Taxation

Development

FO
R

Presented By: Edgardo S. Apuhin Jr. MD

What is Taxation
It is the inherent power by which the
sovereign State imposes financial burden
upon persons and property as a means of
raising revenues in order to defray the
necessary expenses of the government (Tax
digest by Cresencio Co Untian , 2002)

TAX
A compulsory contribution from the
person to the government to defray the
expenses incurred in the common
interest of all without reference to
special benefits conferred upon tax
payer

Theories of taxation
Modern theories and principles of taxation involve
around Smith`s principles of an ideal tax system.
1.Equity
taxes must be base on the tax payer`s ability to pay, as
measured by his size of income.
2.Certainty
taxpayers should know which taxes they are subject to, the
amount to pay, and the manner of payments.
3.Convenience
Convenience of the place, time and manner of payments
4.Economy
Tax administration must not involve too much expenses on the
government

Classification of Taxes
a) As to purpose
b) As to incidence
c.)As to rate
d.)As to authority
e.)As to Object
f.)As to scope
d.) As to amount paid

Exemption from Taxation

Tax exemption is grant of immunity to particular
persons or corporations from particular form of tax
upon the property or an excise with which such persons
and corporations generally within the same taxing
district and obliged to pay.
Two grounds for exemption
1. by contract
2.by reason of public policy

The Philippines Tax

System And Its Response

The Constitutional Mandate

The 1973 Constitution contains one basic
principle of taxation which embodies the desired
correlation of taxation to developmental goals.
The Batasang Pambansa ( National Assembly) is
mandated to evolve a progressive system of
taxation. A progressive tax system is in
consonance with policy of the State to
redistribute income and wealth.

The Major Revenue

Agencies

Bureau of Custom
Philippines

Bureau of Custom
Under the Ministry of Finance
The following functions:
Assessments and collection of the lawful revenues from
imported articles and all other dues, fees charges, fines
and penalties accruing under the tariff and customs
laws
Prevention and suppression of smuggling and other
frauds
Enforcements of the tariff and customs laws and all
other laws, rules and regulations relation to tariff and
customs administration
Supervision and control over handling of foreign mails
arriving in the Philippines

Bureau of Custom
Empowered to collect fees, dues and charges for the following:
1.Each original import or export entry
2. Each entry for immediate transportation in bond
3. Each original interval revenue entry
4.For each original withdrawal entry from any bonded
warehouse;
5.For each bond accepted or received
6. For each approval of application in respect to transaction
covered by general bond
7.For each certificate made in the routine administration of
the
Bureau

Bureau of Internal
Revenue

Bureau of Internal
Revenue
Headed by commissioner and assisted by two deputy
commissioners.
The power and duties of BIR are the following:
To assess and collect all national internal revenues, taxes , fees
and charges.
To enforce all forfeitures, penalties and fines connected there
with;
To execute judgments in all cases decided in its favor by the
Court of Tax Appeals and ordinary courts
To give effect and administer the supervisory and police power
conferred to it by law; and
To recommend to the Minister of Finance all needful rules and
regulation for the effective enforcement of the provisions of the
National Internal Revenue Code.

Under the administration of

BIR
Under section 19 of the National Internal
Revenue Code.

1. Income Tax
2.Estate and Donor`s Tax
3.Specific Taxes on certain articles
4.Taxes on Business
5.Documentary Stamp Tax
6.Mining Taxes
7.Miscellaneous taxes

Gross Income Tax Law

Under the gross taxation scheme, personal incomes are
classified into three categories:
Category I compensation Income
included those income gained from employment such as
salaries, wages ,compensation, emolument s and honoraria etc.
Category II- Business Income and Income of the Profession
business and trade income, fees for exercise of profession,
gains from sales.
Category III- Passive and other income
income from interest, dividends, royalties , prizes and other
winnings.

Category I-compensation Income

Taxable income Bracket

Marginal /Statutory Rate

Less than to 2,500

+ 0%

2,500 to 5,000

1%

5,000 to 10,000

25 + 3% of excess over 5,000

10, 000 to 20, 000

175 +7% of excess over 10,000

20,000 to 40, 000

875 + 11% of excess over 20,000

40, 000 to 60,000

3,075 + 15% of excess over 40,000

60,000 to 100,000

6,075 + 19% of excess over 60,000

Category I-compensation Income

Taxable income Bracket

Marginal /Statutory Rate

100,000 to 250, 000

13,675 + 24% of excess over 100,000

250,000 to 500, 000

49,675 +29% of excess over 250,000

over 500,000

122,175 +35% of excess over 500,000

 Personal and additional exemptions are provided under

the new tax scheme, thus:

single

Head of the family

3,000 pesos

4,500 pesos

Married

6,000 pesos

Dependents

2,000 each but not exceeding four

Category II- Business income and Income

from Profession
Net Taxable Income

Marginal/ statutory rate

Less than 10,000

5%

10,000 to 30,000

500 + 15% of excess over 10,000

30,000 to 150,000

3,500 + 30% of excess over 30,000

150,000 to 500,000

39,500 + 45% of excess over 150,000

Over 500,00

197,000 + 60% of excess over 500,000

Category III- Passive and other

Income
Interest

15% from saving deposits

20% from time deposits and yield from deposit substitutes ,
trust fund and similar arrangements

