Transcript
  • 7/29/2019 Taxation 101 basic rules and principles

    1/36

    Taxation 101:

    JR Lopez Gonzales8 August 2011

    Basic Rules and Principles in Philippine Taxation

  • 7/29/2019 Taxation 101 basic rules and principles

    2/36

    Dont be anxious, smile.

  • 7/29/2019 Taxation 101 basic rules and principles

    3/36

    It is the inherent power by which the

    sovereign state imposes financial burdenupon persons and property as a means

    of raising revenues in order to defray the

    necessary expenses of the government

    (Tax Digest by Crescencio Co Untian,

    2002).

    Taxation is the imposition of financialcharges or other levies, upon a taxpayer

    (an individual or legal entity) by a state

    such that failure to pay is punishable by

    law.

    What is Taxation?

  • 7/29/2019 Taxation 101 basic rules and principles

    4/36

    It is a mode by which government make exactions

    for revenue in order to support their existence andcarry out their legitimate objectives (Tax Law and

    Jurisprudence by Justice Vitug, 2000).

    It is the most pervasive and the strongest of all thepowers of the government. Taxes are the lifeblood

    of the government, without which, it cannot

    subsist.

    What is Taxa

    tion?

  • 7/29/2019 Taxation 101 basic rules and principles

    5/36

    The first known system of taxation was in

    Ancient Egypt around 3000 BC - 2800 BC inthe first dynasty of the Old Kingdom.

    In Biblical times, tax is already prevalent.According to Genesis 47:24:

    "But when the crop comes in, give afifth of it to

    Pharaoh. The otherfour-fifths you may keep asseed for the fields and as food for yourselves andyour households and your children".

    History of Taxation

  • 7/29/2019 Taxation 101 basic rules and principles

    6/36

    Earliest taxes in Rome are called asportoriawere customs duties on imports and exports

    Augustus Caesar introduced the inheritance taxto provide retirement funds for the military.The tax was five percent on all inheritancesexcept gifts to children and spouses .

    In England, taxes were first used as emergencymeasures.

    History of Taxation

  • 7/29/2019 Taxation 101 basic rules and principles

    7/36

    History of Taxation in the Philippines

    The pre-colonial society, being communitarian,did not have taxes.

  • 7/29/2019 Taxation 101 basic rules and principles

    8/36

    During the Spanish Period, new income-

    generating means were introduced by thegovernment such as the :

    Manila-Acapulco Galleon TradePolo Y Servicio (Forced Labor)

    Bandala

    Encomienda System

    Tribute

    History of Taxation in the Philippines

  • 7/29/2019 Taxation 101 basic rules and principles

    9/36

    Manila-Acapulco Galleon Tradewas the main source of income

    for the colony during its early

    years.

    The Galleon trade brought silver

    from Nueva Castilla and silk from

    China by way of Manila.

    History of Taxation in the Philippines

  • 7/29/2019 Taxation 101 basic rules and principles

    10/36

    Polo Y Servicio is the forced labor for 40 days, ofmen ranging from 16 to 60 years of age who were

    obligated to give personal services to community

    projects. One could be exempted from the polo by

    paying a fee calledfalla (which was worth one and ahalf real).

    Bandala is one of the taxes collected from the

    Filipinos. It comes from the Tagalog word mandala,which is a round stock of rice stalks to be threshed.

    History of Taxation in the Philippines

  • 7/29/2019 Taxation 101 basic rules and principles

    11/36

    Encomienda are large tracts of land given to a personas reward for a meritorious act. The encomenderos

    were given full authority to manage the encomienda by

    collecting tribute from the inhabitants and govern

    people living on it.

    Tribute was the residence tax during the Spanish times.

    It may be paid in cash or kind, partly, or wholly.

    But in 1884, the tribute was replaced by the cedula

    personalor personal identity paper, equivalent to the

    present community tax certificate.

    History of Taxation in the Philippines

  • 7/29/2019 Taxation 101 basic rules and principles

    12/36

    That in the 19th century, the

    cedula served as an identificationcard that had to be carried at all

    times. A person who could not

    present his or her cedula to aguardia civil could then be detained

    for being indocumentado.

    Andres Bonifacio and otherKatipuneros tore their cedulas in

    August 1896, signaling the start of

    the Philippine Revolution.

    Did you know?

  • 7/29/2019 Taxation 101 basic rules and principles

    13/36

    The cdula was imposed by the

    Americans on January 1, 1940, whenCommonwealth Act No. 465 went into

    effect, mandating the imposition of a

    base residence tax of fifty centavos and

    an additional tax of one peso based onfactors such as income and real estate

    holdings.

    The payment of this tax would merit the

    issue of a residence certificate.

    Corporations were also subject to the

    residence tax.

