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GROUP 3

TAXATION
PRESENTATION OUTLINE Group 3

Principle of Taxation
Purposes and Objectives of Taxation Ms. Elenita Esmero

Revenue Design and


Taxation Structure Mr. Albert Jerome Casihan

Kinds of Philippine Taxes


Tax Remedies Ms. Ma. Rossana Fariñas

2
&
Principle of Taxation
Purposes and Objectives of Taxation
TAXATION is defined as:

• Inherent power of the sovereign exercised thru the


legislature

• imposes burdens upon the subject and object within its


jurisdiction

• raising revenues to carry out the legitimate objectives of the


government
Purposes of Taxation
Revenue Objective
• to raise funds/revenue to meet the objectives of the government

Non-Revenue Objectives
• Sumptuary or regulatory - to promote the general welfare;

• Compensatory - to maintain high level of employment thru the


acceleration of infrastructure projects
Theory of Taxation
“LIFE BLOOD THEORY”

• Tax acts as the blood which supports government and state

• Without revenue raised from taxation, the government will not


survive, resulting in detriment to society
Basis of Taxation
“BENEFIT-RECEIVED PRINCIPLE” (Symbiotic Relationship)

• reciprocal duties of protection and support between the state and


its people / taxpayers
Essential Characteristics of Tax
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 or property
5. It is levied by the state which has jurisdiction over the person or
property
6. It is levied by the law-making body of the state
7. It is levied for public purpose
Canons of Taxation
PRINCIPLES OF A SOUND TAX SYSTEM
1. FISCAL ADEQUACY
- the sources of revenue should be sufficient to meet the demands
of public expenditures

2. EQUALITY / THEORETICAL JUSTICE


- tax burden should be in proportion to the taxpayer’s ability to pay
3. ADMINISTRATIVE FEASIBILITY
• - tax laws should be capable of convenient, just and effective
administration
FOUR R’s OF TAXATION
Revenue

Redistribution

Repricing

Representation
LIMITATIONS OF TAXATION
• Inherent limitations – restrictions on the power exists from the very
nature of the power of taxation itself.

• Constitutional limitations – restrictions in the exercise of the power


of taxation as expressly provided in the Philippine Constitution.
HISTORY OF TAXATION
The first known system of taxation was in Ancient Egypt around 3000
BC - 2800 BC in the first dynasty of the Old Kingdom.

• In Biblical times, tax is already prevalent.


According to Genesis 47:24:
"But when the crop comes in, give a fifth of it to Pharaoh. The
other four-fifths you may keep as seed for the fields and as food
for yourselves and your households and your children"
HISTORY OF TAXATION
• Reign of Egyptian Pharaohs
- Pharaoh would conduct a biennial tour of the kingdom

• Earliest taxes in Rome are called as portoria were customs duties on


imports and exports
- Augustus Caesar introduced the inheritance tax to provide
retirement funds for the military.

• In England
- Taxes were first used as an emergency measure
HISTORY OF TAXATION IN THE PHILIPPINES
• The pre-colonial society, being communitarian, did not have taxes.
HISTORY OF TAXATION IN THE PHILIPPINES
During the Spanish Period, new income generating means were
introduced by the government such as the :
• Manila-Acapulco Galleon Trade
• Polo Y Servicio (Forced Labor)
• Bandala
• Encomienda System
• Tribute
THE PHILIPPINE TAX SYSTEM
Tax law in the Philippines covers:

• National taxes

• Local taxes
National Taxes
• Documentary Stamp Tax
• Donor’s Tax
• Estate Tax
• Excise Tax
• Percentage Tax
• Value Added Tax (VAT)
• Withholding Tax on Compensation
Local Taxes
• Real Property Tax
• Franchise Tax
• Business of Printing and Publication Tax
• Professional Tax
• Amusement Tax
• Community Tax
• Annual Fixed Tax for Delivery Trucks and Vans
• Barangay Tax
• Barangay Clearance
ASPECTS OF TAXATION
1. Levying / imposition of tax (Legislative function)
ASPECTS OF TAXATION
2. Assessment and collection of tax (Executive function)
CLASSIFICATION OF TAXES
• As to subject matter or object
 Personal, poll or capitation (community tax)
Property (real state tax)
Excise (income tax, VAT, donor’s tax)

