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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 PhilippinesTax 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
• Donor’s 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