General Principles: Concept and Definition of Taxation

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GENERAL PRINCIPLES CONCEPT AND DEFINITION OF TAXATION

Concept and Definition

The term taxation defines the power by which the sovereign raises revenue to defray the necessary expenses of the government.

Taxation, in its broadest and most general sense, includes every charge or burden imposed by the sovereign power upon persons, property, or property rights for the use and support of the government and to enable it to discharge its appropriate functions, and in that broad definition there is included a proportionate levy upon persons or property and all the various other methods and devices by which revenue is exacted from persons and property for public purposes.

The process or means by which the sovereign, through its law-making body, raises income to defray the necessary expenses of government; a method of apportioning the cost of government among those who in some measures are privileged to enjoy its benefits and must, therefore, bear its burdens

Taxation is enforced proportional contributions from persons and properties, exacted by inherent power of the State by virtue of its sovereignty for the support of government and for all public needs.

CLASS NOTES: Power of Taxation is different from Police Power. For example, business taxes are under Police Power, not Power of Taxation.

Taxation can also regulate (i.e. SIN Taxes). Power of Taxation plus Police Power equals Power to Destroy.

There are differences between Power of Taxation and Police Power and Eminent Domain.

Characteristics

Enforced Contribution

Two. Payable through Money.

Three. Proportionate in Character.

Four. Levied by Congress.

Five. Territorial in Operations.

Six. Levied for Public Purpose

Seven. Unlimited in Nature.

Purpose

Principles of a Sound Tax System

INHERENT AND CONSTITUTIONAL LIMITATIONS OF TAXATION

Public Purpose

Inherently Legislative

Exceptions:

Territoriality / Situs of Taxation

International Comity

Exemption of Government Agencies

Reason for the exemption:

Constitutional - from the law:

Due Process and Equal Protection Clause

Freedom of Expression

Religious Freedom

Non-imprisonment for non-payment of poll tax

Origin of Revenue or Tariff Bills

Law-Making Process

Veto Power of the President

Tax Exemptions of Religious, Educational, and Charitable Institutions or Organizations from Property Tax

Voting Requirement for Grant of Tax Exemption

Prohibition on the Use of Public Money or Property for Religious Purposes

Prohibition on the Use of Tax Levied for Special Purpose

Judicial Review Power of the Supreme Court

Local Government Units' Taxing Authority

Requisites of a Valid Tax

Lifeblood Doctrine; Manifestations; Prohibition on Compensation and Set-off, Impact, and Effect

Manifestations

Prohibition on Compensation and Set-off

General Rule:

Exception:

Impact and Effect of the Prohibition on Compensation and Set-off

AUTHORITY OF CONGRESS, SECRETARY OF FINANCE, AND COMMISSIONER OF INTERNAL REVENUE

Exception: Taxation may be exceptionally delegated, subject to such well-settled limitations as:

Oversight Function:

Requisites for validity and effectivity of regulations:

Revenue regulations are

Exceptions: The Commissioner may not delegate the following:

The Commissioner of Internal Revenue's function and authority is lodged from Section four to seven of the Tax Code, summarize as follows:

CONSTRUCTION AND INTERPRETATION OF TAX LAWS RULES, AND REGULATIONS

Construction of Tax Laws

Exceptions

Construction of Tax Rules and Regulations

Construction of Penal Provisions of Tax Laws

Summary:

DOUBLE TAXATION

Constitutionality of Double Taxation

International Double Taxation

Direct Duplicate Taxation

The requisites are:

Indirect Duplicate Taxation

Mitigants

ESCAPE FROM TAXATION

Shifting

Ways of shifting the tax burden:

Factors in Determining Tax Shifting:

Taxes that Can be Shifted:

Elements:

TAX EXEMPTION

Grounds for Tax Exemption:

Kinds of Tax Exemption:

Construction of Tax Exemption:

Exceptions:

COMPROMISE AND TAX AMNESTY

Definition of Compromise:

Requisites of a Tax Compromise:

Definition of Tax Amnesty:

TAXPAYER'S SUIT: RATIONALE AND REQUISITES

Requisites:

Limitations:

Classification of Taxes:

Two. As to who bears the burden or incidence - direct versus indirect

Three. As to purposes

Four. As how amount is determined

Five. As to taxing authority

Rationale:

Requisites:

RE: DUE PROCESS AND EQUAL PROTECTION CLAUSES: The input tax is not a property or a property right within the

Arkansas Writers' Project versus Ragland

Two Instances of Violating Freedom of Expression:

American Bible Society versus City of Manila (landmark case) - The license fees are not valid.

