General principles-of-taxation.pptx-joni-2

Concept of Taxation
-Taxation is the process or means by which the
sovereign, through its lawmaking body, raises
income to defray the necessary expenses of the
government.
-A tax is a compulsory payment levied on the
persons or companies to meet the expenditure
incurred on conferring common benefits upon the
people of a country.

Concept of Taxation
-Taxation is the act of laying a tax..the
process or means by which the sovereign,
through its law making body raises revenue to
defray the necessary expenses of government.
- it is indispensable and inevitable price for
civilized society ;without which the government
would be paralyzed.

Classification of Taxes
Taxes can be classified into various types on the basis
of form,nature,aim and method of taxation. the most
common and traditional classification is to classify into direct
and indirect taxes.
Direct Tax
Indirect tax

 Direct taxes
A direct tax is that tax whose burden is borne by the same
person on whom it is levied. The ultimate burden of taxation falls on
the person on whom the tax is levied. It is based on the income and
property of a person. Thus income tax, corporation tax on
company’s profits, property tax, capital gains tax, wealth tax etc are
examples of direct taxes.
 Indirect taxes
An indirect tax is that tax which is initially paid by one
individual, but the burden of which is passed over to some other
individual who ultimately bears it. It is levied on the expenditure of a
person. Excise duty, sales tax, custom duties etc are examples of
indirect taxes.

On the basis of degree of progression of tax, it may be
classified into:
Proportional tax
Progressive tax
Regressive tax

Proportional tax
A tax is called proportional
when the rate of taxation remains
constant as the income of the tax
payer increases. In this system all
incomes are taxed at a single
uniform rate, irrespective of whether
tax payer’s income is high or low.
The tax liability increases in
absolute terms, but the proportion of
income taxed remains the same.

Progressive tax
When the rate of
taxation increases as
the tax payer’s income
increases, it is called a
progressive tax. In this
system, the rate of tax
goes on increasing
with every increase in
income.

Regressive taxation
A regressive tax is one in
which the rate of taxation
decreases as the tax payer’s
income increases. Lower income
is taxed at a higher rate, whereas
higher income is taxed at a lower
rate. However absolute tax
liability may increase.

 As to subject matter
Personal/Poll/Capitation Tax.
This tax means that there is a fixed amount upon all persons residing within a specified
territory with no regards to their property or occupation.
(e.g., Residence Tax)
Property Tax.
This tax refers to one assessed on all property located within a certain territory on a
specified date in proportion to its value.
(e.g., Real Estate Tax)
Excise Tax.
This tax embraces any form of burden not laid directly upon person or property.
(e.g., Value-Added Tax/VAT)
VAT is a form of sales tax.
It is an indirect tax levied upon the consumption of the sale of goods and
services and on the imports of goods into the country.

 As to who bears the burden
Direct Tax.
This tax refers to the tax which is demanded from an individual
who tends to buy or purchase a good or service.
Ex. Income tax, community tax, estate tax
Indirect Tax.
This refers to the tax paid primarily by a person who can shift
the burden upon someone else.
Ex.VAT, customs duties.

 As to determination of account
Specific Tax.
This tax is fixed or determinate sum imposed by the head or number
or some standard of weight and measurement, and requires no assessment
beyond listing and classification.
Ex. Tax on distilled spirits, fermented liquors, cigars
Ad Valorem Tax.
This tax is fixed proportionate with the value of the property and
requires the intervention of assessors before the amount due from each
taxpayer.
Ex. Real estate tax, excise tax on cars, non essential goods.

