GENERAL PRINCIPLES AND

CONCEPT OF TAXATION
 Topics includes:

 Definition of taxation
 Purpose of taxation
 Theory and basis of taxation
 Lifeblood theory
 Scope of the power of taxation
 Characteristics or nature of the state’s power
to tax
 Topics includes:

 Processes included or embodied in the term

taxation
 Matters within the competence of the
legislature to determine
 Basic principles of a sound tax system (Canons
of Taxation)
 Inherent power of the state
 Distinctions among the three inherent powers
 Topics includes:

 Inherent limitations of taxation

 Constitutional limitations of taxation
 TAXATION

 Is the act of laying a tax, i.e. the process or

means by which the sovereign, through its law
making body, raises income to defray the
necessary expenses of government.
PURPOSE OF TAXATION

 Principal/Primary Purpose
 Raise revenue to government needs. (Revenue
purpose)
 Secondary Purpose
 Compensatory – to reduce excessive inequalities of
wealth; to maintain high level of employment; to
control inflation
 Sumptuary or regulatory – to implement the police
power of the State to promote the general
welfare
Theory and Basis of Taxation

 Existence of the government is a necessity

 Reciprocal duties of protection and support
between the state and its inhabitants (benefits
received theory)
 Lifeblood Theory

 Taxes are the lifeblood of the Government and their

prompt and certain availability are imperious need.
 Upon taxation depends the government’s ability to
serve the people for whose benefit taxes are
collected.
 Manifestation of lifeblood theory:
1. Imposition of tax even in the absence of the
constitutional grant
2. Right to select objects of taxation
3. No injunction to enjoin or stop tax collection
Scope of the Power of Taxation

 Comprehensive
 Plenary
 Unlimited
 Supreme

- subject to inherent and constitutional

limitation
Characteristics/nature of the
State’s Power to Tax

 Inherent in sovereignty
 Legislative in character
 Subject to constitutional and inherent
limitations
Processes included or embodied
in the term taxation

 Levying – imposition of tax which is a legislative

act
 Collection – of the tax levied which is essentially
administrative in character
Matters within the Competence
of the Legislature to determine

1. Subject matter or object to be taxed

2. Purpose of the tax so long as it is a public
purpose
3. Amount or rate of the tax
4. Manner or means of collecting taxes
Basic Principles of a Sound Tax
System (Canons of Taxation)

1. Fiscal Adequacy – sources of revenue should

be sufficient to meet the demands of public
expenditures
2. Equality or Theoretical Justice – tax burden
should be proportionate to the taxpayer’s
ability to pay (ability to pay principles)
3. Administrative Feasibility – laws should be
capable of convenient, just and effective
administration.
Inherent Powers of the State

1. Taxation – power by which the sovereign raises

revenue to defray the necessary expenses of the
government

2. Power of Eminent Domain – power of the state or

those to whom the power has been delegated to
take private property for public use upon paying
the owners’ a just compensation to be ascertained
according to law
Inherent Powers of the State

3. Police power – power of the state to enact

such laws in relation to persons and property
that may promote public health, public morals,
public safety and general welfare of the
people.
 Similarities among the 3
Inherent Powers

1. Inherent in the State

2. Exist independently of the Constitution
3. Constitute the three methods by which the
state interferes which private rights and
property
4. Each presupposes and equivalent compensation
 Distinctions among the 3
Inherent Powers

1. As to purpose
Taxation Support of government

Police Power Promote general welfare

Power of eminent domain Public purpose

 Distinctions among the 3
Inherent Powers

2. As to authority which exercises the power

Taxation Government only

Police Power Government only

Power of eminent domain Government, public service companies and

public utilities
 Distinctions among the 3
Inherent Powers

3. As to persons affected
Taxation Community or class of individuals

Police Power Community or class of individuals

Power of eminent domain Individual as owner of a particular property

 Distinctions among the 3
Inherent Powers

4. As to benefits received
Taxation Equivalent of tax in the form of protection
and benefit
Police Power No direct and immediate benefit, only such
as may arise from the maintenance of a
healthy economic standard of society
(damnum absque injuria or damage without
injury)
Power of eminent domain Market value of the property taken from him
 Distinctions among the 3
Inherent Powers

5. As to effect
Taxation Taxes become part of public funds

Police Power No transfer of title, there is restraint on

the injurious use of property
Power of eminent domain There is transfer of the right to property,
either ownership or a lesser right
 Distinctions among the 3
Inherent Powers

