General Principles of Taxation 1. Inherent limitation on the power of taxation – tax must be for public purpose 2. Constitutional limitation on the power of taxation – no appropriation of public money for religious purposes 3. Exist independent of the constitution being fundamental powers of the state - Power of taxation - Police power - Power of eminent domain 4. Power to acquire private property upon payment of just compensation for public purpose – power of eminent domain 5. Power to regulate liberty and property to promote the general welfare Police power 6. Power to demand proportionate contributions from persons and property to defray the expenses of the government – Power of taxation 7. Basic Principles of sound tax system - Fiscal adequacy - Equality or theoretical justice - Administrative feasibility 8. The tax imposed should be proportionate to the taxpayer’s ability to pay - Equality or theoretical justice 9. Sources of revenue as a whole, should be sufficient to meet the demands of public expenditures - Fiscal adequacy 10.Tax laws must be capable of convenient, just and effective administration - Administrative feasibility 11.Our National Internal Revenue Laws – Civil in nature 12.Subject to inherent and constitutional limitations, the power of taxation is regarded as supreme, plenary, unlimited and comprehensive – Scope of taxation 13.S1: The point on which a tax is originally imposed is impact of taxation - F S2: Police power is superior to the non-impairment clause of the constitution - T S3: As a rule, taxes are subject to set-off or compensation - F S4: As a rule, provisions on the validity of tax exemptions are resolved liberally in favor of the government. – T 14.The levying or imposition of tax and the collection of the tax are processes which constitute the taxation system. – Aspects of taxation 15.Process or means by which the sovereign, through its law-making body raises income to defray the expenses of the government – Taxation 16.Enforced proportional contributions from persons and property levied by the state by virtue of its sovereignty for the support of the government and for all public needs – Taxes 17.The principal purpose of taxation is – raise revenues for governmental needs. 18.The aspects of taxation – shared by legislative and executive departments 19.Taxation as distinguished from police power and power of eminent domain - There is generally no limit as to the amount that may be imposed 20.Inherent powers that maybe exercised even by public service corporations and public entities
- Power of eminent domain 21.The President is authorized to increase or decrease national internal revenue tax rates- F One of the nature of taxation is the reciprocal duties of protection and support between state and subjects thereof - F Every sovereign government has the inherent power to tax – T Income tax is an indirect tax – F 22.Persons or things belonging to the same class shall be taxed at the same rate – Uniformity in taxation 23.Tax should be proportional to the relative value of the property to be taxed – Equality in taxation 24.Following are the nature of taxation - Inherent in sovereignty - Essentially legislative in character - Subject to inherent and constitutional limitations 25. “Place of taxation”, the country that has the power and jurisdiction to levy and collect the tax – Situs of taxation 26. The existence of the government is a necessity and that the state has the right to compel all individuals and property within its limits to contribute – Theory of taxation 27.Reciprocal duties of support and protection between the people and the government – Basis of taxation 28.A tax must be imposed for public purpose: - National defense - Public education - Improvement of the sugar and coconut industries 29. Essential characteristics of a tax: - Payable in money - Proportionate in character - Enforced contribution X unlimited as to amount 30.Special assessment is an enforced proportional contribution from owners of land especially benefited by public improvement. Characteristics: - levied on land - not a personal liability of the persons assessed - based solely on the benefit derived by owners of land X based on government’s need of money to support its legitimate objectives 31.Privilege of not being imposed a financial obligation to which others are subject – Tax exemption 32.As to scope of the legislative power to tax, NOT correct.- Sole arbiter of the purpose for which taxes shall be levied is CIR, provided the purpose is public but the courts may review the levy of the tax to determine whether or not the purpose is public. 33.Nature of taxation – Power is exercised by legislative action. 34.Not a determinant of the place of taxation – Amount of tax to be imposed. 35.An escape from taxation where the tax burden is transferred by the one on whom the tax is imposed or assessed to another- shifting
36.Escape from taxation where the producer or manufacturer pays the tax and endeavours to recoup himself by improving his process of production thereby turning out his units of products at a lower cost. – Transformation 37.Escape from taxation where there is a reduction in the price of the taxed object equal to the capitalized value of future taxes which the taxpayer expects to be called upon to pay – Capitalization 38.Use of illegal or fraudulent means to avoid or defeat the payment of tax. – Evasion 39.Use of legal or permissible means to minimize or avoid taxes – Avoidance 40.Synonymous to tax evasion – Tax dodging 41.Synonymous to tax avoidance – Tax minimization 42.In every case of doubt, tax statutes are construed – strictly against the government and liberally in favour of the taxpayer 43.In every case of doubt, tax exemptions are construed – liberally in favour of the government and strictly against the taxpayer 44.In case of conflict between Tax Code and PAS – Tax Code shall prevail over