    The Development of the Community Tax

  • 7/29/2019 Taxation 101 basic rules and principles

    14/36

    A sample cedula in the 1920s.

  • 7/29/2019 Taxation 101 basic rules and principles

    15/36

    Also known as a residence certificate, is a

    legal identity document in the Philippines.

    Issued by cities and municipalities to all

    persons that have reached the age of majorityand upon payment of a community tax, it is

    considered as a primary form of identification

    in the Philippines and is one of the closest

    single documents the Philippines has to a

    national system of identification, akin to a

    driver's license and a passport.

    What is a cedula?

  • 7/29/2019 Taxation 101 basic rules and principles

    16/36

    A person is required to present a cedula whenhe or she acknowledges a document before a

    notary public; takes an oath of office upon

    election or appointment to a government

    position; receives a license, certificate or

    permit from a public authority; pays a tax or

    fee; receives money from a public fund;

    transacts official business; or receives salary

    from a person or corporation.

    Why is cedula important?

  • 7/29/2019 Taxation 101 basic rules and principles

    17/36

    Taxation has four main purposes or effects:

    1. Revenue

    2. Redistribution3. Repricing

    4. Representation

    The Four Rs of Taxation

  • 7/29/2019 Taxation 101 basic rules and principles

    18/36

    RevenueThe taxes raise money

    to spend on armies,

    roads, schools and

    hospitals, and on more

    indirect government

    functions like market

    regulation or legal

    systems.

    The Four Rs of Taxation

  • 7/29/2019 Taxation 101 basic rules and principles

    19/36

    Redistribution

    This refers to the transferring

    wealth from the richer sections

    of society to poorer sections.

    Repricing

    Taxes are levied to address

    externalities; for example,

    tobacco is taxed to discouragesmoking, and a carbon tax

    discourages use of carbon-based

    fuels.

    The Four Rs of Taxation

  • 7/29/2019 Taxation 101 basic rules and principles

    20/36

    Representation

    As what goes with the

    slogan "no taxation

    without representation"

    , it implies that: rulerstax citizens, and citizens

    demand accountability

    from their rulers as theother part of this

    bargain.

    What is a cedula?

  • 7/29/2019 Taxation 101 basic rules and principles

    21/36

    The main purpose of taxation is to accumulate funds forthe functioning of the government machineries. No

    government in the world can run its administrative

    office without funds and it has no such system

    incorporated in itself to generate profit from itsfunctioning.

    The governments ability to serve the people depends

    upon the taxes that are collected. Taxes areindispensable in the government operation and without

    it, the government will be paralyzed.

    Why Tax?

  • 7/29/2019 Taxation 101 basic rules and principles

    22/36

    Tax law in the Philippines covers national and

    local taxes. National taxes refer to national

    internal revenue taxes imposed and collected by

    the national government through the Bureau of

    Internal Revenue (BIR) and local taxes refer to

    those imposed and collected by the local

    government. The 1987 Philippine Constitution

    sets limitations on the exercise of the power to

    tax. The rule of taxation shall be uniform andequitable. The Congress shall evolve a

    progressive system of taxation. (Article VI,

    Section 28, Paragraph 1).

    The Philippine Tax System

  • 7/29/2019 Taxation 101 basic rules and principles

    23/36

    Tax evasion happens whenthere is fraud through

    pretension and the use of other

    illegal devices to lessen ones

    taxes, there is tax evasion,

    under-declaration of income,

    and non-declaration of income

    and other items subject to tax,Under-appraisal of goods

    subject to tariff , and over-

    declaration of deductions

    What is Tax Evasion?

  • 7/29/2019 Taxation 101 basic rules and principles

    24/36

    The Congress may, by law, authorize thePresident to fix within specified limits, and

    subject to such limitations and restrictions as it

    may impose, tariff rates, import and exportquotas, tonnage and wharfage dues, and other

    duties or imposts within the framework of the

    national development program of the

    Government (Article VI, Section 28, Paragraph 2).

    The Branches of Government vis--vis the Tax Law

  • 7/29/2019 Taxation 101 basic rules and principles

    25/36

    The President shall have the power to veto any

    particular item or items in an appropriation,revenue, or tariff bill, but the veto shall not affect the

    item or items to which he does not object (Article VI,

    Section 27, Paragraph 2).

    The Supreme Court has the power to: review, revise,

    reverse, modify, or affirm on appeal or certiorari, as the

    law or the Rules of Court may provide, final judgments

    and orders of lower courts in all cases involving the

    legality ofany tax, impost, assessment, or toll, or any

    penalty imposed in relation thereto (Article VIII,

    Section 5, Paragraph 2b).

