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TAXATION 101

Basic Rules and Principles in Philippine


Taxation
What is Taxation?
It is the inherent power by which the
sovereign state imposes financial
burden upon persons and property as
means of raising revenues in order to
defray the necessary expenses of the
government ( Tax Digest by Crescencio
Co Untian, 2002).
Taxation
- is the imposition of financial charges
or other levies, upon a taxpayer (an
individual or legal entity) by state such
that failure to pay is punishable by
law.

*Earliest taxes in Rome are called as


portoria were customs duties on
imports and exports.
*Augustus Caesar introduced the
inheritance tax to provide retirement
funds for the military. The tax was five
percent on all inheritances except gifts
to children and spouses.
*In England, taxes were first used as
emergency measures.
*The pre-colonial society, being
communitarian, did not have taxes.
*During the Spanish Period, new
income-generating means were
introduced by the government such as
the:
- Manila-Acapulco Galleon Trade

- it is a mode by which government


make exactions for revenue in order to
support their existence and carry out
their legitimate objectives ( Tax Law
and Jurisprudence by Justice Vitug,
2002).

- Polo Y Servicio (Forced Labor)

-It is the most pervasive and the


strongest of all the powers of the
government. Taxes are the lifeblood of
the government, without which, it
cannot subsist.

MANILA- ACAPULCO GALLEON TRADE

HISTORY OF TAXATION
*The first know system of taxation was
in Ancient Egpyt around 3000BC
2800BC in the first dynasty of the old
kingdom.
*In biblical times, tax is already
prevalent. According to Genesis 47:24
But when the crop comes in, give a
fifth of it to Pharaoh. The other fourfifths you may keep as seed for the
fields and as food for yourselves and
your households and your children.

- Bandala
- Enconmienda System
- Tribute

- was the main sources of income for


the colony during its early years.
The Galleon trade brought silver from
Nueva Castilla and silk from China by
way of Manila.
POLO Y SERVICIO
- is the forced labor for 40days, of men
ranging from 16 to 60 years of age
who were obligated to give personal
services to community projects. One
could be exempted from the polo by
paying a fee called falla (which was
wort one and a half real).
BANDALA

- is one of the taxes collected from the


Filipinos. It comes from the Tagalog
word mandala, which is a round stock
of rice stalks to be threshed.

The payment of this tax would merit


the issue of a residence certificate.
Corporations were also subject to the
residence tax.

ENCONMIENDA
- are large tracts of land given to a
person as reward for a meritorious act.
The encomenderos were given full
authority to manage the encomienda
by collecting tribute from the
inhabitants and govern people of living
on it.
TRIBUTE
- was the residence tax during the
Spanish times. It may be paid in cash
or kind, partly or wholly.
But in 1884, the tribute was replaced
by the cedula personal or personal
identity paper, equivalent to the
present community tax certificate.
DID YOU KNOW?
That in the 19th century, the cedula
served as an identification card that
had to be carried at all times. A person
who could not present his or her
cedula to a guardia civil could then be
detained for being indocumentado
Andres Bonificaio and other
Katipuneros tore their cedula in August
1896, signalling the start of the
Philippine Revolution.
THE DEVELOPMENT OF THE
COMMUNITY TAX
The cedula was imposed by the
Americans on January 1,1940, when
Commonwealth Act No.465 went into
effect, mandating the imposition of a
base residence tax of fifty centavos
and an additional tax of one peso
based factors such as income an real
estate holdings.

What is a cedula?
Also known as a residence
certificate, is a legal identity
document in the Philippines.
Issued by cities and municipalities to
all persons that have reached the age
of majority and upon payment of a
community tax, it is considered as a
primary form of identification in the
Philippines and is one of the closest
single documents the Philippines has
to a national system of identification,
akin to a drivers license and a
passport.
Why is cedula important?
A person is required to present a
cedula when he or she acknowledges
a document before a notary public;
takes an oath of office upon election or
appointment to a government
position; receives a license, certificate
or permit from a public authority; pays
a tax or fee; receives money from a
public fund; transacts official business
or receives salary from a person or
corporation.
The Four Rs of Taxation
Taxation has four main purposes or
effects:
1. Revenue
2. Redistribution
3. Repricing
4. Representation

REVENUE

- The taxes raise money to spend on


armies, roads, schools, and hospitals,
and on more indirect government
functions like market regulation or
legal systems.
REDISTRIBUTION
- This refers to the transferring wealth
from the richer sections of society to
poorer sections.
REPRICING
- Taxes are levied to address
externalities; for example, tobacco is
taxed to discourage smoking, and a
carbon tax discourages use of carbonbased fuels.
Representation
- As what goes with the slogan no
taxation without representation, it
implies that: rulers tax citizens, and
citizens demand accountability from
their rulers as the other part of this
bargain.
Why Tax?
The main purpose of taxation is to
accumulate funds for the functioning
of the government machineries. No
government in the world can run its
administrative office without funds
and it has no such system
incorporated in itself to generate profit
from its functioning.
The governments ability to serve the
people depends upon the taxes that
are collected. Taxes are the
indispensable in the government
operation and without it, the
government will be paralyzed.

