INCOME TA X A TION

1ST SEMESTER 2019-2020

PRINCIPLE OF TAXATION
*SCOPE OF TAXATION
• DEFINITION OF TAXATION
*LIMITATIONS OF THE POWER TO TAX
• NATURE OF TAXATION
*PRINCIPLES OF SOUND TAX SYSTEM
• INHERENT POWERS OF TAXATION
• PURPOSES OF TAXATION *SITUS OF TAXATION

• BASES OF TAXATION *DEFINITION OF TAXES

• STAGES OF TAXATION *CHARACTERISTICS OF TAXES

 DEFINITION OF TAXATION
A PROCESS OR ACT OF IMPOSING A CHARGE BY GOVERNMENTAL
AUTHORITY ON PROPERTY, INDIVIDUALS OR TRANSACTIONS TO
RAISE MONEY FOR PUBLIC PURPOSES.
A POWER BY WHICH AN INDEPENDENT STATE, THROUGH ITS LAW-
MAKING BODY, RAISES AND ACCUMULATES REVENUE FROM ITS
INHABITANTS TO PAY THE NECESSARY EXPENSES OF THE
GOVERNMENT.
A MEANS BY WHICH THE SOVEREIGN THROUGH ITS LAW-MAKING
BODY DEMANDS FOR REVENUE IN ORDER TO SUPPORT ITS
EXISTENCE AND CARRY OUT ITS LEGITIMATE OBJECTIVES.
NATURE OF TAXATION
INHERENT POWER OF SOVEREIGNTY
ESSENTIALLY A LEGISLATIVE FUNCTION
FOR PUBLIC PURPOSES
IT IS COMPREHENSIVE, UNLIMITED, PLENARY, SUPREME
TERRITORIAL IN OPERATION
SUBJECT TO CONSTITUTIONAL LAND INHERENT LIMITATIONS
INHERENT POWERS OF THE SOVEREIGN
STATE

• TAXATION POWER
• POLICE POWER
• POWER OF EMINENT DOMAIN
INHERENT POWERS OF THE SOVEREIGN
STATE

• POLICE POWER IS THE POWER TO ENACT LAWS TO PROMOTE

THE GENERAL WELFARE OF THE PEOPLE.

• EMINENT DOMAIN IS THE POWER TO TAKE PRIVATE PROPERTIES

FOR PUBLIC USE WITH DUE PROCESS AND JUST COMPENSATION.
 PURPOSES OF TAXATION
REVENUE PURPOSE
TO DEFRAY THE NECESSARY EXPENSES OF THE GOVERNMENT
REGULATORY PURPOSE
 TO REGULATE INFLATION
 TO ACHIEVE ECONOMIC AND SOCIAL STABILITY
 TO SERVE AS KEY INSTRUMENT FOR SOCIAL CONTROL
COMPENSATORY PURPOSE
 FOR THE EQUITABLE DISTRIBUTION OF WEALTH AND INCOME IN SOCIETY
 AS A TOOL AND WEAPON IN INTERNATIONAL RELATIONS
BASES OF TAXATION

• BASED ON NECESSITY
• BASED ON RECIPROCAL DUTIES OF PROTECTION AND
SUPPORT BETWEEN THE STATE AND ITS INHABITANTS.
STAGES OR PROCESS OF TAXATION

• LEVY OR IMPOSITION
• ASSESSMENT AND COLLECTION
• PAYMENT
SCOPE OF TAXATION
SCSCOPE OF TAXATION

• COMPREHENSIVE
• UNLIMITED
• PLENARY
• SUPREME
INHERENT LIMITATIONS

• TERRITORIALITY OF TAXATION
• INTERNATIONAL COMITY
• PUBLIC PURPOSE
• EXEMPTION OF THE GOVERNMENT
• NON-DELEGATION OF THE TAXING POWER
CONSTITUTIONAL
LIMITATIONS
• DUE PROCESS OF LAW
• EQUAL PROTECTION OF THE LAW
• UNIFORMITY RULE IN TAXATION
• PROGRESSIVE SYSTEM OF TAXATION
• NON-IMPRISONMENT FOR NON-PAYMENT OF DEBT OR
POLL TAX
CONSTITUTIONAL
LIMITATIONS
• NON-IMPAIRMENT OF OBLIGATION AND CONTRACT
• EXEMPTION OF RELIGIOUS OR CHARITABLE ENTITIES, NON-
PROFIT CEMETERIES, CHURCHES AND MOSQUE FROM
PROPERTY TAXES
• NON-APPROPRIATION OF PUBLIC FUNDS OR PROPERTY FOR
THE BENEFIT OF ANY CHURCH, SECT OR SYSTEM OF RELIGION
• NON-IMPAIRMENT OF SUPREME COURT JURISDICTION
PRINCIPLES OF A SOUND TAX
SYSTEM
• FISCAL ADEQUACY – THE SOURCES OF REVENUE OF
THE GOVERNMENT SHOULD BE SUFFICIENT TO MEET
THE DEMAND OF PUBLIC EXPENDITURES.
• EQUALITY OR THEORETICAL JUSTICE – TAX BURDEN
MUST BE PROPORTIONATE TO THE TAXPAYER’S ABILITY
TO PAY.
• ADMINISTRATIVE FEASIBILITY – TAX LAW MUST BE
CAPABLE TO CONVENIENT, JUST AND EFFECTIVE
ADMINISTRATION (FREE FROM CONFUSION AND
UNCERTAINTY)
SITUS OF TAXATION
• PERSONS (PLACE OF RESIDENCE)
• REAL PROPERTY (LOCATION OF THE PROPERTY)
• TANGIBLE PERSONAL PROPERTY (LOCATION)
• INTANGIBLE PERSONAL PROPERTY (RESIDENCE OF OWNER EXCEPT
WHEN THE PROPERTY ACQUIRES SITUS OF ITS OWN)
• INCOME (WHERE IT IS EARNED)
• BUSINESS, TRANSACTIONS, OCCUPATION (WHERE IT HAPPENED)
DEFINITION OF TAXES
• TAXES ARE THE LIFEBLOOD OF THE GOVERNMENT WHICH
ARE AN ENFORCED CONTRIBUTION EXPECTED FROM THE
PEOPLE, PAYABLE IN MONEY AND PROPORTIONATE IN
CHARACTER WHICH ARE LEVIED BY THE LAW-MAKING
BODY OF THE STATE ON PERSONS, PROPERTY AND
TRANSACTIONS FOR PUBLIC PURPOSE.
 CHARACTERISTICS OF TAXES
• 1. IT IS AN ENFORCED CONTRIBUTION.
• 2. IT IS GENERALLY PAYABLE IN MONEY.
• 3. IT IS PROPORTIONATE IN CHARACTER.
• 4. IT IS LEVIED ON PERSONS, PROPERTY, OR THE EXERCISE OF A RIGHT OR PRIVILEGE.
• 5. IT IS LEVIED BY THE LAW-MAKING BODY OF THE STATE.
• 6. IT IS LEVIED FOR PUBLIC PURPOSE.
CLASSIFICATION OF TAXES ACCORDING TO

