Taxation Memory Aid

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MEMORY AIDCBO OVER-ALL CHAIRPERSON: Evangeline Co ASSISTANT CHAIRPERSON: Rose Lyn Rabanera ACADEMICS COMMITTEE - HEADS: Reigel Prado, Omar Gabrieles SECRETARIAT HEAD: Romino Arzadon FINANCE COMMITTEE HEAD: Kyan Sioco LOGISTICS COMMITTEE - HEAD: Janis Ruckenbrod TAXATION COMMITTEE HEAD: Jocelyn Manalo CO-HEAD: Marlyn Reyes GENERAL PRINCIPLES: Marissa Asencion INCOME TAXATION: Cheryl Hernandez MEMBERS: Fatima Kristine Franco, Aries Magpantay TRANSFER TAXATION: Nieves Elegado MEMBER: Rosevee Paylip TAX REMEDIES AND LOCAL TAXATION: Marlyn Reyes, Jocelyn Manalo MEMBER: Claudine Mayor SUBJECT ADVISERS: Justice Japar Dimaampao Atty. Bernard Bandonell

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CBO OVER-ALL CHAIR: Evangeline Co; ASSISTANT CHAIR: Rose Lyn Rabanera; SECRETARIAT - HEAD: Romino Arzadon; ACADEMICS - HEADS: Reigel Prado, Omar Gabrieles; FINANCE HEAD: Kyan Sioco; LOGISTICS - HEAD: Janis Ruckenbrod

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TABLE OF CONTENTSPage 1

General Principles National Taxation A. Income Taxation B. Transfer Taxes 1. Estate Tax 2. Donors Tax C. Business Tax 1. Value- Added Tax 2. Excise tax 3. Percentage tax 4. Documentary Stamp Tax Tax Remedies Tariff and Customs Code Local Taxation Court of Tax Appeals

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T A X A T I O NADVISERS: Justice Japar Dimaampao, Atty. Bernard Bandonell TAXATION - HEAD: Jocelyn Manalo; CO-HEAD: Marlyn Reyes MEMBERS: Marissa Asencion, Nieves Elegado, Fatima Kristine Franco, Cheryl Hernandez, Aries Magpantay, Claudine Mayor, Rosevee Paylip

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CBO OVER-ALL CHAIR: Evangeline Co; ASSISTANT CHAIR: Rose Lyn Rabanera; SECRETARIAT - HEAD: Romino Arzadon; ACADEMICS - HEADS: Reigel Prado, Omar Gabrieles; FINANCE HEAD: Kyan Sioco; LOGISTICS - HEAD: Janis Ruckenbrod

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I. GENERAL PRINCIPLES TAXATION is the inherent power of the state to raise revenues by impositions to defray government expenses. as a process, taxation to the manner by which the government exercises the power of taxation from the act of levy until final collection of the imposition. TAXES 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 its public needs. CHARACTERISTICS OF A TAX: (Code: CPP SP) 1. 2. 3. 4. an enforced contribution it is levied on persons and property it is a personal liability of the taxpayer it is imposed by the state which has jurisdiction over the person and property, and 5. it is levied for public purpose.

It has the right to compel all persons and property within its limits to contribute. Although the power to tax is almost unlimited, it must not be exercised in an arbitrary manner. We may seek redress to courts in case of irregularities. 3. Benefits-Protection Theory In return for the taxes received, the government only secures to the citizen that general benefit which results from protection to his person and property and the promotion of those various schemes which have for their object the welfare of all. This theory spawned the doctrine of symbiotic relationship. DOCTRINE OF SYMBIOTIC RELATIONSHIP Taxes are what we pay for a civilized society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of ones hard-earned income to the taxing authorities, every person who is able to must contribute his share in the burden of running the government. The government, for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their material and moral values. NATURE OF THE TAXING POWER a. inherent attribute of sovereignty The power of taxation is an incident of sovereignty as it is inherent in the State, belonging as a matter of right to every independent government. It does not need of constitutional conferment. Constitutional provisions do not give rise to the power to tax but merely impose limitations on what would otherwise be an invincible power. No attribute of sovereignty is more pervading and at no point does the power of government affect more constantly and intimately all the relations of life than through the exactions made under it.

THEORIES OF TAXATION 1. Lifeblood Theory Taxes are the lifeblood of the government and their prompt and certain availability is an imperious need. This implies that: 1) The BIR is justified in availing of the most expedient remedy in the collection of the tax (CIR vs. Pineda) 2) The BIR is not bound by the mistakes, errors, or omissions of its agents (thus, the Doctrine of Estoppel does not apply to the collection of taxes) (Rivera vs. Fernandez) 3) No court other than the CTA may enjoin the collection of taxes. 2. Necessity Theory The existence of the government is a necessity. No government can exist or continue without means to pay its expenses and to raise those means.

