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    I. Taxation

    A.Theory and basis of taxation

    1.Necessity Theory

    existence of the government is a necessity;

    That it cannot continue without the means to pay its expenses;(51 Am. Jur. 42).

    2.Lifeblood Theory

    3.Benefits- Protection Theory state demands and receives taxes

    so that it may be enabled to carry its mandate into effect and

    perform the functions of government

    and to be secured in the enjoyment of the benefits of organized

    society

    B.Purposes of taxation (6)1.Revenue to provide funds or property with which the State promotes

    the general welfare and protection of its citizens ( 51 Am. Jur. 71-73)

    2.Regulation taxation also has a regulatory purpose like those

    imposed on tobacco and alcoholic products, or amusement places like

    night clubs, cabarets, cockpits, etc.

    3.Promotion of General Welfare taxation may be used as an implement

    of the police power in order to promote the general welfare of the

    people.

    4.Reduction of Social Inequality

    Made through progressive system of taxation

    Where the objective is to prevent the undue concentration of

    wealth in the hands of a few individuals.

    5.Encourage Economic Growth the purpose is to grant incentives or

    exemptions in order to encourage investments and thereby promote

    the countrys economic growth.6.Protectionism provide protection to local industries like protective

    tariffs and customs duties

    C.Principles of a Sound Tax System (3)

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    1.Fiscal adequacy sources of government revenue must be sufficient to

    meet government expenditures and other public needs.

    Fiscal adequacy as one of the characteristics of a sound tax system

    which requires that sources of revenue must be adequate to meet

    government expenditures and their variations(Chavez v. Ongpin)

    2.Administrative Feasibility taxes should be capable of being effectively

    enforced.

    3.Theoretical Justice a good tax system must be based on the taxpayers

    ability to pay.

    Congress shall evolve a progressive system of taxation (Sec. 28 (1),

    Art. VI, 1987 Constitution

    D.Taxation Distinguished from Police Power and Eminent Domain

    Taxation Police power

    Purpose raising revenue promote public welfare

    Amount of

    exactionno limit

    to cover the cost of

    regulation, issuance of

    license or surveillance

    Benefitsreceived No special or direct onlygeneral benefit

    no direct benefits , a

    healthy economicstandard is attained

    (damage without injury)

    Non-

    impairment of

    contracts

    it subsist, a taxing act

    cannot impair the

    obligations of contracts

    it does not apply

    Transfer of

    property rights

    taxes paid become part

    of the public funds

    no transfer but only

    restraint on the exercise

    of property rights exists

    Taxation Eminent Domain

    Nature of power

    exercisedto raise public revenue

    taking of private

    property for public use

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    Compensation

    received

    general benefit of all

    citizens and inhabitants

    of a State

    direct benefit results in

    the form of just

    compensation to the

    property owner

    Non-impairment of

    contracts

    may not be impairedthis is not so in eminent

    domain

    Persons

    Affected

    applies to all persons,

    property and exercised

    that may be subject

    thereto,

    only a particular

    property is

    comprehended

    E.Taxes distinguished from other impositions

    F.Scope of the Legislative Taxing Power (7)

    1.person, property, or occupation

    2.amount or rate of the tax

    3.purposes for which taxes shall be levied provided they are public

    purposes

    4.kind of tax to be collected

    5.apportionment of the tax, whether the tax shall be general or limited to a

    particular locality or partly general and partly local;

    6.situs of taxation

    7.method of collection

    G.Power of Judicial Review in Taxation

    Courts cannot inquire into the wisdom of a taxing act. (CIR v.

    Lingayen Gulf Electric Power Co.)

    As long as the legislature, in imposing a tax, does not violate

    applicable constitutional limitations or restrictions, the courts have

    no concern with the wisdom or policy of the exaction (51 Am. Jur. 77-

    78)

    Courts power in a taxation is limited only to the application and

    interpretation of the law

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    Courts have no authority to pass judgment upon the taxation policy

    of the Government. it is inherent in the power to tax that the State be

    free to select the subjects of taxation, and it has been repeatedly held

    that inequalities which result from singling out of one particular class

    for taxation or exemption infringe no constitutional limitation (CIR v.

    Santos)

    H.Nature of the power of Taxation