CHAPTER 1: Introduction to Taxation Flashcards
(131 cards)
1
Q
______ may be defined as a State power, a legislative process, and a mode of government cost distribution.
A
Taxation
2
Q
Taxation is an inherent power of the State to enforce a proportional contribution from its subjects for public purpose.
A
As a state power
3
Q
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 process
4
Q
Taxation is a mode by which the State allocates its costs or burden ot its subjects who are benefited by its spending.
A
As a mode of cost distribution
5
Q
The government’s necessity for funding is the ______.
A
theory of taxation
6
Q
The government provides benefits to the people in the form of public services, and the people provide the funds that finance the government. This mutuality support between the people and the government is referred to as the ______.
A
basis of taxation
7
Q
______ is a mode of allocating government costs or burden to the people.
A
Taxation
8
Q
The government regards the following general considerations in the exercise of its taxation power:
A
- Benefit received theory
- Ability to pay theory
9
Q
The ______ presupposes that the more benefit one receives from the government, the more taxes he should pay.
A
benefit received theory
10
Q
The ______ 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.
A
ability to pay theory
11
Q
Aspects of the Ability to Pay Theory
A
- Vertical equity
- Horizontal equity
12
Q
______ proposes that the extent of one’s ability to pay is directly proportional to the level of his tax base.
A
Vertical equity
13
Q
______ requires consideration of the particular circumstance of the taxpayer.
A
Horizontal equity
14
Q
Vertical equity is a ______ concept while horizontal equity is a ______ concept.
A
gross, net
15
Q
According to this doctrine, taxes are essential and indispensable to the continued subsistence of the government. Without taxes, the government would be paralyzed for lack of motive power to activate or operate it.
A
The Lifeblood Doctrine
16
Q
______ are the lifeblood of the government, and their prompt and certain availability are an imperious need.
A
Taxes
17
Q
(LBD) Tax is imposed even in the absence of a ______.
A
Constitutional grant
18
Q
(LBD) Claims for tax exemption are construed against ______.
A
taxpayers
19
Q
(LBD) The government reserves the right to choose the ______ of taxation.
A
objects
20
Q
(LBD) The courts are not allowed to interfere with the ______ of taxes.
A
collection
21
Q
(LBD) In income taxation, income received in advance is taxable upon ______.
A
receipt
22
Q
(LBD) In income taxation, deduction for ______ and ______ is not allowed as effectively defers the collection of income tax.
A
capital expenditures, prepayments
23
Q
(LBD) In income taxation, a lower amount of deduction is preferred when a claimable expense subject to ______.
A
limit
24
Q
(LBD) In income taxation, a higher tax base is preferred when the tax object has ______ tax bases.
A
multiple
25
The Inherent Powers of the State
1. Taxation power
2. Police power
3. Eminent domain
26
______ is the power of the State to enforce proportional contribution from its subject to sustain itself.
Taxation power
27
______ is the general power of the State to enact laws to protect the well-being of the people.
Police power
28
______ is the power of the State to take private property for public use after paying just compensation.
Eminent domain
29
The scope of taxation si widely regarded as ______, ______, ______ and ______.
comprehensive, plenary, unlimited, supreme
30
______ has its own inherent limitations and limitations imposed by the Constitution.
Taxation
31
Inherent Limitations of Taxation
1. Territoriality of taxation
2. International comity
3. Public purpose
4. Exemption of the government
5. Non-delegation of the taxing power
32
The government can only demand tax obligations upon its subjects or residents within its territorial jurisdiction.
Territoriality of Taxation
33
Two-fold obligations of taxpayers:
1. Filing of returns and payment of taxes
2. Withholding of taxes on expenses and its remittance to the government
34
It cannot enforce these upon subjects outside its territorial jurisdiction as this would result in encroachment of ______.
foreign sovereignty
35
In ______, resident citizens and domestic corporations are taxable on income derived both within and outside the Philippines.
income taxation
36
In ______, residents or citizens such as resident citizens, non-resident citizens and resident aliens are taxable on transfers of properties located within or outside the Philippines.
transfer taxation
37
In the ______, countries of the world agreed to one fundamental concept of co-equal sovereignty wherein all nations are deemed equal with one another regardless of race, religion, culture, economic condition or military power.
