MODULE 1

Question 1

What are the theory and basis of taxation? Define each.

Answer 1

1) The Necessity Theory - Based on the theory that the existence of government is a necessity; it cannot continue without the means to pay its expenses; thus, the state has the right to compel its citizens and property within its limits to contribute.
2) The Benefits Received Principle - Based on the reciprocal duties of protection and support between the state and its inhabitants. In return for his contribution, the taxpayer receives benefits and protection from the government.

Question 2

What is Taxation?

Answer 2

The act of levying a tax, it is the process or means by which the sovereign, through its law making body (a legislative power), raises income to defray the necessary expenses of government.

Question 3

When does the Power of Taxation begin?

Answer 3

It begins immediately after a State is born.

Question 4

What are the four essential elements of a State?

Answer 4

People, Territory, Sovereignty and Government.

Question 5

What are the Basic Principles of a Sound Tax System? Define each.

Answer 5

1) Fiscal adequacy– the sources of revenue should be sufficient to meet the demands of public expenditure
2) Equality or theoretical justice– tax burden should be in proportion to the taxpayer’s ability to pay; certain and not arbitrary (uniform and equitable)
3) Administrative feasibility—tax laws should be capable of convenient, just and effective administration (convenient to pay, economical to collect); easy to implement

Question 6

What are the Principal Approaches in Distributing the Tax Burden? Define each.

Answer 6

A. Benefit Approach– Tax payment should be based on benefits received by the taxpayer

B. Ability to Pay Approach– Tax payment should be based relative to the ability of taxpayers to pay

Question 7

What is the Purpose of Taxation?

Answer 7

There are 3: Primary, Secondary, and Compensatory purposes. Taxes are raised to generate revenues and to mobilize resources.

Question 8

What is the exception to the General Rule: National Taxes are Not Subject to Legal Compensation?

Answer 8

A. Legal compensation by operation of law, this is when both claims of the government and the taxpayer against each other have already become due, demandable and fully liquidated

B. Principle of solutio indebiti

Question 9

What are the Nature and the Limits of Taxation?

Answer 9

1. Purpose must be public in nature
2. Prohibition against delegation of taxing powers
3. Exemption of government entities, agencies and instrumentalities
4. International Comity
5. Limitation on Territorial Jurisdiction

Question 10

What are the exceptions to non-delegation of taxing power?

Answer 10

1. Delegation to President
2. Delegation to Local Government Units
3. Administrative Bodies

Question 11

What are the Constitutional Limitations of the Power of Taxation?

Answer 11

1) DUE PROCESS OF LAW
2) Equal Protection Clause
3) PROHIBITION against IMPRISONMENT FOR NON-PAYMENT OF POLL TAX
4) Non-establishment clause and the non-infringement of religious freedom
5) PROHIBITION VS. APPROPRIATION FOR RELIGIOUS PURPOSES
6) PROHIBITION VS. TAXATION OF RELIGIOUS, CHARITABLE AND EDUCATIONAL ENTITIES, ETC.
7) PROHIBITION VS. TAXATION OF NON-STOCK, NON-PROFIT EDUCATIONAL INSTITUTIONS

Question 12

What are the 3 inherent powers of government?

Answer 12

Taxation, Police Power, Eminent Domain