Topic: power of taxation, importance of taxation, nature of taxation & meaning of taxes.

Power of taxation
Power of taxation is power of the state to impose tax on individuals and
properties to support the government. Tax is the lifeblood of the government. The
revenue of the state are principally raised through taxation. Taxes are what we pay
for civilized society. Without taxes, the government would be paralyzed for lack of
the motive power to activate and operate it. Hence, despite the natural reluctance
to surrender part of ones hard-earned income to the taxing authorities, every
person must contribute his share in the operation of the government. The
government for its part is expected to respond in the form of tangible and intangible
benefits intended to improve the lives of the people. This symbiotic relationship is
the rationale of taxation and should dispel the erroneous notion that is an arbitrary
method of exaction by those in the seat of power.
-

Politics, Governance and Government with Philippine Constitution (Roman

R. Dannug)

It refers to the power of the state to impose burden on persons, properties,

services and occupations.
These three powers are inherent and belong to the very essence of
government. Without these, the government cannot perform its functions and
cannot exist. However, people who are given the mandate to discharge government
functions might abuse their powers. The constitution does not grant the government
these three great powers but it defines, delimits and allocates their exercise among
various government-agencies. - Discourses on the 1987 Philippine Constitution
(Reynaldo S. Naguit)

Meaning of taxation
Taxation is the supreme power of a sovereign state to impose burdens or
charges upon persons, property or property rights for public purpose. It is the power
vested upon the legislature for the purpose of raising revenues to finance
government expenditures and for the general welfare and protection of its citizen.
-

Fundamentals of Economics by Roman D. Leao, Jr.

Taxation is the method of apportioning the cost of government among those

who in some measure are privileged to enjoy its benefits and must therefore, bear
its burden.
-

Cooley, Law of Taxation, p. 59.

Taxation does not confine itself on government expenditures. It also regulates

the flow of income in our economic system. When there is too much money in the
system, the government withdraws some of this money to check inflation.

Politics and Governance with Philippine Constitution

Topic: power of taxation, importance of taxation, nature of taxation & meaning of taxes.

As a power, taxation is the power of the state to impose charge or burden

upon persons, property or property rights, for the use and support of the
government and to enable it to discharge its appropriate functions.
-

Hector De Leon

Meaning of tax
According to Cooley, taxes are the enforced proportional contribution from
persons and property, level by the state for virtue of its sovereignty for the support
of the government and for all public needs.
Taxes are compulsory contributions to support the state. It is considered as
the lifeblood of government that without which, a government may not be able to
perform and expenditures are financed by tax revenues. It is but right and proper
that we pay our taxes.
-

Leao, Jr

Taxes are enforced proportional contributions from persons and property

levied by the lawmaking body of the state by virtue of its sovereignty for the
support of the government and all public needs.
They are financial burdens or charges imposed by the government upon
persons or property to raise revenue for public purpose or purposes.
-

Naguit

The basis of Taxation

The authority to tax is inherent to every sovereign state for without it, the
government cannot continue to promote the welfare of its citizens. For this reasons,
it has the power to require all its inhabitants to pay.
The basis of taxation is found in the reciprocal duties of protection and
support between the state and those that are subject to its authority. In return of
their contribution, taxpayer enjoys services and protection from the government.
-

Naguit.

The basis and theory of taxation

1. The power of taxation proceeds upon the theory that the existence of
government is a necessity that it cannot continue without means to pay
its expenses, and that for these means it has a right to compel all its
citizen and property within its limits to contribute.
2. The basis of taxation is found in the reciprocal duties of protection and
support between the state and its inhabitants. In return for the citizens

Politics and Governance with Philippine Constitution

Topic: power of taxation, importance of taxation, nature of taxation & meaning of taxes.

contribution for the support of the government, the state is supposed

make adequate and full compensation in the form of benefits and
protection which it gives to his life, liberty and property.
Hector De Leon

Importance of taxation
The people, as good citizen, have the responsibility to contribute a fair-share
to the cost of government in order for the state to:
1. Raise revenue. No government can exist without it. It cannot promote the
welfare of the people.
2. Protect locally produced goods against competition from import by
imposing higher custom duties.
3. Protect new industries by granting tax exemptions.
4. Regular property.
5. Distribute equality the welfare of the nation.

Essential Characteristics of Taxation

1.
2.
3.
4.
5.
6.
7.