Tolentino versus Secretary of Finance (landmark case) -

La Sallian Educational Innovators Found. vs. CIR - Petitioner is exempt from paying taxes and duties.

CIR v. St. Luke's Medical Center, Inc - St.

Chevron Philippines, Inc. vs. BCDA - The royalty fee is for regulatory purposes.

INCOME TAX

Criteria in Imposing Philippine Income Tax

CLASS NOTES: The term 'nonresident citizen' means:

Kinds of Taxpayers

Individual Taxpayers

Non-resident Citizens - A nonresident citizen is taxable only on income derived from sources within the Philippines.

Corporations

Nationality (Grandfather Rule) and Incorporation Rule.

Resident Foreign and Non-resident Foreign.

Estates

Trusts

Income

Requisite for an income to be taxable:

Rule

Test of Recognition

Gross Income: all income derived from whatever source, including, but not limited, to the following items:

Exclusions:

Taxability of Income

Requisites for Income to be Taxable:

Sources

Non-Resident Alien

Fringe Benefits

De Minimis Benefits

Substituted Filing System Conditions:

Professional Income

Business Income

Active vs. Passive Income

Rule on Intracorporate Dividends (Section twenty-four (D) (four), NIRC as amended)

CLASS NOTES: Re: Business Income: Individuals

Domestic Corporations

Income from Dealings in Property (Section thirty-nine, NIRC as amended)

Capital versus Ordinary Asset

Types of Gains

CLASS NOTES: Computation of Gain or Loss (Section forty (A), NIRC as amended)

Tax Free Exchanges (Section forty (C) (two), NIRC as amended

Gross Income versus Net Income versus Taxable Income

Net Income

Taxable Income

Tax Deductions versus Tax Credits

Optional Standard Deduction

OSD for Corporations, except non-resident foreign corporations: In lieu of

CLASS NOTES: Re: Allowable Deductions under Section thirty-four, NIRC as amended:

Requirements for Allowable Deductions for Interest:

Allowable Deductions on Taxes under Section thirty-four C, NIRC as amended.

Requisites for Allowable Deductions for Casualty Losses:

Allowable Deductions on Net Operating Loss Carry Over:

Allowable Deductions on Bad Debts under Section thirty-four E, NIRC as amended.

Allowable Deductions on Depreciation under Section thirty-four F, NIRC as amended.

Requisites for Allowable Deductions FOR DEDUCTIONS:

Allowable Deductions on CHARITABLE AND OTHER CONTRIBUTIONS under Section thirty-four(H). NIRC as amended.

Allowable Deductions on RESEARCH AND DEVELOPMENT under Section thirty-four(I), NIRC as amended.

Allowable Deductions on PENSION TRUSTS under Section thirty-four(J), NIRC as amended.

Withholding Taxes

Duties of a Withholding Agent

Overview

This document examines the concept and definition of taxation, detailing the government's authority to raise revenue and the principles that govern a sound tax system. It also addresses inherent and constitutional limitations impacting the enforcement of tax laws.

Key Points

1Taxation is defined as the government's power to raise revenue for public needs
2The primary purpose of taxation includes generating funds and promoting the general welfare of citizens
3Key characteristics of taxation include enforceability, proportionality, and public purpose
4There are inherent limitations that can render tax laws unconstitutional if violated
5The legislature retains the power to set tax rates and collect taxes, with some delegation to local governments and administrative agencies.

Details

Category: Law and Legal Studies

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