CHAPTER 9

WELCOME TO TAXATION
LESSON 9-1 OVERVIEW OF
TAXATION
Lesson Objectives

To have a preliminary appreciation of the

importance of taxation

To gain an appreciation of the evolution of

taxation
“ THE HARDEST THING IN THE WORLD TO
UNDERSTAND THE INCOME TAX.” –ALBERT EINSTEIN
An Introduction
What is taxation? Atty. De Leon’s
book citing American
Jurisprudence defines it as the
process or means by which the
sovereign, through its law-making
body, raises income to defray the
necessary expenses of
government.” Thus, tax collection
is a way of the government to
raise funds for its necessary
expenditures. Just as an ordinary
student depends on the regular
allowance by his parents for his
daily expenses, the government depends on the taxes paid by
its citizens for its local and national expenses. It needs budget
to support the construction and improvement of roads,
bridges, and highways as well as funds to take care of the
welfare of the underprivileged and disadvantaged people of
the nation. Although the government wants to provide its
people with services that are on a par with our neighboring
countries such as modern and impressive public
transportation, buses, and trains, it has no source of income
sufficient to cover everything and function effectively. The
question arises as to how it will survive. It is therefore
imperative to ask from its people in exchange for the various
services provided which will ultimately inure to the benefit of
its citizens. The contributions can be in the form of individual
payments from the people’s earnings as “ add-ons” to some
goods purchased or services enjoyed.
 The power inherent or natural to the State. Our country acts
collectively as the government in order to perform its purpose of
maintaining peace and order in society. But unlike the student who
can just ask for allowance from his parents, the government cannot
simply ask each citizen for its “allowance” and expect to be given.

This is the reason why there should be an established la on

taxation which is the function of the legislature or the law-making
branch of the government. It lists systems and procedures, known
as the National Internal Revenue Code (NIRC), that will serve as a
guide to the executive branch of the government and the people as
to where, when, how, and how much should be collected and paid.
The law ensures that the government will not abuse its natural tax
collecting power by expressly limiting the goods and services it may
place on the “add-ons.” Without the law, the government’s power is
generally unlimited since it is necessary for the State’s existence
and thus may become prone to abuse. The law also informs the
people how to comply with their obligations in exchange for the
benefits they enjoy from the government.
HISTORY OF TAXATION
LIKE ALL THINGS, EVEN TAXATION
HAS ITS BEGINNINGS.

The word “taxation” was

derived from the Latin word
taxationem which means “ a
rating valuing or appraisal.”
The word evolved into the Old
French taxacion. the word “tax”
used as a verb was derived
from the Latin taxare which
means “evaluate, estimate,
asses, or handle .” The word
evolved into the Old French
“taxer” during the 13th century
which means “ to impose a tax
.”
However, the present definition of tax as “to burden
or to put a strain on “or” to censure and charge” was
only recorded during the 14th century.
According to Lymer, “ taxation occurred as
ancient empire developed _perhaps like temple and
monument construction, taxation is a common
phenomenon of human society.” He further notes
that while taxes arose independently, like writing, it
was a characteristics of civilized society. More often,
it is the “ uncivilized act of war that often seems to be
the empetus (motivation) for developing or adopting a
new form of tax.”
EVEN BEFORE THE PRESENT NAME WAS ADOPTED, THE PRACTICE OF COLLECTING
A FIXED AMOUNT OR RATE OF CONTRIBUTION FROM THE PEOPLE HAD ALREADY
BEEN DOCUMENTED. ANCIENT CIVILIZATION LIKE CHINA, EGYPT, GREECE, AND
ROME, AMONG OTHERS, HAVE WRITTEN RECORDS TO SHOW THE BURDEN PLACED
ON BASIC THINGS LIKE COOKING OIL AND CROPS OF THE LAND OR FOR SPECIAL
PURPOSES LIKE WARTIME EXPENSES AND RETIREMENT FUNDS FOR THE
COUNTRY’S MILITARY.

1. Why is taxation important to the

state?
Understanding
Test Your
DRILL 1
 Look for the words relevant to this chapter’s topic. The clues below will
help you know what words to look for.

