TAXATION
Therefore, tax is a free imposed upon
Tax Evasion – is the use of the tax payer of illegal means to
avoid or minimize payment of the tax.
Tax Avoidance – is the use of the tax payer of legally
permissible methods to reduce his tax liability.
Why pay taxes?
- The answer will ultimately point to the state or
political society.
Why a Political Society?
- The following are some arguments why there is a
need for political society:
 As an embodied spirit, man is essentially
directed to the other in the personal realm
(neighbor) and in the social realm
(functional)
 There are certain values and goods which
can be attained only organically, by a group
of individuals, such as economic goods,
cultural goods, peace and order.
 Because of the compelling way in which
these needs impose themselves upon man,
the group has a necessary, unconditional
and close character.
 Political organizations: formal organization
of a community by means of which
community takes cognizance of the common
good and reflects & acts upon possible
solution to problem.
 Distinction between community & political
organization: community may have interests
other than common good.
 To effect this common good, need for
authority: legal power & physical power to
exact obedience from citizen in view of the
common good.
“ Machiavelli, the first political philosopher to use term ‘state’
in its specific sense, refers to the government apparatus which
guides the political society and is at the service of this society.”
Nature of Taxation and Tax
 Taxation is means for a state, through laws and
legislations, to obtain income to finance public
expenditures. Through taxation, the government is
able to provide public education, health services, and
infrastructure that benefit the people.
 Taxation is an obligation (not an option), so that it
requires taxpayers to contribute a certain proportion
of their income or wealth. Taxation in this case is a
burden (from a latin word “onus,” which means
“obligation”.
individual, properties, transactions and business
entities to support the necessary expense and
services of government.
 It is also defined as “an enforced proportional
contribution, generally payable in money, levied by
the law-making body of the state by virtue of its
sovereignty upon the person or the property within
its jurisdiction for the support of the public
government and all public needs”.
 “Taxation is the inherent power by which the
sovereign state imposes financial burden upon
persons and property as a means of raising revenue
to defray the necessary expenses of the government”.
TAX VS. TAXATION
Tax is not the same as taxation. A tax is a fee, whereas taxation
is a process.
Taxation is a mandated subject by the constitution. It is
integrated in all social sciences courses. All enrolled college
students, whether in public or private school are required to
study taxation as an integrated subject in humanities and
social sciences.
PURPOSE OF TAXATION
 Primary : to raise revenue to satisfy government
needs
 “aside from financing purely governmental
operational expenditures, taxation is also utilized as
a tool to carry out the national objectives of social
and economic development.
Thus, basis of taxation is two-fold:
A. Necessity: government cannot exist and function
without the means to play its expenditures.
B. Reciprocal duties of protection and support between
the state and its inhabitants
TWO ASPECTS OF TAXATION
a. Levy: legislative act of imposing the tax, exercised by
congress
b. Collection: administrative act of collecting the tax,
exercised by the executive branch with:
1. Bureau of Internal Revenue – national taxes
2. Bureau of Customs – customs duties
3. Local Government Units – local taxes and real
property taxes
4. Appropriate Government Agencies – fees &
charges
ESSENTIAL CHARACTERISTICS OF A TAX
  Enforced or obligatory contribution to the Income Tax – is referred to as tax on all yearly profits arising
government from property, professions, trades or offices, or as tax on a
 Payable in the form of money person’s income emoluments, profits and the like.
 Laid by some rule of apportionment which is usually
; is generally regarded as an exercise tax. It is not levied upon
based on the ability to pay
persons, property, funds or profits but upon the right of a
 Levied on persons, property, acts privileges, or
person to receive income or profits
transactions
 Levied by the state which has jurisdiction or control SITES/ PLACE OF TAXATION:
over the subject to be taxed
 Nature of the tax and the subject matter thereof; a
 Levied by the la making body of the state
person, property, or activity
 Levied for public purpose
 Possible protection and benefit that may accrue both
BASIC PRINCIPLES OF A SOUND TAX SYSTEM to the state and taxpayer
 Domicile or residence
 Fiscal adequacy: “the source of revenue should be
 Citizenship
sufficient to meet the demands of public
 Source of income
expenditures”.
 Doctrine: state’s taxing power does not extend
 Equality or theoretical justice: “the tax imposed
beyond its territorial limits.
should be proportionate to the tax payer’s ability to
pay”. Basis
 Administrative feasibility : “tax laws should be
capable of convenient, just and effective  the recipient of the income is a citizen or resident of
administration” tax must be plain and clear to the country
taxpayer and should be capable of efficient  the income is derived from sources within the country
enforcement by government officials. “The income tax is founded on the protection
afforded by the state to the recipient of the income in
NATURE OF THE POWER OF TAXATION his person, in his right to receive the income and in his
enjoyment of it when received.”
 “The power of taxation is inherent in sovereignty
being essential to the existence of every CLASSIFICATION OF TAXPAYERS
government.”
 “It is essentially a legislative function.” 1. Individuals
a. Citizens – resident and non-resident
 “ It is subject to constitutional and inherent
b. Aliens – resident and non-resident (those who
limitations.”
not engaged in trade or business in the
3 CONSTITUTIONAL LIMITATIONS: Philippines and those who are not engaged in
trade and business)
A. Due process clause: taxpayer may not be deprived of
2. Corporations
life, liberty or property without due process of law.
a. Domestic or those incorporated under Philippine
B. Equal protection clause: taxpayers shall be treated
laws
alike under similar circumstances and conditions,
b. Foreign or those incorporated under the
both in privileges and liabilities imposed.
Philippine laws General Partnership
C. Uniformity clause: taxable articles or property of the
3. General partnership
same class shall be taxed at the same rate. No direct
a. General professional partnership – partners are
double taxation.
liable for income tax based on their respective
CLASSIFICATION OF TAXES: shares in the profits of the partnership
b. General co-partnership – the purpose is to
Taxes classified as… engage in business
a. As to subject matter or object
b. As to who bears burden
c. As to determination of amount
d. As to purpose
e. As to authority imposing the tax
f. As to gradation or rate