School: St.

Vincent of Quebiawan Integrated School Grade Level: 12

Teacher: Angelica H. Paras Semester: First
Learning Area: Fundamentals of Accounting, Business, and Management 2 Quarter: Second Week: 4

SELF–INSTRUCTIONAL PACKETS
I. OBJECTIVES
A. Content Standards

The learners demonstrate an understanding of the sound principles of taxation, its purpose, and
preparation of forms and payment of taxes

B. Performance Standards

The learners shall be able to accomplish the BIR (Bureau of Internal Revenue) forms

C. Learning Competencies

The learners define income and business taxation and its principles and processes.
(ABM_FABM12-IIh-j-15)

D. Objectives

At the end of the lesson, the learners are expected to:

1. define taxation,
2. differentiate income and business taxation
3. identify the principles and processes of taxation.

II. CONTENT

Taxation pt. 1

III. LEARNING RESOURCES

A. Reference/s (Sanggunian)

Fundamentals of Accountancy, Business, and Management 2 Teacher’s Guide

Fundamentals of Accountancy, Business, and Management 2 by F. Ong

B. Other Learning Resources (Iba pang Kagamitang Panturo)

IV. PROCEDURES
A. Reviewing previous lesson or presenting the new lesson

Hello again! How are you? How did you find the lesson last week? A bit confusing, but fulfilling
once you reconcile the account, right?

For this week, we will focus on taxation.

Have you ever heard the word taxation? I am sure that you already did!

Now, I want you to answer the activity on the next page of this module to check your prior
knowledge about this topic.

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 1
QUICK
CHECK Do this activity.
Answer the following questions.

1. How do the government generate its income?

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2. Have you tried asking yourself, where do government collect its cash to defray its
expenditures?
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3. Can you name at least 3 forms of tax?

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B. Establishing a purpose for the lesson

What is the purpose of taxation?

The primary purpose of taxation is to provide the proper funding

needed to run the government. The money collected from taxes
will finance the projects that will promote the general welfare of
our people. It will also be used to pay for the police and military
forces that will guard our territories and to maintain peace and
order.

There are various secondary purposes of taxation:

1. By imposing high customs duties or taxes on imported goods,
local products made in the Philippines would remain
competitive. Additional taxes would jack up the prices of imported goods.

2. By imposing progressive taxes, it will reduce the inequalities between the wealth and
income of our people. The progressive system of taxation means that those who can earn
more will be subjected to higher income taxes. This will narrow down the differences
between the disposable income of those who earn more from those who earn less.

3. By increasing taxes, the government may mitigate effect of an impending inflation. Inflation
is a situation wherein the purchasing power of the peso will go down due to rising prices of
commodities.

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C. Presenting examples/instances of the new lesson

Read the article below about the ABS-CBN tax issues why they did not renew their franchise.

ABS-CBN paid proper taxes every year,’ says network exec.

By: Neil Arwin Mercado - Reporter / @NAMercadoINQ
INQUIRER.net / 04:12 PM July 01, 2020

MANILA, Philippines — Broadcasting company ABS-CBN maintained that it has paid its
taxes, debunking alleged tax violations being thrown at the network amid its bid for another
25-year franchise.
During the joint hearing of the House committee on legislative franchises and committee on
good government and public accountability, Ricardo Tan, ABS-CBN Group chief financial
officer, refuted several tax-related allegations against the media firm.
“ABS-CBN has paid its proper taxes every year. Contrary to the allegations, there has not
been a single year where ABS-CBN has paid zero taxes,” Tan told lawmakers.
According to Tan, ABS-CBN as a group paid in 2018 a total of P5.2 billion in various taxes,
of which P465 million was income tax.
“In fact, the BIR issued a tax clearance to ABS-CBN for the year 2018,” pointed out Tan.
Further, Tan said ABS-CBN did not violate the terms and conditions of its legislative franchise
when it availed of tax incentives through its subsidiary Big Dipper Digital Content Design Inc.
It was alleged that ABS-CBN used Big Dipper Digital Content Design Inc. as a tax-shield.
“Big Dipper Digital Content and Design Inc. is not a tax avoidance scheme. We did not deprive
the government of revenues nor did we violate the terms of our franchise,” Tan said.
Tan explained that in 2009, the Philippine government offered fiscal and non-fiscal incentives
to various sectors such as tourism, BPOs, infrastructure, and creative industries to help stir
the economy through the global financial crisis.
“Big Dipper applied and qualified for PEZA (Philippine Economic Zone Authority) registration
under the creative industry sector covering non-BPO, IT-enabled services, and film, TV and
theatre arts production,” said Tan.
In the same hearing, PEZA director-general Charito Plaza said that Big Dipper Digital Content
Design Inc. is registered with PEZA under the category “IT Enterprise”.
Moreover, Tan asserted that ABS-CBN did not violate the law when it entered into a
compromise agreement with the Bureau of Internal Revenue (BIR) for the settlement of taxes.
“ABS-CBN has complied with all the relevant government rules and regulations concerning
the payment of its taxes. It is not illegal or unusual for a company to enter into a compromise
agreement with the BIR,” Tan said.
“A compromise agreement is a legal remedy available to all taxpayers and not just to ABS-
CBN,” he added.
The move to enter into a compromise agreement, Tan likewise said, “is a remedy provided
for under the Tax Code in cases where doubt may exist in the validity of assessment or
financial incapacity.”
“It is available to all taxpayers, not just to ABS-CBN,” he also said.
Further, Tan explained that ABS-CBN’s Lingkod Kapamilya Foundation has not, and has
never been, used as a tax-shield.
“The ABS-CBN Lingkod Kapamilya Foundation is a non-stock, non-profit foundation
accredited by the Philippine Council for NGO Certification whose tax exemption has been
confirmed by the BIR,” Tan stressed.
The joint committees have discussed various issues amid ABS-CBN’s request for a new
franchise such as the citizenship of chair emeritus Gabby Lopez, the Lopez family’s
reclamation of the network after the EDSA Revolution, and alleged labor violations of the
network.
If ABS-CBN’s franchise application will pass the committee level, it will still need to go through
debates on the House of Representatives’ plenary floor.

