PRINCIPLES OF

TAXATION (Part 3)
Objects of Taxation
Objects of Taxation
Objects of Taxation - refer to the subject to which taxes are imposed.

A. Persons
a) natural person – refers to individual taxpayers,
b) juridical person – includes, corporations, partnerships, and any
associations
Objects of Taxation
B. Properties
a) real properties – immovable properties, such as land, or house and
lot
b) personal properties – includes movable properties such as car and
other personal belongings,
1) tangible and
2) intangible
Objects of Taxation

C. Excise objects
a) transaction – act of conducting activities related to any business or
profession,
b) privilege – a benefit derived through gratuitous transfer by fact of death
or donation
c) right – a power, faculty or demand inherent in one person and incidental
to another,
d) interest – an advantage accruing from anything
Situs of Taxation
Situs of Taxation
- Refers to the place, of taxation, or the state or political unit which has
jurisdiction to impose tax over its inhabitants.

Protection is the basic consideration that justifies tax situs.

Factors that determine situs of taxation:
1. Nature, kind or classification of the tax being imposed
2. Subject matter of the tax (person, property, rights or activity)
3. Source of the income being taxed
4. Place of the excise, privilege, business or occupation being taxed
5. Citizenship of the taxpayer
6. Residence of the taxpayer
Kinds of Double Taxation
1. Direct Double Taxation
– Objectionable and prohibited because it violates the constitutional
provision on uniformity and equality. It means:
• Taxing twice
• Within the same jurisdiction
• For the same purpose
• In the same year or taxing period
• Same kind or character of tax

2. Indirect Double Taxation

– Not legally objectionable
– It extends to all cases in which there is a burden of two or more pecuniary
imposition but imposed by different taxing authorities.
Classification of Taxes
Classification of Taxes
As to who bears the burden
a. Direct – non transferable, falls directly on the person paying the
tax.
– imposed on persons obliged to pay the same and this
burden cannot be shifted or passed on to another.
– demanded from every person who, as intended, should pay
the tax which he cannot shift to another.

b. Indirect – transferable
– payment is demanded from a person who is allowed to
transfer the burden of taxation to another.
Classification of Taxes
As to determination of amount
a. Specific – this is a fixed amount based on volume, weight or quantity
of goods as measured by tools, instruments or standards

b. Ad Valorem – this is based on the value of the property subject to tax.

Classification of Taxes
As to scope or authority collecting the tax
a. National – taxes imposed by the national government
1. estate and donor’s tax
2. income tax
3. VAT
4. excise tax
5. customs duties
6. documentary stamp tax

b. Local or Municipal – taxes collected by the municipal government

1. community tax
2. municipal license tax
3. professional tax
4. real estate tax
Classification of Taxes
As to rate or graduation
a. Proportional or flat rate – tax is based on a fixed percentage of the
amount of the property, receipt or other basis to be taxed
b. Progressive or graduated rate – tax rate increases as the tax base or
bracket increases
c. Regressive – tax rate decreases as the tax base or bracket increases.
d. Digressive – fixed rate is imposed on a certain amount but diminishes
gradually on sums below it
e. Mixed tax – system that uses all or a combination of the different taxes
based on rates
Other Charges
Other Charges / Fees
1. Penalty – sanction imposed as a punishment for violations of law or acts
deemed injurious.

2. Revenue – refers to all funds or income derived by the government

whether from tax or from other sources.

3. Debt – is an obligation to pay or render service for a definite future period

of time based on contract.

4. Toll – is a compensation for the use of somebody else’s property

determined by the cost of the improvement.
Other Charges / Fees
5. License fee – is a contribution enforced by the government primarily to
restrain and regulate business or occupation.

6. Custom duties – are imposition on imported goods brought into the

country to protect local industry.

7. Subsidy – is a monetary aid directly granted or given by the government

to an individual or private commercial enterprises deemed beneficial to
the public.
Sources of Tax Laws
Sources of Tax Laws
1. Constitution
2. Tax Treaties and Conventions with Foreign Countries
3. The Tax Code (RA No. 8424 – National Internal Revenue Code; as
amended; i.e, RA 10963 – TRAIN Law)
4. Tariff and Custom Code
5. Portions of the Local Government Code
6. Statutes and laws like RA1125 (an Act Creating the Court of Tax
Appeals), RA 7716 (e-VAT Law)
7. Presidential Decrees
8. Executive Orders
9. Court Decisions
Sources of Tax Laws
10. Revenue Regulations promulgated by the Department of Finance
11. Administrative issuances of the BIR like Revenue Memorandum Circulars,
and those of the Bureau of Customs like Customs Management Orders.
12. BIR Rulings
13. Local Tax Ordinances