Taxation- is the process or means by which the The government is a necessity as well as taxation

sovereign (independent state), through its law-making because the government can neither exist nor endure
body (the legislature), imposes burdens upon subjects without taxation.
and objects within its jurisdiction for the purpose of 2. basis of taxation benefits received or reciprocity
raising revenues to carry out the legitimate objects of theory
the government. Reciprocal duty of protection and support between the
state and its inhabitants. Spawned the Doctrine of
The three inherent powers of the state
symbiotic Relationship, taxes are what we pay for a
1. Police Power- promoting public welfare by
civilized society.
restraining and regulating the use of liberty and
Payment of tax=protection from the government
property. Exercised only by the government.
2. Power of Taxation- power to raise revenue to defray Manifestation of the Lifeblood theory
the necessary expenses of the government. 1.” No estoppel against the government”
3. Power of Eminent Domain. Power of the state to 2. Collection of taxes cannot be enjoined (stopped) by
acquire private property for public purpose upon injunction
payment of just compensation. 3. taxes could not be the subject of compensation or
All of them are: set-off
 Inherent in the state 4. right to select objects (subjects) of taxation
 Exists independently a. subject or object to be taxed
 Ways by the state to interfere with private b. purpose of tax
rights and property c. amount or rate
 Legislative in nature and character d. kind of tax
 Presuppose an equivalent compensation e. apportionment of the tax
received, indirectly or directly by the persons f. situs of taxation
affected g. the manner, means, and agencies of
Purpose of Taxation collection of the tax.
1. Primary: Revenue or Fiscal Purpose 5. a valid tax may result in the destruction of the
-to provide funds or property with which to promote taxpayer’s property.
the general welfare and the protection of its citizen and Scope of Power to tax
finance its multifarious activities. a. comprehensive
2. Secondary: Regulatory Purpose b. unlimited
-employed as a devise for regulation or control to c. plenary
achieve: d. supreme
a) promotion of general welfare Essential Elements of Tax
b) reduction of social inequality a. it is an enforced contribution
c) economic growth b. generally payable in money
Taxes imposed for regulation: c. proportionate in character
a. excise tax for alcohol and cigarettes d. levied on persons, property, or the exercise of a right
b. amusement tax for clubs, cockpits, and racetracks or privilege
Taxes imposed for attaining some social or economic e. levied by the law-making body of the state
objectives: f. levied for public purposes.
a. increasing taxes in period of prosperity Aspects of Taxation
[Link] tax incentives 1. LEVYING
c. lowering taxes in case of economic break down 2. ASSESSMENT
3. COLLECTION OF THE TAX
Theory and Basis of taxation
Nature of the state’s power to tax
1. theory (authority) Lifeblood theory and/or Necessity
1. inherent in sovereignty
theory
2. legislative in character
 f. prohibition against infringement of religious freedom
g. prohibition against appropriation of proceeds of
taxation for the use, benefit, or support of any church
Classification of taxes h. prohibition against taxation of religious, charitable,
1. As to scope and educational entities
a. national i. prohibition against taxation of non-stock, nonprofit
b. local educational institutions
2. As to subject matter or object Situs of Taxation
a. personal, poll or capitation 1. Subject matter
b. property 2. nature of the tax
c. excise 3. citizenship
3. As to who bears the burden 4. residence of the taxpayer
a. direct 5. source of income
b. indirect 6. place of excise, business or occupation being taxed
4. as to determination of amount Double Taxation
a. specific -strict sense, direct duplicate taxation means taxing
b. ad valorem twice and is illegal.
5. as to purpose Requisites:
a. primary, fiscal, revenue purpose 1. by the same taxing authority
b. secondary, regulatory, special or sumptuary purpose 2. for the same purpose
6. as to graduation or rate 3. in the same year
a. proportional 4. same subject or object
b. progressive or graduated 5. same kind/character of the tax.
c. regressive Means of avoiding or minimizing the burden of
7. as to taxing authority taxation:
a. national 1. Shifting- only indirect taxes
b. local 2. Transformation- lower costs of production
Elements of sound tax system 3. Tax evasion- illegal means to defeat or lessen the
a. fiscal adequacy payment of a tax. “tax dodging”
- main purpose of tax is to raise revenue to fund public 4. Tax avoidance- legally permissible alternative tax
services rates or methods in order to reduce or avoid a tax
b. theoretical justice liability.