T A X A T I O NADVISERS: Justice Japar Dimaampao, Atty. Bernard Bandonell TAXATION - HEAD: Jocelyn Manalo; CO-HEAD: Marlyn Reyes MEMBERS: Marissa Asencion, Nieves Elegado, Fatima Kristine Franco, Cheryl Hernandez, Aries Magpantay, Claudine Mayor, Rosevee Paylip

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CBO OVER-ALL CHAIR: Evangeline Co; ASSISTANT CHAIR: Rose Lyn Rabanera; SECRETARIAT - HEAD: Romino Arzadon; ACADEMICS - HEADS: Reigel Prado, Omar Gabrieles; FINANCE HEAD: Kyan Sioco; LOGISTICS - HEAD: Janis Ruckenbrod

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[Churchill and Tait vs. Concepcion, 34 Phil. 969] Being attribute of sovereignty, its relinquishment is never presumed. [Luzon Stevedoring Co. vs. CTA, L-30232, July 29, 1988] Tax is an attribute of sovereignty which emanates from necessity upon which the very existence of the government is dependent. b. legislative in character "the power to tax is exclusively vested in the legislature and it cannot be delegated as a whole." In short, only the legislature can impose taxes. This is why a person, activity, or property is subject to tax because and only because the law says so. Further, about local government, taxation remains exclusively legislative. Meaning, only the local legislative body thru an ordinance may impose taxes. Inherent limitations 1. 2. 3. 4. 5. Public Purpose Inherently Legislative Territorial International Comity Exemption from Taxation of Government Agencies/Instrumentalities

11. Freedom of religion ((Art. III, Sec. 5) 12. Exemption from property tax of properties of religious, educational, charitable institutions (Art. VI, Sec. 28[3]) 13. Tax exemptions granted to non-stock, non-profit educational institutions (Art. XIV, Sec. [4,5]) 14. No public money or property used for a particular sect, priest, religious minister, etc. (Art. VI, Sec. 29[1]) 15. Grant of tax exemptions (Art. VI, Sec. 28[4]) 16. Grant of power of taxation to local government units (Art. X, Sec. 5) 17. Money collected for a special purposes shall be considered a special fund (Art. VI, 29[3]) 18. Exclusive appellate jurisdiction of the SC over judgments of lower courts involving the legality of taxes, imports, assessments, fees, penalty. (Art. VIII, Sec. 5) ASPECTS, PROCESS, PHASES OF TAXATION. (Code: LAP Levying, Assessment, Payment) a. Levying/Imposition of the tax. This is essentially legislative. It refers to the enactment of tax laws or statutes. Note: Courts have no power to interfere in the wisdom, objective, motive or expediency in the passage of a tax law, as this is purely legislative in character. To do so would be tantamount to a violation of both the letter and spirit of the organic laws by which the Philippine Government was brought into existence to invade a coordinate and independent department of the Government and to interfere with the legitimate powers and functions of the Legislature. [Tolentino, et al. vs. Secretary of Finance, 235 SCRA 630] b. Assessment and Collection. This is essentially administrative. It is the act of administration and implementation of tax law by the executive branch through its administrative agencies. Nonetheless, the delegation must pass the completeness and sufficient standard test in order to prevent the abuse of its exercise.

Constitutional Limitations 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Due Process Clause (Art. III, Sec. 1) Equal Protection Clause (Art. III, Sec. 1) Uniformity (Art. VI, Sec. 28[1]) Progressive system of taxation (Art. VI, Sec. 28[1]) Non-impairment of contracts (Art. III, Sec. 10) Non-imprisonment for Non-payment of Poll Tax (Art. III, Sec. 20) Appropriation, revenue and tariff bills must originate exclusively in the House of Representatives (Art. III, Sec. 24) Presidential veto (Art. VI, Sec. 27[2]) Presidential power to tax tariff rates (Art. VIII, Sec. 28[2]) Freedom of the press (Art. III, Sec. 4)

T A X A T I O NADVISERS: Justice Japar Dimaampao, Atty. Bernard Bandonell TAXATION - HEAD: Jocelyn Manalo; CO-HEAD: Marlyn Reyes MEMBERS: Marissa Asencion, Nieves Elegado, Fatima Kristine Franco, Cheryl Hernandez, Aries Magpantay, Claudine Mayor, Rosevee Paylip

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