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    Lesson 3 MGT207 Escape From Taxation Prepared by SKM (Additional)

    Uploaded by

    Alkhair Sangcopan

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd

    Lesson 3 MGT207 Escape From Taxation Prepared by SKM (Additional)

    Uploaded by

    Alkhair Sangcopan
    29 views25 pages

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    © © All Rights Reserved

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    Copyright:

    © All Rights Reserved
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    29 views25 pages

    Lesson 3 MGT207 Escape From Taxation Prepared by SKM (Additional)

    Uploaded by

    Alkhair Sangcopan

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 25

    Escape from Taxation

    • Means or methods by which the taxpayer saves the tax or


    escapes the burden of tax payment.
    • It may or not result in a loss of revenue to the
    government.
    • Legal or illegal means
    Forms of Escape from Taxation

    • Do not reduce revenue collection by the government


    a. Shifting
    b. Capitalization
    c. Transformation
    • Result in a loss of revenue for the government
    d. Result in a loss of revenue for the government
    e. Tax evasion
    f. Tax avoidance
    Forms of Escape from Taxation

    • Do not reduce revenue collection by the government


    a. Shifting - transfer of tax burden by one on whom the tax is assessed to another
    b. Capitalization - Reduction in the selling price of income-producing property by an amount
    equal to the capitalized value of future taxes that may be paid by the purchaser

    c. Transformation - a method by which the manufacturer or producer upon whom the tax is
    imposed pays the tax and strives to recover such expenses through lower production costs without sacrificing
    quality of the product.

    • Result in a loss of revenue for the government


    d. Result in a loss of revenue for the government
    e. Tax evasion
    Forms of Escape from Taxation

    • Do not reduce revenue collection by the government


    a. Shifting - transfer of tax burden by one on whom the tax is assessed to
    another (example: general sales taxes, transferred from the business to the
    consumers)
    b. Capitalization - Reduction in the selling price of income-producing
    property by an amount equal to the capitalized value of future taxes that may be
    paid by the purchaser (e.g., a decline in the price of land that offsets an increase in property
    taxes)
    c. Transformation - a method by which the manufacturer or producer upon
    whom the tax is imposed pays the tax and strives to recover such expenses through
    lower production costs without sacrificing the quality of the product.
    Forms of Escape from Taxation

    • Result in a loss of revenue for the government


    d. Tax evasion - fraudulent or forbidden schemes or devices
    designed to lessen or defeat taxes.
    Example: Failure to file a return or make false declarations on a
    return, such as exaggerated or fake deductions and unreported income.
    • e. Tax avoidance - exploitation by the taxpayer of the legally
    permissible alternative tax rates or methods of assessing taxable
    property or income to reduce tax liability.
    Example: Advance deeds, loan payments, grants, tax deductions, credits,
    or exemptions that are legally available to reduce tax liability
    Forms of Escape from Taxation
    • Result in a loss of revenue for the government

    f. Exemption from taxation - grant of immunity to persons or


    corporations or to persons or corporations of a particular class from a
    tax which persons and corporations generally within the same taxing
    district are obliged to pay.
    Example: individual taxpayers with annual taxable income amounting
    to PhP250,000.00 or below are still exempt from paying income tax,
    while the rest of taxpayers, except those with taxable income of more
    than PhP8,000,000.00, will have lower tax rates ranging from 15% to
    30%, previously 20% to 32%
    Tax Amnesty

    • Tax amnesty allows taxpayers to voluntarily disclose and pay


    tax owing in exchange for avoiding tax evasion penalties.

    Set-off or compensation.
    Taxes are not subject to set-off or compensation.
    • A person cannot refuse to pay tax on the grounds that the
    government owes him an amount equal to or greater than the
    tax being collected.
    Taxpayer’s suit

    • A taxpayer has a sufficient personality and interest to seek


    judicial assistance with a view of restraining what he believes
    to be an attempt to unlawfully disburse public funds.
    • Immunity from all criminal and civil obligations arising from
    non-payment of taxes.
    • General pardon is given to all taxpayers.
    • It applies only to past periods (retroactive application).
    REFERENCES

    • https://lawphil.net/judjuris/juri1998/aug1998/gr_125704_1998.html

    • https://barretttaxlaw.com/

    • https://www.linkedin.com/pulse/situs-taxation-nelson-gargoles

    • https://www.slideshare.net/fimportado/general-principles-of-taxation-38514961

    • DBM.gov.ph

    • Income Taxation by Ferdinand C. Importado CPA, MBA

    • https://www.slideshare.net/fimportado/general-principles-of-taxation-38514961
    Taxation Rate in the
    Philippines

    Shahria K. Mautante &


    Jamaica A. Auxtero-
    Barrientos
    1. Income Tax Rate
    Tax Rate in
    the 2. Sale Tax Rate/ VAT Rate
    Philippines
    3. Corporate Tax Rate
    1. Income Tax Rate (5 % -32 %)

    ❑ The Income of residents in the Philippines is taxed


    progressively up to 32 %. Residents' citizens are taxed
    on all their net income derived from sources within
    and outside the Philippines.

