What is a legal basis?

the justification for or reasoning behind something.

A law based explanation how or why things are carried out in a certain manner

the underlying support or foundation for an idea, argument, or process.

What are the main aspects of

Public Finance Administration

Taxation

Budgeting

Accounting and Auditing

What is Taxation?

Taxation is the inherent power of the

sovereign, exercised through the

legislature, to impose burdens upon

subjects and objects within its

jurisdiction for the purpose of raising

revenues to carry out the legitimate

objects of government.

What is the essence of

Taxation?

The power of taxation proceeds upon

the theory that the existence of a

government is a necessity; that it cannot

continue without means to pay its

expenses; and that for those means it

has the right to compel all citizens and

property within its limits to contribute.

Theoretical Basis of

Taxation Life Blood Theory of Taxation

Social Contract Theory

Benefit Received Principle

Sources of Taxation

Constitution

Special laws or Statutes

NIRC

Administrative Rules and Regulations

Administrative Rulings and Opinions

Judicial Rulings or Jurisprudence

Kinds of taxes

1. Income Tax

2. Estate and donor's taxes

3. Value-Added tax

4. Other percentage taxes

5. Excise taxes

6. Documentary Stamp taxes

7. Such other taxes as are or hereafter may be imposed and collected by the Bureau of Internal Revenue

Limitations of the Power to Tax

Limitation means a legally specified period

beyond which an action may be defeated

or a property right is not to continue

Two Classes of tax limitations

Inherent Limitations

Constitutional Limitations

Constitutional Limitations

Due process of law (sec. 1Art. III)

Rule of uniformity and equity in taxation (sec 28(1)Art VI)

No imprisonment for non-payment of poll tax (sec. 20, Art III)

Non-impairment of obligations and contracts (sec 10, Art III)

Prohibition against infringement of religious freedom (Sec 5, Art III)

Prohibition against appropriations for religious purposes (sec 29, (2)

Art. VI)

exemption of all revenues and assets of non-stock, non-profit

educational institutions used actually, directly, and exclusively for

educational purposes from income, property and donor’s taxes and

custom duties (sec. 4 (3 and 4) art. XIV.)

Concurrence by a majority of all members of Congress in the

passage of a law granting tax exemptions. (Sec. 28 (4) Art. VI.)

Inherent Limitations

Purpose. Taxes may be levied only for public purpose;

Territoriality. The State may tax persons and properties under its jurisdiction;

International Comity. the property of a foreign State may not be taxed by another.

Exemption. Government agencies performing governmental functions are exempt from taxation

Non-delegation. The power to tax being legislative in nature may not be delegated. (subject to exceptions)

The process of Taxation

Taxation is a Legislative function since a Statute is required to enable the Executive branch to initiate tax collection.

However, it is the Executive department who issues the recommendations to Congress regarding the effectiveness of the tax statutes.

All aspects of tax policy formulation and implementation is principally handled by the Department of Finance.

The Secretary of Finance is the key recommendatory position to the President when it comes to concerns about the tax policies.

With such, the Executive formulates its recommendations to the Congress for it legislate statutes which will be implemented by the Department of Finance through the Bureau of Internal Revenue and the Bureau of Customs.

What is Budgeting?

In general, a government budget is the

financial plan of a government for a

given period, usually for a fiscal year,

which shows what its resources are, and

how they will be generated and used

over the fiscal period. The budget is the

government's key instrument for

promoting its socio-economic objectives.

Formulation of Budget

Constitutional Basis of

Budgeting Section 24, Article VI, which states that all appropriations,

revenue or tariff bills increase of the public debt, bills of localapplication and private bills shall originate in the House ofRepresentatives, but the Senate may propose or concur with

amendments

Section 25 (1), Article VI, states that the Congress may notincrease the appropriations recommended by the President forthe operation of the government as specified in the budget. Theform, content, and manner of preparation of the budget shall beprescribed by law.

