GENERAL PRINCIPLES OF TAXATION

Inherent powers of the state:

Power of Eminent domain - to take private property for public use upon paying to the owner a just
compensation.

Police power - to enact laws in relation to persons and property as may promote public health, safety,
morals, and general welfare.

Power of taxation -to demand enforced contributions for public purposes.

Taxation

 Inherent power of sovereign, exercised through legislative, to impose burdens upon subjects and
objects within its jurisdiction for the purpose of raising revenues to carry out the legitimate
objects of the government.

 Strongest power of the government It has the power to create and it also the power preserved
to destroy.

Theory and basis of Taxation

 Lifeblood theory the existence of the government is necessity that the government cannot
continue without means to pay its expenses.

 Benefit received principle called " symbiotic relationship".

Nature of taxation

• It is Inherent in sovereignty

• Legislative in character

• Subject to constitutional and inherent limitations

Limitations on power of taxation

• Constitutional limitations--restrictions, explicit or impliedly stated in the constitution.

• Inherent limitation--restricts the power of taxation although they are not in the constitution.
Forms of escapes from taxation

• Shifting - Transfer of a burden of tax by the statutory taxpayer to another.

• Tax evasion - Fraudulent or illegal means of reducing tax dues “Tax dodging"

• Tax avoidance - legally permissible means of reducing tax dues “Tax minimization

• Tax exemption - Grant of immunity from a tax.

 Impact of taxation - point of imposition

 Incidence of taxation - point on which the burden falls

• Capitalization - reduction the selling price by an amount equal to future taxes to be paid by future buyer.

• Transformation - not increasing the selling price but strives to recover the tax through more efficient
production.

Amnesty and condonation - to imposed penalties on tax evasion or violation of tax law.

Tax condonation (Tax Remission) - states desists or refrain of exaction as well as to restore what has
already taken.

Learning about the topic:

TAX, LAWS, SYSTEMS AND ADMINISTRATION

Taxes are involuntary fees levied on individuals or corporations and enforced by a government entity
indoor to finance government activities.

• Is an enforced proportional contribution levied by the lawmaking body of the state to raise
revenue for public purpose.

Essential Elements of Taxes

1. It is an enforced contribution.

2. It is generally payable in money.

3. It is proportionate in character.

4. It is levied on persons, property, or the exercise of a right or privilege.

5. It is levied by the State with has jurisdiction over the subject or object of taxation.

6. It must be uniform and equitable.

7. It must be not violating constitutional and inherent limitations.

8. It is levied by the law- making body of the State.

9. It is levied for public purposes.

Classification of taxes

• As to purpose

- Fiscal or revenue tax – imposed for general purpose.

- Regulatory - imposed to regulated business, conduct acts or transactions.

• As to subject matter

- Personal poll or capitation - residents of a particular territory.

- Property tax - on properties, real or personal

- Excise tax - a privilege or engagement in an occupation.

• As to incidence

- Direct tax - the statutory taxpayer is the economic taxpayer.

- Indirect tax – in case of business taxes where statutory taxpayer is not the economic taxpayer.

• As to amount

- Specific tax - fixed amount imposed on per unit basis like per kilo and liter.

- Ad valorem – tax of fixed proportion like VAT.

• As to imposing property

- National tax – imposed by the national government.

- Local tax imposed by the local/municipal government.

• As to rate

- Proportional tax - flat or fixed rate tax and emphasizes equality as it subjects all taxpayers with
the same rate without regard of their ability to pay.

- Progressive or graduated tax - imposes increasing rates as tax base increases and results in
equitable taxation.

- Regressive tax - imposes decreasing tax rates as the tax base increase.

- Mixed tax - manifest tax rates which is a combination of any of the above types of tax.

Other Government Collection Terms

1. TAX vs. REVENUE

- Tax refers to the amount imposed by the government for public purposes.

- Revenue refers to all income collections of the government.

2. TAX vs. LICENSED FEE

- Tax emirates from taxation power and is imposed upon any subject to raise revenue.

- License fees emirates from police power and is imposed to regulate exercise of such privilege.
3. TAX vs. TOLL

- Tax is a levy of government hence it is a demand of sovereignty.

- Toll is a charge for the use of other’s property hence, it is a demand of ownership.

4. TAX vs. DEBT

- Tax arises from law

- Debt arises from private contract

5. TAX vs. SPECIAL ASSESSMENT

- Tax is an amount imposed upon persons, properties, or privileges.

- Special Assessments is levied by the government on lands adjacent to a public improvement.

6. TAX vs. TARIFF

- Tax is an amount imposed upon persons, properties, or privileges.

- Tariff is the amount imposed on imported or exported commodities.

7. TAX vs. PENALTY

- Tax is an amount imposed for the support of the government.

- Penalty is an amount imposed to discourage an act.

Taxation law - refers to any law that arises from the exercise of the taxation power of the state.

• Types of Taxation Laws

1. Tax Laws

2. Tax Exemption Laws

• Nature - The Philippine Internal Revenue laws are generally civil in nature.

• Sources of Taxation Laws

1. Constitution
2. Statutes and presidential decree

3. Judicial decisions or case laws

4. Executive order and batas Pambansa

5. Tax treaties and conventions with foreign countries.

6. Local ordinances

• Vague tax exemptions - in the construction of tax statutes, exemptions are constructed against the
taxpayer and in favor of the government.

Types of Administrative Issuances

1. Revenue Regulations

2. Revenue Memorandum Orders (RMOs)

3. Revenue Memorandum Rulings (RMRs)

4. Revenue Memorandum Circulars (RMCs)

5. Revenue Bulletins (RB)

6. BIR Rulings

7. Revenue Administrative Orders ( RAOs )

8. Revenue Delegation of Authority Orders ( RDAOs )