INCOME TAXATION
MODULE 2
Prepared by: Atty. Angelo Andro M. Suan, CPA
LESSON/TOPIC : General Principles
Reference : Mamalateo, 2019; Reviewer on Taxation
Concept:
POLICE EMINENT
POWER DOMAIN
1. Purpose
To raise To promote To facilitate
revenue public the State’s
purpose need of
through property for
regulations public use
2. Amount of Exaction
No limit Limited to No exaction;
the cost of but private
regulation, property is
issuance of taken by the
the license or State for
surveillance public
purpose
3. Benefits Received
No special No direct A direct
or direct benefit is benefit results
benefit is received; a in the form of
received by healthy just
the economic compensation
taxpayer; merely general standard of society is to the property owner
benefit of protection attained
4. Non-impairment of Contracts
Contracts may not be Contracts may be impaired Contracts may be impaired
impaired
5. Transfer of Property Rights
Taxes paid become part of No transfer but only restraint Transfer is effected in favor of
public funds in its exercise the State
6. Scope
All persons, property and All persons, property, rights Only upon a particular
excises and property
privileges
SYSTEMS OF TAXATION
Global System Schedular System
A system employed where the tax system A system employed where the income tax
views treatment varies and is made to depend on the
indifferently the kind or category of taxable income of the
tax base and generally treats in common taxpayer.
all
categories of taxable income of the
individual.
A system which taxes all categories of A system which itemizes the
income except certain passive different incomes and provides for varied
incomes and capital gains. It percentages of taxes, to be applied thereto.
prescribes a unitary but progressive rate for
the taxable aggregate incomes and flat rates
for certain passive incomes derived by
individuals.
EXAMPLES OF TAXES LEVIED WITH A REGULATORY PURPOSE, OR COMBINED EXERCISE OF
POLICE POWER AND THE POWER OF TAXATION.
a. Motor vehicle registration fees are now considered revenue or tax measures.(Pal
v. Edu, G.R No. L-41383, August 15,1988) This case reversed the doctrine previously
held in Republic v. Philippine
Rabbit Bus Lines, Inc., 32 SCRA 211, to the effect that motor vehicle
registration fees are regulatory exactions and not revenue measures.
b. The tax imposed on videogram establishments is not only regulatory but a
revenue measure because the earnings of such establishments have not been
subject to tax depriving the government of an additional source of income. (Tio
v. Videogram Regulatory Board, 151 SCRA 208)
c. The “coconut levy funds” were all raised under the state’s taxing and
police powers.
The state’s concern to make it a strong and secure source not only in the
livelihood of the significant segment of the population, but also of export earnings,
the sustained growth of which is one of the imperatives of the economic growth.”
Philippine Coconut Producers Federation, Inc. Cocofed v. Presidential Commission on
Good Government (178 SCRA 236, 252)
CONSTRUCTION OF TAX LAWS
1. Public purpose is always presumed.
2. If the law is clear, apply the law in accordance to its plain and simple tenor.
3. A statute will not be construed as imposing a tax unless it does so clearly,
expressly and unambiguously.
4. In case of doubt, it is construed most strongly against the Government, and
liberally in favor of the taxpayer.
5. Provisions of a taxing act are not to be extended by implication.
6. Tax laws operate prospectively unless the purpose of the legislature to give
retrospective effect is expressly declared or may be implied from the language
used.
7. Tax laws are special laws and prevail over a general law.
NATURE OF TAX LAWS
1. Not political in character
2. Civil in nature, not subject to ex post facto law prohibitions
3. Not penal in character
Question:
1. Can the government collect taxes in the form of property, other than cash?
2. Give an example of tax in under global system and under schedule tax system.
