JUSTICE AND

FAIRNESS
State and Citizens Responsibility:
Taxation and Inclusive Growth

BERNABE, John Wendel A.

BSBA HRM 1A
 State and Citizens Responsibility: Taxation and Inclusive
Growth

To consider taxation as moral and as overall beneficial for all of the society
To know the significance of taxes from the citizens and state
To know how taxation related to justice and fairness
To know the impact of taxation to the economic growth
To know the responsibility of the citizens and state to foster inclusive growth

Rawls wrote a great deal about economic justice generally, but very little about
taxation in particular, and what he did say is puzzling. He preferred a consumption
tax to an income tax, and he suggested that such a tax could have flat rates. This is
surprising because, Rawls's broader conception of economic justice e.g., the famous
difference principle-manifests great concern for the least advantaged in society, and
a flat, consumption-based tax is quite generous to the rich, as compared to
alternatives such as a progressive income or wealth tax.
What about a consumption base? Putting flat rates together with a consumption base
is less redistributive than a flat wealth tax. But it might still be redistributive. A
consumption base can be very flexible in allocating tax burdens, and, therefore, is not
controlling in determining an overall level of redistribution in society. A progressive
consumption tax could easily be designed to impose a greater burden on the rich
compared to the poor than would an
income tax with less progressive rates. Even a flat consumption-based tax raises more
revenue from the rich than the poor because rich people can generally be counted
on to consume more total goods and services than poor people consume. Certainly,
a consumption tax would not preclude satisfaction of the difference principle in a
society in which all economic institutions were coordinated. The base question seems
even less central to Rawls's theory than the rate structure because the base is at least
as amenable as the rates to variation in distribution, depending on other institutions
and circumstances. Rawls uses the tax system as a means of achieving distributive
justice, rather than as a requirement of justice itself-the features of a tax system are
not constitutional essentials. Thus, a consumption-based tax could form part of an
integrated governmental scheme that used revenues in a redistributive manner so as
to guarantee opportunity and improve the prospects of the least well-off. If the
proceeds of taxes collected are redistributed to provide the greatest benefit to the
least well-off-through whatever mechanism, whether direct transfers, schools, health
care, or other programs that open opportunity and improve the prospects of the
poorest-then it matters little what the tax itself looks like because the spending side
of the budget corrects or adjusts the distributional consequences overall.

Taxes
Taxes are mandatory contributions levied on individuals or corporations by a
government entity whether local, regional, or national. Tax revenues finance
government activities, including public works and services such as roads and schools,
or programs such as Social Security and Medicare.
Taxes have been classified in various ways according to who pays for them, who bears
the ultimate burden of them, the extent to which the burden can be shifted, and
various other criteria. Taxes are most commonly classified as either direct or indirect
Direct taxes are primarily taxes on natural persons (e.g., individuals), and they are
typically based on the taxpayer’s ability to pay as measured by income, consumption,
or net wealth. What follows is a description of the main types of direct taxes.
Indirect taxes are levied on the production or consumption of goods and services or
on transactions, including imports and exports. Examples include general and
selective sales taxes, value-added taxes (VAT), taxes on any aspect of manufacturing
or production, taxes on legal transactions, and customs or import duties.

Taxation
Taxation is fundamental to sustainable development: it supports the basic functions
of an effective state and sets the context for economic growth. However, there is
another role for taxation that is often overlooked – as a catalyst for more
responsive and accountable governments, and for expanding state capacity.
Why Taxation from Citizen and State matter?
In my opinion, Taxation is significant to foster economic growth and development
governments need sustainable sources of funding for social programs and public
investments. Programs providing health, education, infrastructure, and other services
are important to achieve the common goal of a prosperous, functional, and orderly
society and they require that governments raise revenues. Furthermore, Taxation not
only pays for public goods and services; it is also a key ingredient in the social
contract between citizens and the economy.

How Taxation Improve Governance?

