Basic Principles

of Taxation,
Taxes and Tax
Law

TAXATION
Inherent

power of the state

to impose a charge or burden against
persons, properties or rights,
The purpose of which is to raise
revenues
To defray the necessary expenses of the
government

STATE POWERS
1. Taxation
2. Eminent Domain
3. Police Power

Similarities of the three powers of

the State
1.
2.
3.
4.

They are all necessary attributes of

sovereignty
They are all inherent to the State
They are all legislative in nature
They are all ways in which the State
interferes with private rights and
properties

5. They all exist independently with the

Constitution and are exercisable by the
government even without Constitutional
grant.
6. They all presuppose an equivalent form
of compensation received by the persons
affected by the exercise of the power.
7. The exercise of these powers by the
local government units may be limited by
the national legislature.

BASIC PRINCIPLES OF A SOUND TAX SYSTEM

1. Fiscal Adequacy
2. Equality or theoretical justice
3. Administrative Feasibility

ESSENTIAL CHARACTHERISTICS OF
TAX
1.
2.
3.
4.
5.
6.

It is an enforced contribution;
It is levied by the law making body;
It is proportionate in character;
It is generally payable in money;
It is imposed for the purpose of raising
revenue
It is to be used for public purpose.

Limitations on the power of taxation

1.
2.

Inherent
Constitutional

INHERENT LIMITATIONS ON THE

PURPOSE OF TAXATION
1.
2.
3.
4.
5.

Purpose
Territoriality
International Comity
Exemption of the government
Non-delegation of taxing power

Constitutional Limitations on the

Power of Taxation
1.
2.
3.
4.
5.
6.

Due process of law

Equal protection of law
Uniformity rule in taxation
Progressive system of taxation
Non imprisonment for non payment of
debt or poll tax
Non-impairment of obligation and
contract

7. Free worship rule

8. Exemption of religious or charitable entities,
non-profit cemeteries, churches or mosque
from property taxes.
9. Non appropriation of public funds for the
benefit of any church, sect or system of
religion.
10. Exemption from taxes of revenues and
assets of non-profit, non-stock educational
institutions.
11. Concurrence of a majority of all members
of Congress for the passage of law granting
tax exemption

12. Non-diversification of tax collection

13. Non-delegation of the power of taxes
14. Non-impairment of the jurisdiction of
the Supreme Court to review tax cases.
15. The requirement that appropriations,
revenues or tariff bills shall originate
exclusively in the House of
Representatives
16. The delegation of taxing power in
local government units.

Tax Evasion vs Tax Avoidance

Tax Avoidance when a taxpayer
minimizes his tax liability by taking
advantage of legally available tax
planning opportunities. This is otherwise
known as tax minimization or tax
planning.
Tax evasion occurs when the taxpayer
resorts to unlawful means to lessen or to
get away with his tax liability.

Situs of Taxation
- place of taxation.
Factors affecting the situs of taxation
1. Subject matter what is being tax.
2. Nature of tax which tax to impose
3. Citizenship of the taxpayer
4. Residence of the taxpayer

Situs of Taxation
1. Persons
2. Real Property or tangible personal
property
3. Intangible personal property
4. Income taxpayers residence or
citizenship, or place where the income
was earned.
5. Business occupation and transaction
6. Gratuitous transfer of property

Double Taxation
- occurs when the same taxpayer is taxed twice
by the same jurisdiction for the same thing.
1.

2.

Direct Double Taxation same subject is

taxed twice by the same taxing authority,
within the same jurisdiction or taxing district,
for the same taxable period and for the same
kind or character of tax.
Indirect Double Taxation is other than
double taxation. This occurs when at least
one of the secondary elements of docuble
taxation is not common for both impositions.

Classification of Taxes
1. As to subject matter or object
a. Personal, poll or capitation tax
of a fixed amount imposed on individuals
whether citizens or not, residing within a
specified territory without regard to their
property or the occupation in which they
may be engaged.
Example : Community tax

b. Property tax imposed on property,

whether real or personal in proportion to its
value or in accordance with some other
reasonable method of apportionment.
Example : real estate tax
c. Excise tax tax imposed upon the
performance of an act, the enjoyment of
privilege or the engaging in an occupation.
Example : estate tax, donors tax, income
tax, value-added tax.

2. As to who bears the burden

a. Direct tax determined who are
intended or bound by law to pay the tax.
Examples: community tax, income tax,
estate tax, donors tax.
b. Indirect tax which the taxpayer can
be shifted to another.
Examples : customs duties, value added
tax

3. As to determination of amount
a. Specific tax imposed based on a
physical unit of measurement, as by head
or number, weight, or length or volume.
Example : tax on distilled spirits, cigars,
wines
b. Ad Valorem tax of a fixed
proportion of the value of property; needs
an independent appraiser to determine its
value.
Examples : excise tax o cigarettes, gasoline
and others.

4. As to purpose
a. General, fiscal or revenue tax
with no particular purpose or object for
which the revenue is raised, but is simply
for whatever need may arise.
Examples : income tax, value added tax
b. Special or regulatory tax
imposed for a special purpose regardless
of whether revenue is raised or not and is
intended to achieve some social or
economic end.
Example : protective tariffs or custom
duties.

5. As to authority imposing the tax or

scope
a. National tax imposed by the
national government.
Examples: internal revenue taxes, tariff
and customs duties
b. Municipal or local tax imposed
by municipal government.
Examples: real estate tax, municipal tax.

6. As to graduation or rate
a. Proportional tax based on a fixed
percentage of the amount of property
income or other basis to be taxed.
Examples: percentage taxes, real estate
taxes.
b. Progressive or graduated tax rate
increases as the tax bases increases.
c. Regressive tax rate decreases as
the tax base increases.

Tax Distinguished from Other Fees

1.
2.
3.
4.
5.
6.
7.

From
From
From
From
From
From
From

Toll
Penalty
Special Assessment
permit or license fee
Debt
Revenue
Customs Duties

Philippine Tax Laws and Taxes

National Internal Revenue Code of
1997
a. income taxes (individual and
corporate);
b. estate and donors taxes;
c. value-added tax;
d. other percentage taxes;
e. excise tax; and
f. documentary stamp tax
1.

2. Tariff and Customs Code of 1978

a. import duties; and
b. export duties
3. Local Government Code of 1991
a. real property tax;
b. business taxes, fees and charges;
c. professional tax;
d. community tax; and
e. tax on banks and other financial
institutions.

4. Special Laws
a. Motor Vehicle Law (R.A. 4136)
motor vehicle fees.
b. Private Motor Vehicle Tax Law (P.D.
1958) private motor vehicle tax
c. Philippine Immigrate Act of 1940
(C.A. 613 as amended) Immigration tax;
and
d. Travel Tax Law (P.D. 1183, as
amended) - travel tax

Sources of Taxation Laws

1.
2.
3.
4.
5.
6.
7.
8.

Constitution
Statutes and Presidential Decrees
Judicial Decisions or case laws
Executive Orders and Batas Pambansa
Administrative Issuances
Local ordinances
Tax treaties and conventions with foreign
countries.
Revenue Regulations.