At the end of this lecture, you should be able to: - Define taxation and taxes. - Enumerate and explain the three inherent powers of the state. - Describe different internal revenue taxes. - Explain the different characteristics of taxes. - Describe the nature of taxation in the Philippines

1. RYAN JAVIER CUMBE

2. At the end of this lecture, you should be able to:
 Define taxation and taxes.
 Enumerate and explain the three inherent powers of the state.
 Describe the nature of taxation in the Philippines
 Explain the different characteristics of taxes.
 Describe different internal revenue taxes.

3. is the inherent power of
the state to demand
contributions for public
purposes.

4.  Public Order and Public Safety
 Infrastructure
 Education
 Helps control inflation and economy
 Shifting of wealth

5. Necessity Theory
Funds are needed by the
government.
Life Blood Theory
Taxation is the lifeblood of the
government. The government cannot
survive without it.
Benefits Received Theory
This follows the symbiotic relationship doctrine. Subjects should
pay taxes for government services received. These services are
necessary for the subjects to enjoy the benefits of an organized
society.

6. - to provide funds or property with which to
promote the general welfare and protection
of its citizens and to enable it to finance its
multifarious activities.

7. a. to protect local industries through imposition of customs
duties.
b. to reduce inequalities in wealth and income by adopting
progressively higher tax rate.
c. to prevent inflation or ward off depression by increasing
or decreasing taxes, respectively.
c. to promote and protect some enterprise or industry by
giving tax exemptions and tax incentives.

8. State Power
inherent power to enforce
proportional contribution
from its subjects for public
use.
Legislative
process
Process laying taxes by
the legislature of the
state to enforce
proportional contribution
from its subject for
public purpose.
Mode of
cost distribution
 a mode by which the
state allocates its costs
or burden to its subjects
who are benefited by its
spending.

9. are the enforced proportional
contributions from persons
and property levied by the law-
making body pf the state by
virtue of its sovereignty for the
support of the government and
all public needs.

10. It is an enforces contribution.
It is generally payable in money.
It is proportional in character.
It is levied on persons or property.
It is levied by the state that has jurisdiction over the person.
It is levied by the law-making body of the state.
It is levied for public purpose or purposes.
It is commonly required to be paid at regular periods.

11. Police Power
e
s
o
d
,
,
d
Power of
Eminent
Domain
Power of
Taxation
the power of the state to
enact laws for promotion to
public safety and order, public
health, public morals,
education, and general
welfare.
The power of the state to
take private property for
public purposes upon
payment of a just
compensation.
 The power of the state to
exact proportional
contribution from its people
to cover the cost of
government expenditures.

12. They are all necessary attributes of sovereignty.
They are all inherent to the state.
They are all legislative in nature.
They are all ways in the state interferes with private rights and
properties.
They all exist independently with the Constitution and are exercised by
the government even without Constitutional grant.
They all presuppose an equivalent form of compensation received by the
persons affected by the exercise of the power.
The exercise of these powers by the local government units may be
limited by the national legislature.

13. The Bureau of Internal Revenue shall be under the supervision
and control of the Department of Finance and its powers and
duties shall comprehend the assessment and collection of all
national internal revenue taxes, fees, and charges, and the
enforcement of all forfeitures, penalties and fines connected
therewith, including the execution of judgments in all cases
decided in its favor by the Court of Tax Appeal and the ordinary
courts. The Bureau shall give effect to an administer the
supervisory and police powers conferred to it by the internal
revenue code or other law.

15. Amending numerous sections of the
Republic Act No. 8424, National Internal
Revenue Code of 1997.
Tax Reform for Acceleration and
Inclusion
(TRAIN)

16. - is a tax imposed on the
gains presumed to have been
realized by the seller from
the sale, exchange, or other
disposition of capital assets
located in the Philippines.

17. - is a tax on documents, instruments, loan,
agreements and paper evidencing the
acceptance, assignment, sale or property
incident thereto.