PAS 45.Tax of a fixed amount imposed upon all persons residing within a specified territory without regard to their property or occupation they may be engaged – Personal, poll or capitation 46.Tax imposed on personal or real property in proportion to its value or on some other reasonable method of apportionment – Property 47.Tax imposed upon the performance of an act, the enjoyment of privilege or the engaging in an occupation – Excise 48.Tax which is demanded from the person whom the law intends or desires to pay it – Direct 49.Tax which is demanded from one person in the expectation and intention that he shall indemnify himself at the expense of another – Indirect 50.Tax which imposes a specific sum by the head or by some standard of weight or measurement and which requires no assessment other than a listing or classification of the objects to be taxed – Specific 51.Tax of a fixed proportion of the amount or value of the property with respect to which the tax is assessed – Ad valorem 52.Tax based on a fixed percentage of the amount of property, income or other basis to be taxed – Proportional 53.Tax where the rate decreases as the tax base increases – Regressive 54.Tax where the rate increases as the tax base increases – Progressive 55.Tax burdens shall neither be imposed nor presumed to be imposed beyond what the statute expressly and clearly states because tax statutes because tax statutes should be construed strictly against the government. – T Tax exemptions, tax amnesty, tax condonations and their equivalent provisions are not presumed and, when granted are strictly construed against the taxpayer because such provisions are highly disfavoured by the government. –T Exemptions from taxation are highly disfavoured in law and he who claims tax exemption must be able to justify his claim or right. – T The BIR has the duty and the exclusive power of enacting, implementing and interpreting tax laws. –F
56.Strongest of all inherent powers of the state because without it, the government can neither survive nor dispense any of its other powers and functions effectively – Power of Taxation 57.This power is superior to the non-impairment clause and is broader in application because it is a power to make and implement the laws. – Police Power 58.An inherent limitation of taxation may be disregarded by the application of constitutional limitation. – T Income tax liabilities shall be paid by the inhabitants even if foreign invaders occupy our country – T Taxes may be imposed retroactively by law, but unless so expressed by such law, these taxes must only be imposed prospectively – T Tax laws are either political or penal in nature – F 59.Constitutional limitation on the Power of Taxation: - No person shall deprived of life, liberty or property without due process of law - No person shall be denied the equal protection of the law - No person shall be imprisoned for debt or non-payment of tax X No law granting any tax exemption shall be passed without the concurrence of a majority of all the members of Congress. 60.Distinction of a tax from permit or license fee is that a tax is: - One in which there is generally no limit on the amount that maybe imposed 61.Police power as distinguished from the power of eminent domain: - Maybe exercised by private individuals 62. Tax wherein both the incidence of or the liability for the payment of the tax as well as the burden of the tax falls on the same person – VAT 63.Characteristics or elements of a tax: - Enforced contribution - Legislative in character - Based on the ability to pay X payable in money or in kind 64. Tax as distinguished from license fees: - Non payment does not necessarily rendered the business illegal 65.The power to impose taxes is exercised by – Congress 66.One of the characteristics of internal revenue laws is that they are: - Generally prospective in application 67.Excise tax: - Transfer tax - Sales tax - Income tax X Real property tax 68.Similarities of the inherent power of taxation, eminent domain, and police power: - Necessary attributes of sovereignty - Compensation is received - Legislative in character X Superior to the non-impairment clause of the constitution 69.Scheme of shifting the incidence of taxation:
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Manufacturer transfers the tax to the consumer by adding the tax to the selling price of the goods sold - Purchaser asks for a discount or refuse to buy at regular prices unless it is reduced by the amount equal to the tax he will pay - Manufacturer transfers the sales tax to the distributor, then in turn to the wholesaler, in turn to the retailer and finally to the consumer X Changing the terms of the sale like FOB shipping point in the Philippines to FOB destination abroad, so that the title passes abroad instead of in the Philippines. 70.Taxes may be imposed to raise revenues or to provide disincentives to certain activities within the state – T The state can have the power of taxation even if the Constitution does not expressly give it the power tax –T For the exercise of the power of taxation, the state can tax anything at any time – T The provisions of taxation in the Philippines Constitution are grants of power enabling the state to impose taxes. – F 71.License fee as distinguished from tax: - Limited to cover cost of regulation 72.VAT is an example of: - Proportional tax 73.Tax principle described in the statement “The more income earned by the taxpayer, the more tax he has to pay”. – Theoretical justice 74.Most superior and least limitable among the fundamental powers of the state: - Police power 75.One of the characteristics of a tax is that: - Generally payable in money 76.Characteristics of our internal revenue laws: - Civil in nature - Generally prospective in application - May operate retrospectively if congress so provides X Political in nature 77.A revenue bill: - Must originate from the House of Representatives and on which same bill the Senate may propose amendments - May have a House version and a Senate version approved separately and then consolidated, with both house approving the consolidation version. - May be recommended by the President to Congress X May originate from the Senate and on which same bill the House of Representatives may propose amendments. 