ICCT Colleges Foundation, Inc.

Income Taxation – CBTAX01

CHAPTER 1 – ACTIVITY /ASSIGNMENT

FUNDAMENTAL PRINCIPLES OF TAXATION

AL Vincent Miravalles TA190719

Direction: Answer the following questions/statements in not less than

5 sentences.

1. Explain the elements of sound system:

a) Fiscal adequacy means that the sources of revenue, taken as a whole, should be sufficient to
meet the expanding expenditures of the govern- ment regardless of business conditions, export
taxes, trade balances, and problems of economic adjustment. It means that the revenues should be
capable of expanding or contracting annually in response to variations of public expenditures.
The alternatives are to incur the risk of a series of deficits or surpluses due to inelastic revenues or
to adjust the amount of public expenditures and services to fit the flow of funds, probably by
curtailing expenditures for defense, education, or other activities so that the budget may be
balanced and the public credit maintained.

Examples of Fiscal adequacy in a sentence

Fiscal adequacy, which is one of the characteristics of a sound

tax system, requires that sources of revenues must be adequate to meet
government expenditures and their variations.

Fiscal adequacy is a fundamental requirement for a tax system

given the government’s need for revenue to ensure good governance.

A Fiscal Adequacy Fiscal adequacy refers to the ability of taxation law to finance Government
expenditure.

Fiscal adequacy is a fundamental requirement for a tax system given the Government’s need for
revenue to ensure good governance.As discussed above, tax
revenue provides a primary rationale for wine taxation.

Fiscal adequacy refers to the ability of taxation law to

finance government expenditure.

b) Theoretical justice or equity which means that the

tax burden should be proportionate to the taxpayer’s ability to pay (this is the so-called ability to
pay principle)
 It means that taxes levied must be based upon the ability of the citizen to pay. Justice and equality
are vague terms . They are furthermore relative to popular concepts of justice which prevails at any time
and place.

Also includes distribution based on a third distributive rule, the special needs of individuals under
consideration for rewards, although few studies have included the study of
need (Schwinger, 1986). Justice motive theory states that the relations
among group members in the distribution and/or receipt of the rewards
determine which of these three basic rules or approaches to reward
distribution is used

c) Administrative feasibility This principle connotes that in a

successful tax system, such tax should be clear and plain to
taxpayers, capable of enforcement by an adequate and well-trained staff of public office,
convenient as to the time and manner of payment, and not unduly burdensome upon or
discouraging to business activity.

which means that the tax law should be capable of convenience, just and effective administration.

Administrative feasibility means tax laws and regulations must be capable of being effectively
enforced with the least inconvenience to the taxpayer. And theoretical justice means that a sound tax
system must be based on the taxpayers’ ability to pay.

Operating a policy must be within the administrative capability of the department or agency
involved. For instance, metering supplies requires a certain level of household visits, and billing staff. A
drive for conservation needs to be backed up by qualified staff to advise households, industries or farmers
on technology and improved water management and use. By
the same token, supply augmentation schemes are not the easy
option they may appear if they require intensive monitoring and
maintenance.

New policies will be worthless unless their

implementation is monitored and enforced. For instance, the
system of water transfer practised in some states of the USA
requires official approval for each transaction. The control of
water pollution implies regular monitoring and inspection, and a willingness to penalize the offenders.
Water pricing requires regular collection of revenue and a willingness to prosecute non-payers, coupled
with appropriate administrative arrangements for funds collected to be channelled back to the water
system.

2. What do you mean by Taxpayer’s suit? Give examples.

An action brought by an individual whose income is

subjected to charges imposed by the state or federal
government, for the benefit of that individual and others in
order to prevent the unlawful diversion of public funds.
 In a taxpayer's suit, one is allowed to sue where there is an assertion that public funds are
illegally disbursed or deflected to an illegal purpose, or that there is a wastage of public funds
through the enforcement of an invalid or unconstitutional law. On the other hand, in a citizen's
suit, the person complaining must allege that he has been or is about to be denied some right or
privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or
penalties by reason of the statute or act complained of (GR No. 183591, October 14, 2008).

A taxpayer's suit requires that the act being complained of directly involves the illegal
disbursement of public funds derived from taxation. To be sure, standing as a citizen has been
upheld by the Court in case where a petitioner is able to craft an issue of transcendental
importance or when paramount public interestis involved.

A citizen's suit is a rule whereby any Filipino citizen in representation of others, including
minors or generations yet unborn may file an action to enforce rights or obligations under
environmental laws.

For example, because every taxpayer of a town has an interest in the preservation of an
orderly government, many state laws grant individual taxpayers the right to sue town officers,
boards, or commissions to recover money that has been wrongfully spent.