CHAPTER 1 Flashcards by Trisha mae Villavilla

may be defines as a State power, a legislative
process, and a mode of government cost distribution

TAXATION

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Taxation is a process of levying taxes by the
legislature of the state to enforce proportional
contributions from its subjects for public purpose.

A. As a state power
B. As a process
C. As a model of cost distribution

B. As a process

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Taxation is an inherent power of the state to enforce
a proportional contribution from its subjects for
public purpose.

A. As a state power
B. As a process
C. As a model of cost distribution

A. As a state power

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Taxation is a mode of allocating government costs or
burden to the people. In distributing the cost or burden,
the government regards the following general
considerations in the exercise of its taxation power:

theories of ____________________

Theories of Cost Allocation

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Taxation is a mode by which the state allocates its
cost or burden to its subjects who are benefited by
its spending

A. As a state power
B. As a process
C. As a model of cost distribution

C. As a model of cost distribution

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The benefit received theory presupposes that the more
benefit one receives from the government, the more
taxes he should pay

Benefit Received Theory

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The ability to pay theory presupposes that taxation
should also consider the taxpayer’s ability to pay.
Taxpayers should be required to contribute based on
their relative capacity to sacrifice for the support of the
government.

Ability to Pay Theory

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proposes that the extent of one’s ability
to pay is directly proportional to the level of his tax base.

Vertical equity

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requires consideration of the particular
circumstances of the taxpayer.

Horizontal equity

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it is the power to enact laws to promote the general
welfare of the people.

Police Power

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 it is the power to take private property for public use
upon payment of just compensation.

Eminent Domain

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 It is the power to take property (generally money) for the
support of the government and the public purpose

Taxation Power

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scope: Regulates both liberty and property

A. police power
B. eminent domain
c. taxation

A. police power

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scope: Affect only property
rights

A. police power
B. eminent domain
c. taxation

B. eminent domain
c. taxation

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Authority : Exercised only by the Government

A. police power
B. eminent domain
c. taxation

A. police power
c. taxation

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Authority : May be exercised by private entities

A. police power
B. eminent domain
c. taxation

B. eminent domain

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Purpose: For public use
A. police power
B. eminent domain
c. taxation

B. eminent domain

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Purpose: Promotion of general
welfare

A. police power
B. eminent domain
c. taxation

A. police power

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Purpose: For the support of
the government

A. police power
B. eminent domain
c. taxation

c. taxation

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Persons Affected : Community or a
class of individuals

A. police power
B. eminent domain
c. taxation

A. police power
c. taxation

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Persons Affected :Only the owner of a private property

A. police power
B. eminent domain
c. taxation

B. eminent domain

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Effect: There is a transfer of
title to property

A. police power
B. eminent domain
c. taxation

B. eminent domain

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Effects: No transfer of title;
there may just be a
restraint on the
injurious use of
property

A. police power
B. eminent domain
c. taxation

A. police power

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effect: Contribution
becomes part of
public fund

A. police power
B. eminent domain
c. taxation

c. taxation

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Type of property Property is wholesome and is devoted to public use or purpose. A. police power B. eminent domain c. taxation

B. eminent domain c. taxation

Type of property : Property is noxious or intended for a noxious purpose and as such taken and destroyed. A. police power B. eminent domain c. taxation

A. police power

Benefits received: Compensation is the full and fair equivalent (FMV) of the property taken. A. police power B. eminent domain c. taxation

B. eminent domain

Benefits received: Compensation is the protection and public improvement instituted by the government for the taxes paid. A. police power B. eminent domain c. taxation

c. taxation

Benefits received: Compensation is the intangible, altruistic feeling that the individual has contributed to the public good. A. police power B. eminent domain c. taxation

A. police power

Amount of imposition: No imposition. The owner is paid FMV of his property. A. police power B. eminent domain c. taxation

B. eminent domain

Amount of imposition: Sufficient to cover cost of the license and the necessary expenses of police surveillance and regulation A. police power B. eminent domain c. taxation

A. police power

Amount of imposition: No limit A. police power B. eminent domain c. taxation

c. taxation

To raise revenue/funds to defray the necessary expenses of the government (also called Revenue Purpose).

primary purpose

– As a tool for general, social and economic welfare (also called regulatory/Sumptuary/Compensatory Purpose).

