CHAPTER 1 – FUNDAMENTAL PRINCIPLES OF TAXATION

PREPARED BY: JAYSON M. AGONOY, CPA

DEFINITION OF TAXATION

◼ Is the process or means by which the sovereign through its law making body imposes burdens upon
subjects and objects within its jurisdiction for the purpose of raising revenues to carry out the
legitimates objects of the government.
INHERENT POWERS OF THE STATE

◼ POLICE POWER
◼ TAXATION
◼ EMINENT DOMAIN
PURPOSE OF TAXATION

◼ PRIMARY - REVENUE
◼ SECONDARY - REGULATORY
THEORY AND BASIS OF TAXATION

◼ LIFEBLOOD OR NECESSITY THEORY

◼ THE POWER OF TAXATION IS ESSENTIAL BECAUSE THE GOVERNMENT CAN
NEITHER EXIST OR ENDURE WITHOUT TAXES.
THEORY AND BASIS OF TAXATION

◼ LIFEBLOOD OR NECESSITY THEORY

◼ THE POWER OF TAXATION PROCEEDS UPON THE THEORY THAT THE
EXISTENCE OF GOVERNMENT IS NECESSITY. IT IS A NECESSARY BURDEN TO
PRESERVE THE STATES SOVEREIGNTY AND A MEANS TO GIVE THE
CITIZENRY AN ARMY TO RESIST AGRESSION, A NAVY TO DEFEND ITS
SHORES, AND A CORPS OF CIVIL SERVANT TO SERVE, PUBLIC
IMPROVEMENTS FOR THE CITIZENS TO ENJOY.
MANIFESTATION OF LIFEBLOOD THEORY

◼ RULE OF “NO ESTOPPEL AGAINST THE GOVERNMENT”

◼ COLLECTION OF TAXES CANNOT BE STOPPED BY INJUNCTION
◼ TAXES CANNOT BE SUBJECT OF COMPENSATION OR SET-OFF
◼ RIGHT TO SELECT OBJECTS OR SUBJECTS OF TAXATION
◼ A VALID TAX MAY RESULT IN THE DESTRCUTION OF THE TAXPAYERS
PROPERTY
SCOPE OF THE POWER OF TAXATION

◼ COMPREHENSIVE
◼ UNLIMITED
◼ PRENARY
◼ SUPREME
ESSENTIAL ELEMENTS OF TAX

◼ IT IS AN ENFORCED CONTRIBUTION
◼ IT IS GENERALLY PAYABLE IN MONEY
◼ IT IS PROPORTIONATE IN CHARACTER
◼ IT IS LEVIED ON PERSONS, PROPERTY, OR THE EXERCISE OF A RIGHT OR
PRIVELEGE
◼ IT IS LEVIED BY THE LAW MAKING BODY OF THE STATE.
◼ IT IS LEVIED FOR PUBLIC PURPOSE
ASPECTS OF TAXATION

◼ LEVYING OR IMPOSITION OF TAX IS A LEGISLATIVE ACT OR FUNCTION

◼ ASSESSMENT OR DETERMINATION OF THE CORRECT AMOUNT OF TAX
◼ COLLECTION OF THE TAX LEVIED.
NATURE OF THE STATE POWER OF TAXATION

◼ IT IS INHERENT IN SOVEREIGNTY
◼ IT IS LEGISLATIVE IN CHARACTER
◼ EXEMPTION OF GOVERNMENT
◼ INTERNATIONAL COMITY
◼ LIMITATIONS OF TERRITORIAL JURISDICTION
◼ STRONGEST AMONG THE INHERENT POWERS OF THE STATE.
CLASSIFICATIONS OF TAXES – AS TO SCOPE

◼ NATIONAL
◼ INCOME TAX
◼ ESTATE TAX
◼ DONOR’S TAX
◼ VAT OR PERCENTAGE TAXES
◼ LOCAL – SITUS TAX
◼ REAL ESTATE TAX
◼ BUSINESS TAX
CLASSIFICATIONS OF TAXES – AS TO SUBJECT MATTER OR
OBJECT

◼ PERSONAL, POLL OR CAPITATION

◼ PROPERTY
◼ EXCISE
CLASSIFICATIONS OF TAXES – AS TO WHO BEARS THE BURDEN

◼ DIRECT
◼ INDIRECT
CLASSIFICATIONS OF TAXES – AS TO DETERMINATION OF
AMOUNT

◼ SPECIFIC
◼ AD-VALOREM
CLASSIFICATIONS OF TAXES – AS TO PURPOSE

◼ PRIMARY, FISCAL OR REVENUE PURPOSE

◼ SECONDARY, REGULATORY
CLASSIFICATIONS OF TAXES – AS TO RATE

◼ PROPORTIONAL
◼ PROGRESSIVE OR GRADUATED
◼ REGRESSIVE
CLASSIFICATIONS OF TAXES – AS TO TAXING AUTHORITY

◼ NATIONAL
◼ LOCAL
ELEMENTS OF SOUND TAX SYSTEM

◼ FISCAL ADEQUACY
◼ THEORETICAL JUSTICE OF EQUITY
◼ ADMINISTRATIVE FEASIBILITY
LIMITATIONS ON THE STATES POWER TO TAX

◼ INHERENT LIMITATIONS
◼ CONSTITUTIONAL LIMITATIONS
◼ OTHERS
TAX DISTINGUISHED FROM TERMS

◼ TOLL – MONEY PAID FOR THE USE OF SOMETHING

◼ PENALTY – SANCTION IMPOSED IN VIOLATION OF LAW
◼ REVENUE – ALL INCOME DERIVED BY THE GOV’T
◼ SPECIAL ASSESSMENT – ENFORCED PROPORTIONAL CONTRIBUTION
◼ SUBSIDY – AID GRANTED BY THE GOV’T
◼ PERMIT OR LICENSE FEE – CHARGES IMPOSE UNDER THE POLICE POWER
◼ CUSTOMS DUTIES – IMPOSED ON EXPORTS AND IMPORTS
MEANS OF AVOIDING OR MINIMIZING TAXES

◼ SHIFTING
◼ TRANSFORMATION
◼ EVASION
◼ TAX AVOIDANCE
◼ EXEMPTION
◼ CAPITALIZATION
KINDS OF EXEMPTION

◼ AS TO BASIS
◼ CONSTITUTIONAL
◼ STATUTORY
◼ AS TO FORM
◼ EXPRESS
◼ IMPLIED
◼ AS TO EXTENT
◼ TOTAL
◼ PARTIAL
SEE YOU NEXT MEETING…

◼THANK YOU!!!