Dividends

15%

Royalties

15%

Prizes and other

winnings

15% if exceeding 3,000 pesos share of individual partners in

the net profits of partnerships taxable as corporation-15%

For Economic Development

Tax can be used as an important tool in
the following manner:
1. Optimum allocation of available resources
Tax is the most important source of public
revenue. The imposition of tax leads to
diversion of resources from the taxed to the
non-taxed sector. The revenue is allocated on
various productive sectors in the country with a
view to increasing the overall growth of the
country. Tax revenues may be used to
encourage development activities in the less
developments areas of the country where

2. Raising government revenue

In modern times, the aim of public
finance is not merely to raise sufficient
financial
resources
for
meeting
administrative expense, for maintenance
of low and order and to protect the
country from foreign aggression. Now
the main object is to ensure the social
welfare. The increase in the collection of
tax increases the government revenue.
It is safer for the government to avoid
borrowings by increasing tax revenue.

3. Encouraging savings and investment

Since developing countries has mixed
economy, care has also to be taken to
promote
capital
formation
and
investment both in the private and
public sectors. Taxation policy is to be
directed to raising the ratio of savings to
national income.

4. Reduction of inequalities in income

and wealth
Through reducing inequalities in income
and wealth by using an efficient tax
system, government can encourage
people to save and invest in productive
sectors

5. Acceleration of Economic Growth

Tax policy may be used to handle critical
economic situation like depression and inflation.
In depression, tax is set to increase the
consumption and reduce the savings to increase
the aggregate demand and vice verse. Thus the
tax policy may be used to strengthen incentives
to savings and investment.

6. Price Stability
In underdeveloped countries, there is
another role to maintain price stability to
ensure growth with stability.

7. Control mechanism:
Tax policy is also used as a control mechanism to
check inflation, consumption of liquor and luxury
goods and to protect the local poor industries from
the uneven competition. Taxation is the only
effective weapon by which private consumption
can be curbed and thus resources transferred to
the state. Thus the economy can ensure
sustainable development.
Thus it can be said that the economic
development of a country depends various
reasons one of them are on the presence of an
effective and efficient taxation policy.

Importance and Role of

Taxation

Importance and Role of Taxation

Taxes are important because they are the lifeblood of
the government and so should be calculated without
unnecessary hindrance.
Being the lifeblood of the Government, their prompt
and certain availability is an imperious need.
Further, the primary purpose is to generate funds for
the State to finance the needs of the citizenry and to
advance the common weal.

Importance and role of taxation

Taxation is the process by which the
government imposes charges on citizens and
corporate businesses. The charges collected by
the government are used to fund different
government projects that would in the end
benefit the citizens of the country as a whole.
The taxation process can benefit both the
society and business as a whole.

Society
Taxation is important to society because the government use
the tax collected to fund projects related to health care
systems, education systems, and public transports. Also, the
money collected can also be used to give unemployment
benefits, pensions, and other matters that can benefit the
society as a whole. Without tax, the government would not be
able to fund the essential projects and services that people
need.
The government allocates the money collected from the
taxpayers to different areas of the country. The areas picked
are rural areas. Some rural areas may have resources that
might be beneficial for both the country and its economy.
Therefore, the government would allocate part of the tax
money to provide the essential services required and to
improve the standards of such places.
Other important role taxation has is it can affect the rate of

Businesses
The concept of taxation is vital to businesses in the
economy, as the amount of tax taken from each
business is accumulated, one of the ways that tax is
used to help business is through the government
funding the money back into the economy as long
term loans and/or funding. The money could also be
pumped back into the economy by the government
in the event of an economic recession or turmoil.
Another benefit of taxation to the society, Is that it
helps develop the country as a whole, and the more
developed the country is; would therefore mean
better prospects for the business's as it increases
the well-being of the country's society.

 Borrowing the words of the Supreme Court:

It is said that taxes are what we pay for a civilized society.
Without taxes, the Government would be paralyzed for the lack
of the motive power to activate and operate it. Hence, despite
the natural reluctance to surrender part of ones hard-earned
income to the taxing authorities, every person who is able must
contribute his share in the running of the government. 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. 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.

God bless
-Thank You-