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TAX > TAX H01 - General Principles of Taxation > Flashcards

TAX H01 - General Principles of Taxation Flashcards

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1
Q

What are the 3 branches of the Government? Explain each.

A
  1. Legislative - Law-making body
    a. Senate (Upper House)
    b. House of Representatives (Lower House)
  2. Executive - Carry out laws
    a. President
    b. Vice President
    c. Cabinet
    d. Bureaus
  3. Judiciary - Guardians of the Constitution
    a. Supreme Court
    b. Other Federal Court
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2
Q

What are the definitions of taxation?

A

Taxation as a Power
Taxation as a Process
Taxation as a Mode of Cost Allocation

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3
Q

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

A

Taxation as a Power

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4
Q

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

A

Taxation as a Process

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5
Q

Taxation is a means of allocating government burden to the people

A

Taxation as a Mode of Cost Allocation

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6
Q

What are the 3 Inherent Powers of the State?

A

Power of Taxation
Police Power
Power of Eminent Domain

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7
Q

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

A

Power of Taxation

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8
Q

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.

A

Police Power

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9
Q

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

A

Power of Eminent Domain

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10
Q

What are the similarities of the Three Powers?

A

(EELLIPS)

  1. Equally necessary
  2. Inherent (co-exist with the creation of the Government)
  3. Legislative in nature
  4. State interferes with private rights and property
  5. Exist independently with the Constitution (only limits)
  6. Presuppose an equivalent compensation
  7. Local government units exercising powers may be limited by national legislature
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11
Q

What are the differences of the 3 Inherent Powers based on exercising authority?

A

Taxation - Government
Police Power - Government
Eminent Domain - Government or Private Entities

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12
Q

What are the differences of the 3 Inherent Powers based on necessity of delegation?

A

Overall, no delegation as to the National Government

As to LGUs and Private Entities:
Taxation - No Delegation
Police Power - With Delegation for LGUs
Eminent Domain - With Due Delegation for LGUs and Private Entities

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13
Q

What are the differences of the 3 Inherent Powers based on purpose?

A

Taxation - Revenue and support for the Government
Police Power - Protection of well-being of people
Eminent Domain - Property is taken for public use

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14
Q

What are the differences of the 3 Inherent Powers based on Persons affected?

A

Taxation - Community or Class of Individuals
Police Power - Community or Class of Individuals
Eminent Domain - Operates on the owner of the property

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15
Q

What are the differences of the 3 Inherent Powers based on the effect of transfer of property rights?

A

Taxation - Money paid as taxes becomes part of the public fund
Police Power - No transfer of title; most is restraint on the injurious use of property
Eminent Domain - Transfer of right to property (Ownership or Lesser Right)

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16
Q

What are the differences of the 3 Inherent Powers based on the amount of imposition?

A

Taxation - Unlimited
Police Power - Sufficient to cover costs of regulation
Eminent Domain - No imposition, owner is paid the FMV of his property

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17
Q

What are the differences of the 3 Inherent Powers based on importance?

A

Taxation - Most important
Police Power - Most superior
Eminent Domain

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18
Q

What are the differences of the 3 Inherent Powers based on relationship with the constitution?

A

Taxation - Inferior to the NIC
Police Power - Superior to the NIC
Eminent Domain - Superior and may override the NIC (welfare of the state is superior to private contracts)

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19
Q

What are the differences of the 3 Inherent Powers based on limitation?

A

Taxation - Constitutionally and inherently restricted
Police Power - public interest and requirement of due process
Eminent Domain - public purpose and just compensation

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20
Q

What are the stages of taxation? Explain the process.

A
  1. Legislative Act/Levy or Imposition/Impact of Taxation
  2. Administrative Act/Assessment of Tax/Incidence of Taxation
  3. House of Representatives - Tax Billing
  4. When approved
  5. Senate - May make amendments, insertions, or change the bill entirely
  6. President - Approval/Veto

*Veto - may be override by the Congress by 2/3 votes.

