GHIST- PRELIMS

Unit 2. Taxation
1. Taxation is a mechanism through which most
government expenditures are financed. The tax is the
amount that is levied or imposed on a tax payer.
2. The three principles of a sound tax system are:
1) Social Justice – taxation is based on equity, which
means that the ability to pay taxes must be considered
and that those who pay taxes must benefit from what it
is spent for
2) Compliance – the tax measures implemented must
allow the compliance of the taxpayers. If supposed
taxpayers are able to circumvent the tax law or its
administration, then there is a flaw in the tax system.
3) Adequacy of Revenue – the taxes collected must
yield enough revenue.
(c) To ensure that the government is able to provide for
the needs of those under its jurisdiction and care through
the provision of better infrastructure, health, education,
jobs, and social protection for the people.
NOTE:
Sociologist Robert Merton modified the Structural
Functional Analysis to include manifest and latent
consequences of a social structure (like laws) to the society
at large or to groups. Manifest consequences are
consequences that are intended or expected to come with
the structure. Latent consequences on the other hand are
consequences that are incidental or accidental in nature.
Consequences may either be positive or negative in effect.
Positive consequences are called Functions while negative
consequences are called Dysfunctions.

3. The types of tax structures are progressive, proportional,

and regressive. Progressive taxes are tax rates that increase
with the base. Proportional taxes are fixed percentages to
the base. Regressive taxes are fixed tax rates or tax rates
that decrease as the base increases.

4. Taxes may either be direct (example: income, estate, gift,

inheritance, residence, real property taxes); or indirect
because the burden may be transferred to someone else
(example: excise, tax, import duties, ad valorem tax).

5. Taxes may be imposed by that national government

(example: personal income tax and income tax and excise
tax as found in the National Internal Revenue Code of 1997,
as amended by RA 10963) and local government units
(example: community tax and real property tax as found in
the Local Government Code of 1991).

REPUBLIC ACT NO. 10963

Signed into law on December 19, 2017, RA 10963 or the Tax

Reform for Acceleration and Inclusion (TRAIN Law) is the
first package of four tax reforms under the government’s
Comprehensive Tax Reform Program. Among the more
prominent features of the TRAIN law that had a wide range
effect is the implementation of a lower personal income tax
but on the other hand, an increase in taxes related to
consumption.

The objectives of the TRAIN law as stated in Section 2.

Declaration of Policy of RA 10963 reads as follows:

(a) To enhance the progressivity of the tax system through

the rationalization of the Philippine internal revenue tax
system, thereby promoting sustainable and inclusive
economic growth;

(b) To provide, as much as possible, an equitable relief to a

greater number of taxpayers and their families in order to
improve levels of disposable income and increase economic
activity; and