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TAXATION
Camille Anne E. Duterte
4LM3
December 17, 2015
GENERAL PRINCIPLES
What is
Taxation?
Definition
It is the power by which
the sovereign, through its
law-making body, raises
revenue to defray the
necessary expenses of th...
Why is it
important?
Rationale
Taxes are what we pay for
the civilized society. Without
taxes, the government would
be paralyzed for lack of
motive power...
• Taxpayers owe honesty to the government just
as government owes fairness to taxpayers.
(Commissioner of Internal Revenue...
Where does the
State get its
power to tax?
Nature of Taxing Power
• Inherent in the State
• Not to be exercised arbitrarily
• Power emanating from necessity.
“x x x a necessary burden to p...
• Not granted in the Constitution; Constitution
merely provides for limitations
• Peculiarly and exclusively legislative i...
What are taxes?
Taxes
Taxes are:
• Enforced proportional contribution from
persons and property levied by the law-
making body of the State by virtue of it...
Characteristics of Taxes:
Taxes have the
following
characteristics:
Forced charge contribution; operates in
invitum; not contracts but positive acts of the
gov’t
Pecuniary burden payable i...
Imposed on persons, property or services
within State’s jurisdiction
For public purpose
Gives rise to criminal liabilit...
Why do they say that
the power to tax is the
power to destroy?
The Power to Destroy
Justice Holmes: The power to tax is not
the power to destroy
• Taxation is not an unlimited power. The
validity of the ena...
Marshal dictum: The power to tax is
the power to destroy
• It is a destructive power which interferes with
the personal an...
What are the different
purposes of taxation?
Purposes of Taxation
• Revenue
• Non-revenue:
– Promotion of general welfare
– Regulation
– Reduction of Social Inequity
– Encourage economic g...
Principles of a Sound Tax System
It is important to know whether
a tax bill intended to be passed
in Congress has the thre...
1. Fiscal Adequacy
– sufficient to meet public expenditure
– Neither excess nor deficiency
2. Administrative Feasibility
–...
Judicial Review
When does the
Judiciary come into
picture?
• As long a the legislature does not violate
applicable constitutional limitations, courts
have no concern with the wisdom...
 Personal
 Property
 Direct
 Indirect
 Excise
 General
 Special
 Specific
 Ad Valorem
 Customs Duties
 National...
LIMITATIONS ON THE TAXING
POWER
Taxation Power Limitations
What are the two
limitations on the
Taxing power of the
State?
The limitations can
either be In...
Inherent
• Proceed from the very
nature of the taxing power
itself
• Distinct and positive
limitations which inhere in
tax...
1. Public Purpose
– The State’s paramount concern is the promotion of general
welfare
2. Non-delegability
– GR: Taxing pow...
Non-delegable vs Delegable legislative
powers
Tax Legislation
• Selection of the property to
be taxed
• Determination of t...
3. Territoriality
– Situs – place of taxation
– Only extends to persons, property or businesses
within its jurisdiction
4....
• Lutz v. Araneta 98 Phil 148
• Pepsi-Cola Bottling Co. of the Ph., Inc. v. City of Butuan,
et al., L-22814, Aug 28, 1968
...
a) Due Process of Law – Sec. 1, Art. III, 1987
Constitution
b) Equal Protection of the Law - Sec. 1, Art. III, 1987
Consti...
f) Origin of Appropriation, Revenue and Tariff Bills –
Sec. 24, Art. VI, 1987 Constitution
g) Uniformity, Equitability and...
• Villegas v. Hiu Chiong Tsai Pao Ho, et al., L-29646, Nov. 10,
1978
• Cagayan Electric Power & Light Co., Inc. v. Comm. o...
INCOME TAXATION
What is
INCOME?
INCOME is wealth that
flows into the taxpayer
other than mere return
of capital, within a
specified time
For example:
You sold your house
property worth P 1,000,000
for P 1,500, 000.