    The Branches vis--vis the Tax Law

  • 7/29/2019 Taxation 101 basic rules and principles

    26/36

    A) Personal, capitation or poll taxes

    These are taxes of fixed amount upon

    residents or persons of a certain class without

    regard to their property or business

    B) Property taxes

    1. Real Property Tax - an annual tax that may

    be imposed by a province or city or a

    municipality on real property such as land,

    building, machinery and other improvements

    affixed or attached to real property.

    The Forms of Taxes Imposed on Persons and Property

  • 7/29/2019 Taxation 101 basic rules and principles

    27/36

    2. Estate Tax (Inheritance Tax) - a tax on the right

    of transmitting property at the time of death

    and on the privilege that a person is given in

    controlling to a certain extent the disposition

    of his property to take effect upon death.

    3. Gift or Donors Tax - a tax on the privilege of

    transmitting ones property or property rights

    to another or others without adequate and

    full valuable consideration.

    The Forms of Taxes Imposed on Persons and Property

  • 7/29/2019 Taxation 101 basic rules and principles

    28/36

    4. Capital Gains Tax - tax imposed on

    the sale or exchange of property .

    Those imposed are presumed to

    have been realized by the seller for

    the sale, exchange or other

    disposition of real property locatedin the Philippines, classified as

    capital assets.

    C. Income Taxes - Taxes imposed on

    the income of the taxpayers from

    whatever sources it is derived. Tax on

    all yearly profits arising form property,

    possessions, trades or offices.

    The Forms of Taxes Imposed on Persons and Property

    The Forms of Taxes Imposed on Persons and

  • 7/29/2019 Taxation 101 basic rules and principles

    29/36

    D. Excise or License Taxes - Taxes

    imposed on the privilege, occupation or

    business not falling within the

    classification of poll taxes or property

    taxes. These are imposed on alcoholproducts; on tobacco products; on

    petroleum products like lubricating oils,

    grease, processed gas etc; on mineral

    products such as coal and coke andquarry resources; on miscellaneous

    articles such as automobiles.

    The Forms of Taxes Imposed on Persons and

    Property

  • 7/29/2019 Taxation 101 basic rules and principles

    30/36

    Under these lies two other taxes:

    1.Documentary Stamp Tax - a tax imposed upon

    documents, instruments, loan agreements and

    papers and upon acceptance of assignments, sales

    and transfers of obligation and etc.

    2. Value added tax- is imposed on any person

    who, in the course of trade or business sells,

    barters, exchanges, leases, goods or properties,

    renders services, or engages in similar

    transactions.

    The Branches of Government vis--vis the Tax Law

  • 7/29/2019 Taxation 101 basic rules and principles

    31/36

    Products like Papawash have value-added taxes, too.

    Wh Sh ld ?

  • 7/29/2019 Taxation 101 basic rules and principles

    32/36

    1. Individuals

    a. Resident Citizenb. Non-resident Citizen

    c. Resident Aliens

    d. Non-resident Aliens

    2. Corporations

    a. Domestic Corporations

    b. Foreign Corporations

    3. Estate under judicial settlement

    4. Trusts irrevocable both as to the

    trust property and as to the

    income.

    Who Should Pay Taxes?

    Wh ( Wh t) th t d i

  • 7/29/2019 Taxation 101 basic rules and principles

    33/36

    The Constitution expressly grants taxexemption on certain

    entities/institutions such as:

    1. Charitable institutions, churches,

    parsonages or convents appurtenant

    thereto, mosques, and nonprofit

    cemeteries and all lands, buildings andimprovements actually, directly and

    exclusively used for religious, charitable

    or educational purposes (Article VI,

    Section 28, Paragraph 3).

    Who (or What) are those exempted in

    paying taxes?

    Wh ( Wh t) th t d i i t ?

  • 7/29/2019 Taxation 101 basic rules and principles

    34/36

    Who (or What) are those exempted in paying taxes?

    2. Non-stock non-profit educational institutions used actually,

    directly, and exclusively for educational purposes. (Article XVI,

    Section 4 (3)).Exempted to tax as stated in the Article 283 of Rules and

    Regulations Implementing Local Government Code of 1991 (RA

    7160):

    Local water districts

    Cooperatives duly registered under RA 6938, otherwise known

    as the Cooperative Code of the Philippines

    Non-stock and non-profit hospitals and educational

    institutionsPrinter and/or publisher of books or other reading materials

    prescribed by DECS (now DepEd) as school texts or references,

    insofar as receipts from the printing and / or publishing thereof

    are concerned.

    Top Celebrity Taxpayers in 2010

  • 7/29/2019 Taxation 101 basic rules and principles

    35/36

    Top Celebrity Taxpayers in 2010

  • 7/29/2019 Taxation 101 basic rules and principles

    36/36

    Maraming Salamat Po!