6. As to amount of imposition
Taxation No limit

Police Power Limited to the cost of the license and the

necessary expenses of police surveillance and
regulation
Power of eminent domain No regulation, the owner is pad the fair
market value of his property
 Distinctions among the 3
Inherent Powers

7. As to relationship to the non-impairment of

obligations clause of the Constitution
Taxation Inferior to the clause

Police Power Superior to the clause

Power of eminent domain Inferior to the clause

 Limitations on Power of
Taxation

 Inherent Limitation – those which restrict

power although they are not embodied in the
Constitution
 Constitutional Limitation – those which are
expressly found in the Constitution or implied
from its provisions
 Inherent Limitations

a. Public This is the purpose affecting the

purpose inhabitants of the state as a
community and not merely as
individuals.
b. International The property of a foreign state or
comity government may not be taxed by
another.
c. Territorial The tax laws of a state are
jurisdiction enforceable ony within territorial
limits.
 Inherent Limitations
d. Double This means taxing a person, property
taxation or right twice within the same year
by the same taxing authorities.
e. Exemption Government agencies performing
from taxation governmental functions are except
of government from tax unless expressly taxed
entities while those performing proprietary
functions are subject to tax unless
expressly exempted.
f. Non- The power to tax being legislative
delegation of cannot be delegated to the other
the power to branches
tax
 Constitutional Limitations
1. Rules a. Due Process of Law (Art. III, Sec. 1)
b. Equal Protection of the Laws (Art. III, Sec.1)
c. Rules of Uniformity and Equity in Taxation
[Art. VI, Sec. 28 (1)]
2. Negatives a. Non-imprisonment for non-payment of poll tax
(Art. III, Sec. 20)
b. Non-impairment of the obligation and
contracts (Art. III, Sec. 10)
c. Non-infringement of religious freedom (Art.
III, Sec. 5)
d. No appropriation for religious purposes (Art.
III, Sec. 29 (2))
e. Non-impairment of the jurisdiction of
Supreme Court in Tax cases [Art. III, Sec. 5
(2)(b)]
 Constitutional Limitations
3. Exemptions a. Exemption from taxation of charitable
institutions, churches and parsonages or
convents appurtenant thereto, mosques, non-
profit cemeteries, and all lands, buildings, and
improvements, actually, directly, and
exclusively used for religious, charitable or
educational purposes [Art. VI, Sec. 28 (3)]
b. Exemption of Revenues and Assets of Non-
stock, Non-profit Educational Institutions and
Donations for Educational Purposes from
taxes and duties [Art. XIV, Sec. 4 (3)]
c. Exemption from Tax of all grants,
endowments, donations or contributions used
actually, directly and exclusively for
educational purposes. [Art. XIV, Sec. 4 (4)]
 Constitutional Limitations
4. Congress a. Concurrence by a Majority of all members of
the Congress for the passage of a law granting
tax exemptions [Art. VI, Sec. 28 (4)]
b. All Appropriation, Revenue or Tariff Bills shall
originate exclusively from the House of
Representatives, but the Senate may propose
and concur with amendments (Art. VI, Sec.
24)
c. The Congress may authorize the President to
fix Tariff rates, Import and Export Quotas,
Tonnage and Wharfage dues and other Duties
and Imposts [Art. VI, Sec. 28 (2)]
d. Congress may provide for incentives including
tax deductions to encourage private
participation in programs of basic and applied
scientific research (Art. XIV, Sec. 11)
 Constitutional Limitations
5. President a. Power of the President to Veto any particular
item or items in a Revenue or Tariff Bill [Art.
VI, Sec. 27 (2)]
6. Special Fund a. All money collected on any tax levied for
special purpose shall be treated as a special
fund [Art. VI, Sec. 29 (3)]
7. Local a. Each LGU shall have the power to create its
Government own sources of revenue and to levy taxes,
fees and charges (Art. X, Sec. 5)
b. LGU shall have a just share in the National
Taxes (Art. X, Sec. 6)
 Inherent Limitation
(Amplified and Illustrated)

1. Public Purpose

1. Test of The best test of rightful taxation is that

rightful taxation proceeds of the tax must be used:
a. For the support of the government
b. For any of the recognized objects of
government
c. To promote the welfare of the community
2. Tax levied for A tax levied for a private, not public, purpose
private purpose constitutes taking of property without due
process of law as it is beyond the power of the
government to impose.
 Inherent Limitation
(Amplified and Illustrated)
1. Public Purpose
3. Instances of a. Financing of educational activities and
public purpose programs
b. Promotion of science
c. Erection and maintenance of roads, bridges
and piers
d. Aid for victims of a public calamity
e. Relief to the poor and unemployed and to
provide for unemployed benefits
f. Payment of pensions and bonuses for services
rendered by public officers and employees
g. The construction of experimental stations to
seek increases of efficiency in sugar
production and the improvement of living and
working conditions in sugar mills or plantation.
 Inherent Limitation
(Amplified and Illustrated)

