TAXATIO
N
•History of Taxation
•importance of taxation to the
taxpayers and to the government
•Kinds and Characteristics of Taxes
•Taxation System in the Philippines
History
• During the reign of Egyptian Pharaohs
• Scribes as tax collectors
• In Greece
• A tax referred to as Eisphora was imposed only in times of
war
• In Athens
• A monthly tax called Metoikon was collected to foreigners
• Ancient Greek Taxation
• Taxation was used as an emergency power. Additional
resources gained from war were used to refund tax previously
collected from the people
• Earliest taxes in Rome
• Taxes known as Portoria were customs duties on imports and
exports
• Augustus Caesar introduced the inheritance tax to provide
retirement funds for the military. The tax was five percent on
all inheritances except gifts to children and spouses
• In England
• Taxes were first used as an emergency measure
• Taxes on income or capital were a recent development as a
result of increasing government intervention in the economy
• In the Philippines
• The pre-colonial society, being communitarian, did not have
taxes
• In Modern Industrial Nations
• The government designates a tax
base (such as income, property
holdings, or a given commodity)
• A Tax Law is a body of rules passed
by the legislature by which the
government acquires a claim on tax
payers to convey, transfer and pay to
the public authority
Taxation
• The system of compulsory
contributions levied by a government
or other qualified body on people,
corporations and property in order to
fund public expenditures.
• An inherent power of the state to
raise income and to demand enforced
contributions for public purposes.
Purposes Taxation
• to raise revenues for public needs so that
persons can live in a civilized society
• The government increase taxes in order to
stabilize prices and stimulate greater
production.
• An instrument of fiscal policy influences
the direction and structure of money
supply, investments, credits, production,
interest rate, inflation, prices and in
general, of the national economy
Characteristics of a sound Tax system
• Fairness
• Clarity and Certainty
• Convenience
• Efficiency
Effects of Taxation
• Personal Income Tax which is presumed to fall
entirely on the legal taxpayers influences
decisions to work, save, and invest. These
decisions affect other people.
• Corporate Income Tax may simply result to lower
corporate profits and dividends. It may reduce
their income of all owners of property and
businesses. The company may move toward
raising the prices of their products
Taxation in the Philippines
• The legislative branch enacts laws to
continually revitalize the taxation policy of
the country
• BIR (Bureau of Internal Revenue)
– Mandated to comprehend the assessment
and collection of all national internal revenue
taxes, fees and charges so as to promote a
sustainable economic growth
Taxation in the Philippines
• Republic Act No. 8424
(Comprehensive Tax Reform Act of
1997)
– Tax Payer: any person subject to tax
whose sources of income is derived
from within the Philippines
– TIN (Taxpayer Identification Number) is
required for any individual taxpayer
Taxation in the Philippines
• Tax Reforms:
– Lower income tax rates to enhance the
competitiveness of the Philippines in the region
– Removal of areas which provide avenues for tax
avoidance and abuse
– Exemption of OFWs from payment of tax for
income earned outside the Philippines
– Simplification of the tax system which encourages
payments from tax payers including those from
the underground economy
Taxation in the Philippines
• Taxes are collected within a
particular period of time know as
taxable year
• This is the calendar year or the fiscal
year that covers an accounting period
of 12 months ending on the last day of
any month other that December.
Kinds of taxes
• Income Tax
– Tax on all yearly profits arising form property,
possessions, trades or offices
– Tax on a person’s income, emoluments and profits
• Donor’s Tax
– Tax imposed on donations inter-vivos or those made
between living persons to take effect during the
lifetime of the donor.
• Estate Tax
– Tax on the right of the deceased person to transmit
property at death
Kinds of taxes
• Value-added Tax (VAT)
– Tax imposed and collected on every sale, barter,
exchange or transaction deemed sale of taxable
goods, properties, lease of goods, services or
properties in the course of trade as they pass along
the production and distribution chain
• Capital Gains Tax
– Tax imposed on the gains presumed to have been
realized by the seller for the sale, exchange or other
disposition of real property located in the Philippines,
classified as capital assets
Kinds of taxes
• Excise Tax
– Tax applicable to specified goods
manufactured in the Philippines for domestic
sale or consumption
– Specific tax: imposed on certain goods based on weight
or volume capacity or any other physical unit of
measurement (Specific tax = volume x tax rate)
» Alcohol products, petroleum products, tobacco
products
– Ad valorem tax: imposed on certain goods based on
selling price or other specified value of the goods
(Ad valorem tax = selling price x tax rate)
» Mineral products, automobiles
Kinds of taxes
• Documentary Tax
– Tax on documents, instruments, loan
agreements and papers, agreements
evidencing the acceptance, assignments, sale
or transfer of an obligation, rights or property
incident thereto
Withholding tax
• Expanded withholding tax:
–A system of collecting taxes
whereby the taxes withheld on
certain income payments are
intended to equal or at least
approximate the tax due of the
payer on said income.
Withholding tax
• Final withholding tax:
– A system of collecting taxes whereby
the amount of income tax withheld by
the withholding agent is constituted as a
full payment of the income tax due form
the payer on the said income. The payer
is not required to file an income tax
return for the particular income.
Withholding tax
• Withholding tax for
compensation income:
– Commonly referred to as pay as you go
or pay as you earn.
– A method of collecting the income tax at
source upon receipt of the income.
Shifting the incidence of
taxation
– Shifting taxation is the process of
passing the burden of the tax to others.
– A tax can be shifted when the taxpayer
is able to obtain a higher price for
something he sells or when he pays a
lower price for a commodity he
purchases.
Tax Evasion
• When there is fraud through pretension
and the use of other illegal devices to
lessen one’s taxes, there is tax evasion
– Under-declaration of income
– Non-declaration of income and other items
subject to tax
– Under-appraisal of goods subject to tariff
– Over-declaration of deductions
Assignment
Write your answer in a 1 whole sheet of
paper
1. Define the following:
– Poverty
– Poverty line
– Degradation
2. Explain the causes of poverty
3. What are the effects of poverty?