TAXATION

(LIFEBLOOD OF ANY STATE)

The power of the state to collect
revenues for public purposes only.
The inherent power of the state,

acting through the legislature:

to impose and collect revenues
to support the government and its
recognized objects.
 It is anchored on the benefits-received
principle (Villegas and Abiola), its burden
must be shouldered by those who enjoy the
government ‘s benefits and services.
 It must be noted that not all people can
afford to pay taxes.
 Taxes must be based on an individual’s
ability to pay taxes.

( A government cannot function without the

necessary funds.)
 Characteristics of Taxes
 Enforced Contribution
 The National Internal Revenue Code of the
Philippines (Republic Act 8284)
 All the citizens, with respect to their ability, have to
pay taxes.
 A tax cannot be imposed as a voluntary contribution
or donation.
 Payable in Money
Atax must be discharged alone in money in which
must be in legal tender.
 Proportionate in Character
 Taxes are based on the ability to pay.
 Imposed on Persons or Property
A tax may be imposed on acts, transactions, or
contracts.
 A person will pay taxes for his income and owned
estates.
 Imposed by the State which has Jurisdiction
over the Person or Property
 The state cannot apply its power of taxation to
individuals or entities outside its legal jurisdiction.
 Imposed by the Law-making Body of the
State
 Itsimposition must be anchored on the enactment of
statutes and ordinances made by the Legislative
branch of the government.
 It is Levied for Public Purposes
 Taxation
involves and a tax constitutes, a
charge or burden to provide income for public
purposes:
 The support of the government.
 The administration of the law.
 The payment by public expense.
 KINDS OF TAXES UNDER
EXIXTING LAWS
 As to who bears the burden
 Direct Taxes
- these are paid and shouldered directly by
the taxpayers.
-include personal income taxes and estate
taxes.
 Indirect Taxes
-paid by the taxpayer but which he can shift
or pass on to others particularly who avail of
his goods and services.
 As to Subject Matter or Object
 Personal, Poll or Capitalization Tax
- A tax of fixed amount imposed on individual
residing within a specified territory, whether a
citizen or not, and regardless of property or the
occupation they engaged in such as community
tax.
 Property Tax
-refers to the amount imposed on property,
whether real or personal, in proportion either to its
value or in accordance with some other reasonable
method or appointment.
 Excise Tax
-it is charged or imposed upon the performance of
an act, the enjoyment of a privilege and in
engaging an occupation.
 As to Purpose
 General, Fiscal, or Revenue Tax
-imposed for the general purpose of the
government to raise funds for its needs.
-examples are income tax and almost taxes.
 Special or Regulatory Tax
-imposed for a special purpose to achieve
some social or economic ends, irrespective of
whether revenue is actually raised or not.
-examples are protective tariffs or customs
duties on import goods to protect local
industries.
 As to Determination of Account
 Specific Tax
-refers to the fixed amount imposed by the head
or number, or by some standard or weight or
measurement which requires assessment other
than a listing or classification of the subjects to
be taxed.
 Ad Valorem Tax
-is a fixed proportion of the value of the property
with respect to which the tax is assessed.
-requires the intervention of assessors or
appraisers to estimate and determine the
amount due from each taxpayer.
-examples are real estate tax, percentage tax,
and excise tax on cigars and cigarettes.
 As to Scope or Authority Imposing Tax
 National Tax
-imposed by the national government.
-examples are national revenues and customs
duties.
 Municipal or Local Tax
-imposed by municipal or public corporations.
-example is real estate tax.
 As to Graduation or Rate
 Proportional Tax
-based on fixed percentage of the amount of the
property, Income or other basis to be taxed.
-examples are real property tax and all
percentage taxes.
 Progressive or Graduated Tax
-refers to the rate which increases the
tax base or bracket increases.
-examples are income tax, estate tax,
and donor’s tax.
 Regressive Tax
-refers to the rate which decreases as
the tax base or bracket increases.
 KINDS OF TAXES UNDER
EXISTING LAWS
 National Taxes
-those implied by the National Government
under the National Internal Revenue Code
and other laws particularly the Tariff and
Customs Code.
 Local Taxes
-those imposed by local governments to meet
particular needs under the Local Government
Code, such as real property tax and the
community tax(formerly residence tax)
 Kinds Of National
Internal Revenue Taxes
 Income Tax
- a tax on a person’s income, emoluments,
profits and the like realized in one taxable
year.
 Estate Tax
-a tax on the right of the deceased person to
transmit his/her estate to his/her lawful
heirs and beneficiaries at the time of death
and on certain transfers, which are made by
law as equivalent to testamentary
disposition.
 - it is not a tax property and a tax
imposed on the privilege of
transmitting property upon the
death of the owner.
- is based on the laws in force at
the time of death notwithstanding
the postponement of the actual
possession or enjoyment of the
estate by the beneficiary.
 FOUR CANONS FOR GOOD
 EQUITY
TAXATION
-must be based on ability to pay.
 CERTAINTY
-the amount to be paid and the manner for
payment must be certain.
 CONVENIENCE
-the time for payment and the manner of
collection must not be oppressive.
 ECONOMY
-the tax to be levied must be just enough
to sustain the government and its function.
THREE PHASES OF TAXATION
 Levy or Imposition- involves the impact of
taxation, free to select the persons or
properties or the business, interest, or
privileges that may be subjected to imposition
or burdens, as long as the legislative body
does not violate constitutional restrictions or
limitations.
 Assessment and Collection- the basic
guidelines on the assessment are laid down
and the administrative authorities are
responsible for the details in the collection of
taxes .
 Payment- referred to as the incidence of
taxation

PURPOSE OF TAXATION
 To raise revenue or provide funds to promote the
general welfare and protection of its citizens.
 To enable the government to finance its
multifarious activities.
 To satisfy the following objectives:
• Equitably distribute the wealth of the nation,
referring to the case of estate and donor’s taxes
• Protect new industries in which the rate of taxation
may be increased to regulate the proliferation of
unnecessary industries and competition with
foreign investments.
• Uplift social conditions as in the case of
regulatory taxes in the exercise of police
powers.

BASIS OF TAXATION
-based on reciprocal duties of protection
and support between the state and its
inhabitants. In return for his contribution,
the taxpayer receives benefits and
protection from the government.
- termed as the “benefits received
principle”
CHARACTERISTICS OF A SOUND
TAX SYSTEM
 Fiscal Adequacy- the sources of revenue
must be adequate or enough to defray
the expenses of the government.
 Theoretical Justice- taxes must be based
on the ability to pay.
 Administrative Feasibility- must meet the
following criteria:
a. Tax laws must be clear and concise
b. It is capable of proper enforcement
c. It is not burdensome