TAXES

- enforced proportional contribution from

persons and properties levied by the
lawmaking body of the State by virtue its
sovereignty for the support of the
government and all public needs
TAX RATE STRUCTURES
PROPORTIONAL TAXATION

$2,000 $3,000 $5,000

Proportional taxes - tax of a fixed percentage of amount of the base;

- impacts low, middle and high income earners relatively equally;
- the increase in the tax rate is proportionate
to the increase in the tax base;
- more of an impact on higher-income
individuals and businesses, and less on low-
income earners;
 Regressive taxes - the increase in the tax
rate is not proportionate to the increase in
the tax base;
 have a greater impact on low-income
individuals than high-income earners;
 PROGRESSIVE VS. REGRESSIVE TAX
RATES

Taxable Income 3,000 30,000 300,000 3,000,000

10% 15% 20% 25%
Progressive Tax Rate
25% 20% 15% 10%
Regressive Tax Rate
*rates used are for presentation purposes only
CLASSIFICATION OF
TAXES
AS TO SUBJECT MATTER OR OBJECT
Personal, poll or capitation – imposed on individuals,
whether citizens or not, residing within a specified
territory;

Property - imposed on property whether real or personal

in proportion either to its value or with some reasonable
method of appointment;

Excise - imposed upon performance of an act, privilege or

engaging in occupation;
 AS TO WHO BEARS THE BURDEN

Direct – tax demanded from persons Indirect - tax which the taxpayer can
who are intended or bound by the law to shift to another;
pay the tax;
AS TO DETERMINATION OF AMOUNT
Specific tax – tax of a fixed amount imposed by the head or
number, or by some standard of weight or measurement; it
requires no assessment other than a listing of classification of the
subjects to be taxed; (e.g. Excise tax on distilled spirits, cigars and
cigarettes)

Ad valorem tax – tax of a fixed proportion of the value of the

property with respect to which the tax is assessed; it requires the
intervention of assessors or appraisers to estimate the value of
such property before the amount due from each taxpayer can be
determined; (e.g. Real estate tax)
AS TO PURPOSE

General, fiscal or revenue tax – tax that is imposed

solely to raise revenue for government expenditures;
(e.g. Income tax, VAT)

Special or regulatory tax – tax imposed for a special

purpose; (e.g. Sugar adjustment taxes, Oil price
stabilization fund)
AS TO AUTHORITY IMPOSING THE
TAX
National – tax imposed by the national
government; (e.g. Internal revenue taxes,
customs duties)

Municipal or local – tax imposed by municipal

agencies; (e.g. Sand and gravel tax, occupation
tax)
 TAX VS. OTHER
FEES
Toll - payment generally applied to the consideration which is
paid for the use of road, bridge or the like of a public nature;
- Toll is a demand of proprietorship;

Tax - is a demand of sovereignty;

*********

Penalty - any sanction imposed as punishment for violation of

laws;
- Penalty is designed to regulate conduct;

Tax - is designed to raise revenue;

 TAX VS. OTHER FEES
Special Assessment - is enforced proportional contribution from owners of land
for special benefits resulting from public improvements;
- Special Assessment is levied only on land;

Tax - levied on person, property or exercise of privilege;

*********

Permit or License Fee – charge imposed under the police power for purpose
of regulation ;
- License fee is imposed for regulation;

Tax - levied for revenue;

TAX VS. OTHER FEES
Debt - is generally based on contract, assignable and maybe paid in kind;

Tax - is based on law, cannot be assigned and payable in money;

*********
Customs Duties – imposed on persons, properties, occupation, exercise
of rights or privilege commodities imported or exported;

Tax – includes customs duties

- an act granting exemptions from all taxes of any kind and nature carries
with it exemptions from customs duties;
PHILIPPINE TAX
LAWS
• National Tax Laws
NIRC and Tariff and Customs Code
• Local Tax Laws
Local Government Code on Local Tax
• Miscellaneous Tax Laws
TAX LAWS – Sources of Authority
- President and his Administration
- signs laws
- vetoes legislation passed by Congress
- carries out laws

- Senate and House of Representatives

- makes, alters and repeals laws through the powers vested in the Philippine
Congress

