What is Taxation

What is taxation? Definition: Taxation refers to the act of a taxing authority actually levying tax. Taxation as a term applies to all types of taxes, from income to gift to estate taxes. It is usually referred to as an act; any revenue collected is usually called "taxes." It is the inherent power by which the sovereign state imposes financial burden upon persons and property as a means of raising revenues in order to defray the necessary expenses of the government (Tax Digest by Crescencio Co Untian, 2002). Taxation is the imposition of financial charges or other levies, upon a taxpayer (an individual or legal entity) by a state such that failure to pay is punishable by law. It is a mode by which government make exactions for revenue in order to support their existence and carry out their legitimate objectives (Tax Law and Jurisprudence by Justice Vitug, 2000).

Concept of Taxation Taxation is the inherent power of the state to impose and demand contribution upon persons, properties or rights for the purpose of generating revenues for public purpose. The power of taxation upon necessity and is inherent in every government or sovereignty.

Significance of taxation • Primary purpose : generate funds or revenues used to defray expenses incurred by the government in promoting the general welfare of its citizenry

• Other purpose : • to equitably contribute to the wealth of the nation • To protect new industries • To protect local producers

Classification of taxes 1. As to subject matter •. personal, poll or capitation tax (ex. Residence tax) •.Property tax (ex. Real estate tax) •.Excise tax (ex. RVAT) 2. As to who bears the burden •.Direct tax (ex. Income tax) •.Indirect tax (ex. Buying of goods and services) 3. As to determination of account •.Specific tax (ex. Taxes on wines) •.Ad Valorem Tax

Entities exempted from taxation • Religious Institutions • Charitable Institutions • Non-profit, Non-Stock Educational Institutions • Non-profit Cemeteries • Government institutions • Foreign Diplomats