support. Defined as State Power, a legislative process and a mode of government cost distribution Inherent powers of the state
As a state power – taxation is an inherent Taxation power
power of the state to enforce a proportional Power of state to enforce proportional contribution from its subjects for public contribution from its subjs to sustain purposes. itself Ex. Gov requiring people to pay a tax As a process – is a process of levying taxes by on any goods they buy that will go to the legislature of the state to enforce the funding of police force proportional contributions from its subj. for public purpose Police power Gen power of state to enact laws to As a mode of cost distribution – taxation is a protect the welfare of people mode by which the state allocates its costs or Ex. Real estate zoning, bldg. codes burden to its subjs. Who are benefitted by its and rent controls spending. Eminent domain Aspects of ability to pay theory Power of state to take priv property for public use after paying just Vertical Equity compensation Proposes that the extent of one’s abilitu to Ex. Buying a priv. land for the making of pay is directly proportional to the level of his rail road tax base. Aspects of taxation Ex. A has income of 200k and B has 400k. in taxing income, the gov. should tax B more Levying of tax than A bcuz B has a greater income and a Imposition of tax requires legislative greater capacity to contribute intervention. In PH, it is congress that levies taxes Horizontal Equity Requires consideration of the particular Collection of tax levied circumstances od the taxpayer. Essentially an administrative function
Ex, a & b had 300k inco. A is a single mom
w./o a child while b is married w/ 4 kids. In taxing income, the gov should tax a more bcuz she has more of the capacity to INCOME TAXATION Basic Principles of Sound Tax system - Tax can only be imposed within Fiscal Adequacy territories of the state. Sources of rev, must be enough or - No basis for taxing foreign subjs. sufficient to provide funds to meet gov. expenditures International Comity – property of foreign state may not be taxed by another in respect Theoretical Justice to the agreement of the states. Taxes must be based on the payer’s ability to pay Exemption – gov. agencies performing governmentak functions are exempt from Administrative Feasibility taxation. Those in gov. The tax must be clear tax payer, not unduly burdensome and Non-delegation – power to tax being discouraging to busi., convenient legislative in nature may not be delegated. as to time and manner of payment, and capable of enforcement by Double Taxation competent public officials Occurs when same taxpayer is taxed twice The law must be capable of by the same tax jurisdiction for the same convenient, just and effective thing. administration. Elements Limitations on the power of Taxation Primary: subject Subj. to constitutional and inherent Secondary: same type of tax limitations. Same purpose of tax Same taxing jurisdiction Constitutional limitations Same tax period Prov. For in the constitution or implied from its provisions. Direct double taxation Inherent Limitations Occurs when all elems of double tax exist for Restrictions to the power to tax attached to botj impositions. its nature Illegal as it is against the constitution
1. Inherent Lims Becomes legal objectionable for being
Purpose – levied only for public oppressive and inequitable if both taxes are purpose imposed w/ same purpose by same taxing Territoriality – state may tax persons authority for same taxable period. and properties under its jurisdiction INCOME TAXATION Indirect Double Taxation Allowed by selecting tax options allowed by When at least one of the secondary elems. Is law which minimizes tax liability or by careful not common for both impositions. tax planning to reduce tax exposure.
Ex. Busi. Tax is imposedby municipal gov. Tax Amnesty
prior to issuance of busi. License to a General pardon/forgiveness granted by gov. taxpayer for engaging in advertising busi. for erring taxpayers to give them a chance ---------------------------------------------------------------- to reform and enable them to have a fresh Lifeblood Doctrine/Theory start to be a part of a society w/ clean slate Taxes are the lifeblood of the government and their prompt and certain availability are It is an absolute forgiveness or waiver by the an imperious need gov. on its rights to collect and is retrospective in application Taxation is indispensable and inevitable price for civilized society; Tax Exemption (tax holiday) Immunity privilege or freedom from being without taxes, the government would be subj. to a tax which others are subj. to paralyzed for lack of motive power to activate or operate it. All forms of tax exemption can be revoked by congress except those that is granted by A government cannot continue to exist and constitution or contract. operate without financial means. This inherent power gives the government the Tax condonation (tax remission) right to tax citizens and properties within its Forgiveness of tax obligation of a certain jurisdiction. taxpayer under certain justifiable grounds.
Tax Evasion (Tax dodging) Bcus the deprive the gov of revs. Tax occurs when the taxpayer resorts to illegal or exemption, tax refund , tax amnesty and tax unlawful means to lessen or ot get away with condonation are construed against his tax liability. taxpayer and in favor of gov.
Examples of atx evasion are under-
declaration of sales, overstatement of expenses, and backdating an imp. Document Tax Avoidance (Tax minimization/planning) Any act or trick that reduces or totally escapes taxes by any legally permissible means. INCOME TAXATION Tax amnesty vs. Tax condonation
Amnesty - covers both civil and criminal
liabilities - Operates retrospectively by forgiving past violation - Conditional upon taxpayer paying the gov. a portion of tax
Condonation – covers only civil liabilities
- Applies prospectively to any unpaid bal of tax. Portion already paid will not be refunded - Requires no payment.
Situs of Taxation
- Situs is the place of taxation
- Is the atax jurisdiction that has the power to levy taxes upon the tax object. - The rule is that the state may rightfully levy and collect tax where the subj. being taxed has a situs under its jurisdiction. - Serves as the frames of referenvce in gauging whether the tax obj. is within or outside the tax jurisdiction of the taxing authority. INCOME TAXATION INCOME TAXATION INCOME TAXATION
