also uses _________________________, wherein the higher the income is, the higher the tax rates used. This is to ensure _______ among the income earners.
progressive tax rates; equity
Philippine Tax Laws (5)
- The Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Act)
- Tax Reform for Acceleration and Inclusion (TRAIN) Law
- Article VI, Section 28 of the Constitution;
- The National Internal Revenue Code; and
- Local Government Code of 1991.
Constitutional Limitations (1987) - 15
- Due Process of Law
- Equal Protection of the Law
- Uniformity in Taxation
- Progressive System of Taxation
- Non-imprisonment for Non-payment of Poll Tax
- Free Worship Rule
- Exemption of Religion, Charitable or Education Entities, Non-profit Cemeteries, Churches and Mosque from Property Taxes
- Non-Appropriation of Public Funds for the Benefit of any Church or System of Religion
- Concurrence of a Majority of ALL Members of Congress to Pass Law Granting Exemption
- Tax Bills shall Originate Exclusively in the House of Representatives, but Senate may Propose Amendments
- Non-Diversification of Tax Collection
- Non-Delegation of the Power of Taxation
- Non-Impairment of the Supreme Court Jurisdiction
- Each Local Government Unit Shall Exercise the Power to Create its Own Sources of Revenue
- Exemption from Taxes of the Revenues and Assets of Non-Profit, Non-Stock Educational Institutions
____________________: No one should be deprived of his life, or property without due process of law.
The law established procedures which must be adhered in making assessments and in enforcing collections.
Failure of the government to observe their rules violates the requirement of due process.
Due Process of Law
_________________________: Taxpayers under similar circumstances and conditions should be treated equally both in terms of rights conferred and obligations imposed.
Equal Protection of the Law
_________________________: Requires the uniform application and operation, without discrimination, of the tax in every place where the subject of tax is found.
Uniformity in Taxation
Tax rates increase as the tax base increase. This is consistent with the taxpayer’s ability to pay and reduces social inequality.
Progressive System of Taxation
No one shall be imprisoned for mere inability to pay debt. Non-payment of poll tax is only punishable by a surcharge.
Non-imprisonment for Non-payment of Poll Tax
Properties and revenues of religion institutions such as offerings are not subject to tax. This exemption does not extend to income from properties or activities of religious institutions that are proprietary or commercial in nature.
Free Worship Rule
Constitutional exemptions from property tax applies for properties actually directly, and exclusively used for chartable, religious and educational.
Exemption of Religion, Charitable or Education Entities, Non-profit Cemeteries, Churches and Mosque from Property Taxes
To support freedom of religion, the government should not favor any particular system of religion by appropriating public funds or property in support thereof.
Non-Appropriation of Public Funds for the Benefit of any Church or System of Religion
Tax should never be diversified or used for private purpose.
Non-Diversification of Tax Collection
Congress cannot take away from the Supreme Court the power given to it by the Constitution as the final arbiter of tax cases.
Non-Impairment of the Supreme Court Jurisdiction
This is a constitutional recognition of the local autonomy of local governments and an express delegation of the taxing power.
Each Local Government Unit Shall Exercise the Power to Create its Own Sources of Revenue
Taxes in the Philippines (8)
- Capital Gains Tax
- Documentary Stamp Tax
- Donor’s Tax
- Estate Tax
- Income Tax
- Percentage Tax
- Value-Added Tax
- Excise Tax
________________ is a tax imposed on the gains presumed to have been realized by the seller from the sale, exchange, or other disposition of capital assets located in the Philippines, including pacto de retro sales and other forms of conditional sale.
Capital Gains Tax
___________________ is a tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation, rights, or property incident thereto.
Documentary Stamp Tax
___________ is a tax on a donation or gift, and is imposed on the gratuitous transfer of property between two or more persons who are living at the time of the transfer.
Donor’s Tax
____________ is a tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death and on certain transfers which are made by law as equivalent to testamentary disposition.
Estate Tax
___________- is a tax on all yearly profits arising from property, profession, trades or offices or as a tax on a person’s income, emoluments, profits and the like.
Income Tax
________________ is a business tax imposed on persons or entities who sell or lease goods, properties or services in the course of trade or business whose gross annual sales or receipts do not exceed P550,000 and are not VAT-registered.
Percentage Tax
________________ is a business tax imposed and collected from the seller in the course of trade or business on every sale of properties (real or personal) lease of goods or properties (real or personal) or vendors of services. It is an indirect tax, thus, it can be passed on to the buyer.
Value-Added Tax
_____________ is a tax on the production, sale or consumption of a commodity in a country. It applies to goods manufactured or produced in the Philippines for domestic sale or consumption or for any other disposition; and to imported goods.
Excise Tax
_____________________________ is the tax withheld from individuals receiving purely compensation income.
Withholding Tax on Compensation
Three kinds of Withholding Tax (3)
- Expanded Withholding Tax
- Final Withholding Tax
- Withholding Tax on Government Money Payments
________________________ is a kind of withholding tax which is prescribed only for certain payors and is not creditable against the income tax due of the payee for the taxable year. Income Tax withheld constitutes the full and final payment of the Income Tax due from the payee on the said income.
Final Withholding Tax
___________________ is a kind of withholding tax which is prescribed only for certain payors and is creditable against the income tax due of the payee for the taxable quarter year.
Expanded Withholding Tax
_______________________________________________ is the withholding tax withheld by government offices and instrumentalities, including government-owned or -controlled corporations and local government units, before making any payments to private individuals, corporations, partnerships and/or associations.
Withholding Tax on Government Money Payments