 H C N A R B E V I T U C E X E
 R X Z L N Q M M D X Y N B V T
 M E N O I T A X A T K Y T N E
 S O V E R E I G N T Q M B C Q
 C T V U N O I T A X A T E Q D
 O P T M N W T X W J G E J B D
 N Y Z Y P L C B V R R L N R W
 G G P N Y O I T Y G P N P D L
 R E P M B C N M A R Q T Z B V
 E T G E H B G T I X B K Q R D
 S R Z I G B D P Q T A E K Q L
 S M N B W N T X D B E R M K L
 M A D N R Q T G V R P D E O J
 X Y R R K Z Q R D D M Q V B R
Another name for the State
Collects taxes
Another name for the legislative branch
Latin for taxation
Latin for tax
Ancient civilization in Middle East
Ancient civilization in East Asia
Ancient civilization in Europe
Ancient civilization in Europe
Scope of taxation
Another name for the National Internal Revenue Code
Characteristics of civil society (Lymer)
LESSON 9-2 GENERAL PRINCIPLES
OF TAXATION AND TAXES

Lesson Objectives
•To be familiar with the general principles of taxation with
regards to its nature, characteristics, and purposes

•To know the basic principles of a sound tax system

•To know some of the classification of the types of taxes

REVIEW – DEFINITION OF
TAXATION
After an overview of taxation, this lesson will discuss the concept,
nature, and characteristics of taxation and taxes.

As discussed by Hector De Leon, American Jurisprudence defines

taxation as “the process or means by which the sovereign, through
its law-making body, raises income to defray the necessary
expenses of government.” He goes further to state that “ it is merely
a way of apportioning the cost of government among those who in
some measure are privileged to enjoy its benefits and, therefore,
must bear its burdens. As a power, taxation refers to the inherent
power of the State to demand enforced contributions for public
purpose or purposes.”

From the general concept, we can infer the nature of taxation.

 NATURE OF TAXATION

1.Inherent in sovereignty
The power is inherent as an incident necessary to the
existence of every government. Being vital, it does not
require a Constitution or law to create it per se but
only to limit the power and scope. Think of this as
turning-off a faucet to make sure that the water does
not continually flow out. The water represents the
power to tax. The faucet is the Constitution and
accompanying laws which limit its flow and strength.
2. Legislative
This refers to the legislative branch of our government. Collectively known
as the Congress, it makes laws to limit the power of taxation. The taxes
created by law-makers (i.e., Congressmen and Senators) are generally
called national taxes. National taxes apply to all citizens of the country.
This only means that there is uniform implementation throughout the
country but not necessarily the same rate for everyone.
On the other hand, while local government units (LGU) are expressly
granted power to tax those within their local territories, these powers are
subject to limitations. The taxes they impose are classified as local taxes
and are applicable only to those who reside within the boundaries of the
LGU’s authority. For a preliminary distinction to determine what type of
taxes fall under each category, national taxes are covered by the National
Internal Revenue Code more commonly known as the Tax Code. Note also
that while taxation is inherent in the sovereign state, a law must expressly
provide the LGU’s taxing power.
3.Subject to constitutional and inherent limitations
Chief Justice Marshall of the United States Supreme Court once
said that the “ power to tax involves the power to destroy.” To
avoid abuse, the Constitutional as the supreme law of the land
provides for limitations expressly or impliedly. Some inherent
limitations include that the tax must be imposed for a public
purpose, limited to only these within the taxing State’s territory,
and exemption of the government’s entities performing
governmental functions from taxation as it is ridiculous for the
government to tax itself in order to pay itself.
In addition, the State also cannot tax the property of foreign
sovereigns. This is the principle of international comity where
State A respects the sovereignty of other State (State B) and will
not reduce it by placing the latter (State B) under the former’s
(State A) jurisdiction.
PURPOSE OF TAXATION : ALWAYS A PUBLIC
PURPOSE
1.Earn revenue – the money collected by the government is
used to provide for various public services to promote the
welfare of the people.
2.Non – revenue objective – taxation may be used to regulate
the behavior of the people towards a particular purpose the
government seek to achieve. Some examples include the
following:
A . Increase in taxes on foreign products to make local
products more competitive
B . Increases in taxes on alcoholic drinks and cigarettes to
discourage vices
C . Decrease in taxes for particular businesses to encourage
start-ups and investments which will create more jobs.
ESSENTIAL CHARACTERISTICS OF
TAX
1.Enforced contribution – tax is
not voluntary . The payment is a
requirement (forced)and not
dependent upon the person’s
will. The enforcing agency of the
government is the Bureau of
Internal Revenue (BIR) which is
under the Department of
Finance (DOF).
2. Generally payable in money –
the money to be paid is
understood to be legal tender.
Legal tender comprises the
coins and notes which must be
accepted to settle a money debt
or obligation. In the Philippines ,
this is the Philippine Peso.
3.Proportionate – the amount a person pays is dependent on his
capacity to pay. This is more commonly known as the Ability to Pay
principle. Thus, who earn more like celebrities ( Manny Pacquiao ) and
business tycoons ( think of the Ayalas ) pay more than the average
Juan.
4.Placed on persons r property – although a tax may be place on an
act ( ex. Writing a will ), a transaction ( ex. Sale ), a right ( ex. Travel ), or
a privilege ( ex. To operate a business ), it is still an individual who
must pay the tax. The property serves a dual purpose. It may be used
to determine the amount of tax to be paid as part of rights enjoyed by
an owner or as a “ last resort “ in case the person fails and /or refuses
to pay the taxes due.
5.Taxed by the State which has authority and power over the person or
property – the person or property must be within the territorial
boundaries of the State so that the State can enforce its power to tax
on them. This means that the Sate cannot tax persons not within its
authority ( for example, foreigners in other countries who never had
any transaction in the Philippines whether for travel or business) or
properties beyond its territories.
6.Taxed by the law-making body of the State – this
refers to the law-making body which is the Congress.
As previously discussed, there are certain exceptions
as when the LGUs are also given the power to tax
certain items ( see Art. X, Sec. 5 of the 1987
Constitution ).

