TAXATION

Taxation
Act of imposing and collecting a tax.

The process or means by which a sovereign entity like a government, through its law-making body, raises revenues
to defray the necessary expenses of the government for the public.

Taxes can be defined as enforced and proportional contributions from persons and property imposed by the law-
making body of the state for the support of the government and all public needs.

Governments have the inherent capacity to impose and collect taxes by virtue of their sovereignty over their
constituents.
 Characteristics of Taxes
1. Taxes are an enforced contribution.

2. Taxes are generally payable in money.

3. Taxes are imposed on persons and property.

4. Taxes are levied by the national or a local government unit which has a jurisdiction over person
or property.

5. It makes a congressional act to put up taxes.

6. Taxes are imposed safely for public purposes.

 Classification of Taxes
As to subject matter or object As to scope for authority imposing the tax
1. Personal, poll or capitation 6. National
2. Property 7. Municipal or local
3. Excise
As to purpose As to determination of account
4. General, fiscal or revenue 8. Specific
5. Special or regulatory 9. Ad valorem
As to graduation or rate
10. Proportional
11. Progressive or graduated
12. Regressive
 Definition
National Taxes
of Different Kinds of Taxes
Income Tax - ability of a person to produce earnings by doing professional occupation, ands
these earnings are taxed by national government.
Donor’s Tax – act of a certain person on disposing without consideration of money or giving a
certain thing in favor of another who accepts it.
Estate Tax – tax imposed on the right of a deceased person to transfer the estate to his lawful
heir or beneficiary.
Value-added Tax (VAT) – imposed on the sale and/or exchange of goods and services, or lease of
goods ad real and personal properties.
Excise Tax – tax imposed on specific goods produced in the Philippines for local consumption or
sale in the country, or to goods made in other countries and imported and consumed in the
Philippines.
Definition of Different Kinds of Taxes
Other percentage Taxes – imposed on and based on the selling price or gross value of goods and
services being sold, imported, exchanged, or bartered.
Documentary Stamp Taxes –this is tax on legal documents and papers like stock certificates,
financial statements from Securities and Exchange Commission, papers, bank notes, and other.
Customs Duties and Tariffs – taxes imposed on the importation and exportation of goods in and
out of the country.
Travel Tax – imposed on travel whether local or foreign.
Energy Tax – imposed on use of petroleum products and electric power.
Private Motor Vehicles Tax – imposed on the owners of private motor vehicles for the use of the
vehicles.
 Limitations on the Power of Taxation
1. Principle of due process of Law – a person who has tax liabilities and not able to pay taxes may
not be deprived of his property without being given due notice and other legal procedures.
2. Principle of equal protection of the laws – this requires the tax system to treat all persons
alike. The code of conduct that is applicable to one is applicable to all.
3. Rule of uniformity in taxation – states that all taxable activities, properties or goods will have
the same tax within the same class. There may develop differences among different classes of
taxable objects and activities, however the same system is implemented on objects within the
same class.
4. Nobody can be imprisoned for non-payment of a poll tax. This is provided for under
constitution.
 Limitations on the Power of Taxation
5. Non-impairment of the obligation of contracts – taxation rule which stipulates that taxation cannot change or
impair the stipulations of contract either by law or party without the agreement of the latter.
6. Non-impairment of religious freedom – No taxes shall be imposed or collected which would impair religious
freedom
7. Taxes will be used solely for public purposes. No appropriation or use for religious purpose can be done.
8. Religious, charitable, educational entities, non-profit cemeteries, and churches are exempted from taxes.
9. Non-stock, non-profit educational institutions are likewise exempted from taxes.
10. Tax exemption cannot be done outright.
11. The President has the authority to veto a particular item/s in revenue or tariff bill
12. Congress has the power to define the levy taxes, tax cases in all levels of the court will be under the final
jurisdiction of the Supreme Court.
 Tax Evasion and Tax Avoidance
oTax avoidance - is used by a taxpayer of legally permissible means or methods in
order to avoid or reduce tax liability. It is not punishable by law.

oTax evasion - is used by the tax payer of illegal or fraudulent means to defeat or
reduce the payment of a tax. It is punishable by law.
 Several common administrative approaches
which allow the government to collect taxes
Distraint of personal property
Levy of real property
Enforcement of forfeiture
Entering compromise of tax liability
Filing of bonds
Surcharge and Interest
Giving rewards to informers
Aliens may be deported
Inspection of books and accounts
Inquiring into bank deposit accounts