LECTURE 1:
Taxation is the process of collection of taxes for the use of raising funds in the
government and provide them to promote the general welfare and finance its
multifarious activities.
Tax is the number source of funds of the government. It is the income of the
government to defray the expenses of the government.
Taxation is the process and inherent power of the government in the country. These
taxes are distributed to different sectors by local governments such as education
sectors, health sectors and many others.
Another purpose of taxation is to reduce inequalities in wealth and prevent inflation.
There are 3 basic principles of sound tax system, fiscal adequacy, equality justice
and administrative feasibility. What we mean by
Sound tax system is that there is certainty and stability, in terms of tax, fiscal
adequacy means creating new taxes by merely changing the rates applicable to
existing taxes or adequate amount of taxes for the government to fund for the
expenses.
Equality justice meaning the ability to pay principle.
Administrative feasibility means an effective administration.
Aside from tax stability, there are also limitations of taxation.
Inherent limitation and Constitutional limitations simply state that there are
restrictions in the execise of the power of taxation. Example of large agencies
collecting taxes are Bureau of Internal Revenue and Bureau of Customs.
There 3 powers of the government:
1. Eminent Domain - the power of the state to take private property for public use upon
paying to the owner a just compensation.
2. Police Power - the power of the state to enact such laws in relation to persons and
properties as may promote public health, public morals, public safety, and the general
welfare of the people.
3. Taxation
Internal Revenue Allotment Agencies collecting bigger taxes are:
1. BIR - Bureau of internal revenue
2. Bureau of customs
3 Branches of the Government:
1. Executive - president, vp, cabinet members
2. Legislative - congress (upperhouse, lowerhouse)
3. Judiciary - supreme courts, municipal courts, provincial courts,
Limitations of taxation:
1. Inherent limitations
2. Constitutional limitations
LECTURE 1 PART 2:
Elements of a tax:
1. Enforced contribution - mandatory to pay tax if qualified and able to pay tax.
2. Generally payable in money - absolute, no exception; pay tax in cash
3. Proportionate in character - depends on what you earn, your work etc.
4. Levied on persons, properties, or the exercise of a right or privilege
Ex. SinTax - tax on alcohol, cigarettes etc.
5. Levied by the state which has jurisdiction over the subject or object of taxation 6. Levied by the lawmaking body of the state
7. Levied for public purpose
Examples: Construction of roads and bridges; pensions to retired government
employees and their widow and children; assistance to victims of calamities; social
welfare and healthcare projects.
KINDS OF TAXES;
AS TO SUBJECT MATTER OR OBJECT
1. Personal, Poll, Capitation Tax - tax of a fixed amount imposed on individuals
(citizens or aliens), residing within a specified territory without regard to their property
or occupation in which they may be engaged.
Example: Community Tax
2. Property Tax - tax imposed on property (real or personal), in proportion either to its
value or in accordance with some other reasonable method of apportionment.
Example:
Real property tax - immovable properties (e.g., Buildings, lands)
3. Excise of privilege tax - tax imposed upon the: Performance of an act; enjoyment of
a privilege; engaging in an occupation.
Example: Income Tax
AS TO WHO BEARS THE BURDEN:
1. Direct Tax - tax that is demanded from the person who also shoulders the burden of
the tax (income tax, estate tax, donor's tax).
2. Indirect Tax - tax demanded from one person in the expectation and intention that
he shall indemnify himself at the expense of the others. (VAT,percentage tax.)
AS TO DETERMINATION OF AMOUNT
1. Specific Tax - tax of a fixed amount imposed by the head or number, or by some
standard of weight or measurement; it requires no assessment other than a listing of
classification of the subjects to be taxed. (e.g. Excise tax on distilled spirits, cigards
and cigarettes)
2. Ad Valorem Tax - tax of a fixed proportion of the value of the property with respect to
which the tax is assessed. (e.g. Real estate tax)
AS TO PURPOSE
1. General, fiscal or revenue tax - tax that is imposed solely to raise revenue for
government expenditure. (e.g. Income tax, VAT)
2. Special or regulatory tax - tax imposed for a special purpose (e.g. Sugar adjustment
taxes, Oil price stabilization fund)
AS TO AUTHORTIY IMPOSING
1. National - tax imposed by the national government (e.g. Internal revenue taxes,
customs duties)
2. Municipal or local - tax imposed by municipal agencies (e.g. Sand and gravel tax,
occupation tax)
AS TO GRADUATION OR RATE
1. Proportional - tax based on a fixed percentage of the amount of the property,
recipets or other basis to be taxed. (e.g. VAT)
2. Progressive - tax the rate of which increases as the tax base or bracket increases.
(e.g. Income tax, estate tax, donor's tax)
3. Regressive - tax the rate of which decreases as the tax base or bracket increases.
Inherent Powers
1. Eminent Domain - the power of the state to take private property for public use upon
paying to the owner a just compensation.
