READINGS IN PHILIPPINE HISTORY

TAXATION

Meaning/Definition of Taxation:
Taxation is a term for when a taxing authority,
usually a government, levies or imposes a financial
obligation on its citizens or residents. Paying taxes
to governments or officials has been a mainstay of
civilization since ancient times. (Julia Kagan, 2022).
All involuntary assessments, including income,
capital gains, and estate taxes, are referred to as
"taxation." Although the term "taxation" can apply to
both an act and a noun, it is most commonly used to
refer to the ensuing revenue. (Julia Kagan, 2022).
 When a government or other authority demands a fee
from individuals and businesses, this is known as
taxation.
 Unlike other payments, the charge is compulsory and
unrelated to any particular services that have been or
will be rendered.
 Taxes are levied on tangible property, including real
estate and business dealings like stock sales or home
purchases.
 Income, corporate, capital gains, property,
inheritance, and sales taxes are among the different
types of taxes.

A tax is a mandatory financial charge or other

sort of levy placed on a taxpayer (an individual or
legal entity) by an administrative body to pay for
certain public expenditures and administrative costs
(regional, local, or national). (Wikipedia, 2022)

Nature of Taxation:
1. It’s inherent in sovereignty. – The power of
taxation is inherent in sovereignty as an incident or
attribute thereof, being essential to the existence
of every government. It exists apart from
constitutions and without being expressly conferred
by the people. Hence, it can be exercised by the
 government even if the Constitution is entirely
silent on the subject.

2. Constitutional provisions relating to the power of

taxation do not operate as grants of the power to the
government. They merely constitute limitations upon a
power which would otherwise be practically without
limit.

a) While the power to tax is not expressly provided

for in our Constitution, its existence is recognized by
the provisions relating taxation.
b) It is legislative in character. – The power to
tax is peculiarly and exclusively legislative and
cannot be exercised by the executive or judicial branch
of the government. Hence, only Congress, our national
legislative body can impose taxes. The levy of a tax,
however, may also be made by a local legislative body
subject to such limitations as may be provided by law.

3. It is subject to constitutional and inherent

limitations. – The power of taxation is subject to
certain limitations. Most of these limitations are
specifically provided in the Constitution or implied
therefrom, while the rest are inherent and they are
those which spring from the nature of the taxing
power itself although they may or may not be provided
in the Constitution.
Individual equities or inequities, however, are
not considered in the exercise of the power; and,
therefore, the mere fact that the taxation is unjust
or oppressive with respect to a particular taxpayer
does not of itself render a tax law invalid, where no
constitutional provision has been violated.
(Taxation, 2017).
Tax law in the Philippines covers national and local
taxes. National taxes refer to national internal
revenue taxes imposed and collected by the national
government through the Bureau of Internal Revenue (BIR)
and local taxes refer to those imposed and collected by
the local government. (BIR, 2022).

Scope of Taxation:
It is comprehensive, unlimited, supreme and plenary,
but subject to constitutional and inherent limitations.

Limitations of Taxation:
Limitations on The Power of Taxation. The power of
taxation, is however, subject to constitutional and
inherent limitations.
Constitutional limitations are those provided for
in the constitution or implied from its provisions,
while inherent limitations are restrictions to the
power to tax attached to its nature.
The following are the inherent limitations.
1. Purpose. Taxes may be levied only for public purpose.
2. Territoriality. The State may tax persons and properties
under its jurisdiction.
3. International Comity. the property of a foreign State may
not be taxed by another.
4. Exemption. Government agencies performing governmental
functions are exempt from taxation.
5. Non-delegation. The power to tax being legislative in
nature may not be delegated. (Subject to exceptions).

Importance of Taxation:
Without taxes, governments would be unable to meet
the demands of their societies. Taxes are crucial
because governments collect this money and use it to
finance social projects.
Some of these projects include:
Health

 Without taxes, government contributions to the

health sector would be impossible. Taxes go to
funding health services such as social healthcare,
medical research, social security, etc.
Education

 Education could be one of the most deserving

recipients of tax money. Governments put a lot of
importance in development of human capital and
education is central in this development. Money from
 taxes is channelled to funding, furnishing, and
maintaining the public education system.
Governance

 Governance is a crucial component in the smooth

running of country affairs. Poor governance would
have far reach ramifications on the entire country
with a heavy toll on its economic growth. Good
governance ensures that the money collected is
utilized in a manner that benefits citizens of the
country. This money also goes to pay public
servants, police officers, members of parliaments,
the postal system, and others. Indeed, with a proper
and functioning form of government, there will be no
effective protection of public interest.
 Other important sectors are infrastructure
development, transport, housing, etc.
 Apart from social projects, governments also use
money collected from taxes to fund sectors that are
crucial for the wellbeing of their citizens such as
security, scientific research, environmental
protection, etc.
 Some of the money is also channeled to fund projects
such as pensions, unemployment benefits, childcare,
etc. Without taxes it would be impossible for
governments to raise money to fund these types of
projects.
 Furthermore, taxes can affect the state of economic
growth of a country. Taxes generally contribute to
the gross domestic product (GDP) of a country.
Because of this contribution, taxes help spur
economic growth which in turn has a ripple effect on
the country’s economy; raising the standard of
living, increasing job creation, etc.
 Governments also use taxes as a deterrent for
undesirable activities such as the consumption of
liquor, tobacco smoking, etc. To achieve this,
governments impose high excise levies on these
products and as a result, raise the cost of these
products to discourage people from buying or selling
them.

Importance of Tax to Businesses

 For business to flourish in the country, there has
to be good infrastructure such as roads, telephones,
electricity, etc. This infrastructure is developed by
governments or through close involvement of the
government. When governments collect money from taxes,
it ploughs this money into development of this
infrastructure and in turn promotes economic activity
throughout the country.
The concept of taxation is also important to
businesses because governments can fund this money back
into the economy in the form of loans or other funding
forms.
Taxes help raise the standard of living in a
country. The higher the standard of living, the
stronger and higher the level of consumption most
likely is. Businesses flourish when there is a market
for their product and services. With a higher standard
of living, businesses would be assured of a higher
domestic consumption as well. Taxes are essential and
every citizen is meant to reap benefits of these taxes.
This is why it is important that citizens endeavor to
pay taxes and understand that it is meant to be more
than just a “money grab” from the government.

Types of Taxes:
Progressive Tax — A tax that takes a larger percentage
of income from high-income groups than from low-income
groups.
Proportional Tax — A tax that takes the same percentage
of income from all income groups.
Regressive Tax — A tax that takes a larger percentage
of income from low-income groups than from high-income
groups.