• As to who bears the burden


Direct (corporate & individual income yaxes, CTC, estate tax,
donor’s tax)
Indirect (VAT)
CLASSIFICATION OF TAXES
• As to determination of amount
Specific tax (taxes on distilled spirits, wines)
Ad valorem (property tax, sales tax, VAT)

• As to purpose
General, fiscal or revenue
WHO PAYS TAXES
1. Individuals
a. Resident Citizen
b. Non-resident Citizen
c. Resident Aliens
d. Non-resident Aliens
2. Corporations
a. Domestic Corporations
b. Foreign Corporations
3. Estate under judicial settlement
4. Trusts irrevocable both as to the trust property and as to the income.
CONCLUSION
It is said that taxes are what we pay for civilized society. Without
taxes, the government would be paralyzed for lack of motive power to
activate and operate it. Hence, despite the natural reluctance to
surrender part of one’s hard earned income to the taxing authorities,
every person who is able to must contribute his share in the running of
the government.
Thank You!
Revenue Design
& Taxation Structure
INTRODUCTION
What is a Revenue Design?
A revenue design is a framework for generating revenues. It
identifies which revenue source to pursue, what value to offer, how
to price the value, and who pays for the value.

What is a Taxation Structure?


Is a proposed system for the collection of taxes by a central
revenue service.
Taxation is a tool commonly used by government as a means of
redistributing income amongst its citizens.
How Policy Makers create a
TAXATION STRUCTURE?
3 Types of Taxation
Systems
3 Objectives of Tax System
#1 To raise revenue to fund government operations.

#2 To assist in the redistribution of wealth and/or income.

#3 To encourage or discourage certain activities through the


use of tax provisions.
3 Objectives of Tax System
#1 To raise revenue to fund government operations.

#2 To assist in the redistribution of wealth and/or income.

#3 To encourage or discourage certain activities through the


use of tax provisions.
Sin Tax” expands health coverage in the Philippines

New taxes on tobacco and alcohol enable the poorest


and most vulnerable Filipinos to obtain health services.

The Sin Tax increased taxes on all


tobacco and alcohol projects,
providing a new injection of funding
that enabled the Philippine
Government to enroll more people
in universal health care and scale-
up NCD prevention services in
primary care.

Source: WHO
3 Objectives of Tax Systems
#1 To raise revenue to fund government operations.

#2 To assist in the redistribution of wealth and/or income.

#3 To encourage or discourage certain activities through the


use of tax provisions.
3 Objectives of Tax Systems
#1 To raise revenue to fund government operations.

#2 To assist in the redistribution of wealth and/or income.

#3 To encourage or discourage certain activities through the


use of tax provisions.
THE PHILIPPINE TAX SYSTEM
Tax System in the Philippines covers national and local taxes.

National taxes refer to national internal revenue taxes imposed


and collected by the national government through the Bureau
of Internal Revenue (BIR) and;

Local taxes refer to those imposed and collected by the local


government.

The 1987 Philippine Constitution sets limitations on the exercise


of the power to tax. The rule of taxation shall be uniform and
equitable. The Congress shall evolve a progressive system of
taxation. (Article VI, Section 28, Paragraph 1).
Criteria for Evaluating Taxes

