Chapter 10 - Philippine Taxation

8/17/2019 Chapter 10 - Philippine Taxation

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Chapter 10

Philippine

Taxation


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Chapter 10Philippine Taxation

What is Taxation?


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Taxation

- It is the inherent power by which thesovereign state imposes fnancial burdenupon persons and property as a means oraising revenues in order to de ray thenecessary expenses o the government ( TaxDigest by Crescencio Co Untian 2!!2"#


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Taxation is the imposition o fnancialcharges or other levies upon a taxpayer (anindividual or legal entity" by a state such that

ailure to pay is punishable by law#


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It is a mode by which government ma&e

exactions or revenue in order to support theirexistence and carry out their legitimateob'ectives ( ax )aw and *urisprudence by *ustice+itug 2!!!"#

It is the most pervasive and thestrongest o all the powers o the government#

axes are the li eblood o the government

without which it cannot subsist#


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History of Taxation

he frst &nown system o taxationwas in .ncient /gypt around 3!!! 0C- 21!! 0C in the frst dynasty o the

ld ingdom#

In 0iblical times tax is already

prevalent# .ccording to Genesis


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History of Taxation

In Biblical times, tax is alreadyprevalent. According to Genesis

47:24 :

"But when the crop comes in, give a f th o itto Pharaoh The other our!f ths ou ma#eep as see$ or the fe%$s an$ as oo$ or ourse%ves an$ our househo%$s an$ our

chi%$ren"


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History of Taxation

/arliest taxes in 6ome are called as portoriawere customs duties on imports and exports

.ugustus Caesar introduced the inheritancetax to provide retirement unds or themilitary# he tax was fve percent on allinheritances except gi ts to children andspouses #


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History of Taxation

In /ngland taxes were frst used asemergency measures#


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History of Taxation in the Philippines

The pre-colonial society, being communitarian, did not ha e taxes!


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During the Spanish Period, new income-generatingmeans were introduced by the government such as the :

• Manila-Acapulco alleon !rade

• Polo " Servicio #$orced %abor&• 'andala• (ncomienda System• !ribute


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"anila-#capulco $alleon Trade was the mainsource o) income )or the colony during its earlyyears*

!he $alleon trade brought silver )rom NuevaCastilla and sil+ )rom hina by way o) Manila*


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Polo % &er icio is the )orced labor )or . days, o) menranging )rom 1/ to /. years o) age who were obligated togive personal services to community pro0ects* ne couldbe e2empted )rom the polo by paying a )ee called falla(which was worth one and a half real) *

'andala is one o) the ta2es collected )rom the $ilipinos* 3tcomes )rom the !agalog word mandala, which is a roundstoc+ o) rice stal+s to be threshed*


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(ncomienda are large tracts o) land given to a person asreward )or a meritorious act* !he encomenderos weregiven )ull authority to manage the encomienda bycollecting tribute )rom the inhabitants and govern peopleliving on it*

Tribute was the residence ta2 during the Spanish times*3t may be paid in cash or +ind, partly, or wholly*



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Did you no!"!hat in the 16th century, the 7cedula8served as an identi)ication card that had tobe carried at all times* A person who couldnot present his or her cedula to a guardiacivil could then be detained )or being7indocumentado8*

Andres 'oni)acio and other 9atipunerostore their cedulas in August 146/, signaling

the start o) the Philippine evolution *


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The )e elopment of the Community Tax

!he c;dula was imposed by the Americans on went into e))ect,mandating the imposition o) a base residence ta2 o) )i)tycentavos and an additional ta2 o) one peso based on)actors such as income and real estate holdings*

!he payment o) this ta2 would merit the issue o) aresidence certi)icate* orporations were also sub0ect to theresidence ta2*


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# sample cedula in the 1*+0s!


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Also +nown as a residence certificate , is a legal identitydocument in the Philippines*

3ssued by cities and municipalities to all persons that havereached the age o) ma0ority and upon payment o) acommunity ta2, it is considered as a primary )orm o)identi)ication in the Philippines and is one o) the closestsingle documents the Philippines has to a national system o)identi)ication, a+in to a driver?s license and a passport*

What is a cedula ?


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A person is re5uired to present a cedula when he or sheac+nowledges a document be)ore a notary public@ ta+es anoath o) o))ice upon election or appointment to a government

position@ receives a license, certi)icate or permit )rom a publicauthority@ pays a ta2 or )ee@ receives money )rom a public)und@ transacts o))icial business@ or receives salary )rom aperson or corporation*

Why is cedula important?


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The .our / s of Taxation

Taxation has four main purposes or effects

1! /e enue+! /edistribution2! /epricing3! /epresentation


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/e enue

!he ta2es raise money to spend on armies, roads,schools and hospitals, and on more indirect government)unctions li+e mar+et regulation or legal systems*


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/edistribution

!his re)ers to the trans)erring wealth )rom the richersections o) society to poorer sections*

/epricing

!a2es are levied to address e2ternalities@ )ore2ample, tobacco is ta2ed to discourage smo+ing, and a

carbon ta2 discourages use o) carbon-based )uels*


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/epresentation

As what goes with the sloganno ta2ation without representation ,

it implies that: rulers ta2 citiBens, andcitiBens demand accountability )romtheir rulers as the other part o) thisbargain*


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Why Tax?