7.For public purpose – it is necessary for “ the

support of the government, administrations of law, or
the payment of public expenses.”
BASIC PRINCIPLES OF A SOUND TAX
SYSTEM
A sound tax system is considered to be one if the set of
principles and processes taken as a whole can function
effectively.

1.Fiscal adequacy – the total revenue of the government must be sufficient

to answer for the cost of public expenditure. There must be flexibility in the
revenue source to accommodate the annual changes as the budget for
government expenditures may vary from year to year.
2.Equality or theoretical justice – this reinforce the ability to pay principle
which holds that “ similarity situated taxpayers should pay equal taxes,
those who have more should pay more.” The contribution of each person
must be just and reasonable.
3.Administrative feasibility – the tax law must be capable of effective
enforcement. A law, no matter how beautifully crafted, will not further the
purpose of the government if it cannot be implemented properly. The law
must encourage proper and prompt payment by making it convenient to
the taxpayer. It must also discourage corruption of officials by closing up
loopholes for possible tax evasion of taxpayers.
CLASSIFICATION AND
DISTINCTIONS
1.Subject Matter
a. Personal, Poll or Capitation – fixed amount charged
against persons of a specified territory whether or not a
citizen. The tax disregards properties owned and
occupations or businesses engaged in.
b. Property – tax imposed on real or personal property in
proportion to the value or other reasonable method of
distribution.
c. Excise – all other taxes not falling under the above 2
classifications. It is charged on the “ performance of an
act, enjoyment of a privilege, or engaging in an occupation,
profession, or business.”
2.Person responsible
a. Direct – the person responsible for the tax must pay it. He /
She cannot shift / pass the burden to another person. One
example is the income tax which is based on the earnings of
an individual.

