Principles of Taxation and 4 Income Taxes : Prepared by: Reman P, Sanong, LPT, MBA, ‘Shanna Lou P. Sevillo, MBA, TTT Chapter 1- Fundamental Principles) Tene process by which the sovereign, ehrough ite Rocnatied bouys tepsess beedone open subjects and objects within ite qurteaiction tor the purpose of raining revenvee te S822 out legitimate sojects of the goverment, < the enforced proportional contributions or Ghazges levied by the lav-nating bosy of the Sa “el ‘The Inherent Powers of the State) 4. police Power =the pover of prosoting public velfare and Teguiating the use of Liberty and propecty. 2.Power of Taxation Z the power by which the state raises revenue fo defray the ey expenses of the government. S-Power of Eainent Domain athe power to acquire private property for ee reer eee asim aE aa a — 9/27/2022 Similarities among the three int ona oe Soa Athey are inherent in the state. 2. They exist independently of the Constitution. 3. They are legislative in nature and character. 4. Ways by which the State interferes with tern 5. Each Presupposes an equivalent compensation received. Distinctions among Three Powers ted mfNovae Tare Tanti forisiwamtates bp ( eiron ae eo aie emai Mat a pop ten toy och ten Purposes of Taxation Primary: Revenue or Fiscal “te provide funds ana propert with which to promote the General welfare snd the protection of ite citizens snd ‘Secondary: Regulatory/Sumptuary/Compensatory by meuns of which cestain effects or conditions envisioned tint Theory and Basis of Taxation 14, Theory: Lifeblood and Necessity Theory 3 ot taxation proceeds upon the theory Ut TONES SE"dovctnnent iow nacenasey eaesnsey necessary burden to preserve the state's Se tggression, navy to defend tte shores from ea fe enjoyment of the citizency, and amprovenent (one within the State's tereitery and these whic Pepretection which a government 12 a Agposed to provide. 9/27/2022 Cont... Lifebtood Doctrine = = The power of taxation is essential because the government can neither exist nor endure without taxation. = The gov't cannot continue to perform its basic functions or serving and protecting its People without means to pay its expenses. “Consequently, the state has the right to compel its citizens and property within its Limits to contribute, eid Theory and Basis of Taxation(cont..) I) 2. Basis: Benefits Received or Reciprocity Theory = The basis is the reciprocal duties of Protection and support between the states and its inhabitant: sThe state collects taxes from the subjects of government. The citizens pay taxes in order they may be secured in the enjoyment of the benefits of organized society. = also calles Doctrine of 5: Relationship Scope of the Power of Taxation a. Comprehensive b. Unlimited ) Plenary d.) Supreme findV Essential Elements rane 1) tis an enforced contrbuto Classification of Taxes) 2) Itis general Nn. 9/27/2022 a 1.) aa te teope yale in money. 4. Matdonal - imposed by National Covesnaent Pe is proportionate in erty 2) aaa et seem ites -) Its levied on subjects or objec 4. Hestonal poll or epitation ~ tat of + flsad anoust 5) Its levied SOF objects of taxation, Anponed upo individuals whether rh . Classification of Taxes(cont..) Seer eed Characteristics of the State's P’ an Te 1.) 1 4s inherent in soveriegnty Tiecad, of Revenue - tax inposed solely for the general’ purpone of the governaent 2.) Tt legislative in character. aes ma 3.) Bxemption of government entities, S, Sean tiie purpste, tax iaposed for specific ‘agencies, and intruventalities. . 4.) International comity aie 5.) Limitations of Territorial Jurisdiction a 1S ato tne cet &.) strongest asong in the inherent povers of ancunt ef the property or ot -o. ‘ied iid d9/27/2022 ». meen 4 cont. 8 be. rogretsive or gradusted = tax shy 1 nan Siuch"Thctenses ao the ex base en he brnsuee_Prtie cama sweetie os " See fc. Regressive - tax the rat 1e rate of which decreases a fas the tax base on the bracket increases. 2 fete of approriation, cevenue, tariff Pills PY fe oe eee the President Sirus Ra Ted authority of President £0 inpoe itr tational = tates inponed under the ational gare ates, er Chey of area guavas, conned fernal Revenue Code. Collected by the SIR. nro gelagaved by Congress ERFOUg nd vhartage dues as dela: i oo * cinalzenent of the saree Comet é hae ATTA 5. teense aits Elements of a Sound Tax System cont. | 1 wattormty and Bey 1° id Shtze tne subject of tan ror nonpayment of te ia necessary that the sources of Be heequate co meet the govertment expenditures be AGAgERIn the level of public services denanded By the citizens and policymaxers By meorteical suntice or Equity ~ Taxpayer's 2.) Theorsstont me be taken into considerations. f, nines ingringeans of religions fsedom Sry nsuinksteative Feasibility - Tax must be opinion of pened of ©: damian etyective and efficient enforcement. ror ampere of oa oat i ene Fern seo Limitations of the State's Powel rto Tax | cont... | fy Lmao ol es fee ee S Infringement of Press Freedom tindFactors to Consider in SITUS of Te +) Subject matter, mation +) Nature of the tax ) Citizenship ) Residence of the Taxpayer ) Source of Income f.) Place of Exercise, Occupation being taxed b. a. e. Business, or ‘tit EXAPLES OF SITUS OF TAXATIO + Income: Place where itis the same eamed, citizenship residence of the owner Ex A) Pesto and Mana bth Fin ctzens who curenty employed as markatng saffin BGO, Tagug wih mothy Salary of Php30,000. 