Download - General Principles of Taxation
CONCEPT, NATURE AND CHARACTERISTICS OF TAXATION AND
TAXES
DEFINITION OF TAXATION
the act of laying a tax, i.e., the process by which the sovereign, through its law – making body, raises revenue to
defray the necessary expenses of the government
PURPOSE AND IMPORTANCE
To provide funds with which to promote the general welfare and protection of its citizens, and to enable it to finance its multifarious activities.
DEFINITION OF TAXES
The enforced proportional contributions from persons and property levied by the law-making body of the state for the support of the government and all public needs
ESSENTIAL CHARACTERISTICS OF TAXIt is an enforced contribution
Tax is not a voluntary payment or donationIts imposition is no way dependent upon the
will or assent of the persons tax
It is generally payable in moneyIt is an exaction to be discharged alone in
money which must be in legal tender
It is proportionate in characterIt is ordinarily based on the ability to pay
It is levied on persons or propertyTax may be imposed on acts or transactions or
contracts
It is levied by the state which has jurisdiction over the person or propertyThe persons or property must be subject to the
jurisdiction of the taxing state
It is levied by the law – making body of the stateThe power to tax is a legislative power which
only the legislative body can exercise through the enactment of statutes or ordinances
It is levied for public purposesTaxation and tax involves a charge or burden
imposed to provide income for public purposes
THEORY AND BASIS OF TAXATIONThe power of taxation proceeds upon thetheory that the existence of government is anecessity
It cannot continue without means to pay its expenses
It has a right to compel all its citizens and property within its limits to contribute
The basis of taxation is found in thereciprocal duties of protection and supportbetween the state and its inhabitants
The taxpayer receives benefits and protection from the government
NATURE OF TAXATIONIt is inherent in sovereignty
The power of taxation is inherent to sovereignty by being essential to the existence of every government
It is legislative in characterUnder the Constitution only legislative body
can impose taxesPower to tax is also granted to local
government subject to limitations
It is subject to constitutional and inherentlimitations
The limitations are specifically provided in the fundamental law or implied therefrom while the rest spring from the nature of taxing power
ASPECTS OF TAXATION1. Levying or imposition of the tax which is a
legislative act
2. Collection of the tax levied which is essentially administrative in character
BASIC PRINCIPLES OF SOUND TAX SYSTEMFiscal adequacy
The sources of revenue should be sufficient to meet the demands of public expenditure
Equality or theoretical justiceThe tax burden should be proportionate to the
taxpayer’s ability to payAdministrative feasibility
Tax laws should be capable of convenient , just, and effective administration
CALSSIFICATION OF TAXESAS TO SUBJECT MATTER Personal, poll or capitation
Tax of a fixed amount imposed on individuals, residing within specified territory, whether citizens or not, without regard to their property or the occupation in which they may be engaged.
Example: community tax
PropertyTax imposed on property, whether real or
personal, in proportion either to its value or in accordance with some other reasonable method of apportionment
Example: real estate tax
ExciseAny tax which does not fall within the
classification of a poll tax or property tax.Example: value-added tax, income tax
AS TO PURPOSEGeneral, fiscal or revenue
Tax imposed for the general purposes of the government to raise revenue
Example: income tax, almost all taxes
Special or regulatoryTax imposed for a special purposeExample: protective tariffs or custom duties on
imports, to protect local industries against foreign competition
AS TO SCOPENational
Tax imposed by national governmentExample: national internal revenue taxes
Municipal or localTax imposed by municipal or public
corporationsExample: real estate taxes
AS TO DETERMINATION OF ACCOUNTSpecific
Tax of a fixed amount imposed by the head or number, or by some standard of weight or measurement
Example: excise taxes on wines, cigars, gasoline
Ad valoremTax of a fixed proportion of the value of the
property with respect to which the tax is assesed
Example: real estate tax, value-added tax
AS TO WHO BEARS THE BURDENDirect
Tax which is demanded from the person who also shoulders the burden of the tax; or tax which the taxpayer cannot shift to another
Example: community tax, income tax
IndirectTax which is demanded from one person in the
expectation and intention that he should indemnify himself at the expense of another
Example: all business taxes, VAT
AS TO GRADUATION OR RATEProportional
Tax based on fixed percentage of the amount of property, income or other basis to be taxed
Example: real property tax
Progressive or graduatedTax based on the rate of which increases as the
tax base or bracket increasesExample: income tax, estate tax, donor’s tax
RegressiveTax base on the rate of which decreases as the
tax base or bracket increases
TAX DISTINGUISHED FROM OTHER TERMSRevenue
Refers to all the funds or income derived by the government whether from tax or any other source
Refers to the amount collected
Internal revenueRefers to taxes imposed by the legislature or
other than duties on imports and exports
Custom dutiesTaxes imposed on goods exported from or
imported into a country
DebtA generally based contract that is assignable,
maybe paid in any kind and is not punishable (by imprisonment) if not paid
PenaltyAny sanction imposed as a punishment by
violation of law or acts deemed injurous
CLASSIFICATIONS OF LIMITATIONSConstitutionalLimitations that are expressly found in the
Constitution or implied by its own provisions which are enumerated:
Due process of lawEqual protection of the lawsRule of uniformity and equity in taxationNo imprisonment of non-payment of poll taxNon-impairment of the obligation of contractsNon-infringement of religious freedom
No appropriation for religious purposeExemption of religious, charitable and
educational entities, non-profit cemeteries and churches from taxation
Exemption of non-stock, non-profit educational institutions from taxation
Concurrence by majority of all members of Congress for the passage of a law granting tax exemption
Authority of the President to veto the particular items in a revenue or tariff bill
Non-impairment of the jurisdiction of the Supreme Court intaxes
InherentLimitations which restrict the power although
they are not embodied in the Constitution which are enumerated:
Requirement that levy must be for public purpose
Non-delegation of the legislative power to taxExemption from taxation of government
entitiesInternational comityTerritorial jurisdiction
REQUIREMENT OF EQUAL PROTECTIONEqual protection of the laws signifies that all persons subject to legislation shall be treated alike under like circumstances and conditions both in the privileges conferred and liabilities imposed
There is no violation of the protection: where those with different incomes are made to pay
different rates for taxes Where foreign corporations are made to pay higher
amount of taxes than that paid by domestic corporations