BUSINESS TAXATION

CONSUMPTION TAX

• A consumption tax is a broad category of tax that is levied on

the consumption value of goods and services.

• Examples of consumption taxes include retail sales taxes,

excise taxes, value added taxes, use taxes, taxes on gross
business receipts (also known as business transfer taxes), and
import duties.
CONSUMPTION TAX VS INCOME TAX

• A consumption tax essentially taxes people when they spend

money. And the income tax you're fundamentally taxed when you
earn money or when you get interest, dividends, capital gains, and
so on. And a consumption tax that wouldn't happen, you would be
taxed essentially when you actually spent the money at the store.
Effects of Taxation on Consumption and
Employment

• Taxation reduces the purchasing power of the people and it

reduces their consumption. The decline
in consumption leads to decrease in effective demand for the
goods and services, which in turn affects the production of these
commodities.
Value Added Tax (VAT) on Importation

• VAT is a type of sales tax which is levied on consumption on the

sale of goods, services or properties, as well as importation, in
the Philippines.

• To simplify, it means that a certain tax rate (0% to 12%) is added

up to the selling price of a goods or services sold. It is also
imposed on imported goods from abroad.
Business Tax

• Corporate income tax

• The applicable CIT rate for both resident and non-resident

corporations is 30 percent based on net taxable income.
• This is set to change with the introduction of
the Corporate Income Tax and Incentives Rationalization Act
(CITIRA) in September 2019.
Citira Law

• This Act shall be known as the "Corporate Income Tax and

Incentives Reform Act (CITIRA)." (b) Develop a more market-
responsive and globally- competitive tax and investment
incentives regime that is performance-based, targeted, time-
bound, and transparent.
Value Added Tax

• VAT is a type of sales tax which is levied on consumption on the

sale of goods, services or properties, as well as importation, in
the Philippines. To simplify, it means that a certain tax rate (0%
to 12%) is added up to the selling price of a goods or services sold.
It is also imposed on imported goods from abroad.
• A value-added tax (VAT) is a consumption tax placed on a product
whenever value is added at each stage of the supply chain, from
production to the point of sale. The amount of VAT that the user
pays is on the cost of the product, less any of the costs of
materials used in the product that have already been taxed.
Persons Liable for VAT

• Any person who, in the course of trade or business, sells, barters,

exchanges, leases goods or properties, renders services, and any
person who imports goods shall be liable to the value-added
tax (VAT) imposed in Sections 100 to 102 of the NIRC.
Percentage Tax

• As the Bureau of Internal Revenue (BIR) defines it,

Other Percentage Tax (OPT or non-VAT as commonly termed) is a
business tax imposed on persons or entities who sell or lease
goods, properties or services in the course of trade or business
whose gross annual sales or receipts
Excise Tax

• Excise Tax is a tax on the production, sale or consumption of a

commodity in a country.

• Excise taxes are most often levied upon cigarettes, alcohol,

gasoline and gambling. These are often considered superfluous or
unnecessary goods and services. To raise taxes on them is to raise
their price and to reduce the amount they are used. In this
context, excise taxes are sometimes known as "sin taxes.
Mandatory BIR Registration

• Also known as BIR Form 2303 and Certificate of

Registration (COR), this type of document gives you the legal
rights to operate your business in the Philippines. It provides you
with Tax Identification Number (TIN) and the authority to print
and issue official receipts.
Benefit Received Theory

• The benefit principle is a concept in the theory of taxation from

public finance. It bases taxes to pay for public-goods expenditures
on a politically-revealed willingness to pay for benefits received.
The principle is sometimes likened to the function of prices in
allocating private goods.
Example Benefit Received Theory

• Most of the taxes or revenue collected by government at the point

of provision of public goods or services follow benefits-received
principle of taxation. Examples include highway tolls, bridge
tolls, park tickets and train fares.
Ability to pay theory

• The ability to pay principle is a method of taxation that seeks to

tax those with greater incomes at higher rates. This form of
progressive taxation is viewed as being fair and equitable as it
imposes additional taxes on those who can afford to pay.
Hence the difference is:

• Those who benefit from good roads pay the cost of those roads.
The ability-to-pay principle of taxation stands in sharp contrast
to the benefits principle. ... It does not make any
connection between use and payment but simply states that the
individuals who are most able to bear the burden of the tax
should pay the tax.
Principles of return in taxation:

• Just pay your tax and don’t expect any direct return from it.
Life Blood Theory of Taxation

• The lifeblood theory constitutes the theory of taxation, which

provides that the existence of government is a necessity; that
government cannot continue without means to pay its expenses;
and that for these means it has a right to compel its citizens and
property within its limits to contribute
Inherent Right of a State:

• The Fundamental Powers of the State The Fundamental

Powers of the state are the police power, the. power of eminent
domain, and the power of taxation.
These powers are inherent and do not need to be expressly
conferred by the constitutional provision on the state. They are
suppose to co-exist with the state.