INCOME TAXATION
“Ignorance of the law excuses no one”
The law is harsh, but it is the law.
Assignment :
1. Consumption Taxes
2. Differentiate Income Tax Vs
Consumption Taxes
3. Discuss types of Consumption Taxes
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TAXATION
• It is the process or means by which the
sovereign thru its lawmaking body raises
income to defray the necessary expenses of
the government.
• Taxes is the lifeblood of the government.
• Taxation is indispensable and inevitable.
PHILIPPINES TAX LAWS
1. National Tax Laws
NIRC – National Internal Revenue Code
Tariff and Customs Code
2. Local Tax Laws
Local Government Code on Local Tax
Ordinances
3. Miscellaneous Tax Laws
INHERENT POWERS
OF THE STATE
-existing as a natural or basic part of
every sovereign State without being
conferred or granted by the people or
Constitution.
TAXATION
TAXATION
(Power to tax)
•
•
Act of levying a tax. It is a process by which the
sovereign (independent State), through its lawmaking body (legislative branch) raises income to
defray the necessary expenses of the government.
Taxes are levied primarily to raise revenue for
government expenditures.
is the system by which a government takes money
from people and spends it on things such as
education, health, and defense.
EMINENT DOMAIN
EMINENT DOMAIN
• the right of a government to take and
appropriate private property to public use,
whenever the public exigency requires it.
• The taking of private property for
expropriation can only be validly done if
there is genuine necessity and the necessity
is public in character.
• Private property shall not be taken for public
use without just compensation.
POLICE POWER
POLICE POWER
• Power of the state of promoting public welfare
by restraining and regulating the use of liberty
and property.
• To enact laws to promote public health, morals,
safety and general welfare of the people.
• It may be exercised only by the government.
• Properties taken in the exercise of this power is
destroyed because it is noxious or intended for
noxious purpose.
SIMILARITIES
• Inherent in the State
• They exist independently of the constitution
although the conditions for their exercise may
be prescribed by the constitution.
• Ways by which the State interfere with private
rights and property
• Legislative in nature and character
• Presuppose an equivalent compensation
received, directly or indirectly, by the peson
affected.
PURPOSES OF TAXATION
•
PRIMARY PURPOSE
- To raise revenue /funds to defray the necessary expenses
of the government.
( Revenue or Fiscal Purpose)
•
SECONDARY PURPOSE
a.) REGULATORY PURPOSE - employed as a devise for
regulation or control by means of which certain effects or
conditions envisioned by the government may be achieved.
b.) COMPENSATORY PURPOSE i. Reduction of Social Inequality
ii. Economic Purpose
iii. Protect local industries against unfair competition
NATURE AND CHARACTERISTICS OF TAXATION
•
•
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•
•
•
•
Inherent power – may be exercised although not
expressly granted by the constitution.
Essentially a legislative function – only the legislative
can impose taxes.
Subject to inherent and constitutional limitations –
not an absolute power.
For public purpose.
The strongest of all the inherent powers of the State.
Subject to international treaty or comity.
Generally payable in money
Territorial in scope.
TAXES
- enforced proportional contributions
from persons and property, levied by the
State by virtue of its sovereignty for the
support of the government and all its public
needs.
ESSENTIAL CHARACTERISTICS OF TAX
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A tax is
a forced charge, imposition or
contribution.
A pecuniary burden payable in money.
Imposed for public purpose.
Imposed pursuant to a legislative authority.
Levied within the territorial and legal
jurisdiction of the state.
Assessed in accordance with some reasonable
rule of apportionment.
THEORY OF TAXATION
• NECESSITY THEORY
 The existence of the government is a necessity.
 Government cannot continue to perform serving
and protecting its people without means to pay
its expenses.
 For this reason, the State has the right to compel
all its citizens and property within its limits to
contribute.
• LIFEBLOOD DOCTRINE
 Taxes are the lifeblood of
government without which it
neither exists nor endure.
the
can
• BASIS OF TAXATION
 Reciprocal duties of “protection and support”
between the State and its inhabitants.
TAXES ARE COLLECTED = PERFORMANCE OF
GOVERNMENT FUNCTIONS
CITIZENS PAY TAXES = SECURED IN THE
ENJOYMENT OF THE BENEFITS OF ORGANIZED
SOCIETY.
DOCTRINE OF SYMBIOTIC RELATIONSHIP – taxes
are what we pay for a civilized society.
SCOPE OF THE TAXING POWER
OF THE LEGISLATIVE
• TAXATION – the most absolute of all the
powers of the government. It has the
broadest scope because in the absence of
limitations,
it
is
considered
comprehensive, unlimited, plenary and
supreme.
• Matters within the competence of the legislature
include the determination of the following:
1. Subject or object to be taxed ( person,
property or excises/privileges
2. Purpose of the tax as long as it is for PUBLIC
USE
3. Amount or rate of tax
4. Kind of tax
5. Apportionment of tax
6. Situs of Taxation
7. Manner or method of collection
ASPECTS OF TAXATION
• LEVYING / IMPOSITION OF THE TAX –
• This process involves the passage of tax laws
or ordinances through legislature.
• Imposition of taxes requires legislative
intervention . (CONGRESS)
ASPECTS OF TAXATION
• 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 Bureau of Internal Revenue or
Bureau of Customs.
ASPECTS OF TAXATION
• 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 TAXATION
• FISCAL ADEQUACY – sources of revenue are
sufficient to meet government expenditures.
• EQUALITY / THEORETICAL JUSTICE – taxes
imposed must be proportionate to the
taxpayers ability to pay.
• ADMINISTRATIVE FEASIBLITY - law must be
capable of convenient, just
and effective
administration – free from confusion and
uncertainty.
LIMITATIONS OF THE
TAXING POWER
INHERENT LIMITATIONS–
1. Public Purpose – taxes must be used for
i. support of the government
ii. Recognized objects of the government
iii. Promote the welfare of the community
( not individuals)
2. Situs of Taxation or Territoriality – the taxing
power of a country is limited to person or
property within and subject to its
jurisdiction.
PLACE OF TAXATION
a) The State where the subject to be taxed
has a situs may rightfully levy and
collect tax.
b) The situs is necessarily in the state
which has jurisdiction or which
exercises dominion over the subject in
question.
a)
b)
c)
d)
FACTORS IN DETERMINING SITUS OF
TAXATION
Subject matter ( person, property or
activity)
Nature of the tax
Citizenship
Residence of the taxpayer
3. International Comity or Treaty –
State cannot tax another State based on the
principle of Sovereign Equality among the
states
4. Non-delegability of the taxing power–
( Enactment of Tax Laws)
Power of taxation is purely legislative, hence,
the power cannot be delegated either to
executive of judicial departments.
(Doctrine of separation of powers among the
three branches of government.)
ASSIGNMENT
1. SOURCES OF TAX LAWS
2. CLASSIFICATION OF TAXES
3. WHAT ARE OTHER CHARGES AND FEES?
Distinguished them from taxes.
4. SYSTEMS OF INCOME TAXATION
5. ESCAPE FROM TAXATION