Section 25 (2), Article VI states that no provision or enactmentshall be embraced in the General Appropriations Bill unless itrelates specifically to some particular appropriation therein. Anysuch provision or enactment shall be limited in its operation tothe appropriations to which it relates.

Section 25 (4), Article VI: “A special appropriations bill shall specify thepurpose for which it is intended, and shall be supported by fundsactually available as certified by the National Treasurer, or to be raisedby a corresponding revenue proposal therein.”

Section 25 (5), Article VI: “No law shall be passed authorizing anytransfer of appropriations, however, the President , the President ofthe Senate, the Speaker of the House of Representatives, the ChiefJustice of the Supreme Court, and the Heads of ConstitutionalCommissions may, by law, be authorized to augment any item in thegeneral appropriations law for their respective e offices from savingsin other items of their respective appropriations.”

Section 25 (7), Article VI: “If, by the end of the fiscal year, the[Philippine] Congress shall have failed to pass the GeneralAppropriations Bill for the ensuing fiscal year, the GeneralAppropriations Law for the preceding fiscal year shall be deemed re-enacted and shall remain in force and effect until the GeneralAppropriations Bill is passed by [the Philippine] Congress.”

Section 22, Article VII: “The President shall submit to the Congresswithin thirty (30) days from the opening of every regular session, asthe basis of the General Appropriations Bill, a budget of receipts andexpenditures and sources of financing, including receipts from existingand proposed revenue measures.

Restrictions on Budgeting

The President has exclusive right to propose a budget.

Congress can only reduce or reallocate appropriations in the proposed budget.

The President can use a line-item veto.

The previous year’s budget is automatically “re-enacted” if the budget is not passed prior to the start of the fiscal year.

The President can impose restrictions on the disbursement of funds appropriated by Congress.

The President can augment any appropriations from savings in other appropriations.

Highest allocation to Education

Separation of Church and State

Special Funds are for Special funds only

Accounting and Auditing

Accounting is defined as "the art of recording,

classifying and summarizing, in a significant

manner and in terms of money, transactions

and events which are, in part at least of a

financial character and interpreting the results

thereof." Its primary function is to measure and

communicate financial and business data as it

gives meaning to financial reports by explaining

the results of transactions in terms of profit and

loss and current financial positions.

Auditing on the other hand is the

examination of information by a third party

than the preparer or user with the intention

of establishing its reliability, and the

reporting of the results of this examination

with the expectation of increasing the

usefulness of the information of the user.

Justification of Accounting and

Auditing (COA) The Commission has the power, authority

and duty to examine, audit and settle allaccounts and expenditures of the fundsand properties of the Philippinegovernment. Towards that end, it has theexclusive authority to define the scope,techniques and methods of its auditing andexamination procedures. It also mayprevent and disallow irregular,unnecessary, excessive, extravagant orunconscionable expenditures, or uses ofgovernment funds and properties

Constitutional Provision and

Legal Basis

Article IX (D), Section 2 of the 1987

Constitution is the prime basis of

accounting and auditing of public

finance.

The Audit Code of the Philippines

(P.D. 1445)

References

Books

Hector De Leon, Text Book on Philippine 1987 Constitution

Hector De Leon, The Law on Income Taxation

Leonor M. Briones, Philippine Public Fiscal Administration, Fiscal Administration Foundation Inc. Mandaluyong, 1996

Online References

http://www.gov.ph/the-philippine-constitutions/the-1987-constitution-of-the-republic-of-the-philippines

http://www.gov.ph/1987/07/25/executive-order-no-292

http://www.transparencyreporting.net/index.php

http://hrepreflibrarian.wordpress.com/2013/03/07/the-budget-process-the-philippine-congress/

https://ideas.repec.org

http://www.oecd.org/countries/philippines/48170279.pdf

http://www.dbm.gov.ph

http://www.lawphil.net/administ/coa/coa.html

http://tax71.blogspot.com/2009/06/limitations-on-power-of-taxation.html