FUNDAMENTAL

PRINCIPLES OF TAXATION
DEFINITION, PURPOSE AND ASPECTS OF INCOME
TAXATION
 What is TAXATION?

• Taxation is the process or means by which the

sovereign (independent state), through its law making
body (the legislature), imposes burdens upon subjects
and objects within its jurisdiction for the purpose of
raising revenues to carry out the legitimate objects of
government.
 What is TAXATION?

• Taxation is the act of levying a tax to apportion the

cost of government among those who, in some
measure are privileged to enjoy its benefits and must
therefore bear its burdens.
 What is TAXATION?

• Taxation is a power inherent in every sovereign state

being essential to the existence of every government.

• Hence, even if not mentioned in the Constitution, the

state can still exercise the power . Any constitutional
provision regarding the state’s power to tax should not
be interpreted as a “grant of power”, but merely a
limitation on the state’s power to tax.
 What is TAXATION?
• Taxation can be defined as a State power, a legislative process, and a
mode of government cost distribution.

1. As a state power – Taxation is an inherent power of the state to

enforce a proportional contribution from its subjects for public
purposes.
2. As a process – Taxation is a process of levying taxes by the
legislature of the state to enforce proportional contribution from
its subjects for public purpose
3. As a mode of cost distribution – Taxation is a mode by which the
State allocates its costs or burden to its subjects who are benefited
by spending.
 What are TAXES?

• Taxes are enforced proportional contributions or

charges 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.
 ASPECTS of TAXATION

1. Levying or imposition of the tax (legislative function)

2. Assessment or determination of the correct amount of

applicable tax (executive function)

3. Collection of the tax levied (executive function) . The

National agency charged with the function of
collecting internal revenue taxes is the Bureau of
Internal Revenue.
 PURPOSES OF TAXATION
1. Primary: Revenue or Fiscal Purpose
 The primary purpose of taxation on the part of the
government is to provide funds or property with which to
promote the general welfare and the protection of its
citizen and to enable it to finance its multifarious
activities.
 A government can run its administrative set up only
through public funding which is collected in the form of
tax.
 Examples: Taxes imposed for raising revenues which are
income and business taxes.
 PURPOSES OF TAXATION
2. Secondary: Regulatory Purpose
(Sumptuary/Compensatory)
 In this purpose, taxation is often employed as a devise for
regulation or control (implementation of State’s police
power) by means of which certain effects or conditions
envisioned by the government may be achieved such as:
a) Promotion of General Welfare
b) Reduction of Social Inequality
c) Economic Growth