Introduction to Income Taxation

Flashcards on the general principles of taxation, including definition, powers, theories, scope, limitations and types of taxation.

An act, process, or means by which the Sovereign (independent State) through its law-making body (legislative branch of the government) makes demand for revenue in order to support its existence and carryout its legitimate objectives

Taxation

Taxes imposed primarily to raise revenue to finance various activities of the government in the promotion of the general welfare and protection of the public.

Revenue Purpose of Taxation

Taxation power exercised to regulate inflation, achieve economic and social stability, and to serve as a key instrument for social control.

Taxation power exercised to regulate inflation, achieve economic and social stability, and to serve as a key instrument for social control. Regulatory Purpose of Taxation

Compensatory Purpose of Taxation

Taxes used to make up for the benefits received.

Inherent Power of Sovereignty (Nature of Taxation)

Exists co-extensive with sovereignty; the government can exercise the power even without any provisions in the Constitution mentioning it.

Legislative Function (Nature of Taxation)

The law-making body of the government and its political subdivisions exercises the power of taxation.

Public Purpose (Nature of Taxation)

Taxes are public money, and its appropriation to be valid must be for the common good of the people, such that no individual or particular entity shall primarily be enriched or benefited from its use.

Territorial in Scope (Nature of Taxation)

Tax laws do not operate beyond a country’s jurisdictional limits unless there exists a privity of relationship between the taxing State and the object of the tax.

Power of Taxation

The power to demand enforced contribution for public purpose(s).

Power of Eminent Domain

Power to take private property for public use upon paying the owner a just compensation to be ascertained according to law.

Police Power

Power to enact such laws in relation to persons and property as may promote public health, public morals, public property and the general welfare of the people.

Benefit Received Theory

The more benefit one receives from the government, the more taxes he should pay.

Ability to Pay Theory

Taxation should also consider the taxpayer’s ability to pay and should require to contribute based on their relative capacity to sacrifice for the support of the government.

Lifeblood Doctrine

Taxes are essential and indispensable to the continued subsistence of the government. Without taxes, the government would be paralyzed for lack of motive and power to activate or operate it.

Marshal Doctrine

The power to tax involves the power to destroy

Holmes’s Doctrine

“Taxation power is not the power to destroy while the court sits”

Tax Evasion

Taxpayer uses unlawful means to escape taxation

Tax Avoidance

Tax minimization, reducing or totally escaping payment of taxes through legal means

Tax Exemption

Immunity from being taxed by law

Shifting

Transfer of tax burden

Capitalization

Adjustment of value due to taxes

Transformation

Elimination of wastes to avoid taxes

Situs of Taxation

Refers to the place of taxation, or the state or political unit which has jurisdiction to impose tax over its inhabitants.