BASIC PRINCIPLE OF TAXATION

Prepared by : Jinelle T. De Jesus

Taxation
Taxation is the inherent power of the sovereign, exercised through the legislature, to impose burdens upon subjects and objects within its jurisdiction for the purpose of raising revenues to carry out the legitimate objects of government. It is also defined as the act of levying a tax, i.e. the process or means by which the sovereign, through its law-making body, raises income to defray the necessary expenses of government. It is a method of apportioning the cost of government among those who, in some measure, are privileged to enjoy its benefits and must therefore bear its burdens.

Taxes

Taxes are the enforced proportional contributions from persons and property levied by the law-making body of the State by virtue of its sovereignty for the support of the government and all public needs.

Essential elements of a tax

1. It is an enforced contribution 2. It is generally payable in money. 3. It is proportionate in character. 4. It is levied on persons, property, or the exercise of a right or privilege. 5. It is levied by the State which has jurisdiction over the subject or object of taxation. 6. It is levied by the law-making body of the State. 7. It is levied for public purpose or purposes.

Purposes of taxation
1. Revenue or fiscal: The primary purpose of taxation on the part of the government is to provide funds or property with which to promote the general welfare and the protection of its citizens and to enable it to finance its multifarious activities.
2. Non-revenue or regulatory: Taxation may also be employed for purposes of regulation or control.

Classification of Taxes
1. Personal, poll or capitation tax

Tax of a fixed amount imposed on persons residing within a specified territory, whether citizens or not, without regard to their property or the occupation or business in which they may be engaged. 2. Property tax Tax imposed on property, real or personal, in proportion to its value or in accordance with some other reasonable method of apportionment.
3. Excise tax

A charge imposed upon the performance of an act, the enjoyment of a privilege, or the engaging in an occupation.

As to purpose
1.General/fiscal/revenue tax
A general/fiscal/revenue tax is that imposed for the purpose of raising public funds for the service of the government. 2. Special/regulatory tax A special or regulatory tax is imposed primarily for the regulation of useful or non-useful occupation or enterprises and secondarily only for the purpose of raising public funds

As to who bears the burden

1. Direct tax

A direct tax is demanded from the person who also shoulders the burden of the tax. It is a tax which the taxpayer is directly or primarily liable and which he or she cannot shift to another.
2. Indirect tax

An indirect tax is demanded from a person in the expectation and intention that he or she shall indemnify himself or herself at the expense of another, falling finally upon the ultimate purchaser or consumer. A tax which the taxpayer can shift to another.

As to scope of the tax

1. National tax
A national tax is imposed by the national government.

2.

Local tax

A local tax is imposed by municipal corporations or local government units (LGUs).

As to the determination of amount

1. Specific tax A specific tax is a tax of a fixed amount imposed by the head or number or by some other standard of weight or measurement. It requires no assessment other than the listing or classification of the objects to be taxed. 2. Ad valorem tax

An ad valorem tax is a tax of a fixed proportion of the value of the property with respect to which the tax is assessed. It requires the intervention of assessors or appraisers to estimate the value of such property before the amount due from each taxpayer can be determined.

As to gradation or rate
1. Proportional tax Tax based on a fixed percentage of the amount of the property receipts or other basis to be taxed. Example: real estate tax. 2. Progressive or graduated tax

Tax the rate of which increases as the tax base or bracket increases. Example: income tax.

Digressive tax rate: progressive rate stops at a certain point. Progression halts at a particular stage.
3. Regressive tax

Tax the rate of which decreases as the tax base or bracket increases. There is no such tax in the Philippines.

INHERENT LIMITATIONS
1) Situs or territoriality of taxation 2) Must be for a Public purpose

3) International comity
4)Non-delegability of the taxing power 5) Exemptions of Government agencies

Constitutional limitations
1. 2. 3. Due process of law Equal protection of laws Rule of uniformity and equity in taxation

4. Prohibition against imprisonment for nonpayment of poll tax

5. Prohibition against impairment of obligation of contracts

6. Prohibition against infringement of religious freedom 7. Prohibition against appropriation of proceeds of taxation for the use, benefit, or support of any church 8. Prohibition against taxation of religious, charitable and educational entities 9. Prohibition against taxation of non-stock, nonprofit educational institutions

The End Thank you!