INTRODUCTION TO TAXATION<br />May 10, 2011<br />
QUIZ<br />1. A kind of economy where many economic activities undertaken by private firms, others by the government<br />2...
QUIZ<br />3. Define paternalism<br />4. How can the gov’t solve/lessen externalities?<br />5. This is how the gov’t gets m...
REVIEW<br />Gov’t affects our lives from birth to death<br />Mixed Economy - Many economic activities undertaken by privat...
REVIEW<br />Mercantilists – gov’t should promote trade and industry (18th)<br />Adam Smiths’ response – Wealth<br />Laisse...
GOVERNMENT FAILURES<br />Limited information<br />Limited control over private market responses<br />Limited control over ...
FUNDAMENTAL QUESTIONS	<br />What is to be produced?<br />PPF – public goods and private goods<br />How should it be produc...
TAXATION <br />Of two things you can be certain; death and taxes. -Benjamin Franklin.<br />As old as gov’t itself<br />As ...
FORMS OF TAXATION<br />Direct Taxes<br />Personal Income Tax<br />Corporate Income Tax<br />Transfer Tax- gift tax estate ...
DIRECT TAXES<br />Personal Income Tax<br />All taxable income net of deductions<br />Exemptions if single<br />Resident an...
DIRECT TAXES<br />Corporate Income Tax<br />On businesses (firms)<br />Corporations no matter how created or organized inc...
 <br />
DIRECT TAXES<br />Transfer Tax<br />Gift tax – imposed on right to transfer property during lifetime of transferer levied ...
Levied on production and sales of goods and services<br />Sales tax – imposed on all g/s exchanged in the country<br />Tax...
INDIRECT TAXES<br />Specific tax – tobacco, alcohol, gas, oil, excise duties<br />Export tax, import tax<br />Regressive T...
DISTRIBUTION OF TAX<br />Direct Taxes – more progressive<br />Indirect Taxes – more regressive<br />Philippines – in gener...
DESIRABLE CHARACTERISTICS OF ANY TAX SYSTEM<br />Economic Efficiency – not interfere with efficient allocation of resource...
DESIRABLE CHARACTERISTICS OF ANY TAX SYSTEM<br />Political responsibility – should be transparent<br />Fairness – should b...
ECONOMIC EFFICIENCY<br />Behavioral – work, education, savings, investment, marriage, divorce<br />Financial – insurance, ...
ECONOMIC EFFICIENCY<br />Announcement effects – effects are felt even before the tax is imposed<br />Tax on real estate ca...
ECONOMIC EFFICIENCY<br />Nondistortionary Taxes – nothing an individual can do to alter his tax liability<br />Lump-sum ta...
ECONOMIC EFFICIENCY<br />Corrective Taxation – correct market failure<br />Ex: Pigouvian Tax – externalities<br />Raise re...
FAIRNESS<br />Horizontal Equity – individuals who are the same in relevant aspects are treated the same<br />Twins: A like...
FAIRNESS<br />Vertical Equity – some individuals are in a position to pay higher taxes than others and they should do so<b...
GOVERNMENT REVENUE<br />Tax Revenue (80-90%)<br />Direct tax (50%)<br />Indirect Taxes <br />Non-tax revenue<br />Asset sa...
OTHER WAYS TO RAISE MONEY<br />BOT – Build Operate Transfer<br />Borrowing from Private Banks<br />But private banks refus...
DIRECT TAXES<br />Travel<br />“prizes”<br />Corpo Income<br />Lump-sum<br />Inheritance<br />Withholding<br /><ul><li>Marr...
Consumption
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Ec102 may 10