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1! /egressi e Tax

- 3s a ta2 where lower-income entities pay a higher )ractiono) their income in ta2es than do higher-income entities*

# egressive ta2es can also be thought o) as ta2es wherethe marginal ta2 rate is less than the average ta2 rate*

Types of Taxation &ystem


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+! Proportional Tax 4sometimes called a flat tax5

- 3s a ta2 where everyone, regardless o) income, paysthe same )raction o) income in ta2es* #Proportional ta2es can

also be thought o) as ta2es where marginal and average ta2rates are the same*&



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2! Progressi e Tax

- 3s a ta2 where lower-income entities pay a lower)raction o) their income in ta2es than do higher-income

entities* #Progressive ta2es can also be thought o) asta2es where the marginal ta2 rate is higher than theaverage ta2 rate*&



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!he main purpose o) ta2ation is to accumulate )unds)or the )unctioning o) the government machineries* =ogovernment in the world can run its administrative o))icewithout )unds and it has no such system incorporated in itsel)to generate pro)it )rom its )unctioning*

!he governmentCs ability to serve the people dependsupon the ta2es that are collected* !a2es are indispensablein the government operation and without it, the government

will be paralyBed*

Why Tax?


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The Philippine Tax &ystem

!a2 law in the Philippines covers national and localta2es* =ational ta2es re)er to national internal revenue ta2esimposed and collected by the national government throughthe 'ureau o) 3nternal evenue #'3 & and local ta2es re)er to

those imposed and collected by the local government* !he164 Philippine onstitution sets limitations on the e2erciseo) the power to ta2* !he rule o) ta2ation shall be uni)orm ande5uitable* !he ongress shall evolve a progressive systemo) ta2ation* #Article E3, Section F4, Paragraph 1&*


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What is Tax ( asion?Tax evasion happens when

there is fraud through pretension andthe use of other illegal devices tolessen one’s taxes, there is tax evasion,

under-declaration of income, and non-declaration of income and other itemssubject to tax, Under-appraisal ofgoods subject to tariff , and over-declaration of deductions


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The 'ranches of $o ernment is-6- is the Tax 7a8

!he ongress may, by law, authoriBe the President to)i2 within speci)ied limits, and sub0ect to such limitations andrestrictions as it may impose, tari)) rates, import and e2port5uotas, tonnage and whar)age dues, and other duties or

imposts within the )ramewor+ o) the national developmentprogram o) the overnment #Article E3, Section F4,Paragraph F&*


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!he President shall have the power to veto anyparticular item or items in an appropriation, revenue, or tari))bill, but the veto shall not a))ect the item or items to which he

does not ob0ect #Article E3, Section F , Paragraph F&*

The 'ranches is-6- is the Tax 7a8


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!he Supreme ourt has the power to: review, revise,

reverse, modi)y, or a))irm on appeal or certiorari, as the lawor the ules o) ourt may provide, )inal 0udgments and

orders o) lower courts in 7all cases involving the legality o)any ta2, impost, assessment, or toll, or any penalty imposedin relation thereto8 #Article E333, Section >, Paragraph Fb&*

The 'ranches is-6- is the Tax 7a8


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The .orms of Taxes 9mposed on Persons and Property

#5 Personal, capitation or poll taxes!hese are ta2es o) )i2ed amount upon residents orpersons o) a certain class without regard to their property orbusiness

'5 Property taxes1! /eal Property Tax - an annual ta2 that may be

imposed by a province or city or a municipality on realproperty such as land, building, machinery and other

improvements a))i2ed or attached to real property*


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'5 Property taxes

+! (state Tax 49nheritance Tax5 - a ta2 on the right o)transmitting property at the time o) death and on the privilegethat a person is given in controlling to a certain e2tent the

disposition o) his property to ta+e e))ect upon death*

2! $ift or )onor s Tax - a ta2 on the privilege o)transmitting oneCs property or property rights to another or

others without ade5uate and )ull valuable consideration* a


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'5 Property taxes

+! (state Tax 49nheritance Tax5 - a ta2 on the right o)transmitting property at the time o) death and on the privilegethat a person is given in controlling to a certain e2tent the

disposition o) his property to ta+e e))ect upon death*

2! $ift or )onor s Tax - a ta2 on the privilege o)transmitting oneCs property or property rights to another or

others without ade5uate and )ull valuable consideration* a


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'5 Property taxes

3! Capital $ains Tax - ta2 imposed on the sale ore2change o) property * !hose imposed are presumed to havebeen realiBed by the seller )or the sale, e2change or other

disposition o) real property located in the Philippines, classi)iedas capital assets*


