Income Taxation Chapter 2

Final Withholding Tax

A system of tax collection wherein payors are required to deduct the full tax on certain income payments

National Tax

A tax imposed by the national government

Fiscal or Revenue Tax

A tax imposed for general purpose

Regulatory

A tax imposed to regulate business, conduct, acts or transactions.

Excise or Privilege Tax

A tax imposed upon the performance of an act, enjoyment of a privilege or engagement in an occupation

Sumptuary

A tax levied to achieve some social or economic objectives

Specific Tax

A tax of a fixed amount imposed on a per unit basis such as per kilo, liter or meter, etc.

Ad Valorem

A tax of a fixed proportion imposed upon the value of the ta object

Documentary Stamp Tax

A tax on documents, instruments, loan agreements and papers evidencing the acceptance, assignment, sale or transfer of an obligation , right or property incident thereto.

Personal, Poll or Capitation

A tax on persons who are residents of a particular territory

Property Tax

A tax on properties, real or personal

Regressive

A tax system not employed in the Philippines

Tax

An amount imposed upon persons, privilege, transactions, or properties.

Expanded Withholding Tax

An estimated tax required by the government to be deducted on certain income payments made by taxpayers engaged in business.

Withholding Tax on Compensation

An estimated tax required by the government to be withheld by employers against the compensation income to their employees

Revenue Regulations

Are formal pronouncements intended to clarify or explain the tax law and carry into effect its general provisions by providing details of administration and procedure.

Taxes

Are imposed after the commencement of a business or profession. It is post-activity

Revenue Regulations

Are issuance signed by the Secretary of Finance upon recommendation of the Commissioner of Internal Revenue (CIR) that specify, prescribe, or define rules and regulations for the effective enforcement of the provisions of the National Internal Revenue Code and related statutes.

Revenue Memorandum Orders (RMOs)

Are issuance that provided directives or instructions; prescribe guidelines; and outline processes, operations, activities, workflows, methods, and procedures necessary in the implementation of stated policies, goals, objectives, plans, and programs of the Bureau in all arears of operations except auditing.

Revenue Memorandum Circulars

Are issuances that publish pertinent and applicable portions as well as amplifications of laws, rules ,regulations and precedents issued by the BIR and other agencies/offices

Tax Exemption Laws

Are laws that grant certain immunity from taxation

Tax Laws

Are laws that provide for the assessment and collection of taxes

Rulings

Are merely advisory or a sort of information service to the taxpayers such that none of them is binding except to the addressee and maybe reversed by the BIR at any time

BIR Rulings

Are official positions of the Bureau to queries raised by taxpayers and other stakeholders relative to clarification and interpretation of tax laws.

Revenue Memorandum Rulings

Are rulings, opinions and interpretations of the CIR with respect to the provisions of the Tax Code and other tax laws as applied to a specific set of facts, with or without established precedents, and which the CIR may issue from time to time for the purpose of providing taxpayers guidance on the tax consequence in specific situations.

Large Taxpayers

Are under the provision of the Large Taxpayer Service (LTS) of the BIR National Officer

Non-Large Taxpayers

Are under the supervision of the respective Revenue District Offices (RDOs) where the business, trade or profession of the taxpayer is situated

Tax

Arises from law

Debt

Arises from private contracts

Value Added Tax

Consumption tax collected by VAT business taxpayers

Other percentage tax

Consumption tax collected by non-VAT business taxpayers

Tax

Draws interest only when the taxpayer is delinquent

Debt

Draws interest when it is also stipulated by the contracting parties or when the debtor incurs a legal delay.

License Fee

Emanates from police power and is imposed to regulate the exercise of a privilege such as the commencement of a business or of a profession.

Tax

Emanates from taxation power and is imposed upon by an object such as persons, properties, or privileges to raise revenue

Generally Accepted Accounting Principles

Generally accepted accounting principles or GAAP are not laws, but a mere conventions of financial reporting they are benchmarks for the fair and relevant valuation and recognition of income , expenses , assets , liabilities , and equity of a reporting entity from general purpose financial reporting . GAAP accounting reports are intended to meet the common needs of a vast number of users in the general public.

Revenue Regulations

Have the force and effect of a law, but is not intended to expand or limit the application of the law; otherwise, it is void

Tax Laws

Including rules, regulations, and ruling prescribe the criteria for tax reporting, a special form of financial reporting which is intended to meet specific needs for tax authorities.

Final Withholding Tax

Intended for the collection of taxes from income with high risk of non-compliance

Toll

Is a charge for the use of other's property; hence, it is a demand of ownership

Tax

Is a levy of government; hence, it is a demand of sovereignty.

Progressive Tax System

Is a tax system that emphasizes direct taxes. It encourage economic efficiency as it leaves no other resort to taxpayers than to be efficient.

Progressive Tax System

Is a type of tax system that impacts more upon the rich

Tax

Is an amount imposed for the support of the government

Penalty

Is an amount imposed to discourage an act. It ma be imposed by both the government and private individuals. It may arise from both law or contract whereas tax arises from law

Tax

Is an amount imposed upon persons, properties, or privileges

Tax

Is an enforced proportional contribution levied by the lawmaking body of the State to raise revenue for public purpose.

