Introduction-to-Taxation.pdf

Introduction to Taxation OUTLINE  Concept of taxation and its necessity for every government  Lifeblood doctrine and its implication to taxation  Theories of government cost allocation  Inherent power of the State  Scope of the taxation power  Stages of taxation  Concept of si...

Introduction to Taxation OUTLINE  Concept of taxation and its necessity for every government  Lifeblood doctrine and its implication to taxation  Theories of government cost allocation  Inherent power of the State  Scope of the taxation power  Stages of taxation  Concept of situs in taxation  Fundamental principles surrounding taxation  Various escapes from taxation WHAT IS TAXATION? Taxation may be defined as a state power, a legislative process, and a mode of government cost distribution.  THEORIES OF COST ALLOCATION  Benefit received theory  Ability to pay theory The Theory of  Vertical equity Taxation  Horizontal equity The Basis of Taxation THE LIFEBLOOD DOCTRINE INHERENT POWERS OF THE STATE  Taxation Power  Police Power  Eminent Domain  THE LIMITATIONS OF THE TAXATION POWER A. Inherent Limitations (5)  Territoriality of taxation  International comity SCOPE OF THE TAXATION POWER  Public purpose The scope of taxation is widely  Exemption of the government regarded as comprehensive,  Non-delegation of the taxing power plenary, unlimited and supreme. B. Constitutional Limitations (16)  Due process of law  Equal Protection of Law  Uniformity Rule in Taxation  Progressive System of taxation  Exemption from taxes  SITUS OF TAXATION (PLACE)  Business Tax Situs  Income Tax Situs on Services  Income Tax Situs on Sale of Goods  Property Tax Situs STAGES OF THE EXERCISE OF  Personal Tax Situs TAXATION POWER 1. Levy or imposition OTHER FUNDAMENTAL DOCTRINES IN  Legislative act in taxation TAXATION 2. Assessment and collection  Marshall Doctrine  Administrative act of  Holme’s Doctrine taxation  Prospectivity of Tax Laws  Non-compensation or set-off  Non-assignment of taxes  Imprescriptibility in taxation  Doctrine of Estoppel  Judicial Non-interference  Strict Construction of Tax Laws DOUBLE TAXATION Examples: Taxpayer is taxed twice by the same tax jurisdiction for the same thing Elements: 1. Primary element: Same object 2. Secondary Elements: a. Same type of tax b. Same purpose of tax c. Same taxing jurisdiction d. Same Tax Period Types: 1. Direct Double Taxation  All the element exist for both impositions  No law expressly prohibits double taxation 2. Indirect Double Taxation  Indirect double taxation is prevalent in practice  At least one of the secondary elements is not common for both  Direct double taxation is discouraged impositions  ESCAPES FROM TAXATION Categories: 1. Result to loss of Gov’t revenue 1. Tax Evasion- tax dodging How can double taxation be 2. Tax Avoidance- tax minimization minimized? 3. Tax exemption- tax holiday a. Provision of tax exemption 2. Do not result to loss of Gov’t revenue b. Allowing foreign tax credit 1. Shifting –transferring tax burden c. Allowing reciprocal treatment 2. Capitalization- adjustment of value of d. Entering into treaties or bilateral an asset caused by changes in tax agreements rates 3. Transformation- elimination of waste or losses to form savings Tax Amnesty vs Tax Condonation Taxes, Tax Laws and Tax Administration OUTLINE  The Type of Taxation Laws  Distinctions among tax laws, revenue regulations and rulings  Tax, its elements and classifications  Distinction of tax from similar items  Tax system and its types  The principles of sound tax system  How tax is administered  The powers of BIR  Types of Taxation Laws  Tax Laws –assessment and collection of taxes  NIRC  Tariff and Customs Code  Local Tax Code Taxation Law  Real Property Tax Code Refers to any law that arises from the exercise of the taxation power  Tax Exemption Laws- grant certain of the state immunity from taxation  Minimum Wage law  Omnibus Investment Code of 1987  BMBE Law  Cooperative Development Act   Types of Administrative Issuances 1. Revenue Regulations 2. Revenue Memorandum orders 3. Revenue Memorandum rulings Sources of Taxation 4. Revenue Memorandum circulars Revenue Bulletins Laws 5. 6. BIR Rulings Constitution Statutes and Presidential Decrees Judicial Decisions or Case Laws  Types of Rulings Executive Order and Batas Pambansa 1. Value Added Tax (VAT) rulings Administrative issuances 2. International Tax Affairs Divisions Local ordinances (ITAD) rulings Tax treaties and conventions w/ Foreign 3. BIR Rulings Countries Revenue Regulations 4. Delegated Authority (DA) rulings  Generally Accepted Accounting Principles (GAAP) vs Tax Laws  Classification of Taxes  As to purpose 1. Fiscal/Revenue Tax (general purpose) TAX 2. 3. Regulatory Sumptuary (social objectives) Enforced proportional contribution levied by  As to Subject matter the lawmaking body of the state to raise 1. Personal, poll/capitation 2. Property Tax revenue for public purpose. 3. Excise/Privilege Tax Elements of a Valid Tax  As to incidence 1. Direct Tax 1. Tax must be levied by the taxing power 2. Indirect Tax having jurisdiction over the object of taxation  As to amount 1. Specific Tax 2. Tax must not violate constitutional and 2. Ad valorem inherent limitations  As to rate 1. Proportional tax 3. Tax must be uniform and equitable 2. Progressive or graduated tax 3. Regressive tax 4. Tax must be for public purpose 4. Mixed tax 5. Tax must be proportional in character  As to imposing authority 1. National Tax 6. Tax is generally payable in money 2. Local Tax  Tax System  Methods or schemes of imposing, assessing and collecting taxes.  National tax system and local tax system Distinction of taxes Types of tax system according to with similar items Imposition Tax vs Revenue  Progressive Tax vs License Fee  Proportional Tax vs Toll  Regressive Tax vs Debt Types of tax system according to Impact Tax vs Tariff  Progressive System  Regressive System Tax vs Penalty TAX COLLECTIONS Principle of a Sound Tax System SYSTEMS 1. Fiscal Adequacy A. Withholding System on Income tax 2. Theoretical Justice 1. Creditable withholding Tax 3. Administrative Feasibility a. Withholding tax on compensation Tax Administration b. Expanded withholding tax - Management of the Tax System 2. Final withholding Tax - Entrusted to the BIR B. Withholding System on Business Tax Powers of BIR C. Voluntary compliance system D. Assessment or enforcement system OTHER AGENCIES TASKED WITH  TAXPAYER CLASSIFICATION FOR TAX COLLECTIONS OR TAX PURPOSES OF TAX ADMINISTRATION INCENTIVES  Large Tax payers 1. Bureau of Customs  Non-large Taxpayers 2. Board of Investments 3. PEZA 4. Local Government Tax Collecting Unit 5. Fiscal Incentives Review Board THANK YOU!