Income and Business Taxation – Introduction to Taxation (Notes)

Vocabulary flashcards covering general principles of taxation from the lecture notes.

Taxation

Inherent power by which the sovereign state imposes a financial burden upon persons and property to raise revenue for government expenses.

Primary purpose of taxation

To raise revenue to satisfy government needs.

Secondary purposes of taxation

Promotion of general welfare; regulation; reduction of social inequality; encourage economic growth; protectionism.

Public purpose (characteristic of taxation)

Taxes must be used for public purposes.

Inherent power of government

Taxation is the strongest inherent power of the government.

Territorial in operation

Taxation is limited to the territory of the taxing authority.

Comprehensive taxation

Taxation is broad in scope, covering many subjects and transactions.

Pecuniary in nature

Taxation deals with money; it is a monetary levy.

Plenary in nature

Taxation power is unlimited in extent unless limited by law.

Police Power

Inherent state power to enact laws promoting public health, safety, morals, and the common good.

Power of Eminent Domain

Inherent state power to take private property for public use upon payment of just compensation.

Power of Taxation (inherent power)

Inherent state power to impose a proportionate burden upon persons, property, rights or transactions to raise revenue and support government expenditure.

Levying / Imposition

Process of imposing the tax by passing tax laws; typically a legislative act.

Assessment

Process of determining the correct amount of tax due.

Collection and payment

Process of compliance with tax law by the taxpayer.

Situs (taxation)

Taxation may be exercised only within the territorial jurisdiction of the taxing authority.

Privity of relationship (Situs exception)

An exception to territorial taxation where a privity of relationship exists between taxpayer and taxing authority.

International comity

Respect for other jurisdictions' tax laws and practices to avoid conflicts.

Non-delegability of taxing power

The power to tax cannot be delegated to other authorities.

Exemption of government entities

Government agencies and instrumentalities performing governmental functions are generally exempt from taxation; proprietary functions may be taxable unless exempted.

GOCCs (Government-Owned or Controlled Corporations)

GOCCs are government-owned or controlled corporations; their tax status depends on their charter and function.

GOCCs income tax exemption (examples)

GSIS, SSS, PHIC, PCSO are generally exempt from income tax; PAGCOR is exempt from income tax but not from business tax.