Taxation

Taxation

Power of the State (through legislature) impose financial burdens on persons and property to raise revenue for public purposes.

Police Power

Promote general welfare

Eminent Domain

Taking private property for public use with just compensatiom

Tax

Raises revenue to support government

Primary purpose of taxation

Raise funds for government (Revenue)

Secondary purpose of taxation

Regulation and promotion of welfare (e.g. discourage harmful goods, redistribute wealth.)

Necessity Theory

Government needs revenue to exist (The existence of government is a necessity, it cannot continue without means to pay its expenses, for this reason, it has the right to compel all its citizens and property to contribute.)

Benefits-Protection Theory

Taxes = price for protection (Taxes are what we pay for a civilized society. The government and the people have reciprocal and mutual duties of support and protection to one another. Symbolic relationship between the government and the taxpayer.

Lifeblood Doctrine

Taxes are essential for government existence (Taxes are the lifeblood pf the government without which it can neither exist nor endure)

1. A forced charge, imposition or contribution (Forced contribution)

2. It is a pecuniary burden payable money

3. It is imposed for public purpose

4. It is imposed pursuant to legislative authority

5. It is levied within the territorial and legal jurisdiction of a state

6. It is assessed in accordance with some reasonable rule of appointment

Characteristics of Tax

1. Levy or Imposistion

2. Assessment and collection

3. Payment of Tax

Stages or Process of Taxation

Levy or imposition

This process involves the passage of tax laws or ordinances through the legislature

Assessment and Collection

This process involves the act of administration and implementation of tax laws by the executive through its administrative agencies such as the Bureau of Internal Revenue or Bureau of Customs

Payment of Tax

This process involves the act of compliance by the taxpayer in contributing his share to pay the expenses of the government

1. Fiscal Adequacy

2. Administrative Feasibility

Theoretical Justice

Basic Principles of a Sound Tax System

Fiscal Adequacy

The sources of government revenue must be sufficient to meet government expenditures and other public needs

Administrative Feasibility

Tax laws must be capable of convenient, just and effective administration—free from confusion and uncertainty

Theoretical Justice

A good tax system must be based on the taxpayer’s ability to pay. This suggests that taxation must be progressive conformably with the constitutional mandate that congress shall evolve a progressive system of taxation

1 inherent

2. Constitutional

Limktations

Inherent

Public purpose, international comity, non-delegation, government exemption, situs, double taxation rules.

Constitutional

Due process, equal protection, uniformity, progressive taxation, religious exemptions

By subject

Personal / Property / Excise

By burden

Direct vs Indirect

By amount

Specific vs Ad valorem

By purpose

Revenue vs Regulatory

By Jurisdiction

National vs local

By graduation

Proportional vs Progressive vs Regressive

Global

All income reported in one return

Schedular

Different rates for different incomes

Evasion

Ilegal

Avoidance

Legal means to reduce tax

Evasion, Avoidance, Transformation, Capitalization, Exemption

Escapes from Taxation

Resident Citizen (RC)

Filipino living in the Philippines

Non-Resident Citizen (NRC)

Filipino living abroad > 183 days

Resident Alien (RA)

Foreigner living in the Philippines

Non-Resident Alien ETB

Foreigner > 180 days in the Philippines / has philippine business

Nom-Resident Alien NETB

Foreigner < 180 days, no PH business

Basic Income Tax

Graduated Rate

Final Withholding Tax (FWT)

On passive income

Capital Gains Tax (CGT)

On certain capital assets