GLOBAL RECIPROCAL COLLEGE

Avenida extension, Caloocan City

Competency: Integrate the ability of creativity and craftmanship skills of the student
with regards to applying in business taxation. Expected the capability to follow a rules
and identify that course would be a path in augmenting the strategies use in business.
Analyze the strategic situation in handling challenges in business. Student will acquire
knowledge and appreciate the ways of general principles and concept of taxation which
influences and persuades in the aspects of business. Be able to present thoughts and
findings solution for pitching ideas understand the general concepts and principles of
taxation. Above all it is about of being able to do and follow the general rules
implemented by the government for taxation to follow a right action to business
organization.

Outcome: Preparation for the students to apply the general cconcepts and priciples of
taxation to acquire knowledge, and aware the general rules in txation. Prepare for
situation and exercise the concept and principles of taxation. To develop significant
research related to business program that will be useful and relevantto the needs of the
school, the city, and the larger community outside, identify the need of business
students that can be use on business study specially to the students major in
accountancy it will shows practical understanding of business taxation and will provide
competency of business students it will contributes positively development of student
and they become effective in the field of business.

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Course Title: Income Taxation

Section:
Schedule:
Name of Faculty:

Module Number: 1

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Lesson Title/Topic: General Principles and Concepts of Taxation

Week Number:

Intended Learning Outcomes:

At the end of this unit, the students should be able to:

Learning and Teaching Support Materials

1. Module
2. Google classroom
3. Illustrations
4. Articles
5. Other texts/websites

Lesson Proper

Income Taxation:
General Principles and Concepts of Taxation

INHERENT POWERS OF THE STATE

 Essential power necessary for the sovereign state’s survival.

 Exist as the central force in order that a government can:

 Command

 Maintain peace and order,

 Survive irrespective of any constitutional provision.

THREE INHERENT POWERS OF THE SOVEREIGN STATE

 Police power

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  The power to protect citizens and provide safety and welfare of society.

 Eminent domain power

 The power to take private property (with just compensation) for public use.

 Taxation power

 The power to enforce contributions to support the government, and other

inherent.

TAXATION DEFINED

 A power by which an independent state, through its law making body, raises and
accumulates revenue from its inhabitants to pay the necessary expenses of the
government.
 A process or act of imposing a charge by governmental authority on property,
individuals or transactions to raise money for public purposes.
 A means by which the sovereign state through its law-making body.
Demands for revenue in order to support its existence and carry out its legitimate
objectives.

NATURE OF TAXATION POWER

 Inherent Power Of Sovereignty;
 Essentially A Legislative Function;
 For Public Purposes;
 Territorial In Operation;
 Tax Exemption Of Government;
 The Strongest Among The Inherent Powers Of The Government; And
 Subject To Constitutional And Inherent Limitations.

SCOPE OF TAXATION POWER

 It reaches every trade or occupation

 Every object of industry, and
 Every species of possession.
 It imposes a burden which, in case of failure to discharge, may be followed by seizure
or confiscation of property.

SUBJECT TO INHERENT AND CONSTITUTIONAL LIMITATIONS

INHERENT POWER
 Its very purpose and nature restrict taxation.
 Tax power should be exercised for its very nature, purpose and jurisdiction.

 A violation of these inherent limitations is tantamount to taking a property without due

process of law.

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CONSTITUTION
 To protect the object of taxation against its abusive implementation.

 If a tax law violates the constitution, such law shall be declared null and void.

SIMILARITIES AMONG TAXATION, EMINENT DOMAIN AND POLICE POWERS

1. They are inherent powers of the state;

2. They constitute the three ways by which the state interferes with the private rights and property;

3. They are legislative in nature and character;

4. They presuppose an equivalent compensation;

5. They all underlie and exist independently of the constitution;

6. They are all necessary attributes of sovereignty; and

7. The provisions in the constitution are just limitations on the exercise of these powers.

DISTINCTION OF TAXATION, POLICE POWER, AND EMINENT DOMAIN

TAXATION POLICE POWER EMINENT DOMAIN

POWER TO POWER TO MAKE POWER TO TAKE
1. AS TO
ENFORCE AND IMPLEMENT PRIVATE PROPERTY
CONTRIBUTION TO LAWS FOR THE FOR PUBLIC USE
CONCEPT RAISE GENERAL WITH JUST
GOVERNMENT WELFARE. COMPENSATION.
FUNDS.
2. AS TO PLENARY, BROADER IN MERELY A POWER TO
SCOPE
COMPREHENSIVE APPLICATION, TAKE PRIVATE
AND SUPREME GENERAL POWER PROPERTY FOR PUBLIC
TO MAKE AND USE.
IMPLEMENT LAWS.

