Income Taxation Review Flashcards

A complete set of vocabulary flashcards derived from the Income Taxation lecture notes, defining fundamental principles, powers, doctrines, and tax schemes.

Taxation

Defined as a state power, a legislative process, and a mode of government cost distribution to raise revenue for public purposes.

Doctrine of Symbiotic Relationship

The basis of taxation establishing a mutuality of support where the government provides public services and taxpayers supply taxes.

Benefit Received Theory

A theory of tax allocation stating that the more benefits an individual receives from the government, the more taxes they should pay.

Ability to Pay Theory

A theory of tax allocation stating that those with higher financial capacity should be taxed more even if they benefit less, while those with lower capacity pay less even if they benefit more.

Vertical Equity

An aspect of the ability to pay theory where tax liability is directly proportional to the level of the tax base, typically using gross profit for individual taxpayers.

Horizontal Equity

An aspect of the ability to pay theory that considers the specific financial circumstances and expenses of taxpayers, using net income for business taxpayers.

Lifeblood Doctrine

A doctrine stating that taxes are essential to the government because without them, it cannot fund its public services.

Fiscal Purpose

The primary objective of taxation, which is to raise revenue for government needs.

Police Power

An inherent power of the state to regulate liberty and property for the common good and to promote public health, safety, and well-being.

Eminent Domain

An inherent power of the state to take private property for public use upon payment of fair and just compensation.

Non-Delegation of Taxing Power

An inherent limitation stating that the legislative authority to enact tax laws belongs exclusively to Congress and cannot be delegated, subject to constitutional exceptions.

Territoriality of Taxation

The principle that a government can only demand tax obligations within its territorial jurisdiction.

International Comity

The principle of co-equal sovereignty among nations under which governments refrain from taxing foreign governments.

Due Process of Law

A constitutional limitation requiring substantive compliance (public purpose, valid law, proper jurisdiction) and procedural fairness in assessment and collection.

Equal Protection of Law

A constitutional requirement that all taxpayers under the same circumstances and conditions shall be treated equally in rights conferred and obligations imposed.

Rule of Uniformity and Equity

A rule requiring that taxpayers belonging to the same class are taxed the same, though different classes may be taxed differently.

Doctrine of Use

The rule determining tax exemption on property belonging to religious, charitable, or educational entities based on actual, direct, and exclusive use.

Progressive System of Taxation

A tax system where the tax rate increases as the tax base or income level increases.

Levy

The legislative stage of taxation involving the enactment of tax statutes, setting rates, objects, purposes, and coverage.

Assessment and Collection

The administrative stage of taxation where tax laws are implemented and enforced by executive agencies.

Situs of Taxation

The specific location or jurisdiction that has authority to tax a person, property, act, or business transaction.

Marshall Doctrine

The principle stating that "the power to tax involves the power to destroy."

Holmes Doctrine

The principle stating that "taxation power is not the power to destroy while the court sits."

Prospectivity

The rule that tax laws are forward-looking and apply to future events rather than past transactions.

Doctrine of Non-Set-Off

The rule stating that taxes cannot be offset against ordinary private debts or obligations owed between the taxpayer and the government.

Judicial Non-Interference

The rule that courts will not issue injunctions to stay or restrain the collection of taxes.

Direct Double Taxation

The imposition of two or more identical taxes by the same taxing authority on the same subject matter, purpose, period, and taxpayer.

Indirect Double Taxation

The imposition of multiple taxes where at least one essential element (such as taxing authority, tax type, or taxpayer identity) differs.

Tax Evasion

The illegal use of fraudulent schemes, such as hiding income or under-reporting sales, to avoid paying taxes owed.

Tax Avoidance

The lawful arrangement of financial affairs using statutory loopholes and options to minimize tax liability.

Forward Shifting

The transfer of tax burden from the seller directly to the customer by increasing the selling price of goods or services.

Backward Shifting

The transfer of tax burden from the buyer back to the supplier by demanding a lower wholesale purchase price.

