Fundamentals of Taxation - Vocabulary Flashcards

A vocabulary set covering key terms and definitions from the Fundamentals of Taxation lecture notes.

The government’s compulsory levy to raise revenue for public purposes.

Taxation

Burden

The economic load borne by taxpayers as a result of taxation.

Sovereignty

The supreme political authority of a state; taxation is a power inherent in sovereignty.

Police Power

The government’s power to regulate behavior and enforce order for public welfare, safety, and health.

Eminent Domain

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

Lifeblood Theory

Taxation is essential to fund government; without taxes, government cannot function.

Reciprocity Theory

Taxes correspond to the benefits received from government; more benefits justify higher taxes.

Ability to Pay Theory

Taxes should be based on the taxpayer’s capacity to sacrifice and pay.

Enforced Contribution

Taxes are mandatory contributions, generally payable in money, imposed by law.

Levying

Congress determines objects of taxation through legislation; the act of imposing taxes.

Assessment

Process by which tax amounts are determined, with guidance from agencies like the BIR.

Collection

The process of taxpayers paying taxes to the tax authority (e.g., the BIR).

Tax

An enforced proportional contribution by the State to raise revenue for public purposes, generally payable in money and levied on persons, property, or privileges; legislative in nature.

Public Purpose

Tax laws must be enacted for public rather than private purposes.

National Taxes

Taxes imposed by the national government, such as income tax, VAT, estate tax, donor’s tax, excise tax, documentary stamp tax.

Local Taxes

Taxes imposed by local governments, such as real property tax, local business tax, community tax.

Personal Tax vs Property Tax

Taxes classified by subject matter: personal (on persons) vs property (on real/personal property).

Ad Valorem

A tax based on the value of the object being taxed (percentage of value).

Specific Tax

A tax with a fixed amount per unit or quantity (e.g., P2.00 per 0.5 kg of tobacco).

Direct Tax

Tax burden falls on the same person who pays it.

Indirect Tax

Tax burden can be shifted to others (burden may fall on someone besides the payer).

Proportional Tax

A tax rate that remains the same percentage for all taxpayers.

Progressive Tax

Tax rate increases as the tax base (e.g., income) increases.

Regressive Tax

Tax rate decreases as the tax base increases.

Fiscal Adequacy

A sound tax system should generate sufficient revenue to meet government needs.

Theoretical Justice

A tax system should be capable of being paid by taxpayers in a way that is fair.

Administrative Feasibility

A tax system should be administratively workable and enforceable.

Inherent Limitations on the Power to Tax

Constraints such as public purpose, non-delegation, territoriality, international comity, and government exemptions.

Non-delegation

Limit that certain powers (like taxation) cannot be delegated to other bodies except in specific, allowed cases.

Territoriality

Tax jurisdictional reach is limited to the territory where the tax is imposed or the tax base is located.

International Comity

Respect for other jurisdictions in taxation matters; cooperation and avoidance of harmful conflicts.

Exemption of the Government

Tax exemptions for the government and its agencies are generally allowed and recognized.

Due Process

Tax laws must be fair: substantive and procedural due process protect taxpayers from oppression.

Equal Protection

Taxpayers must be treated equally under the law; classifications must rest on substantial distinctions.

Uniformity Rule in Taxation

Tax classifications should reflect common attributes and be based on substantial distinctions.

Non-Imprisonment for Non-Payment (Poll Tax)

There should be no imprisonment solely due to poverty or inability to pay tax debt (with exceptions like poll tax).

Non-Impairment of Obligations and Contracts

Tax exemptions in contracts should be honored and not canceled unilaterally.

Non-Infringement of Religious Freedom

Taxation should not unduly burden religious worship or exercise.

Non-Appropriation of Government Funds for Religious Uses

Public funds or property should not be used to support religious groups.

Origination of Tax Laws

Tax laws must originate in the House of Representatives (HOR) in the Philippines.

Sources of Tax Laws

Constitution, statutes/presidential decrees, case law, executive orders/Batas Pambansa, local ordinances, tax treaties, BIR issuances.

Nature of Philippine Tax Laws

Civil, not penal in nature; penalties aim to secure compliance; laws construed against the government and in favor of the taxpayer.

Taxpayer’s Suit

A taxpayer may challenge tax statutes in court if public funds are misused or a law is violated and the taxpayer is directly affected.

Situs of Taxation

Rules determining where a tax is due based on factors like residence, location of property, place of business, or place of performance.

Tax vs Toll

Taxes are levies of sovereignty; tolls are charges for use of others’ property and can be charged by private entities.

Tax vs Penalty

Taxes are imposed to support government; penalties discourage acts and may be imposed by public or private entities.

Tax vs Special Assessment

Taxes are broad burdens on persons/properties; special assessments are land-specific for improvements and attach to land.

Tax vs License Fee/Permit

Taxes arise after business start; license fees are pre-activity regulatory charges.

Tax vs Tariff/Customs Duties

Taxes are general levies by the government; tariffs are duties on imported/exported goods payable to customs.

Double Taxation

Taxing the same object by the same jurisdiction more than once; can be direct or indirect.

Direct Double Taxation

All elements of double taxation exist for both impositions.

Indirect Double Taxation

At least one secondary element of double taxation is not common to both impositions.

Escapes from Taxation: Shifting

Transferring the tax burden to other taxpayers, permissible in VAT, other taxes, and excise taxes.

Escapes from Taxation: Capitalization

Raising selling prices to incorporate future tax costs (OK for ordinary sales tax strategies).

Escapes from Taxation: Transformation

Reducing net income through allowable expenses to lower tax liability.

Tax Exemption

Immunity from tax granted by Constitution, law, or contract; generally revocable by Congress except constitutional or contractual exemptions.

Tax Avoidance

Legally minimizing tax liability through permissible means.

Tax Evasion

Illegal avoidance or reduction of tax payments by deceit or contravention of the law.

3% OPT (Optional Tax on non-VAT sales)

An optional tax on sales that are not subject to VAT, added to selling price as a tax component.