INCOME TAXATION customs duties and fees (e.g.

Special Duties imposed

by the Bureau of Customs)
1. DEFINITION AND CONCEPTS
5. PRINCIPLES OF A SOUND TAX SYSTEM
2. NATURE AND CHARACTERISTICS
A. Fiscal adequacy- revenue raised must be sufficient to
3. THEORY AND BASIS OF TAXATION
meet govt./public expenditures and other public needs.
A. Lifeblood Theory
B. Administrative feasibility - tax laws must be clear and
B. Necessity
concise; capable of effective and efficient enforcement;
C. Symbiotic Relationship (Benefits-Protection)
convenient as to time and manner of payment, must not
“The power to Tax is the Power to Destroy.”
obstruct business growth and economic development.
4. PURPOSE OF TAXATION:
(BIR rulings/Tax code)
A. Primary - revenue purposes
C. Theoretical Justice - must take consideration the
B. Secondary
taxpayer’s ability to pay (ability to pay theory). art. VI,
i. Promotion of general welfare - taxation may be
Sec. 28(1) of the 1987 Constitution mandates that the rule
used to implement police power (e.g. grant of VAT
on taxation must be uniform and equitable and that the
exemption and discounts to senior citizens)
State evolve a progressive systems of taxation.
ii. Regulation - where taxes are levied on excises or
1. Progressive (the higher tax base, the higher tax
privileges for purposes of rehabilitation and
rate)
stabilization of threatened industry which is affected
2. Regressive (the lower tax base, the higher tax
by public interest or to discourage consumption of
rate)
harmful products (e.g. excise taxes on cigarettes and
3. Proportional (fixed tax rate, ex. VAT 12%)
alcohol, motor vehicle registration fee)
NOTE: Non-observance of fiscal adequacy and
iii. Reduction of social inequality - this is made
administrative feasibility will render the tax measure
possible through the progressive system of taxation
unsound but not unconstitutional. However, non-
where the objective is to prevent the undue
observance of the principle of theoretical justice is invalid
concentration of wealth in the hands of few
because the Constitution itself requires that taxation must
individuals. Progressivity is key-stoned on the
be equitable.
principle that those who are able to pay should
6. ASPECTS OR STAGES OF TAXATION
shoulder the bigger portion of the tax burden (e.g.
A. Levy - the determination by Congress of the subject
income taxation)
and object of taxation as well as the rate. It refers to the
iv. Encouragement of economic growth - tax
enactment of laws or statutes.
incentives and reliefs may be granted to encourage
 Subject - taxpayer
investment (I.e. Income Tax Holiday, 5% preferential
1. Individual
Gross Income Tax for PEZA registered entities)
A. Citizen
v. Protectionism - for the protection of local industries,
I. Resident Citizen
in case of foreign importations, protective tariffs and
II. Nonresident
B. Alien
 I. Resident Alien
II. Nonresident
A. Nonresident Alien Engaged in Trade and Business
(NRA ETB)
B. Nonresident Alien Not Engaged in Trade and Business
(NRA NETB)
2. Non-individual
A. Corporation
B. Estates/Trust
 Object

B. Assessment - is the determination of the correct

amount of taxes that should be paid by the taxpayer; it
may likewise refer to the notice received by the taxpayer
containing a demand for a definite amount to be paid
providing therefor a due date within which to make the
payment.
C. Collection - the enforcement of a previous assessment.
*payment - the act of compliance by the taxpayer,
including such options, schemes or remedies as
may be legally open or available to him.
4. Refund - the taxpayer asks for the restitution of
the money paid as tax which is either excessive or
erroneous.