M4 Lesson 4: Taxation Classification of Taxes:

Lesson 3 Taxation As to subject matter or object

• Personal, poll or capitation
Basic Taxation - fixed amount taxes imposed on people residing in a
The Concept of Taxation, its Importance, Principles, and specified territory without regard to properties or
Classifications earnings.
• Property
General Principles - taxes imposed on real and personal property.
• Tax – enforced proportional contributions from • Excise
persons and property levied by the state for the support - tax imposed on consumption and engagement in the
of its public needs. practice of a profession
• Taxation – a rate by which government makes As to purpose
exactions for revenue in order to support its existence
and carry out legitimate purpose for general welfare. • General, fiscal or revenue.
• The Importance of taxation derives from the • Special or regulatory
unavoidable obligation of the government to protect the As to scope
people and extend them benefits in the form of public • National
projects and services. • Municipal or Local
• In exchange, persons are subjected to the reciprocal
duty of sharing the expenses to be incurred therefore As to determination of account
through the payment of tax. • Specific
Similarities - Taxes imposed no specific amounts on a specific
• Inherent and need no express constitutional grant. standard of measurement.
• Not just necessary but indispensable • Ad valorem
• Modes by which the state interferes with private rights. - this is a tax which is added into the assessed value of a
• They presupposes equivalent compensation though not taxable entity.
necessarily determined in pecuniary. As to graduation or rate
• Exercised primarily by the legislative department or law • Proportional
makers. - taxes that are computed as a fixed proportion of the
• Intended only for the general welfare and public value of an entity being taxed in the rate of consumption.
purpose. • Progressive
- those are taken whose rates increase as the entity
Three Inherent Powers of the STATE being taxes also increases.
• POLICE - The power to control everything for general • Regressive
welfare - opposite of progressive.
Lawful means and Lawful subject
*Salus populi est suprema lex Kinds of Taxes
**Sic utere tuo ut alienum non laedas • Income Tax - these earnings are taxed by the national
• EMINENT DOMAIN - The power to expropriate government and are progressive
properties for public use for Just compensation in nature.
• Donor’s Tax - the act of a certain person in disposing
• TAXATION - The power to demand contributions from without consideration of money or giving certain thing in
anyone enjoying its protection and benefits favor of another who accepts it.
*Life-blood Theory • Estate Tax - tax imposed on the right of a deceased
*Equal, Uniform and Equitable person to transfer the estate to his lawful heir or
*Public purpose beneficiary.
Taxation - the power to demand from the members of • Value Added Tax - tax imposed on the sale and/or
the society of their proportionate share or contribution in exchange of goods and services.
the maintenance of the state as a whole; it is also the act • Excise Tax - tax imposed on specific goods produced in
of imposing and collecting a tax. the Philippines for local consumption.
Other Percentage Taxes
Characteristics of Taxes: • Documentary Stamp Tax - tax on legal documents and
• Taxes are enforced contribution. papers.
• Taxes are generally payable in money. • Customs duties and tariffs - customs duties are taxes
• Taxes are imposed on persons or property. imposed on the importation and exportation of goods in
• Taxes are levied by the national and local government. and out of the country.
• It takes a congressional act to put up taxes. • Travel Tax - tax imposed on travel whether local or
• Taxes are imposed solely for public purposes. foreign.
• Energy Tax - tax imposed on the use of petroleum
products.
• Private motor vehicle tax - tax imposed on the owners
of private motor vehicles.
Other terms
• Tax Levying - act of putting up taxes on persons,
activities and products.
• Tax Assessment - is the official action of an officer duty
authorized by law in determining the amount of tax due.
• Tax Collection - process of getting the taxes imposed
by the proper government agencies.
• Tax Avoidance - the use by a taxpayer of legally and
permissible means or methods in order to avoid or
reduce tax liability. It is not punishable by law.
• Tax Evasion - is the use by a taxpayer of illegal or
fraudulent means to defeat or reduce the payment of a
tax; it is punishable by law.
Limitation on the Power of Taxation
• Principle of due process of land.
• Rule of Uniformity
• Equal protection of the laws.
• Nobody can be imprisoned for non – payment of a poll
tax.
• No taxes shall be imposed which would impair religious
freedom.
• No appropriation or use for religious purpose can be
done.
• Religious, charitable, educational entities, non-profit
cemeteries and churches are exempted from taxes.
• Non-stock, Non-profit educational or other institutions
are exempted from paying taxes.
• Tax exemption cannot be done outright.
• The President has the authority to veto a particular
item or items in a revenue or tariff bill.
• Taxes cases in all levels of the courts will be under the
final jurisdiction of the Supreme Court.
Common administrative approaches which allow the
government to collect taxes
• Seizure by the government of personal property to
enforce the payment of taxes.
• Levy of real property.
• Enforcement of forfeiture
• Entering into a compromise tax liability
• Filing of bonds.
• For the late payments and delinquent taxpayers,
surcharge and interest can be imposed.
• Giving of rewards to informers.
• Certain officers of BIR are allowed to make arrests,
searches and seizures.
• Aliens may be deported if they willingly refuse to pay
taxes.
• Inspection of book of accounts.
• Inquiring into bank accounts.