A.

CONCEPT, NATURE, AND

CHARACTERISTICS OF TAXATION
Taxation
the act of laying a tax
the process by which the
sovereign, through its law-making
body, raises income to defray the
necessary expenses of
government
refers to the inherent power of
the State to demand enforced
contributions for public purpose
Purpose of Taxation:
o to raise revenues for
governmental needs
o to provide funds or property with
which to promote the general
welfare and protection of its
citizens
o to attain various social and
economic (non-revenue)
objectives
on-revenue
!axation
grant of tax
exemptions or the
creation of conditions
conducive to the
growth of anemic
enterprises
taxes on imports
taxes on imported
goods
increase or decrease
taxes depending on
the in"ation or
de"ation
those to reduce
ine#ualities in wealth
and incomes (estate,
donor$s and income
taxes)
Taxes
-enforced proportional and
pecuniary contributions from persons
and property
- levied by the law making body
of the state having jurisdiction over the
subject of the burden
- for the support of the
government and all public needs
Essentia C!ara"teristi"s of Tax
%& 't is an enfor"e# contribution&
(rinciple of )epresentation-
applies only to political
communities which is satis*ed by
the ade#uate representation in
the legislative body which votes
the tax
+& 't is proportionate in character&
,bility-to-pay principle - the total
tax burden will be distributed
among individuals according to
their capacity to bear it, taking
into account all of the relevant
personal characteristics
.& 't is generally pa$a%e in &one$ &
- discharged alone in the form of
money which must be in legal tender
/& 't is levied on persons or propert$.
- may be imposed on acts,
transactions, rights, or privileges
0& 't is levied by the state which has
'uris#i"tion over the person or
property&
- taxing power necessarily stops
at the state boundary lines
1& 't is levied by the a()&a*in+ %o#$
of the state&
- local legislative bodies are now
given direct authority to collect
taxes under the 2onstitution
3& 't is levied for pu%i" purposes.
- to provide income for public
purposes for the support of the
government, the administration of
the law, or the payment of public
expenses
Nature an# t!e Po(er of Taxation
%&) 't is inherent in sovereignty&
- taxation may be exercised by
the government even if the 2onstitution
is entirely silent on the subject
- 2onstitutional provisions merely
constitute limitations upon such power
+&) 't is legislative in character&
- exclusively legislative function
- the local legislative body may
exercise the power of taxation subject
to such limitations as may be provided
by law
.&) 't is subject to constitutional and
inherent limitations&
- the power of taxation is not
absolute
- such limitations may be
provided by the 2onstitution or implied
therefrom and the rest is inherent
based on the nature of such power
Aspe"ts of Taxation
%& 4evying or imposition of tax
(legislative act) taxation
+& 2ollection of the tax levied
(administrative act) tax
administration
Extent of t!e ,e+isati-e Po(er
%& !he subjects or objects to be taxed&
- may be persons, whether
natural or juridical
- property, whether real or
personal, tangible or intangible
-businesses, transactions, rights
or privileges
+& !he purpose or object of the tax so
long as it is a public purpose&
.& !he amount or rate of the tax&
- 5eneral rule6 the legislature may
levy a tax of any amount or rate it sees
*t
- if taxes are oppressive or unjust,
the only remedy is the election of
new representatives
-must be uniform and e#uitable
/& !he manner, means, and agencies of
collection of the tax&
- refer to the administration of the
tax or the implementation of tax laws
- legislature6
7 (rescribes the mode or
method by which the tax shall be
collected
7 designates the o8cers
through whom its will shall be enforced
7 the remedies which the
State or the taxpayer may
avail in connection
therewith
.asi" Prin"ipes of a Soun# Tax
S$ste&
%& 9iscal ade#uacy
- the sources of revenue should
be su8cient to meet the demands of
public expenditure
+& :#uality or !heoretical ;ustice
- it means that the tax burden
should be distributed in proportion to
the taxpayer$s ability to pay
- aka <ability-to-pay principle=
- those who have more should
pay more
.& ,dministrative 9easibility
- it means that tax laws should be
capable of convenient, just and
e>ective administration or enforcement
at a reasonable cot
.. C,ASSIFICATIONS AND
DISTINCTIONS
2lassi*cation of !axes6
%&) ,s to subject matter or object6
a& (ersonal, poll, or capitation
- tax of a *xed amount
imposed on persons
residing within a speci*ed
territory, whether citizens
or not, without regard to
their property or the
occupation or business in
which they may be engaged
- ex& 2ommunity tax
b& (roperty
- tax imposed on property ,
whether real or personal
- ex& )eal estate tax
c& :xcise
- synonymous with
<privilege tax=
- the charge imposed upon
the performance of an act,
the enjoyment of a
privilege, or the engaging in
an occupation, profession,
or business
- ex& ?,!, 'ncome tax,
estate tax, donor$s tax
+&) ,s to who bears the burden6
a& @irect
- tax which is demanded or
exacted from the very
person who also shoulders
the burden of the tax
- ex& 2orporate and
individual income taxesA community
taxA estate tax
b& 'ndirect
- tax which is demanded
from, or are paid by, one
person in the expectation
and intention that he shall
indemnify himself at the
expense of another by
passing on the burden to
the latter, falling *nally
upon the ultimate
purchaser or consumer
- ex& ?,!, percentage taxes,
excise taxes on certain goods, customs
duties
.&) ,s to determination of amount6
a& Speci*c
- tax of a *xed amount
imposed by the head or
number, or by some
standard of weight or
measurement
- ex& !axes on distilled
spirits, wines, and
fermented li#uorsA cigars
and cigarettes, and others
b& Ad valorem
- <according to value=
- tax of a *xed proportion of
the value of the property
with respect to which the
tax is assessed
- ex& )eal estate tax$ excise
taxes on automobiles, non-
essential goods such as
jewelry and perfumes, and
othersA customs duties
(except on cinematographic
*lms)
/&) ,s to purpose6
a& 5eneral, *scal, or revenue
- tax imposed for the
general purposes of the government
- ex& 'ncome tax, ?,!
