, 1. define taxation.

A means by which governments finance their expenditure by imposing charges on citizens and
corporate entities.
Governments use taxation to encourage or discourage certain economic decisions. For example,

i reduction in taxable personal (or household) income by the amount paid as interest on home mortgage
loans results in greater construction activity, and generates more jobs. See also taxation principles.

s
2.what are the basic purposes of taxation?
Object 2
1

To influence behavior (tobacco)Taxes on alcohol and cigarettes are to discourage people from using
them.

To stabilize the economy. The government uses the raising and lowering of taxes to help stabilize the
business cycle.
To fund public goods and servicesTaxes are the main sources of income for the government. Most of

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the Federal Governments revenues come from your taxes.
To redistribute incometaxes taken from the wealthy can be used to help the needy.

3. discuss the scope of taxation.

e That depends to some extent on the kind of government and social system you have. It is possible to tax
just about everything and everyone, but usually there are various kinds of exemptions. These include
charitably organizations or people whose income is below a certain point. You can often claim tax back

e
on items that are thought essential, or it may not be imposed at all

4. What are the inherent limitations of taxation?

d 1.Territoriality. The State may tax persons and properties under its jurisdiction;
2.International Comity. the property of a foreign State may not be taxed by another.

e
3.Exemption. Government agencies performing governmental functions are exempt from
taxation
4.Non-delegation. The power to tax being legislative in nature may not be delegated. (subject to
exceptions)

d 5. Enumerate the constitutional limitations of taxation.

f
for non-payment of community tax, but may be imprisoned for other violations of the
community tax law, such as falsification of the community tax certificate, or for failure to pay
other taxes.
3.Non-impairment of obligations and contracts, sec 10, Art III . the obligation of a contract is

o impaired when its terms and conditions are changed by law or by a party without the consent of
the other, thereby weakening the position or the rights of the latter. IF a tax exemption granted

r
 by law and of the nature of a contract between the taxpayer and the government is revoked by a
later taxing law, the said law shall not be valid, because it will impair the obligation of contract.
4. Prohibition against infringement of religious freedom Sec 5, Art III, it has been said that the
constitutional guarantee of the free exercise and enjoyment of religious profession and worship,
which carries the right to disseminate religious belief and information, is violated by the
imposition of a license fee on the distribution and sale of bibles and other religious literatures
not for profit by a non-stock, non-profit religious corporation.
5. Prohibition against appropriations for religious purposes, sec 29, (2) Art. VI, Congress cannot
appropriate funds for a private purpose, or for the benefit of any priest, preacher or minister or
for the support of any sect, church except when such priest, preacher, is assigned to the armed
forces or to any penal institutions, orphanage or leprosarium.
6. exemption of all revenues and assets of non-stock, non-profit educational institutions used
actually, directly, and exclusively for educational purposes from income, property and donors
taxes and custom duties (sec. 4 (3 and 4) art. XIV.
7. Concurrence by a majority of all members of Congress in the passage of a law granting tax
exemptions. Sec. 28 (4) Art. VI.
8. Congress may not deprive the Supreme Court of its jurisdiction to review, revise, reverse,
modify or affirm on appeal or certiorari, final judgments and orders of lower courts in all cases
involving the legality of any tax, impost, assessment or any penalty imposed in the relation
thereto.
6. State the nature or characteristics of a tax exemption.
7. State the exceptions to the rule that tax exemptions must be strictly construed against the taxpayer.
8.Discuss the provisions of the constitution regarding exemptions from taxation.
(2) No provision or enactment shall be embraced in the general appropriations bill unless it relates
specifically to some particular appropriation therein. Any such provision or enactment shall be limited
in its operation to the appropriation towhich it relates.(3) The procedure in approving appropriations
for the Congress shall strictly follow the procedure for approvingappropriations for other
departments and agencies.(4) A special appropriations bill shall specify the purpose for which it is
intended, and shall be supported by fundsactually available as certified by the National Treasurer, or to
be raised by a corresponding revenue proposal therein.(5) No law shall be passed authorizing
any transfer of appropriations; however, the President, the President of the Senate,the Speaker of the
House of Representatives, the Chief Justice of the Supreme Court, and the heads of
ConstitutionalCommissions may, by law, be authorized to augment any item in the general
appropriations law for their respectiveoffices from savings in other items of their respective
appropriations.(6) Discretionary funds appropriated for particular officials shall be disbursed only for
public purposes to be supported by appropriate vouchers and subject to such guidelines as may be
prescribed by law.(7) If, by the end of any fiscal year, the Congress shall have failed to pass the general
appropriations bill for the ensuingfiscal year, the general appropriations law for the preceding fiscal
year shall be deemed re-enacted and shall remain inforce and effect until the general appropriations bill
is passed by the Congress
9. Enumerate and discuss briefly the different escape from taxation.
1. FORMS OF ESCAPE FROM TAXATION/ EXEMPTIONFROM TAXATION
2. FORMS OF ESCAPE FROM TAXATION A. Shifting B. Capitalization C.
Transformation D. Avoidance E. Exemption F. Evasion
3. A. SHIFTING process by which tax burden is transferred from statutory taxpayer to
anotherwithout violating the law. One way of passing the burden of the tax from one person to
other (Blacks LawDictionary ,supra ). For Example, taxes paid by the manufacturer may be
shifted to theconsumer by adding the amount of the tax paid to the price of the product. Kinds
of Shifting 1. Forward shifting- when burden of tax is transferred from a factor ofproduction
through the factors of distribution until it finally settles onthe ultimate purchaser or consumer
2. Backward shifting when the burden is transferred from consumerthrough factors of
distribution to the factors of production; 3. Onward shifting- when the tax is shifted 2 or more
times eitherforward or backward.
4. B. CAPITALIZATION the reduction in the price of the taxed object equalto the capitalized
value of the future taxes which thepurchaser expects to be called upon to pay . This refers to
the reduction in the price of the taxedobject to the capitalize value of future taxes which
thepurchaser expects too be called upon to pay. Anexample as the reduction made by the seller
on theprice of the Real Estate, in anticipation of the futuretax to be shouldered by the future
buyer.
5. C. TRANSFORMATION the manufacturer or producer upon whom the taxhas been
imposed, fearing the loss of his market ifhe should add the tax to the price, pays the tax
andendeavors to recoup himself by improving hisprocess of production thereby turning out his
unitsat a lower cost. Occurs when the manufacturer or the producerupon whom the tax has
been imposed pays the taxand endeavor to recoup himself/herself byimproving his/her
process of production (De Leon,1991).
6. D. TAX AVOIDANCE exploitation by the taxpayer of legallypermissible alternative tax
rates or methods ofassessing taxable property or income, in orderto avoid or reduce tax
liability. The exploitation by the taxpayer of legallypermissible methods in order to avoid or
reducetax liability. This is also known as taxminimization. An example is exhausting
and/orutilizing all allowable deductions in law to lessenor reduce the tax burden.
7. E. TAX EXEMPTION grant of immunity to particular persons orcorporations of a particular
class from a taxwhich persons and corporations generally withinthe same state or taxing district
are obliged topay. The grant of immunity or freedom from financialcharge, obligation, or
burden to which others aresubjected.
8. . GROUNDS FOR TAX EXEMPTIONa) Contract, wherein the government is thecontracting
partyb) Public policyc) Reciprocity
9. .BASIC PRINCIPLES REGARDING TAX EXEMPTIONS 1. Exemptions are highly
disfavored by law and he who claims anexemption must be able to justify his claim by the
clearest grant oflaw. 2. He who claims tax exemption should prove by convincing proofsthat he
is exempted 3. Tax exemptions should be strictly construed against the personclaiming it. 4.
Taxation is the rule and exemption Is the exception 5. Constitutional grant of tax exemptions
are self-executing 6. In the same way that taxes are personal, tax exemptions are alsopersonal
7. Deductions for income tax purposes partake of the nature of taxexemptions, therefore
deductions should also be construed strictlyagainst the taxpayer.
 10. F. TAX EVASION use of taxpayer of illegal or fraudulent means to defeat orlessen the
payment of tax. The practice by the taxpayer through illegal or fraudulentmeans to defeat or
lessens the amount for tax. This is alsoknown as tax dodging. Tax evasion presupposesmalice,
fraud, bad faith, or willful intent on the part of taxpayer(Rep. v. Gonzales, 13 SCRA 633) as in
the case of substantialunder declaration of income for four (4) consecutive years (Perez v.
CTA,L-10507). An example is the deliberate and/ormalicious failure to report income to defeat
tax liability.
11. . INDICIA OF FRAUD IN TAX EVASION Indicia of Fraud in tax evasion 1. Failure to
declare for taxation purposes true and actualincome derived from business for 2 consecutive
years; 2. Substantial under declaration of income tax returns of the taxpayer for 4 consecutive
years coupled with intentional overstatement of deductions .
10. define tax evasion, tax avoidance and shifting.