Bureau of Internal Revenue

Is entrusted to for the tax administration of the national tax system in the Philippines

License Fee

Is imposed before engagement in activities. It is pre-activity.

Creditable Withholding Tax

Is intended to support the self-assessment method to lessen the burden of lump sum tax payment of taxpayer and also provides for a possible third-party check for the BIR of non-compliant taxpayers.

Special Assessment

Is levied by the government on lands adjacent to a public improvement

Tax

Is levied without expectation of a direct proximate benefit

Regressive Tax System

Is one that emphasized indirect taxes. Hence, the impact of taxation rests upon the bottom end of the society. It is anti-poor

Bureau of Customs

Is tasked to administer collection of tariffs on imported articles and collection of the Value Added Tax on importation

Board of Investments

Is tasked to lead the promotion of investments in the Philippines by assisting Filipinos and foreign investors to venture and prosper in desirable areas of economic activities.

Tariff

Is the amount imposed on imported or exported commodities

Statutory Taxpayer

Is the economic taxpayer

Economic Taxpayer

Is the one who actually pays the tax

Statutory Taxpayer

Is the person named by law to pay the tax

Tax System

It includes all the tax laws and regulations, the means of their enforcement, and the government officers, bureaus and withholding agents which are part of the machineries of the government in tax collection

Proportional

It is a tax system that is employed in taxation of corporate income and business

Progressive

It is a tax system that is employed in the taxation of income of individuals, and transfers of properties by individuals

Philippine Economic Zone Authority

It is created to promote investments in export-oriented manufacturing industries in the Philippines and, among other myriads of functions, supervise the grant of both fiscal and non-fiscal incentives

Special Assessment

It is imposed on land only and is intended to compensate the government for a part of the cost of the improvement

Board of Investments

It supervises the grant of tax incentive under the Omnibus Investment Code.

Special Assessment

Its basis is in the benefit in terms of the appreciation in land value caused by the public improvement

Revenue Bulletins

Refer to periodic issuances , notices , and official announcements of the commissioner of internal revenue that consolidate the bureau of internal revenue's position on certain specific issues of law or administration in relation to the provisions of the tax code , relevant tax laws , and other issuances for the guidance of the public

Tax

Refers to all income collections of the government from public purposes.

Tax

Refers to the amount imposed by the government for public purpose.

Tax Administration

Refers to the management of the tax system.

Tax System

Refers to the methods or schemes of imposing, assessing, and collecting taxes.

Revenue

Refers toll income collections of the government which includes taxes, tariff, licenses, toll, penalties, and others.

Fiscal Adequacy

Requires that the sources of government funds must be sufficient to cover government costs

Administrative Feasibility

Suggest that tax laws should be capable of efficient and effective administration to encourage compliance. Government should make it easy for the taxpayer to comply by avoiding administrative bottlenecks and reducing compliance costs.

Theoretical Perspective or Equity

Suggests that taxation should consider the taxpayer's ability to pay. It also suggests that the exercise of taxation should not be oppressive, unjust, or confiscatory

Local Tax

Tax imposed my municipal or local government.

Income Tax

Tax on annual income, gains or profits

Estate Tax

Tax on gratuitous transfer of properties by a decedent upon death.

Donor's Tax

Tax on gratuitous transfer of properties by a living donor.

Excise Tax

Tax on sin products and non-essential commodities.

Revenue

The amount collected

Tax

The amount imposed

Withholding System on Income Tax

The payor of the income withholds or deducts the tax on the income before releasing the same to the payee and remits the same to the government

Regressive Tax

The tax imposed as decreasing tax rates as the tax base increases. This is the total reverse of progressive tax. It is regarded as anti-poor. it directly violates the constitutional guarantee of progressive taxation.

National Tax System and Local Tax System

The two divisions of the Philippine Tax System

Proportional Tax

This is a flat or fixed rate tax . The use of this emphasizes equality as its subjects to all taxpayers with the same rate without regard to their ability to pay.

Progressive or Graduated Tax

This is a tax which imposes increasing rates as the tax base increases. The use of progressive tax rates results in equitable taxation because it gets more taxi those who are more capable. it ain't in lessening the gap between the rich and the poor.

Mixed Tax

This tax manifest tax rates which is combination of any of the above types of tax.

Assessment or Enforcement System

Under this collection system, the government identifies non-compliant taxpayers, assess their tax dues including penalties, demands for taxpayer's voluntary compliance or enforces collections by coercive means such as summary proceeding or juridical proceedings when necessary

Voluntary Compliance System

Under this collection system, the taxpayer himself determines his income, reports the same thought income tax returns and pays the taxy to the government. It is also referred to as the "self-assessment method"

Direct Tax

When both the impact and incidence of taxation rest upon the same taxpayer. The tax is collected from the person who is intended to pay the same.

Indirect Tax

When the tax is paid by any person other than the one who is intended to pay the same. This occurs in the case of business taxes where the statutory taxpayer is not the economic taxpayer.