Biasura, Jhazreel Mae N.

Income taxation
BSA 1B Mr. Eugene Balindan, CPA

1. The three inherent powers of the government are the power to tax, police power and eminent
domain. To simply explain their purposes, power to tax is for revenue, police power is for public
good and welfare and eminent domain is for public use. Broadly speaking the power of taxation
is the power of a governing body to impose duties and obligation upon the entities or individuals
who are subject to their authority. The most common example we were all familiar is when
government collect currency from people in order to generate revenue or funds for the activities
and services of the government. On the other hand, police power is the power of the
government to enforce regulations and laws to promote public health safety, morals, and
general welfare. Some examples are the right to regulate pollution and environmental control.
Lastly, eminent domain is the right to take private property that can be used for public
institutions. The state may acquire land for streets, parks, public buildings and more. Example is
when the power is used by the state to widen the road due to higher traffic and there is a house
near to the highway then the state will seize the property and will just provide compensation

2. As a general rule, tax laws are prospective in nature as the principle of prospectivity of tax laws
states that a tax bill must only be applicable after becoming a law. Therefore, laws should take
effect after they have been enacted and published. As a rule, laws have no retroactive effect
unless the contrary is provided. The reason for this is that prospective application of tax laws
would better reflect principles of equity because taxes are burdens and should not be imposed
without due process of law. For example, a law provides that it shall take effect after 30 days
following its publication on September 5, 2020 and will continue to take effect until it is
repealed then the law is prospective.

3. Tax evasion is illegal and occurs when an individual or entity deliberately avoids paying a tax
liability and can often times result n criminal charges and possible prison time. For example,
when a person who wishes to avoid the payment of taxes assessable on the transaction was
advised by tax consultant to make i t appear that his income in 2018 is PHP 200,000 instead of
250,000. This is an example of evasion because intentionally decreasing the income without
basis is illegal and will result to a clear reduction in the liability. On the other hand, tax
avoidance is tax planning n advance using legitimate tax deductions. Professionals like CPAs, tax
attorneys and accountants are noted for helping wealthy and famous income taxpayers lower
their taxes using legal techniques. Example, when you receive food, transportation, or other
subsides from your company which do not contribute to your basic pay and is therefore not
taxable. And virtually, all sales people are party to tax avoidance because of extent of internal
subsides in sales. Lastly is tax exemption that means free from federal income taxation and can
apply to portion of individual income or to nature of organization. For example, nonprofit
organizations are generally tax exempted because it provides public benefit and it furthers social
cause. However, if the organization engages in activities that are unrelated to their purpose,
then they become required to pay.
Biasura, Jhazreel Mae N. Income taxation
BSA 1B Mr. Eugene Balindan, CPA