taxation

Classification of Taxes

As to Subject Matter O A. personal, poll or capitation- tax of a fixed amount on

individuals residing within a specified territory, without regard to their property, occupation or business.

Ex. Community tax (basic)

O B. property- imposed on property, real or personal, in proportion to its value, or in accordance with some reasonable method or apportionment.

Ex. Real estate Tax

O C. Excise- imposed upon the performance of an act, the enjoyment of a privilege, or the engaging in an occupation, profession or business.

Ex. Income tax, VAT, Estate Tax, Donor’s Tax

As to Who Bears the Burden

O a. Direct- the tax is imposed on the person who also bears the burden thereof

Ex. Income tax, community tax, estate tax

O b. Indirect – imposed on the taxpayer who shifts the burden of the tax to another, Ex. VAT, customs duties.

As to Determination of Account

O a. Specific Tax– imposed and based on a physical unit of measurement as by head number, weight, length or volume.

Ex. Tax on distilled spirits, fermented liquors, cigars

O b. Ad Valorem Tax- of a fixed proportion of the value of the property with respect to which the tax is assessed.

Ex. Real estate tax, excise tax on cars, non essential goods.

As to Purpose

O A. General, fiscal, or revenue- imposed for the general purpose of supporting the government.

Ex. Income tax, percentage tax

O B. Special or regulatory- imposed for a special purpose, to achieve some social or economic objective.

Ex. Protective tariffs or custom duties on imported goods intended to protect local industries

As to Scope

Oa. National- imposed by the national government ex. NIRC, custom duties

Ob. Municipal or Local- imposed by municipal corporations or local governments ex. Real estate tax,

Distinction of Tax From Other Terms

1. Tax distinguished from toll

o a. A tax is a demand of sovereignty, while toll is a demand for proprietorship

o b. A tax is paid for the use of the government’s property, while a toll is paid for the use of another’s property.

o c. A tax may be imposed by the government only, while the toll is enforced by the government or a private individual or entity.


2. Tax distinguished from Penalty

o a. A tax is intended to raise revenue, while a penalty is designed to regulate conduct.

o b. A tax may be imposed by the government only, while a penalty may be imposed by the government of a private individual .


3. Tax distinguished from Debt.

O a. A tax is based on law, while the debt is based on contract.

O b. A tax may not be assignable, while a debt is assignable.

O c. tax is generally payable in cash, while debt is payable in cash or in kind.

O d. person may be imprisoned for a non-payment of taxes, but any person may not be imprisoned for non-payment of debt.


4. Tax distinguished from other terms

a. Revenue – this refers to all the funds or income derived by the government whether form tax or any other source in another sense.

b. Internal Revenue - it refers to taxes imposed by the legislature other than duties on imports and exports.

c. Customs Duties(simple duties) - they are taxes imposed on goods exported into a country.

Entities Exempted from Taxation

1. Religious institution (church, mosques, and parsonages.

2. Charitable institution 3. Non-profit, non-stick educational

institution 4. Non-profit cemeteries 5. Government institution 6. Foreign diplomats(by virtue of treaty ,

Art. XV, Sec.3&4,1987 Constitution, Art. VII, Sec.28,Par1)

Situs of Taxation O Situs is Latin term which means “situation”, ”location”,

or “place”. Its literal meaning refers to place of taxation. In real property, the rule is “tax is imposed to place or state(city, municipality, or province) where the property is located, subject to be taxed, has a jurisdiction over said property.

O In movable property taxation, the rule is , “mobilia sequnter personan” , a Latin term or phase which means “ movables follow the law person”(back’s Law Dictionary , 5th edition).

O It gives us an idea that the place or state (city, municipality or province , wherein your property is located has a jurisdiction in imposing the payment for property tax.

Concept of Double Taxation

O The two(2) concepts of double taxation are :

1. Direct duplicate 2. Indirect duplicated

O Direct duplicate has the following elements :

a. Taxing twice b. By the same taxing authority c. Within the same purpose d. For the same purpose e. In the same taxable periodf. Involving the same period

Forms of Escape from Taxation

There are six(6) forms of escape from taxation:

1. Shifting- is one way of passing the burden of tax from one person to another (black’s Law Dictionary, supra)

O Kinds of shifting

a. Forward shifting – occurs when the burden of the tax transferred from a factor of production to the factor of distribution.

b. Backward shifting- occurs when the burden of tax is transferred from a factor the consumer to the producer or manufacturer.

c. Onward shifting – occurs when tax is shifted to two or more times either forward or backward.


2. Capitalization- this refers to the reduction in the price of the taxed object to the capitalized value of future taxes which the purchaser expects to be called upon to pay.

3. Transformation- occurs when the manufacturer or producer upon whom tax has been imposed pays the tax and endeavour to “recoup” himself/herself by improving his/her process of production.

4. Tax Evasion- is the practice by the taxpayers through illegal or fraudulent means to defeat or lessen the amount for tax. This is known as “tax dodging”.


5. Tax Avoidance- is the exploitation by the taxpayers of legally permissible methods in order to avoid or reduce tax ability. This known as “tax minimization”.

6. Tax Exemption- is the grant of immunity or freedom from a financial charge, obligation, or burden to which others are subjected.

Grounds for Exemption a. Contract, wherein the government is the contracting partyb. Public Policy c. Reciprocity

taxation

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