vmaking body,

on, as a power
availability are
nment cannot
rwer gives the
out taxes, the
Feb. 17, 1988,
akings of any
)nomy may be
rl ,of every tax
, 'to seek and
improvement
the Bureau of
whose benefit
ficiarles in the
; taxes .in the
:dministration
rus legitimate
ernment. lt is
rts to achieve
3
wealth from
growth,
and
risions in two
gating
certain
l, low-income
lorate system
rules provide
incentives for certain desirable activities. For instance, business can claim deductions for
depreciatidn of productive
assets much faster than the assets actually wear out. This
provides incentive for businesses to invest in these assets, leading to increased
employmdnt of low- and middle-inconle workers.
a
All too often, the incentive and mitigating aspects of various tax provisions work at
cross-purposes. Consider the two examples just
mentioned. While the purpose of the
rapid dep.?eciation rules may be to increase investments in productive facilities that will
lead to increased employment of low- and middle-income workers, rapid depreciation
rates ma{y also greatly reduce the tax liabilities of wealthy individual business-owners
and thus actually increase, rather than reduce, the concentration of wealth in society.
_{
Perhaps it is because of these conflicting objectives that Congress so often seems to
exhibit 'confused' behavior when writing tax rules. When an incentive provision is
enacted, numerous limitations and restrictions will usually prevent its application in
many circumstances. There may also be exceptions to the exceptions. Often the
congressional process of fine-tuning incentive tax provisions will create a maze of
statutory law under which significant tax savings are possible, but only if transactions
are carefully planned to fit within statutory requirements.
State Powers
L. Taxation. The power of the state by which the sovereign raises revenue to defray
the necessary expenses ofthe government.
2. Eminent Domain. The power of the state to take private property for public use
upon payment of
just
compensation.
3. Police Power. The power of the state to enact laws to promote public health, public
morals, public safety and the general welfare of the people.
Aspects of Taxation
L. Levying of the tax. The imposition of tax requires legislative intervention. ln the
Philippines, it is Congress that levies taxes; and
2. Collection of the tax levied. This is essentially an administrative function.
Basic Principles of a Sound Tax System
1. Fiscal adequacy. Sources of revenue are sufficient to meet government
expenditures;
2. Equality or theoretical justice,
The tax imposed must be proportionate
to taxpayer's
ability to pay; and
3. Administrative feasibility. The law must be capable of convenient,
just
and effective
administration.