CLASSIFICATION of

TAXES
FUNDAMENTAL PRINCIPLES OF TAXATION
 CLASSIFICATION OF TAXES
1. As to scope
a. National – imposed by the National Government (income
tax, estate tax, donor’s tax, VAT other percentages taxes,
documentary stamp tax).

b. Local- imposed by local government units such as

municipal government (real estate tax and professional tax
receipts). The local government units power to tax is based on
constitutional grant that paved the way for the enactment of
local government code of the Philippines. Hence, the local
government’s power to tax is not inherent.
 CLASSIFICATION OF TAXES
2. As to subject matter or object
a. Personal, poll or capitation – tax of a fixed
amount imposed upon on individual, whether
citizens or not, residing within a specified territory
without regard to their property or the occupation in
which he may be engaged (e.g. community tax).

b. Property – tax imposed on property, whether real

or personal, in proportion either to its value, or in
accordance with some other reasonable method of
apportionment (e.g. real estate tax)
 CLASSIFICATION OF TAXES
c. Excise or Privilege tax – any tax which does not fall
within the classification of a poll tax or property. This is
a tax on the exercise of certain rights and privileges.
• Excise tax also refers on the tax levied or imposed on
sin products and non-essential goods such as cigars
and liquors. It may be specific or ad valorem.
 CLASSIFICATION OF TAXES
3. As to who bears the burden:

a. Direct tax –A tax which is demanded from the person who

also shoulders the burden of tax or tax which the taxpayer
cannot shift to another.
▪Both the incidence (liability for the payment of the tax) as well
as the impact of the burden of the tax falls on the same person
(income tax, estate tax, donor’s tax).
 CLASSIFICATION OF TAXES
3. As to who bears the burden:

b. Indirect tax –tax which is demanded from one person in the

expectation and intention that he shall indemnify himself at the
expense of another.
• These are taxes wherein the incidence of or the liability for
the payment of the tax on one person but the burden thereof
can be shifted or passed to another person (e.g. VAT,
percentage tax, excise tax).
 CLASSIFICATION OF TAXES
4. As to determination of amount:

a. Specific Tax – tax of fixed amount imposed by the head or

number, or by some standard or weight of measurement
(e.g.excise tax on cigars and liquors)

b. Ad valorem – a tax of fixed proportion of the value of the

property with respect to which the tax is assessed (e.g. vat,
income tax, donor’s tax and estate tax)
 CLASSIFICATION OF TAXES
5. As to Purpose:

a. Primary, Fiscal, or Revenue Purpose – tax imposed solely

for the general purpose of the government, i.e, to raise
revenue for government purposes (e.g. income tax, donor’s
tax, and estate tax).
b. Secondary, Regulatory, Special or Sumptuary Purpose –
tax imposed for a specific purpose, i.e. to achieve some
social or economic ends irrespective of whether revenue is
actually raised or not (e.g. tariff and certain duties on
imports)
 CLASSIFICATION OF TAXES
6. As to Graduation or Rate:
a. Proportional - tax based on a fixed percentages of amount
of the property, receipts, or other basis to be taxed
b. Progressive or graduated – tax the rate of which increases
as the tax base or bracket increases (e.g. income tax on
individual taxpayers)
c. Regressive – tax the rate of which decreases as the tax base
or bracket increases
 CLASSIFICATION OF TAXES
7. As to Taxing Authority:
a. National tax - taxes imposed under the National Internal
Revenue Code (Tax Code) collected by the national
government through the Bureau of Internal Revenue and
other national government agencies . Examples: Income tax,
estate tax, donor’s tax, VAT, other percentage tax, excise
tax, documentary stamp tax
 CLASSIFICATION OF TAXES
▪ Other national taxes other than those collected by the BIR as
provided for special laws include but not limited to: Custom
duties, taxes on narcotic drugs, special education fund taxes,
energy taxes on aircraft, motorized watercraft, electric
power consumption, sugar adjustment taxes, travel tax and
private motor vehicle tax
 CLASSIFICATION OF TAXES

b. Local tax- taxes imposed by local government units (e.g.

real property tax, professional tax, business tax fees and
charges, community tax, tax on banks and other financial
institutions)
 DISTINCTION OF TAXES WITH
SIMILAR ITEMS
❑TAX vs. REVENUE - Tax refers to the amount
imposed by the government for public purpose.
Revenue refers to all income collections of the
government which includes taxes, tariff, licenses, toll,
penalties and others.

▪The amount imposed is tax but the amount collected

is revenue.
 DISTINCTION OF TAXES WITH
SIMILAR ITEMS
❑ TAX vs. LICENSED FEE – Tax has a broader subject than license.
Tax emanates from taxation power and is imposed upon any object
such as persons, properties, or privilege to a revenue.

▪ Licensed fee emanates from police power and imposed to regulate the
exercise of a privilege such as the commencement of a business or a
profession.

