TAXATION.pptx

Taxes

People who pays higher taxes are people who can get better health services and those who pay less or not all can’t get better health services.

As early as 10th Century

The underprivileged classes were already giving tributes, both in cash and in kind to support the ruling classes.

In ancient Greece and Rome

Taxes on income and wealth were practically unknown, specifically income from mines and tributes from wealthy citizens. For the government to survive, voluntary contributions were given to the State for its use and maintenance.

In the middle agesTaxes of any kind had little space in the

agrarian feudal system. Rents were collected on farmers. The landlords collected rents from the landholdings at their pleasure. The excess of these rents were then given to States as their share on their hierarchical basis to form part of the revenue for the use of the State.

14th CenturyThe feudal system was gradually broken up

by the dissipation of the public domain, by the growth of commerce and industry and decentralization of government, these rent-like revenues gave way to TAXES.

LAND

WEALTH

TAXATION

They began to realize that the State soul no longer exist without the imposition of taxes on the people to finance the needs of the State.

Throughout the ages…

France and Spain were then commercial centers of the world.

The direct bulk of government revenues were derived from taxes on articles of trade and commerce.

18th Century

Taxes from income of individuals started when Great Britain adopted an income tax in 1798 and a death transfer tax in 1796.

History pointed out that some of the causes of rebellion among them was the imposition and oppressive taxes on the people.

Much of desperation that exploded during the French Revolution grew of this oppressive imposition and in equitable taxation at that time. The people were not represented in the government and no participation in the policies of the State, whereby they could voice their opinion on how taxes should be imposed.

History pointed out that some of the causes of rebellion among them was the imposition and oppressive taxes on the people.

Much of desperation that exploded during the French Revolution grew of this oppressive imposition and in equitable taxation at that time. The people were not represented in the government and no participation in the policies of the State, whereby they could voice their opinion on how taxes should be imposed.

This way is particularly true with the situation during the Spanish regime in the Philippines, as popularized by the phrase “Taxation without representation is tyranny,” the government of the world, democratic and representative, and such other forms og government, gave vent to insure the collection of taxes for the needs of the State and for public purposes.

As civilization advanced and the need for a more representative government was established, taxes took on a new twist. The need foe taxation has been emphasized – the individual is now taking part in contributing a share of his earnings for the support of the government which he belongs to.

Any person who knowingly or willfully violates the provision of the Act shall be punished by imprisonment of not less than one more or more than three years or a fine not less than 1,000 and not more that 15,000 or both distinction of the court.

Meaning of TaxationTaxation is the act of imposing tax, the

process or means by which the sovereign, law-making body, raises revenue to defray the necessary expenses of the government.

Expressed in another way, it is a method of apportioning the cost of government among those who, in some measure have the privileges to enjoy their benefits and must, therefore bear its burden.

Meaning of Tax

Taxes are the enforced proportional contributions from persons and property levied by the law- making body of the state by virtues of its sovereignty for the support of the government.

Purpose and Importance

Funds to finance government’s tasks of promoting general welfare and protection of its citizens

Life-blood of nation

Health Econo

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n or non-

payment of taxes

Undermines

the nation’

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Conversely,

Characteristics of TaxIt is an enforced contribution.

It is generally payable in form of money.

It is proportionate in character.

It is levied on person or property.

It is levied by the state, which has the jurisdiction over the person or property.

It is levied by the law-making body of the state.

It is levied for public purposes.

Nature and Power of Taxation

It is inherent in sovereignty.

It is legislative in character.

It is subject to constitutional and inherent limitations.

Basic Principles of a Sound Tax System

Fiscal Adequacy

•This means that the resources of revenue should be sufficient to meet the demands of public expenditures.

Equality of theoretical justice

•Tax burden should be proportion to the taxpayer’s ability to pay.

Administrative feasibility

•Tax laws should be capable or convenient, just and effective administration.

Classification of Taxes

According to subject,

1. Personal, poll or capitalization. Tax of a fixed amount is imposed on individuals residing within the specified territory, whether he is a citizen or not, regardless of his property or his occupation in which he is engaged.

Example is Residence Tax.



2. Property Tax. This kind of tax imposed on property whether it is real or personal. It is proportion either to its value, or in accordance with some reasonable method of appointment.

Example is Real Estate Tax.



3. Excise Tax. Tax, which does not fall within the classification of a poll tax. It is imposed upon the performance of an act, the enjoyment of a privilege, or the engagement of an occupation.

Example is Privilege Taxes on business or occupation;

estate, donors and income taxes.


According to purposes,

1. General Fiscal or Revenue.This type of Tax is imposed for the general purpose of the government.

Examples are Income Tax, Sales tax


According to purposes,

2. Special or Regulatory.It is a tax imposed for a special purpose, to achieve some special economic ands irrespective of whether it is actually raised or not.

Example is protective tariffs or custom duties on

imports to protect industries against foreign competition.


According to scope,

1. NationalThis is the tax imposed by the national government.

Examples are national internal revenue taxes,

custom duties and national taxes imposed by special laws.