taxes refer to national internal


revenue taxes imposed and collected
by the national government through
the Bureau of Internal Revenue (BIR)
and local taxes refer to those imposed
and collected by the local government.
The 1987 Philippine Constitution sets
limitations on the exercise of the
power of tax. The rule of taxation shall
be uniform and equitable. The
congress shall evolve a progressive
system of taxation. (Article VI, Section
28, Paragraph 1).
What is TAX EVASION?
Tax evasion happens when there is
fraud through pretension and the use
of other illegal devices to lessen ones
taxes, the is tax evasion, underdeclaration of income, and nondeclaration of income and other items
subject to tax, Under-appraisal of
goods subject to tariff, and overdeclaration of deductions.
THE BRANCHES OF GOVERNMENT
The Congress may, by law, authorize
the President to fix within specified
limits, and subject to such limitations
and restrictions as it may impose,
tariff rates, import and export quotas,
tonnage and wharfage dues, and other
duties or imposts within the
framework of the national
development program of the
Government (Article VI, Section 28,
Paragraph 2).

THE PHILIPPINE TAX SYSTEM

The President shall have the power to


veto any particular item or items in an
appropriation revenue, or tariff bill, but
the veto shall not affect the item or
items to which he does not object
(Article VI, Section 27, Paragraph 2).

Tax law in the Philippines covers


national and local taxes. National

The Supreme Court has the power to:


review, revise, reverse, modify, or

affirm on appeal or certiorari, as the


law of the Rules of Court may provide,
final judgements and orders of lower
courts in all cases inloving the
legality of any tax, impost,
assessment, or toll, or any penalty
imposed in relation thereto (Article
VIII, Section 5, Paragraph 2b).
THE FORMS OF TAXES IMPOSED ON
PERSONS AND PROPERTY
A) Personal, capitation or poll taxes
- These are taxes of fixed amount
upon residents or persons of a certain
class without regard to their property
or business.
B) Property taxes
1. Real Property Tax
- An annual tax that may be imposed
by a province or city or a municipality
on real property such as land, building,
machinery and other improvements
affixed or attached to real property.
2. Estate Tax (Inheritance Tax)
- A tax on the right of transmitting
property at the time of death and on
the privilege that a person is given in
controlling to a certain extent the
disposition of his property to take
effect upon death.
3. Gift or Donors Tax
- A tax on the privilege of transmitting
ones property or property rights to
another or others without adequate
and full valuable consideration.
4. Capital Gains Tax
- Tax imposed on the sale or exchange
of property. Those imposed are
presumed to have been realized by
the seller for the sale, exchange or
other disposition of real property

located in the Philippines, classified as


capital assets.
C) Income Taxes
- Taxes imposed on the income of the
taxpayers from whatever sources it is
derived. Tax on all yearly profits
arising form property, possessions,
trades or ff
D) Excise or License Taxes
- Imposed on the privilege, occupation
or business not falling within the
classification of poll taxes or property
taxes. These are imposed on alcohol
products; on tobacco products; on
petroleum products like lubrication
oils, grease, processed gas etc; on
mineral products such as coal and
coke and quarry resources; on
miscellaneous articles such as
automobiles.
Under these lies two other taxes:
1. Documentary Stamp Tax
- A tax imposed upon documents,
instruments, loan agreements and
papers and upon acceptance of
assignments, sales and transfers of
obligation and etc.
2. Value added tax
- Is imposed on any person who, in the
course of trade or business sells,
barters, exchanges, leases, goods or
properties, renders services, or
engages in similar transcations.
Ex: Products like Papawash have
value-added taxes, too.
Who should pay taxes?
1. Individuals
a. Resident Citizen
b. Non- resident citizen

c. Redisent Aliens
d. Non-resident Aliens

*Local water districts

2. Corporations

*Cooperatives duly registered under


RA 6983, otherwise known as the
Cooperative Code of the Philippines

a. Domestic Corporations
b. Foreign Corporations

*Non-stock and non-profit hospitals


and education institutions

3. Estate under judicial settlement


4. Trusts irrevocable both as to the
trust property and as to the income.
Who (or What) are those exempted in
paying taxes?
The constitution expressly grants tax
exemption on certain
entities/institutions such as:
1. Charitable institutions, churches,
parsonages or convents appurtenant
thereto, mosques, and non-profit
cemeteries and all lands, buildings
and improvements actually, directily
and exclusively used for religious,
charitable or educational purposes
(Article VI, Section 28, Paragraph 3).
2. Non-stock non-profit educational
institutions used actually directly, and
exclusively for educational purposes
(Articles XVI, Section 4 (3)).
Exempted to tax as stated in the
Article 283 of Rules and Regulations
Implementing Local Government Code
of 1991 (RA 7160)

*Printer and/or publisher of books or


other reading materials prescribed by
DECS(now DepED) as school texts or
references, insofar as receipts from
the printing and/ or publishing thereof
are concerned.
Top Celebrity Taxpayers (2010)
*Willie Revillame (No.3)
*Sharon Cuneta-Pangilinan (No.18)
*Kris Aquino (No.39)
*Piolo Pascual (No.50)
*Marian Rivera (No.62)

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