One of the ways in which taxation can improve governance is by developing the state
apparatus. Improvements in tax administration can lead to broader improvements in
state capacity by means of administrative innovations that can spread through the
civil service; pressure for improvements in other agencies; an enhanced government
presence in remote areas; and by providing data and information essential to other
government activities.

The taxes from individuals and organizations are very significant for the growth of
the country. Paying taxes are crucial because governments collect this money and use
it to finance social projects. Without taxes, government contributions to the health
sector would be impossible. Taxes go to funding health services such as social
healthcare, medical research, social security for us to be safe and secured.
Us Students are also beneficiary of taxes for the educational purposes, like some the
government department like CHED gives a financial support to those students who
needed the most. The money from that department that supports the financial needs
of the student came from the Citizens and Organizations taxes so it is important for
us student to know the importance of paying taxes to our government so that when
we become workers who are already paying taxes, we can understand and we’re
aware about the purpose and use of taxation to everyone.
 :
National Tax Law

I. 1987 Constitution

The 1987 Philippine Constitution sets limitations on the exercise of the power to tax.

The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation. (Article VI, Section 28,
paragraph 1)

All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. If the
purpose for which a special fund was created has been fulfilled or abandoned, the balance, if any, shall be transferred to the general funds of
the Government. (Article VI, Section 29, paragraph 3)

The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restriction as it may
impose, tariff rates, import and export quotas, tonnage and wharfage dues, and other duties or imposts within the framework of the national
development program of the Government (Article VI, Section 28, paragraph 2) The President shall have the power to veto any particular item
or items in an appropriation, revenue or tariff bill, but the veto shall not affect the item or items to which he does not object. (Article VI,
Section 27, second paragraph)

The Supreme Court shall have the power to review, revise, reverse, modify or affirm on appeal or certiorari, as the law or the Rules of Court
may provide, final judgments and orders of lower courts in x x x all cases involving the legality of any tax, impost, assessment, or toll or any
penalty imposed in relation thereto. (Article VIII, Section 5, paragraph)

Tax exemptions are limited to those granted by law. However, no law granting any tax exemption shall be passed without the concurrence
of a majority of all the members of the Congress. (Article VI, Section 28, par. 4). The Constitution expressly grants tax exemption on
certain entities/institutions such as (1) charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, and
nonprofit cemeteries and all lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational
purposes (Article VI, Section 28, paragraph 3); (2) non-stock non-profit educational institutions used actually, directly and exclusively for
educational purposes. (Article XVI, Section 4(3))

In addition to national taxes, the Constitution provides for local government taxation. (Article X, Section 5) (Article X, Section 6)
Parenthetically, the Local Government Code provides that all local government units are granted general tax powers, as well as other
revenue-raising powers like the imposition of service fees and charges, in addition to those specifically granted to each of the local
government units. But no such taxes, fees and charges shall be imposed without a public hearing having been held prior to the enactment
of the ordinance. The levy must not be unjust excessive, oppressive, confiscatory or contrary to a declared national economic policy
(Section 186 and 187) Further, there are common limitations to the grant of the power to tax to the local government, such that taxes like
income tax, documentary stamp tax, etc. cannot be imposed by the local government.

II. Laws
The basic source of Philippine tax law is the National Internal Revenue Law, which codifies all tax provisions, the latest of which is embodied
in Republic Act No. 8424 (“The Tax Reform Act of 1997”). It amended previous national internal revenue codes, which was approved on
December 11, 1997. A copy of the Tax Reform Act of 1997, which took effect on January 1, 1998, can be found here.

Local taxation is treated separately in this Guide. There are, however, special laws that separately provide special tax treatment in certain
situations. (See attached matrix on special laws)
 III. Treaties
The Philippines has entered into several tax treaties for the avoidance of double taxation and prevention of fiscal evasion with respect to
income taxes. At present, there are 31 Philippine Tax Treaties in force. Copies are available at the BIR Library and the International Tax
Affairs Division of the BIR, which is under the Deputy Commissioner for Legal and Inspection Group.