TAXATION POLICE POWER EMINENT DOMAIN

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3. AS TO EXERCISED ONLY BY EXERCISED ONLY BY MAY BE
AUTHORITY
GOVERNMENT OR GOVERNMENT OR GRANTED TO
ITS POLITICAL ITS POLITICAL PUBLIC SERVICE
SUBDIVISIONS. SUBDIVISIONS. OR PUBLIC
UTILITY
COMPANIES.
4. AS TO MONEY IS TAKEN PROPERTY IS PRIVATE
PURPOSE
TO SUPPORT THE TAKEN OR PROPERTY IS
GOVERNMENT. DESTROYED TO TAKEN FOR
PROMOTE PUBLIC USE.
GENERAL
WELFARE.

TAXATION POLICE POWER EMINENT DOMAIN

5. AS TO THE POWER TO CAN BE CAN BE
NECESSITY OF MAKE TAX EXPRESSLY EXPRESSLY
DELEGATION LAWS CANNOT DELEGATED TO DELEGATED TO
BE DELEGATED. THE LOCAL THE LOCAL
GOVERNMENT GOVERNMENT
UNITS BY THE UNITS BY THE
LAW MAKING LAW MAKING
BODY. BODY.

6. AS TO OPERATES ON A OPERATES ON A OPERATES ON

PERSON COMMUNITY OR COMMUNITY OR A PARTICULAR
AFFECTED A CLASS OF CLASS OF PRIVATE
INDIVIDUAL. INDIVIDUAL. PROPERTY OF AN
INDIVIDUAL.

TAXATION POLICE POWER EMINENT DOMAIN

7. AS TO CONTINUOUS HEALTHY MARKET VALUE OF

BENEFIT
S PROTECTION ECONOMIC THE PROPERTY
AND STANDARD OF EXPROPRIATED.
ORGANIZED SOCIETY.
SOCIETY.

8. AS TO AMOUNT GENERALLY, COST OF NO IMPOSITION.

OF IMPOSITION
NO LIMIT. REGULATION,
LICENSE AND
OTHER
NECESSARY
EXPENSES.

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 TAXATION POLICE POWER EMINENT
DOMAIN

9. AS TO INSEPERABLE FOR PROTECTIO COMMON

THE EXISTENCE N, SAFETY NECESSITIES
IMPORTANCE OF A NATION – IT AND AND INTERESTS
SUPPORTS POLICE WELFARE OF THE
POWER AND OF SOCIETY. COMMUNITY
EMINENT TRANSCEND
DOMAIN. INDIVIDUAL
RIGHTS IN
PROPERTY.
10. AS TO SUBJECT TO RELATIVELY FREE SUPERIOR TO
RELATIONSHI
P TO CONSTITUTIONA L FROM AND MAY OVER
CONSTITUTIO AND INHERENT CONSTITUTIONAL RIDE
N LIMITATIONS. LIMITATIONS. CONSTITUTIONA
L IMPAIRMENT
INFERIOR SUPERIOR TO NON PROVISION
TO NON IMPAIRMENT BECAUSE THE
IMPAIRMEN CLAUSE. WELFARE OF
T CLAUSE. THE STATE IS
SUPERIOR TO
ANY PRIVATE
CONTRACT.

TAXATION POLICE EMINENT DOMAIN

POWER
11. AS TO CONSTRAINTS BY LIMITED BY BOUNDED BY
LIMITATION
CONSTITU- THE PUBLIC PURPOSE
TIONAL AND DEMAND AND JUST
INHERENT FOR PUBLIC COMPENSATION.
LIMITATIONS. INTEREST
AND DUE
PROCESS.

INHERENT LIMITATIONS

The natural restrictions to safeguard and ensure that the power of taxation shall be exercised by
the government only for the betterment of the people whose interest should be served, enhanced

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and protected.

 Taxes may be levied only for public purposes;

 Being inherently legislative, taxation may not be delegated;
 Tax power is limited to territorial jurisdiction of the state;
 Taxation is subject to international comity; and
 Government entities are generally tax-exempt.

