Income Taxation

Taxation

State power, a legislative process, and mode of government cost distribution.

As state power

An inherent power of the state to enforce a proportional contribution from its subjects for public purpose.

As a process

Process of levying taxes by the legislature of the state to enforce proportional contributions from its subjects for public purpose.

As mode of cost distribution

State allocates its costs or burden to its subjects who are benefited by its spending.

Theory of taxation

Government can't exist without a system of funding.

Basis of taxation

Mutuality of support between the people and the government.

Benefit received theory

The more benefit one received, the more taxes he should pay.

Ability to pay theory.

Taxpayers should be required to contribute based on their relative capacity to sacrifice

Vertical equity

One's ability to pay is directly proportional to the level of his tax base.

(GROSS CONCEPT)

Horizontal equity

It requires of the particular circumstance of the taxpayer.

(NET CONCEPT)

Lifeblood doctrine

Without taxes, the government would be paralyzed for lack of motive power to activate or operate it.

Inherent power of the state

Taxation power,

police power,

eminent domain.

Taxation power

Power of the state to enforce proportional contribution from its subject to sustain itself

Police power

General power of the state to enact laws to protect the well-being of the people

Eminent domain

The power of the state to take private property for public use after paying just compensation.

Scope of taxation

Widely regarded as comprehensive, plenary (complete), unlimited and supreme.

Territoriality of Taxation

Tax can be imposed only within the territories of the state.

International comity

Mutual courtesy or reciprocity between states.

International comity

Basic principle saying that all states are equally sovereign.

Public purpose

Tax is intended for the common good and can't be exercised to any private interest.

Equal protection of the law

Taxpayers should be treated equally both in terms of rights and obligations.

Uniformity rule in taxation

Taxpayers under dissimilar circumstances should not be taxed the same.

Progressive system

Tax rate increases as the tax base increases.

Doctrine of use

Only properties actually devoted for religious, charitable activities are exempt from real property tax.

Supreme court of the Phillipines

All cases involving taxes can be raised to and be finally decided by who?

Stages of the exercise of taxation power

1) Levy

2) assessment and collection

Administrative act of taxation

Assessment or the determination of the tax liabilities of taxpayers and collection

Situs

The place of taxation

Situs

The tax jurisdiction that has the power to levy taxes upon the object

Business tax situs

Business are subject to tax in the place where the business is conducted.

Income tax situs on services

Service fees are subject to tax where they are rendered.

Income tax situs on sale of goods

The gain on sale is subject to tax in the place of sale.

Property tax situs

Properties are taxable in their location.

Personal tax situs

Persons are taxable in their location.

Marshall doctrine

The power to tax involves the power to destroy.

Vague exemptions law

Against the taxpayer and in favor of the government.

(No exemption)

Vague tax laws

Against the government and in favor of the taxpayer (no tax)

Direct double taxation

Direct duplicate

Indirect double taxation

Indirect duplicate

Escape of taxation

To limit or even avoid the impact of taxation

Tax evasion

Also known as tax dodging.

Tax evasion

Illegally reducing or avoiding the payment of tax.

Tax avoidance

Also known as tax minimization

Tax avoidance

Legally reduces or totally escapes taxes

Tax exemption

Also known as tax holiday

Tax exemption

Immunity from being subject to tax

Shifting

Transferring tax burden to other taxpayers

Capitalization

The adjustment of the value of an asset caused by changes in tax rates.

Transformation

Pertains to elimination of wastes or losses by the taxpayer to form savings

Amnesty

Absolute forgiveness or waiver by the government on its right to collect and is retrospective in application.

Tax condonation

Forgiveness of the tax obligation of a certain taxpayer under certain justifiable grounds.

Tax laws

Laws that provide for the assessment and collection of taxes

Tax exemption lawas

Laws that grant immunity from taxation

Revenue Regulations

Signed by Sec of Finance. It defines rules and regulations for the NIR Code.

Revenue Memorandum orders

Provides directives or instructions; guidelines for programs of the Bureau.

Revenue memorandum Rulings

Rulings, opinions and interpretations of CIR

Revenue Memorandum Circulars

Amplifications of laws issued by BIR

Revenue Bulletin

Notices and announcements of CIR

BIR Rulings

Relative to clarification and interpretation of tax laws. (More on advisory)

Fiscal, Regulatory and sumptuary

Classification of Taxes as to purpose

Personal, property tax and privilege tax

Classification of Taxes as to subject matter

Direct and indirect

Classification of Taxes as to incidence

Specific tax and Ad Valorem

Classification of Taxes as to amount

Proportional, Progressive, Regressive & Mixed Tax

Classification of Taxes as to Rate

National and Local Tax

Classification of Taxes as to imposing Authority

Fiscal / Revenue Tax

Tax imposed for general purpose

Regulatory

Tax imposed to regulate diff transactions

Sumptuary

Tax levied to achieve some social and economic objectives

Specific tax

Fixed amount imposed on a per unit basis

Ad valorem

Fixed proportion imposed upon the value of the tax object

Proportional tax

Flat or fixed rate.

(Regardless of ability to pay)

Progressive or Graduated Tax

Increase rates as tax base increases. (Equitable taxation)

Regressive Tax

Decrease tax rates as the tax base increases.

(Anti poor)

National Tax

Tax imposed by the national government

Local Tax

Tax imposed by the municipal or local government

Income tax

Tax on annual income

Estate Tax

Tax on gratuitous transferring of property by a decedent upon death

Donor's Tax

Tax on gratuitous transfer of property by a living donor

VAT

Consumption tax

Other percentage tax

Consumption tax collected by non-VAT business taxpayers

Excise tax

Tax on sin products and non-essential commodities

Documentary stamp tax

Tax on documents and papers

Local tax

Real Property Tax, Professional tax, business taxes, community tax, and tax on banks are examples of ______ ?

Tax

The amount imposed

Revenue

The amount being collected

Tax

Imposed after commencement of business profession

License

Imposed before commencement of business profession

Toll

Charge for the use of other's property. (Demand of Ownership)

Special assessment

Cost of the improvement.

Tariff

Imposed on imported and exported commodities

Penalty

Imposed to discourage an act

Tax system

Methods or schemes of imposing, assessing and collecting tax

National Tax system and Local tax system

Two system of the Philippines

Progressive tax system

Emphasizing that tax cant be shifted

Withholding System

Under this collection system, payor of the income deducts the tax on the income

Withholding tax on compensation

Tax withheld by the employer from payments of compensation income to employees

Expanded withholding tax

Creditable against the income tax due of the payee for the taxable year

Final withholding tax

NOT creditable against the income tax due to the payee for the taxable year

Voluntary Compliance System

Referred as SELF-ASSESSMENT METHOD

Assessment Or Enforcement System

Government identifies non-compliant taxpayers.