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Taxation- a means by which governments finance their expenditure by

imposing charges on citizens and corporate entities. Governments use taxation
to encourage or discourage certain economic decisions. For example, reduction
in taxable personal income by the amount paid as interest on home mortgage
loans results in greater construction activity, and generates more jobs.

Taxation is important to everyone. It encompasses every areas of our
daily life including property, family, employment and our everyday
transaction as well as our business affair.

Objectives of Taxation

To raise revenue

Taxes on imports maybe increase to protect local industries from

the competition of foreign trade.

Taxes on imported goods may also be used as bargaining tool by a

country by setting rates first at the relatively high level before
trade negotiations are entered into with another country to
enhance it bargaining power and

To discourage buyer to buy imported products to raise revenue.

3. Distribution of wealth

Taxes maybe increase in periods of prosperity to spending power

and halt inflation or lowered in period of slump to expand business
and ward of depression.

Taxes levied to reduce inequalities in wealth and income, as for

instance, the state, donors and income taxes, their payers
inequalities in wealth and incomes being the recipients of un
earned wealth or mostly in the higher income brackets.

Taxes levied to promote science and to finance educational

activities to improve the efficiency of local police force.

4. To regulate consumption of non-deemed essential products.

What is Tax?
-raising the income of the country
-the act of collecting taxes

Taxation is the process by which the states exercise its inherent

or natural power to raise such as tax revenue.

Tax is a compulsory contribution of a certain sum of money

people and business pay to the government to defray its costs
of providing services for the common goals.

Tax system is the orderly manner in which taxes are assessed,

levied and collected.

State policy on taxation

The law that governs Philippines taxation is the National Internal

Revenue Code, which was rewritten as Tax Reform Act of
1997(R.A. 8424).

To promote sustainable economic growth through the

rationalization of the Philippines Internal Revenue Tax System.

To provide, as much as possible, an equitable relief to a greater

number of tax payers in order to improve levels of disposable
income and increase economic activity.

To create a robust environment for business to unable firms to

complete better in the regional as well as the global market.

Steps in Taxation

Determine the tax base.

Apply the tax rate on the tax base to arrive at the tax due the

Collect the Tax due.

Enforce the law.

Two concepts of Taxation

Theory of Necessity-which means that there is a need for a

government and therefore the people must fund this government

by paying their taxes.

Principles of Reciprocity-which means that the government protects

the life liberty and property of the people and in return supports
the government by paying their taxes.

Classification of Taxes

Based on subject matter

Personal, poll or capitation- imposed of person with in


Property-a tax imposed or property on real

Excise-on good manufactured consumed

Based on who bears the burden

donors taxes items that has donation, gifts and trust.

Direct-levied against persons and are paid directly to a

tax collecting agency.

property taxes, estate tax on diseased person or burden to


Indirect- levied against goods and services and change

only indirectly on people in the form of sales, taxes,
import duties and like.

Example: Value Added Tax

Based on determination of account

SPECIFIC-Tax imposed according to physical quantity of

goods, as per

AD VALOREM-Tax of a fixed amount based on the value of

property of real estate.

Based on purpose
A. REVENUE-FISCAL TAX-Tax imposes throughout the country
raised for
whatever needs by the
government may arise.
B. SPECIAL-REGULATORY TAX- tax imposes or levied for

a special purpose.

Based on the authority who impose the Tax

NATIONAL - tax change by the national government.

Example: value added tax



GOVERNMENT-tax change by the local government.

Based on the graduation or rate

A. PROPORTIONAL - Tax a fixed of uniform amount.

fixed percentage of the amount.

B.PROGRESSIVE OR GRADUATED - tax tends to increased as the base

C. REGRESSIVE- tax tends to decreased as the tax base decrease as the tax
base. The regressive tax system is not practiced in the Philippines.

Essential characteristic of Tax

Obligatory or Compulsory contribution

In forced contribution of tax.


Charge by the law making body of the state congress.


Impartial in character or proportionate in Character Tax Evasion illegal.


Payable in money.


Obligatory for the purpose of raising funds.


For public used only.


Levied on persons and properties.


Taxation should be for public purpose.

Taxation should be uniform.

It must be within justice to individuals.

It must be within the jurisdiction of the government living the tax.


Amiel Y. Creedy, J and Hun, s.(1999)Measuring attitudes toward inequality.

Scandinavian Journal of Economics, 101, pp.83-96.

Cornwell, A. and Creedy, J (1997) Environmental Taxes and Economic


Tax exemptions, 2008, Research Division, Washing Ton State department of

Revenue, January 2008.


Origin principle of taxation.


Maagblog.ysu/edu/accounting taxation-room-resources/