Fundamental Principles of Taxation
Doctrine of Symbiotic Relationship
"Taxes are what we pay for civilized society."
Theoretical Justice or Equity
"ability to pay principle;" The tax burden should be proportionate to the taxpayer's ability to pay.
Scope of the Power of Taxation
(1) Comprehensive (2) Unlimited) (3) Plenary (4) Supreme
Sources of Tax Laws
(1) Constitution (2) National Internal Revenue Code (3) Tariff and Custom Code (4) Local Government Code (5) Local Tax Ordinances (6) Tax Treaties and International Agreements (7) Special Laws (8) Court Decisions (9) Revenue Rules and Regulations, and Administrative Rulings and Opinions
Kind of exemption as to basis
(1) Constitutional (2) Statutory
Exceptions to non-delegation rule
(1) Delegation tp the President (2) Delegations to Local Government Units (3) Delegations to Administrative Agencies (4) It is subject to Constitutional and Inherent Limitations
Constitutional Limitations (Provisions indirectly affecting taxation)
(1) Due process of law (2) Equal protection of laws (3) Freedom of the press (4) Religious freedom (5) Non-impairment of obligations of contracts
Kinds of exemption as to form
(1) Express (2) Implied
Nature/Characteristics of the State's Power to Tax
(1) It is inherent in sovereignty (2) It is legislative in character (3) Exemption of government entities, agencies, and instrumentalities (4) International Comity (5) Limitation on territorial jurisdiction (6) Strongest among the inherent powers of the state
Essential Elements of Tax
(1) Levied by the State which has jurisdiction over the persons or property. (2) Levied and collected for public purpose. (3) Commonly required to be paid at regular periods or intervals. (4) Assessed in accordance with some reasonable rule of apportionment. (5) Levied pursuant to legislative authority. (6) An enforced contribution. (7) Pecuniary burden payable in money
Aspects of Taxation
(1) Levying (2) Assessment (3) Collection
Constitutional Limitations (Provisions directly affecting taxation)
(1) Prohibition against imprisonment for non-payment of poll tax (2) Uniformity and equality of taxation (3) Grant by Congress of authority to the president to impose tariff rates (4) Prohibitions against taxation of religious, charitable entities, and educational entities (5) Prohibitions against taxation of non-stock, non-profit educational institutions (6) Majority vote of Congress for grant of tax exemption (7) Prohibition on the tax levied for special purpose (8) President's veto power on appropriation, revenue, tariff bills (9) Non-impairment of jurisdiction of the Supreme Court (10) Grant of power to the LGUs to create its own sources of revenue (11) Origin of Revenue and Tariff Bills (12) No appropriation or use of public money for religious purposes
Inherent Limitations
(1) Purpose must be public in nature (2) Prohibition against delegation of taxing power (3) Territorial Limitation (4) Non-delegability of taxing power (5) Tax exemptions of the government
Manifestation of the Lifeblood Theory
(1) Rule of "No estoppel against the government" (2) Collection of taxes cannot be enjoined (stopped) by injunction (3) Taxes could not be subject of compensation or set off. (4) Right to select objects (subjects) of taxation. (5) A valid tax may result in the destruction of the tax payer's property especially on excise tax
Factors to consider in determining the situs of taxation:
(1) Subject matter (person, property or activity) (2) Nature of the tax (3) Citizenship (4) Residence of the taxpayer (5) Source of income (6) Place of excise, business or occupation being taxed
Kinds of exemption as to extent
(1) Total (2) Partial
Grounds for granting tax exemptions
(1) may be based on contract. (2) may be based on some ground of public policy. (3) may be based on grounds of reciprocity or to lessen the rigors of international double or multiple taxations.
The 3 Inherent Powers of the State (Essential/Fundamental)
1. Police Power 2. Power of Taxation 3. Power of Eminent Domain
Similarities among the Three (3) Inherent Powers of the State
1. They are inherent in the State. 2. They exist independently of the constitution although the conditions for which their exercise may be prescribed by the constitution. 3. Ways by which the State interfere with private rights and property. 4. Legislative in nature and character 5. Presuppose an equivalent compensation received, directly or indirectly, by the persons affected.
Specific
A classification of taxes as to determination of amount that is of fixed amount imposed by the head or number, or by some standard of weight or measurement
Ad Valorem
A classification of taxes as to determination of amount that is of fixed proportion of the value of the property with respect to which the tax is assessed (percentage)
Regressive
A classification of taxes as to graduation or rate that is at the rate of which decreases as the tax base or bracket increases.
Progressive or graduated
A classification of taxes as to graduation or rate that is at the rate of which increases as the tax base or bracket increases.
Proportional
A classification of taxes as to graduation or rate that is based on fixed percentage of amount of the property, receipts, or the basis to be taxed
Primary, Fiscal or Revenue Purpose
A classification of taxes as to purpose that is for raising public funds/revenue for the service of the government.
Secondary, Regulatory, Special or Sumptuary Purpose
A classification of taxes as to purpose that is for the regulation of useful or non-useful occupation or enterprises and secondarily only for the purpose of raising public funds.
National
A classification of taxes as to scope that is imposed by the National Government
Local
A classification of taxes as to scope that is imposed by the municipal corporations or local government units.
