General Concepts of Taxation

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Questions and Answers

What is the primary purpose of taxation?

To provide funds for government expenses (correct)

To regulate social behavior

To promote economic competition

To control property ownership

Which of the following is NOT one of the inherent powers of the State?

Police Power

Power of Taxation

Power of Public Education (correct)

Power of Eminent Domain

According to the Lifeblood Theory of taxation, taxes are essential for which of the following reasons?

To support government functions and services (correct)

To minimize the impact of immigration

To ensure free market competition

To limit government functions

Which statement is true regarding the powers of the State related to taxation?

Taxes cannot be the subject of compensation or set-off Signup and view all the answers

Which of the following reflects a secondary purpose of taxation?

Regulating social behavior Signup and view all the answers

What is the basis of taxation as described in the content?

Taxation is essential for enjoying government benefits Signup and view all the answers

Which theory of taxation is based on the need to preserve the state's sovereignty?

Necessity Theory Signup and view all the answers

Which of the following describes the 'no estoppel' rule in taxation?

The government cannot be barred from collecting taxes. Signup and view all the answers

What type of tax is imposed on property in proportion to its value?

Property tax Signup and view all the answers

Which type of tax allows the taxpayer to indemnify himself at the expense of another?

Indirect tax Signup and view all the answers

Which characteristic describes the comprehensive nature of taxation?

It applies to businesses and individuals alike. Signup and view all the answers

What is the primary purpose for levying a tax?

For public purposes. Signup and view all the answers

What characterizes a progressive tax system?

Tax rate increases as the tax base increases Signup and view all the answers

Which principle indicates that tax sources must be adequate for fiscal purposes?

Fiscal adequacy Signup and view all the answers

What does it mean for a tax to be proportionate in character?

It varies based on the income or property value. Signup and view all the answers

Which of the following best describes the nature of the state's power of taxation?

It is inherent in sovereignty and can be enforced without a law. Signup and view all the answers

What type of tax is fixed in proportion to the value of the property?

Ad valorem tax Signup and view all the answers

What aspect of taxation pertains to the assessment or determination of the correct amount?

Assessment Signup and view all the answers

What describes the nature of a tax that is primarily used to regulate behavior rather than raise revenue?

Regulatory purpose tax Signup and view all the answers

Which type of tax is imposed by the local government?

Property tax Signup and view all the answers

Which factor does NOT contribute to determining the situs of taxation?

Financial status of the taxpayer Signup and view all the answers

Which of these is a characteristic of special assessment taxes?

Levied only on land Signup and view all the answers

Which of the following is a limitation to the state’s power of taxation?

It is subject to international agreements. Signup and view all the answers

Which type of tax is a fixed amount imposed upon individuals residing within a specified territory?

Poll or capitation tax Signup and view all the answers

Which of the following best describes a subsidy?

A direct financial aid given by the government Signup and view all the answers

What does the term 'direct double taxation' encompass?

Taxation by the same authority for the same subject Signup and view all the answers

Which of the following is not a means of avoiding the burden of taxation?

Importation Signup and view all the answers

Which source of tax laws deals specifically with international agreements?

Tax treaties and international agreements Signup and view all the answers

What is the primary characteristic of customs duties?

Charges on goods exported or imported Signup and view all the answers

Which of the following methods is an example of tax avoidance?

Utilizing legal loopholes to reduce tax liabilities Signup and view all the answers

What does the term 'capitalization' refer to in the context of taxation?

The process of reducing selling price based on taxable income Signup and view all the answers

Which source of tax law is specifically governed by local authorities?

Local Government Code Signup and view all the answers

Study Notes

General Concepts and Principles of Taxation

Taxation is the process of a sovereign government imposing burdens to raise revenue for legitimate government functions
Taxes are enforceable contributions levied by the state's law-making body to support government and public needs
The three inherent powers of the state are police power, power of taxation, and power of eminent domain.

Purposes of Taxation

The primary purpose of taxation is to raise revenue for promoting general welfare and protecting citizens.
The secondary purpose is to regulate and control activities, with effects such as promoting general welfare, reducing inequality, and supporting economic growth.

Theories of Taxation

Necessity Theory: Taxation is necessary for the state's survival and sovereignty, providing protection and facilities for citizens.
Lifeblood Theory: Taxation fuels the government's essential functions of serving and protecting its people, providing tangible and intangible benefits.
The lifeblood theory is manifested in principles such as the government's immunity from estoppel, the inability to prevent tax collection through injunctions, the lack of compensation or set-off for taxes, the government's power to select objects and methods of taxation, and the validity of taxes even if resulting in property destruction.