United Nations Convention
38
It is by this principle that each country observes ______ or mutual courtesy or reciprocity between them.
international comity
39
Under the ______, the income of foreign government and foreign government-owned and controlled corporations are not subject to income tax.
National Internal Revenue Code (NIRC)
40
Tax is intended for the common good. Taxation must be exercised absolutely for ______.
public purpose
41
The income of the government from its properties and activities conducted for profit, including income from government-owned and controlled corporations is subject to ______.
tax
42
The legislative taxing power is vested exclusively in ______ and is ______, pursuant to the doctrine of separation of the branches of the government to ensure a system of checks and balances.
Congress, non-delegable
43
Under the ______, local government units are allowed to exercise the power to tax to enable them to exercise their fiscal autonomy.
Constitution
44
Under the ______, the President is empowered to fix the amount of tariffs to be flexible to trade conditions.
Tariff and Customs Code
45
No one should be deprived of his life, liberty, or property without ______ of law. Tax laws should neither be harsh nor oppressive.
due process
46
Aspects of Due Process
1. Substantive due process
2. Procedural due process
47
What aspect of due process?
Tax must be imposed only for public purpose, collected only under authority of a valid law and only by the taxing power having jurisdiction. An assessment without a legal basis violates the requirement of due process.
Substantive due process
48
What aspect of due process?
There should be no arbitrariness in assessment and collection of taxes, and the government shall observe the taxpayer's right to notice and hearing. The law established procedures which must be adhered to in making assessments and in enforcing collections.
Procedural due process
49
Under the NIRC, assessments shall be made within ______ from the due date of filing of the return or from the date of actual filing, whichever is later. Collection shall be made within ______ from the date of assessment. The failure of the government to observe these rules violates the requirement of ______.
three years, five years, due process
50
The rule of taxation shall be ______ and ______.
uniform, equitable
51
Taxpayers under ______ should not be taxed the same.
dissimilar circumstances
52
Hence, uniformity is relative ______.
equality
53
Congress shall evolve a ______ system of taxation. Under the this system, tax rates increase as the tax base increases.
progressive
54
Debt acquired ni bad faith constitutes ______, a criminal offense punishable by imprisonment.
estafa
55
Tax arises from law and is a demand of ______. It is distinguished from debt which arises from ______.
sovereignty, private contracts
56
Non-payment of tax compromises ______ while the non-payment of debt compromises ______.
public interest, private interest
57
Poll tax has two components:
a. Basic community tax
b. Additional community tax
58
The constitutional guarantee of non-imprisonment for non-payment of poll tax applies only to the ______ tax. Non-payment of the ______ tax is an act of tax evasion punishable by imprisonment.
basic community, additional community
59
What rule is this?
The Philippine government adopts free exercise of religion and does not subject its exercise to taxation. Consequently, the properties and revenues of religious institutions such as tithes or offerings are not subject to tax. This exemption, however, does not extend to income from properties or activities of religious institutions that are proprietary or commercial in nature.
Free Worship Rule
60
The Constitutional exemption from property tax applies for properties ______, ______, and ______ (i.e. primarily) used for charitable, religious, and educational purposes.
actually, directly, exclusively
61
In observing this Constitutional limitation, the Philippines folows the doctrine of ______ wherein only properties actually devoted for religious, charitable, or educational activities are exempt from real property tax.
use
62
Under the doctrine of ______, the properties of religious, charitable, or educational entities whether or not used ni their primary operations are exempt from real property tax. This, however, is not applied in the Philippines.
ownership
63
Consistent with this constitutional recognition of education as a necessity, the NIRC also exempts government educational institutions from ______ and subjects private educational institutions to a ______.
income tax, minimal income tax
64
As a safety net, the Constitution requires the vote of the ______ of all members of Congress in the grant of tax exemption.
majority
65
In the approval of an exemption law, an ______ or the majority of all members of Congress, not a relative majority or quorum majority, is required. However, in the withdrawal of tax exemption, only a ______ is required.
absolute majority, relative majority
66
Tax colections should be used only for public purpose. It should never be ______ or used for private purpose.
diversified
67
The principle of checks and balances in a republican state requires that taxation power as part of lawmaking be vested exclusively in ______.
