CONCEPT, NATURE AND CHARACTERISTICS OF TAXATION AND TAXES

DEFINITION OF TAXATION
the act of laying a tax, i.e., the process by which the sovereign, through its law making body, raises revenue to defray the necessary expenses of the government

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and to enable it to finance its multifarious activities. .PURPOSE AND IMPORTANCE y To provide funds with which to promote the general welfare and protection of its citizens.

DEFINITION OF TAXES y The enforced proportional contributions from persons and property levied by the law-making body of the state for the support of the government and all public needs .

ESSENTIAL CHARACTERISTICS OF TAX It is an enforced contribution y Tax is not a voluntary payment or donation y Its imposition is no way dependent upon the will or assent of the persons tax It is generally payable in money y It is an exaction to be discharged alone in money which must be in legal tender .

It is proportionate in character y It is ordinarily based on the ability to pay It is levied on persons or property y Tax may be imposed on acts or transactions or contracts It is levied by the state which has jurisdiction over the person or property y The persons or property must be subject to the jurisdiction of the taxing state .

It is levied by the law making body of the state y The power to tax is a legislative power which only the legislative body can exercise through the enactment of statutes or ordinances It is levied for public purposes y Taxation and tax involves a charge or burden imposed to provide income for public purposes .

THEORY AND BASIS OF TAXATION The power of taxation proceeds upon the theory that the existence of government is a necessity y y It cannot continue without means to pay its expenses It has a right to compel all its citizens and property within its limits to contribute .

The basis of taxation is found in the reciprocal duties of protection and support between the state and its inhabitants y The taxpayer receives benefits and protection from the government .

NATURE OF TAXATION It is inherent in sovereignty y The power of taxation is inherent to sovereignty by being essential to the existence of every government It is legislative in character y Under the Constitution only legislative body can impose taxes y Power to tax is also granted to local government subject to limitations .

It is subject to constitutional and inherent limitations y The limitations are specifically provided in the fundamental law or implied therefrom while the rest spring from the nature of taxing power .

. Levying or imposition of the tax which is a legislative act Collection of the tax levied which is essentially administrative in character 2.ASPECTS OF TAXATION 1.

BASIC PRINCIPLES OF SOUND TAX SYSTEM Fiscal adequacy y The sources of revenue should be sufficient to meet the demands of public expenditure Equality or theoretical justice y The tax burden should be proportionate to the taxpayer s ability to pay Administrative feasibility y Tax laws should be capable of convenient . and effective administration . just.

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y Example: community tax . residing within specified territory. whether citizens or not.CALSSIFICATION OF TAXES AS TO SUBJECT MATTER Personal. without regard to their property or the occupation in which they may be engaged. poll or capitation y Tax of a fixed amount imposed on individuals.

Property y Tax imposed on property. income tax . in proportion either to its value or in accordance with some other reasonable method of apportionment y Example: real estate tax Excise y Any tax which does not fall within the classification of a poll tax or property tax. y Example: value-added tax. whether real or personal.

fiscal or revenue y Tax imposed for the general purposes of the government to raise revenue y Example: income tax.AS TO PURPOSE General. to protect local industries against foreign competition . almost all taxes Special or regulatory y Tax imposed for a special purpose y Example: protective tariffs or custom duties on imports.

AS TO SCOPE National y Tax imposed by national government y Example: national internal revenue taxes Municipal or local y Tax imposed by municipal or public corporations y Example: real estate taxes .

gasoline Ad valorem y Tax of a fixed proportion of the value of the property with respect to which the tax is assesed y Example: real estate tax. cigars. or by some standard of weight or measurement y Example: excise taxes on wines. value-added tax .AS TO DETERMINATION OF ACCOUNT Specific y Tax of a fixed amount imposed by the head or number.

or tax which the taxpayer cannot shift to another y Example: community tax. VAT .AS TO WHO BEARS THE BURDEN Direct y Tax which is demanded from the person who also shoulders the burden of the tax. income tax Indirect y Tax which is demanded from one person in the expectation and intention that he should indemnify himself at the expense of another y Example: all business taxes.

estate tax. donor s tax Regressive y Tax base on the rate of which decreases as the tax base or bracket increases .AS TO GRADUATION OR RATE Proportional y Tax based on fixed percentage of the amount of property. income or other basis to be taxed y Example: real property tax Progressive or graduated y Tax based on the rate of which increases as the tax base or bracket increases y Example: income tax.

TAX DISTINGUISHED FROM OTHER TERMS Revenue y Refers to all the funds or income derived by the government whether from tax or any other source y Refers to the amount collected Internal revenue y Refers to taxes imposed by the legislature or other than duties on imports and exports .

maybe paid in any kind and is not punishable (by imprisonment) if not paid Penalty y Any sanction imposed as a punishment by violation of law or acts deemed injurous .Custom duties y Taxes imposed on goods exported from or imported into a country Debt y A generally based contract that is assignable.

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Constitutional CLASSIFICATIONS OF LIMITATIONS y Limitations that are expressly found in the Constitution y y y y y y or implied by its own provisions which are enumerated: Due process of law Equal protection of the laws Rule of uniformity and equity in taxation No imprisonment of non-payment of poll tax Non-impairment of the obligation of contracts Non-infringement of religious freedom .

charitable and educational y y y y entities. non-profit educational institutions from taxation Concurrence by majority of all members of Congress for the passage of a law granting tax exemption Authority of the President to veto the particular items in a revenue or tariff bill Non-impairment of the jurisdiction of the Supreme Court intaxes .y No appropriation for religious purpose y Exemption of religious. non-profit cemeteries and churches from taxation Exemption of non-stock.

Inherent y Limitations which restrict the power although they are y y y y y not embodied in the Constitution which are enumerated: Requirement that levy must be for public purpose Non-delegation of the legislative power to tax Exemption from taxation of government entities International comity Territorial jurisdiction .

y Equal protection of the laws signifies that all REQUIREMENT OF EQUAL PROTECTION persons subject to legislation shall be treated alike under like circumstances and conditions both in the privileges conferred and liabilities imposed y There is no violation of the protection: y y where those with different incomes are made to pay different rates for taxes Where foreign corporations are made to pay higher amount of taxes than that paid by domestic corporations .

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