Onward Shifting

The step-by-step transfer of tax burden through a chain of middlemen until it reaches the final consumer.

Capitalization

The adjustment of an asset's market value where a buyer lowers their purchase offer to offset future tax costs attached to the asset.

Transformation

The absorption of tax burden by a producer who cuts operational costs and improves efficiency instead of raising prices.

Tax Amnesty

A general retrospective pardon granted by the government to erring taxpayers to allow them a clean slate, usually requiring partial tax payment.

Tax Condonation

The prospective forgiveness or remission of tax liabilities under justifiable grounds, requiring no payment.

Fiscal Tax

A tax collected purely to raise revenue for general government operations and public services.

Regulatory Tax

A tax imposed primarily to control, restrict, or limit specific activities, goods, or trades.

Poll Tax

A fixed tax charged on individuals residing within a specified territory regardless of their income or property.

Property Tax

A tax charged on real estate, land, or buildings based on ownership and assessed asset value.

Excise Tax

A tax charged on the right to perform a business, exercise a privilege, or sell specific items.

Direct Tax

A tax paid directly to the government by the entity legally responsible, where the financial burden cannot be shifted to another.

Indirect Tax

A tax collected from a seller or provider who shifts the economic burden to the ultimate purchaser.

Specific Tax

A tax calculated as a fixed monetary amount based on physical units, weight, or volume.

Ad Valorem Tax

A tax computed as a fixed percentage of the total value or selling price of an item.

Proportional Tax

A tax structure applying a single fixed percentage rate across all levels of the tax base.

Regressive Tax

A tax structure where the effective tax burden falls more heavily on low-income earners as a percentage of income.

Gross Income

Total tax-reportable inflows that represent a return on capital that increases net worth and are not exempt by law.

Return of Capital

The recovery of original principal or compensation for lost capital items, which merely restores net worth and is non-taxable.

Return on Capital

Financial gain derived over and above original capital that increases net worth and is subject to income tax.

Realized Benefit

An actual financial gain or advantage derived by a taxpayer through an exchange transaction involving another entity that increases net worth.

Unrealized Gains

Paper increases in asset value held without an exchange transaction, which remain non-taxable until sold or converted.

Actual Receipt

The physical taking or possession of income in the form of cash or physical property.

Constructive Receipt

The realization of income when it is made available to the taxpayer without limitation and placed under their control, even without physical delivery.

Resident Citizen

A Filipino citizen residing in the Philippines, subject to income tax on worldwide earnings derived inside and outside the country.

Non-Resident Citizen

A Filipino citizen residing abroad (such as staying abroad for 183 days or more), taxable only on income derived from sources within the Philippines.

Domestic Corporation

A corporation organized in accordance with Philippine laws, taxable on all income derived from sources within and outside the Philippines.

Resident Foreign Corporation

A foreign-organized corporation conducting business with a permanent establishment in the Philippines, taxable only on Philippine-sourced income.

Non-Resident Foreign Corporation

A foreign corporation that does not conduct business in the Philippines, taxable only on income derived from Philippine sources.

General Professional Partnership

A partnership formed by individuals of the same profession solely for the practice of their common profession, which is exempt from corporate tax as an entity.

Accrual Basis

An accounting method where income is reported when earned and expenses are recognized when incurred, regardless of cash receipt or payment.

Cash Basis

An accounting method where income is reported upon cash collection and expenses are deducted when cash is paid.

Final Withholding Tax

A tax scheme where the tax liability is fully satisfied through deduction at source by the payor, relieving the payee from filing an annual tax return for that item.

Capital Gains Tax

A tax imposed on net gains realized from the sale or disposition of specific capital assets, specifically unlisted domestic stocks and real property in the Philippines.

Regular Income Tax

A self-assessed tax scheme covering active income and other gross income items not subjected to final taxes or capital gains taxes.

Income Tax Return

A official declaration filed by taxpayers reporting gross earnings, allowable deductions, and net taxable income for a designated tax period.