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• Fiscal policy


  Measures undertaken by government to attain the economic goals of stability and full employment
• Fiscal policy measures


  • Use and manipulation of tax rates
  • Allocation of revenues
  • Levels of spending
• Total spending on economic output is the sum of consumption (C), Investment (I), Government Expenditure (G) and Net Export (NX)
• When the government spends more for goods and services

  It is increasing total demand, output, and hence, employment
• Government spending should be financed
• Sources of government revenues

  • Internal sources
  • External sources
• Internal sources of government revenues


  • Taxes
  • Custom duties
  • Privatization of government-owned corporation (GSIS, SSS etc.)
  • Domestic borrowing
• External sources of government revenues


  • Foreign borrowing
• The Philippine government generates revenues mainly through personal and income tax collection, but a small portion of non-tax revenue is also collected through fees and licenses, privatization proceeds and income from other government operations and state-owned enterprises
• Approximately, 86% to 90% of the revenues come from taxes and only approximately 10% to 14% is non-tax
• Government operation is heavily dependent on tax revenues, making taxation very necessary
• Taxation


  The enforced proportional contributions from persons and property imposed by the State through its law-making body, by virtue of its sovereignty for the support of government and all public needs
• Essential elements or characteristics of a tax


  • It is an enforced contribution
  • It is generally payable in money
  • It is proportionate in character
  • It is levied on persons, property, or the exercise of a right or privilege
  • It is levied by the State which has jurisdiction over the subject or object of taxation
  • It is levied by the law-making body of the State
  • It is levied for public purpose or purposes
• Purposes of taxation


  • Revenue or fiscal
  • Regulatory (Non-revenue)
• Revenue or fiscal purpose of taxation


  To provide funds or property to finance government operation and promote the general welfare and protection of its citizens
• Regulatory (Non-revenue) purpose of taxation


  To regulate or control certain activities in order to attain certain effects or conditions envisioned by the government
• Examples of regulatory (non-revenue) taxation


  • Imposition of higher taxes on the sale of cigarettes and liquor to discourage consumption
  • Imposition of tariffs on imported goods to protect local industries from foreign competition
  • Adoption of progressively higher tax rates to reduce inequalities in wealth and income distribution
  • Increase or decrease of taxes to prevent inflation or to ward off depression
  • Imposition of higher taxes on certain industries or economic activities in order to mitigate pollution or other environmental degradation
• Principles of Taxation


  • The Benefit Principle
  • Ability to Pay Principle
  • The Equity Principle
• The Benefit Principle


  The theory that the existence of government is a necessity, and that the government has a right to compel all its citizens and property within its limits to contribute, as there is reciprocity of duties by government and its citizens
• Ability to Pay Principle


  The tax burden should be proportionate to the taxpayer's ability to pay, commonly measured in terms of the income earned by the individual and the size of their family
• Approaches to Equity in Taxation


  • Absolute equal sacrifice
  • Equal proportional sacrifice
  • Equal sacrifice
  • Minimum aggregate sacrifice
• Taxes in the Philippines


  • Internal revenue taxes
  • Local/Municipal Taxes
  • Tariffs and Customs Duties
  • Taxes/Tax incentives under special laws
• Internal revenue taxes in the Philippines


  • Income tax
  • Property Transfer taxes
  • Percentage taxes
  • Excise taxes
  • Documentary stamp tax
• Local/Municipal Taxes in the Philippines


  • Community Tax (residence taxes)
  • Taxes on income estate, legacies, inheritance and gifts
  • Real Property Taxes
  • Alien Registration Fees
  • Taxes on agricultural products
  • Franchise Tax
  • Ad Valorem Taxes
  • Weights and measures
  • Municipal licenses
  • Special licenses
  • Other Revenues
• Minimum aggregate sacrifice


  Tax revenues are first generated by collecting from the high income group first. If the tax revenue is already enough, then there is no need to collect taxes from the low income group. But if the tax revenue is still insufficient, the government will consider collecting taxes from the low income group. This will ensure that the total sacrifice of the society is minimized.
• Internal revenue taxes imposed under the National Internal Revenue Code


  • Income tax
  • Property Transfer taxes
  • Percentage taxes
  • Excise taxes
  • Documentary stamp tax
• Local/Municipal Taxes

  • Community Tax (residence taxes)
  • Taxes on income estate, legacies, inheritance and gifts
  • Real Property Taxes
  • Alien Registration Fees
  • Taxes on agricultural products
  • Franchise Tax
  • Ad Valorem Taxes
  • Weights and measures
  • Municipal licenses
  • Special licenses
• Other Revenues


  • Tariffs and Customs Duties
  • Taxes/Tax incentives under special laws
• Classification of Taxes - As to subject matter or object of Taxation


  • Personal, poll or capitation tax
  • Property tax
  • Excise tax
• Classification of Taxes - As to purpose


  • Revenue tax
  • Regulatory tax
• Classification of Taxes - As to who bears the burden


  • Direct tax
  • Indirect tax
• Classification of Taxes - As to coverage of the tax


  • National tax
  • Local tax
• Classification of Taxes - As to the determination of amount


  • Specific tax
  • Ad valorem tax
• Classification of Taxes - As to application of tax rate


  • Proportional tax
  • Progressive or graduated tax
  • Regressive tax
• Three basic principles of a sound tax system


  • Fiscal adequacy
  • Equality or theoretical justice
  • Administrative feasibility
• Double Taxation


  In its broad sense, it is referred to as indirect double taxation. It extends to all cases in which there is a burden of two or more impositions. In order to constitute double taxation, the following elements must be present: the same property must be taxed twice when it should be taxed once; both taxes must be imposed on the same property or subject matter; by the same State, Government, or taxing authority; for the same purpose; of the same kind or character of tax; within the same jurisdiction or taxing district; during the same taxing period.
• Unlike the United States Constitution, our Constitution does not prohibit double taxation. However, while it is not forbidden, it is something not favored. Such taxation should, whenever possible, be avoided and prevented. With direct double taxation, the principle of equal protection and uniformity in taxation is being violated.
• Means of Avoiding or Minimizing the Burden of Taxation


  • Shifting
  • Evasion
  • Exemption
  • Avoidance
• Sources of tax laws in the Philippines

  • Constitution
  • National Internal Revenue Code
  • Tariff and Customs Code
  • Local Government Code (Book II)
  • Local tax ordinances/City or municipal tax codes
  • Tax treaties and international agreements
  • Special laws
  • Decisions of the Supreme Court and the Court of Tax Appeals
  • Revenue rules and regulations and administrative rulings (BIR Rulings) and opinions
• Allotment


  The apportionment of the taxes collected by the government to the different units or offices of the government as mandated by the provisions of existing revenue laws and regulations. 20% of the collection from national internal revenue taxes shall accrue to the local governments on the bases of the third fiscal year preceding the current fiscal year. The allotment shall be distributed as follows: 30% to provinces; 45% to municipalities; and 25% to cities. The share of each province, city, and municipality shall be determined on the following formulae: 70% for population; 20% for land area; and 10% for equal sharing.