General Principles of Taxation – Review Flashcards

Fifty question-and-answer flashcards summarizing key doctrines, limitations, classifications, and principles from the lecture on General Principles of Taxation.

What is the textbook definition of taxation?

The inherent power of the State to collect enforced, proportional, monetary contributions levied by the law-making body to raise revenues for a public purpose.

What four characteristics flow from the definition of taxation?

It is (1) an inherent State power, (2) a power to collect enforced, proportional, monetary contributions, (3) a power exercised through legislation, and (4) a revenue-raising measure.

What are the three inherent powers of the State?

Police power, Eminent domain, and Taxation.

Name two similarities shared by police power, eminent domain, and taxation.

Any two of: they restrict rights, provide equivalent compensation, are legislative in nature, are inherent, and are crucial & indispensable.

What does the Lifeblood Doctrine declare about taxes?

Taxes are the lifeblood of the government; their prompt and certain availability is essential for the State to function.

What is the Necessity Theory of taxation?

Taxing power derives from the State’s existence and its obligation under the social contract to promote public welfare; without taxes the State cannot fulfill its mandate.

What does the Benefits-Received (symbiotic relationship) Theory state?

Citizens contribute taxes in proportion to the benefits and protection they receive from the State.

Why is taxation considered mandatory in nature?

Non-compliance triggers civil penalties and criminal sanctions; taxes must be paid as a matter of law.

What is tax evasion?

The illegal, willful, and fraudulent non-payment or under-payment of a tax due.

What is tax avoidance (tax minimization)?

The use of legal means, in good faith and at arm’s length, to lawfully reduce, eliminate, or defer tax liability.

What is a tax exemption?

A statutory tax holiday or privilege that legally removes a liability to pay an otherwise applicable tax.

What is tax shifting and what are its three basic forms?

Passing the economic burden of a tax to another. Forms: forward shifting, backward shifting, and onward/multiple shifting.

In VAT, who bears the impact and who bears the incidence of the tax?

Impact (legal liability) is on the seller; incidence (economic burden) is usually shifted to the buyer through price.

What is tax capitalization?

The incorporation of a tax burden into the value of a long-term asset, lowering its market price (e.g., higher income tax reduces share value).

List the six phases of taxation.

Levy, Assessment, Collection, Payment, Refund, and Judicial recourse.

What happens during the levy phase?

The legislature imposes the tax by law, deciding who, what, when, and how much to tax.

What is the assessment phase of taxation?

The executive agency (e.g., BIR) determines the exact amount due from a taxpayer and issues an assessment notice.

What occurs in the collection phase?

The taxing authority enforces payment of the assessed tax, through voluntary remittance, garnishment, or other lawful means.

When can a taxpayer file for a refund?

When taxes were illegally, erroneously, or excessively collected, or when a statutory privilege grants a return of taxes paid.

What special legislative origination rule applies to revenue bills?

All appropriation, revenue or tariff bills must originate exclusively in the House of Representatives, though the Senate may propose or concur with amendments.

What does the ‘one subject, one title’ or rider clause provide?

Every bill must embrace only one subject which must be expressed in its title, preventing riders unrelated to the bill's purpose.

What is the President’s item-veto power over tax legislation?

He may veto specific items in an appropriation, revenue, or tariff bill without vetoing the entire law.

What congressional vote is required to pass a law granting tax exemptions?

A majority of all the Members of Congress (not just those present) must concur.

Although called unlimited, what two broad categories of limits apply to the taxing power?

Inherent limitations and constitutional limitations.

Give five inherent limitations on the power to tax.

Public purpose, Exemption of the government, Non-delegability, International comity, and Territoriality (situs) principle.

What is the public-purpose limitation?

Taxes may be levied only for purposes that benefit the public and not for purely private ends.

Why is the government generally exempt from taxation?

Because taxing the State would mean using the power to destroy against itself and would simply transfer money from one pocket to another with needless paperwork.

Name three entities or bodies to whom Congress may delegate limited taxing authority.

The President (tariff powers), Local Government Units (local taxes), and administrative agencies like the BIR/DOF (rule-making details).

What principle of international law prevents taxing foreign governments?

International comity or sovereign equality (par in parem non habet imperium).

What does the territoriality (situs) principle dictate?

A State should tax only within its territorial boundaries, consistent with benefits received, except where the law clearly extends reach (e.g., resident citizens taxed worldwide).

State the Marshall Doctrine on taxation.

The power to tax involves the power to destroy; therefore, it must be limited.

State the Holmes Doctrine on taxation.

The power to tax is not the power to destroy while the courts sit, as judicial review can restrain excesses.

Give two key differences between a tax and a regulatory fee.

Primary purpose (revenue vs. regulation) and fund destination (general/special fund vs. only for cost of regulation).

What are the three classical principles of a sound tax system?

Fiscal adequacy, Administrative feasibility, and Theoretical justice (equity/ability to pay).

Define fiscal adequacy.

Tax revenues should be sufficient to meet government expenditures and their fluctuations.

What is meant by administrative feasibility?

The tax must be easy to administer and comply with, causing minimal inconvenience and cost.

What is the theoretical justice or ability-to-pay principle?

Taxes should be imposed according to the taxpayer’s capacity; hence a progressive system is constitutionally encouraged.

Differentiate direct and indirect double taxation.

Direct double taxation meets all six identity tests (same subject, purpose, period, jurisdiction, authority, and kind); indirect lacks at least one of them.

List the four requisites of valid classification under the equal protection clause.

Based on substantial distinction, germane to the law’s purpose, applies to present & future conditions, and applies equally to all in the same class.

Which properties enjoy constitutional exemption from real property tax?

Charitable institutions, churches, parsonages, mosques, non-profit cemeteries, and properties actually, directly, and exclusively used for religious, charitable, or educational purposes.

What is the constitutional rule on uniformity and equity in taxation?

Taxation must be uniform and equitable, and Congress shall evolve a progressive system of taxation.

What constitutional safeguard prevents imprisonment for certain non-payment of taxes?

No person shall be imprisoned for debt or for non-payment of a poll tax.

How does the right to privacy constrain BIR information gathering?

Any data collection must meet strict scrutiny, be based on lawful purpose, and protect sensitive personal information under the Data Privacy Act.

When can the non-impairment clause bar a new tax law?

Only when a tax exemption is contractual, granted for a valid consideration, and the State is acting in its private capacity.

Give one example of a direct tax and one of an indirect tax.

Direct: individual income tax. Indirect: Value-Added Tax (VAT).

Differentiate revenue (fiscal) tax and regulatory (sumptuary) tax.

Revenue tax’s sole purpose is to raise funds; regulatory tax primarily regulates conduct while incidentally raising revenue.

Contrast ad valorem and specific taxes.

Ad valorem is based on value (e.g., 20% of price); specific is based on physical unit or measure (e.g., P6 per liter).

Compare proportional, progressive, and regressive tax structures.

Proportional: constant rate; Progressive: rate increases as base increases; Regressive: rate decreases as base increases.

Which level of government imposes national taxes and which imposes local taxes?

National taxes are imposed by Congress and administered by national agencies (e.g., BIR); local taxes are imposed by LGU ordinances within limits set by the Local Government Code.