NATURE, SCOPE, CLASSIFICATION, AND ESSENTIAL CHARACTERISTICS

What is taxation?
Taxation is an act, process, or means by which the sovereign (Independent State) through its law-
making body (legislative branch of the government) makes demand for revenue in order to support its
existence and carryout its legitimate objectives,
Explain the nature of taxation power
The power of taxation generally refers to the combination of the following natural qualities.
1. Inherent power of Sovereignty the power of taxation is co-extensive with sovereignty. It is
existing inseparably with the State. The government could exercise this power even without
any provision in the Constitution mentioning it.
i. Taxation begins its existence from the time a state is born with the concurrence of
its four elements which are people, territory, sovereignty and government.
2. Essentially a legislative Function The Law-making body of the government and its political
subdivisions exercise the power of taxation.
3. For Public Purposes Taxes are public money, and its appropriation to be valid must be for the
common good of the people, such that no individual or particular entity shall primarily be
enriched or benefited from its use.
4. The strongest of all inherent powers of the State - Without money, the government cannot exist
permanently and cannot dispense and exercise any of its powers and / or functions for its people.
i. In the absence o the limitations provided by the Constitutions, the power of
taxation is unlimited, complete, and supreme. The members of the law-making
body could impose taxes on things and rights at appropriate rates within
boundaries of its inherent restrictions.
5. Subject to Inherent International Treaty or Comity As a matter of international courtesy,
property of a foreign state may not be taxed by another state based on principle of sovereign
equality among states of international law. One state cannot exercise its sovereign dominion
over another, therefore, a nation cannot impose enforced contribution to the properties of
other nations.
6. Normally payable in Money Taxes are contributions normally payable in the form of money.
7. Territorial in Scope As a rule, tax laws do not operate beyond a countrys jurisdictional
limits unless there exists a privity of relationship between the taxing State and the object of the
tax. Where privity of relationship exists, the state can still exercise its taxing powers over its
citizens outside its territory because the personal jurisdiction of his government over him still
remains.

What is the basis of taxation?

Taxation is based on necessity and reciprocal duties of protection and support between the state
and its inhabitants. Taxation is the lifeblood or the bread and butter of the government. Therefore,
it is necessary that every citizen must pay his taxes. The government cannot exist without means to
pay its necessary expenses. The citizen pays taxes to support the government in order that he may
continuously be sustained with security and benefits of an organized society.

PURPOSE OF TAXATION
What are the two main purposes of the exercise of taxation power?
Taxation power is exercised for two main purposes; to raise revenue (fiscal) and to regulate certain
activities or consumption (regulatory)
1. Fiscal purpose taxes are imposed primarily to raise the necessary revenue to finance various
activities of the government in the promotion of the general welfare and promotion of the public.
2. Regulatory purpose taxation power could also be exercised to regulate inflation, achieve
economic and social stability, and to serve as a key instrument for social control.
STAGES (ASPECTS) OF TAXATION
What are the three (3) stages of taxation process?
1. Levy pertains to the passage of tax laws and tax ordinances to legislature
2. Assessment refers to the appraisal and valuation process of the subject or
object of taxation to arrive at total amount of collectible tax.
3. Collection involves the effective administrative implementation of obtaining
payment of tax from the taxpayer.
Which of the aspects of taxation process could not be delegated to other branches of the
government?
The levying or imposition aspect of taxation could not in anyway to be delegated and which should
be exclusively exercised by the law-making body; while the other stages of taxation may lawfully be
delegated to other branches of the government. The collection aspect of taxation could even be
delegated to private entity.

BASIC PRINCIPLES OF A SOUND TAXATION SYSTEM

What are the three basic principles of a sound taxation system?
The taxation to be effective is guided by three basic principles
1. Fiscal Adequacy which requires that the sources of government revenue should be
capable of raising the amount that should be sufficient to meet the demand of public
expenditures regardless of business condition.
2. Theoretical Justice which requires that the tax burden must be proportionate to the
taxpayers ability to pay.
3. Administrative Feasibility which should enable the system to conveniently implement a
just and an effective tax administration.

LIMITATIONS OF THE POWER OF TAXATION

Taxation is the most supreme among the inherent powers of the government. Could taxation be
regarded as an absolute power which the government could exercise without restriction?
No. Although the power of taxation is supreme, plenary and comprehensive, it is till subject to some
inherent and constitutional limitations.
What are the inherent limitations on the exercise of power of taxation?
1. It is exercised primarily for public purposes.
2. It is legislative in nature (non-delegation of the legislative power)
3. Its exercise limited to the territorial jurisdiction of the state.
4. It honors and gives due respect to international comity
What are the constitutional limitations on the exercise of power of taxation?
1. Due process of law
2. Equal protection of law
3. Rule of uniformity and equity in taxation
4. Non-impairment of obligations and contracts
5. Non-imprisonment for non-payment of poll tax
6. Presidents power to veto tax bills
7. Non appropriation for religious purposes

SIMILARITIES AND DISTINCTION AMONG INHERENT POWERS OF THE GOVERNMENT

What are the three inherent powers of the government?
The following powers are inherent to the existence of the government:
1. Taxation power a power by which an Independent Sate, through its law-making body, raises
and accumulates revenue from its inhabitants to pay the necessary expenses of the
government.
 2. Police power a power of the Sovereign State to legislate for the protection of the health,
welfare and morals of the community.
3. Eminent domain a power of the Sovereign State to take private property for a public
purpose even without the owners consent.