EFFICIENCY

FAIRNESS

ADMINISTRATIVE FEASIBILITY
TAX REVENUE OF THE PHILIPPINES
THANK YOU
Kinds of Philippine Taxes
& Tax Remedies
Train Law
• President Rodrigo Roa Duterte signed into law Republic Act No.
10963, otherwise known as the Tax Reform for Acceleration and
Inclusion (TRAIN) Act, the first package of the Comprehensive Tax
Reform Program (CTRP), on December 19, 2017 in Malacanang.
PROS and CONS of Train law
• PROS • CONS
Simplified and fairer Tax System Increased prices of products and
Few income tax brackets, and other services
increase in income and bonus tx Increased tax on documentary
threshold stamp tax, dollar deposit, pre-
Fixed and lower rate on Estate, terminated long term time
Donor and Value Added Tax deposit, sale on stock
transaction
Packages the Department of Finance
proposed to Congress:

Package 1: Train
Package 1B: Tax Amnesty
Package 2: Corporate Income Tax and Incentives
Package 2+: Sin Taxes and Mining Taxes
Package 3: Real Property Valuation Taxes
Package 4: Passive Income and Financial
Personal Income tax is a tax that governments impose on income
generated by businesses and individuals within their jurisdiction.
By law, taxpayers must file an income tax return annually to
determine their tax obligations. Income taxes are a source of
revenue for governments. They are used to fund public services,
pay government obligations, and provide goods for citizens.
SAMPLE COMPUTATION OF TAX

GRADE 18

Monthly Salary 40,637.00 x 12 mos 487,644.00 Personal Exemption:P50,000.00

OTHER BENEFITS Allowance for children: (0 x P25,000.00= P0)

14th month pay 40,637.00 40,637.00

13th month pay 40,637.00 40,637.00

Hazard Pay 10,159.25 x 12 mos 121,911.00

Longevity Pay 2,031.85 x 12 mos 24,382.20

C.N.A. Incentive 25,000.00 25,000.00

Deduction non-taxable

GSIS 3,657.33 x 12 mos 43,887.96

PHIC 543.42 x 12 mos 6,521.01

Pag-ibig 100.00 x 12 mos 1,200.00

Union dues 50.00 x 12 mos 600.00


New Law Computation: Old Tax Computation:

Total Salary 487,644.00 487,644.00


less:deduction:
GSIS 43,887.96 GSIS 43,887.96
PHIC 6,521.01 PHIC 6,521.01
Pag-ibig 1,200.00 Pag-ibig 1,200.00
Union dues 600.00 52,208.97 Union dues 600.00 52,208.97
Gross Income 435,435.03 Gross Income 435,435.03
Other Benefit: Other Benefit:

14th month pay 40,637.00 14th month pay 40,637.00

13th month pay 40,637.00 13th month pay 40,637.00

Hazard Pay 121,911.00 Hazard Pay 121,911.00

Longevity Pay 24,382.20 Longevity Pay 24,382.20

C.N.A. Incentive 25,000.00 C.N.A. Incentive 25,000.00


Total 252,567.20 Total 252,567.20

less:Exemption of 90,000.00 less:Exemption of 82,000.00

Total taxable benefit 162,567.20 Personal Exemption: 50,000.00


TOTAL TAXABLE INCOME 598,002.23 Total taxable benefit 120,567.20
TOTAL TAXABLE INCOME 556,002.23
computation of tax due
net taxable income 598,002.23 computation of tax due
less: 400,000.00 net taxable income 556,002.23
198,002.23 less: 500,000.00
(25% x 198,002.23) 49,500.56 56,002.23

add: 30,000.00 (Income Tax bracket is P500,000.00) x 32%


Tax Due 79,500.56 Total 17,920.71

add:(Income tax bracket is P500K) 125,000.00


Tax due 142,920.71
Estate tax – a tax levied on the net value of the estate of a deceased person
before distribution to the heirs whether resident or non-resident of the
Philippines

Amendments of the Estate Tax:


OLD TAX: NEW TAX:
Allowable deduction: Allowable deduction:
Family Home 1,000,000.00 Family Home 10,000,000.00
Standard deduction:
P5,000,000.00
Estate Tax Table:
Over But not over The tax shall Plus
be
P200,000.00 exempt