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21
Q

How is taxation exercised?

A
  1. Legislation of laws by Congress and tax ordinances by the Local Sanggunian
  2. Tax collection by the administrative branch of the government
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22
Q

Discretion of the Taxing Power-this extends to:

A

(MAKAPPS)

  1. amount or rate of the tax
  2. kinds of tax to be collected
  3. apportionment of the tax
  4. the person, property and excises to be taxed, provided within it jurisdiction
  5. situs of taxation
  6. method of collection
  7. purposes for its levy, provided for public purpose
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23
Q

Explain the The Life Blood Doctrine.

A

Taxes are indispensable to the existence of the state. Without taxation the state cannot raise revenue to support is operations.

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24
Q

6 Nature or Characteristics of the Power of Taxation

A

(PPIINT)

  1. for public purpose
  2. inherently legislative in nature
  3. subject to international comity or treaty
  4. not absolute being subject to constitutional and inherent limitations
  5. exaction payable in money
  6. territorial
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25
What are the purposes of taxation?
1. Primary Purpose - to raise revenue 2. Secondary Purpose a. Regulatory b. Compensatory
26
Modes of Cost Allocation
1. Benefit Received Theory 2. Ability to Pay Theory
27
Explain Benefit Received Theory
- if PH citizen/resident, the receipt of benefit is conclusively presumed - the more the benefit, the more tax ex. Business Tax; Indirect Tax
28
Explain Ability to Pay Theory
1. Vertical Equity - the higher, the higher ability to pay vice versa 2. Horizontal Equity - circumstance of taxpayer; deductions and exclusions Ex. Income Tax; Direct Tax
29
What is the theory of taxation?
The existence of a government is a necessity and it cannot continue without means to support itself.
30
What is the basis of taxation?
The government and the people have mutual duties of support and protection.
31
What is the scope of taxation?
SUCP Supreme Unlimited Comprehensive Plenary *Includes power to destroy
32
What are the current objects of taxation?
BITRAPPP 1. businesses 2. interests 3. transactions 4. rights 5. acts 6. Persons 7. properties 8. privileges
33
What are the constitutional limitations of taxation?
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 Exception: 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
34
What are the inherent limitations of taxation?
TTIPN 1. territoriality of taxation 2. subject to international comity or treaty 3. tax exemption of the government 4. tax is for public purpose 5. non-delegation of the power of taxation *The last 2 limitations are also Constitutional limitations
35
What is the situs of taxation?
The place of taxation.
36
What factors that determine the situs of taxation?
NSSCRPP 1. nature, kind or classification of the tax 2. subject matter of the tax 3. citizenship of the taxpayer 4. residence of the taxpayer 5. sources of income 6. place of exercise, business or occupation being taxed 7. place where income-producing activity was held or done
37
What is the situs of taxation of persons?
Residence of the taxpayer
38
What is the situs of taxation of Community Development Tax?
Residence or Domicile of the taxpayer
39
What is the situs of taxation of Business Taxes?
Where the business was conducted or place where the transaction took place
40
What is the situs of taxation of Privilege or Occupation Tax?
Where the privilege is exercised
41
What is the situs of taxation of Real Property Tax?
Where the property is located
42
What is the situs of taxation of Personal Property Tax?
a. Tangible - where they are physically located b. Intangible - domicile of the owner unless the property has acquired a situs elsewhere
43
What is the situs of taxation of Income?
Place where the income is earned or residence or citizenship of the taxpayer
44
What is the situs of taxation of Transfer Taxes?
Residence or Citizenship of the taxpayer or Location of the property
45
What is the situs of taxation of Franchise Taxes?
State that grants the franchise
46
What is the situs of taxation of Corporate Taxes?
Depend on the law of incorporation
47
It means taxing the object or subject within the territorial jurisdiction twice, for the same period, involving the same kind of tax by the same taxing authority.
Double Taxation
48
What are the kinds of Double Taxation?
1. Direct Double Taxation 2. Indirect Double Taxation