Your Income from the sale
was P 500, 000
In computing for Income
tax, we answer the
following questions:
How do I know if Income is
taxable?
Can illegal Income be
taxable?
Yes, illegal income is
taxable by law because it
is forfeited in favour of the
government or return to
owner under Claim o...
How do I know the proper
period of payment?
Tax can either be computed
for Gross Income (sec.
32(A), NIRC) or for Certain
Passive Income (Sec. 24(B),
NIRC)
The National Internal
Revenue Code provides for
Certain Passive Income (Sec.
24(B),NIRC)
The National Internal
Revenue Code provides for
Gross Income (Sec.
32(A),NIRC)
The National Internal
Revenue Code provides
for the Exceptions of
Gross Income (Sec.
32(B),NIRC)
What are
deductions and
where can I find
them in the law?
Deductions are those
subtracted from the taxable
expenses of a p...
I took a browse at the
Deductions provision of the law.
I learned that the following are
deductions granted by law to
thos...
A good example of depreciation
is a vehicle used for business
which value can be divided into
five, representing 5 usable ...
It is important to also take
note of Sec. 36 (M). The
deduction is applicable also to
Compensation Income Earners
After going through
Deductions, the Income
Tax computation also
provides for Exemptions
Yes. Exemptions are either
Persona...
Here is more on that:
How do we
compute for the
Income Tax a
taxpayer ha to
pay?
To answer that, we have
to know first the
formula.
The End.
Taxation Summary
Taxation Summary
Taxation Summary
Taxation Summary
Taxation Summary
Taxation Summary
Taxation Summary
Taxation Summary
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Taxation Summary

  1. 1. TAXATION Camille Anne E. Duterte 4LM3 December 17, 2015
  2. 2. GENERAL PRINCIPLES
  3. 3. What is Taxation? Definition
  4. 4. It is the power by which the sovereign, through its law-making body, raises revenue to defray the necessary expenses of the government.
  5. 5. Why is it important? Rationale
  6. 6. Taxes are what we pay for the civilized society. Without taxes, the government would be paralyzed for lack of motive power to activate and operate it.
  7. 7. • Taxpayers owe honesty to the government just as government owes fairness to taxpayers. (Commissioner of Internal Revenue vs Tokyo Shipping Co., Ltd., et al., GR No. 68252) • No one, not even the State shall enrich itself at the expense of another. (BPI-Family Savings Bank, Inc. vs CA, et al., GR No.122480) We have to understand the relations between the State and the People in Taxation Symbiotic Relationship (State and its People)
  8. 8. Where does the State get its power to tax? Nature of Taxing Power
  9. 9. • Inherent in the State • Not to be exercised arbitrarily • Power emanating from necessity. “x x x a necessary burden to preserve the State’s sovereignty and a means to give the citizenry an army to resist an aggression, a navy to defend its shores from invasion, a corps of civil servants to serve, public improvement designed for the enjoyment of the citizenry and those which come within the State’s territory and facilities, and protection which a government is supposed to provide.” (Phil. Guaranty Co., Inc., vs Commissioner of Internal Revenue, et al.) Nature of Taxing Power It is inherent but not unlimited.
  10. 10. • Not granted in the Constitution; Constitution merely provides for limitations • Peculiarly and exclusively legislative in character • Subject to inherent and constitutional limitations Nature of Taxing Power
  11. 11. What are taxes? Taxes Taxes are:
  12. 12. • Enforced proportional contribution from persons and property levied by the law- making body of the State by virtue of its sovereignty for the support of government and for public needs. • Lifeblood of the government • Purpose: generate funds for the State to finance the needs of the citizens and advance common weal Taxes
  13. 13. Characteristics of Taxes: Taxes have the following characteristics:
  14. 14. Forced charge contribution; operates in invitum; not contracts but positive acts of the gov’t Pecuniary burden payable in money Levied by the legislative body; obligations created by law Assessed according to reasonable rule of apportionment Characteristics of Taxes:
  15. 15. Imposed on persons, property or services within State’s jurisdiction For public purpose Gives rise to criminal liability Characteristics of Taxes
  16. 16. Why do they say that the power to tax is the power to destroy? The Power to Destroy
  17. 17. Justice Holmes: The power to tax is not the power to destroy • Taxation is not an unlimited power. The validity of the enactment (tax laws) depends upon the nature and character of the right destroyed. If so great an abuse is manifested to destroy natural and fundamental rights which no free government consistently violate, it is the duty of the judiciary to hold such an act unconstitutional.
