PRINCIPLES INCOME TAX

Benefits-Protection Theory (Symbiotic relationship)

According to this principle, the basis of taxation is found in the reciprocal duties of protection and support between the State and its inhabitants. In return for his contribution, the taxpayer receives the general advantages and protection which the government affords the taxpayer and his property.

EXEMPTION

grant of immunity from tax.

Customs duties

imposed on goods exported from or imported into the country. The term "taxes" is

Jurisdiction

is a reason why citizens must provide support to the state so the latter could continue to give protection.

Incidence of taxation

is that point on which the tax burden finally rests or settle down.

Taxation

is the act of laying a tax, the process or means by which the sovereign, through its law making body, raises income to defray the necessary expenses of the government.

Police power

is the inherent power of a sovereign state to legislate for the protection of the health, general welfare, safety, and morals of the public. It involves the power to regulate both liberty and property for the promotion of public good.

The power of eminent domain

is the inherent power of a sovereign state to take private property for a public purpose. The Constitution limits the exercise of this power by providing that: "Private property shall not be taken for public use without just compensation." (Art. III, Sec. 9, 1987 Philippine Constitution)

statutory taxpayer

is the person required by law to pay the tax or the one on whom the tax is formally

Impact of taxation

is the point on which a tax is originally imposed.

Subsidy

pecuniary aid directly granted by the government to an individual or private commercial

CAPITALIZATION

reduction in the price of the taxed object equal to the capitalized value of future taxes which the purchaser expects to be called upon to pay; by not selling property which has increased in value, the owner avoids the income tax paid on the gain if the same is sold.

Revenue

refers to all the funds derived by the government, whether from tax or whatever source and whatever manner.

Penalty

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

Fiscal Adequacy

sources of revenue must be adequate to meet expenditures. Violation of this principle will make the law unsound but still valid and not unconstitutional.

Toll

sum of money for the use of something, generally applied to the consideration which is paid for the use of the road, bridge or the like, of a public nature.

Proportional

tax based on a fixed percentage of the amount of the property, receipts or other basis to be taxed. (ex. Real estate tax)

Municipal or local

tax imposed by the local government units. (ex. Real estate tax

National

tax imposed by the national government. (ex. National internal revenue taxes)

Special or regulatory

tax imposed for special purpose, i.e., to achieve some social or economic ends irrespective of whether revenue is actually raised or not. (ex. Protective tariffs)

General or fiscal

tax imposed for the general purposes of the government, to raise revenue for governmental needs. (ex. Income tax)

Property

tax imposed on property, whether real or personal, in proportion either to its value, or in accordance with some other reasonable method of apportionment. (ex. real estate tax)

Specific

tax of a fixed amount imposed by the head or number, or some standard of weight or measurement. (ex. Tax on distilled spirits)

Personal, poll or capitation

tax of a fixed amount imposed on persons residing within a specified territory, whether citizens or not, without regard to their property or the occupation or business in which they may be engaged. (ex. Community tax)

Ad valorem

tax of fixed proportion of the value of the property with respect to which the tax is assessed.

Regressive

tax the rate of which decreases as the tax base or bracket increases, i.e., the tax rate and tax base move in opposite direction.

Progressive or graduated

tax the rate of which increases as the tax base or bracket increases. (ex. Income tax)

Indirect

tax which demanded from one person in the expectation and the intention that he shall indemnify himself at the expense of another, falling finally upon the ultimate purchaser or consumer;

Direct

tax which demanded from the person who also shoulders the burden of the tax; or tax for which the taxpayers is directly liable or which he cannot shift to another. (ex. Income tax, donor's tax, estate tax)

Internal revenue

taxes imposed by the legislature other than duties on imports and exports.

TRANSFORMATION

the manufacturer or producer upon whom the tax has been imposed, fearing the loss of his market if he should add the tax to the price, 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.

Levy

the power of taxation is vested on and exercised by the legislative department. The determination of what should be taxed, when, how, or where lies in the legislative department.

SHIFTING

the transfer of the burden of a tax by the original payer or the one whom the tax was assessed or imposed to another or someone else.

EVASION

use by the taxpayer of illegal or fraudulent means to defeat or lessen the payment of a tax. It is also known as "TAX DODGING." It is punishable by law.

Power to Tax

Subject to inherent and constitutional limitations, the power of taxation is regarded as supreme, plenary, unlimited, and comprehensive.

Excise

any tax which does not fall within the classification of a poll tax or property tax. (ex. Income tax, value added tax)

Payment and/or Exercise of Remedies

compliance and/or resistance by the taxpayer. The exercise of remedy is initially either through the Executive or Legislative Department and ultimately through the Judiciary.

Special assessment

enforced proportional contribution from owners of land specially and peculiarly benefited by public improvements.

Assessment and Collection

exercised by the Executive Department. The agency in charge of the collection of internal revenue taxes is the BIR. For the most part of the lifeblood of the nations, the duty to collect rests with the BIR.

Theoretical Justice

Taxes must be based on the taxpayer's ability to pay and proportional to the relative

legislative

It is ________ in nature because it is subject to constitutional limitations.

inherent

It is________ in nature being an attribute of sovereignty.

nature

(kind);

situs

(place)

object

(purpose);

extent

(rate);

coverage

(subjects); and

Lifeblood Theory

As stated in the case of CIR vs. Algue [158 SCRA 9], the existence of government is a necessity; it cannot exist nor endure without the means to pay its expenses;

Necessity Theory

As stated in the case of PHILIPPINE GUARANTY V. CIR [13 SCRA 775], taxation is a necessary burden to preserve the States sovereignty and a means to give the citizenry an army to resist aggression, anavy to defend its shores from invasion, a corps of civil servants to serve, public improvements for the enjoyment of the citizenry, and those which come within the State's territory and facilities and protection which a government is supposed to provide

AVOIDANCE

OR TAX PLANNING. It is the use by the taxpayer of legally permissible alternative tax rates or methods to avoid or reduce tax liability. The taxpayer uses tax saving device or means sanctioned or allowed by law. Politely called "TAX MINIMIZATION"

Administrative Feasibility

The taxes should be capable of being effectively enforced. Violation of this principle will make the law unsound but still valid and not unconstitutional.

Forward shifting

When the burden of the tax is transferred from a factor of production through factors of distribution until it finally settles on the ultimate purchaser or consumer

Backward shifting

When the burden of the tax is transferred from the consumer or purchaser through the factors of

Onward shifting

When the tax is shifted two or more times either forward or backward.

Debt

a tax is not a debt.