GENERAL CONCEPTS AND PRINCIPLES OF TAXATION

Proportional

- tax based on fixed percentages of amount

Progressive

- tax the rate of which increases as the tax base or bracket increases

4. Tax Avoidance

- the exploitation of legally permissible alternative tax rates of assessing taxable income to reduce tax liability

5. Exemption

- the grant of immunity to particular persons of a particular class

2. Transformation

- the producer pays the tax and endeavor to recoup himself by improving his process of production

6. Capitalization

- the reduction in the selling price of income producing property by an amount equal to the capitalized value

7. Avoidance

- the tax saving device within the means sanctioned by law.

1. Shifting

- the transfer of the burden of tax by the original payer to someone else

3. Evasion

- the use of illegal means to defeat or lessen tax

Lifeblood Theory

- used to continue to perform the government's basic function of serving and protecting its people - give tangible and intangible benefits

a) It is inherent in sovereignty

-can enforce contribution in the absence of law

b) It is legislative in character.

-cannot be exercised by executive and juridical branches

specific

-tax of fixed amount by number, standard of weight, or measurement

DIRECT DOUBLE TAXATION means taxing twice:

1. By the same taxing authority, jurisdiction or taxing district 2. For the same purpose 3. In the same year or taxing period 4. Same subject or object 5. Same kind or character of the tax

9 SOURCES OF TAX LAWS

1. Constitution 2. National Internal Revenue Code 3. Tariff and Customs Code 4. Local Government Code (Book II) 5. Local tax ordinances/ City or municipal tax codes 6. Tax treaties and international agreements 7. Special Laws 8. Decision of the Supreme Court and the Court of Tax Appeals 9. Revenue rules and regulations and administrative ruling and opinion

LIMITIATIONS ON THE STATE'S POWER TO TAX

1. Inherent Limitations 2. ConstitutionalLimitations

MANIFESTATION OF LIFEBLOOD THEORY

1. Rule of "No Estoppel against the government" 2. Collection of taxes cannot be stopped by injunction • CourtofTaxAppeals-havetheauthoritytograntinjunctiontorestraincollectionof internal revenue tax, fee or charge 3. Taxes could not be the subject of compensation or set-off • Taxiscompulsorynotbargain. 4. Right to select objects (subjects) of taxation a) Subject or object to be taxed b) Purpose of the tax (as long as it is a public purpose) c) Amount or rate of the tax d) Kind of tax e) Apportionment of the tax f) Situs(place)oftaxation g) Manner, means, and agencies of collection of the tax 5. A valid tax may result in the destruction of the taxpayer's property. • Lawfultaxcannotbedefeated. • Bringouttheinsolvencyofthetaxpayer • Forfeitureofpropertythroughpolicepower

ASPECTS OF TAXATION

1. levy of imposition 2. assessment and collection

ELEMENTS OF SOUND TAX SYSTEM

Fiscal Adequacy Theoretical Justice or Equity Administrative Feasibility

As to taxing authority:

National Local

THEORIES OF TAXATION

Necessity, Lifeblood

PURPOSES OF TAXATION

Primary: Revenue or Fiscal Purpose Secondary: Regulatory Purpose

Constitutional Limitations

Progressive System Regressive System Regressive Tax Rates

As to graduation or rate:

Proportional, Progressive, Regressive

NATURE/ CHARACTERISTICS OF THE STATE'S POWER OF TAX

a) It is inherent in sovereignty b) It is legislative in character. c) Exemption of government entities, agencies and instrumentalities. d) International Comity e) Limitation of territorial jurisdiction f) Strongest among all the inherent powers of the state

SPECIAL ASSESSMENT Characteristics:

a. Levied only on land b. Not a personal liability of the person assessed c. Based wholly on benefits (not necessary) d. Exceptional both as to time and place

FACTORS IN DETERMINING THE SITUS OF TAXATION

a. Subject matter ( person, property, or activity) b. Nature of tax c. Citizenship d. Residence of the taxpayer e. Source of Income f. Place of excise, business or occupation being taxed

Unlimited

absence of limitation

REVENUE

all funds or income derives by the government.

CUSTOMS DUTIES

are taxes imposed on goods exported from or imported into a country.

Supreme

basta

PERMIT or LICENSE

charge imposed under the police power for purposes of regulation.

Plenary

complete

SCOPE OF TAXATION

comprehensive, unlimited, plenary, supreme

Conprehensive

covers all — business, persons, proffession

As to who bears the burden:

direct, indirect

Progressive System

emphasis on direct taxes

Secondary: Regulatory Purpose

employed as a devise for regulation or control

ESSENTIAL ELEMENTS OF TAX

enforced contribution generally payable by money proportionate in character levied upon persons, property, rights levied by law-making body of the sate levied for public purposes

Basis of Taxation

government may be able to perform its functions while the citizens may be secured in the enjoyment of the benefits.

levy or imposition

impact of taxation, legislative act

Local

imposed by LGUs

national

imposed by the national government

National

imposed under National Internal Revenue Code, collected by Bureau of Internal Revenue

Assessment and collection

incident of taxation, admin act

indirect

indemnify himself at the expense of another

SUBSIDY

is a pecuniary aid directly granted by the government to an individual or enterprise deemed beneficial to the public.

TOLL

is a sum of money for the use of something which is paid of the use of a road, bridge or public nature.

SPECIAL ASSESSMENT

is an enforced proportional contribution from owners of the lands for special benefits resulting from public improvements.

TARIFF

is the system of imposing duties on the importation or exportation of goods

Administrative Feasibility

law must be capable of effective and efficient enforcement

local

local govt

Regressive System

more indirect taxes imposed

Power of taxation

most absolute of all the powers

As to scope:

national local

As to subject matter or object:

personal, poll, or capitation property excise

3 INHERENT POWERS OF THE STATE

police power, eminent domain, taxation

PENALTY

sanction imposed as a punishment for violation of law or acts deem injurious.

Fiscal Adequacy

sources must be adequate

As to determination of fixed amount:

specific, ad valorem

property

tax imposed on property in proportion to its value

personal, poll, or capitation

tax of a fixed amount imposed upon individual residing within a specified territory.

ad valorem

tax of fixed proportion of the value of the property

excise

tax on certain rights and privileges e.g. sin prods / imported goods

Regressive Tax Rates

tax rates which decreases as tax base or bracket increases

Theoretical Justice or Equity

tax should be proportionate

Regressive

tax the rate of which decreases as the tax base or bracket increases

TAXES

the enforced contributions levied by the law-making body of the state for the support of the government and all the public needs.

Police Power

the power of promoting public welfare and regulating the use of liberty and property.

eminent domain

the power to acquire private property for public purpose upon payment of just compensation

Power of Taxation

the power which raises revenue for the expenses of the government

TAXATION

the process by which the sovereign, through its law-making body, imposes burdens for the purpose of raising revenues to carry out legitimate objects of the government

Necessity Theory

to preserve the state's sovereignty a means to give for protection and facilities

Primary: Revenue / Fiscal Purposes

to provide funds or property to promote general welfare and protection of its citizens

direct

tp cannot shift to another

As to purpose:

• Primary,Fiscal,orRevenuePurpose • Secondary, Regulatory, Special, or Sumptuary Purpose