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Outline:
Purpose of Taxation
Characteristics of Tax
Basic Principle of a Sound Tax System Classification of Taxes Entities Exempted from Taxation Limitations on Taxation Situs of Taxation Escape from Taxation
PURPOSES OF TAXATION:
The purposes of taxation are the following: To raise revenue To equitably distribute the wealth of the nation To pick new industries (by providing tax exemption new or pioneering industry) To protect local procedures (by imposing higher custom on cheap imported goods
ASPECTS OF TAXATION
Levy refers to the legislative function and the
declaration of the subject and the rate or amount of taxation. (People vs. Monohey) Assessment - a written notice that the amount stated therein is due as a tax and contains a demand for payment thereof. (Alhambra Cigar vs. Collector) Collection does the law-making body of the state by virtue of its sovereignty for the support of the government and all public needs levy the enforced proportional contributions from persons and properties.
not voluntary in nature, and the imposition is not dependent upon the will of the person taxed. It is generally payable in money. This means that payment by checks, promissory notes or in kind is not acceptable. It is proportionate in character. Payment of taxes must be based on the ability-to-pay principle; thus, the higher the income of the taxpayer, the bigger the amount of the tax paid.
taxes that are imposed or levied on acts, transactions, rights or privileges. Example. Documentary tax It is levied by the State which has jurisdiction over the person or the property. As a general rule, only persons, properties, acts, rights, transactions within the jurisdiction of the taxing States are subject to tax. It is levied by the law-making body of the State. This means that the prior law must be enacted first by the Congress before assessment and collection maybe implemented. (Art. 6, Sec. 29, par (1) of the 1999 Constitution)
Objects of Taxation:
1. Individuals a. Who earn a considerable amount of income as a worker; b. Businessman in partnerships or corporations c. Those who inherited a property or were given a gift or donation of considerable vale
2. Properties a. Real/Intangible(immovable properties) Real estates land, buildings, and houses b. Personal/Tangible(moveable properties) Vehicles, furnitures, patents, and ownership titles, 3. Transactions, consumptions interests, imports and exports; and privileges
purpose. There should be proper delegation of legislative power to tax. Government entities are exempted. There are territorial jurisdiction. There is an observance of international law.
parsonages) Charitable institutions Non-profit, non-stock educational institutions Non-profit cemeteries Government institutions Foreign diplomats (by virtue of treaty) (Art 14 Secs 4 & 3 1987 Constitution Art 8 Sec 28 (1) 1987 Constitution
SITUS OF TAXATION
Concept: Situs is a Latin term which means situation; location; place. Situs of taxation literally means the place of taxation. It refers to the place where taxes are to be paid.
Place in the place where income is earned or the place of residence of the taxpayer. = Ms. L. resides in QC and works in Makati. She may choose to pay her income tax in either of these two places.
= are paid in the place where the property is located = in the place where the property is located = owners domicile-place of permanent residence of the owner
Taxes
Double taxation
Concept There are two (2) concepts of double taxation namely: 1. Direct duplicate 2. Indirect duplicate
This kind of double taxation is not allowed by law. (Villanueva vs. City of Iloilo, L-26521). Indirect taxation, on the other hand occurs when taxes on the same property are not imposed by the same taxing authority. Example: Local government and national government impose taxes on the same property during one taxable period. This kind of imposition is legal.
Shifting
Concept: Shifting is passing the burden of tax from one person to another person (Black Law Dictionary supra). Thus, what is transferred is not the payment of the tax but the burden of the tax. Example: Taxes paid by the manufacturer may be shifted to the consumer by adding the amount the tax paid to the price of the product.
Kinds of Shifting
There are three (3) kinds of shifting namely: Forward shifting Backward shifting Onward shifting
There is forward shifting when the burden of the tax is transferred from a factor of production to the factor of distribution; Backward shifting occurs when the burden of tax is transferred from the consumer to the producer of manufacturer; and onward shifting occurs when the tax is shifted to two or more times either forward or backward.
Tax Evasion Concept: Tax evasion is the use by the taxpayer of illegal or fraudulent means to defeat or lessen the amount of tax. This is also known as Tax dodging. Example Deliberate and / or malicious failure to report income to defeat tax liability.
faith, or willful intent on the part of the taxpayer. (Rep. vs. Gonzales, 13 SCRA 633). As in the case of substantial undeclaration of income for four consecutive year. (Perez vs. CTA L 10507).
Tax Avoidance Concept: Tax avoidance is the exploitation by the taxpayer of legally permissible methods on order to avoid or reduce tax liability. This is also known as tax minimization. Example: Exhausting and / or utilizing all allowable deductions or exemption in law or reduce the tax burden.