Taxation is the process by which the state, through its lawmaking body, raises income to fund the necessary

expenses of the government. a) Basis of Taxation (Where did the idea to tax come from) a. rinciple of necessity! it is needed b. rinciple of "eciprocal duties! you benefit from government services, thus you should pay your taxes. urposes of Taxation a. rimary! Raise revenue for governmental needs b. #econdary a. Compensatory (to alleviate poverty, decrease inflation rates) b. Regulatory Purpose (sin taxes) b) #tate$s power to tax %ature of the #tate$s ower to tax a. Inherent though not expressly granted by the Constitution b. egislative! &nly legislature can impose taxes c. #ub'ect to Constitutional and inherent limitations (imitations to the power of taxation) *istinction between +nherent and ,onstitutional (imitations a. Inherent! which restrict the power, though not embodied in the constitution b. Constitutional! expressly found in the ,onstitution or implied from its constitution +nherent (imitations -. ublic purpose (tax levied for private, not public purpose constitutes taking property without due process of law a. .ust be used for the #upport of the government b. .ust be used for any of the "ecogni/ed ob'ects of government c. .ust be used to romote welfare of the community 0. Territorial 'urisdiction! Tax laws do not operate beyond territorial limits 1. +nternational ,omity! courteous and friendly agreement and interaction between nations 2. %on delegation of the power to tax! purely legislative, congress cannot delegate the power to others. 3. exemption from taxation of government entities! 4. double taxation ,onstitutional limitations -. *ue process of law 0. 56ual protection of law 1. "ule of "eciprocity and e6uity in taxation 2. %on!impairment of the obligation of contract 3. power of the president to veto any particular item or items in a revenue or tariff bill 4. exemption of revenues and assets of non!stock, non!profit educational institutions and donations for educational purposes from taxes and duties 7. no appropriation for religious purposes 8. ,oncurrence by ma'ority of all members of the congress for the passage of a law granting exemptions 9. The congress may not deprive the supreme court of its 'urisdiction in all cases involving the legality of any tax, impost or assessment or toll or any penalty imposed in relation to tax -:. %on!imprisonment for non!payment of poll tax --. Tax collection shall generally be treated as general funds of the government &b'ects of Taxation -. ersons a. %atural b. ;uridical 0. roperties a. "eal properties b. ersonal properties c. Tangible properties d. +ntangible properties

1.

5xcise ob'ects a. Transaction b. rivilege c. "ight d. +nterest

#tages, aspect or processes of taxation -. (evy 0. <ssessment 1. Tax payment= collection Basic rinciples of a #ound Tax system a. >iscal ade6uacy b. Theoretical ;ustice c. <dministrative feasibility 5scape from Taxation a. Tax evasion b. Tax avoidance! tax minimi/ation schemes a. Tax option! choosing to pay the lower tax rate b. #hifting! transferring from the statutory taxpayer to another without violating the law. c. Transformation! the producer absorbs payment of tax to reduce prices and maintain market share d. 5xemption! granted in the basis of i. "eciprocity ii. ublic policy iii. ,ontracts #itus of Taxation! "efers to the place of taxation, or the state or political unit which has 'urisdiction to impose tax over its inhabitants ?eneral "ules of Tax #itus #ource or location of &b'ect (Taxable)@ Residency "esident %onresident "esident %onresident "esident %onresident "esident %onresident !ithin the Philippines A5# A5# A5# A5# A5# A5# A5# A5# A5# "utside the Philippines A5# %& %& %& A5# A5# A5# %& %&

+ncome tax

>ilipino >ilipino <liens <liens >ilipino >ilipino <liens <liens

Transfer Tax

Business Tax

%ature of Taxes -. &bligations created by law 0. ?enerally personal to the taxpayer 5ssential ,haracteristics of Taxes -. 5nforced contribution 0. imposed by the legislative body 1. proportionate in character

2. 3. 4. 7. 8. 9.

ayable in the form of money +mposed for the purpose of raising revenue. Bsed for ublic urpose 5nforced on some persons, properties or rights "e6uired to be paid at regular intervals +mposed by the sovereign state within its 'urisdiction

#$%%&R' "( T&)*# "b+ect -. 0. erson roperty %a+or Classification ersonal tax roperty Tax Business Tax (normal course of Business) ,escription ,ommunity Tax "eal roperty tax Calue <dded Tax Income Classification

1. "ights

&ther ercentage Tax 5xcise Tax Transfer tax 5state tax *onorDs Tax a. >inal withholding tax assive income #ale of real property (capital asset) ,apital ?ain on sale of share outside the stock exchange b. ,reditable withholding tax ,ompensation income rofessional >ee "ent, brokers, agent fee

+ncome Taxes

c. <nnual +ncome tax

,ompensation income Business income gain sale of ther capital assets assive income earned outside

,lassification of Taxes

<s to scope <s to who bears the burden <s to the determination of amount <s to purpose <s to sub'ect matter

%ational (ocal *irect! cannot be shifted (income tax) +ndirect! can be shifted (C<T) #pecific! based on unit of measure (per metric ton, ie. ,ustoms duties) <d Calorem! based on peso value (ie. C<T) ?eneral! revenue generating (income tax) "egulatory! for regulatory (sin taxes) oll! ie. ,ommunity Tax ,ertificate roperty! ie. "eal roperty Taxes 5xcise! ie. +ncome, 5state taxes roportional rogressive "egressive

<s to gradation

For the following topics, please refer to link http://www.chanrobles.com/legal6nircsections.htm a. owers and <uthority of the ,ommissioner of +nternal "evenue (refer to #ec 2 to 7 of the %+",) b. "emedies of the ?overnment