Reviewer Midterm
B. Nature of taxation
C. Characteristics of taxation
1) As to purpose:
Taxation for the support of the government
2) As to compensation:
Taxation Protection and benefits received from the
government.
3) As to persons affected:
Taxation and Police Power operate upon a community or a
class of individuals
5) As to amount of imposition:
Taxation Generally no limit to the amount of tax that may be
imposed.
Some Rules:
3. Toll is paid for the used of anothers property; tax is paid for
the support of government.
E. Purpose of taxation
PRIMARY
SECONDARY
1) FISCAL ADEQUACY
VIOLATION VALID
Sources of revenue should be sufficient to meet the demands
of public expenditure
Revenues should be elastic or capable of expanding or
contracting annually in response to variations in public
expenditure
Elasticity may be obtained without creating annually any new
taxes or any new tax machinery but merely by changes in the
rates applicable to existing taxes
Even if a tax law violates the principle of Fiscal Adequacy , in
other words, the proceeds may not be sufficient to satisfy the
needs of the government, still the tax law is valid
2) ADMINISTRATIVE FEASIBILITY
- VIOLATION VALID
The tax law must be capable of effective or efficient
enforcement
Tax laws should be capable of convenient, just and effective
administration
Tax laws should close-up the loopholes for tax evasion and
deter unscrupulous officials from committing fraud
There is no law that requires compliance with this principle, so
even if the tax law violates this principle; such tax law is valid.
3) THEORETICAL JUSTICE
- VIOLATION INVALID
This principle mandates that taxes must be just, reasonable
and fair
Taxation shall be uniform and equitable
Equitable taxation has been mandated by our constitution, as
if taxes are unjust and unreasonable then they are not
equitable, thus invalid.
The tax burden should be in proportion to the taxpayers ability
to pay (ABILITY TO PAY PRINCIPLE)
2. Necessity theory
H.Doctrines in taxation
Imprescriptibility of taxes
EXCEPTION: They are prescriptible if the tax laws provide for statute
of limitations
PRESCRIPTIVE PERIODS:
I. Classification of Taxes
As to subject matter or object
As to purpose
A direct tax is demanded from the person who also shoul,ders the
burden of the tax. It is a tax which the taxpayer is directly or
primarily liable and which he or she cannot shift to another.
2. Indirect tax
National tax
o A national tax is imposed by the national government.
Local tax
o A local tax is imposed by the municipal corporations or
local government units (LGUs).
1. Specific tax
2. Ad valorem tax
As to graduation or rate
Proportional tax
o Tax based on a fixed percentage of the amount of the
property receipts or other basis to be taxed. Example:
real estate tax.
Progressive or graduated tax
o Tax the rate of which increases as the tax base or
bracket increases.
Digressive tax rate: progressive rate stops at a certain point.
Progression halts at a particular stage.
Regressive tax
o Tax the rate of which decreases as the tax base or
bracket increases. There is no such tax in the
Philippines.
J. Tax systems
Constitutional mandate
GENERAL RULE:
EXCEPTIONS:
Constitutional limitations
Indirect
Direct
L. SITUS OF TAXATION
Place of taxation
The State where the subject to be taxed has a situs may
rightfully levy and collect the tax
In determining the situs of taxation, you have to consider the
nature of the taxes
Example:
REASON:
1. Domicillary theory
i. SOURCE RULE
M. Double taxation
Taxing same property twice when it should be taxed but once.
Taxing the same person twice by the same jurisdiction over
the same thing.
Also known as duplicate taxation
REQUISITES:
EXAMPLES:
1) Tax deductions
2) Tax credits
2) Domestic corporations
I. SHIFTING
1) FORWARD SHIFTING
When the burden of the tax is transferred from a factor of
production through the factors of distribution until it finally
settles on the ultimate purchaser or consumer.
Example:
2) BACKWARD SHIFTING
Example:
2) ONWARD SHIFTING
Example:
II. CAPITALIZATION
III. TRANSFORMATION
Example:
V. TAX EXEMPTION
The theory behind the grant of tax exemptions is that such act
will benefit the body of the people. It is not based on the idea
of lessening the burden of the individual owners of property.
Grounds for granting tax exemptions
- OWNERSHIP
1) TOTAL
2) PARTIAL
> Gross receipts subject to tax under the tax code do not
include monies or receipts entrusted to the taxpayer which do
not belong to it and does not redound to the taxpayers
benefit, and it is not necessary that there must be a law or
regulation which would exempt such monies and receipts
within the meaning of gross receipts.
General rule:
Exceptions