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D. Discussing new concepts and practicing new skills #1

TAXATION

Taxation is an imposition of compulsory levies on individuals or

entities by governments. Taxes are levied in almost every
country of the world, primarily to raise revenue for government
expenditures, although they serve other purposes as well.

In modern economies taxes are the most important source of

governmental revenue. Taxes differ from other sources of revenue in
that they are compulsory levies and are unrequited—i.e., they are generally not paid in
exchange for some specific thing, such as a particular public service, the sale of public
property, or the issuance of public debt. While taxes are presumably collected for the welfare of
taxpayers as a whole, the individual taxpayer’s liability is independent of any specific benefit
received.

There are, however, important exceptions: payroll taxes, for example, are commonly levied on
labor income in order to finance retirement benefits, medical payments, and other social security
programs—all of which are likely to benefit the taxpayer. Because of the likely link between taxes
paid and benefits received, payroll taxes are sometimes called “contributions” (as in the United
States). Nevertheless, the payments are commonly compulsory, and the link to benefits is
sometimes quite weak.

Another example of a tax that is linked to benefits received, if only loosely, is the use of taxes on
motor fuels to finance the construction and maintenance of roads and highways, whose services
can be enjoyed only by consuming taxed motor fuels.

Scope of Power of Taxation

The power of taxation is comprehensive, plenary, unlimited and supreme. This power is however
subject to inherent and constitutional limitations.

Nature of power of Taxation

✓ The power is inherent in the state.
✓ It is essentially a legislative in function.

Basis of Taxation
1. Necessity – the taxation is based on necessity. The government cannot exist without the
means to pay its expenses.
2. Reciprocal duties of protection and support between the state and its inhabitants.

Aspects, Processes, Phases, System of Taxation

a. Levying or imposition of the tax – process of determining the persons or property to be
taxed, the sum or sums to be raised, the rate thereof, the time and manner of levying,
receiving and collecting taxes.
b. Collection of the tax – refers to the manner of enforcing the tax obligation on the part of
those required to pay the tax.

Basic principles of a sound tax system

a. Fiscal adequacy – means sufficiency of source of revenue to meet expenditures of
government regardless of business condition.
b. Equality on theoretical justice – the tax imposed must be proportionate to taxpayers’
ability to pay the same.

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 c. Administrative feasibility – the law must be capable of convenient, just and effective
administration.

Three Inherent Powers of the Government

a. Taxation - The power by which the sovereign raises revenue to defray
the necessary expenses of the government.
b. Eminent Domain – the power of the state to take private property for
public use upon payment of just compensation. It is sometimes called
expropriation.
c. Police Power – the power of the state to enact laws to promote public
health, public morals, public safety and the general welfare of the people.

