Fundamentals of Accountancy: Taxation
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Questions and Answers

What is taxation primarily defined as?

  • A voluntary contribution to the government
  • An inherent power of the state (correct)
  • A process of economic growth
  • A fee for services rendered by the government

The Constitution of the Philippines confers the power of taxation to the state.

False (B)

Name one attribute of taxation.

forced charge, pecuniary burden payable in money, levied by the legislature, assessed with a reasonable rule of apportionment, imposed by the state within its jurisdiction, levied for a public purpose

Taxation is a __________ process involving legislative measures and executive implementation.

<p>legislative</p> Signup and view all the answers

Which type of double taxation is legally objectionable?

<p>Direct duplicate taxation (D)</p> Signup and view all the answers

Match the following attributes of taxation with their descriptions:

<p>Forced charge = Compulsory financial obligation Pecuniary burden = Monetary payment required Levied by the legislature = Imposed through laws Public purpose = Intended for government needs</p> Signup and view all the answers

Double taxation is prohibited in the Philippines.

<p>False (B)</p> Signup and view all the answers

Which entity is primarily responsible for assessing and collecting taxes?

<p>Executive branch (D)</p> Signup and view all the answers

Taxation must be conducted for a public purpose.

<p>True (A)</p> Signup and view all the answers

What is the requirement for direct duplicate taxation to be considered a violation of due process?

<p>The same property is taxed twice for the same purpose by the same authority within the same jurisdiction and period.</p> Signup and view all the answers

What powers does taxation distinguish itself from?

<p>Other inherent powers of the state such as eminent domain and police power.</p> Signup and view all the answers

Ad Valorem is a tax based on the _____ of the article subject to taxation.

<p>value</p> Signup and view all the answers

Match the type of taxation with its description:

<p>Ad Valorem = Tax based on value Double Taxation = Taxing the same property twice Indirect Duplicate Taxation = Not legally objectionable Direct Duplicate Taxation = Obnoxious type of double taxation</p> Signup and view all the answers

What is the primary purpose of taxation?

<p>To raise government funds (B)</p> Signup and view all the answers

Which of the following is NOT a requisite for direct duplicate taxation?

<p>Tax imposed for different purposes (B)</p> Signup and view all the answers

Name one significant factor that determines if a taxpayer is subjected to Philippine tax laws.

<p>Citizenship or residency of the taxpayer.</p> Signup and view all the answers

Eminent domain allows the government to take private property without compensation.

<p>False (B)</p> Signup and view all the answers

Taxation power is generally considered _____ in nature.

<p>territorial</p> Signup and view all the answers

What is the police power of the state mainly concerned with?

<p>Regulating activities to promote public welfare</p> Signup and view all the answers

Eminent domain is the power to take private property for ______ use.

<p>public</p> Signup and view all the answers

Match the inherent power of the state with its characteristics:

<p>Taxation = No Limit on imposition Police Power = Sufficient to cover costs of regulation Eminent Domain = Owner is paid fair market value</p> Signup and view all the answers

Which power allows the state to enforce contributions from the people?

<p>Taxation (A)</p> Signup and view all the answers

The police power of the state is limited to specific regulations.

<p>True (A)</p> Signup and view all the answers

What type of compensation is provided under eminent domain?

<p>Just compensation based on fair market value</p> Signup and view all the answers

What is the Lifeblood Theory in taxation?

<p>Prompt availability of taxes is essential for government existence. (C)</p> Signup and view all the answers

The Necessity Theory suggests that taxation is a voluntary contribution by citizens.

<p>False (B)</p> Signup and view all the answers

List one requirement that must be met for taxation to avoid injustice to individuals.

<p>Notice and opportunity for hearing.</p> Signup and view all the answers

Taxation is necessary to support the state's __________.