2. Territorial Jurisdiction

1. Tax laws The tax law (and this is true of all laws) do not
operate within operate beyond a country’s territorial limits.
2. Property Property which is wholly or exclusively within the
wholly or jurisdiction of another state receives none of the
exclusively in protection for which a tax is supposed to be
other countries compensation.
3. Taxability of A person may be taxed where there is between
a person him and the taxing state a privity of relationship
justifying the levy.
 Inherent Limitation
(Amplified and Illustrated)
2. Territorial Jurisdiction
4. Situs of Taxation
a. Meaning of Situs of taxation literally means place of taxation
Situs of taxation
b. Basic rules on The situs is in the state which has jurisdiction or
situs which exercise dominion over the subject in
questions.
c. Situs of Subject Situs
Taxation
1. Poll tax on Residence of the person
persons
2. Real property State where the property is
tax located whether the owner is
resident or not
 Inherent Limitation
(Amplified and Illustrated)
2. Territorial Jurisdiction
4. Situs of Taxation
c. Situs of Subject Situs
Taxation
3. Tax on tangible State where it is physically
personal property located although the owner
resides in another jurisdiction
(lexi rei sitae)
4. Tax on Domicile of the owner (mobilia
intangible sequntur personam)
personal property
5. Income tax State where the taxpayer is a
resident or citizen
 Inherent Limitation
(Amplified and Illustrated)
2. Territorial Jurisdiction
4. Situs of Taxation
c. Situs of Subject Situs
Taxation
6. Business, Place where the business is
occupation and done, or the occupation is
transaction tax engaged in or the transaction
took place
7. Tax on State where the transferor
gratuitous is/was a citizen or resident or
transfer of where the property is located
property
 Inherent Limitation
(Amplified and Illustrated)
2. Territorial Jurisdiction
4. Situs of Taxation
d. Multiplicity of Income or intangible personal properties may be
Situs subject to taxation in several taxing jurisdiction.

e. Remedies 1. Provision of exemptions

against 2. Allowance of deduction or tax due for foreign
multiplicity of taxes
situs 3. Treaties with other states
 Inherent Limitation
(Amplified and Illustrated)
3. International Comity

1. Meaning It means courteous and friendly agreement and

interaction between nations
2. Grounds International comity is based on any of the
following:
1. Sovereign equality among states
2. Usage among states
3. Foreign government may not be sued without
its consent
3. International Our Constitution has adopted the generally
law is part of accepted principles of international law as part of
the law of the the law of our country.
country
 Inherent Limitation
(Amplified and Illustrated)
4. Non-delegation of the power to tax

1. Power of The power of taxation being purely legislative,

taxation purely Congress cannot delegate the power to others.
The limitation arises from the doctrine of
separation of powers among the three branches
of the government.
2. Exceptions 1. Delegation to the President to fix within
specified limits tariff rates, import or export
quotas, tonnages and wharfage dues and other
duties and imposts
2. Delegation to local governments the power to
create its own sources of revenues and to levy
taxes, subject to such limitations as may be
provided by law
 Inherent Limitation
(Amplified and Illustrated)
4. Non-delegation of the power to tax

2. Exceptions 3. Delegation to administrative agencies certain

aspects of the taxing process that are not
legislative such as:
a. The power to fix value of property for
purposes of taxation pursuant to fixed rules
b. The power to assess and collect taxes
c. The power to perform any of the innumerable
details of computation, appraisement, and
adjustments, and the delegation of such
duties
 Inherent Limitation
(Amplified and Illustrated)
5. Exemption of Government Agencies

1. Government a. Government agencies performing

agencies governmental functions unless expressly
exempted from taxed.
tax b. Government agencies performing proprietary
functions unless expressly taxed.
 Inherent Limitation
(Amplified and Illustrated)
6. Double Taxation

