GOOD DAY!

INCOME TAXATION with Sir KEITH G.

NAVAL, CPA
 GENERAL
PRINCIPLES OF
TAXATION
Lesson 1
 At the end of the lesson,
students will be able to;
■ Define taxation
■ Comprehend Lifeblood doctrine and its implication to
taxation
■ Demonstrate mastery on theories of government
cost allocation
■ Distinguish the inherent power of the State
■ Compare the three power of the State
■ Reconcile the basis of taxation in real life situation
Taxation

-may be defined as a
State power, a
legislative process and
a mode of government
cost distribution.
THE THEORY OF
TAXATION
- The Government’s necessity for
funding.
 Public Services

The Basis of
TAXATION
-Mutuality of support between the people and the
government

Governme nt People

Taxe
s
THEORIES OF COST ALLOCATION

✔ Benefit received theory

-presupposes that the more benefit one
receives from the government, the
more taxes he should pay

✔ Ability to pay theory

-presupposes that taxation should also
consider the taxpayer’s ability to pay.
ASPECTS OF THE ABILITY
TO PAY THEORY
■ VERTICAL EQUITY – directly
proportional to the level of his
tax base
■ HORIZONTAL EQUITY- requires
consideration of the particular
circumstance of the taxpayer.
THE LIFEBLOOD DOCTRINE

TAXES are essential and

indispensable to the continued
subsistence of the government.
Without taxes, the government would
be paralyzed for lack of motive power
to activate or operate it.
THE INHERENT POWERS OF THE
■
ST A T E
Ta x at ion power – The power of the State

to
enforce proportional contribution from its
subjects to sustain itself
■ Police power- the general power of the State to
enact laws to protect the well-being of the
people
■ Eminent Domain- the power of the State to
take private property for public use after
paying just compensation.
COMPARISON OF THE THREE POWERS OF THE
STATE
POINT OF TAXATION POLICE POWER EMINENT
DIFFERENCE DOMAIN
Exercising Government Government Government and
Authority private utilities
Purpose For the support of To protect the For public
government general welfare of purpose
the people
Persons affected Community or Community or Owner of the
class of individuals class of individuals Property

Amount of Unlimited( Tax is Limited( Impositio No amount

Imposition based on n is limited to imposed(the gov’t
government needs) cover cost of pays just
regulations) compensation)
Importance Most Important Most Superior Important
COMPARISON OF THE THREE POWERS OF THE
STATE
POINT OF TAXATION POLICE POWER EMINENT
DIFFERENCE DOMAIN
Relationship with Inferior to the Superior to the Superior to the
the Constitution “Non-Impairment “Non-Impairment “Non-Impairment
Clause” of the Clause” of the Clause” of the
Constitution” Constitution” Constitution”

Limitation Constitutional and Public interest and Public purpose

Inherent due process and just
Limitation compensation