General Principles of Taxation

Question 1

Refers to the inherent power of the state to demand enforced contribution for public purpose to support the government

Answer 1

Taxation as a power

Question 2

The legislative act of laying a tax to raise income for the government to defray its necessary expenses

Answer 2

Taxation as a process

Question 3

Taxation is a means of allocating government burden to the people

Answer 3

Taxation as a mode of cost allocation

Question 4

The power to take property for the support of the government and for public purpose

Answer 4

Power of Taxation

Question 5

The power to enact laws to promote the general welfare of the people.

It is wider in application because it is the general power to make laws

Answer 5

Police Power

Question 6

The power to take private property for public use upon payment of just compensation

Answer 6

Power of Eminent Domain

Question 7

Exercising Authority: Government only

Choices: Taxation, Police Power or Eminent Domain

Answer 7

Taxation & Police Power

Question 8

Exercising Authority for each:

• Taxation
• Police Power
• Eminent Domain

Answer 8

• Taxation & Police Power: Government only
• Eminent Domain: Government and Public/ Utility entities

Question 9

Necessity of Delegation for each:

• Taxation
• Police Power
• Eminent Domain

Answer 9

• Taxation: Delegation is not necessary since it is inherent
• Police Power & Eminent Domain: Delegation is necessary

Question 10

Persons affected for each:

• Taxation
• Police Power
• Eminent Domain

Answer 10

• Taxation & Police Power: Community or class of individuals
• Eminent Domain: Operates on the owner of the property

Question 11

Effect of transfer of property rights:

• Taxation
• Police Power
• Eminent Domain

Answer 11

• Taxation: Money paid as taxes becomes part of the public fund
• Police Power: There is no transfer of title, only restraint on the injurious use of property
• Eminent Domain: There is transfer of right to property whether it be of ownership or lesser right

Question 12

Amount of Imposition for each:

• Taxation
• Police Power
• Eminent Domain

Answer 12

• Taxation: Unlimited
• Police Power: Sufficient to cover the costs of regulation
• Eminent Domain: No imposition, the owner is paid the fair market value of his property

Question 13

Importance for each:

• Taxation
• Police Power
• Eminent Domain

Answer 13

• Taxation: Most Important
• Police Power: Most Superior
• Eminent Domain: Important only

Question 14

Relationship with the Constitution for each:

• Taxation
• Police Power
• Eminent Domain

Answer 14

• Taxation: Inferior to the “Non- Impairment Clause” of the Constitution
• Police Power: Superior to the
  “Non- Impairment Clause” of the Constitution
• Eminent Domain: Superior and may override the “Non- Impairment Clause

Question 15

Limitation for each:

• Taxation
• Police Power
• Eminent Domain

Answer 15

• Taxation: Constitutionally and inherently restricted
• Police Power: Public interest and the requirement of due process
• Eminent Domain: Public purpose and just compensation

Question 16

Stages of Taxation:

1. Levy or imposition
2. Assessment of Tax

Aspects of Taxation:

1. Levy: Impact
2. Assessment: Incidence

Answer 16

Tax Process

Question 17

How is the Tax Process exercised?

Answer 17

• Legislation of Laws: Congess (National Tax)
• Tax ordinances: Local Sanggunian (Local Tax)
• Tax Collection: Administrative branch of Govt.

Question 18

Purposes of Taxation

Answer 18

• Primary purpose: to raise revenue
• Secondary purposes: Regulatory and Compensatory

Question 19

Theory that states:

Tax Payment should be based on benefits received and

Everyone is conclusively presumed to be receiving benefits from Govt.

Answer 19

Benefit Received Theory

Question 20

Theory that states:

Tax Payment should be based on ability of taxpayers to pay

Answer 20

Ability to Pay Theory

This can be:
- Vertical equity
- Horizontal equity

Question 21

______ states:

The existence of the government is a necessity and it cannot continue without means to support itself.

Answer 21

Theory of Taxation

Question 22

______ states:

The government and the people have the reciprocal and mutual duties of support and protection.

Answer 22

Basis of Taxation

Question 23

Scope of Taxation

Hint: CPUS

Answer 23

CPUS

• Comprehensive
• Plenary
• Unlimited
• Supreme

Question 24

Limitations of Taxation Power

Answer 24

• Constitutional Limitations &
• Inherent Limitations: (TIP END) Territoriality
  International comity and treaty
  Public purpose
  Exemption
  Non-Delegation

Question 25

Situs of Taxation

Answer 25

1. **Persons**- *residence* of taxpayer 2. **Community Development tax**- *residence or domicile* of taxpayer 3. **Business taxes**- where *business was conducted* or *transactions took place* 4. **Privilege or occupation tax**- where *privilege is exercised* 5. **Real property tax**- where *property is located* 6. **Personal property tax** - Tangible - Intangible 7. **Income**- *income is earned* or *residence or citizenship* of taxpayer 8. **Transfer taxes**- *residence or citizenship* or *location* of property 9. **Franchise taxes**- state that *grants the franchise* 10. **Corporate taxes**- *depend on law of incorporation*

