INCOME TAXATION PURPOSES OF TAXATION

DEFINITION OF TAXATION • REVENUE PURPOSE

- TO DEFRAY THE NECESSARY EXPENSES OF THE
• A PROCESS OR ACT OF IMPOSING A CHARGE BY GOVERNMENT
GOVERNMENTAL AUTHORITY ON PROPERTY, • REGULATORY PURPOSE
INDIVIDUALS OR TRANSACTIONS TO RAISE MONEY - TO REGULATE INFLATION
FOR PUBLIC PURPOSES. - TO ACHIEVE ECONOMIC AND SOCIAL STABILITY
- TO SERVE AS KEY INSTRUMENT FOR SOCIAL
• A POWER BY WHICH AN INDEPENDENT STATE, CONTROL
THROUGH ITS LAW- MAKING BODY, RAISES AND • COMPENSATORY PURPOSE
ACCUMULATES REVENUE FROM ITS INHABITANTS TO - FOR THE EQUITABLE DISTRIBUTION OF WEALTH AND
PAY T H E N E C E S S A R Y E X P E N S E S O F T H E INCOME IN SOCIETY
GOVERNMENT. - AS A TOOL AND WEAPON IN INTERNATIONAL
RELATION
• A MEANS BY WHICH THE SOVEREIGN THROUGH ITS
LAW-MAKING BODY DEMANDS FOR REVENUE IN BASES OF TAXATION
ORDER TO SUPPORT ITS EXISTENCE AND CARRY OUT •BASED ON NECESSITY
ITS LEGITIMATE OBJECTIVES •BASED ON RECIPROCAL DUTIES OF PROTECTION AND SUPPORT
BETWEEN THE STATE AND ITS INHABITANTS.

NATURE OF TAXATION
STAGES OR PROCESS OF TAXATION
• INHERENT POWER OF SOVEREIGNTY
• ESSENTIALLY A LEGISLATIVE FUNCTION
•LEVY OR IMPOSITION

• FOR PUBLIC PURPOSES

•ASSESSMENT AND COLLECTION
• PAYMENT
• IT IS COMPREHENSIVE, UNLIMITED, PLENARY,
SUPREME SCOPE OF TAXATION
• TERRITORIAL IN OPERATION •COMPREHENSIVE
• SUBJECT TO CONSTITUTIONAL LAND INHERENT •UNLIMITED
LIMITATIONS •PLENARY
•SUPREME
INHERENT POWERS OF THE SOVEREIGN STATE
• TAXATION POWER INHERENT LIMITATIONS
• POLICE POWER •TERRITORIALITY OF TAXATION
• POWER OF EMINENT DOMAIN •INTERNATIONAL COMITY
•PUBLIC PURPOSE
- POLICE POWER IS THE POWER TO ENACT LAWS •EXEMPTION OF THE GOVERNMENT

TO PROMOTE THE GENERAL WELFARE OF THE •NON-DELEGATION OF THE TAXING POWER

PEOPLE.
- EMINENT DOMAIN IS THE POWER TO TAKE
PRIVATE PROPERTIES FOR PUBLIC USE WITH DUE
PROCESS AND JUST COMPENSATION.
CONSTITUTIONAL LIMITATIONS
•DUE PROCESS OF LAW
•EQUAL PROTECTION OF THE LAW
•UNIFORMITY RULE IN TAXATION
•PROGRESSIVE SYSTEM OF TAXATION
•NON-IMPRISONMENT FOR NON-PAYMENT OF DEBT
OR POLL TAX
Principles of a sound tax system Tax distinguished from other terms
•Fiscal adequacy – the sources of revenue of the • Tax vs toll
government should be sufficient to meet the demand of • Tax vs penalty
public expenditures. • Tax vs special assessment
•Equality or theoretical justice – tax burden must be • Tax vs revenue
proportionate to the taxpayer’s ability to pay. • Tax vs subsidy
•Administrative Feasibility – tax law must be capable to • Tax vs permit or license
convenient, just and effective administration (free from • Tax vs custom duties
confusion and uncertainty)
Double taxation
SITUS OF TAXATION •Direct double taxation means taxing twice (1) by the
• Persons (place of residence) same taxing authority, jurisdiction or taxing district (2)
• Real Property (location of the property) for the same purpose (3) in te same year or taxing
• Tangible Personal Property (location) period (4)same subject or object (5) same kind/
• Intangible Personal Property (residence of owner character of the tax.
except when the property acquires situs of its own)
• Income (where it is earned) Means of avoiding or minimizing the burden of tax
• Business, transactions, occupation (where it happened) •1. Shifting
•2. transformation
Definition of Taxes •3. evasion
•Taxes are the lifeblood of the government which are an •4. avoidance
enforced contribution expected from the people, •5. capitalization
payable in money and proportionate in character which •6. . exemption
are levied by the law-making body of the state on
persons, property and transactions for public purpose. Kinds of exemption
•As to basis
Characteristics of taxes •Constitutional
•1. It is an enforced contribution. •statutory
•2. It is generally payable in money. •As to form
•3. It is proportionate in character. •Express
•4. it is levied on persons, property, or the exercise of a •implied
right or privilege. •As to extent
•5. It is levied by the law-making body of the state. •Total
•6. it is levied for public purpose. •partial

Classification of Taxes According to Sources of tax law

1. Subject matter 1. Constitution
2. Who bears the burden 2. National internal revenue code
3. Authority 3. Tariff and customs code
4. Purpose 4. Local government code
5. Determination of Amount 5. Local tax ordinances
6. Graduation or rate 6. Tax treaties and international agreement
7. Special laws
8. Decisions of the supreme court and court of tax
appeals
9. Revenue regulations and administrative rulings and
opinions
Construction of tax laws
•Public purpose is always presumed.
•If the law is clear, apply the law in accordance to its plain
and simple tenor.
•A statute will not be construed as imposing tax unless it
does so clearly, expressly and unambiguously.
•Provisions of a taxing act are not to be extended by
implication.
•In case of doubt, it is construed most strongly against
the government, and liberally in favor of the taxpayer.
•Tax laws operate prospectively unless the purpose of
the legislature to give retrospective effect is expressly
declared or may be implied from the language used.
•Tax laws are special laws and prevail over a general law.

Power of the BIR commissioner

•Power of the Commissioner to Interpret Tax Laws and to
Decide Tax Cases.
•Power of the Commissioner to Obtain Information, and
to Summon, Examine, and Take Testimony of Persons.
•Power of the Commissioner to Make assessments and
Pr e s c r i b e a d d i t i o n a l R e q u i r e m e n t s f o r Ta x
Administration and Enforcement.
•Authority of the Commissioner to Delegate Power.