200,000.00 550,000.00 5%
Estate tax shall be subject to an
estate tax of 6%
550,000.00 2,000,000.00 15,000.00 8%

5,000,000.00 10,000,000.00 135,000.00 15%

10,000,000.00 And over 1,215,000.00 20%


Decedent is unmarried, family home
more than P10,000,000:
Real and personal properties P 14,000,000

Family Home 30,000,000


Gross Estate P44,000,000

Less: Deductions
Ordinary Deductions
Unpaid real estate tax -2,000,000

Special Deductions
Family Home -10,000,000
Standard Deduction -5,000,000
Total Deductions -17,000,000

NET TAXABLE ESTATE P27,000,000

Old Tax: New Tax:


Tax due: P10,000,000.00= 1,215,000.00 Tax Due: P27,000,000.00 x 6%= P1,620,000.00
P17,000,000 x 20%= 3,400,000.00
Total Tax Due: P 4,615,000.00
(3) Decedent is married, the family
home exclusive property, more than
P10,000,000:
Exclusive Conjugal Total
Conjugal Properties:
Real and personal properties 14,000,000 14,000,000
Exclusive Properties:
Family Home P30,000,000 P30,000,000
Gross Estate 30,000,000 14,000,000 P44,000,000

Less:
Ordinary Deductions
Conjugal Ordinary Deductions -2,000,000 -2,000,000
Net Conjugal Estate 12,000,000
Special Deductions
Family Home -10,000,000
Standard Deduction -5,000,000
Total Deductions -17,000,000

Net Estate 27,000,000


Less: 1/2 Share of Surviving Spouse -6,000,000
Spouse
Conjugal Property P14,000,000
Conjugal Deductions (2,000000)
Net Conjugal Estate P12,000,000
(P12M/2)
NET TAXABLE ESTATE P21,000,000

Old Tax: New Tax:


Tax due: P10,000,000.00= 1,215,000.00 Tax due: P21,000,000.00x 6%= P1,260,000.00
P11,000,000 x 20%= 2,200,000.00
Total Tax Due: P 3,415,000.00
Donor’s tax- is imposed upon any person, natural or
juridical, resident or non-resident whose transfer or
causes to transfer by gift or donation, whether direct or
indirect in trust or otherwise, real, personal, tangible,
intangible property.
Donor’s Tax Table:
If donee is relative:
Tax Due
Over But Not Over Exempt Plus of Excess Over

100,000.00 Exempt

100,000.00 200,000.00 0 2% 100,000.00

200,000.00 500,000.00 2,000.00 4% 200,000.00


6% on the basis of the total gifts
500,000.00 1,000,000.00 14,000.00 6% 500,000.00
in excess of P250,000.00 exempt
gift during the calendar year
1,000,000.00 3,000,000.00 44,000.00 8% 1,000,000.00

3,000,000.00 5,000,000.00 204,000.00 10% 3,000,000.00

5,000,000.00 10,000,000.00 404,000.00 12% 5,000,000.00

10,000,000.00 and above 1,004,000.00 15% 10,000,000.00


If donee is stanger 30% of the net gift
How much is the donor’s tax due on
these donations?
Date of donation Amount Donor's Tax
1. January 30, 2018 P2,000,000
January 30, 2018 donation 2,000,000
Less: Exempt Gift -250,000
Tax Due / Payable on the January Donation = 1,750,000 P105,000

2. March 30, 2018 1,000,000


March 30, 2018 donation 1,000,000
Add: January 30, 2018 donation 2,000,000
Less: Exempt Gift -250,000
Total = 2,750,000

Tax Due Thereon 165,000


Less: Tax due/paid on January donation 105,000

Tax Due / Payable on the March Donation 60,000


What is VAT?
VAT (Value Added Tax)- is a from of sales tax. It is a tax on consumption levied on
the sale, barter exchange or lease of goods and properties and services in the
Philippines and on importation of good into the Philippines.