b. Indirect – the person responsible for the tax is expected to

shift / pass the burden to another person. De Leon cited
American Jurisprudence which states that the person
responsible is expected to reimburse himself by making the
last buyer or ultimate consumer pay for the amount instead.
The amount paid is not as a tax but is part of the price of the
goods or services bought. One example is the Value – Added
tax (VAT) which a fast food restaurant charges its customers.
 Retailer
Consumers buys
Wholesaler purchases from
the goods and uses
Supplier sells goods, purchases from Wholesaler at
it. He ultimately
posses the burden of Supplier at price with price VAT, resells
shoulders the
VAT on his goods to VAT, resells the goods the goods to
burden VAT which
the Wholesaler to retailer and passes consumer and
started from the
burden of VAT passes the burden
Supplier
of VAT
3.DETERMINATION OF AMOUNT

a. Specific – tax based on a fixed amount of number or other

standard of measurement like weight. It is based on
quantity of the units rather than their value.
b. Ad valorem – literally means “ according to value.” The
items which are taxed according to this scheme require
first a valuation to estimate their fair market value before a
certain percentage is imposed on the item.
4.Purpose
a. General, Fiscal, Revenue – to raise revenue to cover
government expenses.
b. Special or Regulatory – to achieve a particular purpose the
government considers important whether or not sufficient
revenue is collected.
5.SCOPE OF AUTHORITY FOR IMPOSING TAX

a. National – tax imposed by the national authority; source is either

the Tax Code or other special laws which Congress passed.
b. Local – taxes imposed by the Local Government Units (LGUs)

L’/
a. Proportional – fixed percentage regardless of the amount of the
property, it is also called a flat or uniform tax
b. Progressive or graduated – the tax percentage would be
constant for the amount bracket assigned to it (ex. 5% if income
is not over P 10,000) but would increase to the next rate as the
current bracket is exceeded (ex. 10% if income is over P 10,000
but not over P 3,000)
7.Tax System
a. Progressive System of Taxation – the tax laws
emphasize more direct taxes rather than indirect taxes
using the ability to pay principle. A progressive tax is
NOT synonymous with the progressive system of
taxation and vice versa.
b. Regressive System of Taxation – the tax laws are
geared towards more indirect taxes rather than direct
taxes. Since indirect taxes are usually passed on the
consumer as part of the price when they buy goods or
services the “ collection “ becomes easier. The
consumer public, however, bears more of the burden.
A regressive tax is NOT synonymous with the
regressive system of taxation and vice versa.
TO DIFFERENTIATE A PROGRESSIVE RATE FROM A PROGRESSIVE SYSTEM
OF TAXATION, AN EXAMPLE OF THE RATE IS THE INCOME TAX WHERE
THERE IS A BRACKETING ACCORDING TO THE LEVEL OR RANGE OF
INCOME BEING EARNED BY THE INDIVIDUAL. THUS, THE HIGHER THE
INCOME, THE HIGHER THE TAX SHOULD BE. THE PROGRESSIVE SYSTEM
IS THE SYSTEM OF HOW THE STATE WILL TAX ITS INDIVIDUALS. IF IT IS
PROGRESSIVE, THE POLICIES FOR TAXES WILL PRIORITIZE THE ABILITY
TO PAY PRINCIPLE WHEN MAKING TAX LAW.

On the contrary, regressive tax is one where the rate becomes lower
as income becomes higher. The State has not implemented any type
of tax with this treatment. On the other hand, the regressive system
of taxation exists in a society when there are many low income
earning individuals who purchase the same commodities as the
more affluent (think of groceries). This occurs because the tax each
one shoulders (like VAT) is not based on the person’s ability to pay
but on the price of the commodity. What happens is technically
everyone shoulders the same burden. But since the income of low-
earning consumers is more limited, the cut from their earnings feels
heavier on them compared to those more affluent.
 Test Your Understanding

 1.Enumerate the nature of taxation and its purpose.

2.In your own words, explain the Ability to pay principle.

3.Agree or Disagree. The Philippines does not have regressive

taxes but it may be possible to have a regressive system of
taxation. Explain.

4.Why is it important to have a sound tax system?

DRILL 2
Determine what is asked in each item.