CONSTITUTIONAL LIMITATIONS

Provisions of the fundamental law of the land that restrict the supreme, plenary, unlimited and
comprehensive exercise by the state of its inherent power to tax.

The consitutional provisions that limit the exercise of the power to tax are as follows:

 DUE PROCESS OF LAW;

 EQUAL PROTECTION OF LAW;
 RULE OF UNIFORMITY AND EQUITY;
 PRESIDENT’S POWER TO VETO SEPARATE ITEMS IN REVENUE OR TARIFF BILLS.
 EXEMPTION FROM PROPERTY TAXATION OF RELIGIOUS, CHARITABLE OR
EDUCTAIONAL ENTITIES, NONPROFIT CEMETERIES, CHURCHES, AND
CONVENTSAPPURTENANT THERETO;
 NO PUBLIC MONEY SHALL BE APPROPRIATED FOR RELIGIOUS PURPOSES.
 MAJORITYOF ALL THE MEMBERS OF THE CONGRESS GRANTING
TAX EXEMPTIONS;
 THE CONGRESS MAY NOT DEPRIVE THE SUPREME COURT OF ITS JURISDICTION IN
ALL CASES INVOLVING THE LEGALITY OF ANY TAX, IMPOST OR ASSESSMENT OR
TOLL OR ANY PENALTY IMPOSED IN RELATION TO TAX;
 NO IMPRISONMENT FOR NONPAYMENT OF POLL TAX; AND
 TAX COLLECTION SHALL GENERALLY BE TREATED AS GENERAL FUNDS OF THE
GOVERNMENT.

DUE PROCESS OF LAW

 It mandates a fundamental right of protection that life, liberty or property shall only be
taken away from any person (natural or juridical) if its exercise is not contrary to the
fundamental law of the land and it is done after compliance with the established
procedure prescribed by law.
 Requires that the law should be reasonable and not oppressive (substantive), and it
requires opportunity to be heard in proper court of litigation before judgement is
rendered affecting one’s person or property (procedural).

 PURPOSE OF DUE PROCESS

 To secure the individual from the abusive exercise of the taxing power of the

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 government.

 “EQUAL PROTECTION OF THE LAWS”

 All persons subject to legislation shall be treated alike under similar

circumstances and conditions both in the privileges conferred and liabilities
imposed.
 PURPOSE THE CONSTITUTIONAL MANDATE

 On equal protection is to protect persons belonging to the same class against

intentional and arbitrary discrimination.

RULE ON UNIFORMITY AND EQUITY IN TAXATION

 “EQUALITY IN TAXATION”

 Similar to progressive system of taxation.

 Tax laws and their implementation must be fair, just, reasonable and
proportionate to one’s ability to pay.
 PRIMARY REQUISITE OF EQUITY PRINCIPLE:

 A progressive tax rate shall be applied equally to all persons, firms, and
corporation, and transactions placed in similar classification and situation.
 PROGRESSIVE SYSTEM OF TAXATION

 Tax laws shall give emphasis on direct rather than indirect taxes or on the
ability-to-pay principle of taxation.

PRESIDENT’S VETO POWER

“VETO POWER” - refers to the executive’s power to refuse to sign into law a bill that has been
passed by a legislature.

IT CAN BE DEFINED INTO:

 ITEM VETO
The power to veto items in appropriation bills without affecting any other
provisions of such bills, and
 POCKET VETO
The power to disapprove legislative act by the president with the result that bills
shall fail to become laws.

EXEMPTION FROM PROPERTY TAXATION

 The exemption is granted in return for the benefits they have afforded for the public
welfare.
 To be exempted from taxation, the real property must be exclusively used for religious,

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 educational and charitable purposes.

IMPORTANCE OF TAXATION

 It is the primary source of government revenue that is used to effectively and permanently
perform government functions.
 Without taxation, the other inherent powers (police and eminent domain powers) would
be paralyzed.

BASIS OF TAXATION

 Established based on the principles of:

 NECESSITY
 The government has a right to compel all its citizens, residents and
property within its territory to contribute money.
 Taxation is the “lifeblood” or the “bread and butter” of the
government and every citizen must pay his taxes.

 RECIPROCAL DUTIES OF PROTECTION AND SUPPORT BETWEEN THE STATE AND

INHABITANTS.
 The government collects taxes from the subject of taxation in order
that it may be able to perform its functions.

