Desiree Jayne V.

Noriega Arc - 5102

Taxation and Land Reform

Income Tax Rate 5% - 32%

Corporate Tax Rate 30%

Sales Tax/ VAT rate 12%

Personal Income Tax Income of residents in Philippines is taxed progressively up to 32%. Resident citizens are
taxed on all their net income derived from sources within and without the Philippines. For nonresident, whether
an individual or not of the Philippines, is taxable only on income derived from sources within the Philippines.

Taxable Income (PhP)

Tax Rate Php 0 – 10,000 5%

Php 10,000 – 30,000 10%

Php 30,000 – 70,000 15%

[Php 70,000 – 140,000 20

Php140,000 – 250,000 25%

Php 250,000 – 500,000 30%

Php 500,000 and above 32%

A tax (from the Latin taxo) is a compulsory financial charge or some other type of levy imposed upon a
taxpayer (an individual or legal entity) by a governmental organization in order to fund various public
expenditures. A failure to pay, along with evasion of or resistance to taxation, is punishable by law. Taxes
consist of direct or indirect taxes and may be paid in money or as its labour equivalent.
Most countries have a tax system in place to pay for public, common or agreed national needs and government
functions. Some levy a flat percentage rate of taxation on personal annual income, but most scale taxes based
on annual income amounts. Most countries charge a tax on individuals income as well as on corporate income.
Countries or subunits often also impose wealth taxes, inheritance taxes, estate taxes, gift taxes, property
taxes, sales taxes, payroll taxes or tariffs.
In economic terms, taxation transfers wealth from households or businesses to the government. This has
effects which can both increase and reduce economic growth and economic welfare. Consequently, taxation is
a highly debated topic.

Primary Purpose of Taxation

Taxation is a means by which governments finance their expenditure by imposing charges on citizens and
corporate entities. The main purpose of taxation is to accumulate funds for the functioning of the government
machineries. All governments in the world cannot run its administrative office without funds and it has no such
system incorporated in itself to generate profit from its functioning. In other words, a government can run its
administrative set up only through public funding which is collected in the form of tax. Therefore, it can be well
understood that the purpose of taxation is very simple and obvious for proper functioning of a state. Taxes are
charges levied against a citizen’s personal income or on property or for some specified activity. As such, one
purpose of taxation is to increase in effectiveness and productivity of the nation as government is able to
implement various socio-economic development projects such as the construction of roads and bridges,
schools, health facilities and provision of social services.

Another reason is that taxation assists in reducing consumption of unwanted goods. Taxes as such can be
used as an effective tool to reduce the consumption of unwanted goods like alcohol. Higher taxes on such
goods reduce the consumption as the price of the product will be very high for the consumers. Government
also uses taxes as a way to protect local industries and as such make them more profitable. Increasing tariffs
on imports and charging lower taxes to local products may boost the demand for goods and services produced
by domestic industry. Taxes on imports, which are called tariffs, can be used by government to correct an
unfavorable balance of payment situation by increasing the tariffs. This will result in imports becoming
expensive and will cause a fall in demand for the imported goods.

Direct tax is a tax imposed upon a person or property as distinct from a tax imposed upon a transaction, which
is described as an indirect tax. Direct tax is one imposed upon an individual person (juristic or natural) or
property (i.e. real and personal property, livestock, crops, wages, etc.) as distinct from a tax imposed upon a
transaction. In this sense, indirect taxes such as a sales tax or a value added tax (VAT) are imposed only if and
when a taxable transaction occurs. People have the freedom to engage in or refrain from such transactions;
whereas a direct tax (in the general sense) is imposed upon a person, typically in an unconditional manner,
such as a poll-tax or head-tax, which is imposed on the basis of the person's very life or existence, or a
property tax which is imposed upon the owner by virtue of ownership, rather than commercial use.

