Basic Principle of Taxation

8/13/2019 Basic Principle of Taxation

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BASICPRINCIPLE OFTAXATIONPrepared by :

Jinelle T. De Jesus


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Taxation is the inherent power of the sovereign,exercised through the legislature, to impose burdens

upon subjects and objects within its jurisdiction for the

purpose of raising revenues to carry out the legitimate

objects of government.

Taxation

It is also defined as the act of levying a tax, i.e. the

process or means by which the sovereign, through its

law-making body, raises income to defray the

necessary expenses of government. It is a method of

apportioning the cost of government among thosewho, in some measure, are privileged to enjoy its

benefits and must therefore bear its burdens.


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Taxes

Taxes are the enforced proportional contributions

from persons and property levied by the law-makingbody of the State by virtue of its sovereignty for the

support of the government and all public needs.


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Essential elements of a tax

1. It is an enforced contribution

2. It is generally payable in money.

3. It is proportionate in character.4. It is levied on persons, property, or the exercise of

a right or privilege.

5. It is levied by the State which has jurisdiction over

the subject or object of taxation.

6. It is levied by the law-making body of the State.

7. It is levied for public purpose or purposes.


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Purposes of taxation

1. Revenue or fiscal: 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 itscitizens and to enable it to finance its multifarious

activities.

2. Non-revenue or regulatory: Taxation may also be

employed for purposes of regulation or control.


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Classification of Taxes

1. Personal, poll or capitation taxTax of a fixed amount imposed on persons residing

within a specified territory, whether citizens or not,

without regard to their property or the occupation or

business in which they may be engaged.

2. Property tax

Tax imposed on property, real or personal, in

proportion to its value or in accordance with some

other reasonable method of apportionment.

3. Excise tax

A charge imposed upon the performance of an act,

the enjoyment of a privilege, or the engaging in an

occupation.


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As to purpose

1.General/fiscal/revenue tax

A general/fiscal/revenue tax is that imposed for the

purpose of raising public funds for the service of the

government.

2. Special/regulatory tax

A special or regulatory tax is imposed primarily for the

regulation of useful or non-useful occupation or

enterprises and secondarily only for the purpose of

raising public funds


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As to who bears the burden

1. Direct tax

A direct tax is demanded from the person who also

shoulders the burden of the tax. It is a tax which the

taxpayer is directly or primarily liable and which he or

she cannot shift to another.

2. Indirect tax

An indirect tax is demanded from a person in the

expectation and intention that he or she shallindemnify himself or herself at the expense of another,

falling finally upon the ultimate purchaser or consumer.

A tax which the taxpayer can shift to another.


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As to scope of the tax1. National tax

A national tax is imposed by the national government.

2. Local tax

A local tax is imposed by municipal corporations or

local government units (LGUs).


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As to the determination of amount

1. Specific tax

A specific tax is a tax of a fixed amount imposed by the

head or number or by some other standard of weight or

measurement. It requires no assessment other than the

listing or classification of the objects to be taxed.

2. Ad valorem tax

An ad valorem tax is a tax of a fixed proportion of the

value of the property with respect to which the tax is

assessed. It requires the intervention of assessors or

appraisers to estimate the value of such property before

the amount due from each taxpayer can be

determined.


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As to gradation or rate

1. Proportional tax

Tax based on a fixed percentage of the amount

of the property receipts or other basis to be taxed.

Example: real estate tax.

2. Progressive or graduated tax

Tax the rate of which increases as the tax base or

bracket increases. Example: income tax.


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Digressive tax rate: progressive rate stops at a

certain point. Progression halts at a particular stage.

3. Regressive tax

Tax the rate of which decreases as the tax base or

bracket increases. There is no such tax in the Philippines.


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1) Situs or territoriality of taxation

2) Must be for a Public purpose

3) International comity

4)Non-delegability of the taxing power

5) Exemptions of Government agencies

INHERENT LIMITATIONS


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Constitutional limitations

1. Due process of law

2. Equal protection of laws

3. Rule of uniformity and equity in taxation

4. Prohibition against imprisonment for non-

payment of poll tax

5. Prohibition against impairment of obligation of

contracts


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6. Prohibition against infringement of religious

freedom

7. Prohibition against appropriation of proceeds of

taxation for the use, benefit, or support of any church

8. Prohibition against taxation of religious,

charitable and educational entities

9. Prohibition against taxation of non-stock, non-

profit educational institutions


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The End

Thank

you!

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Basic Principle of Taxation