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Chapter 1 Introduction To Consumption Taxes

Consumption taxes are levied on the acquisition or use of goods and services. There are three main types: percentage tax, value added tax (VAT), and excise tax. Consumption taxes are charged regardless of whether the purchase is for business, personal, or charity use. The rationale for consumption taxes includes encouraging savings formation, benefiting from goods and services in proportion to taxes paid, and redistributing wealth to society. Domestically, sales of services and goods are subject to different consumption tax treatments, as are imports of services and goods.

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72 views1 page

Chapter 1 Introduction To Consumption Taxes

Consumption taxes are levied on the acquisition or use of goods and services. There are three main types: percentage tax, value added tax (VAT), and excise tax. Consumption taxes are charged regardless of whether the purchase is for business, personal, or charity use. The rationale for consumption taxes includes encouraging savings formation, benefiting from goods and services in proportion to taxes paid, and redistributing wealth to society. Domestically, sales of services and goods are subject to different consumption tax treatments, as are imports of services and goods.

Uploaded by

Micko Lagundino
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 1: Introduction to Consumption Taxes

Saturday, 29 February 2020 8:29 PM

Consumption Tax
Types of Consumption Taxes:
Consumption refers to the acquisition or utilization of goods or services by any person. The Utilization of 1. Percentage tax
goods or services may be through purchase, exchange or other means. This utilization is subject to a tax 2. Value Added Tax
called consumption tax. 3. Excise tax

Consumption is levied without regard to the purpose of the purchaser or consumer whether it is for
business, personal or charity use.

Foreign Consumption
Rationale of Consumption Tax "Destination Principle"
1. Savings formation Only goods and services destined for consumption in the Philippines
2. Rationalization of Benefit Received Theory are subject to consumption tax while those destined for consumption Following the cross-border doctrine, goods that
3. Wealth redistribution to society abroad are not subject to consumption tax cross the border destined for foreign countries are
not charged consumption taxes. Due to this, the
government do not impose taxes on exports. The
NIRC either exempts exports or subject them
TYPES OF CONSUMPTION to a 0% tax rate

Domestic Consumption
Domestic Sales Importation

Sale of Services: Sale of Goods: Import of Services: Import of Goods:


a. Exempt a. Exempt a. Exempt a. Exempt
b. Specifically subject to percentage tax b. Vatable b. Subject to percentage tax b. Subject to VAT on importation
c. Vatable c. Subject to final withholding VAT

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