3.

Uplift social conditions as in the case of regulatory taxes in the exercise of police powers through
TAXATION taxation.
BASIS OF TAXATION
- Taxation is based on the reciprocal duties of protection and support between the state and
TAXATION- is the inherent power of the state, through the legislature, to impose and collect
its citizens as well as its residents, and on the sovereign power as well as the jurisdiction by
revenues to support the government and its recognized objects. It has a three-fold nature:
the state over its people and property.
o Inherent power of the state – It exists just like the power of eminent domain and police
- The basis of taxation is found in the reciprocal duties of protection and support between the
power, independent of the constitution.
state and its inhabitants. In return for his contribution, the taxpayer receives benefits and
o Legislative – The power of taxation cannot be exercised by the executive or the judicial
protection from the government. This is termed as the benefits received principle.
branch of the governments.
CHARACTERISTICS OF A SOUND TAX SYSTEM
o Subject to constitutional and inherent limitations – the power of taxation is subject to
1. Fiscal Adequacy – the sources of revenues must be adequate or enough to defray the expenses
certain limitations most of which are specifically provided in the fundamental law of the
of the government and their variations.
taxing power itself.
2. Theoretical justice – the general principle should be that taxes must be based on the ability to
According to John Smith, as cited by Jose N. Nolledo (Principles of Agrarian Reforms, Cooperatives and
pay.
Taxation, 2000), there are four canons of good taxation:
3. Administrative feasibility – the tax laws must be clear and concise. It must be capable of proper
1. Equity – Taxation must be bases on ability to pay. This means that those who have more income
enforcement that is not burdensome and is convenient as to time and manner of payment.
will pay more while those who have lesser income will pay less.
Criteria for its being administratively feasible:
2. Certainty – The amount to be paid, as well as the time and manner for payment, must be certain.
a. Tax laws must be clear and concise.
3. Convenience – the time for payment and the manner of collection must not be oppressive.
b. It is capable of proper enforcement.
4. Economy – the tax to be levied must be just enough to sustain the government and its function.
c. It is not burdensome.
TAX – is an enforced contribution, generally payable in money, proportionate in character, levied by the
THEORY OF TAXATION
law-making body of the state on persons, property, or property rights where the state has its jurisdiction,
- Taxation proceeds from the theory that the existence of the government is a necessity.
to raise revenue for the government and to finance all public needs.
Government operations depend largely on revenues sourced out from taxation. The
Three phases of taxation:
government can’t exist without paying its expenses. The necessity for a government to exist
1. Levy or imposition – this involves the impact of taxation. The legislature is free to select the
is the theory that underlies the power of taxation.
persons or properties or the business, interests or privileges that may be subjected to imposition
CLASSIFICATIONS OF TAXES
or burdens, as long as the legislative body does not violate constitutional restrictions or
1. As to Subject Matter of Object:
limitations.
a. Personal poll or capitation tax – refers to tax a fixed amount imposed on an
2. Assessment and collection – the basic guidelines on the assessment and collection are laid down
individual residing within a specified territory, whether a citizen or not, and
and the administrative authorities are responsible for the details in the collection of taxes.
regardless a property or the occupation they engaged in.
3. Payment – this is referred to as the incidence of taxation. The moment the legislature has seen
b. Property tax – refers to the amount imposed on property, whether real or
to tax specified persons, properties, business or privileges and, in the process, observes the
personal, in proportion either to its value or in accordance with some other
limitations imposed by the fundamental law, the obligation to pay tax or charge becomes a mere
reasonable method or apportionment.
incident.
c. Excise tax – refers to any tax which does not fall within the classification of a
PURPOSE OF TAXATION
poll tax pr a property tax.
The primary purpose of taxation is to raise revenue or provide funds to promote the general
2. As to Purpose:
welfare and protection to its citizens and to enable the government to finance its multifarious activities.
a. General, fiscal or revenue tax – imposed for the general purpose of the
1. Equitably distribute the wealth of the nation, referring to the case of estate and donor’s taxes.
government to raise funds for the governmental need.
2. Protect new industries in which the rate of taxation may be increased to regulate the
b. Special or regulatory Tax – imposed for a special purpose to achieve some
proliferation of unnecessary industries and competition with foreign investments.
social or economic ends, irrespective of whether revenue is actually raised or
not.
 3.As to scope or authority imposing the Tax: LIMITATIONS ON THE POWER OF TAXATION
a. National tax – imposed by the national government. 1. Constitutional Limitation – is expressly found in the constitution or implied from its
b. Municipal or Local tax – imposed by municipal or public corporations. provisions.
4. As to determination of Account: 2. Inherent Limitation – refers to those that restrict the power although they are not
a. Specific tax – refers to the fixed amount imposed by the head or number, or by embodied in the constitution.
some standard or weight or measurement which requires assessment other
than listing or classification of the subjects.
b. Ad Valorem Tax – is a fixed proportion of the value of the property with PREPARED BY:
respect to which the tax is assessed.
5. As to Who bears the burden: ELLEN NICY ROA
a. Direct tax – demanded from the person who also shoulders the burden of the
tax.
b. Indirect tax – demanded from one person in the expectation and intention that
he should indemnify himself at the expense of another: or a tax imposed on
goods before they reach the customer who ultimately pays for them, not as a
tax, but as part of the purchase price to which it is added.
6. As to Graduation or Rate:
a. Proportional tax – based on a fixed percentage of the amount of the property,
income, or the other basis to be taxed.
b. Progressive or Graduated Tax – refers to the rate which increases as the tax
base or bracket increases.
c. Regressive Tax – refers to the rate which decreases as the tax base or bracket
increases.
TAX AS DIFFERENTIATED WITH OTHER TERMS
1. Revenue – refers to all the funds or income derived by the government, whether from
tax or any other source.
2. Internal revenue – refers to taxes imposed by the legislature other than duties in
imports and exports.
3. Custom duties – are taxes imposed on goods exported from or imported into a country.
4. Debt – is generally based on contract while a tax is based on law; debt is assignable
while a tax cannot be assigned; debt may be paid in kind while tax is generally payable
in money.
5. Penalty – any sanction imposed as a punishment for violation of law or acts deemed
injurious. Penalty is designed to regulate conduct while tax is primarily aimed at raising
revenue; and a penalty maybe imposed by either the government or private entities
while a tax may only be imposed by the government.