Basic Principles of

TAXATION
JBCG
INHERENT POWERS OF THE STATE
•Taxation
•Power of Eminent Domain
•Police Power
TAXATION
•Inherent in the state.
•Independently of the constitution.
•Constitute the three methods by which the state
interferes with private rights and properties.
•Legislative in nature and character.
•Each presupposes an equivalent compensation.
TAXATION
•The of laying a tax, i.e., the process or means by
which the sovereign, through its lawmaking body,
raises income to defray the necessary expenses of
government.
PURPOSES OF TAXATION
•The principal purpose is to raise revenue for
governmental needs. Revenue purpose.
•The secondary purposes of taxation are:
• Compensatory purposes
• Sumptuary or regulatory purpose
THEORY AND BASIS OF
TAXATION
•The power of taxation proceeds upon the theory that
the existence of the government is a necessity, that it
cannot continue without means to pay its expenses
and that for this means it has a right to compel all its
citizens and property within its limits to contribute.
•The basis is the reciprocal duties of protection and
support between the State and its inhabitants.
BASIC PRINCIPLES OF A
SOUND TAX SYSTEM
•Fiscal Adequacy
•Equality or Theoretical Justice
•Administrative Feasibility
 INHERENT AND
CONSTITUTIONAL LIMITATIONS
•Inherent Limitations are those which restrict the
power although they are not embodied in the
constitution.
•Constitutional Limitations are those which are
expressly found in the constitution or implied from its
provisions.
INHERENT LIMITATIONS
•PUBLIC PURPOSE
•INTERNATIONAL COMITY
•TERRITORIAL JURISDICTION
•DOUBLE TAXATION
•EXEMPTION FROM TAXATION OF GOVERNMENT
ENTITIES
•NON-DELEGATION OF THE POWER TO TAX
PUBLIC PURPOSE
•This is the purpose affecting the inhabitants of the
State as a community and not merely as individuals.
•Test of rightful taxation:
• For the support of the government.
• For any of the recognized objects of government.
• To promote the welfare of the community.

INHERENT LIMITATIONS
INTERNATIONAL COMITY
•The property of a foreign state or government may
not be taxed by another.
•International comity means courteous and friendly
agreement and interaction between nations.

INHERENT LIMITATIONS
 GROUNDS OF
INTERNATIONAL COMITY
•Sovereign equality among states.
•Usage among states.
•Foreign government may not be sued without its
consent.

INHERENT LIMITATIONS
TERRITORIAL JURISDICTION
•The tax laws of a State are enforceable only within its
territorial limits.
•Situs of Taxation:
• Literally means place of taxation.
• The situs is in the state which has jurisdiction or which
exercise dominion over the subject in question.

INHERENT LIMITATIONS
INHERENT LIMITATIONS
SUBJECT SITUS
Poll Tax on Persons Residence of the person
Real Property Tax State where the property is located whether the owner
is resident or not
Tax on tangible personal State where it is physically located although the owner
properties resides in another jurisdiction
Tax on intangible personal Domicile of the owner
property
Income Tax State where the taxpayer is a resident or citizen
Business, Occupation, and Place where the business is done, or the occupation is
Transaction Tax engaged in, or the transaction took place
Tax on gratuitous transfer State where the transferor is/was a citizen or resident,
of property or where the property is located
DOUBLE TAXATION
•This means taxing a person, property, or right twice
within the same year by the taxing authority.
•There is no double taxation in the following:
• A tax on mortgage as personal property when the
mortgaged property is also taxed at its full value as real
estate.
• A tax upon the same property imposed by two differing
states.

INHERENT LIMITATIONS
 EXEMPTION FROM
TAXATION OF
GOVERNMENT AGENCIES
•Government agencies performing
governmental functions are exempt from
tax unless expressly taxed while those
performing proprietary functions are
subject to tax unless expressly exempted.

INHERENT LIMITATIONS
NON-DELEGATION OF THE
POWER TO TAX
•The power of taxation being purely legislative, Congress
cannot delegate the power to others.
•The limitation arises from the doctrine of separation of
powers among the three branches of the government.

INHERENT LIMITATIONS
CONSTITUTIONAL LIMITATIONS
•Due Process of Law
•Equal Protection of the Laws
•Rule of Uniformity and Equity in Taxation
DUE PROCESS OF LAW

CONSTITUTIONAL LIMITATIONS
DUE PROCESS OF LAW
•Procedural due process in judicial proceedings requires
“opportunity to be heard before judgment is rendered
affecting one’s person or property.”
•Due process in taxation required:
• Tax must be for public purpose;
• Imposed within the territorial jurisdiction;
• No arbitrariness or oppression in assessment or collection.

CONSTITUTIONAL LIMITATIONS
EQUAL PROTECTION OF THE LAWS
•All persons subject to legislation shall be treated alike
under circumstances and conditions both in the privileges
conferred and liabilities imposed.

CONSTITUTIONAL LIMITATIONS
RULE OF UNIFORMITY AND
EQUITY IN TAXATION
•All taxable articles or properties of the same class shall
be taxed at the same rate.
•Progressive system of taxation means that tax shall place
emphasis on direct rather than indirect taxation, with
ability to pay as the principal criterion.

CONSTITUTIONAL LIMITATIONS
COMPUTE FOR INDIVIDUAL INCOME
TAX DUE (2015, 2020, and 2023):
•Gross Monthly Salary: Php64,360
•Dependents: 1
COMPUTE FOR INDIVIDUAL INCOME
TAX DUE (2015, 2020, and 2023):
•Gross Monthly Salary: Php8,500
•Dependents: None
BASED on the latest record of the Philippine
Statistics Authority, a total of 1,080,810 business
enterprises operate in our country. Of these, 99.58
percent are micro, small and medium enterprises
(MSMEs). MSMEs also hold 63 percent of the
country's workforce.
THANK YOU!