PURPOSES OF TAXATION

OBJECTIVES IN THE EXERCISE OF TAXING POWER

 REVENUE PURPOSES

 The primary purpose of taxation is to raise revenue by collecting funds or property

for the support of the government in promoting the general welfare and protecting
its inhabitants.
 REGULATORY PURPOSE

THIS OBJECTIVE IS ACCOMPLISHED TO

 Regulate inflation,

 Achieve economic and social stability, and

 Serve as key instrument for social control

TAXES MAYBE USED AS A TOOL AND WEAPON IN INTERNATIONAL RELATIONS AS A TOOL

TO PROTECT TRADE RELATION, SPECIAL DUTIES MAYBE CREATED TO PROTECT NEW

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 CONDITIONS, SUCH AS:

 DISCRIMINATORY DUTY
 This special duty is designed to offset any foreign discrimination
against our local commerce.

 COUNTERVAILING DUTY
 It maybe imposed to offset any foreign subsidy granted to
imported goods to the prejudice of our local industries.

 MARKING DUTY
 IT IS GENERALLY IMPOSED AS ADDITIONAL DUTY TAX ON
IMPORTED ARTICLES AND/OR CONTAINERS WITH IMPROPER
CLASSIFICATION.

 DUMPING DUTIES
 IT REFERS TO THE ADDITIONAL DUTY TAXES IMPOSED ON
IMPORTED GOODS WITH PRICES LESSER THAN THEIR FAIR MARKET
VALUES TO PROTECT LOCAL INDUSTRIES.

 COMPENSATORY PURPOSE

 Taxation is a way of giving back the expected economic and social benefit due to
the inhabitants.

OBJECTS OF TAXATION

 Objects of taxation may refer to the subject to which taxes are imposed.

GENERALLY TAXES ARE IMPOSED ON THE FOLLOWING:

1. Persons, whether natural or juridical persons;

2. Properties, whether real, personal, tangible or intangible properties;

3. Excise object, such as transactions, privilege, right and interest.

NATURE OF TAXES

“TAXES” - are forced burdens, charges, exactions, impositions or contributions assessed in

accordance with some reasonable rule of appointment, by authority of a sovereign state, upon the
person, property, or rights exercised, within its jurisdiction, to provide public revenues for the
support of the government, the administration of the law, or the payment of public expenses.

 Taxes are obligations created by law.

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  Taxes are generally personal to the taxpayer.

ESSENTIAL CHARACTERISTICS OF TAXES

 Enforced contribution.

 Imposed by legislative body.

 Proportionate in character.

 Payable in form of money.

 Imposed for the purpose of raising revenue.

 Used for a public purpose.

 Enforced on some persons, properties or rights.

 Commonly required to be paid at regular intervals.

 Imposed by the sovereign state within its jurisdiction.

CLASSIFICATION OF TAXES

 AS TO PURPOSE
 Revenue or Fiscal

These taxes are imposed solely for the purpose of raising revenue
for the government.

 Regulatory, Special or Sumptuary

These taxes are imposed for the purpose of achieving some

social or economic goals having no relation to the raising of revenue.

 AS TO OBJECT OR SUBJECT MATTER

 Personal, Poll or Capitation

These taxes are fixed in amount and imposed on persons

residing within a specified territory regardless of the amount of their
property or their occupation or business.

 Property

These taxes are imposed on personal or real

property bases on its proportionate value or in accordance with
other reasonable method of apportionment.
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  Excise

These taxes are imposed upon the performance of a right

or act, the enjoyment of a privilege or the engagement in an occupation

 AS TO DETERMINATION OF AMOUNT

 Ad Valorem

 These taxes are fixed amounts in proportion to the value of the

property with respect to which the tax is assessed.

 It requires the intervention of Assessors to estimate the

value of such property before the amount due to the
taxpayer be determined.

 Specific

- These taxes are fixed amounts imposed and based on

some standard of weight or measurement, head or number, length or
volume.

- It requires independent assessment other than a listing or

classification of the subject to be taxed.
 AS TO WHO BEARS THE BURDEN

 Direct

 These taxes are non-transferable.

 The liability for the payment of tax as well as the tax falls on
the same person.

 Indirect
- These taxes are transferable.

- The liability for the payment of tax falls on one person but the
burden thereof can be shifted or passed to another.

