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TAXATION
The power by which the sovereign, through its law-making body, raises revenue to defray the necessary expenses of the government.
TAXATION
It is merely a way of apportioning the cost of the government among those who in some measure are privileged to enjoy its benefits and must bear its burdens.
TAXATION
The Supreme Court of the Philippines described it as a symbiotic relationship whereby in exchange for the protection that the citizens get from the government, taxes are paid.
TAXATION as described by the Supreme Court
It is said that taxes are what we pay for civilized society. Without taxes, the government will be paralyzed for lack of motive power to activate and operate it.
TAXATION as described by the Supreme Court
Hence, despite the natural reluctance to surrender part of one's hard-earned income to the taxing authorities, every person who is able must contribute his share in the running of the government.
TAXATION as described by the Supreme Court
The government for its part is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values.
TAXATION as described by the Supreme Court
The symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power
TAXATION as described by the Supreme Court
“Taxpayers owe honesty to government just as the government owes fairness to taxpayer”
TAXATION as described by the Supreme Court
"If the state expects its taxpayers to observe fairness and honesty in paying their taxes, so must it apply the
same standard against itself... No one, not even the State, should enrich itself at
the expense of another..."
Defintion
Levy A legislative power The determination of the ff:▪ Persons▪ Property or exercises to be taxed▪ The sum or sums to be raised▪ The due date thereof▪ The time and manner of levying and collecting taxes
Defintion
Collection Consists of manner of enforcement of obligation on the part of those who are taxed
Includes assessment
Purposes and Objective
Revenue Basically, the purpose of taxation is to provide funds or property with which the State promotes the General Welfare and Protection of citizens
Purposes and Objective
Regulation Taxation also has a regulatory
purpose as in the case of taxes levied on exercises or privileges like those imposed on tobacco and alcoholic products, or amusement places like night clubs, cabarets, cockpits, etc.
Purposes and Objective
Regulation A regulatory purpose in the rehabilitation and stabilization of a threatened industry which is affected with public interest, like oil industry..
Purposes and Objective
Promotion of General welfare The Supreme Court ruled that taxation may be used as in implement of the police power in order to promote the general welfare of the people.
Purposes and Objective
Promotion of General welfare While the funds collected under
the Oil Price Stabilization Fund (OSPF) may be referred to as taxes, they are exacted in the exercise of the police power of the State.
Purposes and Objective
Promotion of General welfare From such fund, amounts are
drawn to reimburse oil companies when appropriate situations arise for increases in the cost of crude oil importation.
Purposes and Objective
Reduction of Social Inequality This is made possible through the
progressive system of taxation where the objective is to prevent the undue concentration of wealth in the hands of a few individuals.
Purposes and Objective
Reduction of Social Inequality Progressivity is key stoned on the principle that those who are able to pay should shoulder the bigger portion of the tax burden.
Purposes and Objective
Reduction of Social Inequality Incidentally, The present rates of income, estate and gift taxes present a good example of progressivity.
Purposes and Objective
Encourage Economic Growth In the realm of tax exemptions
and tax reliefs, for instance, the purpose is to grant incentives or exemptions in order to encourage investments and thereby promote the country's economic growth
Purposes and Objective
Encourage Economic Growth It is also worthwhile to note that the power to exempt from tax is inherent in the State.
Purposes and Objective
Encourage Economic Growth However, It is significant to note
that with respect to real property taxes, no such power exists, save in the case of condonation of taxes which can be granted only for certain justifiable reasons which are expressly stated in law
Purposes and Objective
Protectionism In some important sectors of the economy, as in the case of foreign importations, taxes sometimes provides protection to local industries like protective tariffs customs duties.
Taxes
The enforced proportional contributions from people and property levied by the law-making body of the State by virtue of its sovereignty for the support of government and for public needs.
Attributes and Characteristics
A. Tax is a forced charge, imposition or contribution and as such it operates in invitum
It is no way to dependent on the will or contractual assent, express or implied, of the person taxed.
Attributes and Characteristics
A. Tax is a forced charge, imposition or contribution and as such it operates in invitum
They are not contracts, either expressed or implied, but positive acts of government.
Attributes and Characteristics
B. It is a pecuniary burden payable in money
A tax is not necessarilly confined to those payable in money, as in the case for instance, of backpay of certificates which under R.A. 304 could be used as payment of taxes.
