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Characteristics of tax:

1.
2.
3.
4.
5.
6.
7.

Enforced contribution.
Generally payable with money.
Proportionate in character.
Levied on persons or property
Levied by the state which has jurisdiction mover the subject
Levied by the law-making body of the state.
Lommonly required to be paid at regular periods or intervals.

Classification of tax:
1. As to subject matter or object
A. personal, poll or capitation- tax of a fixed amount on individuals residing within a
specified territory, without regard to their property, occupation or business. Ex.
Community tax (basic)
B. property- imposed on property, real or personal, in proportion to its value, or in
accordance with some reasonable method or apportionment. Ex. Real estate Tax
C. Excise- imposed upon the performance of an act, the enjoyment of a privilege, or
the engaging in an occupation, profession or business. Ex. Income tax, VAT, Estate
Tax, Donors Tax
2. As to who bears the burden of the tax
a. Direct- the tax is imposed on the person who also bears the burden thereof
Ex. Income tax, community tax, estate tax
b. Indirect imposed on the taxpayer who shifts the burden of the tax to another,
Ex. VAT, customs duties.
3. As to determination of amount
a. specific imposed and based on a physical unit of measurement as by head
number, weight, length or volume. Ex. Tax on distilled spirits, fermented liquors,
cigars
b. Ad Valorem of a fixed proportion of the value of the property with respect to
which the tax is assessed. Ex. Real estate tax, excise tax on cars, non essential
goods.
4. As to purpose
A. general, fiscal, or revenue- imposed for the general purpose of supporting the
government. Ex. Income tax, percentage tax
B. special or regulatory- imposed for a special purpose, to achieve some social or
economic objective. Ex. Protective tariffs or custom duties on imported goods
intended to protect local industries.
5. As to scope or authority imposing the tax

a. national- imposed by the national government ex. NIRC, custom duties


b. municipal or local- imposed by municipal corporations or local governments ex.
Real estate tax,
6. As to graduation of rates.
a. proportional- based on a fixed percentage of the amount of the property, receipts
or on other basis to be taxed ex. Real estate tax, VAT
b. progressive and graduated- the rate of the tax increases as the tax base or
bracket increases ex. Income tax, estate tax, donors tax
c. regressive- the rate of tax decreases as the tax base or bracket increases.
d. degressive- increase of rate is not proportionate to the increase of tax base.
Types of taxes:
Federal Income Tax: A tax levied by a national government on annual income.
State and/or Local Income Tax: A tax levied by a state or local government on
annual income. Not all states have implemented state level income taxes.
Payroll Tax: A tax an employer withholds and/or pays on behalf of their employees
based on the wage or salary of the employee. In most countries, including the
United States, both state and federal authorities collect some form of payroll tax. In
the United States, Medicare and Social Security, also called FICA, make up the
payroll

tax.

Unemployment Tax: A federal tax that is allocated to state unemployment


agencies

to

fund

unemployment

assistance

for

laid-off

workers.

Sales Tax: A tax imposed by the government at the point of sale on retail goods
and services. It is collected by the retailer and passed on to the state. Sales tax is
based on a percentage of the selling prices of the goods and services and is set by
the state. Technically, consumers pay sales taxes, but effectively, business pay
them since the tax increases consumers costs and causes them to buy less.
Foreign Tax: Income taxes paid to a foreign government on income earned in that
country.
Value-Added Tax: A national sales tax collected at each stage of production or
consumption of a good. Depending on the political climate, the taxing authority
often exempts certain necessary living items, such as food and medicine from the
tax.
Tax levying:
under United States Federal law, is an administrative action by theInternal Revenue
Service (IRS) under statutory authority, without going to court, to seize property to

satisfy a tax liability. The levy "includes the power ofdistraint and seizure by any
means". The general rule is that no court permission is required for the IRS to
execute a section 6331 levy.For taxpayers in serious debt to the IRS, the most
feared weapon in the IRS arsenal is the tax levy. Using the powers granted to the
IRS in the Internal Revenue Code, the IRS can levy upon wages, bank accounts,
social security payments, accounts receivables, insurance proceeds, real property,
and, in some cases, a personal residence. Under Internal Revenue Code section
6331, the Internal Revenue Service can levy upon all property and rights to
property of a taxpayer who owes Federal tax. The IRS can levy upon assets that
are in the possession of the taxpayer, called a seizure, or it can levy upon assets in
the possession of a third party, a bank, a brokerage house, etc. All future statutory
references

will

be

to

the Internal

Revenue

Code unless

noted

otherwise.

Tax assessment:
An 'assessor' is a specialist who calculates the value of property. The value
calculated by the assessor is then used as the basis for determining the amounts to
be paid or assessed for tax or insurance purposes.
In local government in the United States, an assessor is an appointed or elected
official

charged

with

determining

the

value

of

each

taxable

property

in

a county, municipality, or township; this information is then used by the locality to


determine the necessary rate of taxation to support the community's annual
budget. (This is a specialization of the previous sense; a person who performs
similar work for a private employer is more often called an appraiser or, specifically
in the insurance industry, an adjuster.) In Florida, this official is known as
the property appraiser. In Vermont, this office is known as a lister.
A professional organization for assessors and source for innovation, education, and
research in property appraisal, assessment administration, and property tax policy
is the International Association of Assessing Officers.

