Fundamentals of taxation

It's all about fundamentals of taxation.
I made it as a presentation of my report in Economics.

1. Fundamentals of Taxation

2. Nature of taxation Taxation is a state power exercised through the country’s legislative body. The principle of taxation states that taxes are collected to support the government in its expenses and services for public welfare. Reciprocal duties of protection and support between the state and its citizens The constitution also states that revenues through taxation must only be used for government operations and for public welfare.

3. purpose The purpose of taxation is to raise revenues from all possible sources to support government expenditures and services and to promote the general well-being and protection of its citizens. Taxes safeguard newly-opened industries to pioneering and new industries and other enterprises. Taxes also shield domestic producers by levying a much higher custom duties on imported goods.

4. Canons of taxation refer to the basic principles of a sound tax system which identify the following: fiscal adequacy, administrative feasibility, and theoretical justice

5. Fiscal Adequacy Taxes collected by the Bureau of International Revenue (BIR) must be sufficient enough to fund the necessary government expenditures and basic services in a given fiscal year. Revenues must be capable of adjusting to variations in public expenditures.

6. Administrative feasibility Payment of taxes must be taxpayer-friendly. Theoretical justice “ability-to-pay” principle

7. Basis of taxation the Constitution, the fundamental law of the land; Statutes, laws passed by the Congress; or Presidential Decrees; Bureau of International Revenue rules and regulations; Judicial decisions on tax cases by the Supreme Court; Provincial, city, and municipal ordinances; Observance of international agreements; and Administrative rulings and opinions.

8. Objects of taxation Individuals who earn a considerable amount of income as a worker, or as a businessman in partnerships or corporations, including those who inherited a property or given a gift or donation of a considerable value; Tangible and intangible properties, whether personal properties (movable properties) that can be moved or relocated or real properties (immovable properties); and Transactions, consumptions interests, imports and exports; and privileges.

9. Situs of taxation Situs is a Latin term for “place” or “location”. It refers to the place where taxes are to be paid. 1. Income tax this is paid either in the place where the income is earned or the place of residence of the taxpayer. 2. Real property tax this is paid where the property is situated.

10. 3. Personal property tax taxes on intangible properties are paid in the place where the property is located, similar to real property tax. Situs of taxation of intangible properties is the owner’s domicile. This refers to the place of permanent residence of the owner. 4. Business and occupation taxes this is paid in the place where the business or occupation is located.

11. Limitations of taxation Inherent limitations are rooted in the nature of taxation itself. These are the limitations that are not affected by changes in the provisions of the constitutions. The tax revenues must only be used for public purpose. There should be proper delegation of legislative power to tax

12. Government entities are exempted. There are territorial jurisdictions. There is an observance of international law.

13. Constitutional limitations of taxations are those limitations provided in the constitution. These limitations are more subject to change when a new constitution is introduced in the country. Observance of due process of law - Article III, Section 14.1 of the Constitution says that, “No person shall be hold to answer for a criminal offense without due process of law.”

14. Equal protection of the law - No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws (Art. III, Sec. 1). Uniformity and equity rule. - The rule of taxation must be uniform and equitable, and likewise progressive (Art. VI, Sec. 28.1) Non-imprisonment for non-payment of poll tax - No person shall be imprisoned for a debt or non-payment of a poll tax (Art. III, Sec. 20 A poll tax (personal or capitation tax) is a fixed amount imposed on individuals residing within a specified territory.

15. No appropriation for religious purposes - No public money or property shall be appropriated, applied, paid or employed; directly or indirectly, for the use, benefit or support of any sect, church, denomination, sectarian institution or system of religion; or of any priest, preacher, minister, or dignitary as such, except when such priest, preacher, minister or dignitary is assigned to the armed forces, or to any penal institution or government orphanage or leprosarium. (Art. VI, Sec. 29.2). But, charitable institutions, churches and personages or convents appurtenant thereto, mosques, nonprofit cemeteries; and all lands, buildings, and improvements-actually, directly, and exclusively- used for religious, charitable or educational purposes shall be exempt from taxation. (Art. VI, Sec.28.3)

16. Double taxation Refers to an instance when an income, a property, or a transaction was imposed with the two or more taxes by taxing authority in the same year. Occurs when an object of taxation was levied with two or more taxes from a single tax basis. Direct duplicate- same income taxed twice Indirect duplicate- taxes that are paid by the same individual o corporation based on two or more different taxing bases.

17. The question of government taxing itself The government may be taxed if it derives profit in the exercise of its proprietary capacity, and not when the revenues were gained from the exercise of governmental responsibility. The government functions in its governmental capacity when it serves the people and delivers basic services to them. The government acts in its proprietary capacity when it functions for profit.

18. Avoiding taxation These are the other concepts related to taxation in terms of avoidance or nonpayment : Shifting - This is the passing on of the tax burden from one person to another. Capitalization - This is done by reducing the price of a taxable product or service to lower the tax that will be imposed on its consumption.

19. Tax Avoidance - refers to the availing by the taxpayer of legally allowable means in reducing or minimizing the tax due on certain properties, items, and services - “tax minimization” Tax Evasion - refers to the use by the taxpayer of illegal means in escaping, defeating or lessening the tax due. - “tax dodging” Tax exemption - the bestowal of immunity by the taxing authority on a taxpayer from the obligation of tax payment.