LIAM NATHANIEL FUENTEBELLA COMA 3B

1. An individual taxpayer is having multiple income- from his profession, from his

compensation as employee, and from his business. His professional income was

subjected to a withholding tax of 15%, his compensation income was likewise subjected

to a withholding tax under the 30% bracket, while his income from business was

subjected to 20% income tax. At the end of the year, all his income was consolidated, and

from the consolidated income, an income tax due was assessed in the amount of

Php1,000,000. Is there double taxation from his three income? Is the double taxation legal

or not? Please explain.

There is no double taxation from his three incomes. To object to double taxation the

three taxes must be imposed on the same property or subject matter, for the same purpose, by

the same State, Government, or taxing authority. Within the same taxing period, and they must

be the same kind or character of tax. Double taxation is not illegal because the 1987

Constitution does not prohibit such exercise. However, it is not favored.

2. If you are a tax consultant, and you are asked by your employer if your business will

resort to tax minimization, transformation, or shifting, what will be your advice to your

employer? Why did you choose this option and how is it advantageous compared with

the other options?

If I had to offer advice as a tax consultant to my employer, the option of shifting would be

my preference. One reason is that it is completely lawful to do so and won't violate any laws. As

the employer will no longer be responsible for paying the tax, this is advantageous.
3. A taxpayer is claiming exemption from payment of taxes. However, he cannot provide

concrete proof that he is tax exempt. He claims that his tax exemption is presumed

considering that he is a micro entrepreneur and the government is supporting micro

businesses. How will you resolve the issue? Will the taxpayer be given tax exemption?

Why?

Tax exemptions are the provision of immunity to individuals or corporations that fall

under a specific category. The micro-entrepreneur must first present proof to support his claim in

order for the tax exemption to be validly granted. He might receive an exemption from paying

income tax.

4. A taxpayer resorted to tax evasion. Thus, the BIR filed a criminal case against him. The

taxpayer argued that taxes are not criminal in nature and thus asked for its dismissal.

Can a taxpayer be imprisoned by reason of intentionally not paying its taxes? Explain.

It is true that failing to pay taxes can result in imprisonment. If found guilty of tax evasion

or tax fraud, in addition to the fine, he or she will also receive a prison sentence.

5. What instances can you reduce the effects of double taxation? Please enumerate and

explain.

There are three known ways to reduce or eliminate double taxation. First is Tax

Deduction where an amount is subtracted from the gross income to arrive at taxable income

where tax due is ultimately reduced. The Second is Tax Credit where an amount subtracted

from a taxpayer’s tax due directly. The last part is Treaties with other States, where a tax treaty

specifies the rights to a tax of the state of source and the state of residence. In some cases, one

of the contracting states is given the exclusive right to tax, but for other types of income or

capital, both states are given the right to tax, though the amount of tax that the state of the
source may impose is limited. Every time the state of source receives a full or restricted power

to tax, it applies. According to the treaty, the state of residency must grant relief in order to

prevent double taxation.