Tax collection:
tax collection occurs wherever the state passes on its obligation to collect taxes to
private companies or firms in return for a fixed or ad valorem fee. This contrasts
with tax farming where a private individual or organization pays off a pre-

determined tax debt, and then subsequently recoups that payment by collecting
money from the people within a certain area or business.
A

modern

example

of

variation

of

tax

farming

is

the United

States IRS outsourcing of the collection of taxpayers' debts to private debt


collection agencies from September 2006. Opponents to this change note that the
IRS will be handing over personal information to these debt collection agencies,
who are being paid between twenty-two and twenty-four percent of the amount
collected. Opponents are also worried about the agencies being paid on percent
collected because it will encourage the collectors to use pressure tactics to collect
the maximum amount. IRS spokesman Terry Lemons responds to these claims
saying the new system "is a sound, balanced program that respects taxpayers'
rights and taxpayer privacy." Currently there are other state and local agencies that
are using private collection agencies and have not had any problems.
Limitation of taxation:
The power of taxation, is however, subject to constitutional and inherent limitations.
Constitutional limitations are those provided for in the constitution or implied from
its provisions, while inherent limitations are restrictions to the power to tax
attached to its nature.
The following are the inherent limitations.
Purpose. Taxes may be levied only for public purpose;
Territoriality. The State may tax persons and properties under its jurisdiction;
International Comity. the property of a foreign State may not be taxed by another.
Exemption. Government agencies performing governmental functions are exempt
from taxation
Non-delegation. The power to tax being legislative in nature may not be delegated.
(subject to exceptions)
Constitutional limitations.
Observance of due process of law and equal protection of the laws. (sec, 1, Art. 3)
Any deprivation of life , liberty or property is with due process if it is done under the
authority of a valid law and after compliance with fair and reasonable methods or
procedure prescribed. The power to tax, can be exercised only for a constitutionally
valid public purpose and the subject of taxation must be within the taxing
jurisdiction of the state. The government may not utilize any form of assessment or
review which is arbitrary, unjust and which denies the taxpayer a fair opportunity to
assert his rights before a competent tribunal. All persons subject to legislation shall
be treated alike under like circumstances and conditions, both in the privileges

conferred in liabilities imposed. Persons and properties to be taxed shall be group,


and all the same class shall be subject to the same rate and the tax shall be
administered impartially upon them.
Rule of uniformity and equity in taxation (sec 28(1)Art VI) All taxable articles or
properties of the same class shall be taxed at the same rate. Uniformity implies
equality in burden not in amount. Equity requires that the apportionment of the tax
burden be more or less just in the light of the taxpayers ability to bear the tax
burden.
No imprisonment for non-payment of poll tax (sec. 20, Art III) A person cannot be
imprisoned for non-payment of community tax, but may be imprisoned for other
violations of the community tax law, such as falsification of the community tax
certificate, or for failure to pay other taxes.
Non-impairment of obligations and contracts, sec 10, Art III . the obligation of a
contract is impaired when its terms and conditions are changed by law or by a party
without the consent of the other, thereby weakening the position or the rights of the
latter. IF a tax exemption granted by law and of the nature of a contract between
the taxpayer and the government is revoked by a later taxing law, the said law shall
not be valid, because it will impair the obligation of contract.
Prohibition against infringement of religious freedom Sec 5, Art III, it has been said
that the constitutional guarantee of the free exercise and enjoyment of religious
profession and worship, which carries the right to disseminate religious belief and
information, is violated by the imposition of a license fee on the distribution and
sale of bibles and other religious literatures not for profit by a non-stock, non-profit
religious corporation.
Prohibition against appropriations for religious purposes, sec 29, (2) Art. VI,
Congress cannot appropriate funds for a private purpose, or for the benefit of any
priest, preacher or minister or for the support of any sect, church except when such
priest, preacher, is assigned to the armed forces or to any penal institutions,
orphanage or leprosarium.
exemption of all revenues and assets of non-stock, non-profit educational
institutions used actually, directly, and exclusively for educational purposes from
income, property and donors taxes and custom duties (sec. 4 (3 and 4) art. XIV.
Concurrence by a majority of all members of Congress in the passage of a law
granting tax exemptions. Sec. 28 (4) Art. VI.
Congress may not deprive the Supreme Court of its jurisdiction to review, revise,
reverse, modify or affirm on appeal or certiorari, final judgments and orders of

lower courts in all cases involving the legality of any tax, impost, assessment or any
penalty imposed in the relation thereto.
Tax evasion:
Tax evasion is using illegal means to avoid paying taxes. Typically, tax
evasion schemes involve an individual or corporation misrepresenting their income
to the Internal Revenue Service.
Tax avoidance:
The use of legal methods to modify an individual's financial situation in order to
lower the amount of income tax owed. This is generally accomplished by claiming
the permissible deductions and credits. This practice differs from tax evasion, which
is

illegal.