1. Meaning a. Double taxation referred to is direct double

taxation or direct duplicate taxation
b. Direct double taxation means taxing twice, by
same taxing authorities, within the same
jurisdiction or taxing district, for the same
purpose, in the same year or taxing period
some of the property in the territory.
2. Instances a. A tax mortgage as personal property when the
where there is mortgaged property is also taxed at its full
no direct double value as real estate
taxation b. A tax upon the same property imposed by two
differing states
 Constitutional Limitations
(Amplified and Illustrated)
1. Due Process of Law

1. Constitution “No person shall be deprived of life, liberty, or

al provision property without due process of law …” (Art III,
Sec. 1a)
2. Deprivation Any deprivation of life, liberty or property is with
with due process due process if it is done:
of law a. Under the authority of law that is valid or of
the Constitution itself
b. After compliance with fair and reasonable
methods or procedures prescribed by law
 Constitutional Limitations
(Amplified and Illustrated)
1. Due Process of Law

3. Procedural Procedural due process in judicial proceedings

due process requires “opportunity to be heard before
judgment is rendered affecting one’s person or
property.”
4. Requirement Due process in taxation requires:
a. Tax must be for public purpose
b. Imposed within the territorial jurisdiction
c. No arbitrariness or oppression in assessment
and collection
 Constitutional Limitations
(Amplified and Illustrated)
2. Equal Protection of Laws

1. Constitutional “No person shall be deprived of life, liberty, or

provision property without due process of law nor shall any
person be denied equal protection of the laws”
(Art III, Sec. 1)
2. Person All persons subject to legislation shall be treated
subject to alike under circumstances and conditions both in
legislation the privileges conferred and liabilities imposed.
3. Absolute The Constitution does not require things which
equality not are different in fact to be treated in law as
required though they were the same.
 Constitutional Limitations
(Amplified and Illustrated)
2. Equal Protection of Laws
4. Classification It is valid when:
allowed a. There is substantial distinction
b. The classification is germane (relevant) to the
issue
c. The classification applies not only to existing
obligations but future conditions as well
d. The classification is applicable to all members of
the same class
5. Examples of a. Where an ordinance imposes a property tax on motor
denial of equal vehicles using the streets in Manila, such being payable
protection only by owners of vehicles residing in Manila but those
outside Manila who also use the streets are not made to
share the corresponding burden.
b. Where a tax provisions is enforced against manufacturers
of filled milk only, but not against persons similarly
situated such as manufacturers of condensed skimmed
milk
 Constitutional Limitations
(Amplified and Illustrated)
3. Rules of Uniformity and Equity in Taxation

1. Constitutional “The rule of taxation shall be uniform and

provision equitable.” [Art. VI, Sec. 28 (1)]
2. Properties of All taxable articles or properties of the same
the same class class shall be taxed at the same rate.
3. When is a tax A tax is considered uniform when it operates with
uniform the same force and effect in every place where
the subject may be found.
4. Concept of The concept of equity in taxation requires that
equity in apportionment of the tax burden be more or less
taxation just in the light of the taxpayer’s ability to
shoulder the tax burden and, if warranted, on the
basis of the benefits he receives from the govt.
 Constitutional Limitations
(Amplified and Illustrated)
3. Rules of Uniformity and Equity in Taxation

5. Congress to To ensure and enhance the equity objective, the

evolve a Constitution enjoins Congress to evolve a
progressive progressive system of taxation.
system of
taxation
6. Progressive Progressive system of taxation means that tax
system of shall place emphasis on direct rather than
taxation indirect taxation, with ability to pay as the
principal criterion. A system that places emphasis
on indirect taxes is said to be a regressive tax
system.
 Constitutional Limitations
(Amplified and Illustrated)
3. Rules of Uniformity and Equity in Taxation

7. Difference Equal protection refers to more to like treatment

between equal of persons in like circumstances, uniformity and
protection and equity refers to the proper relative treatment
uniformity and for tax purposes of persons in unlike
equity circumstances.
 Tax and other Charges

 Tax – an enforced contribution levied by the State by virtue of the

sovereignty on persons and property within its jurisdiction for the
support of the government and all public needs.

