PowerPoint Presentation

General Principles of TaxationTax 111 Income TaxationFerdinand C. ImportadoCPA, MBAObjectivesAt the end of this lecture, the students shall be able to:Define taxation.Discuss the purposes of taxation.Identify the theory and basis of taxation.Describe the principles of a sound tax system.List the nature of taxation.ObjectivesAt the end of this lecture, the students shall be able to:Explain the limitations of taxation (constitutional and inherent).Identify the aspects of taxation.

What is taxation?Taxation is the process or means by which the sovereign, through its lawmaking body, raises income to defray the necessary expenses of the government.Purpose of taxationPrimary purposeTo provide funds or property with which to promote the general welfare of its citizens and to enable it to finance its multifarious activities.Purpose of taxationSecondary purposesTo strengthen anemic enterprises by giving tax exemptions.To protect local industries against foreign competition through imposition of high customs duties on imported goods.Purpose of taxationSecondary purposesTo reduce inequalities in wealth and income by imposing progressively higher taxes.To prevent inflation by increasing taxes or ward off depression by decreasing taxes.Theory and basis of taxationTheoryThe existence of the government is a necessity.The government cannot continue without a means to pay its expenses.The government has the rights to compel its citizens and property within its limits to contribute. Theory and basis of taxationBasisTaxation is based on the reciprocal duties of protection and support between the government and its people. Government receives taxes from the people which is used to perform functions of government and other benefits.Benefit-received theory.Basic principles of sound tax systemFiscal adequacyEquality or theoretical justice Administrative feasibilityFiscal adequacyThe source of government revenue should be efficient to demand the needs of public expenditure.Creating new taxes or new tax machinery or by merely changing the rates applicable to existing taxes.Equality or theoretical justiceThe tax burden should be proportionate to the taxpayers ability to pay.Ability-to-pay principleAdministrative feasibilityThe tax laws should be capable of convenient, just and effective administration.Each tax should be:Clear and plain to the taxpayer.Capable of uniform enforcementConvenient as to time, place and manner of payment. Not unduly burdensome upon or discouraging to business activityNature of taxationIt is inherent in sovereignty. Legislative in character. Subject to constitutional and inherent limitations.Limitations of taxationInherent limitations restrictions on the power exists from the very nature of the power of taxation itself.

Constitutional limitations restrictions in the exercise of the power of taxation as expressly provided in the Philippine Constitution.Constitutional limitationsDue process.Equal protection of the laws.Rule of uniformity and equity in taxation.Non-imprisonment for non-payment of poll tax. Non-impairment of the obligations and contracts. Non-infringement of religious freedom.Constitutional limitationsNo appropriation for religious purposes.Exemption of religious, charitable or educational entities, non-profit cemeteries, and churches from taxation. Exemption of revenues and assets of non-stock, non-profit educational institutions and donations for educational purposes from taxation. Constitutional limitationsConcurrence by a majority of all members of the Congress for the passage of a law granting any tax exemption.Power of the President to veto any particular item or items in a revenue or tariff bill.Non-impairment of the jurisdiction of the Supreme Court in tax cases.Inherent limitationsRequirement that levy must be for a public purpose. Non-delegation of the legislative power to tax, except:Delegation to the PresidentDelegation to local governmentsDelegation to administrative bodiesInherent limitationsExemption from taxation of government entities.International comityTerritorial jurisdictionAspects of taxationLevy deals with the provisions of law which determines:The person or property to be taxedThe sum or sums to be raisedThe rate of the taxThe time and manner of levying, receiving and collection the tax.

Aspects of taxationCollections constituted of the provisions of law which prescribe the manner of enforcing the obligation on the part of those taxes to pay the demand thus created.