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    Taxation: Basic Principles of Taxation

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    Erika Villanueva Magallanes
    This document discusses the basic principles of taxation. It defines taxation as the act of levying taxes by the sovereign power to raise funds for necessary government expenses. The primary purpose of taxation is to raise revenue, while secondary purposes include regulation, promotion of welfare, and economic growth. Taxation is an inherent power of the state and is exercised through the legislative process according to constitutional and inherent limitations. A sound tax system must provide adequate funding, be administratively feasible, and achieve theoretical justice.

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    Taxation: Basic Principles of Taxation

    Uploaded by

    Erika Villanueva Magallanes
    24 views33 pages
    This document discusses the basic principles of taxation. It defines taxation as the act of levying taxes by the sovereign power to raise funds for necessary government expenses. The primary purpose of taxation is to raise revenue, while secondary purposes include regulation, promotion of welfare, and economic growth. Taxation is an inherent power of the state and is exercised through the legislative process according to constitutional and inherent limitations. A sound tax system must provide adequate funding, be administratively feasible, and achieve theoretical justice.

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    This document discusses the basic principles of taxation. It defines taxation as the act of levying taxes by the sovereign power to raise funds for necessary government expenses. The primary purpose of taxation is to raise revenue, while secondary purposes include regulation, promotion of welfare, and economic growth. Taxation is an inherent power of the state and is exercised through the legislative process according to constitutional and inherent limitations. A sound tax system must provide adequate funding, be administratively feasible, and achieve theoretical justice.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    24 views33 pages

    Taxation: Basic Principles of Taxation

    Uploaded by

    Erika Villanueva Magallanes
    This document discusses the basic principles of taxation. It defines taxation as the act of levying taxes by the sovereign power to raise funds for necessary government expenses. The primary purpose of taxation is to raise revenue, while secondary purposes include regulation, promotion of welfare, and economic growth. Taxation is an inherent power of the state and is exercised through the legislative process according to constitutional and inherent limitations. A sound tax system must provide adequate funding, be administratively feasible, and achieve theoretical justice.

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    © All Rights Reserved
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    of 33

    TAXATION

    BASIC PRINCIPLES OF TAXATION


    Taxation

     - is the act of laying a tax, the process or means


    by which the sovereign, through its law-making
    body, raises income to defray the necessary
    expenses of government.
     - as a power, taxation refers to inherent power of
    the state to demand enforced contributions for
    public purpose or purposes.
    Purposes of Taxation

     Primary Purpose
     To raise revenue/funds to defray the necessary expenses of the government
    (Revenue purpose).
     Secondary Purpose
     As a tool for general, social, and economic welfare (Regulatory, Sumptuary,
    Compensatory purpose).
     Regulation
     Promotion of General Welfare
     Reduction of Social Inequality
     Encourages Economic Growth
    The Inherent Powers of The State

     POLICE POWER
     It is the power to enact laws to promote general welfare of the people
     EMINENT DOMAIN
     It is the power to take private property for public use upon payment of
    just compensation
     TAXATION POWER
     It is the power to take property for the support of the government and
    for public purpose.
    Similarities among Taxation,
    Eminent Domain, and Police Power
     They are inherent in the State.
     Underlie and exist independently of the constitution although the
    conditions for their exercise may be prescribed by the constitution.
     Methods by which State interferes with private rights and property.
     Presuppose equivalent compensation
     Exercised primarily by the legislature.
    Distinctions among Taxation,
    Eminent Domain, and Police Power
    Police Power Eminent Domain Taxation
    SCOPE
    - Regulates both liberty and - Affects only property rights.
    property. - Affects only property
    rights.

    AUTHORITY
    - Exercised only by the
    - Exercised only by the government.
    government.
    - Maybe exercised by the
    private entities.
    PURPOSE
    - for the support of the
    - promotion of general government.
    welfare.

    - for public use.


    Distinctions among Taxation,
    Eminent Domain, and Police Power
    Police Power Eminent Domain Taxation
    PERSONS AFFECTED
    - Community or class of - Only the owner of the - Community or class of
    individual. private property. individuals

    EFFECT
    - No transfer or title; there - There is a transfer of tile to - Contributions becomes
    may just be a restraint on the property. part of public fund
    injurious use of property.

    TYPE OF PROPERTY
    - Property is wholesome and - Property is wholesome and
    - Property is noxious or is devoted to public use or is devoted to public use or
    intended for a noxious purpose purpose. purpose.
    and as such taken and destroyed.
    Distinctions among Taxation,
    Eminent Domain, and Police Power
    Police Power Eminent Domain Taxation
    BENEFITS RECEIVED
    - Compensation is the full
    - Compensation is the and fair equivalent of the - Compensation is the
    intangible, altruistic feeling that property taken. protection and public
    the individual has contributed improvements instituted by the
    to the public good. government for the taxes paid.

    - No imposition. The owner is


    paid FMV of his property.
    AMOUNT OF IMPOSITION
    - Sufficient to cover cost of - No limit.
    the license and the necessary
    expenses of police surveillance
    and regulation.
    SOURCES OF TAX LAWS

     Constitution
     Tax Codes such as the NIRC, Tariff and Customs Code,
    portion of the Local Government Code
     Statutes (RA 7716 E – VAT Law)
     Presidential Decrees
     Executive Orders
     Court Decisions
     Revenue regulations promulgated by DOF
    SOURCES OF TAX LAWS

     Administrative issuances of the BIR like Revenue


    Memorandum Circulars
     BIR rulings
     Local Tax Ordinances
     Tax Treaties and Conventions with foreign countries.
    Nature of taxation

    1. It is inherent in sovereignty

    – the power of taxation exists independent of any


    legislation. There is no need to enact a law to exercise
    that power because that power springs at the moment
    you have the existence of the state. This is inherent
    because this is based on necessity. Taxation is the life-
    blood of government.
     2. It is subject to constitutional and inherent limitation

     - the power of taxation is subject to a certain limitation. Most of this


    limitations are specifically provided in constitution or implied
    therefrom, while the rest are inherent and they are those which
    spring from the nature of the taxing power itself although they may or
    may not be provided in the constitution.

