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TAXATION

Taxation
Is a state power excercised through the countrys
legislative body. In the Philippines, tax laws are passed
both in the House of Representatives and the Senate.

The constitution obliges each individual to pay taxes


as a form of support to the government. In turn, the
govern mentor the state uses these funds to protect
and serve its people.
The Purpose of taxation is to raise revenues from all possible
sources to support government expenditures and services to
promote the general well-being and protection of its citizens.
Cannons of
Taxation
FiscalAdequacy means that taxes collected by the
BIR must be sufficient to fund the Necessary
government expenditures and basic services in a
given fiscal year.
Administrative Feasibility means that payment of

taxes must be tax-payer friendly. Payment of taxes


must be accessible and convenient.
Theoretical Justice refers to the ability to pay

principle. For example, people who earn more should


be taced at a much higher rate than those who earn
less.
Basis of Taxation
1. The constitution, the fundamental laws of land
2. Statuses, laws passed by the congress
3. Presidential decrees
4. BIR rules and regulation
5. Judicial decisions by the Supreme Court on tax
cases
6. Provincial, city and municipal ordinances
7. Observance of international agreements
8. Administrative rulings and opinions
Situs of taxation
Income Tax this is paid either in the place where the
income is earned or the place of residence of the tax
payer.

Real Property Tax this is paid where the property is


situated.

Personal Property Tax can either be tangible or


intangible. Taxes on tangible properties are paid in the
place where the property is located, similar to real
property tax. Is it is intangible then it refers to the place
where the owner permanently resides.
Limitations on
Taxation
INHERITING LIMITATIONS these are specific
limitations that are not affected by changes in the
provisions of the constitutions.

The tax must only be used for public purpose


There should be proper delegation of legislative

power to tax
Government entities are exempted

There are territorial jurisdictions

There is an observance if international law


CONSTITUTIONAL LIMITATIONS are those limitations
provided in the constitution.

OBSERVANCE OF DUE PROCESS OF LAW article III,


section 14.1

EQUAL PROTECTION OF THE LAW article III, section


1

UNIFORMITY AND EQUITY RULE article VI, section


28.1

NON-IMPRISONMENT FOR NON PAYMENT OF POLL


TAX article III, section 20

NO APPROPRIATION FOR RELIGIOUS PURPOSES


article VI, section 28.3
DOUBLE TAXATION
It refers to an instance when an income, a property,
or a transaction was imposed with two or more taxes
by taxing authority in the same year. In other cases,
double taxation occurs when an object of taxation is
levied with two or more taxes from a single tax basis.
Avoiding Taxation
Shifting transferring of the tax burden from on
person to another.
Capitalization done by reducing the price of a
taxable product or service to lower the tax that will
be imposed on its consumption.
Tax avoidance refers to the availing by the tax
payer of legally allowable means in reducing or
minimalizing the tax due to certain properties, items
and services.
Tax evasion refers to the use by tax payer of illegal
means of escaping, defeating, or lessening the tax
due.
Tax exemption the bestowal of immunity by the tax
TAX
The term tax should not be confused with taxation.
A tax is a fee, which is a percentage of income,
property value, or transactions, to support the
government in its expenses and services. On the
other hand, taxation is the process by which the
government collects tax and generates revenues
that are necessary for its expenses and social
services.
Characteristics of
Tax
1. It is an obligatory or a forced contribution to the
government.
2. It is usually in monetary form
3. It is proportionate in character
4. It is imposed on persons and properties
5. It is levied by the state that has jurisdiction over
the person or property
6. It is levied b the legislative body of the state
7. It is levied for public purposes
Classification of Taxes
1. According to
Object
Personal Tax is a fixed amount imposed on
individuals residing within a specific territory.
Ex. Cedula

Property Tax is paid based on the value of the


property to be levied.
Ex. Real Estate Tax

Consumption Tax is levied goods that people


consume from the market
Ex. Value Added Tax
2. According to
Who Bears The
Burden
Direct Tax is paid by the person directly.
Ex. Individual income taxes

Indirect Tax is indirectly paid by an individual to the


government through intermediaries such as good
and services.
Ex. VAT, excise tax
3. According to the
Determination of
Amount of Tax to be
Paid
Specific Tax imposed on some goods based on its
quantity or by other standards of measurement.
Ex. Taxes on wines and fireworks.

Ad valorem which means according to value in


latin. This tax in imposed based on value or price.
Ex. Real Estate Tax
4. According to
Purpose
General Tax is imposed for the general needs of the
government, such as to raise revenue for public
expenditures.

Special tax - is impose for special purposes like


regulation and maintenance of public services.
5. According to Scope
or Authority
Imposing the Tax
National Tax is imposed on the nation government.
Ex. Internal Revenue Taxes

Local Tax is imposed by municipal corporations or


local government units.
Ex. Professional Tax
6. According to the
Tax System
Proportional Tax is imposed at a fixed percentage of
the taxable objects market price with this, the tax
rate of the good remains fixed even if the prices of
the goods increase.

Progressive Tax increases as the price of the good


or tax increases.

Regressive Tax decreases as the price of the tax


increases. The Philippines does not hove this kind of
tax.
Other Terms
Related to Tax
Revenue refers to all income or profit gained by a
person, a company or an organization from its business
act.
Customs Duty refers to the tax or tariff imposed on
goods exported to the other countries.
Internal Revenue - refers to the governments increase
from taxes and duties collected locally or domestically
Toll is a fee demanded for the use of the property of
another person or private entity
Debt is an amount of money owed to a person or a
company that is to be paid as agreed upon contract.
Penalty is a pecuniary sanction imposed on a taxpayer
when he/she failed to pay his/her levies on time.
National Taxes
Kinds of National
Taxes
1. Income Tax
2. Estate and donor Taxes
3. Value added Tax
4. Other percentage Taxes
5. Excise tax on certain goods
6. Documentary stamp Taxes
7. Other taxes that may be imposed by law
Income Taxation
Is the tax on the net income or the entire income
received in one taxable year. Income tax is imposed
at progressive rates.
Classification of
income and related
concepts
Taxable Income
Passive Income

Gross Income

Net Income

Deductions
Taxable Income refers to the gross income
minus the deductions allowable by law and
the personal and additional exemptions.

Purpose of Income Tax


1. To provide revenues
2. To offset regressive sales and consumption taxes
3. To mitigate the inequalities in the distribution of
income wealth which are considered determent
to social progress
Classifications of
Tax Payers
Individuals

1. Citizens
2. Aliens

. Corporation

. General Partnership
Status of Taxpayers
1. Married taxpayers are those who are
legally and lawfully married. With or
without children or with legally adopted
children. One of them or both of them may
be employed.

2. The Head of the family

3. Single taxpayer is any unmarried individual


TAX RATES
Tax rates are percentages by which an individual or a
corporation is taxed. These rates depend on the
amount of income people or businesses can earn in a
year.
Not Over P10,000 5%
Over P10,000 but not over P500 + 10% of the excess over
P30,000 P10,000
Over P30,000 but not over P2,500 + 15% of the excess
P70,000 over P30,000
Over P70,000 but not over P8,500 + 20% of the excess
P140,000 over P70,000
Over P140,000 but not over P22,500 + 25% of the excess
P250,000 of P140,000
Over P250,000 but not over P50,000 + 30% of the excess
P500,000 of the P250,000
Over P500,000 P125,000 + 32% of the excess
over P500,000
THE END