Chapter 1 - Introduction To Taxation

Front 1

It is defined as a State power, a legislative process, and a mode of government cost distribution.

Back 1

Taxation

Front 2

Taxation is an inherent power of the State to enforce a proportional contribution from its subjects for public purpose.

Back 2

Taxation as a State Power

Front 3

Taxation is a process of levying taxes by the legislature of the State to enforce proportional contributions from its subjects for public purpose.

Back 3

Taxation as a legislative process

Front 4

Taxation is a mode by which the State allocates its costs or burden to its subjects who are benefited by its spending.

Back 4

Taxation as a mode of government cost distribution

Front 5

The government can exist without a system of funding. TRUE or FALSE

Back 5

FALSE. The government cannot exist without a system of funding, and their necessity for funding is the THEORY OF TAXATION.

Front 6

Explain the basis of taxation (the mutuality of support between the people and government)

Back 6

The government provides benefits to the people in the form of public services, and the people provide the funds that finance the government in the form of taxes.

Front 7

Tax payers cannot avoid payment of taxes under the defense of absence of benefit received. TRUE or FALSE

Back 7

TRUE. Because the receipt of benefits is conclusively presumed.

Front 8

2 Theories of Cost Allocation

Back 8

Benefit received theory

Ability to pay theory

Front 9

The theory of cost allocation that presupposes that the more benefit once receives from the government, the taxes he should pay.

Back 9

Benefit received theory

Front 10

The theory of cost allocation that presupposes taxpayers should be required to contribute based on their relative capacity to sacrifice for the support of the government.

Back 10

Ability to pay theory

Front 11

2 Aspects of the ability to pay theory

Back 11

Vertical Equity

Horizontal Equity

Front 12

Aspect of the ability to pay theory which proposes that the extent of one's ability to pay is directly proportional to the level of his tax base.

Back 12

Vertical Equity

Front 13

Aspect of the ability to pay theory that requires consideration of the particular circumstance of the taxpayer.

Back 13

Horizontal Equity

Front 14

Gross concept of ability to pay theory

Back 14

Vertical Equity

Front 15

Net concept of the ability to pay theory

Back 15

Horizontal Equity

Front 16

Taxes are essential and indispensable to the continued subsistence of the government. Without taxes, the government would be paralyzed for lack of motive power to activate or operate it. (CIR vs. Algue)

Back 16

The Lifeblood Doctrine

Front 17

Implication of the lifeblood doctrine in taxation

Back 17

1. Tax is imposed even in the absence of a Constitutional grant.

2. Claims for tax exemption are construed against taxpayers.

3. The government reserves the right to choose the objects of taxation.

4. The courts are not allowed to interfere with the collection of taxes.

5. In income taxation:

a. Income received in advance is taxable upon receipt

b. Deduction for capital expenditures and prepayments is not allowed as it effectively defers the collection of income tax.

c. A lower amount of deduction is preferred when a claimable expense is subject to limit.

d. A higher tax base is preferred when the tax object has multiple tax bases.

Front 18

The government sustains itself by the power of taxation, secures itself and the well-being of its people by police power, and secures its own properties to carry out its public services by the power of eminent domain.

Back 18

Inherent powers of the state

Front 19

3 Inherent Powers of the State

Back 19

Taxation Power

Police Power

Eminent Domain

Front 20

The power of the State to enforce proportional contributions from its subjects to sustain itself.

Back 20

Taxation Power

Front 21

The general power of the State to enact laws to protect the well-being of the people.

Back 21

Police Power

Front 22

The power of the State to take private property for the public use after paying just compensation.

Back 22

Eminent Domain

Front 23

Inherent Limitations of the Taxation Power

Back 23

1. Territoriality of taxation

2. International comity

3. Public purpose

4. Exemption of the government

5. Non-delegation of the taxing power

Front 24

Public services are normally provided within the boundaries of the State.

Back 24

Territoriality of Taxation

Front 25

The government can only demand tax obligations upon its subjects or residents within its territorial jurisdiction.

Back 25

Territoriality of Taxation

Front 26

Two-fold obligations of taxpayers:

Back 26

1. Filing of returns and payment of taxes

2. Withholding of taxes on expenses and its remittance to the government

Front 27

Exception to the territoriality principle

Back 27

1. In income taxation, resident citizens and domestic corporations are taxable on income derived both within and outside the Philippines.

2. In transfer taxation, residents or citizens such as resident citizens, non-resident citizens and resident aliens are taxable on transfers of properties located within or outside the Philippines.

Front 28

The fundamental concept of co-equal sovereignty

Back 28

All nations are deemed equal with one another regardless of race, religion, culture, economic condition or military power.

Front 29

No country is powerful than the other. Each country observes mutual courtesy or reciprocity between them.

Back 29

International comity

Front 30

Tax is intended for the common good. It cannot be exercised to further any private interest.

Back 30

Public Purpose

Front 31

The government normally does not tax itself as this will not raise additional funds but will only impute additional costs.

Back 31

Exemption of the government

Front 32

To ensure a system of checks and balances, the legislative taxing power is vested exclusively in Congress.

Back 32

Non-delegation of the taxing power

Front 33

Constitutional limitations of the taxation power

Back 33

1. Due process of law

2. Equal protection of the law

3. Uniformity rule in taxation

4. Progressive system of taxation

5. Non-imprisonment for non-payment of debt or poll tax

6. Non-imprisonment of obligation and contract

7. Free worship rule

8. Exemption of religious or charitable entities, non-profit cemeteries, churches and mosque from property taxes

9. Non-appropriation of public funds or property for the benefit of any church, sect or system of religion

10. Exemption from taxes of the revenues and assets of non-profit, non-stock educational institutions

11. Concurrence of a majority of all members of Congress for the passage of a law granting tax exemption

12. Non-diversification of tax collections

13. Non-delegation of the power of taxation

14. Non-impairment of the jurisdiction of the Supreme Court to review tax cases

15. The requirement that appropriations, revenue, or tariff bills shall originate exclusively in the House of Representatives

16. The delegation of taxing power to local government units

Front 34

No one should be deprived of his life, liberty, or property without due process of law.

Back 34

Observance of due process of law

Front 35

2 aspects of due process

Back 35

1. Substantive due process

2. Procedural due process

Front 36

An aspect of due process wherein tax must be imposed only for public purpose, collected only under authority of a valid law and only by the taxing power having jurisdiction.

Back 36

Substantive due process

Front 37

Aspect of due process wherein there should be no arbitrariness in assessment and collection of taxes, and the government shall observe the taxpayer's right to notice and hearing.

Back 37

Procedural due process

Front 38

Taxpayers should be treated equally both in terms of rights conferred and obligations imposed.

Back 38

Equal protection of the law

Front 39

Tax payers should be classified according to commonality in attributes, and the tax classification to be adopted should be based on substantial distinction.

Back 39

Uniformity rule in taxation

Front 40

Tax rates increase as the tax base increases.

Back 40

Progressive system of taxation

Front 41

An aids in an equitable distribution of wealth to society by taxing the rich more than the poor.

Back 41

Progressive system of taxation

Front 42

No one shall be imprisoned because of his poverty, and no one shall be imprisoned for mere inability to pay debt.

Back 42

Non-imprisonment for non-payment of debt or poll tax