TAXATION

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TAXATION : the act of laying tax

Purpose of Taxation : 1. Revenue purposes 2. Regulatory purposes 3. Compensatory purposes

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Taxes : are the enforced proportional contributions from persons and property levied by the law making body of the state by virtue of its sovereignty for the support of the government and public needs

NATURE OF THE POWER OF TAXATION

Inherent power of sovereignty Essentially legislative in function For public purposes The strongest of all the inherent powers of the government Territorial in operation Subject to constitutional and inherent limitation

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It is inherent in sovereignty It is legislative in character It is subject to Constitutional and Inherent limitation

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FISCAL ADEQUACY EQUALITY OR THEORITICAL JUSTICE : based on ability to pay principle ADMINISTRATIVE FEASIBILITY

ESSENTIAL CHARACTERISTIC OF TAX 

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It is an enforced contribution It is generally payable in money It is proportionate in character It is levied on persons or property It is levied by the state which has a jurisdiction over the person or property It is levied by the law making body of the state It is levied for public purposes

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Strengthen anemic enterprise Protect local industries Bargaining tool Halt inflation Reduce inequalities in wealth Promote science Implement police power

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RELIGIOUS PURPOSES RELIGIOUS,CHARITABLE, AND EDUCATIONAL ENTITIES, NON PROFIT CEMETERIES AND CHURCES NON-STOCK, NON-PROFIT EDUCATION INSTITUTION THOSE WHICH HAD BEEN VETO BY THE PRESIDENT GOVERNMENT ENTITIES Business league, chamber of commerce or board of trade not organized for profit General professional partnership Labor. Agricultural, or horticular organization not organized principally for profit Gifts made in account of marriage by parents to each of their legitimate. Recognized natural or adopted children Gifts for use of the national government Gifts made in favor of educational institution, social welfare corporation, research organization Benefit payment to member made by the GSIS and SSS Benefits from the US government through US veterans administration Prize receive by winners in charity horse race The annual senior citizen income of not more than P60,000 per annum NON TERRITORIAL JURISDICTION

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Due Process of Law Equal Protection of the Law Rule of uniformity and equity in taxation No imprisonment for non payment of poll tax Non-impairment of the obligations of contracts Non-infringement of religious freedom No appropriation for religious purposes Exemption of religious, charitable, and educational entities, non-profit cemeteries, and churches from property taxation Exemption of non-stock, non-profit educational institutions from taxation Concurrence by a majority of all members of the Congress for the passage of a law granting tax exemption Power of the President to veto any particular item or itens in a revenue or tariff bill Non-impairment of jurisdiction of the Supreme Court in tax cases

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Requirement that levy must be for a public purpose Non-delegation of the legislative power to tax Exemption from taxation of government entities International Comity Territorial Jurisdiction

Prohibition against appropriation for religious purposes

Prohibition against infringement of religious freedom 

Basis : “ No Law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof. The free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall forever be allowed xxx (Sec. 5, Art. III)

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Basis : No public money or property shall be appropriated, applied, paid or employed, directly or indirectly for use, benefit or support or any sect, church, denomination, sectarian or institution or system of religion or of any priest, preacher, minister or other religious teacher or dignitary as such, except when such, except when such priest, preacher, minister or dignitary, is assigned to the armed forces, or any penal institutions, or government orphanage or leprosarium. (Sec. 29, Art. VI)

Prohibition against taxation of religious, charitable, educational entities 

Basis : Charitable institutions, churches and parsonages or convents appurtenant thereto, mosques, nonprofit cemeteries, and all lands, buildings and improvements actually, directly, and exclusively used for religious, charitable or educational purposes shall be exempt from taxation (Sec. 28, Art VI)

Prohibition against taxation of nonstock, non-profit educational institution

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Basis : All revenues and assets of non-stock, nonprofit educational institutions used actually, directly, and exclusively for educational purposes shall be exempt from taxes and duties xxx (Sec. 4, Art. XIV) Subject to conditions prescribed by law, all grants, endowments, donations or contributions used actually, directly and exclusively for educational purposes shall be exempt from tax (Sec.4, Art. XIV)

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“ No law granting any tax exemption shall be passed without the concurrence of a majority of all members of the Congress” (Sec. 28 (4) Art. VI)

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For purposes of practicality and expediency, our Constitution expressly allows Congress “ to authorize the President to fix within specified limits, and subject to such limitations and restrictions as it may impose, tariff rates, import or export quotas, tonnage and wharfage dues and other duties or imposts.xxx(Sec.28, Art.VI)

Requirement of Uniformity and Equity

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Basis : “The rule of taxation shall be uniform and equitable” (Sec.28, Art. VI)

Basis : “ No person shall beagainst imprisoned for Prohibition imprisonment for nondebt or non payment payment of poll tax(Sec.20, of a poll tax Art.III) 

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Levy – determination of certain amount or of certain percentage to be imposed on persons, property or acts Assessment : computation of the sum due, giving of notice, making of the demand Collection : taking or getting by proper governmental agencies if taxes imposed

 On

or before April 15 of the current year

1. As to subject matter or object : a. Personal, poll or capitation b. Property c. Excise 2. As to who bears the burden : a. direct b. indirect 3. As to determination of amount a. specific b. ad valorem 4. As to purpose : a. general, fiscal or revenue b. special or regulatory

5. As to scope a. National b. Municipal 6. As to graduation or rate a. proportional b. progressive c. regressive

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Income Tax Estate and Donor Tax Value Added Tax Other percentage taxes : on small business enterprise, on carriers, on franchise holders, on persons paying for overseas communications, on banks and non-bank financial intermediaries, on life insurance, on proprietors, lessees or operators of amusement, on winners of prizes in horse races and jai-alai, on sale, barter or exchange of stocks

5. Excise tax on certain goods 6. Documentary stamp tax 7. Other taxes : custom duties, sugar adjustment tax, narcotic drugs, travel tax, private motor vehicle tax, energy tax, special education fund tax

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Income tax : tax on the net income or the entire income realized in one taxable year Transfer taxes: Estate tax :tax on the right of the deceased person to transmit his estate to his lawful heirs or beneficiaries Inheritance tax : tax on the right of the heirs or beneficiaries to receive the estate of the deceased person

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Gift taxes : Donors tax : tax levied on the act of giving Donee’s tax : Value Added tax : uniform tax imposed on each sale, barter or exchange or lease of goods, properties or services

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A uniform tax (0% or 10%) imposed on each sale, barter, exchange or lease of goods, properties or services in the course of trade or business as they pass along the production and distribution chain, the tax being limited only to the value added to such goods, properties, or services by seller, transferor or lessor

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It is levied on every importation of goods

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It is a privilege tax It is a percentage tax It is an indirect tax

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1. On sale of goods or properties : tax is equivalent to 10% of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged 2. On imported goods : tax is equivalent to 10% based in total value used by the Bureau of Customs 3. On sale of services and use or lease of properties : tax is equivalent to 10% of gross receipts derived by any person engaged in the sale or exchange of services for a fee or consideration including the use or lease of properties whether real or personal

Gross sales/rptsx 1/11

=

Output Tax

Less :purchase = of goods x 1/11

Input Tax

Output Tax – Input Tac

VAT payable

=

Sales (domestic)

P660,000

Brokerage Total

330,000 990, 000

Output Tax (1/11)

P90,000

Importation

P220,000

Local purchases: Raw Materials

66,000

Supplies Capital

44,000 165,000

Equipment Services Total Less : Input

55,000

330,000 550,000 50,000

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Persons or enterprise Liable for percentage taxes Small business enterprise (