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C! 9ncome Taxes

!a2es imposed on the income o) the ta2payers )romwhatever sources it is derived* !a2 on all yearly pro)itsarising )orm property, possessions, trades or o))ices*


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)! (xcise or 7icense Taxes

!a2es imposed on the privilege, occupation orbusiness not )alling within the classi)ication o) poll ta2es or

property ta2es* !hese are imposed on alcohol products@ ontobacco products@ on petroleum products li+e lubricating oils,grease, processed gas etc@ on mineral products such ascoal and co+e and 5uarry resources@ on miscellaneousarticles such as automobiles*


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)! (xcise or 7icense Taxes

!a2es imposed on the privilege, occupation orbusiness not )alling within the classi)ication o) poll ta2es or

property ta2es* !hese are imposed on alcohol products@ ontobacco products@ on petroleum products li+e lubricating oils,grease, processed gas etc@ on mineral products such ascoal and co+e and 5uarry resources@ on miscellaneousarticles such as automobiles*


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:nder these lies t8o other taxes

1!)ocumentary &tamp Tax - a ta2 imposed upondocuments, instruments, loan agreements and papers andupon acceptance o) assignments, sales and trans)ers o)obligation and etc* +! ;alue added tax- is imposed on any person who, in thecourse o) trade or business sells, barters, e2changes, leases,goods or properties, renders services, or engages in similartransactions*



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:nder these lies t8o other taxes

1!)ocumentary &tamp Tax - a ta2 imposed upondocuments, instruments, loan agreements and papers andupon acceptance o) assignments, sales and trans)ers o)obligation and etc* +! ;alue added tax- is imposed on any person who, in thecourse o) trade or business sells, barters, e2changes, leases,goods or properties, renders services, or engages in similartransactions*



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1!9ndi idualsa* esident itiBenb* =on-resident itiBenc* esident Aliensd* =on-resident Aliens

+! Corporations

a* Domestic orporationsb* $oreign orporations

2! (state under


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Who 4or What5 are those exempted in paying taxes?

!he onstitution e2pressly grants ta2 e2emption on certainentitiesGinstitutions such as: 1* haritable institutions, churches, parsonages or conventsappurtenant thereto, mos5ues, and nonpro)it cemeteriesand all lands, buildings and improvements actually, directlyand e2clusively used )or religious, charitable or educationalpurposes #Article E3, Section F4, Paragraph H&*


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F* =on-stoc+ non-pro)it educational institutions usedactually, directly, and e2clusively )or educational purposes*#Article IE3, Section #H&&* (2empted to ta2 as stated in the Article F4H o) ules and

egulations 3mplementing %ocal overnment ode o) 1661# A 1/.&:


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(2empted to ta2 as stated in the Article F4H o) ules and egulations3mplementing %ocal overnment ode o) 1661 # A 1/.&: • %ocal water districts• ooperatives duly registered under A /6H4, otherwise +nown as the

ooperative ode o) the Philippines• =on-stoc+ and non-pro)it hospitals and educational institutions• Printer andGor publisher o) boo+s or other reading materials prescribedby D( S #now Dep(d& as school te2ts or re)erences, inso)ar as receipts)rom the printing and G or publishing thereo) are concerned*


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Top Celebrity Taxpayers in +01=


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Top Taxpayers in +01=


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9ncome Tax Computation


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&&& Contribution Table


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PhilHealth Contribution Table


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&&& Contribution Table


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9ncome Tax Computation

To compute your taxable income, follo! this formula:

Taxa&%e income ' ()onth% Basic Pa * +vertime Pa * o%i$a Pa *-ight Di.erentia%/ ! (0001Phi% ea%th1Pag! B G $e$uctions ! Tar$iness !

3&sences/

)et9s say /mployee . is married with one dependent and has a basicmonthly pay o :2% !!!# 0ased on the tables o governmentcontributions /mployee . will pay4


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9ncome Tax ComputationTo compute your taxable income, follo! this formula:


:hp %18#3! - ;;; Contribution:hp 382#%! < :hil=ealth Contibution:hp 8!! < :ag-I0I> Contribution

axable Income ? :hp 2% !!! < (%18#3! @ 382#%! @ 8!!" ? :hp 2% !!! < 773#1 ? :hp 2$ !!,#2!


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9ncome Tax ComputationTo compute your taxable income, follo! this formula:


axable Income ? :hp 2% !!! < (%18#3! @ 382#%! @ 8!!" ? :hp 2% !!! < 773#1 ? :hp 2$ !!,#2!

ax ? :hp 8 15% @ A(2$ !!,#2! < 85 785" B #2% ? :hp 8 15% @ (, !17#2 B #2%" ? :hp 8 15% @ 8 %22#3 ? :hp 3 375#3!


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9f you can t explain it simply,you don t understand it 8ellenough!

- #lbert (instein

%5


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Chapter 10 - Philippine Taxation