78.No power to impose taxes – Barrios 79.Tax as distinguished from special assessment: - bases on necessity and is to raise revenues 80.Basic principle of a sound tax system, the Government should not incur a deficit: - Fiscal Adequacy 81.May not raise money for the government – Eminent domain 82.No person shall be imprisoned for non-payment of this: - Poll tax 83.This is a demand of ownership: - Toll 84.Income tax is generally regarded as – excise tax 85.Not acceptable for legally refusing to pay the tax – That there is no benefit derived from the tax
86.Law granting tax exemption requires the concurrence of – Majority vote of members of Congress 87.No person shall be imprisoned for debt or non-payment of poll tax. – Constitutional limitation 88.Department of Finance thru its officers entered into a contract with foreign investors granting them exemption from all forms of taxes to encourage investments in the Phils. The contract is – Void, because the power to grant tax exemption is vested in Congress. 89.Tax as distinguished from debt – based on law 90.Congress can impose a tax at any amount and at anytime shows that – Taxation is a very broad power of the state 91.The amount required is dictated by the needs of the government in – Tax 92.A charge imposed on land for special benefits derived resulting from public improvements – Special assessment 93.National Internal Revenue Taxes: - Income tax - Estate tax - Donor’s tax - VAT - OPT - Excise tax - Documentary stamp tax 94. The three fundamental powers of the state are - Inherent in the state and may be exercised by the state without need of any constitutional grant - Not only necessary but indispensable 95.The three fundamental powers of the state are - Methods by which the state interfere with private rights - Exercised primarily by the legislature 96.Police power regulates both liberty and property while the power of eminent domain and the power of taxation affect only property rights. Police power and the power of taxation may be exercised only by the government while the power of eminent domain may be exercised by some private entities. 97.The property taken in police power is destroyed while the property taken under the power of eminent domain and power of taxation are not destroyed. In power of taxation, the compensation received is the protection afforded to the citizens; in police power the compensation received is the altruistic feeling that somehow you contributed to the promotion of the general welfare; in power of eminent domain, the compensation received is the just compensation paid for the property taken. 98.The point on which a tax is originally imposed is impact of taxation. The point on which a tax burden finally rests or settles down is incidence of taxation. 99.Police power is superior to the non-impairment clause of the constitution. – T Power of taxation is superior to the non-impairment clause of the constitution. – F 100. No person shall be imprisoned for debt or non-payment of tax. – F Tax laws are civil and penal in nature because there are penalties provided in case of violation. – F 101. Tax may be collected in an unlimited amount. - T
License fee may be collected in an unlimited amount. – F 102. Tax is imposed to raise revenue. - T License fee is imposed to raise revenue. – F 103. Tax is a demand of sovereignty. - T Toll is a demand of sovereignty. – F 104. Tax is imposed on persons, property and property rights. - T Special assessment is imposed on persons, property and property rights. –F 105. Collection of tax is a legislative act. - F Imposition of tax is an administrative act. – F 106. A state has the power to tax even if not granted by the constitution. - T A state cannot exercise police power if not granted by the constitution. – F 107. There can only be a tax if there is a law imposing the tax. - T The power to tax may include the power to destroy. – T 108. Due process of law in taxation under the constitution is a grant of power. - F Provisions in the Philippine constitution on taxation are grants of power. – F 109. In the Philippines there may be double taxation. - T Taxation may be used to implement the police power of the state. – T 110. License fee is a charge imposed under police power. - T Special assessment is levied on lands only. – T 111. Tax is imposed regardless of public improvement. - T Special assessment is imposed regardless of public improvements. - F 112. Tax avoidance is the use by the taxpayer of legal or fraudulent means to avoid or defeat taxes. - F Tax evasion is the use by the taxpayer of illegal or fraudulent means to avoid or defeat taxes. - T 113. One of the essential characteristics of a tax is it is unlimited in amount. - F A tax is generally unlimited because it is based on the needs of the state. - T 114. The power of taxation is inherent in sovereignty being essential to the existence of every government. Hence, even if not mentioned in the Constitution the state can still exercise the power and is essentially a legislative function. - T Even in the absence of any constitutional provision, taxation power falls to Congress as part of the general power of law-making. - T 115. The President has the power to veto a revenue bill even if such bill was already approved by Congress. - T The President is superior to Congress as he/she can veto any bill even if already approved by Congress. - F 116. A system of taxation where the amount of revenue from indirect taxes are more than the direct taxes is – Regressive system