<p>sovereignty</p> Signup and view all the answers

Match the following theories of taxation with their descriptions:

<p>Lifeblood Theory = Government cannot exist without taxes. Necessity Theory = Taxation funds required government functions. Benefits-Protection Theory = Inhabitants receive protection in exchange for taxes. Symbiotic Relationship Theory = Reciprocal relationship between state and taxpayers.</p> Signup and view all the answers

A nonresident Filipino taxpayer is taxable on income generated from which source?

<p>Within the Philippines (A)</p> Signup and view all the answers

What imposes limitations on the power of taxation?

<p>Inherent and Constitutional limitations (D)</p> Signup and view all the answers

A resident alien is not taxable on income earned outside the Philippines.

<p>True (A)</p> Signup and view all the answers

With taxes, the state has a reciprocal duty of protection towards its inhabitants.

<p>True (A)</p> Signup and view all the answers

What are the three inherent powers of the state?

<p>Taxation Power, Police Power, Power of Eminent Domain.</p> Signup and view all the answers

What is a Resident Citizen in the context of Philippine taxation?

<p>A Filipino who permanently resides or is domiciled in the Philippines.</p> Signup and view all the answers

A _____ is a person who is not a citizen of the Philippines.

<p>Alien</p> Signup and view all the answers

Match the following taxpayer classifications with their descriptions:

<p>Resident Citizen = A Filipino who permanently resides in the Philippines Nonresident Foreign = Taxation only on income earned within the Philippines Resident Alien = Subject to taxation on income sourced within the Philippines Nonresident Filipino = Taxable on income earned only within the Philippines</p> Signup and view all the answers

Who are considered nonresident citizens according to the provided content?

<p>Philippine citizens who reside abroad with the intention to stay (A)</p> Signup and view all the answers

For resident foreign corporations, income earned outside the Philippines is:

<p>Not taxable (D)</p> Signup and view all the answers

A resident alien is defined as an individual who is a citizen of the Philippines.

<p>False (B)</p> Signup and view all the answers

All domestic corporations are taxed on income generated from sources outside the Philippines.

<p>False (B)</p> Signup and view all the answers

What is the definition of a domestic corporation?

<p>Corporations created or organized in the Philippines under its laws.</p> Signup and view all the answers

Under the National Internal Revenue Code, what classification does a corporation formed under Philippine law fall under?

<p>Domestic Corporation</p> Signup and view all the answers

An individual whose residence is outside the Philippines and is not a citizen is known as a __________.

<p>nonresident alien</p> Signup and view all the answers

Which of the following describes a resident alien?

<p>An individual residing in the Philippines but not a citizen (B)</p> Signup and view all the answers

Match the following types of citizens and their definitions:

<p>Nonresident Citizen = A citizen residing outside the Philippines with intention to remain abroad Resident Alien = An individual residing in the Philippines but not a citizen Domestic Corporation = Corporations organized under Philippine laws Nonresident Alien = An individual not a citizen and residing outside the Philippines</p> Signup and view all the answers

A citizen who works abroad and derives income from that work is considered a nonresident citizen.

<p>True (A)</p> Signup and view all the answers

A citizen of the Philippines who leaves during the taxable year for __________ residency is considered a nonresident citizen.

<p>permanent</p> Signup and view all the answers

Flashcards

Taxation

An inherent power of the state to collect taxes from its inhabitants to support government and public needs.

Inherent Power

A power possessed by a state from its very existence, not granted by any law.

Taxation as a Power

Refers to the state's authority to impose and collect taxes.

Taxation as a Process

The steps involved in levying, assessing, and collecting taxes.

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Tax Policy

The set of rules and guidelines that determine how taxes are levied.

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Tax Administration

The implementation of tax laws through assessment and collection.

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What does it mean that taxation is a forced charge?

Taxes are mandatory, not optional. Residents are obligated to pay.

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What are the key elements of taxation?

Taxation involves a forced charge, payable in money, levied by the legislature, with a reasonable apportionment, imposed by the state within its jurisdiction, and for a public purpose.

