Do your own research and produce your notes by answering the following questions:

1.)    Enumerate and briefly define the three inherent powers of the State.

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

Eminent Domain - power of the State to take private property for public use after payment of just
compensation.

Taxation - to enforce proportional contribution from its subsects to sustain itself.

2.)    What is the primary purpose of taxation?

The primary purpose of taxation is raising income or funds to defray the necessary expenses of the
government or to finance government operational expenditures. Taxation is also utilized as a
tool to carry out national objectives of social and economic development. It may also be used to
reduce inequalities in wealth and income by imposing progressively higher tax rates as in the
cases of estate and income taxes. Taxation also prevents or reduces inflation.

3.)    Four (4) scopes of taxation (No need to define) – acrostic: SCUP

Supreme, Comprehensive, Unlimited, Plenary or Complete

4.)    Principles of a sound tax system and briefly define each – acrostic: FEA

Fiscal adequacy - sources of revenue should be sufficient to meet the demands of public
expenditures

Equality or theoretical justice - tax imposed should be proportionate to the taxpayer’s ability to pay
“ability to pay principle”

Administrative feasibility - tax laws should be capable of convenient, just, and effective
administration

5.)    Characteristics of the state’s power to tax and briefly define each – acrostic: ILS

Inherent in sovereignty or authority being essential to the existence of every government

Legislative in nature, only the legislatures can impose taxes

Subject to constitutional and inherent limitations, it is not an absolute power that can be exercised
by legislatures in any way it pleases. Limitations are provided in fundamental law (e.g., equal
protection law, due process of law, rule of uniformity)

6.)    Inherent limitations on the power of taxation

Territoriality of taxation

International comity

Public purpose

Exemption of the government

Non-delegation of the taxing power

7.)    Constitutional limitations on the power to tax

Due process of law

Equal protection of the law

Uniformity rule in taxation

Progressive system of taxation

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

Non-impairment of obligation and contract

Free worship rule

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

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

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

Concurrence of a majority of all members of Congress for the passage of a law granting tax
exemptions

Non-diversification of tax collections

Non-delegation of the power of taxation

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

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

The delegation of taxing power to local government units

8.)    Essential elements or characteristics of tax

It is an enforced contribution

It is generally payable in the form of money

It is laid by some rule of apportionment

It is levied in persons, property, acts, privileges or transactions

It is levied by the State which has jurisdiction or control over the subject to be taxed

It is levied by the law-making body of the State

It is levied for public purpose

9.)    Classification of taxes (and BRIEFLY define each)

i.                     As to subject matter or object

Personal poll or capitation- tax imposed on individuals residing within a specified territory

Property tax- tax imposed on properties , real or personal

Excise or privilege tax- tax imposed on performance of an act, enjoyment of a privilege

or engagement in an occupation

ii.                   As to who bears the burden

Direct tax- tax is collected from the person who is intended to pay the same

Indirect tax- tax is paid by any person other than the one who is intended to pay

iii.                  As to determination of amount

Specific- tax of a fixed amount imposed on a per unit basis such as per kilo, liter or
meter etc.

Ad valorem- tax of a fixed proportion imposed upon the value of the tax object
 iv.                 As to purpose

Fiscal or revenue tax- tax imposed for general purposes

Regulatory- to regulate business conduct, acts or transactions

Sumptuary- to achieve social or economic objectives

v.                   As to imposing authority (territory)

National tax- imposed by national government

Local tax- imposed by municipal or local governments

vi.                 As to graduation or rate

Proportional tax- based on flat or fixed rate tax,

Progressive or graduated tax- imposes increasing rates as the tax base increase

Regressive tax- imposes decreasing tax rates as the tax base increases

Mixed tax- combination of any of the adobe types of tax.

10.) Distinguish tax versus:

i.                     Toll  

TAX TOLL

a levy of government charge for the use of other’s property,

demand of sovereignty demand of ownership

Depends upon needs of government Depends upon the value of the property leased

Private entities cannot impose tax Both private and government entities impose toll

ii.                   License

TAX LICENSE
 Has a broader subject

Emanates from taxation power Emanates from police power

Imposed after the commencement of a business or Imposed before engagement in those

profession activities

Post-activity imposition Pre-activity imposition

iii.                  Debt

TAX DEBT

Arises from law Arises from private contracts

Non-payment leads to imprisonment Does not 

Cannot be Can be subject to set off

Generally payable in money Can be paid in kind (dacion en pago)

Draws interest only when taxpayer is Draws when it is stipulated by the contracting parties
delinquent or legal delay

11.) Types of double taxation

Direct double taxation

Indirect double taxation

12.) Differentiate tax avoidance vs tax evasion

Tax avoidance is known as tax minimization which is the reduction of taxes by any legally
permissible means  whereas tax evasion is known as tax dodging which is the reduction of tax
in illegal manner or avoidance of payment of tax.

13.) Enumerate and briefly define the forms of escape from taxation

Tax Evasion aka tax dodging is any act that intends to illegally reduce or avoid the payment of tax

Tax Avoidance aka tax minimization is any act that reduces or totally escapes taxes by any legally
permissible means
Tax exemption aka tax holiday is the immunity, privilege or freedom from being subject to a tax
which others are subject to.

Shifting is the process of transferring tax burden to other taxpayers

Capitalization is the adjustment of the value of an asset caused by changes in tax rates

Transformation is the elimination of wastes or losses by the taxpayer to form savings to

compensate for the tax imposition or increase in taxes

14.) State the tax situs for the following:

a.       Business, occupation, or transaction

Businesses are subject to tax in the place where the business is conducted

b.      Real and tangible personal property

Properties are taxable in their location

c.       Income

The gain on sale is subject to tax in the place of sale

d.      Gratuitous transfer of property

Residence of taxpayer or location of property

15.) Explain the following interpretation of tax laws: Tax laws are liberally in favor of the taxpayer
and are strictly construed against the government, except in cases of tax exemptions and
deductions.

Tax laws are given liberal construction for the reason that taxes are a burden. The law must be clear that
you are covered in that exemption.  A taxpayer invoking the exemption must show or prove or has the burden that it will be
exempted or that he is covered by the exemption.  Taxation is the rule and exemption is the exception.

16.) Sources of tax laws

Constitution

Statutes and Presidential Decree

Judicial Decisions or case laws

Executive Orders and Batas Pambansa

Administrative Issuances

Local Ordinances

Tax Treaties and conventions with foreign countries

Revenue regulations

17.) Rule on set-off of taxes

Taxes are not subject to automatic set-off or compensation. Tax is not subject to set-off

Exception

Where the taxpayer’s claim has already become due and demandable such as when the
government already recognized the same and an appropriation for refund was made

Cases of obvious overpayment of taxes

Local taxes

18.) Define the global and schedular systems of taxation

A schedular income tax is one in which separate taxes are imposed on different
categories of income. A global income tax is one in which a single tax is imposed on all
income, whatever its nature.

19.) Define these other doctrines in taxation:

i.                     Taxpayer’s suit

An action brought by an individual whose income is subjected to charges imposed by the

state or federal government, for the benefit of that individual and others in order
to prevent the unlawful diversion of public funds.

ii.                   Equitable recoupment

A doctrine that allows the government to collect a tax or a taxpayer to collect refund of
tax after running of the statute of limitations for such collections in cases where
the statutes of limitations creates an inequitable result

iii.                  Tax amnesty

Amnesty is a general pardon granted by the government for erring taxpayers to

give them a chance to reform and enable them to have a fresh start to be part of
a society with a clean slate. It is an absolute forgiveness or waiver by the
government to collect and is retrospective in application.