CHAPTER 1: TAXATION
Principles of Taxation
TAXATION is a power inherent in every sovereign state to impose a charge or burden
upon persons, properties or rights, to raise revenues, for the use and support of the
government, and to enable it to discharge its appropriate functions.
Nature and Scope of Taxation
 It is inherent power of the state, and is essentially a legislative power.
 As to scope, in the absence of limitations prescribed by the fundamental law or
constitution, the power of taxation is unlimited and comprehensive, and if there
is any limitation at all, it is the sense of responsibility of the members of the
legislature to their constituents.
Taxation Distinguished from Eminent Domain
 Taxation reaches all the persons, properties, etc., covered by the tax, while
eminent domain reaches only a particular owner of a property.
 There is payment of money by a taxpayer in taxation, while there is taking of
property by the government is eminent domain.
 In taxation, the taxpayer is presumed to receive a benefit from the government,
while eminent domain, the property owner receives a benefit by way of just
compensation.
Taxation Distinguished by Police Power
 Taxation is for purposes of raising revenue, while police power is for purpose
regulation. In taxation, there is no limit on the amount of the tax that may be
imposed, while in police power, the license fee must be, as a general rule, just
enough to carry out regulation.
Limitations on the Power of Taxation
(A)
INHERENT LIMITATIONS
1. The tax must be levied for a public purpose.
2. The power of taxation cannot be delegated.
3. The rule on double taxation. (Double taxation means taxing person, property
or right twice within the same year by the same taxing authority.)
4. Government instrumentalities and agencies through which the government
exercises sovereign powers are exempt from tax, in the absence of a clear
proof of a contrary intent in the law;
5. The power of taxation is limited to the territorial jurisdiction of the stating state.
6. The tax law cannot apply to the property of foreign government (international
comity)
Limitations on the Power of Taxation
(B)
1.
2.
3.
4.
CONSTITUTIONAL LIMITATIONS
No law impairing the obligations of contracts shall be passed.
No person shall be imprisoned for debt or non-payment of a poll tax.
The rule on taxation shall be uniform and equitable.
Charitable institutions, churches parsonages or convents appurtenant thereto,
mosques, and non-profit cemeteries, and all kinds of lands, buildings and
improvements actually, directly or exclusively used for religious or
charitable purposes, shall be exempt from taxation.
3 Basic Principles of a sound Tax System
(A)
Fiscal Adequacy
The source of revenues as a whole, should provide enough funds to meet the
expanding expenditures of the government.
(B)
Theoretical Justice
Taxes must be based on the taxpayer’s ability to pay.
(C)
Administrative Feasibility
The tax must be clear to the taxpayer, not unduly burdensome and discouraging
to business, convenient as to time and manner of payment, and capable of
enforcement by competent public officials.
Tax Defined
A tax is a forced burden, charge, exaction, imposition or contribution assessed in
accordance with some reasonable rule of apportionment, y authority of a sovereign
state, upon the person, or property, or rights exercised, within its jurisdiction, to
provide public revenues for the administration of the law, or the payment of public
expenses.
Essential Characteristics of a Tax
a.
b.
c.
d.
e.
f.
It
It
It
It
It
It
is
is
is
is
is
is
forced contribution
exacted pursuant to legislative authority in the exercise of the taxing power
proportionate in character
payable in money
imposed for the purposed of raising revenues
to be used for a public purpose
Tax Distinguished from License Fee
Taxes are imposed under the taxing power of the state for purposes of revenue, while
license fees levied under the police power of the states.
Taxes are forced contributions for the purpose of maintaining government functions,
while license fees are exacted primarily to regulate certain business or occupations.
Taxes are generally unlimited as to amount, while license fees must not unreasonably
exceed the expenses of issuing the license and of supervision, unless the business or
occupation is being regulated is non-useful.
Tax Distinguished from Special Assessment
A special assessment is imposed because of an increase in the value of land benefited
by a public improvement, while a tax is imposed regardless of public improvements.
A special assessment is a contribution of a person for the construction of a public
improvement, while a tax contribution of a taxpayer for the support of the government.
A special assessment is exceptional both as to time and locality, while a tax may be a
regular exaction on a taxpayer anywhere within the jurisdiction of the taxing authority.
Classification of Taxes
As to subject matter
1. Personal Capitation or Poll Tax
- A fixed amount upon all persons, or upon all persons of a certain class, residents
within a specified territory, without regard to their property or occupation.
2. Property Tax
- A tax assessed against all properties, or all properties of a certain class, located
within the jurisdiction of taxing authority, in proportion to its value, or on some
other method of appointment.
3. Excise Tax
- A charge upon the performance of an act, the enjoyment of a privilege, or the
engaging in an occupation. An excise tax is a tax which is not a personal tax
which is not a personal tax or a property tax.
As to who bear the burden
1. Direct Tax
- One which is demanded from the person whom the law intends or desires to pay
it
2. Indirect Tax
- One which is shifted by the taxpayer to someone else
As to determination of the amount
1. Specific Tax
- A tax which is imposes a specific sum by the head or number, or some standard
of weight or measurement and which requires no assessment other than by the
listing and classification of the subjects to be taxed.
2. Ad Valorem Tax
- A tax or duty upon the value of the article or subject or taxation.
- A tax of so much per centum of the invoice or appraised value of the goods
subject to the tax
As to purpose
1.
2.
-
General Tax
At tax levied for general purposes of government
Special Tax
A tax levied for special purpose.
As to scope
1.
2.
-
National Tax
A tax levied by the National Government
Local Tax
A tax levied by a Local Government
As to Proportionality
1. Progressive
- A tax in which the increase in the tax rate is proportionate to the increase in the
tax.
2. Regressive
- A tax in which the increase in the tax rate is not proportionate to the increase in
the tax base
3. Proportional
- A tax of a fixed percentage of amounts of the base (value of the property, or
amount of gross receipts, etc.)
THE PHILIPPINE INCOME TAX
Income tax is succinctly defined as a tax on income, whether gross or net (27 Am. Jur.,
308). It is an imposition by the government where the test of faculty in taxation is
income. In the Philippines, the income tax in the National Internal Revenue Code is:
a.) A national tax is imposed by the National Government
b.) An excise tax is a burden not laid directly upon persons and properties. It is
neither a capitation or poll tax, not a property tax
c.) A direct tax is demanded from the person whom the law intends to imposed it,
and cannot be shifted by the taxpayer
d.) A general tax is levied for the general purposes of the government
e.) An ad valorem tax is levied on value or amount of the income taxpayer.
The Philippine income tax is not the National Internal Revenue Code only.
Also included are:
a.) Special laws, as they give preferential income tax treatments to certain
taxpayers, under certain condition
b.) Revenue regulations
c.) Revenues circulars
d.) Ruling of the Bureau of Internal Revenue
e.) Opinions of the Secretary of Justice
f.) Decisions of the Supreme Court of the Philippines
g.) Decisions of the Court of Appeals
h.) Decisions of the Court of Tax Appeals
i.) Decision of inferior courts