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Taxation Purpose

Taxes must be levied for a public purpose, meaning they must benefit the general welfare and not private interests.

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Uniform Taxation

The rule of taxation must be applied fairly and equally to all taxpayers in similar situations.

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Taxing Authority Jurisdiction

Taxes can only be levied on individuals or property that is located within the jurisdiction of the taxing authority.

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Notice and Hearing

Individuals must be given proper notice and opportunity to be heard before being assessed taxes.

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Limitations on Taxation Power

Taxation power is subject to inherent and constitutional limitations, ensuring it doesn't infringe on basic rights.

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Lifeblood Theory

Taxes are essential for the government to function and provide essential services to its citizens.

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Necessity Theory

Taxes are necessary to cover the costs of running the government and maintain its sovereignty.

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Benefits-Protection Theory

Citizens pay taxes in exchange for the protection and benefits provided by the government.

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Police Power

The government's authority to enact laws, rules, and regulations to maintain public safety, order, and general welfare.

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Eminent Domain

The government's right to take private property for public use, even if the owner doesn't want to sell, as long as they provide fair compensation.

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Purpose of Taxation

The main goal of taxation is to raise revenue for the government to fund public services, such as education, healthcare, and infrastructure.

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Purpose of Police Power

The goal of police power is to regulate behavior and activities that affect public safety, health, and well-being.

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Purpose of Eminent Domain

The government uses eminent domain to acquire private property for public projects that benefit the community, such as roads or schools.

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Amount of Tax Imposition

There's no limit to how much tax the government can impose, as long as it's deemed reasonable and necessary for its needs.

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Amount of Regulation (Police Power)

Regulations should be sufficient to achieve their goal of promoting public welfare without being excessive or burdensome.

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Ad Valorem Tax

A tax based on the value of the item being taxed. Requires an assessment of the item's worth by another party.

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Double Taxation

Taxing the same property or income twice when it should only be taxed once.

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Is double taxation prohibited in the Philippines?

No. There is no constitutional prohibition against double taxation. It is not favored but permissible.

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Direct Duplicate Taxation

This is the more serious type of double taxation, considered a violation of due process. It occurs when the same property is taxed twice by the same authority for the same purpose within the same period and jurisdiction.

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Indirect Duplicate Taxation

This type of double taxation isn't legally problematic. It lacks one or more of the elements that make direct double taxation objectionable.

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Situs of Taxation

The general principle of taxation is that taxing power is territorial. This means tax laws can only be applied within the territory of the taxing authority.

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Factors Affecting Situs of Taxation

To determine if a person or property is subject to a specific tax law, consider these factors: the taxpayer's citizenship and residency and the source or location of the item taxed.

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Taxation Power

The power of the government to impose taxes on individuals and entities within its territory.

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Income Tax for a Filipino Resident

Income earned both within and outside the Philippines is subject to income tax for Filipino residents.

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Income Tax for a Non-resident Filipino

Only income earned within the Philippines is subject to income tax for non-resident Filipinos.

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Income Tax for a Resident Alien

Only income earned within the Philippines is subject to income tax for resident aliens.

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Income Tax for a Non-resident Alien

Only income earned within the Philippines is subject to income tax for non-resident aliens.

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Business Tax for Domestic Corporations

Business income generated both within and outside the Philippines is subject to business tax for domestic corporations.

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Business Tax for Resident Foreign Corporations

Business income generated within the Philippines is subject to business tax for resident foreign corporations.

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Business Tax for Non-resident Foreign Corporations

Business income generated within the Philippines is subject to business tax for non-resident foreign corporations.

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What are the ways to become a Filipino Citizen?

Someone can become a Filipino Citizen by birth, naturalization, and by electing Philippine citizenship if born to a Filipino mother before January 17, 1973.

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What defines a Nonresident Citizen?

A Nonresident Citizen is a Filipino who lives permanently abroad or works abroad most of the time during the taxable year.