What are VATable and VAT-exempt items under the TRAIN Law implemented
starting 2018?

Products and services that are VAT-exempt:


Food and agricultural products
Senior citizens
Persons with Disability (PWD)
Cooperatives
Tourism
Education
Renewable energy
Health
Enterprises and BPOs located in Special Economic Zones
Condominium association dues
Rentals and leases below P15,000 per month
Additional exemption:

Houses that cost P3M or less


Socialized housing priced around P450,000.00 or lower(government or privately
own housing projects meant for the homeless and low-income citizens
Diabetes,cholesterol, and hypertension medicines(the VAT exemption for these
will apply on 2019
What are the types of VAT and TAX Rate

1. VATable 12%
 On Sale of goods and properties-12% of the gross selling price on gross value in
money of the goods or properties sold, bartered or exchanged

 On sale of services and user or lease of properties -12% of gross receipts derived
from the sale or exchange of services, including the use of lease or properties.

 On importation of goods -12% based on the total value used by the Bureau of
Customs in determining tariiff and customs duties

 On export sales and other zero-rated sales 0%


What is Excise Tax?

An excise tax is an indirect tax, usually paid by the manufacturer or retailer of the
product, then passed along in the price of the product to the consumer. For
instance, goods such as cigarettes and alcohol are often taxed by the state or local
authority, at a flat rate per item. This tax is added into the retail price, making it
somewhat of a hidden tax, ultimately paid by the end user of the product.
Excise tax on Automobile
OLD RATE NEW RATE

Net Manufacturer's
Price/Importer's selling Net Manufacturer's
Price/Importer's selling Price Tax Rate
Price Tax Rate
Up to 600K 4%
Up to 600K 2%
Over 600K to 1.M 10%

Over 1 M to 4M 20%
Over 600K to 1.1M P12,000 +20%
Over 4M 50%
Over 1.1 M to 2.1M P112,000 +40%
Hybrid vehicles 50% of the regular rate

Purely electric vehicles, pick-


Over 2.1M P512,000 +60% up exempt
Excise Tax on Cigarettes or Sin Tax Law
OLD RATE NEW RATE

Effectivity Date Tax Rate Effectivity Date Tax Rate


Jan 2017 P30.00 per pack Jan 2018 to June 30,2018 P32.50
Jan 2018 a 4% increase every yeat July 1,2018 to Dec 31,2019 P35.00
Jan 1,2020 to Dec 31,2021 P37.50
Jan 1,2022 to Dec 31,2023 P40.00
and a 4% increase every year starting Jan 2024
Excise Tax on Manufactured Oils and Fuels
2017 2018 2019 2020
P4.50 Lubricating oils and greases(/L or /kg) P8.00 P9.00 P10.00
P.05 Processes gas (/L) P8.00 P9.00 P10.00
P3.50 Waxes and petrolatum (/kg) P8.00 P9.00 P10.00

P.05 Denatured alcohol for motive power(/L) P8.00 P9.00 P10.00

P4.35(excluding Naphtha, regular gasoline, pyrolysis gasoline


Pyrolysis gasoline) and other similar products of distillation (/L) P7.00 P9.00 P10.00

Production of petroleum products, whether or


subject to applicable not as products of distillation and for use
excise tax rate solely for production of gasoline exempt exempt exempt
P4.35 Unleaded premuim (/L) P7.00 P9.00 P10.00
P3.67 Aviation turbo jet fuel (/L) P4.00 P4.00 P4.00
P.00 Kerosene (/L) P3.00 P4.00 P5.00
Diesel (/L) P2.50 P4.50 P6.00

P.00 Liquefied Petroleum Gas (/kg) P1.00 P2.00 P3.00


P.56 Asphalts(/kg) P8.00 P9.00 P10.00
P.00 Bunker (/L) P2.50 P4.50 P6.00

n/a Petroleum coke (/ton) P2.50 P4.50 P6.00