1s the monthly salary subject to Philippine Income tx? 8B.) Stanford is @ US citizen who sol hi Filipino friend, Mang Juan, who is also bas {gain of $600.00 Is tis subject laptop to his In US fora Teacher in Thaland and he sr27/2022 Daniel. a Filipino was ‘contracted to work cae sabe paths con. * Real and tangible personal property: Locaton ot Property + Intangibles: (Franchise,patents,copyrights trademarks lace County exercised) Receivables Residence of coti, Bank deposits: Location of depostory bank Ex: Pesto owns a commeraabuiting in Bacolod Cy ‘whichis Being leased i various tenants Is the rental ‘nome subject to Prine tx? ted Ex: Jos, a Fino residing in Canada donated located in La Carlota City to his best fiend, Maria, subject to done's tax? sid8272022 T# Distinguisheg Sr ™ Other 7, spite poet Tomer to time and Hera Cont... 2yTeVePenany COM 3a at ‘a ——— 4.) max Ve Ravana Violation of income derived by the government 5.) Tax Vs subsidy Sumsidy — is pecuniary aid airectiy granted the government to ay individual or private conmereiat enterprise deened bene public ci ag acts deem injurin oon a ont a ee eee Proportional contcibucion éwse omers of lanis Permit or License - ia a charge Zor apecial bonetita resulting fron puic imposed under the police power for for special benefits resulting from lnposed under the poli improvements. It ie not a tax ‘id ue ee |cont... 7.) Tax Vs Debe =——— cont... 8.) Tax Vs Custom Duties Custom Duties - are taxes imposed on goods exported or imported into a country. 9.) Tax Ve Tarife Tariff - are tax imposed by the government of a country on imports or ter exports of goods. eee Sr27I2022 or eat, te sane ey tits ptt a an ceo of Pts win a 2.) Mang Jose, donated a (901d bar to Wally ‘At that time, Mang Jose was szsetsad for donors tax se Wy was reaueed te inet Means of Avoiding or Minimi t) snieting Burdon ot tation original payer of one the one on vhom the tax only 2.) Transformation sacape from taxation where the producer or hhanufacturer pays the tax and endeavor to himself by improving his process of production they ena on oi ee ower cost.+ also known as tax dodging 4.) Tax Avoidance ~ As the exploita Legally permis OF methods of a easing taxable property a oo ee cont... 5.) Exemption = It is the grant of immunity to a particular persons or corporations of 2 Particular class froma tax which persons and corporatons generally within the state or taxing district are obliged i Aint cont... 6.) capitalization = The reduction in the selling price of income producing property by an anount equal to the capitalized value of future taxes that may be paid by the purchaser 7.) votdance = Te the tax saving device sanctioned by Lav. a 9/27/2022 Grounds for Granting Tax Exemption | 4.) May be based on contract. b.} May be based on some ground of public policy c.) May be based on grounds of reciprocity or to lessen the rigors of international double or multiple tanation aa Nature of Power to grant tax exemption |) a.) National Government b.) Local Government Kinds of ions 1a, 8.) Constitutional ~ Intunities from taxation Whien originates fram the constitution 1.) statutory - Imunities trom taxation whieh from legislation. Exemptions expressly granted by i} Implied - When objects axe deened exespt rovaien teas SRE &Amnesy - It is the general or intentional overlooking by the State of its authority to impose penalties on persons otnerwise guilty of evasion or violation of a revenue or tex law. titra ‘sr27/2022 HOW TO MAKE A TAX oe revenue bitte Splginate’ crow che tomas of ROSSEOSe!) must : Passing 3 readings by ame vote in technical committee, deliteme ty, es Journals of congress, it shail be eieaeea ne which needs to pase 3 reselsey Normally, the President si; Tre td NATURE OF INTERNAL Lave = Internal revenue lavs are not political in = Tax laws are eivil and not panal in nature although there are penalties provided for their violation titraSOURCES OF TAX ey selena) Internat Revenue 6 ‘Tariff and Customs Code | and regulations and adninistrative i tid RULES IN CONSTRUCTING T/ IMPOSING LAWS ae 1. Public purpose is presunes 2, With Legislative intention 3. In case of doubt, tax law is construed AGAINST the GOVERNMENT, and LIBERALLY IN FAVOR of the taxpayer 4. Tax laws operate PROSPECTIVELY unless the purpose of the legislature to give Fetrospective effect i# expressly declared ‘ite 5. Tax lavs are civil in nature POWERS AND DUTIES OF THE Bit ‘The BIR shall be under the control & supervisions of the Deparime (of Finance and the summary ofits powers and dues are ‘Assess and cllet ai intemal over taxes, fees, charges; », Enforce all forfeture, penalties, fines confiscated with the ‘aeeessment and collection of all intemal revenue taxes, f charges; «. Execute judgments in all casos decced in favor of he BIR by the Cour of Tax Appeals (CTA) nd the ordinary cout; and 4. Eflec and administer the supervisory and police powers conferred stb erm Cte nce co “ 9/27/2022 POWER UF IME CIK 10 UBIAIN IAKFATEN: INFORMATION TO ascentan 7H TT CORRECTNESS OF TAX 1. To examine any document relative tothe inuy: 2. To obtain information from third parties, including ‘ovement agence, rasacbon records of @@xP=Ye" 3. Te summon any person to determine tax habilty 4. Totake testimeny of any person relative toa tax nary 5 To cause revenue officers to make a canvass of 1 fans ater END of Modules 1&2) INN THANK YOU AND GOD BLESS!!! tired