 As to purpose
General, Fiscal or Revenue Tax.
It refers to the tax levied to an individual for a general
public purpose.
Ex. Income tax, percentage tax
Special or Regulatory Tax.
It refers to the tax levied to an individual for a particular or
specific purpose.
Ex. Protective tariffs or custom duties on imported goods
intended to protect local industries

 As to scope
National Tax.
It refers to the tax imposed by the state itself and is
effective within the entire jurisdiction thereof.
Imposed by the national government
ex. NIRC, custom duties
Local Tax.
It refers to the tax imposed by a political subdivision of the
state and is effective only within the territorial boundaries
thereof.
Imposed by municipal corporations or local governments
ex. Real estate tax,

1. Tax distinguished from toll
a. A tax is a demand of sovereignty, while toll is a demand for
proprietorship
b. A tax is paid for the use of the government’s property, while a toll
is paid for the use of another’s property.
c. A tax may be imposed by the government only, while the toll is
enforced by the government or a private individual or entity.
Distinction of Tax From Other
Terms

2. Tax distinguished from Penalty
a. A tax is intended to raise revenue, while a penalty is designed to
regulate conduct.
b. A tax may be imposed by the government only, while a penalty
may be imposed by the government of a private individual .
Terms

3. Tax distinguished from Debt.
a. A tax is based on law, while the debt is based on contract.
b. A tax may not be assignable, while a debt is assignable.
c. tax is generally payable in cash, while debt is payable in cash
or in kind.
d. person may be imprisoned for a non-payment of taxes, but any
person may not be imprisoned for non-payment of debt.
Terms

4. Tax distinguished from other terms
a. Revenue – this refers to all the funds or income derived by the
government whether form tax or any other source in
another sense. While tax refers to the amount imposed.
b. Internal Revenue - it refers to taxes imposed by the legislature
other than duties on imports and exports.
c. Customs Duties(simple duties) - they are taxes imposed on
goods exported into a country.
Terms

Inherent limitations
are rooted in the nature of taxation itself. These are the
limitations that are not affected by changes in the provisions
of the constitutions.
1. The tax revenues must only be used for public purpose.
2. There should be proper delegation of legislative power to tax
3. Government entities are exempted.
4. There are territorial jurisdictions.
5. There is an observance of international law.
Limitation of Taxation

Constitutional limitations of taxations
are those limitations provided in the constitution. These
limitations are more subject to change when a new constitution is
introduced in the country.
1. Observance of due process of law - Article III, Section 14.1
of the Constitution says that, “No person shall be hold to
answer for a criminal offense without due process of law.”

2. Equal protection of the law - No person shall be deprived of life,
liberty, or property without due process of law, nor shall any person
be denied the equal protection of the laws (Art. III, Sec. 1).
3. Uniformity and equity rule. - The rule of taxation must be uniform
and equitable, and likewise progressive (Art. VI, Sec. 28.1)
4. Non-imprisonment for non-payment of poll tax - No person shall
be imprisoned for a debt or nonpayment of a poll tax
(Art. III, Sec. 20).

5. No appropriation for religious purposes - No public money or
property shall be appropriated, applied, paid or employed; directly or
indirectly, for the use, benefit or support of any sect, church,
denomination, sectarian institution or system of religion; or of any
priest, preacher, minister, or dignitary as such, except when such
priest, preacher, minister or dignitary is assigned to the armed
forces, or to any penal institution or government orphanage or
leprosarium.
(Art. VI, Sec. 29.2).
But, charitable institutions, churches and personages or convents
appurtenant thereto, mosques, nonprofit cemeteries; and all
lands, buildings, and improvements-actually, directly, and
exclusively- used for religious, charitable or educational purposes

1. Capital Gains Tax 8. Excise Tax
2. Documentary Stamp Tax 9. Withholding Tax on Compensation
3. Donor’s Tax 10. Expanded Withholding Tax
4. Estate Tax 11. Final Withholding Tax
5. Income Tax 12. Withholding Tax on Government
6. Percentage Tax Money Payments
7. Value Added Tax
National Taxes in the Philippines

1. Tax on Transfer of Real Property Ownership
2. Tax on Business of Printing and Publication
3. Franchise Tax
4. Tax on Sand, Gravel and Other Quarry Resources
5. Professional Tax
6. Amusement Tax
7. Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or
Producers, Wholesalers of, Dealers, or Retailers in, Certain
Products
8. Tax on Business
Local Taxes in the Philippines