- Supreme Court and lower courts

- evaluates laws
- hears cases
- has the power to declare laws and actions by the executive branch as
unconstitutional
SOURCES OF TAX LAWS
 Constitution
 Statutes and Presidential Decrees
 Revenue Regulations by the Dept. of Finance
 Rulings issued by the BIR Commissioner and Opinions of the Secretary of Justice
 Decisions of the Supreme court and the Court of Tax Appeals
 Provincial, city, municipal and barangay ordinances subject to limitations set
forth in the Local Govt. Code
 Treaties or international agreements the purpose of which is to avoid or
minimize double taxation
CERTAIN DOCTRINES IN TAXATION
• Prospectivity of Tax Laws

• Double Taxation

• Set-off of Taxes

• Escape from Taxation

PROSPECTIVITY OF TAX LAWS

“Taxes may be imposed retroactively by law but, unless so

expressed by such law, these taxes must only be imposed
prospectively.” (Hydro Resources vs. Court of Appeals, G.R. 80276, Dec. 21,1990, 192 SCRA 604)
Supreme Court
 Direct Duplicate Taxation Indirect Double Taxation
Taxing twice of the - allowed as long as Constitution is not violated
- same subject
- same purpose Methods of Avoiding Double Taxation
- same taxing authority - reciprocal exemptions by law or treaty
- same taxable period - allowance of tax credit for foreign taxes paid
- within the same jurisdiction - allowance of deduction for foreign taxes paid
-same kind or character of tax - reduction of Philippine tax rate
 SET-OFF OF TAXES
“ We have consistently ruled that there can be no offsetting of taxes against the claims
that the taxpayer may have against the government. A person cannot refuse to pay a
tax on the ground that the government owes him an amount equal to or greater than
the tax being collected. The collection of a tax cannot await the results of a lawsuit
against the government.” ( Philex Mining Corporation vs. Commissioner of Internal Revenue, Court of Appeals and the Court
of Tax Appeals, G.R. 125704, Aug. 28,1998)

Supreme Court
 ESCAPE FROM TAXATION
• unlawful means to get away with tax liability
• Also known as tax dodging
3 factors:
• End to be achieved
• State of mind ( in bad faith, willful or
deliberate and not accidental
• Course of action or failure of action that is
unlawful
• Legal means of minimizing tax liability
by taking advantage of tax planning
opportunities
• Process of controlling one’s actions to
avoid undesirable tax consequences
• Also known as tax minimization/ tax
planning
PHILIPPINE TAX LAWS AND TAXES
1. Income Taxes (Individual and Corporation)
b. Estate and Donor’s Tax
c. Value-added Tax
d. Percentage Tax
e. Excise Tax
f. Documentary Stamp Tax

2. Tariff and Custom Code of 1978

a. Import Duties
b. Export Duties
 PHILIPPINE TAX LAWS AND TAXES
3. Local Government Code of 1991 (R.A. 7160)
a. Real Property Tax
b. Business Taxes, Fees & Charges
c. Professional Tax
d. Community Tax
e. Tax on Banks & other Financial Institutions

4. Special Laws
a. Motor Vehicle Law ( R.A. 4163)
- motor vehicle fees
b. Private Motor Vehicle Tax Law (P.D.1958)
- private motor vehicle tax
 PHILIPPINE TAX LAWS AND TAXES
4. Special Laws cont.
c. Philippine Immigration Act of 1940 (C.A.613)
Immigration Act
d. Travel Tax Law (P.D. 1183)
Travel Tax
 HISTORY OF THE PHIL. INTERNAL REVENUE LAW
INTERNAL REVENUE LAW :
- a law passed for the purpose of authorizing the levy and collection of taxes;
- civil in nature;
- First Phil. Internal Revenue Law was approved on July 2, 1904 as Act 1189
effective Aug. 4, 1904.
- National Internal Revenue Code (NIRC) took effect on July 1, 1939
(Commonwealth Act 466)
- amended by R.A. 6110 (Omnibus Tax Law) in 1969; P.D. 69 in 1972; NIRCs of
1977 & 1986
INTERNAL REVENUE LAW:
- R.A. 8424 – an Act Amending the NIRC
also known as “Tax Reform Act of 1997”
 to promote sustainable economic growth
 to provide an equitable relief to a greater number of taxpayers
 to create a robust environment for business and enable the firms
to compete locally and globally
 ensures that the government is
able to provide the needs of
those under its jurisdiction
 INTERNAL REVENUE LAW :
Tax Reform for Acceleration
and Inclusion
- R. A. 10963 or “TRAIN LAW”
- signed into law on December 19, 2017
- took effect on January 1, 2018
INTERNAL REVENUE LAW:
Goals of the TRAIN Law:
INTERNAL REVENUE LAW:
 INTERNAL REVENUE LAW :
Republic Act (RA) No. 11534, Corporate Recovery and
Tax Incentives for Enterprises (CREATE) Act
- created by the Philippine Congress in response to
the COVID-19 pandemic as a fiscal relief to domestic
and foreign corporations doing business in the
Philippines, effective July 1, 2020.
- The CREATE law is officially effective on April 11 (15
days after its publication on March 27)
 The BUREAU OF INTERNAL REVENUE