Nature, Scope, and Limitations of Taxation

The power of taxation is considered the most absolute power of government.
Its scope is comprehensive, unlimited, plenary, and supreme, encompassing all persons, businesses, and professions without restrictions.
Essential elements of a tax include being enforced, payable in money, proportionate, levied on persons, property, or rights, imposed by law, and for a public purpose.

Aspects of Taxation

Taxation involves three aspects: levying, assessment, and collection.
The inherent nature of the state's power of taxation includes its inherent nature, its legislative character, exemptions for government entities, international comity, territorial jurisdiction, and its preeminence among the state's powers.
Government agencies performing governmental functions are generally tax-exempt, while those with proprietary functions are subject to taxation, with some exceptions for specific organizations like the GSIS, SSS, PHIC, PCSO, and local water districts.

Classification of Taxes

Scope: National taxes are imposed by the national government; local taxes are imposed by local government units.
Subject Matter:
- Personal, poll, or capitation taxes are fixed amounts imposed on individuals within a specific territory.
- Property taxes are imposed on property in proportion to its value.
- Excise taxes are levied on specific rights and privileges (e.g., sin products, imported goods).
Burden:
- Direct taxes cannot be shifted to another taxpayer.
- Indirect taxes are borne by the original payer, but they can be indemnified by shifting the cost to others.
Determination of Fixed Amount:
- Specific taxes are fixed amounts based on quantity, weight, or measurement.
- Ad valorem taxes are a fixed percentage of the property's value.
Purpose:
- Primary, fiscal, or revenue purpose is to generate funds.
- Secondary, regulatory, special, or sumptuary purpose aims to regulate or control activities.
Graduation or Rate:
- Proportional taxes have a fixed percentage rate.
- Progressive taxes have rates that increase with the tax base or bracket.
- Regressive taxes have rates that decrease with the tax base or bracket.
Taxing Authority:
- National taxes are imposed under the National Internal Revenue Code, collected by the Bureau of Internal Revenue.
- Local taxes are imposed by local government units.

Basic Principles of a Sound Tax System

Fiscal Adequacy: Tax sources must be sufficient to meet government's needs.
Theoretical Justice or Equity: Taxes should be proportionate to a taxpayer's ability to pay.
Administrative Feasibility: The tax law must be effectively and efficiently enforced.

Limitations on the State's Power to Tax

Inherent Limitations: These are inherent in the nature of taxation itself.
Constitutional Limitations:
- The Constitution requires a progressive tax system, emphasizing direct taxes.
- Regressive systems, which rely more heavily on indirect taxes, are generally discouraged.

Situs of Taxation

Factors Determining Situs:
- The subject matter (person, property, or activity)
- Nature of the tax
- Citizenship
- Residence of the taxpayer
- Source of income
- Place of excise, business, or occupation being taxed

Other Doctrines in Taxation

Toll: A fee for using a public infrastructure like a road or bridge.
Penalty: A sanction for violating laws or engaging in harmful activities.
Special Assessment: An enforced proportional contribution from landowners for specific benefits resulting from public improvements.
- It is levied only on land, is not a personal liability, is based on benefits, and is exceptional in timing and location.
Revenue: All government funds or income.
Subsidy: Financial aid granted by the government to individuals or enterprises deemed beneficial to the public.
Permit or License: A charge imposed under police power for regulatory purposes.
Customs Duties: Taxes on goods imported or exported.
Tariff: A system of imposing duties on imported or exported goods.
Direct Double Taxation: Taxation twice by the same authority, for the same purpose, in the same period, on the same subject, and with the same type of tax.

Means of Avoiding the Burden of Taxation

Shifting: Transferring the tax burden from the original payer to someone else.
Transformation: Recouping the tax cost through improved production processes.
Evasion: Illegally reducing or avoiding tax.
Tax Avoidance: Legally reducing tax liability through permissible alternatives.
Exemption: Immunity granted to specific people or groups from taxation.
Capitalization: Reducing the price of income-producing property by the capitalized value of taxes.
Avoidance: Legal tax-saving strategies.

Sources of Tax Laws

Constitution
National Internal Revenue Code
Tariff and Customs Code
Local Government Code
Local tax ordinances
Tax treaties and international agreements
Special laws
Supreme Court and Court of Tax Appeals decisions
Revenue rules, regulations, and administrative rulings and opinions.

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Description

Explore the fundamental principles and purposes of taxation in this quiz. Understand the inherent powers of the state, including the necessity and lifeblood theories of taxation. Test your knowledge on how taxation impacts government functions and citizen welfare.