Question 26

Double Taxation

Answer 26

- Same **object or subject** - Same **period** - Same **kind of tax** - Same **taxing authority**

Question 27

This **objectionable and prohibited** because it *violates the constitutional provision on uniformity and equality*

Answer 27

Direct Double Taxation

Question 28

A double taxation caused by **two different taxing authorities**, one domestic and foreign

Answer 28

International Double Taxation

Question 29

Remedies to Double Taxation

Answer 29

1. Provision for **Tax exemption** 2. Allowance for **Tax credit** 3. Allowance for **Principle of reciprocity** 4. Enter into **treaties with foreign govt.**

Question 30

Escape from taxation that will **not** result in **loss of revenue**

Answer 30

1. **Shifting**- transferring tax burden to another without violating the law. 2. **Capitalization**- seller is willing to lower the price provided it will shouldered by the buyers 3. **Transformation**- manufacturer absorbs additional taxes by increasing quantity of production

Question 31

Escapes from taxation that will **result to loss of revenue** to Govt.

Answer 31

1. **Tax evasion**- (Tax dodging) Illegal, prohibited and not subject to penalties. 2. **Tax avoidance**- (Tax minimization) Legal, not prohibited and not subject to penalties. 3. **Tax exemption**- immunity, privilege or freedom from payment to which others are obliged to pay.

Question 32

Kinds of Exemptions

Answer 32

1. **Express**- constitution, statute, treaties, ordinance, contracts or franchise. 2. **Implied**- accidental or intentional omission. 3. **Total**- from all taxes (OFWs) 4. **Partial**- from certain taxes

Question 33

Grounds for Exemption

Answer 33

May be based on: - Contract - Public Policy - to foster Charitable and other benevolent institutions - Treaty on grounds of Reciprocity - to Lessen rigors of international double or multiple taxation

Question 34

_______ is: - Scheme used **outside of lawful means** and **subjects taxpayer to penalties** - Accomplished by **breaking the law** - Connotes fraud, deceit and malice

Answer 34

Tax Evasion

Question 35

_______ is: - Tax saving device within means **sanctioned by law** - Accomplished by **legal procesures** - No fraud involved

Answer 35

Tax Avoidance

Question 36

Tax Exemption

Answer 36

- is **not automatic** - is **non-transferable** - is **revocable** by the government (except when granted under a valid contract or by the Constitution) - rule shall be **uniform** - does **not contravene** the Lifeblood Doctrine - is always **disfavored** - is allowed only under a **clear and unequivocal** provision of the law - on **Real property tax** will be based on the **Doctrine of Usage** and not Doctrine of Ownership, except for real properties owned by the government which is absolutely exempt from taxation - on **Real property tax cannot be granted by local governments** but can condone real property tax liabilities in special cases - on **Local taxes** can be granted by local governments but they **cannot condone existing liabilities** on local taxes

Question 37

Constitutional Limitations

Answer 37

1. observance of due process of law 2. equal protection of the law 3. uniformity in taxation 4. progressive scheme of taxation 5. non-imprisonment for non-payment debt or poll tax 6. non-impairment of obligation and contract 7. free worship rule 8. non-appropriation of public funds or property for the benefit of any church, sect or system of religion 9. exemption of religious, charitable or educational entities, non-profit cemeteries, churches and mosque from property taxes. 10. exemption from taxes of the revenues and assets of non-profit, non-stock educational institutions including grants, endowments, donations or contributions for educational purposes 11. concurrence of a majority of all members of Congress for the passage of a law granting tax exemption 12. non-diversification of tax collections 13. non-delegation of the power of taxation Exceptions: a. power to tax was delegated to the President under the Flexibility Clause of the Tariff and Customs Code b. power to tax was delegated to the local government units under the Local Government Code c. matters involving the expedient and effective administration and implementations of assessment and collection of taxes or certain aspects of taxing process that are not legislative in character 14. non-impairment of the jurisdiction of the Supreme Court to review tax cases 15. appropriations, revenue or tariff bills shall originate exclusively in the House of Representatives but the Senate may propose or concur with amendments 16. 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

Question 38

Fundamental Doctrine in Taxation

Answer 38

1. No court may enjoin the collection of taxes 2. Claim for exemptions shall be interpreted strictly against the taxpayer 3. A law that permit deduction from the tax base is strictly construed against the taxpayer 4. Tax assessment are presumed to be correct and done in good faith 5. Tax laws are generally prospective in application 6. Tax are not subject to compensation or set-off 7. Refund of taxes do not earn interest because interest do not run against the government

Question 39

Tax Amnesty vs. Tax Condonation vs. Tax Exemption

Answer 39

**Tax Amnesty** - a **general pardon** or intentional overlooking by the state of its authority to impose penalties on persons otherwise guilty of tax evasion or violation of tax laws. - The purpose is to give the erring taxpayer a **chance to reform** and become part of the society with a **clean slate.** **Tax Condonation** - means to refrain from exacting or imposing a tax. It **cannot extend to refund** of taxes already paid when obtaining condonation **Tax Exemption** - There is **no tax liability at all**. - The grantee **need not pay anything** - Can be availed of by any qualified taxpayer