- Mission is “to collect taxes efficiently and effectively, for

and at the least cost to the government, through impartial
and consistent enforcement of internal revenue laws, and
convenient and honest service to taxpayers”.
 The BUREAU OF INTERNAL REVENUE
- Tax Collection System
R.A. 2343 enacted in 1959 – BIR adopted the “Self Assessment
System” which was retained in Tax Reform Act in 1997.
Methods of collection :
- Voluntary Compliance
- Collection by Enforcement
- Attrition Act of 2005
R.A. 9335 enacted to improve the revenue collection performance of
the BIR and Bureau of Customs thru creation of Revenue Performance
Evaluation Board & Rewards and Incentive Fund
 The BUREAU OF INTERNAL REVENUE
- Attrition Act of 2005
Power and functions of the board :
1. to prescribe rules and guidelines for the allocation , distribution and
release of the Fund;
2. to set criteria and procedures for removing from service officials
and employees whose revenue collection falls short of the target
by at least 7.5%
3. to terminate personnel in accordance with criteria adopted;
4. to prescribe a system for performance evaluation
 The BUREAU OF INTERNAL REVENUE
- 1 Commissioner & 4 Deputy Commissioners

Power and Duties of the BIR:

1. Assessment and collection of all national revenue taxes, fees and
charges;
2. Enforcement of all forfeitures, penalties and fines;
3. Execution of judgements in all cases decided in its favor by the
Court of Tax Appeals;
4. Administration of supervisory and
police powers conferred to it.
 The BUREAU OF INTERNAL REVENUE
Powers of the Commissioner
1. Interpret tax laws and decide tax cases
2. Obtain information, and to summon, examine, and take testimony of
persons
3. Make assessments and prescribe additional requirement for tax
administration and enforcement
4. Delegate powers vested in him by the Code to any subordinate officer with
rank equivalent to a division chief or higher
5. Suspend business operations of a taxpayer
6. Compromise, abate and refund or credit taxes
 POLICY DIRECTIONS ON E-COMMERCE
* Tax neutrality should be the governing principle. Tax imposed on
conventional means should be the same in E-Commerce.
* All other tax principles should be the same guiding principles applicable
to E-Commerce
* BIR will use the potential of E-Commerce in bringing about greater
efficiency in raising revenues and an improved taxpayer services.
* BIR will rationalize its role in providing an appropriate fiscal
environment.
• Tax treatment for E-Commerce
transactions should have high
international acceptance.
 BIR RULINGS & ISSUANCES

 Revenue Regulations - RRs

- issuances signed by the Sec. of Finance, upon recommendation of
the BIR Commissioner that specify, prescribe or define rules and regulations
for the effective enforcement of the NIRC;

 Revenue Memorandum Circulars – RMCs

- issuances that publish pertinent and applicable portions of laws,
rules regulations and
precedents issued by BIR;
 BIR RULINGS & ISSUANCES
 Revenue Memorandum Orders - RMOs
- issuances that provide directives or instructions

 Revenue Memorandum Rulings – RMRs

- rulings, opinions and interpretations of the
Commissioner of Internal Revenue with respect
to tax code

 BIR Rulings
- official position of the BIR
on inquiries of taxpayers
INCOME VS. CAPITAL
Income, in its broad sense, means all wealth which flows into
the taxpayer other than a mere return of capital.
- return in money from one’s business, labor or capital
invested;
- a flow of the fruits of one’s labor;

Capital is a fund or property existing at one distinct point

in time.
- While capital is wealth, income is the service of wealth;
- capital is a fund while income is a flow;
- Capital is a tree and income is the fruit;
 INCOME TAX
- is a tax on all yearly profits arising from
property, profession, trade or business, or
is a tax on a person’s income, emoluments,
profits and the like.

- is based on income, either gross or net,

realized in one taxable year;