Secondary Purpose

1. Regulation 2. Promotion of General Welfare 3. Reduction of Social Inequality 4. Encourages Economic Growth is example of what?

secondary purpose

The existence of government is necessity, it cannot continue without means to pay its expenses, for this reason, it has the right to compel all its citizens and property to continue.

Necessity Theory

– Taxes are the lifeblood of the government without it can neither exist nor endure.

Lifeblood Doctrine

Taxes are what we pay for a civilized society. The government and the people have a reciprocal and mutual duties of support and protection to one another (symbolic relationship between the government and the taxpayer).

The benefits - Protection Theory

Are enforced proportional contributions from persons and property, levied by the State by virtue of its sovereignty for the support of the government and for all its public needs.

tax

The process involves the passage of tax law or ordinance through the legislature.

Levy or Imposition

This process involves the act of administration and implementation of tax laws by the executive through its administrative agencies such as the bureau of Internal Revenue or Bureau of Customs.

Assessment and Collection

– This process involves the act of compliance by the taxpayer on contributing his share to pay the expenses of the government.

Payment of Tax

The sources of government revenue must be sufficient to meet government expenditures and other public needs.

Fiscal Adequacy

Tax laws must be capable of convenient, just and effective administration- free from confusion and uncertainty.

Administrative Feasibility –

proceed from the very nature of the taxing power itself. The taxing power has very distinct and positive limitations some of which inherit in its very nature and exist whether declared or not declared in the written constitution. (D-PINES)

Inherent Limitations

A good tax system must be based on the taxpayer’s ability to pay. This suggests that taxation must be progressive conformably with the constitutional mandate that congress shall evolve a progressive system of taxation.

Theoretical Justice –

this is objectionable and prohibited because of violates the constitutional provision on uniformity and equality. It means: - Taxing twice - By the same taxing authority - Within the same jurisdiction or taxing distinct - For the same purpose - In the same yea or taxing period - Same kind or character of tax

Direct Duplicate taxation,

is not legally objectionable. It extends to all cases in which imposition but imposed by different taxation authorities.

Indirect Duplicate Taxation

a State cannot tax another State based on the on the principle of the Sovereign imposing taxes on foreign ambassadors is not valid law.

International comity or treaty

– of taxation is purely legislative, hence the power cannot be delegated either to the executive or judicial department. The limitation arises from the doctrine of separation of powers among the three branches of the Government.

Non- dilatability of the Taxing power

Exceptions to the rule against the delegation of the taxation power; (2)

1. Delegation to the President, 2. Constitutional Limitations on the Taxing Power

subject to some limitations and restriction, to fix within specified limits, tariff rates and tonnage or wharfage duties and other duties and Imposts. Note: a. __________ – where the occupation is engaged in. b. _________ – where the transaction took or citizenship of the taxpayer; or location of property

Delegation to the President, Occupation Transaction

the following provisions may be said to be limitations prescribed in the Constitution on the taxing power of the Government. a) Observance of due process of law b) Equal protection of law c) Uniformity in taxation d) Progressive scheme of taxation e) Non-imprisonment for non-payment of poll tax f) Non-impairment of the obligations of contracts g) Free-worship clause h) Exemption of charitable institutions, churches, parsonages, or convents appurtenant thereto, mosques, and non-profit cemeteries, and all lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes. i) Exemption from taxes of the revenues and assets of non-profit, non-stock educational institutions including grants, endowments, donations or contributions for educational purposes. j) Non-appropriation of public funds or property for the benefit of any church, sector system of religion, etc. k) No money shall be paid out of the Treasury except in pursuance of an appropriation made by law. l) Concurrence of a majority of ALL members of Congress for the passage of law granting tax exemption m) Non-diversification of tax collections n) The President shall gave the power to veto any particular item (s) in an approximation, revenue or tariff, but the veto shall not affect the item (s) to which no objection has been made. o) Non-impairment of the jurisdiction of the Supreme Court to review tax cases p) Appropriations, revenue or tariff bills shall originate exclusive in the House of Representatives but the Senate may propose or concur with amendments. q) Each local government unit shall exercise the power to create its own sources of revenue and shall have a just share in the national taxes

Constitutional Limitations on the Taxing Power

Tax laws are civil and not penal in nature, although there are penalties provided for their violation. The purpose of tax

NATURE OF INTERNAL REVENUE LAWS –

laws in imposing penalties for delinquencies is to compel the timely payment of taxes or to punish evasion or neglect of duty in respect thereof.