    ❑ For non-resident, whether an individual or not of


    the Philippines, is taxable only on income derived
    from sources within the Philippines
    Forms of Tax
    in the
    Philippines

    • Above rates apply to individuals who derive income


    from business or from the practice of profession
    2. Sales Tax/ VAT Rate (12 %)

    • VAT is a value added sales tax used


    Forms of Tax in the Philippines which is 12 %.
    in the
    Philippines • 12 % VAT of the gross selling price
    (GSP) is imposed all importation,
    sale, barter, exchange or lease of
    goods or properties and sale of
    services.
    Example:
    ❑Corporation
    Is defined under Tax Code (RA 8424), as
    amended the Corporate Recovery and Tax
    Incentives for the Enterprises Act/ (CREATE) .

    Is an artificial being created y the operation


    of law, having the right of succession and the
    powers, attributes and properties expressly
    authorized by law or incident to it’s existence.
    Corporation
    Corporate income tax

    From July 2020 to 2022, foreign companies will be


    eligible for a reduced corporate income tax (CIT)
    rate of 25 percent, down from the regular rate of
    30 percent. The reduction in the headline CIT rate
    was passed by the CREATE Act, which also
    stipulates the further reduction of the CIT rate by
    one percent per year to finally reach 20 percent in
    2027 for foreign companies
    https://www.aseanbriefing.com/news/a-guide-to-taxation-in-the-philippines/
    Corporation
    Corporate income tax

    From July 2020 to 2022, foreign companies will be


    eligible for a reduced corporate income tax (CIT)
    rate of 25 percent, down from the regular rate of
    30 percent. The reduction in the headline CIT rate
    was passed by the CREATE Act, which also
    stipulates the further reduction of the CIT rate by
    one percent per year to finally reach 20 percent in
    2027 for foreign companies
    https://www.aseanbriefing.com/news/a-guide-to-taxation-in-the-philippines/
    Classification of Corporation:
    1. Domestic Corporation
    This are corporations form or organized in the
    Philippines laws.
    2. Foreign Corporation
    This are corporations form or organized or
    existing other than your Philippine laws.

    https://www.rd.go.th/fileadmin/user_upload/AEC/A
    seanTax-Philippines.pdf
    Considered as Corporation :
    1. Joint Stock Companies
    2.Joint Ventures
    3. Joint Accounts
    4. Partnerships except GPP
    5. Insurance Companies
    6. Associations

    https://www.rd.go.th/fileadmin/user_upload/AEC/
    AseanTax-Philippines.pdf
    Rates of income Tax on Domestic Corporations :

    a. Regular Corporate Income Tax (RCIT) - taxable


    income derived during each taxable year from all
    1.Domestic sources within and without the Philippines at 30%
    Corporation tax rate on taxable income.

    b. Minimum Corporate Income Tax (MCIT) - this 2 %


    on gross income staring on the fourth taxable year
    following the beginning of operations, if there is
    zero income or net loss. or computed MCIT is higher
    than regular corporate income (RCIT)
    Illustrative Problem : A corporation was formed at the
    beginning of 2015. The Statement of Comprehensive
    Income at the end of 2020 showed the following amounts
    for the current taxable year:
    1.Domestic CASE 1.
    Corporation

    Regular Corporate Income Tax (RCIT)


    Taxable Net Income 3,000,000
    Multiplied by Corp.Income Tax Rate 30%
    Regular Corporate Income Tax Due 900,000
    Illustrative Problem : A corporation was formed at the beginning
    of 2015. The Statement of Comprehensive Income at the end of
    2020 showed the following amounts for the current taxable year:

    CASE 2.

    Select whichever is higher between computed Regular Corporate


    Income Tax (RCIT) versus Minimum Corporate Income Tax (MCIT).
    Using Regular Rate :

    Regular Corporate Income Tax (RCIT)


    Taxable Net Income 500,000
    Multiplied by Corp. Income Tax Rate 30%
    Regular Corporate Income Tax Due 150,000
    Using Regular Rate:

    Gross Profit 8,000,000


    Multiplied by MCIT Rate 2%
    Minimum Corporate Income Tax 160,000
    Select whichever is higher between computed Regular
    Corporate Income Tax (RCIT) versus Minimum
    Corporate Income Tax (MCIT).

    Regular Corporate Income Tax Due 150,000


    Minimum Corporate Income Tax 160,000

    Therefore,

    Minimum Corporate Income Tax Due 160,000

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