1. It means according to value

2. Type of tax when it is passed on to the ultimate
consumer
3. Fixed tax charged against a person of a territory
4. Principle that reinforces Ability to Pay principle
5. The support of the government, administration of law, or
the payment of public expenses
 6.Imposed by Local Government Units
7. Enforcing agency of the government to collect taxes
8. Objective to regulate behavior of people
9. Who said “power to tax involves power to destroy”?
10. Tax Code
 LESSON 9-3 THE BIR

Lesson Objectives
• to have an idea about the Bureau of Internal
Revenue

• to have a preliminary idea of the acronyms

commonly used in the BIR

• to know the purpose of the various regulations

issued by the BIR
THE BUREAU OF INTERNAL REVENUE
The government agency in charge of tax collection is
known as the Bureau of Internal Revenue or BIR. The
BIR is under the Department of Finance (DOF) and is
headed by the Commissioner of Internal Revenue. The
Commissioner is appointed by the President of the
Philippines. The Commissioner for the past Aquino
administration was Kim Henares while currently holding
the position is Ceasar Dulay under the newly formed
Duterte Administration.
SHORT HISTORY
 Spanish Era- during the 17th and 18th centuries, the Contador de
Resultas served as the Chief Royal Accountant. His function
were similar to the duties of the Commissioner. As the Chief
Arbitrator, his decision on financial matters were considered final
except when revoked by the Council of Indie. Due to poor revenue
collection, the Spanish treasury had to subsidized the Philippines
annually.
 American Era- the military governors ruled from 1898-1901.By
1902 , the civil government was established under Taft. It was
during the term of 2nd government Wright that the Bureau of
Internal Revenue was created through the Reorganization Act No.
1189, BIR was operational under the Secretary of Finance Henry
Ide, author of the Internal Revenue Law of 1904, with John Hord
as the first Cllector 9Commisioner). Appointments were made by
the Governor General with approval of the Philippine
Commission and US President.
 Three American collectors were appointed (Cromwell, Holting,
and Rafferty) before the first Filipino collectors were appointed
following the Filipinization policy of US President McKinley. They
were Wenceslao Trinidad (1918-1922, Juan Posadas , Jr.(1922-
1934), and Alfredo Yatao (1934-1938). In 1937,the Secretary of
Finance promulgated a regulation which reorganized the
Provincial Inspection Districts and maintained an Internal
Revenue Office under the supervision of a Provincial Agent in
each province.
 Japanese Era- the Bureau was combined with the Customs Office
and was headed by a Director of Customs and Internal Revenue.
 Post War Era- the Bureau was re-established separately after
World War II and underwent further reorganization , some of
which were dividing the country into inspection units under a
provincial revenue agent and taking steps toward
decentralization through the creation of Regional Offices. In
1957, the title for the head of the Bureau was changed from
Collector to Commissioner . The last Collector and first
Commissioner was Jose Aranas.
 Marcos Administration- significant contributions include the
permanent Tax Account Number (TAN) for faster identification
and verification of taxpayers. Payment through banks and
audit investigation by industry were considered important for
the improved collection performance of the bureau.
 Aquino Administration- an effective tax administration was
pursued: Operation Walang Lagay. With the advent of VAT in
1988, a massive campaign was launched to encourage
compliance with requirements. The thrust was improve tax
collection and simplify tax administration. Tax reforms were
introduced including the use of Taxpayer Identification
Number (TIN).
 Ramos Administration- the first lady Commissioner Liwayway
Vinzons, Chato underlook a 5-year Tax Computerization Project
in 1994. The project aimed to have a computerized integrated
tax system and internal administration system.
 Arroyo Administration- the thrust was to be more taxpayer
focused. Paperless filling of tax returns and payment of
taxes was adopted through the Electronic Filling and
Payment System (eFPS). Innovation like the Reconciliation
of Listing for Enforcement (RELIEF) System was adopted to
detect under declarations of taxable income. Electronic
services like web-based TIN application ,e-payments
(including the G-Cash and SMART Money facilities), an e-
submissions of reports were also provided. Computerized-
Assisted Audit Tools and Techniques (CAATTs) were
introduced to enhance the BIR’s auditing capabilities.
During this administration, the commissioners who were
appointed subsequently resigned from their posts.
 P-Noy Administration- Commissioners Kim Henares focused
on filling various tax evasion cases against both high-profile
personalities and large corporations and conglomerates.
She is known for being strict in tax compliance and in
passing various regulation to improve disclosures by
requiring detailed reports and summaries to be attached to
tax returns. She also made the annual income tax more
comprehensive. Opinions praise her for achievements in
increasing tax collections which proved to be better than
previous administrations.