Taxation Distinguished from Police Power and Eminent Domain

a. As to compensation
• In Taxation, the compensation is the protection and benefits received from the
government.
• In Police Power, the maintenance of a healthy economic standard of society.
• In Eminent Domain, the just compensation for the property taken.
b. As to purpose
• In Taxation, property (in the form of cash) is taken from the taxpayers’ for the support
of the government.
• In Police power, property taken to promote general welfare.
• In Eminent Domain, property is taken for public use.
c. As to persons involved or affected
• Taxation and Police Power operate upon the whole citizenry.
• Eminent Domain operates on the individual property owner.
d. As to authority which exercises the power
• Taxation and Police Power may be exercised only by the government.
• Power of Eminent Domain may be exercised by public service corporations or public
utilities, if the power is granted by law.
e. As to amount of imposition
• In Taxation, there is generally no limit to the amount of the tax that may be imposed.
• In Police Power, the amount collected is limited to the cost regulation.
• In Eminent Domain, there is no imposition. The owner of the property is paid just
compensation for the property taken.

Limitations on the Power of Taxation

a. Inherent Limitations: Those restrictions not embodied in the constitution.
✓ Taxes may be levied only for public purpose. Public purpose means one which affects
the inhabitants of the state as a community and not merely an
individual.
✓ Power to tax is limited to territorial jurisdiction of the state. The
tax laws of a state are effective enforceable only within its
territorial limits.
✓ Power to tax, being inherently legislative, may not be delegated.
✓ International comity – international obligations concomitant to
our acceptance of the principles of international law, as part of
our laws demand that certain representatives and property of
foreign states found within our territory be exempt from taxation.
✓ Exemption for taxation of government entities.

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 b. Constitutional limitations: those restrictions expressly provided in the constitution.
✓ Observance of the due process of law and equal protection for the laws.
✓ No imprisonment for non-payment of poll tax.
✓ Non-impairment of the obligation of contracts.
✓ President’s power to veto separate items in revenue or tariff bills
✓ Rule of uniformity and equity in taxation
• Uniformity – means that all properties or other taxable subjects belonging to the
same class be taxed at the same rate or measure.
• Equity – means that the apportionment of the tax burden among the taxpayers be
just or equitable taking into account the taxpayer’s ability to pay the burden.
✓ President’s power to fix under certain conditions tariff rates, import and export quotas,
tonnage and wharf age dues and other duties or imposts.
✓ Exemption from taxation of cemeteries, churches personages or convents appurtenant to
thereto, as well as lands, buildings and improvements used exclusively for religious,
charitable and educational purposes.
✓ No money to be appropriated for religious purposes.
✓ The Congress may not be deprive the Supreme Court of its jurisdiction in all cases
involving the legality of any tax, assessment or toll or any penalty imposed in relation
thereto.
✓ Concurrence by a majority of all members of Congress in passage of law granting tax
exemption.

Situs of Taxation
a. Meaning – situs means place of taxation, that is, the country which has jurisdiction to
impose a particular tax upon persons, property or business transaction.
b. Situs of persons or individuals
✓ Community tax – residence of the person
✓ Income tax
• Legal residence
• Place where the income derived
• Office of the Commissioner
✓ Estate Tax – residence of the decedent upon his death.
✓ Donors tax – residence of the donor at the time of donation.
c. Situs of Taxation of property
✓ Real property
✓ Tangible personal property
✓ Intangible personal property

E. Discussing new concepts and practicing new skills #2

What is Double Taxation?

Double Taxation – when the same property is taxed twice when it should be taxed but once.

Kinds of Double Taxation

a. Direct double Taxation – taxing twice by the same authority, for the same purpose, in the
same purpose, in the same year, some of the property in a given territory in which the tax is
laid without taxing all of them a second time.

b. Indirect Double Taxation – this type of double taxation is not prohibited.

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 What Is an Income Tax?
An income tax is a tax that governments impose on income
generated by businesses and individuals within their jurisdiction.
By law, taxpayers must file an income tax return annually to
determine their tax obligations. Income taxes are a source of
revenue for governments. They are used to fund public services,
pay government obligations, and provide goods for citizens.
Certain investments, like housing authority bonds, tend to be e xempt from income taxes.

Individual Income Tax

Individual income tax is also referred to as personal income tax and is levied on wages, salaries,
and other types of income. This tax is usually a tax the state imposes. Because of exemptions,
deductions, and credits, most individuals do not pay taxes on all of their income.

The income tax offers a series of deductions (e.g. deductions for health care, investments and
education expenses) which taxpayers use to reduce their taxable income. For example, if a
taxpayer earns Php 100,000 in income and qualifies for Php 20,000 in deductions, the taxable
income reduces to Php 80,000 (Php 100,000 – Php 20,000). Tax credits are used to reduce the
taxpayer's tax obligation or amount owed. To illustrate, if an individual owes Php 20,000 in taxes
but qualifies for Php 4,500 in credits, his tax obligation reduces to Php 15,500 (Php 20,000 –
Php 4,500).

