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Taxation Concepts and Principles
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Taxation Concepts and Principles
Taxation Concepts and Principles
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1
Question
What is taxation defined as?
Answer
Taxation is defined as a state power, legislative process, and a mode of government cost distribution.
2
Question
What is taxation as a state power?
Answer
Taxation is an inherent power of the State to enforce a proportional contribution from its subjects for public purpose.
3
Question
What is taxation as a process?
Answer
Taxation is a process of levying taxes by the legislature of the State to enforce proportional contributions from its subjects for public purpose.
4
Question
What is taxation as a mode of cost distribution?
Answer
Taxation is a mode by which the State allocates its costs or burden to its subjects who are benefited by its spending.
5
Question
What is the theory of taxation?
Answer
The theory of taxation states that a government cannot exist without a system of funding, hence the government's necessity for funding is the theory of taxation.
6
Question
What is the basis of taxation?
Answer
The basis of taxation is that the government provides benefits to the people in the form of public services, and the people provide the funds that finance the government. The mutuality of support between the people and the government is the basis of taxation.
7
Question
What is the Benefit Received Theory?
Answer
The Benefit Received Theory states that the more benefit one receives, the more he should pay.
8
Question
What is the Ability to Pay Theory?
Answer
The Ability to Pay Theory considers the taxpayer's ability to pay and contributes based on their relative capacity.
9
Question
What is Vertical Equity in the context of taxation?
Answer
Vertical Equity (Gross Concept) implies that the extent of one's ability to pay is directly proportional to the level of his tax base.
10
Question
What is Horizontal Equity in the context of taxation?
Answer
Horizontal Equity (Net Concept) requires consideration of the particular circumstance of the taxpayer.
11
Question
What is the Lifeblood Doctrine?
Answer
The Lifeblood Doctrine states that taxes are the lifeblood of the government, and without taxes, the government would be paralyzed for lack of motive power to activate or operate it.
12
Question
What are the implications of the Lifeblood Doctrine in taxation?
Answer
1. Tax is imposed even in the absence of a Constitutional grant. 2. Claims for tax exemption are construed against taxpayers. 3. The government reserves the right to choose the objects of taxation. 4. The courts are not allowed to interfere with the collection of taxes.
13
Question
In income taxation, what is taxable upon receipt?
Answer
Income received in advance is taxable upon receipt.
14
Question
What are the rules regarding deductions in income taxation?
Answer
1. Deduction for capital expenditures and prepayments is not allowed effectively defers the collection of income tax. 2. A lower amount of deduction is preferred when a claimable expense is subject to limit. 3. A higher tax base is preferred when the tax object has multiple tax bases.
15
Question
What are the inherent powers of the state?
Answer
The inherent powers of the state include: 1. Taxation Power - the power of the state to enforce proportional contribution from its subjects to sustain itself. 2. Police Power - the general power of the state to enact laws to protect the well-being of the people. 3. Eminent Domain Power - the power of the state to take private property for public use after paying just compensation.
16
Question
What is the scope of taxation power?
Answer
The scope of taxation is widely regarded as comprehensive, plenary, unlimited and supreme, but not absolutely unlimited as it has inherent and constitutional limitations.
17
Question
What are the similarities of the 3 powers of the State (Taxation Power, Police Power, and Eminent Domain Power)?
Answer
1. They are all necessary attributes of sovereignty. 2. They are all inherent of the state. 3. They are all legislative in nature. 4. They are all ways in which the state interferes with private rights and properties. 5. They all exist independently of the Constitution and are exercisable by the government even without a constitutional grant. However, the Constitution may impose conditions or limits for their exercise. 6. They all presuppose an equivalent form of compensation received by the persons affected by the exercise of the power. 7. The exercise of these powers by local government units may be limited by the national legislature.
18
Question
What is the territoriality of taxation?
Answer
Public services are normally provided within the boundaries of the state. Thus, the government can only demand tax obligations upon its subjects or residents within its territorial jurisdiction.
19
Question
What are the 2-fold obligations of taxpayers?
Answer
1. Filing of returns and payment of taxes. 2. Withholding of taxes on expenses and its remittance to the government.
20
Question
What are the exceptions to the Territoriality Principle in taxation?
Answer
1. In income taxation, resident citizens and domestic corporations are taxable on income derived both within and outside the Philippines. 2. In transfer taxation, residents or citizens such as resident citizens, non-resident citizens, and resident aliens are taxable on transfers of properties located both within and outside the Philippines.
21
Question
What is the principle of International Comity?
Answer
No country is more powerful than the other; it is by the principle that each country observes international comity or mutual courtesy or reciprocity between them. Therefore, governments do not tax the income and properties of other governments and give primacy to their treaty obligations over their own domestic tax laws.
22
Question
What is the public purpose of taxation?
Answer
Tax is intended for the common good and taxation must exercise the power upon anything including itself. However, the government does not tax itself as this will not raise additional funds but will only impute additional costs.
23
Question
What is the observance of Due Process of Law in taxation?
Answer
No one should be deprived of his life, liberty, or property without due process of law. Tax laws should neither be harsh nor oppressive.
24
Question
What are the 2 aspects of Due Process?
Answer
1. Substantive Due Process - Tax must be imposed only for public purpose, collected only under authority of a valid law, and only by the taxing power having jurisdiction. 2. Procedural Due Process - There should be no arbitrariness in assessment and collection of taxes, and the government shall observe the taxpayer's right to notice and hearing.
25
Question
What is the Equal Protection of the Law in taxation?
Answer
No person shall be denied the equal protection of the law. Taxpayers should be treated equally both in terms of rights conferred and obligations imposed.
26
Question
What is the Uniformity Rule in taxation?
Answer
In taxation, taxpayers under dissimilar circumstances should not be taxed the same.
27
Question
What is a progressive system of taxation?
Answer
A progressive system of taxation is one in which tax rates increase as the tax base increases, and the Constitution favors this system as it is consistent with the taxpayer's ability to pay.
28
Question
What is the policy regarding non-imprisonment for non-payment of debt or poll tax?
Answer
As a policy, no one shall be imprisoned because of his poverty, and no one shall be imprisoned for mere inability to pay debt. Non-Payment of Tax compromises the public, while Non-Payment of Debt compromises private interest.
29
Question
What are the components of Poll Tax?
Answer
1. Basic Community Tax 2. Additional Community Tax.
30
Question
What is the principle of Non-diversification of Tax Collections?
Answer
Tax collection should be used only for public purpose and should never be diversified or used for private purposes.