chapter 1 (notes)

State power, a legislative process, and mode of government cost distribution.

Taxation

An inherent power of the state to enforce a proportional contribution from its subjects for public purpose.

As state power

Process of levying taxes by the legislature of the state to enforce proportional contributions from its subjects for public purpose.

As a process

State allocates its costs or burden to its subjects who are benefited by its spending.

As mode of cost distribution

Government can't exist without a system of funding.

Theory of taxation

Mutuality of support between the people and the government.

Basis of taxation

The more benefit one received, the more taxes he should pay.

Benefit received theory

Taxpayers should be required to contribute based on their relative capacity to sacrifice

Ability to pay theory.

One's ability to pay is directly proportional to the level of his tax base.

(GROSS CONCEPT) Vertical equity

It requires of the particular circumstance of the taxpayer.

Horizontal equity (NET CONCEPT)

Without taxes, the government would be paralyzed for lack of motive power to activate or operate it.

Lifeblood doctrine

Power of the state to enforce proportional contribution from its subject to sustain itself

Taxation power

General power of the state to enact laws to protect the well-being of the people

Police power

The power of the state to take private property for public use after paying just compensation.

Eminent domain

Widely regarded as comprehensive, plenary (complete), unlimited and supreme.

Scope of taxation

Tax can be imposed only within the territories of the state.

Territoriality of Taxation

Mutual courtesy or reciprocity between states.

International comity

Basic principle saying that all states are equally sovereign.

International comity

Tax is intended for the common good and can't be exercised to any private interest.

Public purpose

Substantive due process & Procedural due process

Aspects of due process

Tax must be imposed only for public purpose, collected only under authority of a valid law and only by taxing power.

Substantive due process

There should be no arbitrariness in assessment and collection of taxes and the government shall observe the taxpayer's right to notice and hearing.

Procedural due process

Taxpayers should be treated equally both in terms of rights and obligations.

Equal protection of the law

Taxpayers under dissimilar circumstances should not be taxed the same.

Uniformity rule in taxation

Tax rate increases as the tax base increases.

Progressive system

Only properties actually devoted for religious, charitable activities are exempt from real property tax.

Doctrine of use

All cases involving taxes can be raised to and be finally decided by who?

Supreme court of the Phillipines

1. Levy

2. assessment and collection

3. Payment

4. Refund

Stages of the exercise of taxation power

Assessment or the determination of the tax liabilities of taxpayers and collection

Administrative act of taxation

The place of taxation

Situs

The tax jurisdiction that has the power to levy taxes upon the object

Situs

Business are subject to tax in the place where the business is conducted.

Business tax situs

Service fees are subject to tax where they are rendered.

Income tax situs on services

The gain on sale is subject to tax in the place of sale.

Income tax situs on sale of goods

Properties are taxable in their location.

Property tax situs

Persons are taxable in their location.

Personal tax situs

The power to tax involves the power to destroy.

Marshall doctrine

Against the taxpayer and in favor of the government.

Vague exemptions law (No exemption)

Against the government and in favor of the taxpayer (no tax)

Vague tax laws

Direct duplicate

Direct double taxation

Indirect duplicate

Indirect double taxation

To limit or even avoid the impact of taxation

Escape of taxation

Also known as tax dodging.

Tax evasion

Illegally reducing or avoiding the payment of tax.

Tax evasion

Also known as tax minimization

Tax avoidance

Legally reduces or totally escapes taxes

Tax avoidance

Also known as tax holiday

Tax exemption

Immunity from being subject to tax

Tax exemption

Transferring tax burden to other taxpayers

Shifting

The adjustment of the value of an asset caused by changes in tax rates.

Capitalization

Pertains to elimination of wastes or losses by the taxpayer to form savings

Transformation

Absolute forgiveness or waiver by the government on its right to collect and is retrospective in application.

Amnesty

Forgiveness of the tax obligation of a certain taxpayer under certain justifiable grounds.

Tax condonation

Laws that provide for the assessment and collection of taxes

Tax laws

Laws that grant immunity from taxation

Tax exemption lawas

Signed by Sec of Finance. It defines rules and regulations for the NIR Code.

Revenue Regulations

Provides directives or instructions; guidelines for programs of the Bureau.

Revenue Memorandum orders

Rulings, opinions and interpretations of CIR

Revenue memorandum Rulings

Amplifications of laws issued by BIR

Revenue Memorandum Circulars

Notices and announcements of CIR

Revenue Bulletin

Relative to clarification and interpretation of tax laws. (More on advisory)

BIR Rulings

Classification of Taxes as to purpose

Fiscal, Regulatory and sumptuary

Classification of Taxes as to subject matter

Personal, property tax and privilege tax

Classification of Taxes as to incidence

Direct and indirect

Classification of Taxes as to amount

Specific tax and Ad Valorem

Classification of Taxes as to Rate

Proportional, Progressive, Regressive & Mixed Tax

Classification of Taxes as to imposing Authority

National and Local Tax

Tax imposed for general purpose

Fiscal / Revenue Tax

Tax imposed to regulate diff transactions

Regulatory

Tax levied to achieve some social and economic objectives

Sumptuary

Fixed amount imposed on a per unit basis

Specific tax

Fixed proportion imposed upon the value of the tax object

Ad valorem, Flat or fixed rate.

(Regardless of ability to pay)

Proportional tax

Increase rates as tax base increases. (Equitable taxation)

Progressive or Graduated Tax

Decrease tax rates as the tax base increases.

Regressive Tax (Anti poor)

Tax imposed by the national government

National Tax

Tax imposed by the municipal or local government

Local Tax

Tax on annual income

Income tax

Tax on gratuitous transferring of property by a decedent upon death

Estate Tax

Tax on gratuitous transfer of property by a living donor

Donor's Tax

Consumption tax

VAT

Consumption tax collected by non-VAT business taxpayers

Other percentage tax

Tax on sin products and non-essential commodities

Excise tax

Tax on documents and papers

Documentary stamp tax

Real Property Tax, Professional tax, business taxes, community tax, and tax on banks are examples of ______ ?

Local tax

The amount imposed

Tax

The amount being collected

Revenue

Imposed after commencement of business profession

Tax

Imposed before commencement of business profession

License

Charge for the use of other's property. (Demand of Ownership)

Toll

Cost of the improvement.

Special assessment

Imposed on imported and exported commodities

Tariff

Imposed to discourage an act

Penalty

Methods or schemes of imposing, assessing and collecting tax

Tax system

Two system of the Philippines

National Tax system and Local tax system

Emphasizing that tax cant be shifted

Progressive tax system

Under this collection system, payor of the income deducts the tax on the income

Withholding System

Tax withheld by the employer from payments of compensation income to employees

Withholding tax on compensation

Creditable against the income tax due of the payee for the taxable year

Expanded withholding tax

NOT creditable against the income tax due to the payee for the taxable year

Final withholding tax