It
It
It
It
It
It
It
-

is an enforced contribution
is generally payable in money
is proportionate in character
is levied on persons, property or property rights
is levied by the state, which has jurisdiction over the person or property
is levied by the legislative branch of state
is levied for public purpose
Naguit

Classification of taxes (Naguit)

Taxes are classified as to the scope or authority imposing the tax. They are as
follows:
1. National taxes These are taxes imposed by the national government
under the national internal revenue code (RA 8424) and other laws
particularly the tariff and custom codes; and
2. Local taxes these are taxes by the local government to meet particular
needs under the local government code (RA 7160), such as real-property
tax and the community tax.

Form of taxes (Naguit)

These taxes are
corporations. These are:

compulsory

contribution

made

by

individuals

and

Politics and Governance with Philippine Constitution

Topic: power of taxation, importance of taxation, nature of taxation & meaning of taxes.

1. Direct taxes this is a form of tax paid by the individuals or corporations

directly to the government.
2. Indirect Taxes - imposed on a particular article or transactions which are
paid by others than those from within the collector receive payment.

Example of Direct Taxes (Naguit)

1.
2.
3.
4.
5.
6.

Income tax
Inheritance tax
Estate tax
Donors tax
Capital Gains tax
Documentary stamp

Example of Indirect Taxes (Naguit)

1.
2.
3.
4.

Value added tax

Sales tax
Percentage tax
Excise tax

Other fees, charges and burdens collected by the bureau of customs

1.
2.
3.
4.
5.
6.

Harbor fee
Wharfage due
Berthing charge
Storage charge
Arrastre charge
Tonnage due

Prohibition against delegation of taxing power (Naguit)

The power to impose tax is purely legislative; congress cannot delegate the
power to others. At least three distinct ideas have contributed to the development
of the principle that legislative power cannot be delegated. Once of the reason is
the doctrine of separation of powers. It means that each must exercise its power
without intruding into the exercise of the powers of the other branches, for they are
independent and coordinate.

Prohibition against taxation of government entities (Naguit)

Government agencies and instrumentalities are generally exempted from
taxation, unless otherwise provided by law. The reason is obvious, a tax is levied up
so that public property would render necessary new taxes in order to pay this tax

Politics and Governance with Philippine Constitution

Topic: power of taxation, importance of taxation, nature of taxation & meaning of taxes.

and through the government would be taxing itself to raise money to pay over to
itself. (De Leon, Agrarian Reform and Taxation)

Classification of income (Naguit)

Gross income it means all income derived from whatever source, including but not
limited to the following items:
1. Compensation for service in whatever form paid, including, but not limited to
fees, salaries, wages, commissions, and similar items;
2. Gross income derived from the conduct of trade or business or the exercise of
a profession;
3. Gains derived from dealings in property;
4. Rents;
5. Royalties;
6. Dividends;
7. Annuities;
8. Prizes and winnings;
9. Pensions; and
10.Partners distributive share from net income of the general professional
partnership.
Ordinary income
Taxable income
Passive income
Net income is the net income minus allowable deductions
Exclusions from gross income (Naguit)
1.
2.
3.
4.
5.
6.
7.

Life insurance
Amount received by insured as return of premium
Gifts, and devices
Compensation for injuries or sickness
Income exempt under treaty
Retirement benefits, pension and gratuities
Miscellaneous items.

Taxpayer it means any person subject to tax imposed as imposed by the national
internal revenue code.

Politics and Governance with Philippine Constitution

Topic: power of taxation, importance of taxation, nature of taxation & meaning of taxes.

Taxpayer classifications (Naguit)

1. Individual taxpayer
a. Resident citizen
b. Non-resident citizen
c. Resident aliens
d. Non-resident aliens
2. Corporate taxpayer
a. Domestic corporation
b. Foreign corporation
c. Resident corporation
d. Non-resident corporation
3. General professional partnerships
4. Estates and trusts
Nature of power of taxation
1. Legislative- this power can only be exercised by the law making body (Congress)
not the executive or the judicial branch of the government, except when delegated
by the national legislative body to a local legislative body or to the executive branch,
subject to limitations as may be provided by law
2. Inherent in sovereignty- the power exists as an incident or attribute of sovereignty,
as it is essential to the existence of every government. The power can therefore be
exercised even without the constitution or any law expressly conferring such power

Flow of discussions
1. Meaning of tax (Leao, Jr.)
2. Meaning of taxation (from different sources)
3. Basis of taxation (Leao, Jr.)
4. The classification of income (Leao, Jr.)
5. The importance of taxation
6. When taxation starts(history of taxation)
7. Classification and forms of taxes
8. Nature of taxation
9. What is a taxpayer?
10.What type of taxation were into (classification of taxpayer)
11.Power of taxation
12.Essential characteristics of taxation
13.Limitations

Politics and Governance with Philippine Constitution