SCOPE and ELEMENTS

of TAXATION
FUNDAMENTAL PRINCIPLES OF TAXATION
 SCOPE of the POWER of TAXATION
a) Comprehensive – as it covers persons, businesses,
activities, professions, rights and privileges

b) Unlimited – in the absence of limitations prescribed by law

or the constitution, the power to tax is unlimited and
comprehensive. Its force is so searching to the extent that the
courts scarcely venture to declare that it is subject to any
restrictions.
 SCOPE of the POWER of TAXATION
c) Plenary – as it is complete, BIR may avail of certain
remedies to ensure collection of taxes

d) Supreme – in so far as the selection of the subject of

taxation
 ESSENTIAL ELEMENTS of a TAX
a. It is an enforced contribution – Payment of tax is not
voluntary payment or donation, but an enforced contribution,
exacted pursuant to legislative authority.

b. It is generally payable in money – It is a pecuniary burden

payable in money which must be in legal tender.

c. It is proportionate in character – Payment of taxes should

be based on the ability to pay theory or theoretical justice. The
use of a graduated tax rates is in consonance with this rule.
 ESSENTIAL ELEMENTS of a TAX
d. It is levied on persons, property, or the exercise of a right
or privilege (subjects or objects of taxation)

e. It is levied by the law-making body of the state. The power

of “imposing” a tax, being purely legislative function.
Congress cannot delegate such power. This limitation arises
from the doctrine of separation of powers among the three
branches of the government.

f. It is levied for public purpose.

 ELEMENTS OF A SOUND TAX SYSTEM
❑FISCAL ADEQUACY – The fundamental purpose of
taxation is necessary to raise the revenue necessary to fund
public services.
▪It is necessary that the sources of revenues must be adequate to
meet governmental expenditures and sustain the level of public
services demanded by citizens and policy makers
 ELEMENTS OF A SOUND TAX SYSTEM
❑THEORETICAL JUSTICE OR EQUITY –
Taxpayers ability to pay must be taken into
consideration.
▪The tax burden should be proportionate to the
taxpayer’s ability to pay.
 ELEMENTS OF A SOUND TAX SYSTEM
❑ADMINISTRATIVE FEASIBILITY – Tax laws must be
capable of effective and efficient enforcement. A good tax system
required informed stakeholders who understand how taxes are assessed,
collected and complied with.
▪It should be clear to what is being taxed and how tax burden affect them.
The tax system should be as simple as possible and should minimize
gratuitous complexity.
▪Complicated tax rules make the tax system difficult for citizens to
understand. It also makes harder for governments to monitor and enforce
tax collections and makes it easier for lawmakers to enact and conceal
targeted tax breaks benefiting particular groups