Taxation refers to the act of a taxing authority actually levying tax.

Taxation as a term applies to all types

of taxes, from income to gift to estate taxes. It is usually referred to as an act; any revenue collected is
usually called "taxes."
3 Inherent Powers of the State:
1. Police Power;
2. Power of Eminent Domain or Power of Expropriation;
3. Power of TaxationPurpose:
1. for public good or welfare - Police Power
2. for public use - Power of Eminent Domain
3. for revenue - Power of Taxation
1. POLICE POWER is the power of promoting the public welfare by restraining and regulating the use of
both liberty and property of all thepeople. It is considered to be the most all-encompassing of the three
powers.It may be exercised only by the government. The property taken in theexercise of this power is
destroyed because it is noxious or intended for anoxious purpose.It lies primarily in the discretion of the
legislature. Hence, the President, andadministrative boards as well as the lawmaking bodies on all
municipal levels,including the barangay may not exercise it without a valid delegation of legislative power.
Municipal governments exercise this power by virtue of thegeneral welfare clause of the Local
Government Code of 1991. Even the courtscannot compel the exercise of this power through mandamus
or any judicialprocess.Requisites of a valid police measure:(a.) Lawful Subject the activity or property
sought to be regulated affects thepublic welfare. It requires the primacy of the welfare of the many over
theinterests of the few.(b.) Lawful Means the means employed must be reasonable and mustconform to
the safeguards guaranteed by the Bill of Rights.
2. POWER OF EMINENT DOMAIN affects only property RIGHTS.It may be exercised by some private
entities. The property forcibly takenunder this power, upon payment of just compensation, is needed
forconversion to public use or purpose.The taking of property in law may include:- trespass without actual
eviction of the owner;- material impairment of the value of the property; or- prevention of the ordinary uses
for which the property was intended.The property that may be subject for appropriation shall not be limited
toprivate property. Public property may be expropriated provided there is aSPECIFIC grant of authority to
the delegate. Money and a chose in action arethe only things exempt from expropriation. Although it is
also lodged primarily in the national legislature, the courts havethe power to inquire the legality of the right
of eminent domain and todetermine whether or not there is a genuine necessity therefore.
3. POWER OF TAXATION affects only property rights and may beexercised only by the government. The
property taken under this power shalllikewise be intended for a public use or purpose. It is used solely for
thepurpose of raising revenues, to protect the people and extend them benefits inthe form of public
projects and services (I hope so). Hence, it cannot beallowed to be confiscatory, except if it is intended for
destruction as aninstrument of the police power.It must conform to the requirements of due process.
Therefore,taxpayers are entitled to be notified of the assessment proceedings and to beheard therein on
the correct valuation to be given the property. It is alsosubject to the general requirements of the equal
protection clause that therule of taxation shall be uniform and equitable.
Regalian Doctrine All lands of the public domain belong to the State, which is the source of any
assertedright to ownership of land. All lands not otherwise appearing to be clearly within privateownership
are presumed to belong to the State.
All lands not otherwise clearly appearing to be privately-owned are presumed to belong to the State.

Classification of Taxes:

The taxes have been variously classified. Taxes can be direct or indirect, they can be progressive,
proportional or regressive, and indirect taxes can be specific or ad-valorem. We spell out below the
meanings of these different types of taxes.
Direct and Indirect Taxes:
The distinction between direct and indirect taxes is based on whether or not the burden of a tax can be
shifted wholly or partly to others. If a tax is such that its burden cannot be shifted to others and the person
who pays it to the Government has also to bear it, it is called a direct tax. Income tax, annual wealth tax,
capital gains tax are examples of direct taxes. In case of a direct tax there is a direct contact between the
tax payer and tax levying public authority.
On the other hand, indirect taxes are those whose burden can be shifted to others so that those who pay
these taxes to the Government do not bear the whole burden but pass it on wholly or partly to others. For
instance, excise duty on the production of sugar is an indirect tax because the manufactures of sugar
include the excise duty in the price and pass it on to buyers. Ultimately, it is the consumers on whom the
incidence of excise duty on sugar falls as they will pay higher price for sugar than before the imposition of
the tax.
Thus, though excise duties are on the production of commodities but they can be shifted to the
consumers. Likewise, sales tax on commodities can also be passed on to buyers or consumers in the
form of higher prices charged for the commodities.
Therefore, excise duties and sales taxes on commodities are examples of indirect taxes. They are also
known as commodity taxes. In the case of indirect taxes, there is an indirect relation, between the
Government and those who ultimately bear the burden of the taxes.
Specific and Ad-Valorem Taxes:
Indirect taxes can be either specific or ad-valorem. A specific tax on a commodity is a tax per unit of the
commodity, whatever its price. Thus the amount of total specific tax will vary in accordance with the
changes in total output or sales of the commodity and not with the total value of output or sales.
On the other hand, an ad-valorem type of an indirect tax is levied according to the value of the
commodity. For instance, sales tax in India is an ad-valorem tax as the rate of sales tax in case of several
commodities is 10 per cent of the value of sales of the commodities. Ad-valorem taxes are progressive in
their burden on consumers whereas specific taxes are regressive.
Progressive, Proportional and Regressive Taxes:
According to another classification, taxes can be progressive, proportional or regressive. In case of
proportional tax, the same rate of the tax is charged, whatever be the magnitude of the base on which it is
levied. For instance, if rate of income tax is 25 per cent whatever the size of income of a person, it will
then be a proportional income tax. Likewise, if rate of wealth tax is 5 per cent, it will be proportional wealth
tax.
Thus, in case of proportional tax it is the rate which is fixed and not the absolute amount of the tax. Thus
with the rate of 25 per cent proportional income tax, a person with income of Rs. 25,000 will pay Rs.
6,250 as the tax, and a person with income of 50,000 will pay Rs. 12,500 as the tax. Thus, even under
proportional income tax, a richer person has to pay greater amount of tax though rate of the tax is the
same.
On the other hand, in case of a progressive tax, rate of the tax increases as the amount of the tax base
(income, wealth or any other object) increases. The principle underlying a progressive tax is that greater
the tax base, the higher the tax rate. In India income tax, an important direct tax levied by the Central
Government, is progressive.
Its rate at present (1998-99) varies from 10 per cent in the slab of Rs. 40,000 to 60,000 to 30 per cent in
the slab of income above Rs. 1,50,000. Under progressive income tax, the richer person pays not only
absolutely more tax but also a higher rate of the tax. Thus, the burden of progressive tax falls more
heavily on the richer persons as compared to proportional income tax.
A regressive tax is the opposite of a progressive tax. In case of a regressive income tax, the rate is
lowered as the income rises. Thus, under regressive tax system, the burden of the tax is relatively more
on the poor than on the rich. A regressive tax is therefore inequitable and no civilised Government in the
world today will levy such a tax.

Tax avoidance is 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.

Tax avoidance is the legal usage of the tax regime in a single territory to one's own advantage to
reduce the amount of tax that is payable by means that are within the law. Tax sheltering is very
similar, although unlike tax avoidance tax sheltering is not necessarily legal. Tax havens are
jurisdictions which facilitate reduced taxes.
While forms of tax avoidance which use tax laws in ways not intended by governments may be
considered legal, it is almost never considered moral in the court of public opinion. Many
corporations and businesses which take part in the practice experience a backlash, either from their
active customers or online. (conversely, using tax laws in ways whichwere intended by governments
is sometimes referred to as "tax planning".)