CONCEPT, NATURE AND CHARACTERISTICS OF TAXATION AND TAXES

DEFINITION OF TAXATION

the act of laying a tax, i.e., the process by which the sovereign, through its law making body, raises revenue to defray the necessary expenses of the government

PURPOSE AND IMPORTANCE

To provide funds with which to promote the general

welfare and protection of its citizens, and to enable it to finance its multifarious activities.

DEFINITION OF TAXES
The enforced proportional contributions from persons

and property levied by the law-making body of the state for the support of the government and all public needs

ESSENTIAL CHARACTERISTICS OF TAX

It is an enforced contribution
Tax is not a voluntary payment or donation Its imposition is no way dependent upon the will or

assent of the persons tax

It is generally payable in money

It is an exaction to be discharged alone in money which

must be in legal tender

It is proportionate in character
It is ordinarily based on the ability to pay

It is levied on persons or property

Tax may be imposed on acts or transactions or contracts

It is levied by the state which has jurisdiction over the person or property
The persons or property must be subject to the

jurisdiction of the taxing state

It is levied by the law making body of the state

The power to tax is a legislative power which only the

legislative body can exercise through the enactment of statutes or ordinances

It is levied for public purposes

Taxation and tax involves a charge or burden imposed to

provide income for public purposes

THEORY AND BASIS OF TAXATION

The power of taxation proceeds upon the theory that the existence of government is a necessity

It cannot continue without means to pay its expenses It has a right to compel all its citizens and property within its limits to contribute

The basis of taxation is found in the reciprocal duties of protection and support between the state and its inhabitants
The taxpayer receives benefits and protection from the

government

NATURE OF TAXATION
It is inherent in sovereignty
The power of taxation is inherent to sovereignty by

being essential to the existence of every government

It is legislative in character
Under the Constitution only legislative body can impose

taxes Power to tax is also granted to local government subject to limitations

It is subject to constitutional and inherent limitations

The limitations are specifically provided in the

fundamental law or implied therefrom while the rest spring from the nature of taxing power

ASPECTS OF TAXATION
1.

Levying or imposition of the tax which is a legislative act

Collection of the tax levied which is essentially administrative in character

2.

BASIC PRINCIPLES OF SOUND TAX SYSTEM

Fiscal adequacy
The sources of revenue should be sufficient to meet the

demands of public expenditure

Equality or theoretical justice

The tax burden should be proportionate to the

taxpayers ability to pay

Administrative feasibility
Tax laws should be capable of convenient , just, and

effective administration

CALSSIFICATION OF TAXES
AS TO SUBJECT MATTER Personal, poll or capitation
Tax of a fixed amount imposed on individuals, residing

within specified territory, whether citizens or not, without regard to their property or the occupation in which they may be engaged. Example: community tax

Property
Tax imposed on property, whether real or personal, in

proportion either to its value or in accordance with some other reasonable method of apportionment Example: real estate tax

Excise
Any tax which does not fall within the classification of a

poll tax or property tax. Example: value-added tax, income tax

AS TO PURPOSE General, fiscal or revenue

Tax imposed for the general purposes of the government

to raise revenue Example: income tax, almost all taxes

Special or regulatory
Tax imposed for a special purpose

Example: protective tariffs or custom duties on imports,

to protect local industries against foreign competition

AS TO SCOPE National
Tax imposed by national government Example: national internal revenue taxes

Municipal or local
Tax imposed by municipal or public corporations Example: real estate taxes

AS TO DETERMINATION OF ACCOUNT Specific

Tax of a fixed amount imposed by the head or number,

or by some standard of weight or measurement Example: excise taxes on wines, cigars, gasoline

Ad valorem
Tax of a fixed proportion of the value of the property

with respect to which the tax is assesed Example: real estate tax, value-added tax

AS TO WHO BEARS THE BURDEN Direct

Tax which is demanded from the person who also

shoulders the burden of the tax; or tax which the taxpayer cannot shift to another Example: community tax, income tax

Indirect
Tax which is demanded from one person in the

expectation and intention that he should indemnify himself at the expense of another Example: all business taxes, VAT

AS TO GRADUATION OR RATE Proportional

Tax based on fixed percentage of the amount of

property, income or other basis to be taxed Example: real property tax

Progressive or graduated
Tax based on the rate of which increases as the tax base

or bracket increases Example: income tax, estate tax, donors tax

Regressive
Tax base on the rate of which decreases as the tax base or

bracket increases

TAX DISTINGUISHED FROM OTHER TERMS

Revenue
Refers to all the funds or income derived by the

government whether from tax or any other source Refers to the amount collected

Internal revenue
Refers to taxes imposed by the legislature or other than

duties on imports and exports

Custom duties
Taxes imposed on goods exported from or imported into

a country

Debt
A generally based contract that is assignable, maybe

paid in any kind and is not punishable (by imprisonment) if not paid

Penalty
Any sanction imposed as a punishment by violation of

law or acts deemed injurous

Constitutional CLASSIFICATIONS OF LIMITATIONS

Limitations that are expressly found in the Constitution

or implied by its own provisions which are enumerated: Due process of law Equal protection of the laws Rule of uniformity and equity in taxation No imprisonment of non-payment of poll tax Non-impairment of the obligation of contracts Non-infringement of religious freedom

 No appropriation for religious purpose Exemption of religious, charitable and educational

entities, non-profit cemeteries and churches from taxation Exemption of non-stock, non-profit educational institutions from taxation Concurrence by majority of all members of Congress for the passage of a law granting tax exemption Authority of the President to veto the particular items in a revenue or tariff bill Non-impairment of the jurisdiction of the Supreme Court intaxes

Inherent
Limitations which restrict the power although they are

not embodied in the Constitution which are enumerated: Requirement that levy must be for public purpose Non-delegation of the legislative power to tax Exemption from taxation of government entities International comity Territorial jurisdiction

 Equal protection of the laws signifies that all REQUIREMENT OF EQUAL PROTECTION persons

subject to legislation shall be treated alike under like circumstances and conditions both in the privileges conferred and liabilities imposed There is no violation of the protection:

where those with different incomes are made to pay different rates for taxes Where foreign corporations are made to pay higher amount of taxes than that paid by domestic corporations