18. - is a tax on a donation or
gift, and is imposed on the
gratuitous transfer of
property between two or
more persons who are living
at the time of the transfer.

19. - is a tax on the right of the
deceased person to transmit
his/her estate to his/her lawful
heirs and beneficiaries at the
time of death and on certain
transfers which are made by
law as equivalent to
testamentary disposition.

20. - is a business tax imposed on
persons or entities who sell or lease
goods, properties or services in the
course of trade or business whose
gross annual sales or receipts do
not exceed a certain threshold and
are not VAT-registered.

21. - is a business tax imposed and collected from the seller in the
course of trade or business on every sale of properties (real or
personal) lease of goods or properties (real or personal) or vendors
of services. It is a indirect tax, thus, it can be passed on the buyer.

22. - is a tax imposed on all yearly
profits arising from property,
profession, trades or offices or
as a tax on a person’s income
and profits.

23. - is the tax withheld from
individuals receiving purely
compensation income.

24. - sources of revenue should be
sufficient to meet the
demands of public examples.

25. - tax burdens should be
proportionate to the
taxpayer’s ability to pay.

26. - tax law should be capable
of convenient, just and
effective administration.

27. Due process of law
- there must be a valid law
Equal protection of laws
- “No person shall be deprived of the same protection of laws”
Rule of uniformity and equity in taxation
- “The Congress shall evolve a progressive system of taxation”
Prohibition against imprisonment for non-payment of poll tax
Non-impairment of obligation of contracts
-Applies to bilateral contracts between the government and taxpayer

28. Probition against infringement of religious freedom
- “No law shall be made respecting the establishment of religion, or
prohibiting the free exercise thereof”
Prohibition against appropriation for religious purposed
- “No public money or property shall be appropriated, applied, paid or
employed, directly or indirectly, for the use, benefit, or support of any sect,
church, denomination, sectarian institution or system of religion, or of any
priest, preacher, minister, or dignitary is such, except when such priest,
preacher, minister, or other dignitary is assigned to the armed forces, or to
any penal institution, or government orphanage or leprosarium.

29. Exemption of religious, charitable and educational entities
- “Charitable institutions, churches, and parsonages, or convents
appurtenant thereto, mosques, non-profit cemeteries, and all lands,
buildings, and improvements, actually, directly, and exclusively used for
religious, charitable, or educational purposes shall be exempt from
taxation”
Exemptions of non-stock, non-profit educational institutions
- “All revenues and assets of non-stock, non-profit educational
institutions used actually, directly, and exclusively for educational
purposes shall be exempt from taxes and duties”

30. Grant of tax exemption
Power of the President to veto any appropriation, revenue,
or tariff bill
Non-impairment of the Supreme Court jurisdiction
Revenue bills shall originate exclusively from the House
of Representatives
Prohibition against infringement of press freedom

31. Purpose must be public in nature
- Benefit to private interest should be incidental
Non-delegation of the legislative power to tax
Exemption of government entities
- Entities performing proprietary functions are not exempted
“Congress may impose taxes if it desires so”
International Comity
-Sovereign equality of States
Territorial jurisdiction

32. Exceptions to the non-delegation rule
Delegation to the President – Congress may authorize, by law, the
President to fix: tariff rates; import and export quotas; tonnage
and wharfage dues; and others withing the national development
program.
Delegation to local government units - Congress may grant to a
municipal corporation the power to tax certain matters, it can also
provide for exemptions or even take back the power.
Delegation to administrative agencies- Delegation, by law, to
Fiscal Incentives Review Board (FIRB) the review and restoration
tax exemption privileges and granting of tax incentives to GOCCs.

