Income Taxation

• Taxation is a state power, a legislative process, and a mode of government cost distribution.
• Taxation is an inherent power of the state to enforce a proportional contribution form its subjects for public purpose.
• Taxation is a process of levying taxes by the legislature of the state to enforce proportional contributions from its subjects for public purpose.
• Taxation is a mode by which the state allocates its costs or burden to its subjects who are benefited by its spending.
• Every government provides a vast array of public services including defense, public order and safety, health, education, and social protection among others.
• A system of government is indispensable to every society.
• Without a system of government, the people will not relish the benefits of a civilized and orderly society.
• A government cannot exist without a system of funding.
• The government's necessity for funding is the theory of taxation.
• The government provides benefits to the people in the form of public services, and the people provide the funds that finance the government.
• This mutuality support between the people and the government is referred to as the basis of taxation.
• Capitalization pertains to the adjustment of the value of an asset caused by changes in tax rates.
• Tax condonation is forgiveness of the tax obligation of a certain taxpayer under certain justifiable grounds.
• Amnesty operates retrospectively by forgiving past violations, while condonation applies prospectively to any unpaid balance of the tax.
• Transformation pertains to the elimination of wastes or losses by the taxpayer to form savings to compensate for the tax imposition or increase in taxes.
• Tax Amnesty covers both civil and criminal liabilities, but condonation covers only civil liabilities of the taxpayer.
• Shifting is common with business taxes where taxes imposed on business revenue can be shifted or passed-on to customers.
• Tax Amnesty is a general pardon granted by the government for erring taxpayers to give them a chance to reform and enable them to have a fresh start to be part of a society with a clean slate.
• Amnesty is conditional upon the taxpayer paying the government a portion of the tax, while condonation requires no payment.
• This mutuality is illustrated as follows: Receipt of benefits is conclusively presumed.
• Every citizen and resident of the state directly or indirectly benefits from public services rendered by the government.
• These benefits can be in the form of daily free usage of public infrastructures, access to public health or educational services, the protection and security of life, and other benefits.
• The constitutional guarantee of non-imprisonment for non-payment of poll tax applies only to the basic community tax.
• Non-payment of the additional community tax is an act of tax evasion punishable by imprisonment.
• This exemption is not applied in the Philippines.
• Under the doctrine of ownership, the properties of religious, charitable, or educational entities whether or not used in their primary operations are exempt from real property tax.
• The government should not favor any particular system of religion by appropriating public funds or property in support thereof.
• Compensation to priests, imams, or religious ministers working with the military, penal institutions, orphanages, or leprosarium is not considered religious appropriation.
• In observing this Constitutional limitation, the Philippines follows the doctrine of use wherein only properties actually devoted for religious, charitable, or educational activities are exempt from real property tax.
• The exemption of religious, charitable or educational entities, non-profit cemeteries, churches and mosques, lands, buildings, and improvements from property taxes is constitutional.
• The constitutional guarantee of non-appropriation of public funds or property for the benefit of any church, sect, or system of religion is intended to highlight the separation of religion and the State.
• Tax exemptions granted under contract should be honored and should not be cancelled by a unilateral government action.
• The Constitutional exemption from property tax applies for properties actually, directly, and exclusively used for charitable, religious, and educational purposes.
• The State should set an example of good faith among its constituents and should not set aside its obligations from contracts by the exercise of its taxation power.
• The properties and revenues of religious institutions such as tithes or offerings are not subject to tax.
• The Philippine government adopts free exercise of religion and does not subject its exercise to taxation.
• Property tax situs: Properties are taxable in their location.
• Apportionment of the tax between the national and local government is determined by the tax law.
• Situs of taxation is the place of taxation and serves as a frame of reference in gauging whether the tax object is within or outside the tax jurisdiction of the authority.
• Tax laws are generally prospective in operation and an ex post facto law or a law that retroacts is prohibited by the Constitution.