WHAT IS TAXATION

• Taxation


  A State power, a legislative process, and a mode of government cost distribution
• Taxation as a state power


  • An inherent power of the State to enforce a proportional contribution from its subjects for public purpose
• Taxation as a process


  • A process of levying taxes by the legislature of the State to enforce proportional contributions from its subjects for public purpose
• Taxation as a mode of cost distribution


  • 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 it, the people will not relish the benefits of a civilized and orderly society. However, a government cannot exist without a system of funding
• Basis 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
• Receipt of benefits is conclusively presumed. Every citizen and resident of the State directly or indirectly benefits from the public services rendered by the government
• Theories of cost allocation

  • Benefit received theory
  • Ability to pay theory
• Benefit received theory


  The more benefit one receives from the government, the more taxes he should pay
• Ability to pay theory


  Taxation should consider the taxpayer's ability to pay. Taxpayers should be required to contribute based on their relative capacity to sacrifice for the support of the government
• Vertical equity


  • The extent of one's ability to pay is directly proportional to the level of his tax base
• Horizontal equity


  • Consideration of the particular circumstance of the taxpayer
• Taxes are essential and indispensable to the continued subsistence of the government. Without taxes, the government would be paralyzed for lack of motive power to activate or operate it
• Taxes are the lifeblood of the government, and their prompt and certain availability are an imperious need. Upon taxation depends the government's ability to serve the people for whose benefit taxes are collected
• Implication of the lifeblood doctrine in taxation

  • Tax is imposed even in the absence of a Constitutional grant
  • Claims for tax exemption are construed against taxpayers
  • The government reserves the right to choose the objects of taxation
  • The courts are not allowed to interfere with the collection of taxes
  • Income received in advance is taxable upon receipt
  • Deduction for capital expenditures and prepayments is not allowed as it effectively defers the collection of income tax
  • A lower amount of deduction is preferred when a claimable expense is subject to limit
  • A higher tax base is preferred when the tax object has multiple tax bases
• Inherent powers of the State

  • Taxation power
  • Police power
  • Eminent domain
• Taxation power - is the power of state to enforce proportional contribution from its subject to sustain itself
• Police power - is the general power of state to enact laws to protect the well being of people
• Eminent domain - is the power of state to take private property for public use after paying just compensation