Income Taxation Review Flashcards

Comprehensive practice flashcards covering the fundamental concepts, theories, limitations, and doctrines of Income Taxation as presented by Stefanie Lorraine D. Trinidad, CPA.

How is taxation defined as a state power?

It is an inherent power of the State to enforce a proportional contribution from its subjects for public purpose.

What are the four primary references for income taxation mentioned in the notes?

National Internal Revenue Code of 1997, 1987 Constitution, Tax Reform for Acceleration and Inclusion (TRAIN) Law, and Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Law).

What is the theory of taxation regarding government existence?

The government cannot exist without a system of funding; its necessity for funding is the theory of taxation.

What concept refers to the mutuality of support between the people providing funds and the government providing services?

Basis of taxation

What does the Benefit Received Theory presuppose?

It presupposes that the more benefit one receives from the government, the more taxes he should pay.

Distinguish between Vertical and Horizontal equity in the Ability to Pay Theory.

Vertical equity (gross concept) proposes ability to pay is proportional to the tax base level, while Horizontal equity (net concept) considers the particular circumstances of the taxpayer.

What is the core of the Lifeblood Theory according to CIR vs. Algue?

Taxes are essential and indispensable to the continued subsistence of the government; without them, the government would be paralyzed.

What are the three inherent powers of the State?

Taxation power, Police power, and Eminent domain.

What is the Territoriality principle in taxation?

The government can only demand tax obligations upon subjects or residents within its territorial jurisdiction, as public services are normally provided within state boundaries.

What are the exceptions to the Territoriality principle in income and transfer taxation?

Resident citizens and domestic corporations are taxable on income derived within and outside the Philippines; resident citizens, non-resident citizens, and resident aliens are taxable on property transfers regardless of location.

What is International Comity?

A principle of mutual courtesy or reciprocity where governments do not tax other governments' properties and honor treaty obligations over domestic tax laws.

What is the Procedural Due Process requirement for tax assessments and collections under the NIRC?

Assessments must be made within $3$ years from the due date or actual filing, and collection must be made within $5$ years from the date of assessment.

What is the Uniformity Rule in taxation?

Taxpayers under dissimilar circumstances should not be taxed the same; taxpayers are classified by attributes, and while classes are taxed differently, those within the same class are taxed the same.

What requirement is needed for Congress to pass a law granting a tax exemption?

The concurrence of a majority of all members of Congress (absolute majority).

Where must all appropriations, revenue, or tariff bills originate?

In the House of Representatives, though the Senate may propose or concur with amendments.

What is the 'impact of taxation' stage?

Levy or imposition, which is the legislative act of enacting a tax law by Congress.

Define the 'incidence of taxation.'

The administrative act involving the assessment (determination of liability) and collection of taxes by the administrative branch.

Identify the tax situs for Business, Services, and Property.

Business: where the business is conducted; Services: where they are rendered; Property: where properties are located.

What is the Marshall Doctrine?

The principle that 'The power to tax involves the power to destroy' when used as an instrument of police power to discourage undesirable activities.

What are the time limits for tax prescription under the NIRC if no assessment is issued?

Tax prescribes if not collected by judicial action within $3$ years from the date the return is required to be filed.

Is the government subject to the Doctrine of Estoppel in tax collection?

No; the error, neglect, or omission of government officials does not bind the government or block the correct application of the law.

How are vague tax laws and vague exemption laws construed?

Vague tax laws are construed against the government (in favor of the taxpayer); vague exemption laws are construed against the taxpayer (in favor of the government).

What are the four secondary elements of Double Taxation?

Same type of tax, same purpose of tax, same taxing jurisdiction, and same tax period.

Distinguish between Tax Evasion and Tax Avoidance.

Tax evasion (tax dodging) is an illegal act to reduce payment; tax avoidance (tax minimization) utilizes legally permissible means to escape or reduce taxes.

Explain Forward vs. Backward Shifting.

Forward shifting follows the normal flow of distribution (e.g., manufacturer to consumer); Backward shifting is the reverse, common when buyers have market power.

What are the differences between Tax Amnesty and Tax Condonation?

Amnesty covers civil and criminal liabilities, is retrospective, and requires a portion of tax paid; Condonation covers only civil liabilities, is prospective, and requires no payment.