Tax Philosophies and Theories (Group 1)

“TAXATION AND REVENUE
ADMINISTRATION”
Tax Philosophies and Theories
Presented by: Group 1

EDM 211 INSTITUTIONAL FISCAL MANAGEMENT
OVERVIEW
 What is taxation?
 History of taxation
 Purpose of taxation
 Essential Characteristics of Taxation
 The FOUR R’s of Taxation
 Theories of TAXATION
 Taxation of Educational Institutions in the
Philippines
 Revenue Administration
What is
TAXATION?
Taxation - is the act of laying a tax,

the process or means by which the
sovereign, through its law-making
body, raises income to defray the
necessary expenses of government.
of TAXATION
The primary purpose of taxation on the part of

the government is to provide funds or property
with which to promote the general welfare and
protection of its citizen.
It is an enforced contribution

It is generally payable in money
It is proportionate in character
It is levied on person or property
TAX It is levied by the state which
has jurisdiction over the person
or property
It is levied by the lawmaking body
of the state
It is levied for public purposes
Representation
The taxes raise money to spend on armies, roads,
schools, and hospitals, and on more indirect
government functions like market regulation or legal
systems.
Redistribution
This refers to the transferring wealth from the
richer sections of society to poorer sections.
Regulation/Repricing
Taxes are levied to address externalities; for example,
tobacco is taxed to discourage smoking, and a carbon
tax discourage use of carbon-based fuels.
Representation
As what goes with the slogan “no taxation without
representation”, it implies that: rulers tax citizens,
and citizens demand accountability from their rulers
as the other part of this bargain.
THEORIES OF TAXATION
 LIFEBLOOD THEORY
 BENEFIT RECEIVED THEORY
 ABILITY TO PAY THEORY
 COST OF SERVICE THEORY

LIFEBLOOD THEORY
The existence of government is a necessity; it cannot exist nor

endure without the means to pay its expenses; and for those
means, the government has the right to compel all its citizens
and property within its limits to contribute in the form of
taxes.
BENEFIT RECEIVED THEORY
presupposes that the more benefit one receives from the

government, the more taxes he/she should pay.
Example:
 Public college tuition
 National Park administration fees
 Gasoline
 Security and border as there are
police officers securing the safety of
the public
ABILITY TO PAY THEORY
• presupposes that taxation should also consider the

taxpayer's ability to pay.
• Taxpayers should be required to contribute based on their
relative capacity to sacrifice for the support of the
government.
Example:
 Individual income tax
COST OF SERVICE THEORY
It suggests that the cost incurred by the government in

providing public goods to satisfy social wants should be
regarded as the basis of taxation.
Example:
 The Roads (NLEX & SLEX)
TAXATION OF EDUCATIONAL
INSTITUTIONS IN THE PHILIPPINES
A. Income Taxation
1. Proprietary educational institution
2. Non-stock, non-profit educational institution
3. Government educational institution
B.Value Added Taxation
C. Real Property Taxation
A. INCOME TAXATION
For Income tax purposes, educational institutions are

classified as follows:
 Proprietary educational institution
 Non-stock, non-profit educational institution
 Government educational institution
The Constitution of the Philippines provide for tax exemptions

and privileges as follows:
1. Proprietary Educational Institution
As a rule, proprietary educational institution is subject to a special

income tax rate of ten percent (10%) on their taxable income except
on certain passive incomes. Notably, this is much lower than the
regular corporate income tax rate of 30% of taxable net income.
However, they must dedicate their operations to providing
educational services because if they do not, then, they will cease to
enjoy the benefit of 10%.
2. Non-stock and Non-profit Educational Institution

To avail of the income tax exemption, the authorities – Bureau of

Internal Revenue (BIR) examines carefully its charter and operations as
“non-stock” and “non-profit”. Non-stock relates to the characteristics
of the registered entity with the Securities and Exchange. Commission
(SEC) with the following characteristics:
1. Membership based and not based on shares of stock;
2. Governed by Board of Trustees and not Board of Directors;
3. Does not declare and issue dividends;