9. Fees for Sealing and Licensing of Weights and Measures
10. Fishery Rentals, Fees and Charges
11. Community Tax
12. Taxes that may be levied by the barangays on stores or
retailers with fixed business establishments
13. Service Fees or Charges
14. Barangay Clearance

1.Capital Gains Tax – is a tax imposed on the gains presumed to have been
realized by the seller from the sale, exchange, or other disposition of capital
assets located in the Philippines, including pacto de retro sales and other forms of
conditional sale.
Capital gains tax on sale of real property located in the Philippines and held
as capital asses is based on the presumed gains. The rate is 6% capital gains tax
based on the higher amount between the gross selling price or fair market value.
2.Documentary Stamp Tax – is a tax on documents, instruments, loan
agreements and papers evidencing the acceptance, assignment, sale or transfer
of an obligation, rights, or property incident thereto. Examples of documentary
stamp tax are those that are charged on bank promissory notes, deed of sale, and
deed of assignment on transfer of shares of corporate stock ownership.

3. Donor’s Tax – is a tax on a donation or gift, and is imposed on the gratuitous
transfer of property between two or more persons who are living at the time of the
transfer. Donor’s tax is based on a graduated schedule of tax rate.
4. Estate Tax – is a tax on the right of the deceased person to transmit his/her
estate to his/her lawful heirs and beneficiaries at the time of death and on certain
transfers which are made by law as equivalent to testamentary disposition. Estate
tax is also based on a graduated schedule of tax rate.

5.Income Tax – is a tax on all yearly profits arising from property, profession,
trades or offices or as a tax on a person’s income, emoluments, profits and the
like. Self-employed individuals and corporate taxpayers pay quarterly income
taxes from 1st quarter to 3rd quarter. And instead of filing quarterly income tax on
the fourth quarter, they file and pay their annual income tax return for the taxable
year. Individual income tax is based on graduated schedule of tax rate, while
corporate income tax in based on a fixed rate prescribe by the tax law or special
law.
6. Percentage Tax – is a business tax imposed on persons or entities who sell or
lease goods, properties or services in the course of trade or business whose
gross annual sales or receipts do not exceed the amount required to register as
VAT-registered taxpayers. Percentage taxes are usually based on a fixed rate.
They are usually paid monthly by businesses or professionals. However, some
special industries and transactions pay percentage tax on a quarterly basis.

7. Value Added Tax – is a business tax imposed and collected from the seller in
the course of trade or business on every sale of properties (real or personal)
lease of goods or properties (real or personal) or vendors of services. It is an
indirect tax, thus, it can be passed on to the buyer, causing this to increase the
prices of most goods and services bought and paid by consumers. VAT returns
are usually filed and paid monthly and quarterly.
8. Excise Tax – is a tax imposed on goods manufactured or produced in the
Philippines for domestic sale or consumption or any other disposition. It is also
imposed on things that are imported.
9. Withholding Tax on Compensation – is the tax withheld from individuals
receiving purely compensation income. This tax is what employers withheld in
their employees’ compensation income and remit to the government through the
BIR or authorized accrediting agent.

10. Expanded Withholding Tax – is a kind of withholding tax which is prescribed
only for certain payors and is creditable against the income tax due of the payee
for the taxable quarter year. Examples of the expanded withholding taxes are
those that are withheld on rental income and professional income.
11. Final Withholding Tax – is a kind of withholding tax which is prescribed only
for certain payors and is not creditable against the income tax due of the payee
for the taxable year. Income Tax withheld constitutes the full and final payment of
the Income Tax due from the payee on the said income. An example of final
withholding tax is the tax withheld by banks on the interest income earned on
bank deposits.
12. Withholding Tax on Government Money Payments – is the withholding tax
withheld by government offices and instrumentalities, including government-
owned or -controlled corporations and local government units, before making any
payments to private individuals, corporations, partnerships and/or associations.