What are the three basic similarities of the three inherent powers of the government?
1. Inherent to the existence of the government
2. Exercised for public purposes
3. Legislative in nature and character
4. Presuppose equivalent compensation
5. All underlie and exist independently on the Constitution, but their exercise can only be limited by
the Constitution.
6. All are necessary attributes of the Sovereign State

What are the basic distinctions of the three inherent powers of the government?
1. Police power is broader than taxation and eminent domain because it involves a general power to
make and implement laws.
2. The law on public service or public utility entity may grant eminent domain while police power
and taxation power are to be exercised only by government units.
3. Both taxation and eminent domain are limited by the non-impairment clause in the Constitution,
but not police power.
4. The exercise of police power merely restricts the use of property, while eminent domain requires
the take over of specific property. In taxation, now specific property is being taken, because this
requires payment, generally in money.
5. The exercise of eminent domain requires payment of just compensation to the private property
owner, while in taxation and police power, the government has to receive tax or fee for its
exercise.

SITUS OF TAXATION
What is situs of taxation?
Situs of taxation refers to the place of taxation, or to the State or political unit which has
jurisdiction to impose tax.
The following are the factors which are determinant to the situs of taxation
1. Citizenship of the taxpayer
2. Residency of the taxpayer
3. Nature, kind or classification of tax being imposed
4. Subject or object of taxation
5. Source of income
6. Place of exercise, business or occupation being taxed

Additional Note: The following situs of taxation apply

Persons- residence of the taxpayer
Real property or tangible personal property location of the property
Intangible personal property as a rule, situs is the domicile of the owner unless he has
acquired a situs elsewhere
Income Taxpayers residence or citizenship, or place where the income was earned.
Business, occupation and transaction place where business is being operated,
occupation being practiced and transaction completed
Gratuitous transfer or property taxpayers residence or citizenship, or location of the
porperty
NATURE, CHARACTERISTICS, KINDS OF TAXES

What does the term taxes means?

Taxes are obligations created by law. These are civil liabilities of the taxpayer which may give
rise to his criminal liability if he refuses to pay. Taxes are the lifeblood of the government because these
are main sources of government revenues. These are forced contributions from those who are receiving
protections directly or indirectly from the government to support its multiple functions.

What are the characteristics of taxes?

1. A forced contribution
2. Proportionate in character
3. Imposed by the legislative boy
4. Generally payable in money
5. For public purposes
6. Levied on person, property or right
7. Imposed by the sovereign state which has jurisdiction

What are classifications of taxes?

1. Local and national, as to authority collecting it
2. Direct or indirect, as to who bears the burden
3. Specific and advalorem, as to determination of the amount
4. Fiscal and regulatory, as to purpose
5. Personal, property, or excise, as to object
6. Proportionate, prorgressive and regressive as to rate

TAX INVASION AS DISTINGUISED FROM TAX AVOIDANCE

What is the main distinction between tax avoidance and tax invasion?
Tax avoidance is the legal means to lessen or totally eliminate the tax liability.
Examples are tax shifting, transformation, and other exercise of legal options, which
reduce the tax burden.
Tax evasion is the illegal means to reduce tax payment.
Example is the willful understatement of the income or the overstatement of deductions
from what is lawfully
authorized or permitted.

DOUBLE TAXATION

Define double taxation

Double taxation is an act by the sovereign of taxing twice for the same purpose in the same year
upon the same property or the same person with the same nature or character of tax.

What are the classifications of double taxation?

Direct duplicate taxation This is double taxation in its strict sense. It is prohibited
because it consists imposition of the same tax on the same property for the same purpose
by the same State during the same taxable period.
This kind of double taxation violates the constitutional provision of uniformity and equal
protection, as well as the principle that tax must not be excessive, unreasonable and
equitable. Therefore, such taxation should, whenever and wherever possible, be avoided
to prevent injustice or unfairness.
 Indirect duplicate taxation This is double taxation in its broad sense. It extends to all
cases in which there is a burden of two or more pecuniary impositions. It is usually
allowed as long as there is no violation of equal protection and uniformity clauses of the
Constitution.

TAX ADMINISTRATION

What are the main agency implementing the National Internal Revenue Laws?
The Bureau of Internal Revenue is the administrative agency of the government in charge with
the primary function of administering the National Internal Revenue laws and regulations. It is
responsible for the collection of National Internal Revenue taxes. It is under the executive
supervision and control of the Department of Finance. The Internal Revenue Commissioner heads
it (Sec. 2)

What are the powers of the Commissioner of Internal Revenue

1. To interpret tax laws and to decide on tax cases.
2. To obtain information, to summon and take testimony to effect tax collection
3. To make assessment and prescribe additional requirements for tax administration and
enforcement
Examination of returns and determination of tax due.
Failure to submit required returns, statements, reports and other documents
Authority to conduct inventory-taking, surveillance and prescribe presumptive gross
sales and receipts
Authority to terminate taxable period.
Authority to prescribe real property values.
Authority of the Commissioner to inquire deposit accounts
Authority to accredit and register tax agents.
Authority of the Commissioner to prescribe additional procedural or documentary
requirements.