2. Police Power - the power of the state to enact such laws in relation to persons and
properties as may promote public health, public morals, public safety, and the general
welfare of the people.
3. Taxation
Aside from taxes;
1. Permit or license fee - charge imposed under the police power for purposes of
regulation.
2. Toll - sum of money for the use of something, generally applied to the consideration
which is paid for the use of a road, bridge of a public nature.
3. Special assessment - an enforced proportional contribution from owners of lands for
special benefits resulting from public improvements.
Double Taxation direct duplicate or direct double taxation
Taxing twice for the: VIOLATION
- same purpose
- same taxing authority
- same jurisdiction
- same period
- some of the property in the same territory
Revenue - refers to all funds or income derived by the government, whether from tax
or any other source.
- grants received from other government
- donations from non - government sources
- loans from other entities (private and gov't entity)
- administrative revenues (fines, penalties, forfeitures)
- commerical revenues (GOCC)
- Tax (internal reveue and customs duties)
Situs of taxation
- this shall mean the place of taxation
- the state which has jurisdiction to tax the person, property, or transactions may
rightfully levy and collect the tax.
Lecture 1 part 3 ESCAPE FROM TAXATION
- means or method by which the taxpayer saves the tax or escapes the burden of tax
payment.
- it may or not result to a loss of revenue to the government.
- legal or illegal mean.
FORMS OF ESCAPE FROM TAXATION
1. DOES NOT REDUCE REVENUE COLLECTION OF THE GOV'T
- Shifting - transfer of tax burden by one on whom the tax is assessed to another. (an
example of VAT/OPT (other percentage tax/indirect tax)
- Capitalization - reduction in the selling price of income producing property by an
amount equal to the capitalized value of future taxes that may be paid by the
purchaser.
- Transformation - a method by which the manufacturer or producer upon whom the tax
is imposed pays the tax and strives to recover such expenses through lower production
costs w/out sacrficing quality of the product.
2. RESULT IN LOSS OF REVENUE OF THE GOV'T
- Tax Evasion - fraudulent or forbidden schemes or devices designed to lessen or
defeat taxes. *illegal*
- Tax avoidance - exploitation by the taxpayer of the legally permissible alternative tax
rates or methods of assessing taxable property or income in order to reduce tax
liability. *legal*
- Exemption from taxation - grant of immunity to particular persons or corporations or to
persons or corporations of a particular class from a tax which persons and corporations
generally within the same taxing district are obliged to pay.
TAX AMNESTY
- Immunity from all criminal and civil obligations arising from non payment of taxes.
- General pardon given to all taxpayers.
- It applies only to past period (retroactive application)
AMNESTY VS EXEMPTION:
Tax amnesty
Immunity: Civil and criminal obligations
Application: Retroactive
Tax exemption
Immunity: Civil liability only
Application: Prospective
SET - OFF/ COMPENSATION
- Taxes are not subject to set - off or compensation
- A person cannot refuse to pay tax on the ground that the government owes him an
amount equal to or greater than the tax being collected.
Taxpayer's suit
- a taxpayer has a sufficient personality and interest to seek juridical assistance with a
view of restraining what he believes to be an attempt to unlawfully disburse public
funds.
2ND TOPIC: AFTER LECTURE 1 PART 3
TAX LAWS (30:39 VIDEO)
3 Branches of Government:
1. Executive - president/administrative agencies
2. Legislative - congress - senate/house of rep
3. Judiciary - supreme courts/lower courts.
Tax Law starts from the congress - the congress will pass a tax bill and will undergo
process/readings/debates/discussion.
The Bill Starts from:
Step 1. House of representative (Legislative body)
Step 2. Senate (Legislative body)
Step 3. President (Executive)
- The executive will sign the bill and tax law will be implemented by the executive body
(preside,vice pres, administrative bodies) sepcifically the administrative body will
implement the law.
Exampe: Tax law will be implemented by the BIR/Bureau of Customs and other
Bureaus under the Department of Finance in Administrative Body.
Revenue Regulations - provided by the Department of Finance signed by the
president.
Step 4: Judiciary for questions of law
examples: How is it implemented?
ROLES IN LAWMAKING:
Executive - implementation of the law
Legislative Judiciary - lawyers,debators,protectors,
INTERNAL REVENUE LAWS - are statutory laws created by the congress
Revenue Law - is a law passed for the purpose of authorizing the levy and collection
of taxes in some form to raise revenue.
