Topics

🞂 1. General Principles and Concepts of Taxation

🞂 2. Tax Administration
🞂 3. Concept of Income
🞂 4. Gross Income
🞂 5. Exclusion from Gross Income
🞂 6. Fringe Benefits
🞂 7. Dealings in Property
🞂 8. Deductions from Gross Income
🞂 9. Losses
🞂 10. Income Tax Patterns
🞂 11. Tax On Sole And Corporation
GENERAL PRINCIPLES AND
CONCEPTS OF TAXATION
Inherent Powers of the State
🞂 Police power - to protect citizens and provide for
safety and welfare of society

🞂 Eminent Domain Power – the power to take private

property (with just compensation) for public use.

🞂 Power of Taxation – to enforce contributions to support

the government, and other inherent powers of the state.
 What is Taxation?
Ia power by which an independent state,
through its law-making body, raises and
accumulates revenue from its inhabitants to
pay the necessary expenses of the government.
…What is Taxation?
Iis a mode by which government make exactions for
revenue in order to support their existence and carry out
their legitimate objectives (Tax Law and Jurisprudence by
Justice Vitug, 2000).

It is the most pervasive and the strongest of all the powers

of the government. Taxes are the lifeblood of the
government, without which, it cannot subsist.
Nature of taxation power
🞂 Inherent power of sovereignty
🞂 Essentially a legislative functions
🞂 For public purposes
🞂 Territorial in operation
🞂 Tax exemptions of government
🞂 The strongest among the inherent powers of the
government
🞂 Subject constitutional inherent limitations
Distinction
Taxation Police power Eminent domain
Concept Enforce Make and To take private
contribution to implement laws property for public
raise govt funds for the general use with just
welfare compensation
Scope Plenary, General power to Take private
comprehensive make and property for public
and supreme implement laws use
Authority Exercise only by Exercise only by May be granted to
government or its government or its public service or
political political public utility
subdivision subdivision companies
 Taxation Police power Eminent domain
As purpose Money is taken to Property is taken Private property is
support the or destroyed to taken for public
government promote general use
welfare
Necessity of Tax laws cant be Can be expressly Can be expressly
delegation delegated delegated delegated
Person affected Operates on Operates on Operates on
community or a community or a particular private
class of class of property of an
individuals individuals individual
 Taxation Police power Eminent domain
Benefits Continuous Healthy economic Market value of
protection and standard of the property
organized society society expropriated
Amount of Generally no Cost of regulation, No imposition
imposition limits license, etc
Importance Inseparable for Protection, safety Common
the existence of a of society necessities of
nation community
transcend to
individual rights in
property
 Taxation Police power Eminent domain
Relationship to Subject Free from Superior to and
constitution constitutional and constitutional may override
inherent limitations constitutional
limitations impairment
provision
Limitations Constraints by Limited by the Bounded by public
constitutional and demand for public purposes and just
inherent interest and due compensation
limitations process
Basis of taxation
🞂 Based on the principle of necessity
🞂 Based on reciprocal duties
Purpose of taxation
🞂 Revenue purpose - to raise revenue by collection
funds or property for the support of the government in
promoting the general welfare and protecting its
inhabitants
🞂 Regulatory purpose –(sumptuary) to regulate
inflation, achieve economic and social stability and to
serve as key instrument for social control
🞂 Compensatory purpose – an excise tax on gasoline
consumed is imposed on vehicle owners using roads.
Objects of taxation
🞂 Persons
◦ Natural person
◦ Juridical person
🞂 Properties
◦ Real
◦ Personal
◦ Tangible or intangible
🞂 Excise objects
◦ Transaction (sell or buy)
◦ Privilege (transfer such donation/estate)
◦ Right
◦ Interest
Doctrines in taxation
🞂 Prospectivity of tax laws
🞂 Imprescriptibility of taxes
🞂 Double taxation
🞂 Escape from taxation (evasion & avoidance)
🞂 Exemption from taxation
🞂 Equitable recoupment
🞂 Set-off taxes
🞂 Compromises
🞂 Power to destroy
General rules of tax situs
Nature of tax Citizenship Residency Within Phil Outside Phil
Income tax Filipino Resident yes Yes
Filipino Nonresident yes No
Alien Resident Yes No
Alien Nonresident yes No
Characteristics of taxes
🞂 Enforced contribution
🞂 Imposed by legislative body
🞂 Proportionate in character
🞂 Payable in the form of money
🞂 Imposed for the purpose of raising revenue
🞂 Used for a public purpose
🞂 Enforced on some persons, properties or rights
🞂 Commonly required to be paid at regular intervals
🞂 Imposed by the sovereign state within its jurisdiction
What is tax law?
🞂 Body of laws which codifies all national tax laws
including income, estate, gift, excise, stamp and other
taxes.
◦ RA 8424 – The comprehensive tax reform of the Philippines
also know as National Internal Revenue Code of 1997 or Tax
code
◦ RA 9337 – Vat reform law
◦ RA 10963 - TRAIN Law, effective Jan 1, 2018.
Taxes under the administration of BIR
🞂 Income tax
🞂 Transfer taxes (estate and donor’s tax)
🞂 Business taxes (VAT, Percentage and Excise)
🞂 Documentary stamps tax (DST)
🞂 Other taxes
Sources of Phil Tax Laws
🞂 Constitution
🞂 Statutes
🞂 Executive orders
🞂 Tax treaties and conventions
🞂 Revenue regulations (Dept of Finance)
🞂 BIR revenue memorandum circulars & memorandum
orders
🞂 BIR rulings
🞂 Judicial decisions
🞂 Local tax ordinances