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Ec102 may 10

  1. 1. INTRODUCTION TO TAXATION<br />May 10, 2011<br />
  2. 2. QUIZ<br />1. A kind of economy where many economic activities undertaken by private firms, others by the government<br />2. How do public goods cause market failures? Explain briefly.<br />
  3. 3. QUIZ<br />3. Define paternalism<br />4. How can the gov’t solve/lessen externalities?<br />5. This is how the gov’t gets most of its revenue.<br />Bonus: Peso-dollar exchange rate as of May 10, 2011<br />
  4. 4. REVIEW<br />Gov’t affects our lives from birth to death<br />Mixed Economy - Many economic activities undertaken by private firms, others by the government<br />
  5. 5. REVIEW<br />Mercantilists – gov’t should promote trade and industry (18th)<br />Adam Smiths’ response – Wealth<br />Laissez faire<br />Government should and could stabilize the level of economic activity<br />
  6. 6. GOVERNMENT FAILURES<br />Limited information<br />Limited control over private market responses<br />Limited control over bureaucracy <br />Limitations imposed by political processes<br />
  7. 7. FUNDAMENTAL QUESTIONS <br />What is to be produced?<br />PPF – public goods and private goods<br />How should it be produced?<br />Privately or publicly?<br />For whom should it be produced?<br />Distribution of benefits<br />How are choices made – collectively <br />
  8. 8. TAXATION <br />Of two things you can be certain; death and taxes. -Benjamin Franklin.<br />As old as gov’t itself<br />As old as Biblical times<br />Middle Ages – services to feudal lords<br />Monetized taxes – payment in money instead of services<br />
  9. 9. FORMS OF TAXATION<br />Direct Taxes<br />Personal Income Tax<br />Corporate Income Tax<br />Transfer Tax- gift tax estate tax<br />Indirect Taxes<br />Sales tax<br />Specific tax – import/export tax<br />
  10. 10. DIRECT TAXES<br />Personal Income Tax<br />All taxable income net of deductions<br />Exemptions if single<br />Resident and non-resident citizens receiving income from sources within or outside the Philippines<br />Aliens, whether resident or not, receiving income from sources within the Philippines<br />
  11. 11. DIRECT TAXES<br />Corporate Income Tax<br />On businesses (firms)<br />Corporations no matter how created or organized including partnerships<br />Estates and trusts engaged in trade or business<br />Progressive Tax – as taxable base increases, tax rate increases<br />
  12. 12.  <br />
  13. 13. DIRECT TAXES<br />Transfer Tax<br />Gift tax – imposed on right to transfer property during lifetime of transferer levied on donor<br />Estate tax – imposed on right of an individual to transfer property at death<br />
  14. 14. Levied on production and sales of goods and services<br />Sales tax – imposed on all g/s exchanged in the country<br />Tax rates vary by essentiality<br />E-Vat<br />INDIRECT TAXES<br />
  15. 15. INDIRECT TAXES<br />Specific tax – tobacco, alcohol, gas, oil, excise duties<br />Export tax, import tax<br />Regressive Tax – tax rate decreases as amount subject to taxation increases<br />
  16. 16. DISTRIBUTION OF TAX<br />Direct Taxes – more progressive<br />Indirect Taxes – more regressive<br />Philippines – in general progressive<br />Argued that may be more regressive since indirect taxes are paid more<br />Poorer individuals consume more of their income, therefore pay more indirect taxes<br />
  17. 17. DESIRABLE CHARACTERISTICS OF ANY TAX SYSTEM<br />Economic Efficiency – not interfere with efficient allocation of resources<br />Administrative simplicity – easy and relatively inexpensive to administer<br />Flexibility – able to respond easily (in some cases automatically) to changed economic circumstances<br />
  18. 18. DESIRABLE CHARACTERISTICS OF ANY TAX SYSTEM<br />Political responsibility – should be transparent<br />Fairness – should be and should be seen to be fair, treating those in similar circumstances similarly and imposing higher taxes on those who can better bear the burden of tax<br />
  19. 19. ECONOMIC EFFICIENCY<br />Behavioral – work, education, savings, investment, marriage, divorce<br />Financial – insurance, pension or direct investment<br />Organizational – corporations and single proprietorship<br />
  20. 20. ECONOMIC EFFICIENCY<br />Announcement effects – effects are felt even before the tax is imposed<br />Tax on real estate causes prices to drop markedly<br />If I announce quiz about a new lesson, you’ll force yourself to read about it<br />
  21. 21. ECONOMIC EFFICIENCY<br />Nondistortionary Taxes – nothing an individual can do to alter his tax liability<br />Lump-sum taxes<br />Ex: Head tax – paid regardless of income or wealth<br />Tax that depends on nonalterable characteristics<br />
  22. 22. ECONOMIC EFFICIENCY<br />Corrective Taxation – correct market failure<br />Ex: Pigouvian Tax – externalities<br />Raise revenue and improve efficiency of resource allocation<br />
  23. 23. FAIRNESS<br />Horizontal Equity – individuals who are the same in relevant aspects are treated the same<br />Twins: A like chocolate ice cream, B likes vanilla ice cream<br />Same price, but chocolate ice cream has higher tax<br />SAME OPPORTUNITY SET<br />
  24. 24. FAIRNESS<br />Vertical Equity – some individuals are in a position to pay higher taxes than others and they should do so<br />Example: Income tax<br />During orals, I expect more from those who are B+ and A standing<br />
  25. 25. GOVERNMENT REVENUE<br />Tax Revenue (80-90%)<br />Direct tax (50%)<br />Indirect Taxes <br />Non-tax revenue<br />Asset sales<br />Stocks<br />Service fees <br />
  26. 26. OTHER WAYS TO RAISE MONEY<br />BOT – Build Operate Transfer<br />Borrowing from Private Banks<br />But private banks refuse<br />LGUs not allowed to deposit in private banks<br />Municipal Bonds<br />
  27. 27. DIRECT TAXES<br />Travel<br />“prizes”<br />Corpo Income<br />Lump-sum<br />Inheritance<br />Withholding<br /><ul><li>Marriage
  28. 28. Consumption
  29. 29. Personal Income
  30. 30. Property
  31. 31. Insurance
  32. 32. Utility
  33. 33. Gambling (Sin)
  34. 34. Cedula
  35. 35. Payroll
  36. 36. Federal
  37. 37. Social</li></ul>Security<br /><ul><li>Tithe</li></li></ul><li>INDIRECT TAXES<br />Terminal Fee<br />VAT, E-VAT<br />Poll Tax<br />Currency Transaction<br />Export, Tariff<br /><ul><li>Shipping
  38. 38. Educational
  39. 39. Inflation
  40. 40. Toll Fee
  41. 41. Construction
  42. 42. Environmental</li>

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