INCOME TAXATION
DISTANCE LEARNING LECTURE NO. 01
LESSON FOR WEEK 1
A. DEFINITION
Taxation - is the act of laying a tax;
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the process or means by which the sovereign, through its law-making body (legislative),
raises income to defray the necessary expenses of the government.
It is a way of apportioning the cost of government among those who in some measures
are privileged to enjoy its benefits and must, therefore, bear its burdens.
Is an enforced proportional contribution, imposed by the State by its sovereign capacity,
to support the government.
Taxes - the enforced proportional contributions levied by the law making body of the State by
virtue of its sovereignty upon the persons or property within its jurisdiction for the support of the
government and all public needs (e.g. road, hospital, establishments)
B. THREE ELEMENTS OF TAXATION
1. It is an enforced proportional contribution from persons and properties.
2. It is imposed by the State by virtue of its sovereignty - because of sovereignty the state has
the power to provide public needs.
3. It is levied for the support of the government - not for the people in the government.
C. PURPOSE OF TAXATION:
(1) Primary purpose – to provide funds with which to promote the general welfare and protection
of its citizens and to enable it to finance multifarious activities.
(2) Non-revenue objectives – also utilized as a tool to carry out national objectives of social and
economic development.
A. Giving tax exemptions to anemic enterprises
B. To reduce inequalities in wealth and income by imposing progressively higher tax rates as
in the case of estate and income taxes;
C. To prevent or reduce inflation by increasing taxes, to expand business during periods of
slump by decreasing them.
E. NATURE OF TAXATION
(1) The power of taxation is inherent to the State being essential to the existence of every
government. Hence, even if not mentioned in the constitution, the State can still exercise the
power;
4 elements of state:
A. Territory - mass of land
B. Government C. Population - people
D. Sovereignty - right to be free
● Even Though the taxation is not mentioned in the constitution the government can still
practice taxation since it is inherent to the state.
(2) It is essentially a legislative function. Even in the absence of any constitutional provision, the
power falls to legislature as a part of the more general power of law-making; and
(3) It is subject to constitutional and inherent limitations. Constitutional limitations are those
provided in the fundamental law (e.g. equal protection of the laws, due process of law, rule of
uniformity and equity in taxation) or implied therefrom. While inherent limitations spring from
the nature of the taxing power itself.
F. ESSENTIAL CHARACTERISTICS OF TAXES
(1) It is an enforced contribution for its imposition is in no way dependent upon the will or assent
of the person taxed; - the payment of taxes is not dependent on tax payer’s consent.
(2) It is generally payable in the form of money, although the law may provide payment in kind;
(3) It is laid by some rule of apportionment which is usually based on ability to pay;
(4) It is levied on persons or property and also on acts, transactions, rights, or privileges. In each
case, however, it is only a person who pays the tax;
(5) It is levied by the State which has jurisdiction over the person or property. It is necessary that
the State has jurisdiction or control over the objects to be taxed in order that the tax can be
enforced or collected;
(6) It is levied by the law-making body of the State. The power to tax is a legislative power
which only Congress can exercise. However, it can also be exercised by local government units;
(7) It is levied for public purposes. Taxation involves, and a tax constitutes, a charge or burden
imposed to provide public revenue for the support of the government, the administration of the
law, or the payment of public expenses.
G. THEORY AND BASIS OF TAXATION
(1) NECESSITY THEORY. The existence of government is necessity; that the government
cannot continue without means to pay its expenses; and that for those means it has the right to
compel all citizens and property within its limits to contribute;
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Dawa dae indicated sa constitution required ang state na mag collect taxes in order for the
government to provide the needs of its people.
(2) BENEFIT-PROTECTION THEORY. The reciprocal duties of protection and support between
the State and the inhabitants. The State receives taxes that it may be enabled to carry its mandates
into effect and perform the functions of the government and the citizen pays the portion of taxes
demanded in order that he may, by means thereof, be secured in the enjoyment of the benefits of
organized society.
- People receive benefits/protection and in reciprocity people pay taxes.
J. ATTRIBUTES OF A SOUND TAXATION SYSTEM
(1) FISCAL ADEQUACY – The source of revenue should be sufficient to meet the demands of
public expenditures;
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Ang tax revenue dapat enough para ma meet ang public needs
(2) EQUALITY OR THEORETICAL JUSTICE – The tax burden should be proportionate to the
taxpayer’s ability to pay. This is the so-called ability to pay principle;
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Ang tax na binabayaran dapat proportionate sa ability kang tao na magbayad.
(3) ADMINISTRATIVE FEASIBILITY. The tax laws should be capable of convenient, just and
effective administration.
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Taxes must be paid with money.