b& Special or regulatory
- tax imposed for a special
purpose
- ex& (rotective tari>s or
customs duty on imported goods
0&) ,s to Scope (or authority imposing
the tax)6
a& ational
- tax imposed by the
national government
- ex& ') taxesAcustoms
dutyA and national taxes imposed by
special laws
b& Bunicipal or local
- tax imposed by
municipality corporations or 45Cs
- ex& )eal estate tax,
professional tax
Dote6
Global/International Taxation
- is the study or
determination of tax on a person
or business subject to the tax
laws of diferent countries or
the international aspects of an
individual country's tax laws
Governments usually limit the
scope of their income taxation in
some manner territorially or
provide for ofsets to taxation
relatin! to extraterritorial income
The manner of limitation
!enerally ta"es the form of a
territorial# residency# or
exclusionary system
1&) ,s to graduation or rate6
a& (roportional
- tax based on a *xed
percentage of the amount
of the property, receipts, or
other basis to be taxed
- aka "at of uniform tax
- ex& )eal estate taxes, ?,!,
and other percentage taxes
b& (rogressive or graduated
- !ax the rate of which
increases as the tax base of
bracket increases as the tax
base or braket increases
- ex& 'ncome tax, estate tax,
donor$s tax
c& )egressive
- not applicable to the
(hilippines
- tax the rate of which
decreases as the tax base or bracket
increases
- ex& !he tax rate and the
tax base move in opposite directions
)egressive system of taxation
- exists in a society where
majority of the people are low
income, more indirect taxes are
imposed than direct taxes
TO,, -s. TAX
!oll
- a sum of money for the use of
something, generally applied to
the consideration which is paid
for the use of a road, bridge or
the like, of a public nature
- another method of taxing the
public for the cost of the
construction and repair of the
movement for the use of such
TO,, TAX
@emand of
proprietorship
@emand of
Sovereignty
(aid for the use of
another$s property
(aid for the
support of the
government
@epends upon the cost
of the construction or
maintenance of the
public improvement
used
o limit in
terms of its
imposition
Bay be imposed by the
government or private
individuals
'mposed only
by the
government
PENA,T/ -s. TAX
(enalty
-any sanction imposed as a
punishment for violation or acts
deemed injurious
- violation of tax laws may give
rise to the imposition of penalty
PENA,T/ TAX
)egulates conduct )aises revenue
imposed by the
government or private
imposed only
by the
individuals or entities government
SPECIA, ASSESS0ENT -s. TAX
Special assessment
- an enforced proportional
contribution from owners of lands
especially or peculiarly bene*ted
by public improvements
- aka <special levyE
SPECIA,
ASSESS0ENT
TAX
4evied only on land 4evied on
persons and
property
ot a personal
liability of the person
assessed
Bay be a
personal liability
Fased on wholly
bene*ts
Fased on
necessity
:xceptional both as
to the time and place
5eneral
application
RU,E: exemption from taxation does
not include exemption from special
assessment, but the power to tax
carries with it the power to levy a
special assessment
,ICENSE or PER0IT FEE -s. TAX
4icense or permit fee
- is a charge imposed under the
police power for purposes of regulation
,ICENSE or
PER0IT FEE
TAX
(4icense fee) the
legal compensation
or reward of an
o8cer for speci*c
services
:nforced
contribution
assessed by
sovereign
authority to defray
public expenses
9or regulation 9or revenue
4imited to the
necessary
expenses
o limit
'mposed on the
right to exercise a
privilege
'mposed also on
persons and
property
9ailure to pay
makes an act
illegal
9ailure to pay
does not make the
act illegal
DE.T -s. TAX
DE.T TAX
Fased on contract Fased on law
,ssignable 2annot be
generally be
assigned
Subject to set-o>
or compensation
not
o imprisonment
for non-payment
(except when it
arises from a
crime)
'mprisonment is
the sanction for
non-payment
(except poll tax)
5overned by
ordinary periods of
prescription
5overned by
special
prescriptive
periods provided
for in the !ax 2ode
@raws interest
when there is a
stipulation or
default
@oes not draw
interest (except
when delin#uent)
!axes not generally subject to set-o>
- !he general rule, based on
grounds of public policy is well-
settled that no set-o> is
admissible against demands for
taxes levied for general or local
governmental purposes& !he
reason on which the general rule
is based, is that taxes are not in
the nature of contracts between
the party and party but grow out
of a duty to, and are the positive
acts of the government, to the
