Notes on Taxation

INHERENT POWER OF GOVT

1. Power of Taxation
2. Power of Eminent Domain - power to expropriate private property for public purpose
3. Police power - to promote general welfare of the people by limiting or regulating right

TAXATION - inherent power of the State to exact and enforced contribution upon persons, properties, or
right for the purpose of generating revenues.

SCOPE OF TAXATION
The coverage of the power of Taxation is plenary or unlimited, comprehensive and supreme and is restricted
only by the constitutional and inherent limitations.

NATURE OF TAX LAWS

-not political in nature
-deemed civil in nature, not penal in nature

The NATIONAL INTERNAL REVENUE CODE, being a special law, prevails over general law.

BASIC PRINCIPLES OF SOUND TAX SYSTEM

1. FISCAL ADEQUACY - sources of revenues as a whole must be adequate to meet the expenditures of the
govt. Revenues should be elastic.

2. EQUALITY OF THEORITICAL JUSTICE - there must be equitable or proportionate distribution of the tax
burden.

3. ADMINISTRATIVE FEASIBILITY - tax laws must be capable of reasonable and convenient enforcement, just
and effective administration.

TAX - refers to the enforced burden or mandatory contribution imposed by the government based on its
power of Taxation upon persons, properties, or right.

ESSENTIAL CHARACTERISTICS OF TAX:

1. It is an enforced contribution
2. It is legislative in nature
3. It is imposed in accordance with our based on law
4. It is imposed for public purpose
5. It is proportionate in character
6. It is generally paid in money or cash
7. It is paid in regular intervals
8. it is imposed upon persons, properties, or rights
9. it is imposed top raise government revenues

CLASSIFICATION OF TAXES

1. AS TO SUBJECT MATTER

*PERSONAL TAX, CAPITATION TAX, OR POLL TAX - fixed amounts of taxes imposed upon certain classes of
persons, or upon persons residing within territorial jurisdiction of the State regardless of their property,
professions, or occupations. EXAMPLE: COMMUNITY TAX

*PROPERTY TAX - imposed upon taxpayer's property, real or personal, situated within the territorial
jurisdiction of the State EXAMPLE: REAL PROPERTY TAX

*EXCISE TAX OR PRIVILEGE TAX - tax on performing an act or engaging in an occupation. EXAMPLE: DONOR'S
TAX, INCOME TAX

2. AS TO SCOPE OR AUTHORITY

*NATIONAL TAX - taxes imposed by the national govt, enforced by the BIR or BOC. EXAMPLE: CORPORATE
INCOME TAX, CUSTOMS DUTIES AND TARIFF

*LOCAL TAX - imposed by the local govt. EXAMPLE: REAL ESTATE TAX, COMMUNITY TAX

3. AS TO PURPOSE

*GENERAL TAX - imposed for general purposes, proceeds go to the national funds. EXAMPLE: ESTATE TAX

*SPECIAL TAX - for special purposes. EXAMPLE: GASOLINE TAX

4. AS TO LIABILITIES

*DIRECT TAX - imposed upon persons directly bound to pay the tax which cannot be parsed to other person
for payment. EXAMPLE: INCOME TAXES

*INDIRECT TAX - imposed upon persons liable to pay said taxes but which are permitted by law to be shifted
offer passed. EXAMPLE: VALUE ADDED TAX

5. AS TO DETERMINATION OF AMOUNTS

*SPECIFIC TAX - imposed upon property or rights which amount after determined based on weight or volume
capacity or any physical unit of measurement. EXAMPLE: EXCISE TAX ON LIQUORS AND CIGARETTE
*AD VALOREM TAX - based on sales price or other specified values of properties. EXAMPLE: VALUE ADDED
TAX

6. AS TO GRADUATION OR RATES

*PROGRESSIVE OR GRADUATED TAX - amount of tax increases as the bracket increases

*REGRESSIVE TAX - tax decreases as the bracket increases. To encourage people to earn more.

*PROPORTIONATE TAX - maybe higher or lower depending upon bracket or classification.

TOLL - refers to the compensation charged by the owner for the use of his property and improvements.

TAX SITUS OR PLACE OF TAXATION

-refers to the territorial jurisdiction of the govt where it has the authority to impose its Taxation power which
is to levy and collect taxes.

PLACE OF TAXATION DEPENDS ON FOLLOWING FACTORS:

-domicile or residence of the person

-citizenship or nationality of the person
-location or source of income, property, or right

1. PERSONS - poll tax may be levied yon persons who are inhabitants or residents of the State whether
citizens or not.
2. REAL PROPERTY - subject to taxation in the state where it is located, whether owner is as resident or non-
resident.
3. TANGIBLE PERSONAL PROPERTY - there modern rule is that a tangible personal property is taxable where it
had actual situs, where it is physically located, although owner resides in another jurisdiction.
4. INTANGIBLE PERSONAL PROPERTY - examples of intangible personal property are cash, money, credit, bills,
receivable, bank deposits, bonds, promissory notes, mortgage loans, judgment and corporate stocks, does
not admit actual location, domicile of the owner.
5. INCOME - may be properly exacted from persons who are residents offer citizens in the taxing jurisdiction
and even those who are neither residents BIR citizens provided that income is derived within the taxing state
6. BUSINESS, OCCUPATION, AND TRANSACTION - general rule is that the power to levy excise tax depends
upon the place where the business is done or where the occupation is engaged in, or where the transaction
took place.
7. GRATUITOUS TRANSFER OF PROPERTY - transmission of property for without consideration may be subject
to taxation in the state where the transferor is a citizen or a resident or where the property is located.

PHASES OR ASPECTS OF TAXATION

1. LEVYING OR IMPOSITION OF TAX - legislative process of determining the persons etc to be taxed
2. ASSESSMENT AND COLLECTION OF TAX - manners or procedures of enforcing the tax obligations of the
taxpayers.
INTERNATIONAL COMITY - refers to the fundamental rule of taxation that no law shall be passed to imposed
Taxation on the property owned by foreign government or sovereignty.

CLASSIFICATIONS OF TAX ESCAPES:

1. TAX CREDIT
2. TAX EXEMPTIONS
*EXPRESS OR AFFIRMATIVE TAX EXEMPTIONS
*OMISSION OR IMPLIED TAX EXEMPTIONS
3. TAX EVASION OR TAX DODGING
4. TAX AVOIDANCE
5. TAX SHIFTING