TAXATION

INTRODUCTION
(The General Principles)

Armand Andor II, CPA

 Coverage:
a) TAXATION DEFINITION & NATURE
b) PH HISTORY OF TAXATION
c) GOOD TAX SYSTEM PRINCIPLES
d) THEORIES OF TAXATION
e) LIMITATIONS OF TAXATION
f) PHASES OF TAXATION
g) ESCAPE FROM TAXATION
INHERENT POWERS OF THE STATE
• POLICE POWER
• EMINENT DOMAIN
• TAXATION
A. TAXATION DEFINITION & NATURE

• Taxation – is a power inherent in every state

to impose a charge or burden upon persons,
properties or rights, to raise revenues for the
use and support of the government and enable
it to discharge its appropriate functions.
• It is an Inherent Power.
• It is a mode to raise revenues for the use and support
of the Government Functions.
• It imposed burden.
• It is plenary, comprehensive and supreme.
 B. PH HISTORY OF TAXATION
• DATU Years – where everyone is taxed.
• SPANISH ERA – tax in form of tribute for the King of Spain forms of
payment varies from Gold, Money, Goods (Textile, Rice etc.) and/or Polo y
Servicio (force labor).
• AMERICAN ERA – improves the Spanish Tax System via Government
Budgeting and adds other taxes.
• TODAY – established progressive taxation, establishment of IRS in 1904 now
BIR, withholding tax system, Tax Account Number (TIN today), ORUS ETC.
Online Application for Taxpayer Identification Number (TIN) of Local Employee
Individuals who are registering with the Bureau of Internal Revenue for the first time
by reason of employment are required to register within ten (10) days from the date of
employment.
Where to Avail: Online through the Employer using the BIR eRegistration (eREG)
System. Submission of documents is before the 10th day of the following month.
1. BIR Form No. 1902; (2 originals). 2. Any government-issued ID (e.g. PhilID, Birth
Certificate, passport, driver’s license, Community Tax Certificate) that shows the
name, address, and birthdate of the applicant, in case the ID has no address, any proof
of residence.
 C. GOOD TAX SYSTEM PRINCIPLES

1. FISCAL ADEQUACY – The sources of revenues, as

a whole should provide enough funds to meet the
expenditures of the government.
2. EQUALITY / THEORETICAL JUSTICE – Taxes
imposed shall be based on taxpayer’s ability to pay.
3. ADMINISTRATIVE FEASIBILITY – The
tax should be clear to the taxpayer, not unduly
burdensome and discouraging to business,
convenient as to time and manner of payment,
and capable of enforcement by competent
public officials.
 D. THEORIES OF TAXATION
• NECESSITY THEORY - It is a necessary burden to preserve the
State’s sovereignty.
• LIFEBLOOD THEORY - means that the Government cannot exist
without the lifeblood of Taxes.
• BENEFIT PROTECTION THEORY – describes as a symbiotic
relationship whereby in exchange of the benefits and protection that
the citizens get from the Government, taxes are paid.
 E. LIMITATION OF TAXATION
• INHERENT LIMITATIONS
• CONSTITUTIONAL LIMITATIONS
 INHERENT LIMITATIONS
• PUBLIC PURPOSE USE OF TAXES
• EXEMPTION OF GOVERNMENT TO TAX
• NON-DELEGABILITY OF TAXING POWER
• SITUS OF TAXATION
• INTERNATIONAL COMITY
 CONSTITUTIONAL LIMITATIONS
• DUE PROCESS CLAUSE & EQUAL PROTECTION CLAUSE
• PROGRESSIVITY, UNIFORMITY AND EQUITY OF TAX LAWS
• NON-IMPAIRMENT OF OBLIGATIONS AND CONTRACT
• NON-IMPAIRMENT OF RELIGIOUS FREEDOM AND WORSHIP
• REVENUE TAXES AND BILLS SHALL ORIGINATE TO THE
HOUSE OF REPRESENTATIVES
 CONSTITUTIONAL LIMITATIONS
• EXEMPTION OF PROPERTIES ACTUALLY, DIRECTLY AND
EXCLUSIVELY USED FOR RELIGIOUS, CHARITABLE AND
EDUATIONAL PURPOSES.
• EXEMPTION OF REVENUES AND ASSETS OF NON-STOCK & NON-
PROFIT EDUCATIONAL INSTITUTIONS.
• VOTING REQUIREMENT FOR LEGISLATIVE GRANT OF TAX
EXEMPTIONS.
• POWER OF THE PRESIDENT TO VETO.
 F. PHASES OF TAXATION
• LEVY – Imposition of Tax Laws (Impact of Taxation)
• ASSESSMENT – Execution of Tax Laws (Impact of Taxation)
• COLLECTION – Revenue gathering mechanism for Tax (Incidence
of Taxation)
“Nothing on this earth is standing still. It's either
growing or it's dying. No matter if it's a tree or a
human being”.
Lou Holtz