 Essential characteristics of tax

1. It is an enforced contribution
2. It is levied pursuant to legislative authority
3. It is proportionate in character
4. It is payable in money
5. It is levied on persons and property within the jurisdiction of the
state
6. It is levied and collected for the purpose of raising revenue to be
used for public purpose
7. It is commonly required to be paid at regular intervals (not all
taxes)
 Classification of Taxes

1. As to Scope
National Imposed by the National Government
(e.g. income taxes, estate tax, donor’s tax, value
added tax, other percentage taxes, documentary
stamp tax)
Local or Municipal Imposed by the municipal corporations
(e.g. real property tax, community tax)
 Classification of Taxes

2. As to who bears the burden

Direct Demanded from the person who also shoulders the
burden of tax or tax which the taxpayer cannot
shift to another
(e.g. income taxes, estate tax, donor’s tax,)
Indirect Demanded from one person in the expectation and
intention that he shall indemnify himself at the
expense of another or tax which can be shifted to
another person
(e.g. VAT, other percentage taxes)
 Classification of Taxes

3. As to the determination of the amount

Specific tax of fixed amount imposed by the head or number,
or by some standard of weight or measurement. It
requires no assessment other than a listing or
classification of the subjects to be taxed
(e.g. excise tax on cigar, cigarettes and liquors
Ad valorem Tax of fixed proportion of the value of the property
with respect to which the tax is assessed. It
requires the intervention of assessors or appraisers
to estimate the value of such property before the
amount due from each taxpayer can be determined.
(e.g. VAT, income tax, donor’s tax and estate tax)
 Classification of Taxes

4. As to purpose
General/ Fiscal/ Imposed solely for the general purpose of the
Revenue government, i.e. to raise revenue for government
expenditures
(e.g. income tax, donor’s tax, estate tax)
Special/ Regulatory Imposed for a specific purpose, i.e. to achieve some
social or economic ends irrespective of whether
revenue is actually raised or not
(e.g. tariff and certain duties on imports)
 Classification of Taxes
5. As to object or subject matter
Personal/ poll/ Tax of a fixed amount imposed on individual, whether
capitation citizens or not, residing within a specified territory
without regard to their property or the corporation
in which he may be engaged
(e.g. 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
(e.g. real estate tax)
Excise Any tax which does not fall within the classification
of a poll tax or a property tax. This is a tax on the
exercise of certain rights or privileges
(e.g. income tax, estate tax, donor’s tax, VAT, other
percentage taxes)
 Classification of Taxes

6. As to rates or gradation
Proportional Tax based on a fixed percentage of amount of
property, receipts, or other basis to be taxed
(e.g. VAT, other percentage taxes)
Progressive Tax the rate which increases as the tax base or
bracket increases
(e.g. income tax, estate tax, and donor’s tax)
Regressive Tax the of which decreases as the ta base or
bracket increases.
Regressive System of Taxation

 A regressive tax must not be confused with regressive

system of taxation. In a society where the majority of the
people have low income , it exists when there are more
indirect taxes imposed that direct taxes.
 The low-income sector of the population as a whole buys
more consumption goods on which indirect taxes are
collected. The burden of indirect taxes rests more on
them than on the more affluent groups.
 Studies reveal that the progressive elements of the
income and other direct taxes have not sufficiently offset
the regressive effects of the indirect as a whole.
 Distinction of Tax from Other
Charges
 Toll – sum of money collected for the use of
something, generally applied to the consideration
which is paid for the use of road, bridge, or the like,
of a public nature.
Toll Tax
1. Whose demand Demand of proprietorship Demand of sovereignty
2. Paid for what Use of another person’s Support of the
property government
3. Basis Amount is based on the cost of Amount is based on the
construction or maintenance of necessities of the state
the public improvement
4. Authority that May be imposed by the Imposed by government
imposes government or by private only
entities
 Distinction of Tax from Other
Charges
 Special assessment – an enforced proportional
contribution from owners of lands for special benefits
resulting from public improvements
Special Assessment Tax
1. Levied on what Levied on land only Levied on person, property,
or the exercise of privilege
2. Whose personal Not a personal liability of the Personal liability of the
liability person assessed person taxed
3. Basis Based wholly on the special Based on the necessities of
benefits to the property the government w/o any
assessed special benefit directly
accruing to the taxpayer
4. Application Exceptional both as to time Has general application
and place
 Distinction of Tax from Other
Charges
 License fee – or permit is a change imposed under the
police power for the purpose of regulations.
License Fee Tax
1. Imposed for Imposed for regulation Imposed for revenue
what
2. Exercise of what Involves an exercise of police Involves exercise of taxing
power power power
3. Amount of Amount is limited to the Amount is generally not
imposition necessary expenses of limited
regulations
4. Subject of Imposed on the right to Imposed on person,
imposition exercise a privilege property, and the right to
exercise a privilege
 Distinction of Tax from Other
Charges
 License fee – or permit is a change imposed under the
police power for the purpose of regulations.
License Fee Tax
5. Purpose Legal compensation or reward Enforced contribution
of an officer for specific assessed by sovereign
services authority to defray public
expenses
6. Consequence for Failure to pay makes the act Failure to pay does not
failure to pay or business illegal necessarily makes the
business illegal
 Distinction of Tax from Other
Charges
Debt Tax
1. Basis Based on contract Based on law
2. Assignability Assignable Generally not assignable
3. Payment mode May be paid in kind Generally payable in money
4. Set-off or May be subject to set-off or Generally not subject to
compensation compensation set-off or compensation
5. Consequences No imprisonment for non- Imprisonment for non-
for failure to pay payment payment except poll tax
6. Prescriptive Governed by ordinary Governed by special
period prescriptive period prescriptive period
7. Interest Draws interest when Does not draw interest
stipulated or when there is except when delinquent
default
 Distinction of Tax from Other
Charges