making and enforcing of which,
the personal consent of individual
taxpayers is not re#uired
()epublic vs& Bambulao, %G1+)
- !axes cannot be subject to
compensation for the simple
reason that the government and
the taxpayer are not creditors and
debtors of each other& !here is a
material distinction between a tax
and debt& @ebts are due to the
5overnment in its corporate
capacity, while taxes are due to
the 5overnment in its sovereign
capacity ((hilex Bining vs& 2'),
%GGH)&
- EXCEPTION: both claims of the
government and the taxpayer
against each other have already
became due and demandable as
well as fully li#uidated
+& !axes for taxes
- 5eneral rule6 so setting-o> of
excess taxes paid against other
taxes payable to the government
- :I2:(!'J6 when taxes were
erroneously or illegally paid (is
such case, the 2'), as authorized
by law, may grant the refund or
credit of taxes)
!ax distinguished from other terms6
Ter&s De1nition As
#istin+uis
!e# fro&
TAX
Subsidy (ecuniary aid
directly granted
by the
government to
an individual or
private
commercial
enterprise
deemed
bene*cial to the
public&
ot a tax
)evenu
e
!he amount
collected
)efers to
the amount
imposed
'nternal
)evenu
e
)efers to taxes
imposed by the
legislature other
than duties on
imports or
exports
'ncluded in
the Scope
of !ax
2ustom
s
@utiesK
@uties
!ax imposed on
goods exported
or imported into
a country
'ncluded in
the Scope
of !ax
!ari> )efers to the
book of rates,
duties payable
on goods,
system or
principle of
imposing duties
on the
importation (or
exportation) of
goods
'ncluded in
the Scope
of !ax
(ower of :minent @omain
- power of the state to take
private property for public use
upon paying to the owner a just
compensation to be ascertained
according to law&
-!axation as an 'mplement of the
(ower of :minent @omain
Tax measures are but
$enforced contributions
exacted on pain of penal
sanctions% and $clearly
imposed for a public
purpose% The &'(
discount !iven to senior
citi)ens on pharmacy
products was considered a
property# in the form of a
supposed pro*t# ta"en from
the dru!store and used for
public use# by means of
!ivin! it directly to
individual senior citi)en +e
it stressed that the
privile!e enjoyed by senior
citi)ens does not come
directly from the ,tate# but
rather from the private
establishments concerned
Accordin!ly# the tax credit
bene*t !ranted to these
establishments can be
deemed as their just
compensation for private
property ta"en by the ,tate
for public use -.I/ vs
.entral 0u)on 1ru! .orp2
(olice (ower
- the power of the state to enact
such laws in relation to persons
and property as may promote
public health, public morals,
public safety and the general
prosperity and welfare of its
inhabitants
DISTINCTIONS
E&ine
nt
Do&ai
n
Poi"e
Po(er
TAXATI
ON
,uthorit
y which
exercise
s the
power
(ublic
service
compan
ies or
public
utilities
5overnment or its
political subdivision
(urpose (ublic
use or
bene*t
(romote
general
welfare
support
of the
governm
ent
(ersons
a>ected
:ntity
or
individu
al as
the
owner
of a
particul
ar
propert
y
community or a
class of entities or
individual
:>ect !here is
a
transfer
of the
right to
o
transfer
or title
but
rather,
Boney
contribut
ed in the
concept
of taxes
propert
y
whethe
r it be
of
owners
hip or
lesser
right
there is
restraint
on the
injurious
use of
property
becomes
part of
the
public
funds
Fene*ts
receive
d
!he
person
a>ecte
d
receive
s the
market
value of
the
propert
y taken
from
him
!he
person
a>ected
receives
no direct
and
immedia
te
bene*t
but only
such as
may
arise
from the
mainten
ance of a
healthy
economi
c
standard
of
society
and is
often
referred
to as
damnum
abs#ue
injuria
(damage
without
injury)
!he
person
receives
the
e#uivale
nt of the
tax in
the form
of
protectio
n and
bene*ts
heKit
receives
from the
governm
ent as
such&
,mount
of
impositi
on
o
amount
impose
d but
rather
the
owner
is paid
that
market
value of
the
propert
y taken
,mount
imposed
should
not be
more
than
su8cient
to cover
the cost
of the
license
and the
necessar
y
expense
s
o limit
)elation
ship to
the
2onstitu
'nferior
to the
impair
ment of
9ree
from
constitut
ional
Subject
to
certain
constitut
tion contrac
ts
prohibit
ion so
that the
govern
ment
cannot
expropr
iate
propert
y which
under a
contrac
t it had
previou
sly
bound
itself to
purchas
e from
the
other
contrac
ting
party
limitatio
ns and is
superior
to the
impairm
ent
provision
s
ional
limitatio
ns
including
the
prohibiti
on
against
the
impairm
ent of
contracts
(ublic 9inance
-covers taxation
- refers to the *nancial operations
of all levels of government