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General Principles of Taxtion Part 2

This document outlines key concepts in taxation including: 1. It classifies taxes as direct or indirect and further categorizes direct taxes as progressive, proportional, or regressive and indirect taxes as specific or ad valorem. 2. It discusses the situs of taxation and how this helps determine what is taxable in the Philippines versus foreign countries. 3. It compares various terms related to taxation such as toll, tax, penalty, permit/license fee, debt, and discusses how they differ. 4. It outlines some means of avoiding or minimizing the tax burden including shifting, transformation, evasion, avoidance, exemption, and amnesty. 5. It discusses the sources of tax

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Claudemir Arias
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38 views

General Principles of Taxtion Part 2

This document outlines key concepts in taxation including: 1. It classifies taxes as direct or indirect and further categorizes direct taxes as progressive, proportional, or regressive and indirect taxes as specific or ad valorem. 2. It discusses the situs of taxation and how this helps determine what is taxable in the Philippines versus foreign countries. 3. It compares various terms related to taxation such as toll, tax, penalty, permit/license fee, debt, and discusses how they differ. 4. It outlines some means of avoiding or minimizing the tax burden including shifting, transformation, evasion, avoidance, exemption, and amnesty. 5. It discusses the sources of tax

Uploaded by

Claudemir Arias
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
You are on page 1/ 19

GENERAL

jasmin.villapando@lpu.edu.ph
PRINCIPLES OF
TAXATION
Jasmin Villapando
Outline of The Topics:
• Classification of Taxes
• Situs of Taxation
• Tax distinguished from other terms
or imposts
• Double Taxation
• Means of avoiding or minimizing
the burden of taxation
• Kinds of exemption from Taxation
• Sources of Tax Law
• Nature of Internal Revenue Laws
• Construction of Tax Laws
Classification of Taxes
Direct Tax - a tax that a person or organization
pays directly to the entity that imposed it.

o Progressive
o Proportional
o Regressive
Indirect Tax - imposed on one person or group,
like manufacturers, then shifted to a different
payer, usually the consumer.

o Specific
o Ad Valorem
DIRECT TAXES
PROGRESSIVE PROPORTIONAL REGRESSIVE

A progressive tax is based on the Also referred to as a flat tax, is a One where the average tax burden
taxpayer's ability to pay. It tax in which the percentage of tax decreases with income. Low-
imposes a lower tax rate on low- taken from a person's income income taxpayers pay a
income earners than on those remains the same, regardless of disproportionate share of the tax
with a higher income. how much money he or she earns. burden, while middle- and high-
income taxpayers shoulder a
relatively small tax burden.
INDIRECT TAXES
SPECIFIC AD VALOREM

Refers to the excise tax imposed which is based on Latin phrase that translates to “according to the
weight or volume capacity or any other physical unit value.” The essential characteristic of ad valorem tax
of measurement. is that it is proportional to the value of the
underlying asset.
Situs of Taxation Place of Taxation
This helps the government classify actions and determine whether or not it is taxable in the
Philippines. This also helps separate the taxation powers of foreign countries from the
Philippines.

Without this provision, any country can step on the boundaries of each other and even tax
the citizens of other countries.
Situs of Taxation Place of Taxation
The benefit of learning about the situs of your income includes:

o Knowing the available tax exemptions;


o Knowing your obligations to avoid incurring unnecessary penalties; and
o Determining the proper tax rates of certain transactions
Tax distinguished from other terms or imposts
TOLL TAX
Demand of Proprietorship Demand of Sovereignty

Paid for the use of another Paid for the support of the
property government

Amount is based on cost of Amount is based on the


construction or necessities of the State
maintenance of the public
improvement used

Maybe imposed by the May be imposed only by


government or private the State
individuals or entities
Tax distinguished from other terms or imposts
PENALTY TAX
Design to regulate conduct Primarily aim at raising
revenue