To avail of the income tax exemption, the authorities – Bureau of

Internal Revenue (BIR) examines carefully its charter and operations as
“non-stock” and “non-profit”. Non-stock relates to the characteristics
of the registered entity with the Securities and Exchange. Commission
(SEC) with the following characteristics:
Continuation…
4. In dissolution, assets normally go to another non

stock with similar import purpose of creation;
5. Administrative expenses does not exceed 30% Non-profit on

the other hand relates to the manner of its operation.
3. Government Educational Institution

B. VALUE ADDED TAX

C. REAL PROPERTY TAX

REVENUE
ADMINISTRATION
GOVERNMENT REVENUES
- Money received by a
government.
a. Taxes
b. Non-taxable resources
A. Income Tax
 Individual – 5% to 32%
 Corporate – 30%
 For income tax purposes educational

institutions are classified as:
 Proprietary educational institutions
 Non-stock, non-profit educational
institutions
 Government educational institutions
B. Business Tax
 Value added tax (VAT)

 Percentage tax
 Excise tax
NON TAXABLE SOURCES

- Rents, concessions, and fines collected
(parking fines, court costs on criminal
offenders)
- Fees for the granting and issuance of
permits and license.
Examples:
 Vehicle registration plate permits, building
fees, driver’s license, fees for visas and
passports, donations and voluntary
contributions to the state.
A. FUNDING OF PUBLIC SCHOOL

B. FUNDING OF PRIVATE SCHOOLS

The following are the links used:
https://taxacctgcenter.ph/taxation-of-educational-institutions-in-the-philippines/
https://lexclassrooms.com/principles-of-taxation/
https://www.slideshare.net/ai0429/revenue-administration
https://www.slideshare.net/JRLopezGonzales/taxation-101-basic-rules-and-principles-in-ph
ilippine-taxation-by-jr-lopez-gonzales-for-msu-iit-political-science-seminar?next_slideshow=
2
https://www.slideshare.net/gar_dev/concepts-of-taxation
https://www.slideshare.net/JRLopezGonzales/taxation-101-basic-rules-and-principles-in-ph
ilippine-taxation-by-jr-lopez-gonzales-for-msu-iit-political-science-seminar
https://www.slideshare.net/cheryldemafiles2731/my-presentation-taxation
https://www.divorcenet.com/states/new_york/nyfaq04
https://www.slideshare.net/chrstnbby/taxation-45943843

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“TAXATION AND REVENUE

Tax Philosophies and Theories

Presented by: Group 1

Taxation - is the act of laying a tax,

The primary purpose of taxation on the part of

It is an enforced contribution

 BENEFIT RECEIVED THEORY

 ABILITY TO PAY THEORY

 COST OF SERVICE THEORY

The existence of government is a necessity; it cannot exist nor

BENEFIT RECEIVED THEORY

presupposes that the more benefit one receives from the

ABILITY TO PAY THEORY

• presupposes that taxation should also consider the

COST OF SERVICE THEORY

It suggests that the cost incurred by the government in

For Income tax purposes, educational institutions are

The Constitution of the Philippines provide for tax exemptions

1. Proprietary Educational Institution

As a rule, proprietary educational institution is subject to a special

2. Non-stock and Non-profit Educational Institution

To avail of the income tax exemption, the authorities – Bureau of

1. Membership based and not based on shares of stock;

2. Governed by Board of Trustees and not Board of Directors;

3. Does not declare and issue dividends;

To avail of the income tax exemption, the authorities – Bureau of

4. In dissolution, assets normally go to another non

5. Administrative expenses does not exceed 30% Non-profit on

3. Government Educational Institution

B. VALUE ADDED TAX

C. REAL PROPERTY TAX

 For income tax purposes educational

 Value added tax (VAT)

NON TAXABLE SOURCES

A. FUNDING OF PUBLIC SCHOOL

B. FUNDING OF PRIVATE SCHOOLS

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