TAX 5

INCOME TAXATION
MARIE STACY MARGARETT DIAZ, CPA, CAT, MSAT
Lecturer / Instructor
 CHAPTER 1
POWER OF TAXATION
 What is TAXATION?
It is an inherent power of the state
where through its law-making body
raises revenue to defray the
necessary expenses of the
government.
TAXATION is also:
exercise of an inherent power
a legislative process
a mode of government cost
distribution
a power to destroy
a power to influence/regulate
INHERENT POWERS OF
THE STATE
OTaxation Power
OPolice Power
OEminent Domain
PURPOSES & OBJECTIVES
NON-
RAISE REVENUE REVENUE
O Raise revenue to defray O Promotion of general welfare
expenses of the government O Regulation
for public purpose. O Reduction of social inequality
O Encourage economic growth
O Protectionism
IMPORTANCE
THEORY
BASIS
OF TAXATION
IMPORTANCE

LIFE-BLOOD
DOCTRINE
THEORY

NECESSITY
THEORY
 BASIS

MUTUALITY
OF
SUPPORT
 THEORIES OF COST
ALLOCATION
OBENEFIT-RECEIVED
THEORY
OABILITY TO PAY THEORY
SCOPE OF THE TAXATION POWER

OComprehensive
OPlenary
OUnlimited
OSupreme
2 SCHOOLS OF THOUGHTS
RECONCILED
“Power to tax is the power to
destroy”

“Power to tax is not the power to

destroy while the Supreme Court
sits”
STAGES OF THE EXERCISE OF TAXATION
POWER
INCIDENCE OF
TAXATION IMPACT OF TAXATION
O Levy O Enforcement
O Imposition O Collection
 BASIC PRINCIPLES OF A
SOUND TAX SYSTEM
1. Fiscal Adequacy
2. Administrative Feasibility
3. Theoretical Justice
4. Consistency With Economic Goals
 What is TAX!?

Enforced proportional contribution

levied by the law-making body of
the State to raise revenue for public
purpose.
CHARACTERISTICS OF TAX
Forced contribution
Generally payable in money
Exclusively levied by the legislature
Assessed in accordance with some reasonable
rule of apportionment
Imposed by the State within its jurisdiction
Levied for a public purpose
CLASSIFICATION OF TAXES
SUBJECT MATTER BURDEN
OPersonal Tax ODirect Tax
OProperty Tax OIndirect Tax
OExcise Tax
OCustoms Duties
CLASSIFICATION OF TAXES
MEASURE OF
PURPOSE APPLICATION
OGeneral Tax OSpecific Tax
OSpecific Tax OAd Valorem Tax
CLASSIFICATION OF TAXES
TAXING AUTHORITY RATE
ONational Tax OProgressive Tax
OLocal Tax ORegressive Tax
OProportionate Tax
 OTHER IMPOSITIONS
OTHER THAN TAX
O Toll O Debt
O Penalty O Subsidy
O Compromise Penalty O Customs Duties
O Special Assessment O Impost
O License or Fee O Tithe
O Margin Fee O Tribute
 CHAPTER 2
LIMITATIONS OF TAXING
POWER
 LIMITATIONS
OInherent
OConstitutional
OContractual
 TAXPAYER SUIT
A case filed by a bona fide
taxpayer impugning the validity,
legality or constitutionality of a
tax law or its implementation.
INHERENT LIMITATIONS
OPublic Purpose
ONon-Delegation of the taxing power
OTerritoriality or Situs of Taxation
OTax Exemption of the Government
OInternational Comity
CONSTITUTIONAL LIMITATIONS
ODue Process of Law
OEqual Protection of the law
OUniformity rule
OProgressive system
ONon-imprisonment for non-payment
of debt or poll tax
CONSTITUTIONAL LIMITATIONS
ONon-impairment of obligation and
contract
OFree worship rule
OExemption of religious or charitable
entities, non-profit cemeteries, churches
and mosque from property tax.
CONSTITUTIONAL LIMITATIONS
ONon-appropriation of public funds or
property for the benefit of any church,
sect or system of religion
OExemption from taxes of the revenues
and assets of non-profit, non-stock
educational institution
CONSTITUTIONAL LIMITATIONS

OConcurrence of a majority of all members

of Congress for the passage of a law
granting tax exemption
ONon-diversification of tax collections
ONon-delegation of the power of taxation
CONSTITUTIONAL LIMITATIONS
ONon-impairment of the jurisdiction of the
Supreme Court to review tax cases
OThe requirement that appropriations,
revenue or tariff bills shall originate
exclusively in the House of Representatives.
ODelegation of taxing power to LGU.
 CONTRACTUAL
LIMITATIONS
OBilateral Agreement
OUnilateral Agreement
OFranchise
 DOUBLE TAXATION
Taxing of a taxpayer more than
once by the same tax jurisdiction
for the same object.
 ELEMENTS OF DOUBLE
TAXATION
PRIMARY SECONDARY
OOBJECT OTAX TYPE
OPURPOSE
OJURISDICTION
OPERIOD
 TYPES OF DOUBLE
TAXATION
1. DIRECT DOUBLE
TAXATION

2. INDIRECT DOUBLE
TAXATION
 REMEDIES OF DOUBLE
TAXATION
OTax Sparing Rule
OTreaties
OTax Deduction
OPrinciple of
OTax Credits
Reciprocity
OExemptions
ESCAPES OF TAXATION
OTAX EVASION (TAX DODGING)

OTAX AVOIDANCE (TAX

MINIMIZATION)

OTAX EXEMPTION (TAX HOLIDAY)

ESCAPES OF TAXATION
OSHIFTING

OCAPITALIZATION

OTRANSFORMATION
KINDS OF TAX EXEMPTION
EXTENT OBJECT
O Personal
OTotal
- directly in favor of
OPartial certain person
O Impersonal
- in favor of certain
class
KINDS OF TAX EXEMPTION
BASIS FORM
OConstitutional OExpress
OStatutory OImplied
 ESCAPES OF TAXATION
CONDONATION
 Forgiveness
 Civil Liabilities only
 Prospective
 Without Payment
Eg. SSS Condonation Program
AMNESTY
 General pardon & Absolute
forgiveness
 Both Civil and Criminal
liabilities
 Retrospective
 With Certain Payment
Eg. BIR Tax Amnesty Program
 Questions?
¼ sheet of yellow paper
Write your LAST NAME, FIRST NAME, DATE
TODAY
1. All are essential characteristics of
tax, except:
A. It is an enforced contribution
B. It is generally unlimited in amount
C. It is generally payable in money
D. It is a proportionate burden
2. Refers to a fraudulent act of
minimizing taxes:
A. Tax avoidance
B. Tax evasion
C. Tax minimization
D. Multiple taxation
3. Levied on land

A. Tax
B. Special assessment
C. Toll
D. License fee
4. A form of tax escape through which one is given
tax immunity wherein others are subject to tax:

A. Shifting
B. Tax immunity
C. Tax exemption
D. Tax avoidance
5. A tax imposed on the number:

A. Income tax
B. Specific tax
C. Advalorem tax
D. Custom’s duties
Pass your papers!