The Philippine Treaty Series, edited and annotated by Haydee Yorac and published by Law Publishing House, University of the Philippines,
is available in seven (7) volumes, covering the years 1944 to 1978 . The Philippine Treaty Index, by Benjamin Domingo, covers the years
1978 to 1982. A copy of the Philippine Treaty Index is available in the Department of Foreign Affairs (DFA) Library. These publications
contain treaties entered into by the Philippines. Tax privileges and exemptions granted under treaties to which the Philippines is a signatory
are recognized under Philippine tax law. Copies of treaties entered into by the Philippines with other countries and/or international
organizations, from 1983 up to the present, are available at the DFA Library.

IV. Administrative Material

The Secretary of Finance, upon the recommendation of the Commissioner, promulgates needful rules and regulations for the effective
enforcement of the provisions of the Tax Code (Section 244, Tax Code of 1997). The Commissioner of Internal Revenue, however, has the
exclusive and original power to interpret the provisions of the Tax Code, but subject to review by the Secretary of Finance.

Administrative issuances which may be relied upon in interpreting the provisions of the Tax Code, which are signed by the Secretary of
Finance, or the Commissioner of Internal Revenue, or his duly authorized representative, come in the form of Revenue Regulations, Revenue
Memorandum Orders, Revenue Memorandum Rulings, Revenue Memorandum Circulars, Revenue Memorandum Rulings, and BIR Rulings.

Revenue Regulations (RRs) are issuances signed by the Secretary of Finance, upon recommendation of the Commissioner of Internal
Revenue, that specify, prescribe or define rules and regulations for the effective enforcement of the provisions of the National Internal
Revenue Code (NIRC) and related statutes.

Revenue Memorandum Orders (RMOs) are issuances that provide directives or instructions; prescribe guidelines; and outline processes,
operations, activities, workflows, methods and procedures necessary in the implementation of stated policies, goals, objectives, plans and
programs of the Bureau in all areas of operations, except auditing.

Revenue Memorandum Rulings (RMRs) are rulings, opinions and interpretations of the Commissioner of Internal Revenue with respect to the
provisions of the Tax Code and other tax laws, as applied to a specific set of facts, with or without established precedents, and which the
Commissioner may issue from time to time for the purpose of providing taxpayers guidance on the tax consequences in specific situations.
BIR Rulings, therefore, cannot contravene duly issued RMRs; otherwise, the Rulings are null and void ab initio.

Revenue Memorandum Circular (RMCs) are issuances that publish pertinent and applicable portions, as well as amplifications, of laws, rules,
regulations and precedents issued by the BIR and other agencies/offices.

BIR Rulings are the official position of the Bureau to queries raised by taxpayers and other stakeholders relative to clarification and
interpretation of tax laws.

Revenue Regulations, Revenue Memorandum Orders, Revenue Memorandum Rulings, Revenue Memorandum Circulars, Revenue
Memorandum Rulings, and BIR Rulings are found here.

V. Case Law
In the Philippines, Supreme Court decisions form part of the law of the land. As such, decisions by the Supreme Court (sc.judiciary.gov.ph)
in the exercise of its power to review, revise, reverse, modify or affirm on appeal or certiorari, as the law or the Rules of Court may provide,
final judgments and orders of lower courts cases involving the legality of any tax, impost, assessment, or toll or any penalty imposed in
relation thereto are adhered to and recognized as binding interpretations of Philippine tax law. Court of Appeals and Court of Tax Appeals
decisions which have become final and executory are also recognized interpretations of Philippine tax law.

VI. Treatises and other books

There are no Philippine treatises exclusively devoted to Philippine Tax law but various Philippine authors have come up with annotated
versions of the Tax Code. These books can be purchased from Rex Bookstore and Central Law Publishing, Inc.

