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of Taxation
Tax 111 – Income
Taxation Ferdinand C.
Importado CPA, MBA
Objectives
Primary purpose
• To provide funds or property with which
to promote the general welfare of its
citizens and to enable it to finance its
multifarious activities.
Purpose of taxation
Secondary purposes
• To strengthen anemic enterprises by
giving tax exemptions.
• To protect local industries against
foreign competition through imposition of
high customs duties on imported
goods.
Purpose of taxation
Secondary purposes
• To reduce inequalities in wealth and
income by imposing progressively
higher taxes.
• To prevent inflation by increasing taxes
or ward off depression by decreasing
taxes.
Theory and basis of taxation
• Theory
– The existence of the government is a
necessity.
– The government cannot continue without a
means to pay its expenses.
– The government has the rights to compel its
citizens and property within its limits to
contribute.
Theory and basis of taxation
• Basis
– Taxation is based on the reciprocal duties of
protection and support between the
government and its people.
– Government receives taxes from the people
which is used to perform functions of
government and other benefits.
– Benefit-received theory.
Basic principles of sound tax
system
• Fiscal adequacy
• Equality or theoretical justice
• Administrative feasibility
Fiscal adequacy
• It is inherent in sovereignty.
• Legislative in character.
• Subject to constitutional and inherent
limitations.
Limitations of taxation