TAXATIO

N
Avecilla, Eunice. M.
Banjaon, Jan Trace A.
BASIC PRINCIPLE OF TAXATION

TAXATION
is the power by which the sovereign
raises revenue to defray the
necessary expenses of the
government from among those who in
some measure are privileged to enjoy
its benefits and must bear its burden.
BASIC PRINCIPLE OF TAXATION

TAXATION
Tax is the enforced proportional
contribution from persons and the
properties levied by the State by
virtue of its sovereignty for the
support of government and for public
needs.
N 1. It is inherent in sovereignty
A - it is essential to the existence of
every government.
T 2. It is legislative in character
U - the power to tax is pecuniary and
R exclusively vested to the Congress.

E 3. It is subject to limitations -
inherent and constitutional.
S 1. The levy of tax is essentially for
public purpose.
C
O 2. The subjects or objects to be
taxed may be persons (natural or
P juridical) or property (real or personal,
tangible or intangible. The following
E may be included as subject/object:
business, transaction, rights or
privileges.
 3. The amount and rate of
S tax, which shall be uniform
C and equitable.
O 4. The manner and mode of
enforcement and collection
P 5. The situs of taxation -
E may be exercised only within
the territorial jurisdiction of the
taxing authority
C
H
A 1. It is an enforced
R
A contribution
C
T 2. It is proportionate in
E character
R
I 3. It is levied by the law-
S
T
making body of the state
I 4. It is levied for public
C
S purpose or purposes
C
H
A
R
A
C 5. It is generally payable in
T
E
money
R 6. It is levied on persons
I
S and property by the State
T which has jurisdiction.
I
C
S
PRINCIPLES OF SOUND TAX SYSTEM

• Fiscal adequacy
- the source of revenue should be
sufficient to meet the demands of
public expenditure.
• Theoretical Justice - the burden
should be in proportion of the
taxpayer's ability to pay.
PRINCIPLES OF SOUND TAX SYSTEM

• Administrative Feasibility - it
should be capable of being enforced;
not burdensome; convenient as to
time and manner of payment.
LIMITATIONS (INHERENT)

1. Public purpose
2. Non-delegability of legislative
taxing power
3. Exemption of Government
Agencies/Instrumentalities exercising
essential governmental function.
LIMITATIONS (INHERENT)

4. International comity
- the property of a foreign state or
government may not be taxed by
another.
5. Situs or territoriality
-is the State or country which has
jurisdiction to tax a person, property
or interest.
LIMITATIONS (CONSTITUTION)

1. Due process and equal

protection clause
2. Freedom of religious profession
and worship
3. Non-impairment of contracts
LIMITATIONS (CONSTITUTION)
4. No imprisonment for non-payment of
tax
5. Revenue, appropriation and tariff bills
to originate from the House of
Representatives
6. Uniformity and equality
7. Exemption of property actually,
directly and exclusively used for religious,
charitable and educational purpose
(Section 30 of the Tax Code)
STAGES, PROCESSES OF TAXATION

1. Levy - it is the legislative act that

determines that a tax of a certain amount or of a
certain percentage shall be imposed on the
persons, properties, or acts subject thereto.

2. Assessment - it is the official action of an

officer authorized by law in ascertaining the
amount of tax due under the law from a
taxpayer.

3. Collection - It is the getting by the

BASIS OF TAXATION

1. Principle of Necessity - without

money, the government cannot pay its
expenses and therefore cannot exist.
2. Reciprocal Duties - In return for
the contribution of the taxpayer, he
receives the general advantages and
protection which the government
affords the taxpayer and his property.
PURPOSE OF TAXATION

1. Primary Purpose
(Revenue/Fiscal)

2. Secondary Purpose (Non-

revenue
TAX AVOIDANCE vs. TAX
EVASION
Double taxation means
(1) taxing twice
(2) by the same taxing authority
(3) with the same jurisdiction
(4)for the same purpose
(5) in the same year. In its strict
sense, it is also referred to as
obnoxious or direct duplicate taxation
or direct double taxation.
Forms of escape from taxation:

1. Shifting - the transfer of the

burden by the original payer to
another.
2. Capitalization - the reduction in
the price of the taxed object equal to
the capitalized value of future taxes
which the purchaser expects to be
called to pay.
Forms of escape from taxation:

3. Transformation - the manufacturer or

producer pays the tax and endeavors to
recoup himself by improving his process of
production thereby turning out his units of
products at a lower cost
4. Tax Evasion - the use of illegal or
fraudulent means to defeat or lessen the
payment of a tax. This is punishable by
law. CODAL REFERENCE: Section 254
of the National Internal Revenue Code
Forms of escape from taxation:

5. Tax Avoidance - the exploitation

of legally permissible alternative rates
or methods of assessing taxable
property or income in order to avoid
or reduce tax liability.
 1. Constitution
ST 2. Statutes - Tax Code
OA included
UX 3. Presidential decrees
4. Executive orders
RL
5. Court decisions
CA 6. Implementing rules and
EW regulations
S
S 7. Administrative issuances
8. Local tax ordinance
9. Tax treaties and
conventions with foreign
 INTERPRETATION
T
A General Rule:
X The settled rule is that tax laws
must be construed in favor of the
L taxpayer and strictly against the
A government.
W Exemption - strictly construed
S against the taxpayer. It is
incumbent upon the taxpayer to
prove that he is really exempt
from tax.
SOURCES OF REVENUE
1. Income Tax
2. Estate and donor's tax
(transfer taxes)
3. Value-added tax
4. Other percentage taxes
5. Excise taxes
6. Documentary stamp tax
7. Such other taxes
Thank you !