Taxation Module 1

Module TX 001
INCOME TAXATION
BSBA Office Administration
Principle of Taxation
1. Inherent Power of the State
a. Police Power
➢ Is the general power of the State to enact laws to protect the
well-being of the people.
b. Eminent Domain
➢ Is the power of the State to take private property for public use
after paying just compensation.
c. Taxation Power
➢ Is the general power of the State to enforce proportional
contribution from its subjects to sustain itself.
2. Definition of Taxation
a. As a state power
➢ Taxation is an inherent power of the State to enforce a
proportional contribution from its subject for public purpose.
b. As a process
➢ Taxation is a process of levying taxes by the legislature of the
State to enforce proportional contribution from its subject for
public purpose.
c. As a mode of cost distribution
➢ Taxation is a mode by which the State allocates its costs or
burden to its subjects who are benefited by its spending.
3. The Theory of Taxation

➢ Every government provides a vast array of public services such
as defense, public order and safety, health, education, and
social protection among others.
➢ Is the government’s necessity for funding.
4. The Basis of Taxation

➢ Is the mutuality of support between the people and the
government.
Taxes
GOVERNMENT PEOPLE
Public
Services
Sir Ervin Fernandez

Module TX 001
5. Theories of Cost Allocation

a. Benefit received theory
➢ Presupposes that the more benefit one receives from the
government, the taxes he should pay.
b. Ability to pay theory
➢ Presupposes that taxation should also consider the taxpayer’s
ability to pay.
6. The Lifeblood Doctrine

➢ Taxes are essential and indispensable to the continued
subsistence of the government. Without taxes, the government
would be paralyzed for lack of motive power to activate or
operate it.
7. The Limitations of the Taxation Power
a. Inherent Limitations
1. Territoriality of taxation
2. International Comity
3. Public Purpose
4. Exemption of the Government
5. Non-delegation of the taxing power
b. Constitutional Limitations
1. Due Process of law
2. Equal Protection of the law
3. Uniformity rule in taxation
4. Progressive system of taxation
5. Non-imprisonment for non-payment of debt or poll tax
6. Non-impairment of obligation and contract
7. Free worship rule
8. Exemption of religious or charitable entities, non-profit
cemetery, churches and mosque from property taxes
9. Non-appropriation of public funds or property for the
benefit of any church, sect or system of religion
10. Exemption from taxes of the revenues and assets of
non-profit, non-stock educational institutions.
11. Concurrence of a majority of all members of Congress for
the passage of a law granting tax exemption.
12. Non-diversification of tax collections
13. Non-delegation of the power of taxation
14. Non-impairment of the jurisdiction of the Supreme Court
to review tax cases
Sir Ervin Fernandez

Module TX 001
15. The requirement that appropriations, revenue, or tariff

bills shall originate exclusively in the House
Representatives
16. The delegation of taxing power to local government units
8. Stages of the Exercise of the Taxation

1. Levy or imposition
2. Assessment and collection
9. Situs of Taxation
➢ Is the place of taxation.
➢ It is the jurisdiction that has the power to levy taxes upon the
tax object.
➢ It is the reference whether the tax object is within or outside
the tax jurisdiction of the taxing authority.
10. Escapes from Taxation

➢ Are the means available to the taxpayer to limit or avoid the
impact of taxation.
a. Tax evasion
➢ Also known as tax dodging, refers to any act or trick that
tends to illegally reduce or avoid the payment of tax.
b. Tax avoidance
➢ Also known as tax minimization, refers to any act or trick
that reduces or totally escapes from taxes by any legally
permissible means.
“Everybody is a genius. But if you judge a fish by its ability to climb a

tree, it will spend its whole life believing that it is stupid.” – Albert
Einstein
Sir Ervin Fernandez

Taxation Module 1

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Module TX 001

3. The Theory of Taxation

4. The Basis of Taxation

Sir Ervin Fernandez

5. Theories of Cost Allocation

6. The Lifeblood Doctrine

7. The Limitations of the Taxation Power

Sir Ervin Fernandez

15. The requirement that appropriations, revenue, or tariff

8. Stages of the Exercise of the Taxation

10. Escapes from Taxation

“Everybody is a genius. But if you judge a fish by its ability to climb a

Sir Ervin Fernandez

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