1. Tax on Transfer of Real Property Ownership – tax imposed on the sale,
donation, barter, or on any other mode of transferring ownership or title of real
property.
2. Tax on Business of Printing and Publication – tax on the business of
persons engaged in the printing and/or publication of books, cards, posters,
leaflets, handbills, certificates, receipts, pamphlets, and others of similar nature.
3. Franchise Tax – tax on businesses enjoying a franchise, at the rate not
exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts
for the preceding calendar year based on the incoming receipt, or realized,
within its territorial jurisdiction.

4. Tax on Sand, Gravel and Other Quarry Resources – tax imposed on ordinary
stones, sand, gravel, earth, and other quarry resources, as defined under the
National Internal Revenue Code, as amended, extracted from public lands or from
the beds of seas, lakes, rivers, streams, creeks, and other public waters within its
territorial jurisdiction.
5. Professional Tax – an annual professional tax on each person engaged in the
exercise or practice of his profession requiring government examination.
6. Amusement Tax – tax collected from the proprietors, lessees, or operators of
theaters, cinemas, concert halls, circuses, boxing stadia, and other places of
amusement.

7. Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or
Producers, Wholesalers of, Dealers, or Retailers in, Certain Products – an
annual fixed tax for every truck, van or any vehicle used by manufacturers,
producers, wholesalers, dealers or retailers in the delivery or distribution of
distilled spirits, fermented liquors, soft drinks, cigars and cigarettes, and other
products as may be determined by the sangguniang panlalawigan, to sales
outlets, or consumers, whether directly or indirectly, within the province.
8. Tax on Business – taxes imposed by cities, municipalities on businesses
before they will be issued a business license or permit to start operations based
on the schedule of rates prescribed by the local government code, as amended.
Take note that the rates may vary among cities and municipalities. This is usually
what businesses pay to get their Business Mayor’s Permit.

9. Fees for Sealing and Licensing of Weights and Measures – fees for the
sealing and licensing of weights and measures at such reasonable rates as shall be
prescribed by the sangguniang bayan of the municipality or city.
10. Fishery Rentals, Fees and Charges – rentals, fees or charges imposed by the
municipality/city to grantees of fishery privileges in the municipal/city waters, e.g.,
fishery privileges to erect fish corrals, oysters, mussels or other aquatic beds or
bangus fry areas and others as mentioned in the local government code, as
amended.

11. Community Tax – tax levied by cities or municipalities to every inhabitant of the
Philippines eighteen (18) years of age or over who has been regularly employed on a
wage or salary basis for at least thirty (30) consecutive working days during any
calendar year, or who is engaged in business or occupation, or who owns real
property with an aggregate assessed value of One thousand pesos (P1,000.00) or
more, or who is required by law to file an income tax return. Community tax is also
imposed on every corporation no matter how created or organized, whether domestic
or resident foreign, engaged in or doing business in the Philippines.
12. Taxes that may be levied by the barangays on stores or retailers with fixed
business establishments with gross sales of receipts of the preceding calendar
year of Fifty thousand pesos (P50,000.00) or less, in the case of cities and Thirty
thousand pesos (P30,000.00) or less, in the case of municipalities, at a rate not
exceeding one percent (1%) on such gross sales or receipts.

13. Service Fees or Charges – fees or charges that may be collected by the
barangays for services rendered in connection with the regulations or the use of
barangay-owned properties or service facilities, such as palay, copra, or tobacco
dryers.
14. Barangay Clearance – a reasonable fee collected by barangays upon
issuance of barangay clearance – a document required for many government
transactions, such as when applying for business permit with the city or
municipality.

 http://www.yourarticlelibrary.com/economics/taxation/what-is-tax-
meaning-and-classification-of-tax-explained/38119
 https://www.slideshare.net/gar_dev/concepts-of-taxation
 https://www.scribd.com/doc/63783401/Definition-and-Concept-of-
Taxation
 https://www.bir.gov.ph/index.php/tax-information/capital-gains-
tax.html
 https://cpadreams.wordpress.com/2015/11/30/inherent-limitations-of-
taxation/
 https://www.slideshare.net/ZharleneSoliguen/taxation-in-the-
philippines
References:

General principles-of-taxation.pptx-joni-2

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