NATURE OF INTERNAL REVENUE LAWS

General rule: Tax laws are prospective in operation because the nature and amount of the tax could not be foreseen and understood by the taxpayer at the time the transactions which the law seeks to tax was completed.

APPLICATION OF TAX LAWS

– tax of a fixed amount imposed upon individual, whether citizens or not, residing within a specified territory without regard to their property or the occupation in which he may be engaged (e.g. basic community tax)

Personal, Poll or Capitation Tax

– tax imposed on property, whether real or personal, in proportion either to its value, or in accordance with some other reasonable method of apportionment (e.g. real estate tax)

Property Tax

– any tax which does not fall within the classification of a poll tax or a property tax. This is a tax on the exercise of certain rights and privileges (e.g. income tax, estate tax, donor’s tax, VAT)

Excise Tax

– imposed on the person obliged to pay the same and this burden cannot be shifted or passed on to another. (e.g. income tax, estate tax, donor’s tax)

Direct Tax

– the payment is demanded from a person who is allowed to transfer the burden of taxation to another. (e.g. VAT)

Indirect Tax

this is fixed amount based on volume, weight or quality of goods as measured by tools, instruments or standards. (e.g. excise tax on cigars and liquors)

Specific Tax –

– this imposition is based on the value of the property subject to tax. (e.g. VAT, income tax, donor’s tax and estate tax)

Ad Valorem Tax

levied without a specific or pre-determined purpose. (e.g. Income tax, donor’s tax and estate tax)

Fiscal/General/Revenue Tax –

hose intended to achieve some social or economic goals. (e.g. tariff and certain duties on imports)

Regulatory/Special/Sumptuary Tax

– imposed by the National Government NATIONAL INTERNAL REVENUE TAXES UNDER THE ADMINISTRATION OF THE BIR: a) Income Tax b) Estate and donor’s tax c) Value-added tax d) Other percentage taxes e) Excise taxes f) Documentary stamp taxes B. Local Tax – imposed by municipal corporations (e.g. real estate tax) 6. According to Graduation or Rate A. Proportional/Flat Rate Tax – unitary or single rate. (e.g. VAT) B. Progressive/Graduated Tax – as the tax base grows, the tax rate increase. (e.g. income tax on individuals) C. Regressive Tax – the tax rate increases as the tax base decreases.

National Tax

imposed by municipal corporations (e.g. real estate tax)

Local Tax

unitary or single rate. (e.g. VAT)

Proportional/Flat Rate Tax –

as the tax base grows, the tax rate increase. (e.g. income tax on individuals)

Progressive/Graduated Tax –

– the tax rate increases as the tax base decreases.

Regressive Tax

All items of gross income and deductions are reported in one income tax return and the applicable tax rate is applied on the tax based.

Global System

Different types of income are subject to different sets of graduated or flat income tax rates.

Schedular System –

Claim for refund which is prevented by prescription may be allowed to be used as payment for unsettled tax liabilities if both taxes arise from the same transactions in which overpayment is made and underpayment is due.

Equitable Recoupment –

– Taxes are not subject to set-off or legal compensation because the government and the taxpayer are not mutual creditors and debtors of each other.

Set-off taxes

This provides that a taxpayer suit can only be allowed of the act involves a direct and illegal disbursement of public funds derived from taxation.

Taxpayer Suit –

the taxpayer uses unlawful means to evade or lessen the payment of tax.

Evasion or Dodging

Avoidance, also called

tax minimization,

it is the reduction or totally escaping payment of tax through legally permissible means.

avoidance

Three (3) kinds shifting

forward shifting backward shifting nward shifting

, the seller is willing to lower the price of the commodity provided the taxes will be shouldered by the buyer.

Capitalization

the manufactured absorbs the additional taxes imposed by the government without passing it to the buyers for fear of lost his/its market. Instead, he/it increase quantity of production, thereby turning their units of production at a lower cost resulting to the transformation of tax into a gain through the medium of production.

Transactions

it is an immunity, privilege or freedom from payment of a charge or burden to which others are obliged to pay.

Exemption

CHAPTER 1 Flashcards

(82 cards)