A revenue law is said to be a national revenue law when it is applicable all over the
country.
Internal Revenue Laws are neither political nor penal in nature although there are
penalties in case of violations. Tax laws are civil in nature.
NOTE:
- this applies to tax exemption
- applied also to Statutory laws ; the congress will be the one who will initiate to whom
will be given tax exemptions.
1987 Constitution
-TAXATION has been defined as the power of the sovereign to impose burdens or
charges upon persons, property or property rights for the use and support of the
government to be able to discharge its functions. It is one of the inherent powers of the
state.
OUR BASIS/ SOURCES FOR TAX LAW:
1. 1987 Constitution
2. Statutory Law - tax laws initiated by the congress
3. Revenue Regulations - detailed codes about the implementations of law by the
congress coming from the dep. of finance
4. Revenue Rulings - effectiveness of taxes; by the BIR
5. Judicial Decisions - supreme court cases; sources for tax laws.
6. Local Ordinances - executive is the mayor, sanggunian panglungsod/panglalagiwan
is considered as the legislative bod of the local government. ex. also implements local
tax laws.
7.
PHILIPPINE TAX LAWS AND TAXES
1. NIRC - National Internal Revenue Code of 1997 (P.D 1158, as amended)
- also statutory law
a. income taxes (individual and corporate)
b. estate and donor's taxes
c. value - added tax
d. other percentage taxes
e. excise tax
f. documentary stamp tax
2. TARIFF AND CUSTOMS CODE OF 1978 (P.D. 1464, as amended)
a. import duties
b. export duties
3. LOCAL GOVERNMENT CODE OF 1991 (R.A 7160)
a. real property tax
b. business taxes, fees and charges
c. professional tax
d. community tax
e. tax on banks and other financial institutions
4. SPECIAL LAWS
a. motor vehicle law (R.A 4136) - motor vehicle fees
b. private motor vechile tax law (p.d 1958) - private motor vehicle tax
c. philippine immigration act of 1940 (c.a 613, as amended) - immigration tax;
d. travel tax law (p.d 1183, as amended) - travel tax.
THE BUREAU OF INTERNAL REVENUE: SCREENSHOT!!!!
NOTE:
National Assembly - congress, house representative, and such. from 1935 constitution.
New declaration of the word national assembly.
- 3 branches of the gov't - from 1987 constitution
1st source of income of the country for taxes paid are the BIR.
BIR ISSUANCES AND RULINGS DEFINED - SCREENSHOT!!!
1. Revenue Regulations (RRs)
2. Revenue Memorandum Circulars (RMCs) - circulars applicable to different offices on
what to follow
3. Revenue Memorandum Orders (RMOs) 4. Revenue Memorandum Rulings (RMRs)
5. BIR Rulings
6. Revenue Bulletins
POWERS AND DUTIES OF THE BUREAU OF INTERNAL REVENUE
The chief officials of the Bureau are the Commissioner and 7 Deputy Commissioners.
The Deputy Commissioners are tasked to handle particular groups within the Bureau
such as
1. information systems
2. legal and inspection
3. operations
4. resource management
5. tax reforms administration
6. special concerts
7. large taxpayers
Its powers and duties follow: SCREENSHOT!!!
POWERS OF COMMISSIONER - SCREENSHOT!!
TAX INCENTIVES - SCREENSHOT!!
Section 19 of R.A 10028, The Expanded Breastfeeding Promotion Act of 2009, states
that "The expenses incurred by a private health and non - health facility, establishment
or institution, in complying with the provisions of this act, shall be deductible expenses
for income tax purposes up to twice the actual amount inccurred: Provided, that the....
..... That all health and non- health facilities, establishments and institutions shall
comply with the provision of this act within 6 months after its approval: Provided, finally,
that such establishments or institutions shall secure a "Working Mother Baby Friendly
Certificate" from the Department of Health to be filed with the Bureau of Internal
Revenue, before they can avail of the incentive."
Purpose of this law:
To help mother breastfeeding
Per Republic Act 9999 or the Free Legal Assistance Act of 2010, - SCREENHOT!!
Republic Act 9282 -
Notes:
1. 1987 constitution has no jurisdiction of the CTA, Supremet courts have jurisdictions.
INTERPRETATION AND CONSTRUCTION OF TAX STATUTES
Purpose: needs to interpret and construct to see if the intention of the
congress/legislative body is in line;
TAX LAWS VS GAAP AND GAAS
- Tax law shall prevail