General Principles and Introduction to Income Tax - VOCABULARY Flashcards

A comprehensive set of vocabulary flashcards covering core concepts from the lecture notes on income taxation and related principles.

Taxation

The act or process by which a sovereign body imposes and collects taxes to raise revenue for government expenditures.

Taxes

Enforced contributions from persons and property levied by the lawmaking body to support government and public needs.

Lifeblood Theory

Taxes are the government’s essential revenue; collection is urgent but must be in accordance with law to serve the common good.

Necessity Theory

Taxation is a necessary burden to preserve state sovereignty and provide defense, public services, and government facilities.

Benefits-Protection Theory (Symbiotic Relationship)

Taxation is based on reciprocal duties of protection and support; taxpayers receive governmental benefits in return.

Jurisdiction over Subject and Objects

Taxes are enforceable within the taxing authority’s territorial boundaries, reflecting the state’s protection within its territory.

Nature of Taxing Power

The state’s power to tax is two-fold: inherent (sovereign attribute) and legislative (subject to constitutional limits).

Power to Tax (Inherent Powers of the State)

Inherent, plenary power to impose taxes, subject to constitutional limits; legislature defines what, why, how much, who, and where to tax.

Police Power

Inherent power to regulate public health, welfare, safety, and morals; taxes may be used to promote public welfare.

Power of Eminent Domain

Inherent power to take private property for public use with just compensation.

Taxation vs Police Power vs Eminent Domain

Taxation raises revenue; police power regulates behavior and property for public welfare; eminent domain takes private property for public use with compensation.

Levy

The legislative act of imposing a tax, including decisions on what is taxed, when, how, and where.

Assessment and Collection

Assessment and collection of taxes are generally handled by the executive branch, notably the BIR.

Payment and Remedies

Taxpayers must comply; remedies and enforcement involve executive/legislative channels, with possible judicial review.

Fiscal Adequacy

Revenue sources must be sufficient to meet governmental expenditures.

Theoretical Justice

Tax system should be based on ability to pay and proportional to the value of property or income.

Administrative Feasibility

Taxes should be capable of effective enforcement.

Enforced Contribution

A characteristic of tax: compulsory payment required by law.

Generally Payable in Money

Taxes are typically required to be paid in monetary form.

Proportionate in Character

Tax burden is proportionate to the tax base or value.

Levyed on Persons or Property

Taxes are imposed on individuals or on property as the tax base.

Levyed by the State’s Lawmaking Body

Tax laws are enacted by the sovereign legislative authority.

Levyed for Public Purposes

Taxes are imposed to fund government operations and public needs.

Personal, Poll or Capitation Tax

A fixed amount levied on individuals within a territory, regardless of property ownership or occupation.

Property Tax

Tax imposed on property (real or personal) based on value or another reasonable method of apportionment.

Excise

A tax not classified as a poll or property tax (e.g., income tax, VAT).

Direct Tax

Tax collected directly from the person who bears the economic burden (e.g., income tax).

Indirect Tax

Tax collected from one person with the burden ultimately shifted to another (e.g., VAT).

Specific Tax

A fixed amount imposed by a specified unit of measure (e.g., tax on distilled spirits).

Ad Valorem

Tax based on a fixed proportion of the value of the taxed property.

General or Fiscal Tax

Tax imposed for government revenue (e.g., income tax).

Special or Regulatory Tax

Tax imposed for a specific purpose or regulatory objective, sometimes regardless of revenue.

National Tax

Tax imposed by the national government.

Municipal or Local Tax

Tax imposed by local government units.

Proportional Tax

Tax rate remains constant as the base increases.

Progressive Tax

Tax rate increases as the tax base or income increases.

Regressive Tax

Tax rate decreases as the tax base or income increases.

Toll

Fee charged for the use of a public facility like roads or bridges.

Penalty

Sanction for violation of law or wrongful conduct; not a tax.

Special Assessment

A levy on property owners specially benefited by a public improvement.

License or Permit Fee

Charge imposed under police power for regulatory purposes.

Debt

A loan obligation; taxes are not debts.

Subsidy

Direct government financial aid to individuals or enterprises deemed beneficial to the public.

Revenue

All funds collected by the government from taxes or other sources.

Internal Revenue

Taxes imposed by the national legislature other than customs duties.

Customs Duties

Duties imposed on goods imported into or exported from the country; included in the broad concept of taxes.

Constitutional Limitations

Restrictions in the Constitution on the power to tax (due process, equal protection, uniformity, etc.).

Inherent Limitations

Limitations arising from the nature of the taxing power (territorial limits, public purpose, exemptions, non-delegability, etc.).

International Comity

Limitation on taxing foreign states and embassies; e.g., cannot tax foreign ambassadors or foreign embassies.

Double Taxation (Direct)

Taxing the same subject twice by the same authority within the same jurisdiction and period.

Double Taxation (Indirect)

Taxation with missing one or more elements of direct double taxation; generally permissible.

Shifting

Transferring the burden of a tax from the payer to another party (usually indirect taxes can shift).

Capitalization

Reducing the price of a taxed object by the capitalized value of future taxes the buyer would pay.

Transformation

Tax burden is offset by producers improving processes or adjusting prices to maintain sales.

Evasion

Illegal or fraudulent avoidance of tax payments; punishable by law.

Avoidance / Tax Planning

Legally permissible methods to minimize tax liability; also called tax minimization.

Exemption

Immunity from tax granted by law; claims must be justified; exemptions can be withdrawn.

Construction (Interpretation) of Tax Laws

Tax laws are generally prospective but can have retrospective effect if expressly stated; not penal in character.

Income

Wealth that flows into the taxpayer from labor, capital, or disposition of assets, excluding return of capital.

Capital vs Income

Capital is the wealth itself; income is the flow or fruits derived from that wealth.

Source (Classification of Income)

Activity, property, or labor from which income arises; used to classify income as domestic, foreign, or mixed.

Source Within the Philippines

Income arising from Philippine sources; taxed accordingly.

Source Without the Philippines

Income arising from sources outside the Philippines; taxed differently or exempt depending on rules.

Source Partly Within and Partly Without

Income earned in part inside and part outside the Philippines; taxed according to applicable rules.

Test of Income Source (Examples)

Guidelines to determine income source by type (e.g., interest, services, rent, royalties, sales).

Situs of Income

The place of taxation where income is taxed; can involve citizenship, residence, or place of income earned.

Global (Unitary) Tax System

A system that lumps all income together for a single set of rates after deductions.

Schedular Tax System

Tax system that taxes different types of income under separate schedules with different rates.

Semi-Schedular / Semi-Global Tax System

A hybrid system applying global and schedular treatments depending on income type.

Gross Income Taxation

Final tax imposed on the gross amount of certain income types (e.g., interest, royalties, dividends, capital gains).

Net Income Taxation

Tax computed on net income after allowable deductions and exemptions.