VII. Periodicals
Periodicals on Philippine tax law are the:
(1) Philippine Revenue Service (copies available in the BIR Library), published by the BIR from 1969-1980;

(2) Philippine Revenue Journal (copies available in the BIR Library) which was both published by the Bureau of Internal Revenue from 1969
to 2000; and

(3) the Tax Monthly, published by the National Tax Research Center (NTRC) (copies available in the BIR Library and the NTRC).

VIII. Local Government Tax Law

Local government taxation in the Philippines is based on the constitutional grant of the power to tax to the local governments.

Local taxes may be imposed, as the Constitution grants, to each local government unit, the power to create its own sources of revenues and
to levy taxes, fees, and charges which shall accrue to the local governments (Article X, Section 5). With respect to national taxes, local
Government units shall have a just share, as determined by law, in the national taxes which shall be automatically released to them (Article
X, Section 6).

However, certain taxes, such as the following, may not be imposed by local government units: (Section 133, Local Government Code and
Tax Law and Jurisprudence by Vitug & Acosta, copyright 2000)

(1) Income tax, except when levied on banks and other financial institutions;

(2) Documentary stamp tax;

(3) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis causa, except as otherwise provided in the Local Government
Code (Code) (except taxes levied on the transfer of real property ownership under Section 135, and Section 151 of the Code);

(4) Customs duties, registration fees of vessels (except license fees imposed under Section 149, and Section 151 of the Code), wharfage
on wharves, tonnage dues and all other kinds of customs fees, charges and dues except wharfage on wharves constructed and maintained
by the local government unit concerned;

(5) Taxes, fees, charges and other impositions upon goods carried into or out of, or passing through, the territorial jurisdictions of local
governments in the guise of charges for wharfage, tolls for bridges or otherwise, or other taxes in any form whatever upon such goods or
merchandise;

(6) Taxes, fees or charges on agricultural and aquatic products when sold by marginal farmers or fishermen;

(7) Taxes on business enterprises certified by the Board of Investments as pioneer or non-pioneer for a period of six and four years,
respectively, from the date of registration;

(8) Excise taxes on articles enumerated under the National Internal Revenue Code and taxes, fees, or charges on petroleum products, but
not a tax on the business of importing, manufacturing or producing said products (Patron vs. Pililla, 198 SCRA 82);

(9) Percentage tax or value-added tax on sales, barters or exchanges of goods or services or similar transactions thereon (but not fixed
graduated taxes on gross sales or on volume of production);

(10) Taxes on the gross receipts of transportation contractors and persons engaged in the transportation of passengers or freight by hire
and common carriers by air, land or water except as provided by the Code;

(11) Taxes on premiums paid for reinsurance or retrocession;

(12) Taxes, fees or charges for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving
thereof, except tricycles;

(13) Taxes, fees, or other charges on Philippine products actually exported except as provided by the Code (the prohibition applies to any
local export tax, fee, or levy on Philippine export products but not to any local tax, fee, or levy that may be imposed on the business of
exporting said products);

(14) Taxes, fees or charges on duly organized and registered Countryside and Barangay Business Enterprises (R.A. No. 6810) and on
cooperatives (R.A. No. 6938); and

(15) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units (Section
133, LGC)
The Local Government Code (www.comelec.gov.ph) or (www.dilg.gov.ph/) contains provisions on the scope and limitation on the exercise of
local government taxing power.

IX. National Tax Research Center (NTRC)

Constituted under Presidential Decree 74, the NTRC is mandated to conduct continuing research in taxation to restructure the tax system
and raise the level of tax consciousness among the Filipinos, to achieve a faster rate of economic growth and to bring about a more
equitable distribution of wealth and income. Specifically, the NTRC performs the following functions:

1. Undertake comprehensive studies on the need for additional revenue for accelerated national development and the sources from which
this might most equitably be derived;

2. Re-examine the existing tax system and tax policy structure;

3. Conduct researches on taxation for the purpose of improving the tax system and tax policy;

4. Pass upon all tax measures and revenue proposal;

5. Recommend of such reforms and revisions as may be necessary to improve revenue collection and to formulate sound tax policy and a
more efficient tax structure.