Taxation : terms, it is the act of levying a tax to
Unlimited – In the absence of limitations
apportion the cost of government among those
who, in some measure, are privileged to enjoy
its benefits and must therefore bear its
burdens.
The three (3) Inherent Powers of the State
1.Police Power.
2. Power of Taxation.
3. Power of Eminent Domain.
PURPOSES OF TAXATION
Primary: Revenue or Fiscal Purpose
is to provide funds or property with which to
promote the general welfare and the
protection of its citizens and to enable it to
finance its multifarious activities.
Secondary: Regulatory Purpose (or
Sumptuary/Compensatory)
is to raise revenue for the support of the
government, taxation is often employed as a
devise for regulation or control
(implementation of State's police power) by
means of which certain effects or conditions
envisioned by the government
THEORY and BASIS OF TAXATION
-Theory (Authority): LIFEBLOOD THEORY or
NECESSITY THEORY
-BASIS of Taxation: BENEFITS RECEIVED or
RECIPROCITY THEORY
SCOPE of the Power of Taxation
a. Comprehensive – as it covers persons,
businesses, activities, professions, rights
and privileges
b.
prescribed by law or the constitution, the
power to tax is unlimited and comprehensive.
Its force is so searching to the extent that the
courts scarcely venture to declare that it is
subject to any restrictions.
c. Plenary – as it is complete; BIR may avail of
certain remedies to ensure collection of taxes.
d. Supreme – in so far as the selection of the
subject of taxation.
NATURE/CHARACTERISTICS of the State's
Power to Tax
1. It is inherent in sovereignty.
2. 2. It is legislative in character.
3. 3. Exemption of government entities,
agencies and instrumentalities.
4. 4. International comity (Polite and
friendly agreement[sl among nations)
5. 5. Limitation of territorial jurisdiction
ELEMENTS OF SOUND TAX SYSTEM
a. Fiscal Adequacy
b. Theoretical Justice or Equity ("ability to
pay principle")
c. Administrative Feasibility
LIMITATIONS ON THE STATE'S POWER TO TAX
1. Inherent Limitations
2. Constitutional Limitations
SITUS OF TAXATION
Literally, situs of taxation means "place" of
taxation. It is the state or political unit which
has jurisdiction to impose a particular tax.
FACTORS TO CONSIDER IN DETERMINING THE For regulation
SITUS OF TAXATION:
Exercise of police power
a. Subject matter (person, property, or activity)
TAX
b. Nature of the tax
For revenue
c. Citizenship
Exercise of taxing power
d. Residence of the taxpayer
Generally no limit expenses of regulation of an
e. Source of income Imposed also on persons or property officer

f. Place of excise, business or occupation being TAX versus DEBT

taxed
Debt
TAX versus TOLL
Based on contract
TOLL
May be paid in kind
-Demand of proprietorship
TAX
-Paid for the use of another’s property
Based on law
TAX
Generally payable in mone
-Paid for the support of the government
yMEANS OF AVOIDING OR MINIMIZING THE
-Demand soverienty BURDEN OF TAXATION

TAX versus PENALTY 1. Shifting is the transfer of the burden of

a tax by the original payer or the one on
PENALTY TAX
whom the tax was assessed or imposed
--Designed to regulate conduct to someone else.
2. . Transformation
May be imposed by the government or private An escape from taxation where the
individuals or entities producer or manufacturer pays the tax
TAX andnendeavor to recoup himself by
improving his process of production
Primarily aimed by raing revenue thereby turningnout his units of
TAX versus REVENUE products at a lower cost
3. Evasion
REVENUE Tax evasion is the use by the taxpayer
of illegal or fraudulent means to defeat
Amount collected
or lessen the payment of a tax.
TAX 4. Tax Avoidance

Amount imposed

TAX versus PERMIT or LICENSE FEE 5. Exemption

PERMIT OR LICENSE FEE