May be imposed by the May be imposed only by


government or private the government.
individuals or entities
Tax distinguished from other terms or imposts
PERMIT/LICENSE FEE TAX
For regulation For revenue

Exercise of Police Power Exercise of taxing power

Amount is limited to the Generally no limit


necessary expenses or
regulation

Imposed on the right of Imposed also on persons


reward of an officer for or property
specific services
Tax distinguished from other terms or imposts
DEBT TAX
Based on Contract Based on Law

May be paid in kind Generally payable in


money

Assignable/may be the Cannot generally be


subject of set-off or assignable/subject of set-
compensation off or compensation

A person cannot be Imprisonment is a sanction


imprisoned for non- for non-payment of tax
payment of debt (except (except poll tax)
when it arises from a
crime)
Double Taxation
There is double taxation when the same taxpayer is taxed twice when he should be taxed
only once for the same purpose by the same taxing authority within the same jurisdiction
during the same taxing period, and the taxes are of the same kind or character.

For example, corporate profits may be taxed first when earned by the corporation
(corporation tax) and again when the profits are distributed to shareholders as a dividend or
other distribution (dividend tax).
Means of avoiding or minimizing the burden of taxation
SHIFTING – transfer of the burden of a tax by the
original taxpayer or the one on whom the tax was
assessed or imposed to someone else.

TRANSFORMATION – an escape from taxation


where the producer or manufacturer pays the tax
and endeavor to recoup himself by improving his
process of production thereby turning out his
units of products at a lower cost.

EVASION – use by the taxpayer of illegal or


fraudulent means to defeat or lessen the
payment of a tax. Also known as Tax Dodging.
Means of avoiding or minimizing the burden of taxation
TAX AVOIDANCE – exploitation by the taxpayer of
legally permissible alternative tax rates or
methods of assessing taxable property or income
in order to avoid or reduce tax liability. Also
known as Tax minimization.

EXEMPTION – grant of immunity to particular


persons or corporations or to persons or
corporations of a particular class from a tax
which persons and corporations generally within
the same state or taxing district are obliged to
pay.
Means of avoiding or minimizing the burden of taxation
AMNESTY – general or intentional overlooking vy
the state of its authority to impose penaltie son
persons otherwise guilty of evasion or violation
of a revenue or tax law.

AVOIDANCE – tax saving device within the means


sanctioned by law. This method should be used
by the taxpayer in good faith and at arm’s length.
Kinds of exemption from Taxation
As to Basis:
Constitutional – immunities from taxation that originates
from the constitution
Statutory – Immunities from taxation which emanates
from legislation.

As to Form:
Express – exemption expressly granted by statute.
Implied – when particular persons, property, or rights are
deemed exempt as they fall outside the scope of the
taxing provision itself.

As to Extent:
Total – Connotes absolute immunity
Partial – one where a collection of a part of the tax is
dispensed with.
Sources of Tax Law
1. Constitution
2. National Internal Revenue Code
3. Tariff and Custom Code
4. Local Government Code
5. Tax treaties and International
agreements
6. Special laws
7. Decisions of the supreme court and the
court of Tax Appeals
8. Revenue rules and regulations and
administrative rulings and opinions
Nature of Internal Revenue Laws

o Internal revenue laws are not


political in nature

o Tax laws are civil and not penal


in nature although there are
penalties provided for their
violation
Construction of Tax Laws
o Public purpose is always presumed
o If the law is clear, apply the law in accordance to its
plain and simple tenor.
o A statute will not be construed as imposing a tax
unless it does so clearly, expressly and ambiguously.
o In case of doubt, it is construed most strongly against
the government and liberally in favor of the taxpayer.
o Provisions of a taxing act are not to be extended by
implication.
o Tax laws operate prospectively unless the purpose of
the legislature is to give retrospective effect expressly
declared or may be implied from the language used.
o Tax laws are special laws and prevail over a general
law.

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