1.

Definition and Objectives of Taxation

2. State Powers, Aspects and the Basic
Principles of a Sound Tax System
3. Limitations on the Power of Taxation
4. Some Doctrines in Taxation and its Situs;
5. Meaning of Taxes, its essential
characteristics
6. Types of Tax Rate Structures and the
different Classification of Taxes
Taxation- is the process or means
by which the
sovereign, through its law
making body
raises income to defray the
necessary
expenses of the government.
 1. Stimulating economic growth.

2. Encouraging full employment

3.Maintaining Price Stability

4. Shifting wealth from the rich to the poor;

1. Taxation- The power of the state by which
the sovereign raises revenue to defray the
necessary expenses of the government.
2. Eminent Domain- The power of the state to
take private property for public use upon
payment of just compensation,
3. Police power- The power of the state to
enact laws to promote public health, public
morals, public safety and the general welfare of
the people.
1. Levying of the Tax- The imposition
of tax requires legislative intervention.

2. Collection of the Tax levied- This is

essentially an administrative function.
1. Fiscal Adequacy- Sources of revenue are
sufficient to meet government
expenditures;
2. Equality or Theoretical justice - The tax
imposed must be proportionate to
taxpayer’s ability to pay; and
3. Administrative feasibility - The law must be
capable of convenient, just and effective
administration.
1. Constitutional limitations-
are those provided for in the
constitution or implied from
its provisions.
2. Inherent limitations - are restrictions to the
power to tax attached to its nature, such as:
a. Purpose- taxes maybe levied only for
public purposes.
b. Territoriality - The state may tax
persons and properties under
its jurisdiction.
c. International Comity - The property of the
state may not be taxed by another.

d. Non-delegation- The power to tax being

legislative in nature may not be delegated
“Taxes maybe imposed retroactively by
law but, unless so expressed by such
law”

“ There can be no offsetting of taxes

against the claims that the taxpayer
may have against the government.”
 1. Direct duplicate taxation- the
subject is taxed twice when it should
be taxed but once in a fashion that
both taxes are imposed for the same
purpose, thus legally objectionable. Ex.
Compensation Income- USA
2.Indirect double taxation-is one
other than the direct double
taxation. Though this type may
not prove unconstitutional, it is
being avoided so as not to bring
injustice to the taxpayer.
 1. Tax avoidance - it happens when the
taxpayer minimizes his tax liability by
taking advantage of legally available tax
planning opportunities.

2. Tax evasion- occurs when the taxpayer

resorts to unlawful means to lessen or to
get away with his tax liability.
Situs of Taxation -Means place of taxation.
The situs of taxation is determined by a
number of factors:
a. Subject matter- or what is being taxed.
Ex. Persons, property etc.
b. Nature of tax- or which tax to impose .
ex. income tax , real property tax
c. Citizenship of the taxpayer; and
d. Residence of the taxpayer.
1. Persons – residence of the taxpayer
2. Real property or tangible personal property-
location of the property
3. Intangible personal property- as a rule, situs is
the domicile of the owner unless he has acquired a
situs elsewhere.
4. Income – Taxpayer’s residence or citizenship,
or place where the income was earned.
5. Business, occupation and transaction-place
where business is being operated, occupation
being practiced and transaction completed.
 = Are enforced proportional
contributions from persons and
property levied by the law-making body
of the state by virtue of its sovereignty
for the support of the government and
all public needs.
1. It is an enforced contribution;
2. It is levied by the law making body;
3. It is proportionate in character;
4. It is generally payable in money;
5. It is imposed for the purpose of raising
revenues; and
6. It is to be used for public purpose.
1. Regressive Tax – if the average rate
decreases as the tax base increases.
2. Proportional( flat or uniform taxes)- the
average rate of tax remains constant for all
levels of the tax base.
3. Progressive tax – is one for which the
average rate increases as the amount of the
tax base increases.
1. As to subject matter or object
a. Personal, poll or capitation- Tax of a fixed
amount imposed on individuals . Ex.
Community tax
b. Property –Tax imposed on property, whether
real or personal, in proportion either to its
value or in accordance to any reasonable
method of apportionment. Ex. Real estate tax
c. Excise- Tax imposed upon the performance of
an act, the enjoyment of the privelege or the
engaging of a occupation. Ex. Estate, donors,
VAT.
2. As to who bears the burden.
a. Direct- Tax demanded from persons
who are intended or bound by law to
pay the tax. Ex. Community tax,
income tax, estate tax, donor’s tax.
b. Indirect – Tax which the taxpayer can
shift to another. Ex. 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. Ex. Tax
on distilled spirits, fermented liquors, cigars,
wines, fireworks.
b. Ad Valorem- Tax of a fixed proportion
of the value of property; needs an independent
appraiser to determine its value. Ex. Real
estate tax, excise tax on cigarettes.
4. As to purpose
a. General, fiscal or revenue- Tax with no
particular purpose or object for which the revenue
is raised but simply raised for whatever need may
arise. Ex. Income tax. VAT
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. Ex. Protective tariffs or
customs duties on certain imported goods to
protect local industries against foreign
competition.
5. As to authority imposing the tax or scope
a. National- Tax imposed by the
national government. Ex. Internal revenue
taxes, tariff and custom duties.
b. Municipal or local- Tax imposed by
municipal governments for specific needs .
Ex. Real estate taxes, municipal taxes.
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. Ex. Real estate tax
b. Progressive or graduated- Tax rate
increases as the tax base increases. Ex.
Income tax, estate tax, donor’s tax.
c. Regressive – Tax rate decreases as the
tax base increases. Ex. Value-added tax
Assignments:
1. Tax distinguished from other fees
toll, penalty, special assessment, Permit or
license fee, debt, revenue, custom duties,
Income, Capital, Income Tax
2. Sources of Tax Laws
3. Tax laws Vs. GAAP and GAAS
4. Read about the Internal Revenue Laws
END