-ability to pay must be taken into consideration 5. Exemption
c. Administrative Feasibility Kinds of exemptions:
-tax laws must be effective and capable of efficient As to basis:
enforcement. 1. Constitutional from the constitution
Limitations on the state’s power to tax 2. Statutory from the legislation
1. inherent limitations: As to form:
a. purpose must be public in nature 1. Express
b. prohibition against delegation of the taxing power 2. Implied
c. territorial limitation As to extent
2. constitutional limitations 1. Total. Absolute immunity
a. due process of law 2. Partial.
b. equal protections of laws Amnesty- absolute forgiveness of the government of its
c. rule of uniformity and equity in taxation’ right to collect. To tax evaders that wishes to relent and
d. prohibition against imprisonment for non-payment of reform a chance to do so.
“poll tax” 6. Capitalization- reduction in the selling price of
e. prohibition against impairment of obligation of income.
contracts Sources of tax laws
1. Philippines Constitution Non-resident aliens
2. Tax treaties and international agreements Non-resident aliens - residence is not in Philippines and
3. National internal revenue code (NIRC) or the tax not a citizen.
code NRA-ETB=Stays for more than 180 days during the
4. Tariff and Customs Code taxable year and engaged in business and trade.
5. Local Government Code NRA-NETB=does not engage in business
6. Local tax ordinance
7. Other special Laws Source of income as basis of tax
8. Decisions of the supreme court and the court of tax Resident Citizen- net income within and without
appeals NRC, RC, NRA-ETB- net income within only
9. revenue rules and regulations and administrative NRA-NETB- gross income within only
rulings and opinions.
Types of income
When there is doubt in statute or law 1. Ordinary or regular income
In every case of doubt tax statutes are construed strictly 2. Passive Income
against the government and in favor of the taxpayer. 3. Capital gains tax
Provisions granting tax exemptions
Against the taxpayer ORDINARY OR REGULAR INCOME
Taxpayer’s suit Graduated tax table
Taxpayers have locus standi to question the validity of 2018-2022
tax measures or illegal expenditures of public money. Income Tax rate
Less than 250k exempt
Income tax for individuals 250k-400k 20% of excess over 250k
Individual taxpayers are natural persons with income 400k-800k 30k+25% excess over 400k
derived from within the territorial jurisdiction of a 800k-2M 130k+30% excess over 800k
taxing authority. 2M-8M 490k+32% excess over 2M
8M and more 2,410,000+35% excess over 8M
Citizens of the Philippines
2023 onwards
1. citizens at the time of adaptation of the 1987
Income Tax rate
constitution
Less than 250k exempt
2. fathers or mothers are citizen of the PH
250k-400k 15% in excess of 250k
3. born before jan 17,1973 of Filipino mothers
400k-800k 22,500+20% in excess of 400k
4. those naturalized in accordance with law. 800k-2m 102,500+25% in excess of 800k
Nonresident citizen (NRC) 2m-8m 402,500+30% in excess of 2m
1. established physical presence abroad with the 8m onwards 2,202,500+35% in excess of 8M
intention to stay Self-employed and professionals (SEP)
2. leaves ph during the taxable year to resude abroad Due to the effectivity of RA 10963 (TRAIN LAW) SEP may
-as an immigrant opt to avail 8% preferential tax rate if,
-for employement on permanent basis 1. gross sales and other non-operating income does not
-for work exceed 3M
3. citizen who have stayed outside Philippines for 183 2. the SEP shall be non-VAT registered
days or more 3. The gross sales were not derived from vat-exempt
4. OFWs sales and transaction
Resident citizen- those not classified as nonresident 4. the SEP is not subject to percentage tax other than
citizen under section 116 of the tax` code
Alien- foreign-born person who is not qualified to 5. the SEP signifies his/her intention to elect the
acquire Philippine citizenship by birth or after birth 8%income tax.
Resident aliens- residence is in the Philippines but not a
citizen. No definite intention as to his stay but might
extend so they have a home in the Philippines.
PASSIVE INCOME
Final withholding tax