Congress
68
Also, certain aspects of the taxing process that are non-legislative ni character are ______.
delegated
69
Notwithstanding the existence of the Court of Tax Appeals, which is a special court, all cases involving taxes can be raised to and be finally decided by the ______.
Supreme Court of the Philippines
70
Laws that add income to the national treasury and those that allows spending therein must originate from the ______ while ______ may concur with amendments.
House of Representatives, Senate
71
STAGES OF THE EXERCISE OF TAXATION POWER
1 Levy or imposition
2. Assessment and collection
72
This process involves the enactment of a tax law by Congress and is called impact of taxation.
Levy or imposition
73
Levy or imposition is also referred to as the ______.
legislative act in taxation
74
Congress is composed of two bodies:
1. The House of Representatives, and
2. The Senate
75
As mandated by the Constitution, tax bills must originate from the ______.
House of Representatives
76
Tax bills cannot originate exclusively from the ______.
Senate
77
The tax law is implemented by the administrative branch of the government. Implementation involves assessment or the determination of the tax liabilities of taxpayers and collection.
Assessment and collection
78
Assessment and collection stage is referred to as ______ or the ______.
incidence of taxation, administrative act of taxation
79
______ is the place of taxation. It is the tax jurisdiction that has the power to levy taxes upon the tax object.
Situs
80
______ serve as frames of reference in gauging whether the tax object is within or outside the tax jurisdiction of the taxing authority.
Situs rules
81
Examples of Situs Rules
1. Business tax situs
2. Income tax situs on services
3. Income tax situs on sale of goods
4. Property tax situs
5. Personal tax situs
82
Businesses are subject to tax in the place where the business is conducted.
Business tax situs
83
Service fees are subject to tax where they are rendered.
Income tax situs on services
84
The gain on sale is subject to tax in the place of sale.
Income tax situs on sale of goods
85
Properties are taxable in their location.
Property tax situs
86
Persons are taxable in their place of residence.
Personal tax situs
87
"The power to tax involves the power ot destroy." Taxation power can be used as an instrument of police power. It can be used to discourage or prohibit undesirable activities or occupation. As such, taxation power carries with it the power to destroy. However, the taxation power does not include the power to destroy if it is used solely for the purpose of raising revenue.
Marshall Doctrine
88
"Taxation power is not the power to destroy while the court sits." Taxation power may be used to build or encourage beneficial activities or industries by the grant of tax incentives.
Holme's Doctrine
89
Tax laws are generally ______ in operation. An ______ or a law that retroacts is prohibited by the Constitution.
prospective, ex post facto law
90
Taxes are not subject to automatic ______ or ______. The taxpayer cannot delay payment of tax to wait for the resolution of a lawsuit involving his pending claim against the government.
set-off, compensation
91
Tax is not a debt; hence, it is not subject to ______.
set-off
92
Tax ______ cannot be assigned or transferred to another entity by contract. Contracts executed by the taxpayer to such effect shall not prejudice the right of the government to collect.
obligations
93
______ is the lapsing of a right due to the passage of time. When one sleep on his right over an unreasonable period of time, he is presumed to be waiving his right.
Prescription
94
Under the NIRC, tax prescribes if not collected within ______ from the date of its assessment. In the absence of an assessment, tax prescribes if not colected by judicial action within ______ from the date the return is required to be filed.
5 years, 3 years
95
Under the doctrine of ______, any misrepresentation made by one party toward another who relied therein in good faith wil be held true and binding against that person who made the misrepresentation.
estoppel
96
Generally, courts are not allowed to issue injunction against the government's pursuit to collect tax as this would unnecessarily defer tax collection. This rule is anchored on the ______.
Lifeblood Doctrine
97
When the law clearly provides for taxation, taxation is the general rule unless there is a clear ______. Hence the maxim, "Taxation is the ______, exemption is the ______."
exemption, rule, exception
98
Vague tax laws are construed against the ______ and in favor of the ______.
government, taxpayers
99
A ______ tax law means no tax law.
vague
100
Vague tax exemption laws are construed against the ______ and in favor of the ______.
taxpayer, government
101
A ______ tax exemption law means no exemption law.
vague
102
The right of taxation is inherent to the ______.
