Taxation in the Philippines

Cheryl Anne Demafi les

SS02 Economics

What is Tax?

TAXATION is defined in many ways.Commonly heard definitions include:

It is the process by which the sovereign, through its law making body, races revenues

use to defray expenses of government.It is a means of government in increasing its

revenue under the authority of the law, purposely used to promote welfare and

protection of its citizenry.It is the collection of the share of

individual and organizational income by a government under the authority of the law.

Taxation is the inherent power of the state to impose

and demand contribution upon persons, properties, or

rights for the purpose of generating revenues for

public purposes.

The power of taxation upon necessity and is

inherent in every government or sovereignty.

Concept of Tax

Distinction of Tax

Tax distinguished from Toll- A tax is demand of sovereignty, while toll is

demand for proprietorship.- A tax is paid for the use of the government’s

property, while a toll is paid for the use of another’s property.

- A tax may be imposed by the government only, while a toll is enforced by the government or a private individual or entity.

Tax distinguished from Penalty- A tax is intended to raise revenue, while penalty is

designed to regulate conduct.- A tax may be imposed by the government only

while a penalty may be imposed by the government or a private individual.

Tax distinguished from Debt- A tax is base on law, while a debt is based on

contract.- A tax may not be assignable, while a debt is

assignable.- A tax is generally payable in cash, while debt is

payable in cash or in kind.- A person may be imprisoned for a non-payment

of taxes, but any person may not be imprisoned for non-payment of debt.

What is the History of Tax?

To support the colony, several taxes and monopolies were

established. The buwis (tribute), which could be paid in cash or kind,

with tobacco, chickens, produce, gold, blankets, cotton, rice, or other products depending on the region of

the country.

Also there was the bandalâ (from the Tagalog word mandalâ, a round stack

of rice stalks to be threshed), an annual forced sale and requisitioning

of goods such as rice

-Polo y Servicious

Purposes and Significance of

TaxPrimary purpose: generates funds or revenues use to defray expenses

incurred by the government in promoting the general welfare of its

citizenry.Public expenditure

Other purposes: to equitably contribute to the

wealth of the nation

Characteristics of Tax

It is enforced contribution. Its payment is not voluntary nature, and the imposition is not dependent upon the will of the person taxed.

It is generally payable in cash. This means that payment by checks, promissory notes, or in kind is not accepted.

It is proportionate in character. Payment of taxes should be base on the ability to pay principle; the higher income of the tax payer the bigger amount of the tax paid.

It is levied (to impose; collect) on person or property. There are taxes that are imposed or levied on acts, rights or privileges. Ex. Documentary tax.

It is levied by the state which has jurisdiction over the person or property. As a general rule, only persons, properties, acts, right or transaction with in the jurisdiction of the taxing state are subject for taxation.

It is levied by the law making body of the state. This means that a prior law must be enacted first by the congress before assessment and collection may be implemented of the 1987 constitution.

It is levied for public purposes. Taxes or imposed to support the government for implementation of projects and programs.

1. As to subject matter• Personal, Poll or Capitation Tax (ex.

Residence Tax)• Property Tax. (ex. Real State Tax)

2. As to who bears the burden• Direct Tax (ex. Income Tax)• Indirect Tax (ex. Buying of goods and

services (RVAT) )

Classification of Taxes

3. As to purpose General Tax (ex. Almost All

Taxes)Special Tax

4. As to scopeNational Tax (ex. National

Revenue Taxes)Local Tax

MODYUL 22 ANG PAMBANSANG BADYET.pdf

Principles of Taxation

Fiscal adequacy. Means that the sources of revenue taken as a whole should be sufficient to meet the expanding expenditures of the government regardless of business, export taxes, trade balances, and problems of economic adjustment. Revenues should be capable expanding or contracting annually in response to variations of public expenditures.

Equality or Theoretical Justice. Means the taxes levied must be base upon the ability of the citizen to pay.

Administrative Feasibility. This principle connotes that in a successful tax system, such tax should be clear and plain to taxpayers, capable of enforcement by an adequate and well-trained staff of public office, convenient as to the time and manner payment, and not unduly burdensome upon on discouraging to business activity.

Consistency or Compatibility with Economic Goals. This refer to the tax laws that should be consistent with economic goals or programs of the government. This are the basic services intended for the masses.

Tax ExemptionoReligious InstitutionsoCharitable InstitutionsoNon-Profit, Non-Stock

Educational InstitutionsoNon-profit CemeteriesoGovernment InstitutionsoForeign Diplomats

How to pay Tax?

How to Compute Income Tax in the Philippines

Computing income tax expense and payable is different for individuals and corporations. Taxable corporations may be taxed using a fixed income tax rate.

On the other hand, if you are a self-employed professional or an owner of a single proprietorship business, your income tax expense is computed using a graduated tax rate. It is a progressive tax which the tax rate increases as the taxable base amount increases. This means that the higher taxable income you have, the higher your income tax expense is.

Personal Excemption1. Single or divorced without dependent

P50,000

2. Head of the Family

P50,000

3. Married individuals

P50,000

Government Budget and Expeditures

In National Income Accounting, government spending,

government expenditure, or government spending on goods

and services includes all government consumption and

investment by a state.

DBM Files\2012 Annual Report.pdf

Government acquisition of goods and services for current use to directly satisfy individual or collective needs of the members of the community is called government final consumption expenditure (GFCE.) Government acquisition of goods

and services intended to create future benefits, such as

infrastructure investment or research spending, is called gross

fixed capital formation, or government investment, which

usually is the largest part of the government

Issues on Public

Finance

• Taxation• Budget Deficit• Privatization

Budget Deficit

DBM Files\Budget Deficit Financing.pdf

Kapag lumabis ang gastos sa kita ng pamahalaan,nagiging malaki ang

kakulangan at naaapektuhan ang katatagan ng pamahalaan.Ito ay tinatawag na depisit sa

badyet o budget deficit.

Privatization

Source:

Internet:www.dbm.gov.ph

www.tradingeconomics.comOthers: National Statistical Coordination Board (NSCB)Batayang Ekonomiks