In. Tax. Ch. 1

• Taxation is a process by which the sovereign (Independent State), through its law-making body, imposes burdens against subjects within its jurisdiction.
• The purpose of taxation is to raise revenues to carry out the legitimate objects of the government.
• Purpose of Taxation: Revenue or Fiscal Purpose - to provide funds to promote the general welfare and protection of citizens and to enable to finance its multifarious activities.
• Purpose of Taxation: Regulatory, Sumptuary, Compensatory Purpose - employed as a devise for regulation or control. It is the implementation of State's police power for a) general welfare, b) social inequality, and c) economic growth.
• Examples of taxes for regulation: 1) Excise tax for sin product and 2) Amusement tax for clubs.
• Examples of taxes for social and economic objectives: 1) Increase tax to curb spending power and halt inflation, 2) Tax incentives to promote new industries, 3) Lower tax for economic breakdown.
• Scope of the Power to Tax: Comprehensive - covers persons, businesses, activities, professions, rights and privileges.
• Scope of the Power to Tax: Unlimited - absence of limitations. The courts scarcely venture to declare restrictions.
• Scope of the Power to Tax: Plenary - complete; BIR ensure collection of taxes.
• Scope of the Power to Tax: Supreme - selection of the subject of taxation.
• Essential Elements of Tax: enforced contribution - not voluntary payment; exacted pursuant to legislative authority.
• Essential Elements of Tax: generally payable in money - pecuniary burden payable in money in legal tender.
• Essential Elements of Tax: proportionate in character - 'ability to pay theory' or 'theoretical justice'; use of graduated tax rates.
• Essential Elements of Tax: levied on persons, property, and by legislature for public purpose.
• Aspects of Taxation: Levying - imposition of tax; legislative act or function.
• Aspects of Taxation: Assessment - determination of correct amount of applicable tax.
• Aspects of Taxation: Collection - collecting tax levied; administrative in character. BIR is in charge of collecting internal revenue taxes.
• Nature of State's Power to Tax: inherent in sovereignty - enforce contribution even in the absence of constitutional provision; the State has the supreme power to command to its will from people within jurisdiction.
• Nature of State's Power to Tax: legislative in character - (levying or imposition) is peculiarly and exclusively legislative in nature. It cannot be exercise by executive or judicial branches of the government.
• Nature of State's Power to Tax: exemption of government entities, agencies, and instrumentalities - for that governmental functions will not be impeded.
• Nature of State's Power to Tax: international comity - agreements among nations.
• Nature of State's Power to Tax: limitation or territorial jurisdiction - property outside jurisdiction does not receive any protection from State.
• Nature of State's Power to Tax: strongest among the inherent power of the State.
• Classification of Taxes: Scope: National - imposed by National Government (income tax, estate tax, donor's tax, VAT, documentary stamp tax).
• Classification of Taxes: Scope: Local - imposed by LGU such as municipal corporations (real estate tax and professional tax receipts).
• Classification of Taxes: Subject Matter: Personal, poll or capitation - fixed amount imposed on individual residing within a specified territory without regard to property (community tax).
• Classification of Taxes: Subject Matter: Property - imposed on property in proportion to its value with reasonable apportionment (real estate tax).
• Classification of Taxes: Subject Matter: Excise - any tax that is not a poll or property tax. For rights and privileges (income tax, estate tax, donor's tax); for sin products (cigars and liquors).
• Classification of Taxes: Who Bears the Burden: Direct - burden of tax cannot shift to another.
• Classification of Taxes: Who Bears the Burden: Indirect - indemnify at the expense of another. Burden is passed to another.
• Classification of Taxes: Determination of Amount: Specific - imposed by head or standard of measurement (excise tax on cigars and liquors).
• Classification of Taxes: Determination of Amount: Ad valorem - value of property with respect to which the tax is assessed (VAT, income tax, donor's tax).
• Classification of Taxes: Purpose: Primary, Fiscal, or Revenue Purpose - to raise revenue for government purposes (income tax, donor's tax and estate tax).
• Classification of Taxes: Purpose: Secondary, Regulatory, Special or Sumptuary Purpose - imposed for a specific purpose i.e. to achieve social and economic ends.
• Classification of Taxes: Graduation or Rate: Proportional - tax based on fixed percentages of amount of property or receipts to be taxed (VAT; Ad-valorem tax).
• Classification of Taxes: Graduation or Rate: Progressive or graduated - tax rate increase as tax base or bracket increase (income tax on taxpayers).
• Classification of Taxes: Graduation or Rate: Regressive - tax rate decrease as tax base or bracket increase.
• Classification of Taxes: Taxing Authority: National - under Tax Code, collected by BIR.
• Classification of Taxes: Taxing Authority: Local - imposed by local government units.
• Elements of Sound Tax System: Fiscal Adequacy - sources of revenues must be adequate for government expenditures.