Quote for the day

 “Taxesare the lifeblood of government

and no taxpayer should be permitted to
escape the payment of his just share of
the burden of contributing thereto.”

- Arthur Vanderbilt
WHAT IS TAXATION?
A means by which government finance
their expenditure by imposing charges
on citizens and legal entities.
 Just like blood makes body function and
sustains it, taxation does the same for a
Government/Country. Taxes are the
lifeblood of any country and without
taxes, our country cannot deliver
government services, or protect our
sovereignty.
WHAT IS TAXATION?
Tax accounting is governed by the
National Internal Revenue Code of
1997 (as amended) which dictates
the specific rules that companies
and individuals must follow when
preparing their tax returns.
 Relevant issuances of bir that affects accounting
principles
Revenue Regulations (RR) are issuances
signed by the Secretary of Finance, upon
recommendation of the Commissioner of
Internal Revenue, that specify, prescribe or
define rule and regulations for the effective
enforcement of the provisions of the National
Internal Revenue Code (NIRC) and related
statutes.
 Relevant issuances of bir that affects
accounting principles
Revenue Memorandum Circulars (RMCs)
are issuances that publish pertinent and
applicable portions, as well as
simplification, of laws, rules and
regulations and precedents issued by the
BIR and other agencies/offices.
 Relevant issuances of bir that affects
accounting principles
 Revenue Memorandum Rulings (RMR) are rulings,
opinions, and interpretations of the Commissioner
with respect to the provisions of the Tax Code and
other laws, as applied to specific set of facts, with
or without established precedents, and which the
commissioner may issue from time to time to inform
taxpayers of the tax consequences on specific
situations.
Objectives of Taxation
Taxation is much more than just a means
of raising revenue for the government . It
is also one of the major means by which
the National Government attempts to
achieve various economic and social
objectives.
Economic and Social Objectives
1.Shiftingwealth from the rich to
the poor
2.Maintaining price stability
3.Stimulating economic growth
4.Encouraging full employment
 State Powers
1.Taxation- the power of the state by which
the sovereign raises revenue to defray the
necessary expenses of the government
2.Eminent Power- the power of the state to
take private property for public use upon
payment of just compensation
 State Powers
3. Police Power- the power of the state
to enact laws to promote public health,
public morals, public safety and the
general welfare of the people
 Aspects of Taxation
1.Levying of the tax- The imposition of tax
requires legislative intervention. In the
Philippines, it is Congress that levies
taxes.
2.Collection of the tax levied. This is
essentially an administrative function
Basic Principles of a Sound Tax System

1. FiscalAdequacy- Sources of revenue are sufficient

to meet government expenditures
2. Equality or theoretical justice – The tax imposed
must be proportionate to taxpayer’s ability to pay
3. Administrative feasibility- The law must be
capable of convenient, just and effective
administration
Limitations on the Power of Taxation
1.Constitutional Limitations – are those
provided for in the constitution or
implied from its provisions
2. Inherent Limitations – are restrictions to
the power to tax attached to its nature.
Inherent Limitations
1.Purpose – Taxes may be levied only for
public purpose
2.Territoriality- The State may tax persons
and properties under its jurisdiction
3.International comity- the property of a
foreign State may not be taxed by
another.
Inherent Limitations
4. Exemption Government agencies
performing governmental functions are
exempt from taxation
5.Non- Delegation The power to tax
being legislative in nature may not be
delegate
Situs of Taxation

The situs of Taxation is the place of

taxation . The rule is that the State
may rightfully levy and collect the
tax where the subject being taxed
has a situs under its jurisdiction.
Factors to determine in Situs of Taxation

1. Subject matter- or what is being

taxed. He may be a person or it may
be a property an act or activity.
2. Nature of tax- or which tax to
impose. It may be an income tax, an
import duty or a real property tax
Factors to determine in Situs of Taxation

3. Citizenship of the taxpayer

4. Residence of the taxpayer
The following situs of taxation apply:
1. Persons – Residence of Tax payer
2. Real Property or tangible personal
property – Location of the property
3. Intangible personal property – as a
rule, situs is the domicile of the
owner unless he has acquired a situs
elsewhere.
The following situs of taxation apply:
4. Income – Taxpayer’s residence or
citizenship, or place where the
income was earned.
5. Business occupation and
transaction- Place where business is
being operate, occupation being
practiced and transaction completed.
The following situs of taxation apply:
6. Gratuitous transfer of property-
taxpayer’s residence or citizenship or
location of the property.
 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.
 Essential Characteristics of a
tax
1. It is an enforced contribution
2. It is levied by the lawmaking body
3. It is proportionate in character
4. it is generally payable in money
 Essential Characteristics of a
tax
5. It is imposed for the purpose of
raising revenues.
6. It is to be used for public purpose
Types of Tax rate Structures
 1. Regressive tax – if the average rate decreases
as the tax base increase.
 2. Proportional Tax – also called flat or uniform
taxes, the average rate of tac remains constant
for all levels of the tax base.
 3. Progressive tax is one for which the average
rate increases as the amount of the tax bases
increases.