Attributes and Characteristics
B. It is a pecuniary burden payable in money
In one case, the Supreme Court held that back pay certificates which under R.A. 304 may be used to pay real estate taxes.
Attributes and Characteristics
C. It is levied by the legislative body of the State
taxing power is peculiarly and exclusively legislative in character. Taxes are obligations created by the law
Attributes and Characteristics
D.It is assessed in accordance with some reasonable rule of apportionment
Conformably with the constitutional mandate on progressivity of taxing system, taxes must be based on ability to pay
Attributes and Characteristics
D.It is assessed in accordance with some reasonable rule of apportionment
Do regressive taxes go against the constitutional mandate in Sec. 28(1), Art. VI of the constitution?
Attributes and Characteristics "The constitution does not really prohibit
the imposition of indirect taxes which, like the VAT, are regressive. What it simply provides is that Congress shall 'evolve a progressive system of taxation.'... Resort to indirect taxes should be minimized but not avoided entirely because it is difficult, if not possible, to avoid them by imposing such taxes according to taxpayers' ability to pay..."
Attributes and Characteristics
E. It is imposed by the State on persons, property or services with in jurisdiction
Attributes and Characteristics
F. It is assessed in accordance with some reasonable rule of apportionment
A tax creates a civil liability on the part of a delinquent taxpayer, although the non-payment thereof creates a criminal liability, which could be subject of criminal prosecution under existing laws.
Attributes and Characteristics
F. It is assessed in accordance with some reasonable rule of apportionment
In short, in taxation, it is one's civil liability to pay taxes that give rise to criminal liability, not the other way around as in criminal cases where criminal liability gives rise to a civil liability.
Importance
Taxes are important because they are the lifeblood of the government and so should be calculated without necessary hindrance.
Importance
The legislature, in adopting measures to implement our tax laws, wants to be assured that taxes are paid and collected without delay
Importance
Being the lifeblood of the Government, their prompt and certain availability is an imperious need.
Importance
"The primary purpose is to generate funds for the State to finance the need of the citizenry and to advance the common weal. Due process of the law under the Constitution does not require judicial proceedings in tax cases.
Importance
This must necessarily be so because it is upon taxation that the Government chiefly relies to obtain the means to carry on its operations and it is of utmost importance that the modes adopted to interfered with as little as possible".
Personal to Taxpayer A corporation's tax delinquency cannot, for
instance, be enforced against its stockholders because not only would this run counter to the principle that taxes are personal, but it would also not be in accord with the rule that a corporation is vested by law with a personality that is separate and distinct from those of the persons composing it, as well as from that of any other legal entity to which it may be related.
Personal to Taxpayer
But, stockholders may be held liable for the unpaid taxes of a dissolved corporation if it appears that the corporate assets have passed into their hands, or when stockholders have unpaid subscriptions to the capital of the corporation
Personal to Taxpayer
Similarly, estate taxes accruing upon the transmission of the decedent's state to his heirs are not liabilities which can be enforced against his heirs, for estate taxes are supposed to be obligations that must be paid by the executor/administrator out of the net estate, before delivery to any beneficiary of his distributive share.
Personal to Taxpayer
However, if prior to the payment of the estate tax due on the transfer of decedent's estate, the properties of the deceased are distributed to any beneficiary, then such beneficiary shall be subsidiary liable for the payment of such proportion of the estate tax as his distributive share bears to the total value of the net estate.
Nature of Taxing Power
It is inherent in the StateIt is an attribute of
sovereignty "unlimited in range, acknowledging in
its very nature no limits, so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay it"
Nature of Taxing Power
It is an awesome power (Supreme Court) However, no matter how awesome it may be, it must not be exercised arbitrarily.
Nature of Taxing Power
It is a power emanating from necessity A necessary burden to preserve the State's sovereignty
A means to give the citizenry an army to resist an aggression
Nature of Taxing Power
It is a power emanating from necessity A navy to defend its shores from invasion
A corps of civil servants to serve
Nature of Taxing Power
It is a power emanating from necessity Public improvement designed for
the enjoyment of the citizenry and those which come within the State's territory and facilities, protection which a government is supposed to provide.
