income tax for individuals and general principles

purely compensation income earner

individuals whose source of income is purely derived from an employer-employee relationship

employer and employee relationship

exists when a person for whom services were performed (employer) has the right to control and direct an individual who performs the services (employee) not only as to the result of the work to be accomplished but also as to the details, methods and means by which it is accomplished

employer

any person for whom an individual performs or performed any service, of whatever nature, under an employer-employee relationship.

employee

an individual performing services under an employer-employee relationship. The term covers all employees, including officers and employees, whether elected or appointed, of the Government of the Philippines, or any political subdivision thereof or any agency or instrumentality.

self employed

a sole proprietor or an independent contractor who reports income earned from self-employment

professional

A person formally certified by a professional body belonging to a specific profession by virtue of having completed a required examination or course of studies and/or practice, whose competence can usually be measured against an established set of standards.

legisltive

congress enacts the tax laws

raise funds, promote general welfare, reduction of social inequality, encourage economic growth, protectionism

purpose of taxation

promotion of general welfare

taxation may be used as an implement of police power to promote the general welfare of the people

reduction of social inequality

a progressive system of taxation prevents the undue concentration of wealth in the hands of few individuals

progressivity

based on the principle that those who are able to pay more should shoulder the bigger portion of the tax burden.

encourage economic growth

the grant of incentives or exemptions encourage investment thereby stimulating economic activity

protectionism

In case of foreign importations, protective tariffs and customs are imposed to protect local industries.

police power

regulate to promote general welfare

eminent domain

to take private property for public purpose

fiscal adequacy administrative feasibility theoretical justice

general principles of taxation

fiscal adequacy

The revenue must be sufficient to meet the government expenditures and other public needs

administrative feasibility

• Tax laws must be clear and concise

• Capable of effective and efficient enforcement

• Convenient as to time and manner of payment

• Must not obstruct business growth and economic development

theoretical justice

• Takes into account the taxpayer’s ability to pay

• Must be uniform

• Must be progressive (based on ability to pay)

life-blood doctrine

• The government needs taxes for without taxation, it cannot endure.

• It is needed to defray the government expenses. E.g. Building of roads and infrastructure

benefits protection theory

It involves the power of the State to demand and receive taxes based on the reciprocal duties of support and protection between the State and its citizen.

• Every person who is able must contribute his share in the burden of running the government. The government for its part is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their material and moral values.

situs of taxation

It is the place or authority that has the right to impose and collect taxes.

constitution

inherent power

inherent

proceeds from the very nature of the taxing power itself. They are otherwise known as “elements or characteristics of taxation”.

constitutional

imposed by the constitution

direct

specific

inherent constitutional direct

scope and limitation of taxation