TAXES

Taxesare enforced proportional contribution from the

persons and property levied by the lawmaking body of the State by virtue of its sovereignty for the support of the government and the public needs.

TAX, in a general sense, is any contribution imposed by the government upon individuals, for the use and service of the state, whether under the name of toll, tribute, tallage, gabel, impost, dusty, custom, excise, subsidy, aid, supply, or other name. Tax, in its essential character, is not a debt. (Black’s Law Dictionary)

ESSENTIAL CHARACTERISTIC of a TAX1. It is an enforced contribution;

2. It is levied by the lawmaking

body;

3. It is proportionate in character;

4. It is generally payable in

money;

5. It is imposed for the purpose of

raising revenues; and

6. It is to be used for public

purpose.

Types of TAX RATE Structures

Tax systems are often described as either regressive, proportional, or progressive. A tax is said to be regressive if the average rate decreases as the tax base increases. For proportional taxes (also called flat or uniform taxes), the average rate of tax remains constant for all the levels of tax base, whereas a progressive tax is one for which the average rate increases as the amount of the tax bases increases.

Notice the defi nition of the regressive, proportional, and progressive are based on the direction of change in tax rates with respect to an increase in the tax base. The widely held political view that the rich should pay larger amount of tax than the poor could be upheld under any of the three rate structures even a regressive one.

Before a tax system can be classifi ed as either regressive or progressive, taxes must be expressed as a percentage of some base amount in the previous technical defi nitions, the base use for this purpose is the base on which the tax is computed.

Constitutional Provision on Progressive System of Taxation

The Supreme Court declared Republic Act. (R.A.) 9337 or the VAT Reform Act constitutional. In the same decision, it clarified the constitutional provision on progressive system of taxation. The increase in corporate income tax rate and the removal of

certain exemption are meant to distribute the burden of taxation. Although indirect taxes, e.g. VAT are regressive by nature, the constitution does not prohibit the imposition of

indirect taxes. When the Constitution mandated Congress to evolve a progressive system of taxation, it simply means that direct taxes should be preferred and that regressive indirect

taxes can be minimized with exemptions and differentiated rates (G.R. 168056, G.R. 168207, G.R. 168461, G.R. 168463, and G.R.

168730, Sept. 1, 2005).

Classification of Taxes

1. As to subject matter or object

a. Personal, poll or capitation – Tax of a fixed amount imposed on individuals, whether citizens or not, residing within a specified territory without regard to their property or the occupation in which they may be engaged. Example: community tax.

b. Property – Tax imposed on property imposed on property, whether real or personal, in proportion either to its value or in accordance with some other reasonable method of apportionment. Example: real estate tax.

c. Exercise – Tax imposed upon the performance of an act, the enjoyment of a privilege or engaging in an occupation. Examples: estate tax, donor’s tax, income tax, value-added tax.

2.As to who bears the burdena. Direct – Tax demanded from person who are intended

or bound by law to pay the tax. Examples: community tax, income tax, estate tax, donor’s tax.

b. Indirect – Tax which the taxpayer can shift to another. Examples: customs duties, value-added tax, some percentage taxes.

3. As to determination of amountc. Specific – Tax imposed based on a physical unit of

measurements, as by head or number, weight, or length, or volume. Examples: tax on distilled spirits, fermented liquors, cigars, wines, fireworks, etc.

d. Ad valorem – Tax of a fixed proportion of the value of property; needs an independent appraiser to determine its value. Examples: real estate tax, certain customs duties, exercises taxes on cigarettes, gasoline and others.

Exercise taxes on certain specific goods imposed under the National Internal Revenue Code are either specific or ad valorem taxes.

4. As to purposea. General, fiscal or revenue – Tax within no

particular purpose o r object for which the revenue is raised, but simply raised for whatever need may arise. Examples: income tax, value-added tax.

b. Special or regulatory – Tax imposed for a special purpose regardless of whether revenue is raised or not, and is intended to achieve some social or economic end. Example: protective tariffs or customs duties on certain imported goods to protect local industries against foreign competition.

5. As to authority imposing the tax or scopec. National – Tax imposed by the national

government. Examples: internal revenue taxes, tariff and customs duties.

d. Municipal or local – Tax imposed by municipal government for specific needs. Examples: real estate taxes, municipal licenses.

6. As to graduation or rate

a. Proportional – Tax based on a fixed percentage of the amount of property income or other basis to be taxed. Examples: percentage taxes, real estate taxes.

b. Progressive or graduated – Tax rate increases as the tax base increases. Examples: income tax, estate tax, donor’s tax.

c. Regressive – Tax rate decreases as the tax base increases. Examples: value-added tax.

Tax Distinguished from Other Fees

1. From toll. Toll is a sum of money for the use of something, generally applied to the consideration which is paid for the use of a road, bridge or the like, of a public nature.

A toll is a demand of proprietorship is paid for the use of another’s property and may be imposed by the government or private individuals or entities; while tax is a demand of sovereignty is paid for the support of the government and may be imposed only by the State.

2. From penalty. Penalty is any sanction imposed as a punishment for violation of law or acts deemed injurious. Violation of tax laws my give rise to imposition of penalty.

A penalty is designed to regulate conduct and may be imposed by the government or private individuals or entities. Tax on the other hand, is primarily aimed at raising revenue and may be imposed only by the government.

Tax Distinguished from Other Fees

5. From debt. A debt is generally based on contract, is assignable and may be paid in kind while a tax is based on law, cannot generally be assigned and is generally payable in money.

6. From revenue. Revenue is broader than tax since It refers to all funds or income derived by the government taxes included. Other sources of revenues are government services, income from public enterprise and foreign loans.

 7. From customs duties. Customs duties are taxes imposed on goods exported from or imported to a country. Customs duties are actually taxes but the latter’s or boarder in scope.

Tax Distinguished from Other Fees

3. From special assessment. Special Assessment is an enforced proportional contribution from owners of lands for special benefits resulting from public improvements.

Special assessment is levied only on land, is not personal liability of the person assessed, is based wholly on benefits and is exceptional both as to time and place.

4. From permit or license fee. Permit or license fee is a change imposed under the police power for purpose of regulation.

License fee is imposed for regulation and involves the exercise of police power while tax is levied for revenue and involves the exercise of the taxing power.

END!!!!