Penalty Tax
1. Purpose Designed to regulate conduct Aimed at raising revenue
2. Authority that Imposed by government or Imposed by government
imposes private entities only
 Distinction of Tax from Other
Charges
Other charges/ related terms
1. Subsidy Pecuniary aid directly granted by the government to an
individual or private commercial enterprise deemed
beneficial to the public
2. Revenue Refers to all the funds or income derived by the
government, whether from tax or any other sources
3. Internal Refers to taxes imposed by the legislature other than duties
revenue on imports and exports
4. Custom duties Taxes imposed on goods exported to or imported from a
(duties) country. Customs duties are really taxes but the latter is
broader
5. Tariffs May be used in one of the following three senses:
a. A book of rates drawn usually in alphabetical order
containing the names of several kinds of merchandise with
the corresponding duties to be paid for the same
 Distinction of Tax from Other
Charges

Other charges/ related terms

5. Tariffs May be used in one of the following three senses:
a. A book of rates drawn usually in alphabetical order
containing the names of several kinds of merchandise
with the corresponding duties to be paid for the same
b. The duties payable on goods imported or exported
c. The system or principles of imposing duties on the
importation or exportation of goods.
National Taxes Imposed under
Special Laws

a. Custom duties
b. Sugar adjustment tax
c. Tax on narcotic drugs
d. Specific educational fund tax
e. Science fund tax
f. Energy taxes on aircraft, motorized watercraft
and electric power consumption
g. Travel tax
h. Private motor vehicle tax
 Sources of Tax Laws

a. Constitution
b. Statutes of laws
c. Presidential decrees
d. Revenue regulations
e. Administrative rulings and opinions
f. Judicial decision
g. Provincial, city, municipal and barangay ordinances
h. Treaties and international agreements
 Basic Tax Laws of the
Philippines

a. National Internal Revenue Code (NIRC)

b. Tariff and Customs Code
c. The Local Tax Code
d. The Real Property Tax Code
Exemptions from Taxation

 A grant of immunity,, express or implied to

particular persons, or corporations of a
particular class, from a tax upon property, or an
excise tax which persons and corporations
generally within the same taxing district, are
obliged to pay.
Exemptions from Taxation

 Classification of Exemption
1. Express or affirmative – express provision in the
Constitution, statutes, treaties, ordinances,
franchises or contracts
2. Implied or exemption by omission – occurs when
tax is levied on certain classes of persons,
properties or transactions without mentioning
other classes. Those not mentioned are deemed
exempted by omission.
Exemptions from Taxation

 Interpretation of exemption grant

- Exemption grants are strictly construed against

the person, entity or property claiming exemption.
One claiming must justify such claim by clear and
positive grant.
Tax Avoidance and Tax Evasion

 Tax Avoidance (Tax Minimization)

- use by the taxpayer of legally permissible
methods in order to reduce tax liability.

 Tax Evasion (Tax Dodging)

- use by the taxpayer of illegal means to
defeat or lessen the payment of tax.
 Relationship among Impact,
Shifting and Incidence of
Taxation

 Impact of taxation
- corresponds to the imposition of the tax

 Shifting
- refers to the transfer of tax

 Incidence
- consists of the payment of the tax
 Shifting

 It is the transfer of the burden of a tax by the

original payer or the one to whom the tax was
assessed or imposed to another or someone else.
 Shifting

 Kinds of Shifting
1. Forward – takes place when the burden of the tax is
transferred from a factor of production through the
factors of distribution until it finally settles on the
ultimate purchaser or consumer
2. Backward – effected when the burden of the tax is
transferred from the customer or purchaser through
the factors of distribution to the factor of
production
3. Onward – occurs when tax is shifted two or more time
either forward or backward.