Property
A classification of taxes as to subject matter or object that is imposed on property, whether real or personal, in proportion either to its value, or in accordance with some other reasonable method of apportionment.
Personal, Poll or Capitalization
A classification of taxes as to subject matter or object that is of a fixed amount imposed upon an individual, whether citizens or not, residing within a specified territory without regard to their property or the occupation in which he may be engaged.
Excise
A classification of taxes as to subject matter or object that is on the exercise of certain rights and privileges.
Local
A classification of taxes as to taxing authority that is imposed by local government units
National
A classification of taxes as to taxing authority that is imposed under the National Internal Revenue Code collected by the national government through the BIR and other national government agencies.
Direct
A classification of taxes as to who bears the burden that is demanded from a person who also shoulders the burden of a tax or tax which taxpayer cannot shift to another.
Indirect
A classification of taxes as to who bears the burden that is demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another.
Estoppel
A legal impediment to denying a fact or restoring a right that has been previously waived.
Comprehensive
As it covers persons, business, activities, professions, rights and privileges.
Plenary
As it is complete; BIR may avail of certain remedies to ensure collection of taxes.
Construction of Tax Laws
In case of doubt, it is construed most strongly against the Government, and liberally in favor of the taxpayer
Supreme
In so far as the selection of the subject of taxation.
Unlimited
In the absence of limitations prescribed by law or the constitution, the power to tax is unlimited and comprehensive. Its force is so searching the extent that the courts scarcely venture to declare that it is subject to any restrictions.
Amnesty
It is the general or intentional overlooking by the State of its authority to impose penalties on persons otherwise guilty of evasion or violation of a revenue or tax law.
Power of Taxation
It is the power by which the State raises revenue to defray the necessary expenses of the government.
Police Power
It is the power of the state for promoting public welfare by restraining and regulating the use of liberty and property.
Power of Eminent Domain
It is the power of the state to acquire private property for public purposes upon payment of just (fair value) compensation.
Fiscal Adequacy
Sources of tax should be sufficient enough to meet the government expenditures and sustain the level of public services demanded by citizens and policy makers.
Provisions Granting Tax Exemptions
Such provisions are construed strictly against the taxpayer.
Situs of Taxation
The place of taxation
Lifeblood Doctrine
The power of taxation is essential because the government can neither exist nor endure without taxation.
Necessity Theory
The power of taxation proceeds upon the theory that the existence of the government is a necessity.
Capitalization
The reduction in selling price of income producing property by an amount equal to the capitalized value of future taxes that may be paid by the purchaser.
Reciprocity Theory
The state collects taxes from the subjects of taxation in order that it may be able to perform the functions of government. The citizens, on the other hand, pay taxes in order that they may be secured in the enjoyment of the benefits of organized society.
Administrative Feasibility
The tax system should be effectively administered and enforced with least inconvenience to the taxpayer (systematic)
Levying or Imposition
This process involves the passage of tax laws or ordinance (in the case of local government units) through the legislative branch.
Penalty
a sanction imposed as a punishment for violation of law or acts deemed injurious.
Toll
a sum of money for the use of something, generally applied to the consideration, which is paid for the use of a road, bridge, or the like of a public nature.
Collection
accumulation of taxes, which is essentially administrative in character.
Transformation
an escape from taxation where the producer or manufacturer pays the tax and endeavors to recoup himself by proving his process of production thereby turning out his units of products at a lower cost.
Custom Duties
are taxes imposed on goods exported from or imported into a country.
Secondary Purpose of Taxation
as a devise for regulation or control (implementation of State's police power) by means of which certain effects or conditions envisioned by the government may be achieved such as: (1) Promotion of General Welfare (2)Reduction of Social Inequality (3) Economic Growth
Assessment
determination of the correct amount of the tax by the executive branch.
Tax Avoidance
exploitation by the taxpayer of legally alternative tax rates or methods of assessing taxable property or income in order to avoid or reduce tax liability.
Evasion
illegal or fraudulent means to defeat or lessen the payment of.
Permit or License Fee
is a charge imposed under the police power for purposes of regulation.
Subsidy
is a pecuniary aid directly granted the government to an individual or private commercial enterprise.
Special Assessment
is an enforced proportional contribution from owners of lands for special benefits resulting from public improvements.
Taxation
is the process or means by which the sovereign (independent state), through its law making body (the legislature), imposes burdens upon subjects and objects within its jurisdiction for the purpose of raising revenues to carry out the legitimate objects of government.
Avoidance
is the tax saving divide within the means sanctioned by law; on the other hand, tax evasion is a scheme used outside those lawful means which is not acceptable.
Shifting
is the transfer of the burden of a tax by the original payer or the one whom the tax was assessed or imposed to someone else.
Exemption
it is a freedom from a financial burden to which others are subjected.
Double Taxation
means taxing twice (1) by the same taxing authority, jurisdiction or taxing district (2) for the same purpose (3) in the same tear or taxing period (4) same subject or object same kind/character of the tax
Revenue
refers to all funds or income derived by the government.
Tariff
the system or principle of imposing duties on the importation or exportation of goods.
Primary Purpose of Taxation
to provide funds or property with which to promote the general welfare and the protection of its citizens and to enable it to finance its multifarious activities.
