I. What Is Taxation?

I. WHAT IS TAXATION?
 It is the supreme power of a sovereign state through its law-making body, to

impose burdens or charges upon persons, property or property rights for public
purpose.
 It is the power vested upon the legislature for the purpose of raising revenues to
finance government expenditures and for the general welfare and protection of its
citizens.
 Is the method of apportioning the cost of government among those who in some
measure are privileged to enjoy its benefits and must therefore, bear its burden
(Cooley, Law of Taxation, p59)
 It is the “Life-Blood” of the government without which it may not be able to
perform its functions.
II. WHAT IS TAX?

 These are the enforced proportional contributions from persons and property, level
by the state for virtue of its sovereignty for the support of the government and for
all public needs.
III. BASIS OF TAXATION:

 The authority to imposed tax is inherent to every sovereign state.
 It is found in the reciprocal duties of protection and support between the state and
those are subject to its authority ( people and properties).
IV. ESSENTIAL CHARACTERISTICS OF TAXATION:

 It is an enforced contribution – all citizens are required to pay taxes. Failure to pay
taxes resulted to penalty provided by law.
 Non-payment and understatement of paying taxes is called Tax Evasion
which is punishable by law.
 Tax Avoidance is the proper way to lessen ones’ tax due.
 It is generally payable in money – payment must be made in cash or checks

through authorized agent banks or through Electronic Payment System (EFPS).
 It is proportionate in character – collection of taxes is based upon the income and

the property of the taxpayer. The higher the income, the higher the tax and the
lesser the income the lesser is the tax due.
 Graduated Tax table portrays the proportional computation of tax due.
 It is levied on persons, property or property rights –
 A person who receives an income based on employment (both government
and private sector), practice of profession or upon doing business is taxable
as Self-Employed or Individual Earning Purely of Compensation Income.
 Taxes imposed on properties rights are called Real Property Taxes.
 Selling of Real Property resulted to Capital Gain Tax.
 Transfer of Real or Personal Properties resulted to the payment of Donor’s
Tax.
 It is levied by the state, which has jurisdiction over the person or property
 In case of real properties , the rule is “the place or state where the property
subject to tax is located has authority and jurisdiction to imposed tax”
 In movable / personal property, the rule is “mobilia sequntur personan” a
Latin phrase which means “movables follow the law person”.
 It is levied by the legislative branch of the state –

 It is in the Congress where tax laws are enacted first then submitted to the
Senate to make it as Bill then signed by the President to make it the Tax
Laws that should be the basis of imposition of different taxes (for National
Taxes).
 However, Congress may delegate the power of taxation to local
government Units (LGU like cities municipalities and provinces) subject to
conditions and terms provided by law (for Local Taxes found in RA 7160 –
Local Government Code of 1991).
 It is levied for public purposes – it is intended to raise revenue for public purpose
like public infrastructures, public road, public water systems and the like.
V. IMPORTATNCE OF TAXATION
 Raise revenue
 Protect locally produced goods against compensation from import by imposing
higher custom duties.
 Protect new industries by granting tax exemptions
 Regulate property
 Distribute equally the wealth of the nation
VI. TYPES OF PHILIPPINE TAXES

 National Taxation
 National Internal Revenue Code of 1997 or the Republic Act No. 8424 (Tax
Reform Act of 1997)
 Import and Export Tariffs by Bureau of Customs – Republic Act No. 1937
(Tariff and Customs Code of the Philippines as amended)
Example of National Taxes:
1. Capital Gain Tax – tax on gain on sale of capital assets (6% tax
rate).
2. Documentary Stamp Tax – tax on documents, instruments, loan
agreements and paper evidencing assignment, sale or transfer of
an obligation.
3. Donor’s Tax – tax on donation or gift.
4. Estate Tax – tax on right of the deceased person to transmit
his/her estate to his/her lawful heirs and beneficiaries at the time
of death.
5. Income Tax – tax on all income or revenues derived by individual
or corporation from practice of profession and business activities.
6. Percentage Tax – business tax imposed on persons or entities that
sell or lease goods, properties or service in the course of trade or
business. (3% tax rate).
7. Value added Tax – business tax imposed and collected from seller
in the course of trade or business.
8. Excise Tax – tax imposed on goods manufactured or produced in
the Philippines for domestic sale or consumption.
9. Withholding Tax on compensation – tax withheld from
individuals receiving purely compensation income.
10. Expanded Withholding Tax – kind of withholding tax which is
prescribed only for certain payors and is creditable against income
tax due of the payee.
11. Final Withholding Tax - kind of withholding tax which is
prescribed only for certain payors and is not creditable against
income tax due of the payee.
12. Withholding Tax on Government Money Payments – the
withholding tax withheld by government offices and
instrumentalities before making any payments to private
individuals, corporations etc.
 Local Government Taxation
 Republic Act 7160 ( Local Government Code of 1991)
Example of Local Taxes:
1. Taxes on Transfer of Real Property Ownership

2. Tax on Business of Printing and Publication
3. Franchise Tax
4. Tax on Sand, Gravel and Other Quarry Resources
5. Professional Tax
6. Amusement Tax
7. Annual Fixed Tax for Every Delivery Truck or Van of Manufacturing
or Producers, Wholesalers of, Dealers or Retailers in, Certain
products
8. Tax on Business
9. Fees for Selling and Licensing of Weights and Measures
10. Fishery Rentals, Fees and Charges
11. Community Tax
12. Service Fees or Charges
13. Barangay Clearance

I. What Is Taxation?

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I. WHAT IS TAXATION?

 It is the supreme power of a sovereign state through its law-making body, to

II. WHAT IS TAX?

III. BASIS OF TAXATION:

IV. ESSENTIAL CHARACTERISTICS OF TAXATION:

 It is generally payable in money – payment must be made in cash or checks

 It is proportionate in character – collection of taxes is based upon the income and

 It is levied by the legislative branch of the state –

VI. TYPES OF PHILIPPINE TAXES

Example of National Taxes:

Example of Local Taxes:

1. Taxes on Transfer of Real Property Ownership

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