Nature of Taxing Power
It is a high prerogative of sovereignty the relinquishment of which is never presumed Any reduction or diminution thereof
with respect to its mode or rate must be strictly construed and the same must be couched in clear terms
Nature of Taxing Power
It is a high prerogative of sovereignty the relinquishment of which is never presumed The general rule is that any claim
for exemption from tax statutes should be construed strictly against the taxpayer
Nature of Taxing Power
It is a high prerogative of sovereignty the relinquishment of which is never presumed Incidentally, Its power is not granted in the Constitution.
Nature of Taxing Power
It is a high prerogative of sovereignty the relinquishment of which is never presumed Remains undiminished in the
legislature in the absence of an express surrender thereof, clear and explicit in terms.
Nature of Taxing Power
It is a high prerogative of sovereignty the relinquishment of which is never presumed The power to tax is subject to inherent and constitutional limitations.
Theory and Basis
There are two reasons why the exercise by the
State of its taxing power is justified.
Theory and Basis
Necessity Theory Government cannot continue
without the means to pay its expense
Government has the right to compel all citizens and property within its limits to contribute (eminent domain)
Theory and Basis
Benefits-Protection Theory The State demands and receive taxes
from subjects of taxation within its jurisdiction so that it may be enabled to carry its mandate into effect and perform the functions of government, and the citizen pays from his property the portion demanded that he may be secured in the enjoyment of the benefits of organized society)
Theory and Basis
Benefits-Protection Theory It should be noted that while taxes are
intended for general benefits, special benefits to taxpayers are not required. Moreover, according to the Supreme Court, a person cannot object to or resist the payment of taxes solely because no personal benefit to him can be pointed out as arising from the tax.
Legislative Taxing Power
Scope:The person, property, occupation to be taxed. Exercises or privileges within the jurisdiction are also included
The amount or rate of tax
Legislative Taxing Power
Scope:The purpose for which taxes
shall be levied provided are public purposes
The kind of tax to be collectedThe situs of taxationThe method of collection
Aspects of Taxation
The Levy or imposition of tax on persons, property, or exercises
Collection of levied taxes
Sound Tax System
Fiscal Adequacy The sources of government revenue must be sufficient to meet government expenditures and other public needs (this is essential to avoid budgetary deficits and to minimize local and foreign borrowings)
Sound Tax System
Theoretical Justice A good tax system must be based
on the taxpayers' ability to pay
Administrative Feasibility Taxes should be capable of being
effectively enforced
Inherent Limitation
Taxation is bound in its exercise by its
own nature, essential characteristics and
purpose
Inherent Limitation Public Purpose of tax It is important in taxation because of all
the powers of government, that taxation is said to be the strongest as it can be readily employed against one class of individuals in favour of another so as to ruin one class and give unlimited wealth and property to another ,if there is no implied limitation on the uses for which such taxing power may be exercised.
Inherent Limitation
Non-delegability of the Taxing Power The power of taxation is exclusively legislative, but there are exceptions.
Inherent Limitation
Non-delegability of the Taxing PowerExceptions: The power granted to the congress
to authorize the President to fix limitations and restrictions as may impose, tariff rates, even for revenue purposes only, and other imposts duties
Inherent Limitation
Non-delegability of the Taxing PowerExceptions:
Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the congress may provide, consistent with the basic policy of local autonomy.
Inherent Limitation
Situs of Taxation Defined as the place of taxation, is a limitation on the taxing power.
Inherent Limitation
Situs of Taxation The principle is well-recognized that, however broad the power of taxation may be as to its character, such power is necessarily limited only to persons, property or business within its jurisdiction.
Situs of Taxation
Basic Considerations:Protection
One authority opines that a legal situs cannot be given to property for the purpose of taxation where neither the property nor the person is within the protection of the taxing state.
Situs of Taxation
Basic Considerations:Double Taxation and the Situs Limitation Double taxation is never invalid where it is imposed by different states.
Situs of Taxation
Basic Considerations:Double Taxation and the Situs Limitation In determining situs, it is of no importance that the property has already been taxed or is subject to tax in another state.
Situs of Taxation
Basic Considerations: The Maxim of Mobilia Sequuntur Personam The situs of personal property is the domicile of the owner.
Situs of TaxationBasic Considerations: The Maxim of Mobilia
Sequuntur Personam The doctrine of Mobilia Sequuntur
personam is not allowed to stand in the way of taxation of personalty in the place where it has its actual situs and the requisite legislative jurisdiction exists.