Indirect tax (such as sales tax, per unit tax, value added tax (VAT), or goods and services
tax (GST ), excise, tariff) is a tax collected by an intermediary (such as a retail store) from the person who
bears the ultimate economic burden of the tax (such as the consumer). The intermediary later files a tax return
and forwards the tax proceeds to government with the return. In this sense, the term indirect tax is contrasted
with a direct tax, which is collected directly by government from the persons (legal or natural) on whom it is
imposed. Some commentators have argued that "a direct tax is one that cannot be charged by the taxpayer to
someone else, whereas an indirect tax can be."
An indirect tax may increase the price of goods to raise the price of the products for the consumers. Examples
would be fuel, liquor, and cigarette taxes. An excise duty on motor cars is paid in the first instance by the
manufacturer of the cars; ultimately, the manufacturer transfers the burden of this duty to the buyer of the car in
the form of a higher price. Thus, an indirect tax is one that can be shifted or passed on. The degree to which
the burden of a tax is shifted determines whether a tax is primarily direct or primarily indirect. This is a function
of the relative elasticity of the supply and demand of the goods or services being taxed. Under this definition,
even income taxes may be indirect.

Progressive tax is a tax in which the average tax rate (taxes paid ÷ personal income) increases as the taxable
amount increases. The term "progressive" refers to the way the tax rate progresses from low to high, with the
result that a taxpayer's average tax rate is less than the person's marginal tax rate.The term can be applied to
individual taxes or to a tax system as a whole; a year, multi-year, or lifetime. Progressive taxes are imposed in
an attempt to reduce the tax incidence of people with a lower ability to pay, as such taxes shift the incidence
increasingly to those with a higher ability-to-pay. The opposite of a progressive tax is a regressive tax, where
the average tax rate or burden decreases as an individual's ability to pay increases.
The term is frequently applied in reference to personal income taxes, in which people with lower income pay a
lower percentage of that income in tax than do those with higher income. It can also apply to adjustments of the
tax base by using tax exemptions, tax credits, or selective taxation that creates progressive distribution effects.
For example, a wealth or property tax, a sales tax on luxury goods, or the exemption of sales taxes on basic
 necessities, may be described as having progressive effects as it increases the tax burden of higher income
families and reduces it on lower income families.
Progressive taxation is often suggested as a way to mitigate the societal ills associated with higher income
inequality, as the tax structure reduces inequality, but economists disagree on the tax policy's economic and
long-term effects. One study suggests progressive taxation can be positively associated with happiness, the
subjective well-being of nations and citizen satisfaction with public goods, such as education and
transportation.

Power of taxation is both inherent and legislative in character because it has been reserved by the State for it
to exercise. It is inherent because the sustenance of government requires contribution from them. The power
of taxation is legislative in character because only the legislature can make tax laws.

According to the Philippine Constitution, the following are exempted from taxes:

 Charitable institutions, churches, convents, mosques, non-profit cemeteries, lands and buildings and
improvements – actually, directly, and exclusively used for religious, charitable and educational purposes
(according to Article VI, Section 28)
 All income, revenues, assets of non-stock and non-profit educational institutions used actually, directly
and exclusively for educational purposes and all grants, endowments, donations, contributions (subject to
conditions prescribed by law) used actually, directly and exclusively for educational purposes (according to
Article XIV Section 4)

Tip: If properties, assets, revenues derived are related from religious, educational, and non-profit organizations –
they may be exempted for taxes.

Inheritance tax, estate tax, and death tax or duty are the names given to various taxes which arise on the death of
an individual. In United States tax law, there is a distinction between an estate tax and an inheritance tax: the
former taxes the personal representatives of the deceased, while the latter taxes the beneficiaries of the estate.
However, this distinction does not apply in other jurisdictions; for example, if using this terminology UK inheritance
tax would be an estate tax.

Nature and Characteristics of Taxation and Taxes. Taxation is the inherent power of the state, acting through the
legislature, to impose and collect revenues to support the government and its recognized objects. Simply
stated,taxation is the power of the State to collect revenues for public purpose

Characteristics of an Effective Tax System. A good tax system should meet five basic conditions: fairness,
adequacy, simplicity, transparency, and administrative ease.