33. Levying or imposition of tax
- Passage of tax laws by the legislature
• Exercised by Congress
Levying or imposition of tax
- enforcing the obligation on the part of the taxpayer
• Assessment is the process of determining the tax due
• Exercised by the Bureau of Internal Revenue (BIR)
Taxation
Tax Administration
Taxation System

34. Enforced contribution
Generally payable in money
Proportionate in character
Levied on persons, property, or the exercise of a right or privilege
Levied by the State which has jurisdiction
Levied by the law-making has jurisdiction
Levied by the law-making body
Levied for public purpose

35. QUALITY OF GOOD TAXATION
a) Proportionate to one’s ability to pay – equality and ability
b) Certain and not arbitrary – when, where, and how much to
pay
c) Convenient to pay – in a convenient time or manner
d) Economical to collect – cost-efficient

36. Direct Double Taxation
a) same subject or object
b) same taxing authority
c) same jurisdiction
d) same purpose
e) same taxing period
Indirect Double Taxation
- Example is the double taxation of corporations
“Although not prohibited by the Constitution, it is not favoured
and may be a violation of equal protection of laws

37. Situs means place of taxation
The State which has jurisdiction to impose tax
a) Tax on person (poll tax) – residence, whether citizen or
not
b) Real and tangible personal property – location of property
c) Intangible personal property – Domicile of the owner
d) Income
o Source law – where the income is derived; or
o Nationality theory – citizenship; or
o Domiciliary theory – domicile of the owner

38. Shifting – transfer of a burden of tax by the statutory
taxpayers to another
Impact of taxation – point of imposition
Impact of taxation – point on which the burden falls
Capitalization – reduction in the selling price by an
amount equal to future taxes to be paid by future buyer
Transformation – not increasing the selling price but
strives to recover the tax through more efficient
production

39. Tax evasion – fraudulent or illegal means of reducing tax dues
Tax Dodging
Tax evasion – fraudulent or illegal means of reducing tax dues
Tax Minimization
Tax Exemption – grant of immunity from a tax
• May be based on contract
• May be based on some ground of public policy

40. I. Revenue are not political in nature
II. Civil, not penal, in nature
III.Legislative intent must be considered
IV.Doubt in tax statutes are to be construed strictly against
the government
V. Tax exemptions are to be construed against the tax payer
VI.Generally prospective in operation
VII.Tax are special laws

41. “Taxpayers have the right to question the validity of tax
measures or illegal expenditures of public money in the
proper court”
“but a tax payer is not relieved from the obligation of paying
tax because of his belief”
“For collection of taxes would be hampered and may result to
paralysis of important government functions”

42. The Constitution
Statutory enactments such as:
National Internal Revenue Code (NIRC)
Customs Modernization and Tariff Act (CMTA)
Local Government Code
Executive orders and local tax ordinances

43. Tax treaties and international agreement
Judicial decisions of
Supreme Court
Court of Tax Appeals
Rules and Regulations
BIR Rulings – less general interpretations of tax laws
Revenue Regulations signed by the Secretary of Finance

44. Tax treaties and international agreement
Judicial decisions of
Supreme Court
Court of Tax Appeals
Rules and Regulations
BIR Rulings – less general interpretations of tax laws
Revenue Regulations signed by the Secretary of Finance

45. Subsidy
Differs from tax because tax is a burden while subsidy
is an aid by the government to an individual or private
enterprise.
Revenues
Refers to all funds or income derived by the
government including taxes.
Internal
Revenues
Taxes imposed other than duties on imports and
exports.
Tariffs
The duties payable on goods imported or exported. The
rem tariff and custom duties are used interchangeably
in the tariff and customs code.

46. Debts
Arises from contract, payable in kind or money, subject to setoff,
interest depends upon the agreement of the parties, no
imprisonment unless the debt arises from crimes.
Custom Duties
Imposed on imported or exported goods. It is also one of the
taxes.
License Fee
Emanates from police power. The purpose is regulatory and the
amount is limited to expenses of regulation and control.
Imposed on the exercise of a right or privilege. Non-payment of
license makes the business illegal.
Penalty
Imposed as a punishment because of injurious acts by the
government or by private individuals. It may arise from contract
and maybe paid in kind.