Basis of Taxation

• Benefits Received Theory. In exchange for the benefits received, taxes are paid by the citizen to sustain the

  activities and for the improvement of the government. It is also called the Benefits-Protection Theory, wherein the basis of taxation is the reciprocal duties of protection and support between the state and its inhabitants. The state collects taxes from the subjects of taxation so that it may be able to perform the functions of the government. On the other hand, the citizens pay taxes so that they may be secured in the enjoyment of the benefits of organized society.