Issuances by the BIR

1.Revenue Regulations (RRs)- issuances signed by the
Secretary of Finance, upon recommendation of the
Commissioner of Internal Revenue, that specify, prescribe, or
define rules and regulations for effective enforcement of the
provisions of the NIRC and related statutes.
2.Renvenue Memorandum Circulars –issuances that publish
pertinent and applicable portions, as well as amplifications, of
laws, rules, regulations, and precedents issued by the BIR and
other agencies / offices.
3.Revenue Memorandum Orders (RMOs)- issuances that
provides directives or instructions, prescribe guidelines, and
outline processes, operations, activities, workflows, methods
and procedures necessary in the implementation of stated
policies, goals, objectives, plans and programs of the Bureau
in all areas of operations, except auditing.
4.Revenue Administrative Orders (RAOs)- issuances that cover
subject matters dealing strictly with the permanent
administrative setup of the Bureau, more specifically, the
organizational structure, statements f functions and / or
responsibilities of BIR offices, definitions and delegations of
authority, staffing and personnel requirements and standards
of performance.
5. Revenue Delegation of Authority Orders (RDAOs)- refer to
functions delegated by the Commissioner to revenue officials
in accordance with law.
6.BIR Rulings- the less general interpretations of tax laws
issued from time to time by the Commissioner of Internal
Revenue. These rulings are usually rendered upon the request
of taxpayers who filed queries with the bureau to clarify
certain provisions of tax law.
7. Department of Justice (DOI) Opinions- the Secretary of
Justice, as the Chief Legal Officer of the government , may at
times also give opinions on various matters which include tax
questions.
DRILL 3
1. DOJ Opinions a. Provide directives or instructions,
prescribe guidelines, and outline
processes necessary in the
implementation of stated policies,
goals, objectives
2.RDAO b. Functions delegated by the
Commissioner to revenue officials
3.RMC c. Rendered upon the request of
taxpayers who filed queries with the
bureau
4.RAO
d. Issuances signed by the Secretary of
Finance, upon recommendation of the
5.RR Commissioner
e. Publish pertinent and applicable
portions, as well as amplifications of
laws, rules,, regulations
6.BIR Rulings f. Secretary of Justice
opinions involving tax
questions
7. RMO
g. Cover subject matters
dealing strictly with the
permanent administrative
setup of the Bureau
LESSON 9- FORMS OF ESCAPE FROM
4 TAXATION AND TAX AMNESTY

Lesson Objectives

• To familiarize with the different forms of escape

from taxation
• To know the difference between legal and illegal
methods of escape from taxation particularly tax
evasion vs. tax avoidance
• To have an idea of what is tax amnesty
FORMS OF ESCAPE FROM
TAXATION
While paying taxes is an enforced contributions and not simply
depending on the will of the taxpayer, there are instance when the taxpayer
could escape from the obligation. With the exception of tax evasion, all
others enumerated below are legal means of tax escape.
1.Shifting – the original payor or one whom the tax was assessed transfers
the burden of tax to someone else. This is the scenario if a tax is indirect.
What is transferred is not the PAYMENT of the tax but the BURDEN of the
tax.
2.Capitalization – the total amount of future taxes expected to be paid for
the object is deducted from the purchase price of the object. Capitalization
occurs if the property is income generating and the buyer considers the
reasonability of his/her purchase.
3.Transformation – the seller maintains his selling price and margin of
profit not by shifting the tax to his customers but by improving his method
of production . The savings he acquires from reduced production cost is
used to cover the amount of tax. Technically, it is as if no tax has been
added to the price when in fact it has already been factored in.
4.Evasion – the use of illegal or fraudulent means to escape or
lessen the payment of tax, evasion only occurs on the amount not
paid. Evasion is a crime punishable by s fine and imprisonment.
5.Avoidance – the use of tax-saving devices or means sanctioned by
law to avoid or reduce tax liability. It could involve the use of
alternative tax rates or methods of tax assessment as provided by
law.
6.Exemption – the government grants immunity to particular
persons, corporations, or a particular class of persons or nature of
business; it is a privilege without which they would be taxed like
others similarity situated.
By the way of example, an employee is normally taxed for his
salary. But those who earn the minimum wage prescribed by the
government are exempted from income tax and from withholding tax
on compensation ( to be discussed in the succeeding lessons ).
TAX AMNESTY