49
This kind of double taxation is objectionable and prohibited because it violates the constitutional provision on uniformity and equality.
Direct Double Taxation
50
This kind of double taxation has no constitutional violation. Ex: taxing the same property by two different taxing authority
Indirect Double Taxation
51
A double taxation caused by two different taxing authorities, one domestic and one foreign.
International Double Taxation
52
What are the Remedies to Double Taxation?
PAAE 1. provision for tax exemption 2. allowance for tax credit 3. allowance for principle of reciprocity 4. enter into treaties with, and agreement with foreign government
53
What are the Forms of Escapes from Taxation?
A. Those that will not result in loss of revenue to the government (SCT) 1. Shifting 2. Capitalization 3. Transformation B. Those that will result to loss of revenue to the government (TTT) 1. Tax Evasion 2. Tax Avoidance 3. Tax Exemption
54
The process of transferring the tax burden from the statutory taxpayer to another without violating the law.
Shifting
55
The seller is willing to lower the price of the commodity provided the taxes will be shouldered by the buyers.
Capitalization
56
The manufacturer absorbs the additional taxes imposed by the government without passing it to the buyers for fear of lost of his market. Instead, it increases quantity of production, thereby turning their units of production at a lower cost resulting to the transformation of the tax into a gain through the medium of productions.
Transformation
57
Resorting to acts and devices that illegally reduces or totally escape the payment of taxes that are due to the taxpayer. They are prohibited and are not subject to penalties.
Tax Evasion/Tax Dodging
58
The reduction or totally escaping payment of taxes through legally permissible means that are not prohibited and therefore are not subject to penalties.
Tax Avoidance/Tax Minimization Scheme
59
An immunity, privilege or freedom from payment of a charge or burden to which others are obliged to pay.
Tax Exemption
60
What are the kinds of Exemptions?
1. Express - granted by the constitution, statute, treaties, ordinance, contracts or franchise a. constitutional b. statutory c. contractual 2. Implied - exempted by accidental or intentional omission 3. Total - exemption from all taxes (OFWs) 4. Partial - exemption from certain taxes, partially or totally
61
What are the Grounds for Exemption?
1. It may be based on a contract 2. It may be based on grounds of public policy - ex: granting of exemptions to rural banks, and sweepstakes or lotto winnings 3. It may be based on some grounds to foster charitable and other benevolent institutions 4. It may be created under a treaty on grounds of reciprocity 5. It may be created to lessen the rigors of international double or multiple taxation
62
What are the distinctions between tax evasion and tax avoidance?
Tax Avoidance It is a tax saving device within the means sanctioned by law Accomplished by legal procedures and do not violate the law No fraud is involved Tax Evasion It is a scheme used outside of those lawful means and when availed of, it usually subjects the taxpayer to penalties It is accomplished by breaking the law It connotes fraud, deceit and malice
63
Tax Exemptions are:
1. Is not automatic 2. Is non-transferable 3. Is revocable by the government (except when granted under a valid contract or by the Constitution) 4. Rule shall be uniform 5. Does not contravene the Lifeblood Doctrine. is always disfavored. is allowed only under a clear and unequivocal provision of the law 6. 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 form taxation 7. On real property tax cannot be granted by local governments but can condone real property tax liabilities in special cases 8. On local taxes can be granted by local governments but they cannot condone existing liabilities on local taxes
64
What are the Fundamental Doctrines in Taxation?
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
65
It is 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 Amnesty
66
It means to remit or to desist or refrain form exacting or imposing a tax. It cannot extend to refund of taxes already paid when obtaining condonation.
Tax Condonation
67
Tax Amnesty vs. Tax Exemption
Tax Amnesty Connotes condonation from payment of existing tax liability The grantee pays a portion Not always available Tax Exemption There is no tax liability at all The grantee need not pay anything Can be availed of by any qualified taxpayer

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