  18. 18. Marshal dictum: The power to tax is the power to destroy • It is a destructive power which interferes with the personal and property rights of the people and takes from them a portion of their property for the support of the government.
  19. 19. What are the different purposes of taxation? Purposes of Taxation
  20. 20. • Revenue • Non-revenue: – Promotion of general welfare – Regulation – Reduction of Social Inequity – Encourage economic growth – Protectionism Purposes of Taxation
  21. 21. Principles of a Sound Tax System It is important to know whether a tax bill intended to be passed in Congress has the three elements of a Sound Tax imposition are present
  22. 22. 1. Fiscal Adequacy – sufficient to meet public expenditure – Neither excess nor deficiency 2. Administrative Feasibility – Capable of being effectively administered with least inconvenience 3. Theoretical Justice – Considers taxpayer’s ability to pay – Uniform and equitable – Evolve a progressive system of taxation Principles of a Sound Tax System
  23. 23. Judicial Review When does the Judiciary come into picture?
  24. 24. • As long a the legislature does not violate applicable constitutional limitations, courts have no concern with the wisdom or policy of the exaction, the political or other collateral motives behind it, the amount to be raised, or the persons, property or other privileges to be taxed. Judicial Review
  25. 25.  Personal  Property  Direct  Indirect  Excise  General  Special  Specific  Ad Valorem  Customs Duties  National  Local  Progressive  Regressive  Proportionate Here are the different classifications of Taxes: Classification of Taxes
  26. 26. LIMITATIONS ON THE TAXING POWER
  27. 27. Taxation Power Limitations What are the two limitations on the Taxing power of the State? The limitations can either be Inherent or Constitutional
  28. 28. Inherent • Proceed from the very nature of the taxing power itself • Distinct and positive limitations which inhere in taxing power’s nature and exist whether declared or not in the Constitution Constitutional • Limitations found in the Provisions in the Constitution Taxation Power Limitations
  29. 29. 1. Public Purpose – The State’s paramount concern is the promotion of general welfare 2. Non-delegability – GR: Taxing power may not be delegated – XPN: • Congress may expressly authorize the President to fix within specified limits tariff rates, import and export quotas, tonnage and wharfage dues and other duties within the framework of national development programs of the government (Sec 28 (2) Art. VI, 1987 Constitution) • Local government units may create its source of revenues and levy taxes, fee and charges subject to guidelines and limitations of Congress consistent with the basic policy of local autonomy. (Sec. 5, Art. X, 1987 Constitution) Inherent Limitations
  30. 30. Non-delegable vs Delegable legislative powers Tax Legislation • Selection of the property to be taxed • Determination of the purposes for which taxes shall be levied • Fixing the rate • Rules of taxation Tax Administration • Power to value property • Equalization of assessments by a central body • Collection of taxes
  31. 31. 3. Territoriality – Situs – place of taxation – Only extends to persons, property or businesses within its jurisdiction 4. Exemption of Government from Taxes – Real property owned by the government or any of its political subdivision is exempted unless the beneficial use is for consideration of a taxable person 5. International Comity Inherent Limitations