Business Income Taxes

Businesses pay income taxes on their earnings; the taxes income from corporations,
partnerships, self-employed contractors, and small businesses. Depending on the business
structure, either the corporation, its owners, or shareholders report their business income and
then deduct their operating and capital expenses. The difference is their taxable business
income.

F. Developing mastery (Leads to Formative assessment)

QUICK
CHECK 2 GOT IT? Do this activity to find out.
TRUE or FALSE. Tell whether the given statement is correct or not. Write
your answer on the blank provided before the number.
___ 1. The tax imposed must be proportionate to taxpayer’s ability to pay.
___ 2. Taxation is based on necessity.
___ 3. Taxation, eminent domain and police power are inherent in the state.
___ 4. The power of taxation is comprehensive, plenary, unlimited and supreme.
___ 5. One of the purposes of taxation is to encourage the growth of home industries.
___ 6. Taxes may be levied only for public purpose.
___ 7. In police power, property is taken to promote general welfare.
___ 8. Taxation and eminent domain are inferior to the impairment clause of the
constitution.
___ 9. No imprisonment for non-payment of poll tax.
___ 10. Foreign state found within or territory is exempt on from tax.

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G. Finding practical applications of concepts and skills in daily living

Did you know that every time we purchase products anywhere, there is a certain percentage
added on our products purchased? Yes, there is!

Look at the receipts of Jollibee and Alfa Mart, there is a certain percentage that was added on
the products purchased. That is VALUE ADDED TAX which is imposed under the Law of Income
Taxation of the Philippines.

H. Making generalizations and abstractions about the lesson

The most important source of government revenue is tax. A tax is a compulsory payment made
by individuals and companies to the government on the basis of certain well-established rules
or criteria such as income earned, property owned, capital gains made, or expenditure incurred
(money spent) on domestic and imported articles.

Since many people object to paying taxes, taxation involves compulsion. The taxpayers are
required to make certain payments, regardless of their individual wishes or desires in the matter.
Because of this compulsion, the collection of taxes may have very significant effects upon the
behavior of individuals and the functioning of the economy, which must be taken into
consideration in selection of taxes if the tax structure is not to interfere with the attainment of the
economic goals of society. Furthermore, if the goals of society are to be realized, the burden of
the taxes must be distributed among various persons in a manner consistent with these goals.

No tax is ideal, but taxes are inevitable if the government is to obtain revenue to pay for its
expenditure. The government tries to satisfy most taxpayers by ensuring that taxes are fair and
reasonable.

The major objective of taxation is to raise revenues. But other objectives are also important in
the design of a tax system. The principle of taxation can be chosen only in terms of the goals
which are accepted as the appropriate objectives of the economic system.

I. Evaluating learning

Please see the attached worksheet (page 9)

Reference: DepEd Order No. 42, s. 2016 (Policy Guidelines on Daily Lesson Preparation for the K to 12 Basic Educ. Program)

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 FUNDAMENTALS OF ACCOUNTANCY, BUSINESS, AND MANAGEMENT 2 – SECOND QUARTER

WORKSHEET

4 TAXATION pt. 1
Name__________________________________ Date _______________
Grade and Section________________________ Score_______________
WRITTEN WORK
I. IDENTIFICATION. Identify the following and write the correct answer on the blank provided
before the number.

_______________1. It is the power of the state to take private property for public use upon
payment of just compensation.
_______________2. It means that the law must be capable of convenient, just and effective
administration.
_______________3. It means that the tax imposed must be proportionate to taxpayer’s ability
to pay the same.
_______________4. It means sufficiency of source or revenue to meet expenditures of
government of regardless of business conditions.
_______________5. It is the process of determining the persons, or property to be taxed, the
sums or sums to be raised, the rate thereof, the time and manner of
levying, receiving and collecting taxes.
_______________6. The power of the state to enact laws to promote public health, public
morals, public safety and the general welfare of the people.
_______________7. Means that all properties or other taxable subjects belonging to the same
class be taxed at the same rate or measure.
_______________8. It means taxing twice by the same authority, for the same purpose, in the
same purpose, in the same year, some of the property in a given territory
in which the tax is laid without taxing all of them a second time.
_______________9. It means place of taxation.
_______________10. Kinds of tax for the residence of the decedent upon his death.
_______________11. It is the power by which the sovereign raises revenue to defray the
necessary expenses of the government.
_______________12. It means that the apportionment of the tax burden among the taxpayers
be just or equitable taking into account the taxpayer’s ability to pay the
burden.
_______________13. The power of taxation is comprehensive, plenary, unlimited and
supreme. This power is however subject to inherent and constitutional
limitations.

II. ESSAY. Answer the following.

1. Differentiate income taxation and business taxation.
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Prepared by: Angelica H. Paras | Teacher I

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