Taxation - Economics

8/3/2019 Taxation - Economics

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TAXATION

Prepared by: Amit Tahilani

[email protected]



TAXATION•History of Taxation

•importance of taxation to the

taxpayers and to the government

•Kinds and Characteristics of Taxes•Taxation System in the Philippines



History• During the reign of Egyptian Pharaohs

• Scribes as tax collectors

• In Greece

• A tax referred to as Eisphora was imposed only in times of war

• In Athens• A monthly tax called Metoikon was collected to foreigners

• Ancient Greek Taxation• Taxation was used as an emergency power. Additional

resources gained from war were used to refund tax previously

collected from the people



• Earliest taxes in Rome

• Taxes known as Portoria were customs duties on importsand exports

• Augustus Caesar introduced the inheritance tax to provide

retirement funds for the military. The tax was five percent on

all inheritances except gifts to children and spouses

• In England• Taxes were first used as an emergency measure

• Taxes on income or capital were a recent development as a

result of increasing government intervention in the economy

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

taxes



• 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



• The system of compulsory

contributions levied by a government

or other qualified body on people,corporations and property in order to

fund public expenditures.

• An inherent power of the state to raiseincome and to demand enforced

contributions for public purposes.

Taxation



Purposes Taxation

• to raise revenues for public needs so thatpersons can live in a civilized society

• The government increase taxes in order to

stabilize prices and stimulate greater production.

• An instrument of fiscal policy influences

the direction and structure of moneysupply, investments, credits, production,

interest rate, inflation, prices and in

general, of the national economy



Characteristics of a sound Taxsystem

• Fairness

• Clarity and Certainty• Convenience

• Efficiency



Effects of Taxation• Personal Income Tax which is presumed to fall

entirely on the legal taxpayers influences

decisions to work, save, and invest. These

decisions affect other people.• Corporate Income Tax may simply result to

lower corporate profits and dividends. It may

reduce their income of all owners of property and

businesses. The company may move towardraising the prices of their products



Taxation in the

Philippines• The legislative branch enacts laws to

continually revitalize the taxation policy of

the country

• BIR (Bureau of Internal Revenue) – Mandated to comprehend the assessment

and collection of all national internal revenue

taxes, fees and charges so as to promote a

sustainable economic growth



Taxation in the

Philippines• Republic Act No. 8424

(Comprehensive Tax Reform Act of

1997)

– Tax Payer: any person subject to tax

whose sources of income is derived

from within the Philippines

– TIN (Taxpayer Identification Number) is

required for any individual taxpayer



Taxation in the

Philippines• Tax Reforms: – Lower income tax rates to enhance the

competitiveness of the Philippines in the region

– Removal of areas which provide avenues for tax

avoidance and abuse

– Exemption of OFWs from payment of tax for

income earned outside the Philippines

– Simplification of the tax system which encourages

payments from tax payers including those from the

underground economy



Taxation in the

Philippines• Taxes are collected within a

particular period of time know as

taxable year • This is the calendar year or the fiscal

year that covers an accounting period

of 12 months ending on the last day of any month other that December.



Kinds of taxes• Income Tax

– Tax on all yearly profits arising form property,possessions, trades or offices

– Tax on a person’s income, emoluments and profits

• Donor’s Tax – Tax imposed on donations inter-vivos or those made

between living persons to take effect during the lifetimeof 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 imposed and collected on every sale, barter,

exchange or transaction deemed sale of taxable

goods, properties, lease of goods, services or properties in the course of trade as they pass along the

production and distribution chain

• Capital Gains Tax

– Tax imposed on the gains presumed to have beenrealized by the seller for the sale, exchange or other

disposition of real property located in the Philippines,

classified as capital assets



Kinds of taxes• Excise Tax

– Tax applicable to specified goods

manufactured in the Philippines for domestic

sale or consumption – Specific tax: imposed on certain goods based on weight

or volume capacity or any other physical unit of

measurement (Specific tax = volume x tax rate)

» Alcohol products, petroleum products, tobaccoproducts

– Ad valorem tax: imposed on certain goods based on

selling price or other specified value of the goods

(Ad valorem tax = selling price x tax

rate



Kinds of taxes• Documentary Tax

– Tax on documents, instruments, loan

agreements and papers, agreements

evidencing the acceptance, assignments, saleor transfer of an obligation, rights or property

incident thereto



Withholding tax• Expanded withholding tax:

– A system of collecting taxes

whereby the taxes withheld oncertain income payments are

intended to equal or at leastapproximate the tax due of the

payer on said income.



Withholding tax• Final withholding tax:

– A system of collecting taxes whereby

the amount of income tax withheld bythe withholding agent is constituted as a

full payment of the income tax due form

the payer on the said income. The payer is not required to file an income tax

return for the particular income.



Withholding tax• Withholding tax for

compensation income:

– Commonly referred to as pay as you goor pay as you earn.

– A method of collecting the income tax at

source upon receipt of the income.



Shifting the incidence

of taxation – Shifting taxation is the process of

passing the burden of the tax to others.

– A tax can be shifted when the taxpayer

is able to obtain a higher price for

something he sells or when he pays a

lower price for a commodity he

purchases.



Tax Evasion• When there is fraud through pretension

and the use of other illegal devices to

lessen one’s taxes, there is tax evasion

– 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



AssignmentWrite your answer in a 1 whole sheet of

paper

1. Define the following:

– Poverty

– Poverty line

– Degradation

2. Explain the causes of poverty

3. What are the effects of poverty?

Date post:	06-Apr-2018
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