Professional Documents
Culture Documents
TAX Session 1
TAX Session 1
CONCEPT OF TAXATION
Topics includes:
Definition of taxation
Purpose of taxation
Theory and basis of taxation
Lifeblood theory
Scope of the power of taxation
Characteristics or nature of the state’s power
to tax
Topics includes:
Principal/Primary Purpose
Raise revenue to government needs. (Revenue
purpose)
Secondary Purpose
Compensatory – to reduce excessive inequalities of
wealth; to maintain high level of employment; to
control inflation
Sumptuary or regulatory – to implement the police
power of the State to promote the general
welfare
Theory and Basis of Taxation
Comprehensive
Plenary
Unlimited
Supreme
Inherent in sovereignty
Legislative in character
Subject to constitutional and inherent
limitations
Processes included or embodied
in the term taxation
1. As to purpose
Taxation Support of government
3. As to persons affected
Taxation Community or class of individuals
4. As to benefits received
Taxation Equivalent of tax in the form of protection
and benefit
Police Power No direct and immediate benefit, only such
as may arise from the maintenance of a
healthy economic standard of society
(damnum absque injuria or damage without
injury)
Power of eminent domain Market value of the property taken from him
Distinctions among the 3
Inherent Powers
5. As to effect
Taxation Taxes become part of public funds
6. As to amount of imposition
Taxation No limit
1. Public Purpose
2. Territorial Jurisdiction
1. Tax laws The tax law (and this is true of all laws) do not
operate within operate beyond a country’s territorial limits.
2. Property Property which is wholly or exclusively within the
wholly or jurisdiction of another state receives none of the
exclusively in protection for which a tax is supposed to be
other countries compensation.
3. Taxability of A person may be taxed where there is between
a person him and the taxing state a privity of relationship
justifying the levy.
Inherent Limitation
(Amplified and Illustrated)
2. Territorial Jurisdiction
4. Situs of Taxation
a. Meaning of Situs of taxation literally means place of taxation
Situs of taxation
b. Basic rules on The situs is in the state which has jurisdiction or
situs which exercise dominion over the subject in
questions.
c. Situs of Subject Situs
Taxation
1. Poll tax on Residence of the person
persons
2. Real property State where the property is
tax located whether the owner is
resident or not
Inherent Limitation
(Amplified and Illustrated)
2. Territorial Jurisdiction
4. Situs of Taxation
c. Situs of Subject Situs
Taxation
3. Tax on tangible State where it is physically
personal property located although the owner
resides in another jurisdiction
(lexi rei sitae)
4. Tax on Domicile of the owner (mobilia
intangible sequntur personam)
personal property
5. Income tax State where the taxpayer is a
resident or citizen
Inherent Limitation
(Amplified and Illustrated)
2. Territorial Jurisdiction
4. Situs of Taxation
c. Situs of Subject Situs
Taxation
6. Business, Place where the business is
occupation and done, or the occupation is
transaction tax engaged in or the transaction
took place
7. Tax on State where the transferor
gratuitous is/was a citizen or resident or
transfer of where the property is located
property
Inherent Limitation
(Amplified and Illustrated)
2. Territorial Jurisdiction
4. Situs of Taxation
d. Multiplicity of Income or intangible personal properties may be
Situs subject to taxation in several taxing jurisdiction.
1. As to Scope
National Imposed by the National Government
(e.g. income taxes, estate tax, donor’s tax, value
added tax, other percentage taxes, documentary
stamp tax)
Local or Municipal Imposed by the municipal corporations
(e.g. real property tax, community tax)
Classification of Taxes
4. As to purpose
General/ Fiscal/ Imposed solely for the general purpose of the
Revenue government, i.e. to raise revenue for government
expenditures
(e.g. income tax, donor’s tax, estate tax)
Special/ Regulatory Imposed for a specific purpose, i.e. to achieve some
social or economic ends irrespective of whether
revenue is actually raised or not
(e.g. tariff and certain duties on imports)
Classification of Taxes
5. As to object or subject matter
Personal/ poll/ Tax of a fixed amount imposed on individual, whether
capitation citizens or not, residing within a specified territory
without regard to their property or the corporation
in which he may be engaged
(e.g. community tax)
Property Tax imposed on property, whether real or personal,
in proportion either to its value, or in accordance
with some other reasonable method of
apportionment
(e.g. real estate tax)
Excise Any tax which does not fall within the classification
of a poll tax or a property tax. This is a tax on the
exercise of certain rights or privileges
(e.g. income tax, estate tax, donor’s tax, VAT, other
percentage taxes)
Classification of Taxes
6. As to rates or gradation
Proportional Tax based on a fixed percentage of amount of
property, receipts, or other basis to be taxed
(e.g. VAT, other percentage taxes)
Progressive Tax the rate which increases as the tax base or
bracket increases
(e.g. income tax, estate tax, and donor’s tax)
Regressive Tax the of which decreases as the ta base or
bracket increases.
Regressive System of Taxation
Penalty Tax
1. Purpose Designed to regulate conduct Aimed at raising revenue
2. Authority that Imposed by government or Imposed by government
imposes private entities only
Distinction of Tax from Other
Charges
Other charges/ related terms
1. Subsidy Pecuniary aid directly granted by the government to an
individual or private commercial enterprise deemed
beneficial to the public
2. Revenue Refers to all the funds or income derived by the
government, whether from tax or any other sources
3. Internal Refers to taxes imposed by the legislature other than duties
revenue on imports and exports
4. Custom duties Taxes imposed on goods exported to or imported from a
(duties) country. Customs duties are really taxes but the latter is
broader
5. Tariffs May be used in one of the following three senses:
a. A book of rates drawn usually in alphabetical order
containing the names of several kinds of merchandise with
the corresponding duties to be paid for the same
Distinction of Tax from Other
Charges
a. Custom duties
b. Sugar adjustment tax
c. Tax on narcotic drugs
d. Specific educational fund tax
e. Science fund tax
f. Energy taxes on aircraft, motorized watercraft
and electric power consumption
g. Travel tax
h. Private motor vehicle tax
Sources of Tax Laws
a. Constitution
b. Statutes of laws
c. Presidential decrees
d. Revenue regulations
e. Administrative rulings and opinions
f. Judicial decision
g. Provincial, city, municipal and barangay ordinances
h. Treaties and international agreements
Basic Tax Laws of the
Philippines
Classification of Exemption
1. Express or affirmative – express provision in the
Constitution, statutes, treaties, ordinances,
franchises or contracts
2. Implied or exemption by omission – occurs when
tax is levied on certain classes of persons,
properties or transactions without mentioning
other classes. Those not mentioned are deemed
exempted by omission.
Exemptions from Taxation
Impact of taxation
- corresponds to the imposition of the tax
Shifting
- refers to the transfer of tax
Incidence
- consists of the payment of the tax
Shifting
Kinds of Shifting
1. Forward – takes place when the burden of the tax is
transferred from a factor of production through the
factors of distribution until it finally settles on the
ultimate purchaser or consumer
2. Backward – effected when the burden of the tax is
transferred from the customer or purchaser through
the factors of distribution to the factor of
production
3. Onward – occurs when tax is shifted two or more time
either forward or backward.