  32. 32. • Lutz v. Araneta 98 Phil 148 • Pepsi-Cola Bottling Co. of the Ph., Inc. v. City of Butuan, et al., L-22814, Aug 28, 1968 • Smith Bell & Co., Inc. v. Commissioner of Internal Revenue, L-28271, July 25, 1975 • Phil. Guaranty Co., Inc. v. Commissioner of Internal Revenue, L-22074, Apr 30, 1965 • Wells Fargo Bank & Union Trust Co. v. Collector of Internal Revenue, 70 Phil 325 • Commissioner of Internal Revenue v. British Overseas Airways Corp., et al, GR Nos. 65773-74, Apr 30, 1987 Cases
  33. 33. a) Due Process of Law – Sec. 1, Art. III, 1987 Constitution b) Equal Protection of the Law - Sec. 1, Art. III, 1987 Constitution c) Freedom of Speech and of the Press – Sec. 4, Art. III, 1987 Constitution d) Non-Infringement of Religious Freedom – Sec. 5, Art. III, 1987 Constitution e) Non-Impairment of Contracts – Sec. 10, Art. III, 1987 Constitution Constitutional Limitations
  34. 34. f) Origin of Appropriation, Revenue and Tariff Bills – Sec. 24, Art. VI, 1987 Constitution g) Uniformity, Equitability and Progressivity of Taxation – Sec. 28(1), Art. VI, 1987 Constitution h) Delegation of Legislative Authority to Fix Tariff Rate, etc. – Sec. 28(2), Art. VI, 1987 Constitution i) Tax Exemption of Properties Actually, Directly, and Exclusively Used for Religious, Charitable, and Educational Purpose – Sec. 28(3), Art. VI, 1987 Constitution Constitutional Limitations
  35. 35. • Villegas v. Hiu Chiong Tsai Pao Ho, et al., L-29646, Nov. 10, 1978 • Cagayan Electric Power & Light Co., Inc. v. Comm. of Internal Revenue, GR No. 60126, Sept. 25, 1985 • Ormoc Sugar Co. Inc v. Treasurer of Ormoc City, et al, L- 23794, Feb. 17, 1968 • Assoc. of Customs Brokers, Inc., et al v. The Municipal Board, et al, 93 Phil 107 Cases
  36. 36. INCOME TAXATION
  37. 37. What is INCOME? INCOME is wealth that flows into the taxpayer other than mere return of capital, within a specified time
  38. 38. For example: You sold your house property worth P 1,000,000 for P 1,500, 000. Your Income from the sale was P 500, 000
  39. 39. In computing for Income tax, we answer the following questions:
  40. 40. How do I know if Income is taxable? Can illegal Income be taxable?
  41. 41. Yes, illegal income is taxable by law because it is forfeited in favour of the government or return to owner under Claim of Right Doctrine You will know that income is taxable if the following are present:
  42. 42. How do I know the proper period of payment?
  43. 43. Tax can either be computed for Gross Income (sec. 32(A), NIRC) or for Certain Passive Income (Sec. 24(B), NIRC)
  44. 44. The National Internal Revenue Code provides for Certain Passive Income (Sec. 24(B),NIRC)
  45. 45. The National Internal Revenue Code provides for Gross Income (Sec. 32(A),NIRC)
  46. 46. The National Internal Revenue Code provides for the Exceptions of Gross Income (Sec. 32(B),NIRC)
  47. 47. What are deductions and where can I find them in the law? Deductions are those subtracted from the taxable expenses of a person doing business. Sec. 34 of the NIRC provides for this
  48. 48. I took a browse at the Deductions provision of the law. I learned that the following are deductions granted by law to those who operate or own businesses.
  49. 49. A good example of depreciation is a vehicle used for business which value can be divided into five, representing 5 usable years of vehicles Value of Vehicle
  50. 50. It is important to also take note of Sec. 36 (M). The deduction is applicable also to Compensation Income Earners
  51. 51. After going through Deductions, the Income Tax computation also provides for Exemptions Yes. Exemptions are either Personal or Additional.
  52. 52. Here is more on that:
  53. 53. How do we compute for the Income Tax a taxpayer ha to pay? To answer that, we have to know first the formula.
  54. 54. The End.

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