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What is a Resident Alien?

A Resident Alien is someone who lives in the Philippines but is not a Filipino citizen.

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Who is a Nonresident Alien?

A Nonresident Alien is someone who lives outside of the Philippines and is not a Filipino citizen.

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Domestic Corporation

A domestic Corporation is formed in the Philippines and operates under its laws.

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What are considered Corporations for taxation?

For taxation purposes, partnerships (except general professional partnerships), joint-stock companies, and joint accounts are all considered corporations.

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What are the key criteria for Nonresident Citizen?

Key criteria for Nonresident Citizen include establishing a permanent residence abroad, leaving the Philippines for permanent work or immigration, and working and deriving income abroad for most of the taxable year.

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What are the key criteria for Nonresident Alien?

The key criteria for Nonresident Alien is an individual whose residence is outside the Philippines and who is not a citizen of the Philippines.

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Study Notes

Course Information

  • Course Title: Fundamentals of Accountancy, Business and Management 2
  • Institution: University of the Cordilleras-Senior High School
  • Location: Baguio City

Taxation as an Inherent Power

  • Taxation is an inherent power of the state that predates any specific legislation.
  • The Philippines' constitution doesn't grant this power; it merely limits its use.
  • Taxes are compulsory contributions from individuals and property.
  • Taxes are levied by the government's legislative branch for public needs.
  • Attributes of taxation include a forced charge, payable in money, levied by the legislature, and for a public purpose.

Taxation as a Process

  • Taxation is a process involving two distinct phases: policy-making (legislative branch) and implementation (executive branch).
  • Tax Policy, which occurs in the legislative branch, involves enacting tax laws and ordinances.
  • Tax Administration, conducted by the executive branch (e.g., Bureau of Internal Revenue), assesses, manages, and collects taxes.

Taxation as a Means

  • Taxation is a crucial source of funds for governmental operations.
  • Collecting taxes enables the government to fulfil its duties.
  • Tax collection is necessary for funding public services, projects, and programs.

Theories of Taxation

  • Lifeblood Theory/Bread and Butter Doctrine: The government cannot function without tax revenues.
  • Necessity Theory: Taxation is required for the government's continued existence and performance of essential functions.
  • Benefits-Protection Theory: This theory points to the reciprocal relationship between the state providing protection and citizens paying taxes.
  • Symbiotic Relationship Theory: This emphasizes the reciprocal duties between the state's protection and citizen's financial contributions (taxes).

Principles of a Sound Tax System

  • Fiscal Adequacy: Taxes must be adequate to meet the government's financial needs.
  • Administrative Feasibility: Taxes should be easy to collect and manage efficiently.
  • Theoretical Justice: Taxes should be fair and progressive.

Tax Avoidance vs. Tax Evasion

  • Tax Avoidance: The legal reduction of tax liability through legitimate means. e.g. tax exemptions, deductions, credits.
  • Tax Evasion: The unlawful means of reducing or avoiding tax burden. e.g. concealing income or assets.

Classification of Taxes

  • Direct Taxes: Taxes directly levied on the person or entity liable, like income tax.
  • Indirect Taxes: Taxes levied on the consumption or use of products or services, like value-added tax.
  • Taxation based on the subject matter- Personal tax, Poll tax, property tax, excise taxes, custom duty

Situs of Taxation

  • The location of the activity or property is a critical determinant in determining which jurisdiction and how to tax it.

Classification of Taxpayers

  • Resident Citizens, Non-Resident Citizens, Resident Aliens, Non Resident Aliens, Domestic Corporations, Foreign Corporations.

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Fundamentals of Accountancy, Business and Management 2 Module 6 PDF

Description

This quiz covers essential concepts of taxation as an inherent power of the state, emphasizing its role in public finance. Explore the process of taxation, including policy-making by the legislative branch and implementation by the executive. Understand the attributes and significance of taxes in governance.

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