Situs of Taxation
Basic Considerations: Legislative Power to Fix Situs If no constitutional provisions are violated, the power of legislature to fix is undoubted.
Intangible properties considered with a situs in the Philippines. (a) franchise which must be exercised in
the Philippines; (b) shares, obligations or bonds issued
by any corporation or sociedad anonima organized or constituted in the Philippines in accordance with its laws;
(c) shares, obligations or bonds issued by any foreign corporation eighty-five percentum (85%) of the business of which is located in the Philippines
(d) shares, obligations, or bonds issued by any foreign corporation if such shares, obligations or bonds have acquired a business situs in the Philippines;and
(e) shares or rights in any partnership, business or industry established in the Philippines.
Situs of Taxation
Factors affecting the principle: Kind or classification of tax being
levied Situs of the thing or property taxed Domicile of the person taxed Citizenship of the person taxed Source of the income Situs of excercise, privilege, business
or occupation being taxed
Situs of Taxation
To define the Factors:Property Tax
In considering the place at which property is taxable and the governmental unit which may rightfully levy and collect the property tax
Situs of Taxation
To define the Factors:Property Tax
The taxing power reaches everything in the State which can be denominated as property
Situs of Taxation
To define the Factors:Tax on Persons
A state may levy a personal tax upon persons subject to the jurisdiction of its sovereignty.
Situs of Taxation
To define the Factors:Income Tax
The crucial factors that involves income tax:▪Citizenship of the taxpayer▪Domicile of the taxpayer▪ Source of income
Inherent Limitation
Exemption of Local Government The property of the state and municipal subdivisions devoted to government uses is generally deemed to be exempt from taxation.
Inherent Limitation
International Comity "International obligations
concomitant with our acceptance of the principles of international law as part of our law demand that certain representatives of foreign states station and property of such foreign states found within our territory be exempted from taxation..."
Constitutional Limitation
Provisions that are said to be the
limitations on the Taxing Power are
as follows:
Constitutional Limitation
Due Process of Law "No person shall be deprived of life, liberty, or property without due process"
Constitutional Limitation
Equal Protection of Law "...nor shall any person be denied the equal protection of laws"
Constitutional Limitation
Freedom of Speech and of the Press "No law shall be passed abridging
the freedom of speech, of expression, or of the press, or the right of the people peaceably to assemble and petition the government for the redress of grievance
Constitutional Limitation
Non-infringement of Religious Freedom "No law shall be made respecting an
establishment of religion or prohibiting the free exercise thereof. The free exercise and enjoyment of religious profession and worship without discrimination or preference shall forever be allowed.
Constitutional Limitation
Non-impairment of Contracts "No law impairing the obligations of contracts shall be passed"
Constitutional Limitation:
Non-imprisonment for debt "No person shall be imprisoned for debt or non-payment of poll tax"
Constitutional Limitation
Origin of Appropriations, Revenue and Tariff Bills "All appropriations, revenue or tariff
bills, bills authorizing the increase of the public debt, bills of local application and private bills shall originate exclusively from the House of the Representatives but the senate may propose or concur with amendments"
Constitutional Limitation
Uniformity, Equitability, and Progressivity of taxation "The rule of taxation shall be uniform and equitable. The congress shall evolve a progressive system of taxation"
Constitutional Limitation
Delegation of Legislative Authority to Fix Tariff Rates, Import, Export Quotas, etc.
"The congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose tariff rates, import and export quotas and other imposts, within the framework of the national development program of the Government."
Constitutional Limitation
Tax exemption of properties "Charitable institutions, Churches, Parsonages or Convents, Mosques, non-profit cemetery and all lands, public schools shall be exempted to taxations."
Constitutional Limitation
Voting requirement "No law granting any tax exemption shall be passed without the concurrence of a majority of all the members of the congress."
Constitutional Limitation
Non-impairment of jurisdiction of the Supreme Court "The Congress shall have the power
to define, prescribe, and apportion the jurisdiction of the various courts but may not deprive the Supreme Court of its jurisdiction..."
Constitutional Limitation
Provisions that are NOT limitations on the Taxing Power: Constitutional requirement on the
subject and title of bills Power of the President to veto
any particular item/s in an appropriation
Constitutional Limitation
Provisions that are NOT limitations on the Taxing Power: No money shall be paid out of the
Treasury except of an appropriation made by the law
Appropriation of public money for the benefit of religious systems