DEFINE TAX AND TAXATION: TAXATION is a mode of raising revenue for public purposes.

. TAXES are the enforced proportional contributions from persons and property levied by the law-making body of the State by virtue of its sovereignty for the support of government and for public needs. TAX DISTINGUISHED FROM LICENSE FEE: a)

FUNDAMENTAL PRINCIPLES OF LOCAL TAXATION 1) The National Government may impose local taxes on articles or subjects which are within the territorial jurisdiction of the local government unit. 2) The Local Government unit cannot impose tax on the national government. THE PURPOSES OF TAXATION PRIMARY To raise revenue in order to support the government

PURPOSE: Tax imposed for revenue WHILE

license fee for regulation. Tax for general purposes WHILE license fee for regulatory purposes only.

SECONDARY b)

BASIS: Tax imposed under power of taxation

WHILE license fee under police power.

c)

AMOUNT: In taxation, no limit as to amount

WHILE license fee limited to cost of the license and expenses of police surveillance and regulation. d)

1) Used to reduce social inequality 2) Utilized to implement the police power of the State 3) Used to protect our local industries against unfair competition 4) Utilized by the government to encourage the growth of local industries PRINCIPLES OF A SOUND TAX SYSTEM 1. Fiscal adequacy sources of revenue taken as a whole must be sufficient to meet the demands of public expenditure 2. Equity or theoretical justice tax burden should be in proportion to taxpayers ability to pay 3. Administrative feasibility tax laws should be capable of convenient, just and effective administration ASPECTS OF TAXATION 1) LEVY or IMPOSITION enactment of tax laws legislative in character 2) ASSESSMENT & COLLECTION administrative in character 3) PAYMENT personal cannot be delegated

TIME OF PAYMENT: Taxes normally paid after

commencement of business WHILE license fee before.

e) f)

EFFECT OF PAYMENT: Failure to pay a tax does

not make the business illegal WHILE failure to pay license fee makes business illegal. SURRENDER: Taxes, being lifeblood of the state, cannot be surrendered except for lawful consideration WHILE a license fee may be surrendered with or without consideration. Tax vs License/Permit Fee 1. legal compensation or reward of an officer for specific purposes 2. for regulation purposes 3. an exercise of the police power 4. amount is limited to the necessary expenses of inspection and regulation 5. imposed on the right to exercise privilege 6. non-payment makes the act or business illegal

1. enforced contribution assessed by sovereign authority to defray public expenses 2. for revenue purposes 3. an exercise of the taxing power 4. generally no limit in the amount of tax to be paid 5. imposed also on persons and property 6. non-payment does not necessarily make the act or business illegal

THEORIES OF TAXATION 1. Necessity Theory Taxes proceed upon the theory that the existence of the government is a necessity; that it cannot continue without the means to pay its expenses; and that for those means, it has the right to compel all citizens and properties within its limits to contribute. 2. The Benefits-Protection Theory The basis of taxation is the reciprocal duty of protection between the state and its inhabitants. In return for the contributions, the taxpayer receives the general advantages and protection which the government affords the taxpayer and his property. THE EXTENT OF THE TAXING POWER