Commissioner Dulay proposed tax amnesty as a

“prerequisite to genuine tax reform.” Since tax reform is part
of the top priorities of the Duterte Administration , it is
important to understand its meaning.,

Tax amnesty is a general pardon of the State by

intentionally overlooking its authority to impose penalties on
persons guilty of tax evasion or violation of a particular
revenue or tax law. It is an absolute forgiveness by the State of
the taxpayer’s liability and in doing to the State waives its right
to collect the amount due. Tax amnesty is used to give tax
evaders a chance to start anew, properly comply with the tax
laws, and pay the correct taxes.
Test Your Understanding

1.Differentiate tax evasion from tax avoidance

2.Differentiate tax exemption from tax amnesty

 POINTS TO REMEMBER

purpose of taxation must always be a public purpose.

The government agency in charge of tax collection is the
Bureau of Internal Revenue or BIR.
Paying taxes is an enforced contribution and not simply
depending on the will of the taxpayer.
Evasion is the use of illegal or fraudulent means to escape
or lessen the payment of tax. It is a crime punishable by a
fine and imprisonment.
Tax amnesty is a general pardon of the State by
intentionally overlooking its authority to impose penalties
on persons guilty of tax evasion or violation of a particular
revenue or tax law.
 CHAPTER TEST

I. Answer the crossword based from what you

understood about the chapter discussion. Try to first
answer what you know without going back to the
pages.
 ACROSS
 3 publish pertinent and applicable
portions, as well amplification of
laws rules regulations
 7 payable in legal tender
 8 first lady commissioner
 9 as regards taxation what the law
and constitution avoids
 12 rufings usually rendered upon
the request of taxpayer queries
 14 issuance signed by secretary
of finance upon recommendation
of the commissioner
 16 sufficiency and flexibility in
generating income
 18 another name for the
commissioner
 19 old name for the commissioner
 DOWN
 2 tax collection of the government
 4 according to value
 5 use of tax suving devices
sanctioned by law to escape
liability
 6 need of BIR
 10 power to tax involves the
power to destroy
 11 non- revenue objective
 13 originally created the BIR
through law
 15 example of indirect tax
 17 acronym for paperless thing
and payment
 22 illegal means of escape
 25 pay according to your means
 20 expressly granted powers
to tax  30 type of tax that cannot be
 21 purpose of taxation shifted
 23 what the government can
go after if taxpayer fails
and/or refuses to pay
 24 one state cannot tax
another state
 26 escape by granting
immunity
 27 mode of escape by
transferring the burden
 28 absolute forgiveness of
the state of taxpayer liability
 29 first Filipino collector
 31 introduce to enhance BIR
auditing techniques
B. WRITE ON THE SPACE PROVIDED WHAT IS
ASKED IN EACH ITEM.
1. Provide directives or instructions, prescribe guidelines and
outline processes
2. Means to evaluate , estimate , asses , or handle
3. Total revenue is sufficient for public expenditures
4. When a society has more low income earners who
purchase goods and share the same burden as affluent
taxpayer
5. Government grants immunity to particular persons,
corporations, class of persons or nature of business
6. Purpose of taxation
7. Principle that amount paid is dependent on capacity to pay
8. When a tax burden can be shifted to another person
9. Agency which oversees the BIR
10. Current BIR commissioner
11. Original payer or one whom the tax was assessed transfers
the burden of tax to someone else
 12. Issuances signed by the Sec. of Finance upon
recommendation of the CIR
 13. Means a rating valuing or appraisal
 14. Use of illegal or fraudulent means to escape or lessen the
payment of tax
 15. Less general interpretations of tax laws issued from time
to time by the commissioner of internal revenue
 16. Absolute forgiveness by the state of the taxpayer’s liability
so the state waives its right to collect the amount due
 17. Means according to value
 18. Use of tax saving devices or means sanctioned by law to
avoid or reduce tax liability
 19. Taxes imposed by Local Government Units
 20. Tax objectives when taxes are used to regulate behavior
GROUP MEMBERS
 Rendula, Marylan
 Perino, John david
 Lacsamana, Jenica
 Lobitana, Andrea Maru
 Del Castillo, Maryrose