     - To a certain extent, Congress will abuse that power. To a certain


    extent, you have that principle also that the power to tax involves
    the power to destroy. Congress may abuse that power given to it by
    the people through the electoral process.


    3. It is legislative in character

    - the power to tax is peculiarly and exclusively legislative and


    cannot be exercised by the executive or judicial branch of the
    government.

    - But in the exercise of that power, that power is assigned to


    the law making body. It is not assigned to the judiciary or to the
    executive branch of the government. It is assigned to Congress,
    the law-making body.
    Scope of Taxation
     1. Plenary or complete
    - taxation has unlimited area of application and only
    restricted by the inherent and constitutional
    limitation.

    2. Comprehensive
    - it has wide scope of coverage. It covers all
    persons, properties, rights and transaction subject to
    taxation, unless expressly exempted by laws within the
    sovereign.
     3. Supreme

    - it has the highest degree of application and


    it considered as the strongest among the
    inherent power of the state.
    Limitations on the Taxing Power

     Inherent Limitations (D – PINES)


     Double Taxation
     Public Purpose
     International Comity
     Non- delegability of the taxing power
     Exemption of the Government
     Situs of Taxation
    Limitations on the Taxing Power
     Constitutional Limitations
     Observance of due process of law
     Equal protection of law
     Uniformity in taxation
     Progressive scheme of taxation
     Non- imprisonment for non- payment of poll tax
     Non- impairment of the obligations of contract
     Free- worship clause
     Exemption of charitable institutions, churches, etc.
    Limitations on the Taxing Power
     Constitutional Limitations
     Exemption of from taxes of the revenues and assets of non- profit
    , non- stock educational institution including grants,
    endowments, donations or contributions for educational
    purpose.
     Non- appropriation of public funds or property for the benefit of
    any church, sect or system of religion, etc.
     No money shall be paid out of the treasury except in pursuance
    of appropriation made by law.
     Concurrence of a majority of all members of congress for the
    passage of a law granting tax exemption.
    Limitations on the Taxing Power
     Constitutional Limitations
     Non- diversification of tax collections
     Veto power of the President
     Non- impairment of the jurisdiction of the SC to review tax
    cases.
     Appropriations, revenue or tariff bills shall originate
    exclusively in the house of representatives but the senate
    may propose or concur with amendments.
     Each local government unit shall exercise the power to
    create its own sources of revenue and shall have a just
    share in the national taxes.
    Tax Defined…

     Are enforced proportional contributions


    from persons and property, levied by the
    State by virtue of its sovereignty for the
    support of the government and for all its
    public needs.
    Stages of Taxation (LAP)
     Levy or ImpositionImposition

     This process involves the passage of tax laws or ordinances through the
    legislature.

     Assessment and Collection

     This process involves the act of administration and implementation


    of tax laws by the executive through its administrative agencies such
    as the BIR or BOC.

     Payment of Tax

     This process involves the act of compliance by the taxpayer in


    contributing his share to pay the expenses of the government.
    Basic Principles of a Sound Tax
    System (FAT)

     FISCAL ADEQUACY
     ADMINISTRATIVE FEASIBILITY
     THEORITICAL JUSTICE
    FISCAL ADEQUACY

     The
    sources of the government revenue must
    be sufficient to meet government
    expenditures and other public needs.
    ADMINISTRATIVE FEASIBILITY

     Tax
    laws must be capable of convenient, just
    and effective administration, free from
    confusion and uncertainty.
    THEORITICAL JUSTICE

    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 evolve a progressive system of taxation.
    Classification of Taxes
    According to Subject Matter

     Personal, Poll or Capitation Tax


     Tax of a fixed amount imposed upon individual whether citizens or not,
    residing within a specified territory without regard to their property or the
    occupation in which he maybe engaged.
     Property Tax
     Tax imposed on property, whether real or personal, in proportion either to its
    value, or in accordance with some other reasonable method of
    apportionment.
     Excise Tax
     Any tax which does not fall within the classification pf a poll tax or property
    tax. This is a tax on the exercise of certain rights or privileges.
    According to Who Bears the Burden

     Direct Tax
     Imposed on the person obliged to pay the same and
    this burden cannot be shifted or passed on to
    another.
     Indirect Tax
     The payment is demanded from a person who is
    allowed to transfer the burden of taxation to another
    According to Determination of Amount

     Specific Tax
     Thisis a fixed amount based on the volume, weight, or
    quantity of goods as measured by tools, instruments or
    standards.
     Ad Valorem tax
     Thisimposition is based on the value of the property
    subject to tax
    According to Purpose

     Fiscal/General/ Revenue Tax


     Levied without a specific or pre- determined purpose.
     Regulatory/Special/Sumptuary Tax
     Those intended to achieve some social or economic
    goals.
    According to Scope or Authority

     National Tax
     Imposed by the national government
     Local Tax
     Imposed by municipal corporations
    According to Graduation or Rate

     Proportional or Flat Rate Tax


     Unitary or single rate (VAT)
     Progressive or Graduated tax
     As the tax base grows the tax rate increases (Income
    tax on individuals)
     Regressive Tax
     the tax rate increases as the tax base decreases
    thank you!!!!!!

    Magallanes
    Bornales
    Tancinco
    Villadar
    Carpina
    Sumugat

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