PRINCIPLES OF

TAXATION
BY:
1/C PALOMO, NIKKO M.
1/C DELOS SANTOS, ARVIN V.
 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 of government
 The action, process, or system of taxing people
or things
 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 support
of the government and all public needs
Essential Elements of a Tax
1. It is enforced contributions which signifies that it is
compulsory on the part of the government and an
obligation of the citizen.
2. Is generally payable in money.
3. It is proportionate in character which means it is largely
based on the ability to pay principle.
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
subjects or objects of taxation
6. It is levied by the law-making body of the state
which is deemed to be the direct representatives
of the taxpayers themselves, the people.
7. It is levied for public purpose or purposes which
takes the form of benefit for the greater majority.
 Purposes of Taxation
1. Revenue or fiscal: the primary purpose of the 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 without which the government cannot
function
2. Non-revenue or regulatory: taxation may also be employed for purposes
of regulation or control. This takes the form of the following measures, to
wit:
a.) imposition or tariffs on imported goods to protect local industries
b.) the adoption of progressively higher tax rate to reduce inequalities in
wealth and income.
c.) the increase or decrease of taxes prevent inflation or ward off
depression
PUBLIC PURPOSE IN TAXATION

 This is one of the inherent limitations of the power

to tax and synonymous to “governmental
purpose”, a tax must always be imposed for a
public purpose otherwise, it will be declared as
invalid. The term “public purpose” has no fixed
connotation
It has been said that the best test
of rightful taxation is the proceeds
tax must be used:
 For the support of the government
 Some of the recognized objects of government
 To promote the welfare of the community
THEORY AND BASIS OF TAXATION

 It should be very well emphasized that 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 citizens and
property within its limit to contribute. The basis of taxation
is found in the reciprocal duties of protection and
support between the state and inhabitants. In return for
his contribution, the taxpayer receive benefits and
protection from the government. This is so-called
“benefit received principles”
Toll vs. Tax

 Toll is a sum of money for the use of something, it is the

consideration which is paid for the use of a road, bridge, or
the like, of a public nature. Taxes, on the other hand, are
enforced proportional contributions from persons and
property levied by the state by virtue of its sovereignty for the
support of the government and all public needs.
 Toll is demand of proprietorship; tax is a demand of
sovereignty.
 Toll is paid for the use of another’s property; tax is paid for the
support of government.
 Toll may be imposed by the government or by private
individuals or entities; tax may imposed only by the
government.
 Tax vs. Penalty
 Penalty is an any sanction imposed as a
punishment for violation of law or for acts
deemed injurious; taxes are enforced
proportional contributions from persons and
property levied by the state by virtue of its
sovereignty for the support of the government
and all public needs. Penalty is a designed to
regulate conduct; taxes are generally intended
to regulate revenue.
 General Rule
 A tax delinquency cannot extinguished by legal
compensation. This is because the government and the
delinquent are not mutually creditors and debtors.
Neither is a tax obligation an ordinary debt. Moreover,
the collection of a tax cannot await the result of a
lawsuit against the government. Taxes are not in the
nature of contracts but grow out of a duty to, and are
the positive acts of the government to the making and
enforcing of which the personal consent of the taxpayer
is not required.
 [francia v. IAC, SCRA 754 and republic v. mambulao
lumber 4 SCRA 622]
Three basic principle of a sound
system
1. Fiscal adequacy
- it means that the sources of revenue should be sufficient to
meet the demands of public expenditure. (Chavez V. Ongpin,
186 SCRA 331)
2. Equality or theoretical justice
- it means that the tax burden should be proportionate to the
taxpayer’s ability to pay. This is the so-called “ability to pay
principle”
3. Administrative feasibility
- it means that the laws should be capable of convenient,
just and effective administration.
End of presentation