November 14,15,18

2019

Tax
Seminar
General
Principles
Definition & Concept

Taxation is the power by which the sovereign, through its law-making

body, raises revenue to defray the necessary expenses of government
(Aban, 2001).

It is a mode by which governments make exactions for revenue in order to

support their existence and carry out their legitimate objectives (Vitug,
2006).

Tax are enforced proportional contributions from persons and properties,

levied by the State by virtue of its sovereignty for the support of the
government and for its public needs.

1
Purpose

1. Primary or revenue purpose – to raise funds or property to enable the

state to promote the general welfare and protection of the people.

2. Secondary or non-revenue purpose –

a. Promotion of general welfare

b. Regulation of activities/industries
c. Reduction of social inequality
d. Encourage economic growth
e. Protectionism

2
Nature & Characteristics

Nature:
1. Inherent attribute of sovereignty
2. Legislative in character

Characteristics:
1. Comprehensive
2. Unlimited
3. Plenary
4. Supreme

3
Theory and Basis

Lifeblood theory – the government relies on taxation to obtain the means

to carry on its operations. Taxation is essential to its very existence (CIR v.
Solidbank Corporation, G.R. No. 148191, November 25, 2003).

Necessity theory – without taxes, the government cannot fulfill its

mandate of promoting the general welfare and wellbeing of the people
(Gerochi v. DOE, 527 SCRA 696, 2007).

Benefits-protection theory – it involves the power of the State to demand

and receive taxes based on the reciprocal duties of support and protection
between the State and its citizens.

4
Theory and Basis

Jurisdiction over subjects and objects – it is the country, state or

sovereign that gives protection and has the right to demand payment of
taxes with which to finance activities so it could continue to give
protection.

5
Principles of a Sound Tax System (FAT)
Fiscal Adequacy – revenue raised must be sufficient to meet
government/public expenditures and other needs (Chavez v. Ongpin, G.R.
No. 76778, June 6, 1990).

Administrative Feasibility – the tax system should be capable of being

effectively administered and enforced with the least inconvenience to the
taxpayer (Diaz v. Secretary of Finance, G.R. No. 193007, July 19, 2011).

Theoretical Justice – the rule on taxation must be uniform and equitable

and that the State must evolve a progressive system of taxation (Art. VI,
Sec. 28(1), 1987 Constitution).

6
Situs of Taxation

It is the place or authority that has the right to impose and collect taxes
(Commissioner of Internal Revenue v. Marubeni Corporation, G.R. No.
137377, December 18, 2001).

Factors to consider:
1. Residence of the taxpayer
2. Citizenship of the taxpayer
3. Nature of the tax
4. Subject matter of the tax
5. Source of Income

7
Summary of Rules on Situs
Kinds of Income
Service or Compensation Income
Rent
Royalties
Merchandising
Gain on Sale of Personal Property
Gain on Sale of Real Property
Gain on Sale of Domestic Stock
Interest
Gain on Sale of Transport Document
Tax Situs
Place of performance of service
Location of property (real or personal)
Place of use of intangibles
Place of sale
Place of sale
Location of property
Income within the Philippines
Residence of the debtor
Place of activity that produces income
8
Summary of Rules on Situs
Kinds of Income Tax Situs
Manufacturing:
a) Produced in whole within and sold within Income purely within
b) Produced in whole without and sold Income purely without
without Income partly within and partly without
c) Produced within and sold without Income partly within and partly without
d) Produced without and sold within
Dividend Income from:
a) Domestic Corporation Income within
b) Foreign Corporation - if for the 3-year
period preceding the declaration of
dividend, the ratio of such corporation’s
Philippine income to the world was:
- less that 50% Entirely without
- 50% to 85% Proportionate

- More than 85% Entirely within

9