1. SUBJECT MATTER
2. WHO BEARS THE BURDEN
3. AUTHORITY
4. PURPOSE
5. DETERMINATION OF AMOUNT
6. GRADUATION OR RATE
TAX DISTINGUISHED FROM OTHER TERMS
• TAX VS TOLL
• TAX VS PENALTY
• TAX VS SPECIAL ASSESSMENT
• TAX VS REVENUE
• TAX VS SUBSIDY
• TAX VS PERMIT OR LICENSE
• TAX VS CUSTOM DUTIES
DOUBLE TAXATION

• DIRECT DOUBLE TAXATION MEANS TAXING TWICE (1) BY THE SAME TAXING
AUTHORITY, JURISDICTION OR TAXING DISTRICT (2) FOR THE SAME
PURPOSE (3) IN TE SAME YEAR OR TAXING PERIOD (4)SAME SUBJECT OR
OBJECT (5) SAME KIND/CHARACTER OF THE TAX.
 MEANS OF AVOIDING OR MINIMIZING THE
BURDEN OF TAX
• 1. SHIFTING
• 2. TRANSFORMATION
• 3. EVASION
• 4. AVOIDANCE
• 5. CAPITALIZATION
• 6. . EXEMPTION
KINDS OF EXEMPTION
• AS TO BASIS
• CONSTITUTIONAL
• STATUTORY
• AS TO FORM
• EXPRESS
• IMPLIED
• AS TO EXTENT
• TOTAL
• PARTIAL
SOURCES OF TAX LAW
• 1. CONSTITUTION
• 2. NATIONAL INTERNAL REVENUE CODE
• 3. TARIFF AND CUSTOMS CODE
• 4. LOCAL GOVERNMENT CODE
• 5. LOCAL TAX ORDINANCES
SOURCES OF TAX LAWS

• 6. TAX TREATIES AND INTERNATIONAL AGREEMENT

• 7. SPECIAL LAWS
• 8. DECISIONS OF THE SUPREME COURT AND COURT OF TAX APPEALS
• 9. REVENUE REGULATIONS AND ADMINISTRATIVE RULINGS AND OPINIONS
CONSTRUCTION OF TAX LAWS
• PUBLIC PURPOSE IS ALWAYS PRESUMED.
• IF THE LAW IS CLEAR, APPLY THE LAW IN ACCORDANCE TO ITS PLAIN AND
SIMPLE TENOR.
• A STATUTE WILL NOT BE CONSTRUED AS IMPOSING TAX UNLESS IT DOES
SO CLEARLY, EXPRESSLY AND UNAMBIGUOUSLY.
• PROVISIONS OF A TAXING ACT ARE NOT TO BE EXTENDED BY IMPLICATION.
CONSTRUCTION OF TAX LAWS
• IN CASE OF DOUBT, IT IS CONSTRUED MOST STRONGLY AGAINST THE
GOVERNMENT, AND LIBERALLY IN FAVOR OF THE TAXPAYER.
• TAX LAWS OPERATE PROSPECTIVELY UNLESS THE PURPOSE OF THE
LEGISLATURE TO GIVE RETROSPECTIVE EFFECT IS EXPRESSLY DECLARED OR
MAY BE IMPLIED FROM THE LANGUAGE USED.
• TAX LAWS ARE SPECIAL LAWS AND PREVAIL OVER A GENERAL LAW.
POWER OF THE BIR COMMISSIONER
• POWER OF THE COMMISSIONER TO INTERPRET TAX LAWS AND TO DECIDE TAX
CASES.
• POWER OF THE COMMISSIONER TO OBTAIN INFORMATION, AND TO SUMMON,
EXAMINE, AND TAKE TESTIMONY OF PERSONS.
• POWER OF THE COMMISSIONER TO MAKE ASSESSMENTS AND PRESCRIBE
ADDITIONAL REQUIREMENTS FOR TAX ADMINISTRATION AND ENFORCEMENT .

•AUTHORITY OF THE COMMISSIONER TO DELEGATE POWER.