According to scope,

2. Municipal or local.It is the tax imposed by the municipal government (local government).

Examples are real property tax.


According to determination of amount,

1. Specific.This is tax of affixed amount imposed by the head or number, or by some standard of weight or measurement that requires no assessment.

Examples are taxes on distilled spirits, matches,

cigarettes and others.


According to determination of amount,

2. Ad valorem.This is fixed proportion tax imposed on property with respect to its assessed value. It requires the intervention of assessors or appraiser to estimate the value of such property before the amount value.

Examples are real estate tax, most custom duties.


According to its effect to taxpayer,

1. Direct. This is a demand tax imposed to a person who usually taken the burden.

Examples are residence taxes, corporate and

individual income taxes.


According to its effect to taxpayer,

2. Indirect.This is the tax, which is imposed to most goods either local or imported as mandated by laws.

Examples are specific tax, privilege tax, sales tax,

amusement tax and custom duties.


According to graduation rate,

1. Proportional.This tax is based on a fixed percentage of the amount of property, income and other bases.

Examples are sales tax and real property tax.



2. Progressive or graduated.This is the tax imposed in accordance to the specified bracket in which the tax is based on.



3. Regressive.This is the tax imposed in accordance to the rate of which decrease as the tax base brackets increases.

We have no regressive taxes. A regressive tax, however, must not be confused with regressive system of taxation, which exist where there are more indirect taxes imposed than direct taxes. Since the low income groups as a whole buys more consumption goods from which the indirect taxes are collected, the burden of indirect taxes rest more on them than on the more able segments of society.

RevenueIt refers to all the funds or income derived from the

government, whether it comes from tax or any other source. In a stricter sense, it refers to the amount collected, while tax refers to the amount imposed.

Internal RevenueIt refers to taxes imposed by the legislature to duties

on imports and exports.

Custom Duties (or simply duties)They are taxes imposed on goods exported from a

country or imported into a country.

TariffThe term is simply explained by considering these ideas

or concepts.• This may be the book or rates, which is usually

drawn, in alphabetical order. It contains names of several lands or merchandise together with their corresponding payments.

• This may be the duties payable on goods imported or exported.

• This may be system or principle of imposing duties on the importation or exportation of goods.

DebtA tax is not a debt.

A tax, however, like a debt, is an obligation.

Debt

Based on contract

Assignable

May be paid in kind

May be the subject of set-off or compensation

A person cannot be imprisoned of non-payment

TollIt has been defined as a sum of money for the use of

something, generally applied to consideration, which is paid for the use of roads, bridges or of public purposes.• A toll is demanded based on ownership, while tax is

demanded based on sovereignty.• A toll may be imposed by the government on private

individuals or entities, while a tax may be imposed only by the state.

License or permit feeIt is a charge imposed under the police power for the

purpose of regulation.• License fee is imposed for regulation, while tax is

levied for revenues.• It involves an exercise of police power, while a tax

involves the exercise of the taxing power; and• Its amount is usually limited to the necessary

expense or regulation, while the is generally no limit on the amount of tax that may be imposed.

PenaltyIt is any sanction imposed as a punishment for violation

of law or acts injurious. Thus, the violation of tax may give rise to imposition of penalty.• A penalty is designed to regulate conduct, while a tax

is primarily aimed for raising revenue; and• A penalty may be imposed by either the government

or private entities, while a tax may be imposed only by the government.

Taxation Sample ProblemMr. True Man, a citizen, single but with both parents dependent upon him for

support, is engaged in a service business in the Philippines. For taxable year 1998, he reported the following income, cost and expenses:

Required: Compute for the Income Tax still due or Refundable on his annual income tax return for 1998.

Income from services rendered P 520,000.00Interest income from his bank deposits 64,000.00

Dividend income on his investmentIn share of stocks 6,000.00

Operating Expenses:Salaries and benefits 240,000.00

Shop rental 60,000.00Supplies 12,000.00

Electricity and water 36,000.00Other business expenses 42,000.00Quarterly Tax Payments 10,000.00

Solutions:Income from services rendered P 520,000.00Less: Operating ExpensesSalaries and benefits P 240,000.00Shop Rental 60,000.00Supplies 12,000.00Electricity and Water 36,000.00Other Operating Expenses 42,000.00

Total P 390,000.00Ne Income P 130,000.00Less: Personal Exemption as head of the family 25,000.00Net Taxable Income 105,000.00Income Tax:1st P 70,000Excess 35,000 x 20% 7,000.00

Total P 15,500.00Less: Tax credit on quarterly tax payments (10,000.00)

Tax Still Due 5,500.00

Note:1. Interest income is not included because the income is

already subject to final tax of 20% at source. Income subject to final tax is not required to be included in the income tax return, whether quarterly or annually.

2. Dividend income is also subject to final tax at source at 6%; if earned from 1998 income. However, dividend income is tax-exempt if it is received and earned by a corporation.

3. A taxpayer could qualifies as Head of the Family, if he has a dependent who could be legitimate parent, brother or sister or a legitimate child.

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TAXATION.pptx