Definition of Tax Avoidance

An arrangement made to beat the intent of the law by taking unfair advantage of the shortcomings in
the tax rules is known as Tax Avoidance. It refers to finding out new methods or tools to avoid the
payment of taxes which are within the limits of the law.
This can be done by adjusting the accounts in a manner that it will not violate any tax rules as well as
the tax incurrence will also be minimised. Formerly tax avoidance is considered as lawful, but now it
comes to the category of crime in some special cases.
The only purpose of tax avoidance is to postpone or shift or eliminate the tax liability. This can be done
investing in government schemes and offers like the tax credit, tax privileges, deductions, exemptions,
etc., which will result in the reduction in the tax liability without making any offence or breach of law.

Definition of Tax Evasion

An illegal act, made to escape from paying taxes is known as Tax Evasion. Such illegal practices can be
deliberate concealment of income, manipulation in accounts, disclosure of unreal expenses for
deductions, showing personal expenditure as business expenses, overstatement of tax credit or
exemptions suppression of profits and capital gains, etc. This will result in the disclosure of income
which is not the actual income earned by the entity.
Tax Evasion is a criminal activity for which the assessee is subject to punishment under the law. It
involves acts like:
Deliberate misrepresentation of material facts.
Hiding relevant documents.
Not maintaining complete records of all the transactions.
Making false statements.
11. discuss the situs of taxation.
SITUS OF TAXATION- literally means the place of taxation, or the country that has jurisdiction to
levy a particular tax on persons, property, rights or business.
Basis: Symbiotic relationship. The jurisdiction, state or political unit that gives protection has
the right to demand support.

The situs of taxation is determined by a number of factors

a. Subject matter- or what is being taxed. He may be a person or it may be a property, an

b. Nature of tax- or which tax to impose. It may be an income tax, an import duty or a real
property tax;

c. Citizenship of the taxpayer

d. Residence of the taxpayer.

12. discuss and differentiate the inherent powers of the estate