General Principles of Taxation Flashcards

Vocabulary-style flashcards covering key definitions, principles, classifications, escape methods, and rules on situs from the General Principles of Taxation notes.

Police Power

Power to make and implement laws for the general welfare.

Taxation Power

Power to enforce contribution to raise government funds; an inherent power by which the sovereign through its law-making body raises revenue to defray the necessary expenses of the government.

Eminent Domain Power

Power to take private property for public use with just compensation.

Comparison of Inherent Powers of the State

Comparative matrix outlining the key differences and similarities between Police Power, Taxation Power, and Eminent Domain Power regarding scope, delegation, amounts, limitations, and relation to the Non-Impairment Clause.

Fiscal Adequacy

Principle of a sound taxation system requiring sufficiency of government revenues to meet expenditures and public needs, in consonance with the Lifeblood Theory.

Budget Deficit

A condition in government budget balance where $\text{Government Revenues} < \text{Government Expenditures}$.

Budget Surplus

A condition in government budget balance where $\text{Government Revenues} > \text{Government Expenditures}$.

Equality or Theoretical Justice

Principle of a sound taxation system stating that taxation must be based on the taxpayer's ability to pay and must be progressive.

Administrative Feasibility

Principle of a sound taxation system requiring tax laws to be capable of being effectively enforced without obstructing business growth and economic development.

Necessity Theory

Theory stating that the power to tax is an attribute of sovereignty emanating from necessity to fund public services such as national defense, health, education, and public facilities.

Lifeblood Theory

Importance theory stating that without taxes, the government would be paralyzed for lack of motive power to activate and operate it; emphasizes that taxation must be exercised fairly and uniformly.

Benefits-Protection Theory

Basis of taxation establishing a reciprocal duty and symbiotic relationship where citizens pay taxes in exchange for protection and benefits received from the State.

Levy

The imposition or making of tax laws, also referred to as tax legislation, which is performed by the legislative body.

Assessment

An aspect of tax administration similar to an audit, involving the computation and determination of tax liabilities.

Collection

An aspect of tax administration referring to the actual enforcement and gathering of tax payments.

Impact of Taxation

The point on which tax is originally imposed, comprising the levy and assessment of taxation.

Incidence of Taxation

The point on which the tax burden finally rests or settles down, comprising tax collection.

Direct Duplicate Taxation

Double taxation in the prohibited sense, occurring when the same subject matter is taxed twice for the same purpose, authority, jurisdiction, period, and character of tax; illegal in the Philippines as a violation of substantive due process.

Indirect Duplicate Taxation

Legal or permissible double taxation that occurs when one or more elements of direct duplicate taxation are absent.

Direct Tax

A classification of tax where both the incidence (liability for payment) and the impact (burden) fall on the same person, such as income tax.

Indirect Tax

A classification of tax where the incidence (liability) falls on one person, but the impact (burden) is shifted to another person, such as VAT.

Specific Tax

Tax imposition based on a specific sum by head or number, or by a standard of weight or measurement, such as excise tax on cigarettes.

Ad Valorem Tax

Tax imposed as a percentage upon the value of the article or thing subject to taxation, such as VAT of $12\%$.

Progressive Tax

A tax rate structure where the rate or amount of tax increases as the amount of taxable income increases (e.g., $0\% - 35\%$).

Proportionate Tax

Tax based on a fixed proportion or flat rate of the value of the property assessed, such as VAT of $12\%$.

Special Assessment

An imposition levied on land based entirely on the benefit accruing to it from public works or improvements undertaken by the government in the vicinity.

License or Fee

A regulatory imposition charged under the exercise of police power.

Compromise Penalty

An amount collected in lieu of criminal prosecution in cases of tax violations.

Margin Fee

An exaction designed specifically to stabilize currency.

Subsidy

A legislative grant of money in aid of a private enterprise deemed to promote public welfare.

Tax Avoidance

Legal and permissible means used by a taxpayer to reduce or escape tax liability, also known as tax planning.

Tax Evasion

The illegal or fraudulent means used to defeat or lessen the payment of tax, also known as tax dodging.

Shifting

A method of tax avoidance by which the tax burden is transferred from the statutory taxpayer to another person without violating the law.

Transformation

A tax avoidance method where the producer pays the tax and recoups it by improving production processes to lower output costs.

Capitalization

Concept stating that a mere increase in the value of property represents an unrealized increase in capital rather than taxable income.

Revenue Regulations

Interpretations of an administrative body (BIR) intended to clarify tax laws, promulgated by the Secretary of Finance upon the recommendation of the Commissioner of Internal Revenue.

BIR Rulings

General interpretations of tax laws issued by the Bureau of Internal Revenue, usually upon a taxpayer's request to clarify specific legal provisions.

Situs of Taxation

The place of taxation, defined as the State which has jurisdiction or exercises dominion over the subject in question.

Situs of Taxation Rules

Summary table outlining the legal tax jurisdiction rules for various tax subjects including personal poll tax, real and personal property, income, business transactions, and gratuitous transfers.