State
103
Tax exemption cannot arise from ______ inference. Tax exemption must be ______ and ______.
vague, clear, unequivocal
104
______ occurs when the same taxpayer is taxed twice by the same tax jurisdiction for the same thing.
Double taxation
105
Elements of double taxation
1. Primary element: Same object
2. Secondary elements:
a. Same type of tax
b. Same purpose of tax
c. Same taxing jurisdiction
d. Same tax period
106
Types of Double Taxation
1. Direct double taxation
2. Indirect double taxation
107
This occurs when all the element of double taxation exists for both impositions.
Direct double taxation
108
This occurs when at least one of the secondary elements of double taxation is not common for both impositions.
Indirect double taxation
109
How can double taxation be minimized?
only one tax law is allowed to apply to the tax object while the other tax law exempts the same tax object
Provision of tax exemption
110
How can double taxation be minimized?
both tax laws of the domestic country and a foreign country tax the tax object, but the tax payments made in the foreign tax law are deductible against the tax due of the domestic tax law
Allowing foreign tax credit
111
How can double taxation be minimized?
provisions in tax laws imposing a reduced tax rates or even exemption if the country of the foreign taxpayer also gives the same treatment to Filipino non-residents therein
Allowing reciprocal tax treatment
112
How can double taxation be minimized?
countries may stipulate for a lower tax rates for their residents fi they engage in transactions that are taxable by both of them
Entering into treaties or bilateral agreements
113
______ are the means available to the taxpayer to limit or even avoid the impact of taxation.
Escapes from taxation
114
Categories of Escapes from Taxation
A. Those that result to loss of government revenue
1. Tax evasion
2. Tax avoidance
3. Tax exemption
B. Those that do not result to loss of government revenue
1. Shifting
2. Capitalization
3. Transformation
115
Forms of Shifting
a. Forward Shifting
b. Backward Shifting
c. Onward Shifting
116
______, also known as tax dodging, refers to any act or trick that tends to illegally reduce or avoid the payment of tax.
Tax evasion
117
______, also known as tax minimization, refers to any act or trick that reduces or totally escapes taxes by any legally permissible means.
Tax avoidance
118
______, also known as tax holiday, refers to the immunity, privilege or freedom from being subject to a tax which others are subject to. These may be granted by the Constitution, law, or contract.
Tax exemption
119
Al forms of tax exemptions can be revoked by Congress except those granted by the ______ and those granted under ______.
Constitution, contracts
120
This is the process of transferring tax burden to other
taxpayers.
Shifting
121
This is the shifting of tax which follows the normal flow of distribution (i.e. from manufacturer to wholesalers, retailers to consumers). It is common with essential commodities and services such as food and fuel.
Forward Shifting
122
This is the reverse of forward shifting. It is common with non-essential commodities where buyers have considerable market power and commodities
with numerous substitute products.
Backward shifting
123
This refers ot any tax shifting in the distribution channel that exhibits forward shifting or backward shifting.
Onward shifting
124
This pertains to the adjustment of the value of an assets caused by changes in tax rates.
Capitalization
125
This pertains to the elimination of wastes or losses by the taxpayer to form savings to compensate for the tax imposition or increase in taxes.
Transformation
126
______ is a general pardon granted by the government for erring taxpayers to give them a chance to reform and enable them to have a fresh start to be part of a society with a clean slate. It is an absolute forgiveness or waiver by the government on its right to collect and is retrospective in application.
Amnesty
127
______ is forgiveness of the tax obligation of a certain taxpayer under certain justifiable grounds. This is also referred to as tax remission.
Tax condonation
128
Because they deprive the government of revenues, tax exemption, tax refund, tax amnesty, and tax condonation are construed against the ______ and in favor of the ______.
taxpayer, government
129
______ covers both civil and criminal liabilities, but ______ covers only civil liabilities of the taxpayer.
Amnesty, condonation
130
______ operates retrospectively by forgiving past violations. ______ applies prospectively to any unpaid balance of the tax; hence, the portion already paid by the taxpayer wil not be refunded.
Amnesty, Condonation
131
______ is also conditional upon the taxpayer paying the government a portion of the tax whereas ______ requires no payment.
Amnesty, condonation