 AS TO SCOPE OR AUTHORITY COLLECTING THE TAX

 National

 Taxes collected by the national government (E.g. Estate

and donor’s taxes).

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  Local or Municipal

- Taxes collected by the Municipal government (E.g. Community tax).

 AS TO RATE OR GRADUATION

 Proportional or Flat Rate

 The rate of the tax is based on a fixed percentage

of the amount of the property, receipt or other
basis to be taxed.

 Progressive or Graduated Rate

- The rate of the tax increases as the tax base or bracket

increases (e.g. Income Tax and Estate Tax)

 Mixed Tax
- A system that uses all or a combination of the different taxes

based on rates.

OTHER CHARGES/ FEES

 PENALTY – Is any sanction imposed, as a punishment for

violations of law or acts deemed injurious.

 REVENUE – refers to all funds or income derived whether from

tax or from other sources.

 DEBT – is an obligation to pay or render service from a definite future period

based on contract.

 TOLL – is a compensation for the use of somebody else’s

property determined by the cost of the improvement.

 LICENSE FEE – is a contribution enforced by the government primarily to

restrain and regulate business or occupation.

 CUSTOMS DUTIES - are imposition or imported goods brought into the

country to protect local industry.

 SUBSIDY – is a monetary aid directly given or granted by the

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 government to an individual or private commercial enterprises deemed
beneficial to the public.

 TARIFF – is a schedule or lists of rates, duties of taxes imposed on

imported goods.

 MARGIN FEE – is a tax on foreign exchange designed to curb excessive

demands upon our international reserves.

 SPECIAL ASSESSMENT – is an amount collected by the government for the

purpose of reimbursing itself for certain extended benefits regarding
construction of public works.

SOURCES OF PHILIPPINE TAX LAWS

 THE PHILIPPINES REPUBLIC MAKES LAWS WHICH MAYBE COMPRISED OF THE

FOLLOWING:
CONSTITUTION OF THE PHILIPPINES;

 This refers to that body of rules and maxims in accordance with which
the power of sovereignity are habitually exercised.

STATUTES;

 These are laws enacted and established by the civil will of the
legislative department of the government.
EXECUTIVE ORDERS;

 These are regulations issued by the president or some

administrative under his direction for the purpose of
interpreting, implementing, or giving administrative effect to a
provision of the constitution or sOME LAW OR TREATY.

TAX TREATIES AND CONVENTION WITH FOREIGN COUNTRIES;

 These refer to the treaties or international agreements

with foreign countries regarding tax enforcement and
exemptions.
REVENUE REGULATIONS BY THE DEPARTMENT OF FINANCE;

 These are rules or orders having force of law issued by executive

authorityof the governement to ensure uniform application of tax
laws.

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 IN ORDER THAT ADMINISTRATIVE REGULATIONS MAYBE CONSIDERED VALID, ALL OF THE
FOLLOWING REQUISITES MUST BE COMPLIED WITH:

1. THE REGULATIONS MUST BE USEFUL IN PRACTICAL AND NECESSARY FOR THE

ENFORCEMENT OF THE LAW;

2. THEY MUST BE REASONABLE IN THEIR PROVISIONS;

3. THEY MUST NOT BE CONTRARY TO LAW; AND

4. THEY MUST BE DULY PUBLISHED IN THE OFFICIAL GAZZETE.

5. BIR REVENUE MEMORANDUM CIRCULARS & BUREAU OF CUSTOMS MEMORANDUM

ORDERS;

a. These are administrative rulings or opinions which are less general

interpretation of tax lawsbeing issued by time to time by the
commissionerof the internal revenue and bureau of customs, as the case
maybe.

6. BIR RULINGS;

a. These are expressed official interpretation of the

Tax laws as applied to specific transactions.

7. JUDICIAL DECISIONS;
These refer to the decisions for application made concerning tax issues by the proper
court exercising judicial authority of competent jusrisdiction.

8. LOCAL TAX ORDINANCES

a. These are tax ordinances issued by the province, city, municipality and
barangays/barrios subject to such limitations as provided by the local
government code and the real property tax code.

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Suggested Teaching-Learning Activities

● Gaming
● Brainstorming
● Group Problem Solving
● Presentations
● Essays

Assessment Tasks/Outputs

1)Quiz through Google forms

2)Homework
3)Group Activity via Google classroom

Readings and Other References

Acknowledgements to Authors and Other Creators:

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