▪ Permit or license fee is the amount imposed under a police power for
purposes or regulations.
 DISTINCTION OF TAXES WITH
SIMILAR ITEMS
PERMIT OR LICENSED FEE TAX
For regulation For revenue

Exercise of police power Exercise of taxing power

Amount is limited to the necessary expenses
of regulation
Imposed on the right of reward of an officer
for specific services
Legal compensation or reward of an officer
for specific services
Generally no limit
Imposed also on persons or property
An enforced contribution assesses by
sovereign authority to defray public expenses

Failure to pay license fee makes the act or Failure to pay lead to imprisonment except for
business illegal poll tax
 DISTINCTION OF TAXES WITH SIMILAR
ITEMS

▪Taxes are imposed after the commencement of a business or

a profession. Whereas, licensed fee is imposed before
engagement in those activities.

▪Tax is post-activity imposition while license is a pre-activity

imposition.
 DISTINCTION OF TAXES WITH
SIMILAR ITEMS

❑ TAX vs. TOLL - Tax is a levy of government; hence, it is a demand of

sovereignty.

▪ Toll is a charge for the use of other’s property; hence it is a demand of ownership.
▪ The amount of tax depends upon the need of the government, but the amount of
toll is dependent upon the value of the property leased.

▪ Both the government and private entities impose toll, but private entities cannot
impose taxes.
 DISTINCTION OF TAXES WITH
SIMILAR ITEMS
TOLL TAX
Demand of proprietorship Demand of sovereignty
Paid for the use of another property Paid for the support of government
Amount is based on cost of construction Amount is based on the necessities of the
or maintained of the public improvement State
used
Maybe imposed by the government or May be imposed only by the State
private individuals or entities

Toll is a sum of money for the use of

something generally applied to a
consideration, which is paid of the use of a
road, bridge, or a like of a public nature.
 DISTINCTION OF TAXES WITH
SIMILAR ITEMS
❑ TAX vs. DEBT – Tax arises from law while debt arises from private
contracts.

▪ Non-payment of tax leads to imprisonment but non-payment of debt does

not lead to imprisonment.

▪ Debt can be subject to set-off but tax is not.

▪ Debt can be payable in kind (dacion en pago) but tax is generally payable in
money.

▪ Tax draws interest only when the taxpayer is delinquent. Debt draws interest
when it is stipulated by the contracting parties or when the debtor incurs a
legal delay.
 DISTINCTION OF TAXES WITH
SIMILAR ITEMS
DEBT TAX
Based on contract Based on law
Maybe paid in kind Generally payable in money
Assignable/May be the subject of set-off or Cannot generally be assignable/subject of se
compensation

A person cannot be imprison for Imprisonment is a sanction for non-payment of

non-payment(except when arises from a crime) tax (except poll tax)

Draw interest when stipulated or when Does not draw interest except only when
prescription default deliquent
 DISTINCTION OF TAXES WITH
SIMILAR ITEMS
❑TAX vs. SPECIAL ASSESSMENT – Tax is an amount
imposed upon persons, properties or privileges.

▪Special assessment is levied by the government on lands

adjacent to a public improvement.

▪It is imposed on land only and is intended to compensate the

government for a part of the cost of the improvement.
 DISTINCTION OF TAXES WITH
SIMILAR ITEMS
▪ Special assessment is an enforced proportional contribution from
owners of lands for special benefits resulting from public
improvements.
▪ A special assessment is a levy on property which derives some
special benefit from the improvement. Its purpose is to finance such
improvement thus accruing only to the owners thereof who, after all
pay the assessment.
▪ It is not a tax measure intended to raise revenues for the government
because the proceeds thereof may be devoted to the specific purpose
for which the assessment was authorized.
 DISTINCTION OF TAXES WITH
SIMILAR ITEMS
▪ The basis of special assessment is the benefit in terms of the
appreciation in land value caused by the public improvement. On the
other hand, tax is levied without expectation of a direct proximate
benefit.

▪ Unlike taxes, special assessment attaches to the land. It will not

become a personal obligation of the land owner.

▪ Non-payment of special assessment will not result to imprisonment of

the owner.
 DISTINCTION OF TAXES WITH
SIMILAR ITEMS
▪ Characteristics of Special Assessment:
a. Levied only on land
b. Not a personal liability of the person assessed
c. Based wholly on benefits
d. Exceptional both as to time and place
 DISTINCTION OF TAXES WITH
SIMILAR ITEMS

❑TAX vs. TARIFF – Tax is broader than tariff. Tax

is an amount imposed upon person, privilege,
transactions or properties.

▪Tariff is the amount imposed on imported or

exported commodities.
DISTINCTION OF TAXES WITH SIMILAR
ITEMS

▪ TAX vs. PENALTY – Tax is an amount imposed for the support

of the government. Penalty may be imposed by both the
government and private individuals.

▪ It may arise both from law or contract whereas tax arises from
PENALTY TAX
law.
Designed to regulate conduct Primarily aimed rising revenue
May be imposed by the May be imposed only by the
government or private government
individuals or entities