TAXATION

Vivienne Jonnah R. Cemine

Department of Political Science, MSU-IIT
A. Taxation, In General


B. History of Taxation


C. Taxation in the Philippines


D. Kinds of Taxes


Taxation Defined
The inherent power of the state
- 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 objectives
of the government
Theory of Taxation
Lifeblood Theory

- Without revenue raised from
taxation, the government
will not survive, resulting in
detriment to society

- Performance of governmental functions
redounds to the benefit of the populace in
general

- Revenues could be raised to defray
expenditures for public purposes
Basis of Taxation
Symbiotic Relationship


- The reciprocal relation of
protection and support between
the state and the taxpayers


- The state gives protection and for it to
continue giving protection, it must be
supported by the taxpayers in the form of
taxes
Purposes of Taxation
The basic purpose
- Revenue purpose: to raise funds to meet the
objectives of government

To secondary purposes
- Sumptuary or regulatory purpose: to
promote the general welfare; ex. Sin Tax


- Compensatory purpose: to maintain
high level of employment thru the
acceleration of infrastructure projects

Canons of Taxation
Principles of a Sound Tax System

- Fiscal adequacy: must be able to provide sufficient
revenues to meet the objectives
of government

- Administrative feasibility: should easily be
implemented to assure the smooth
flow into the treasury of the fiscally
adequate amounts

- Theoretical justice: should be collected
premised on the ability to pay
History
Reign of Egyptian Pharaohs
- Pharaoh would conduct a biennial tour
of the kingdom

Earliest taxes in Rome
- Taxes known as Portoria were customs
duties on imports and exports

- Augustus Caesar introduced the
inheritance tax to provide retirement
funds for the military.




History
In England
- Taxes were first used as an emergency measure

In the Philippines
- The pre-colonial society, being communitarian,
did not have taxes




History
In Modern Industrial Nations

- The government designates a tax base (such as
income, property holdings, or a given commodity)


- A Tax Law is a body of rules passed by the
legislature by which the government
acquires a claim on taxpayers to
convey, transfer and pay to the public
authority




Taxation in the Philippines
Tax law in the Philippines covers national and local taxes:


National taxes: refer to national internal revenue
taxes imposed and collected by the
national government through the
Bureau of Internal Revenue (BIR)


Local taxes: refer to those imposed and
collected by the local government.
Taxation in the Philippines
The 1987 Philippine Constitution sets limitations
on the exercise of the power to tax:

The rule of taxation shall be uniform and
equitable. The Congress shall evolve a progressive
system of taxation.

(Article VI, Section 28,
paragraph 1)


Taxation in the Philippines
The Constitution expressly grants tax exemptions:


Charitable institutions, churches, parsonages or
convents appurtenant thereto, mosques, and non-
profit cemeteries and all lands, buildings and
improvements actually, directly and exclusively
used for religious, charitable or educational
purposes.
(Article VI, Section 28, paragraph 3)


Taxation in the Philippines
National Internal Revenue Law: codifies all tax
provisions, the latest of which is embodied in Republic
Act No. 8424 (The Tax Reform Act of 1997)

- Taxpayer: any person subject to tax whose
sources of income is derived from within the
Philippines

- Taxpayer Identification Number (TIN)
is required for any individual taxpayer



Kinds of Taxes
Income Tax
- Tax on a person's income,
emoluments, profits arising from
property, practice of profession,
conduct of trade or business

Donors Tax
- Tax imposed on donations inter-vivos or
those made between living persons to take
effect during the lifetime of the donor

Estate Tax
- Tax on the right of the deceased
person to transmit property at death


Kinds of Taxes
Value-added Tax (VAT)
- Tax on consumption levied
on the sale, barter, exchange or lease of
goods or properties and services in
the Philippines and on importation of
goods into the Philippines

Capital Gains Tax
- Tax imposed on the gains presumed
to have been realized by the seller for
the sale, exchange or other disposition
of real property located in the
Philippines
Kinds of Taxes
Excise Tax
- Tax applicable to specified goods
manufactured in the Philippines for
domestic sale or consumption

Documentary Stamp Tax
- Tax on documents, instruments, loan
agreements and papers, agreements
evidencing the acceptance, assignments,
sale or transfer of an obligation, rights or
property incident thereto


Who Pays Taxes
Resident citizens
- Taxed on all their net income
derived from sources within
and without the Philippines


Alien individuals
- Whether a resident or not, is taxable
only on income derived from sources
within the Philippines


Philippine Tax Rates

Income Tax Rate - 32%

Corporate Tax Rate - 30%

Value Added Tax Rate 12%

Tax Avoidance
The exploitation by the taxpayer of
legally permissible alternative
rates or methods of assessing
taxable property or income to
reduce or entirely avoid tax liability

- Availing of all deductions allowed by law of
refraining from engaging in activities subject
to tax
Tax Evasion
A scheme used outside those lawful means and when
availed of, it usually subjects the taxpayer to further or
additional civil or criminal liabilities:

- Under-declaration of income
- Non-declaration of income and other items
subject to tax
- Under-appraisal of goods subject to tariff
- Over-declaration of deductions
Tax Avoidance v. Tax Evasion
VALIDITY:
Legal; not subject to illegal; subject to
criminal penalty criminal penalty


EFFECT:
Minimization of taxes Almost always
results in absence
of tax payments

MEANS & METHOD
Legal; valid means Illegal methods


Thank you!
Vivienne Jonnah R. Cemine
Department of Political Science, MSU-IIT