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corporate entities.
Governments use taxation to encourage or discourage certain economic decisions. For example,
reduction in taxable personal (or household) income by the amount paid as interest on home
mortgage loans results in greater construction activity, and generates more jobs. See also taxation
principles.
Taxation refers to compulsory or coercive money collection by a levying authority, usually a
government. The term "taxation" applies to all types of involuntary levies, from income to capital
gains to estate taxes. Though taxation can be a noun or verb, it is usually referred to as an act; the
resulting revenue is usually called "taxes."
3 Inherent Powers of the State:
1. Police Power;
2. Power of Eminent Domain or Power of Expropriation; and
3. Power of Taxation
Purpose:
1. for public good or welfare - Police Power
2. for public use - Power of Eminent Domain
3. for revenue - Power of Taxation
1. POLICE POWER is the power of promoting the public welfare by restraining and regulating the use
of both liberty and property of all the people. It is considered to be the most all-encompassing of the
three powers. It may be exercised only by the government. The property taken in the exercise of this
power is destroyed because it is noxious or intended for a noxious purpose.
It lies primarily in the discretion of the legislature. Hence, the President, and administrative boards as
well as the lawmaking bodies on all municipal levels, including the barangay may not exercise it
without a valid delegation of legislative power. Municipal governments exercise this power by virtue
of the general welfare clause of the Local Government Code of 1991. Even the courts cannot compel
the exercise of this power through mandamus or any judicial process.
Requisites of a valid police measure:
(a.) Lawful Subject the activity or property sought to be regulated affects the public welfare. It
requires the primacy of the welfare of the many over the interests of the few.
(b.) Lawful Means the means employed must be reasonable and must conform to the safeguards
guaranteed by the Bill of Rights.
2. POWER OF EMINENT DOMAIN affects only property RIGHTS. It may be exercised by some private
entities. The property forcibly taken under this power, upon payment of just compensation, is needed
for conversion to public use or purpose.
The taking of property in law may include:
2.
3.
4.
5.
6.
7.
8.
9.
the privileges conferred in liabilities imposed. Persons and properties to be taxed shall be
group, and all the same class shall be subject to the same rate and the tax shall be
administered impartially upon them.
Rule of uniformity and equity in taxation (sec 28(1)Art VI) All taxable articles or properties of
the same class shall be taxed at the same rate. Uniformity implies equality in burden not in
amount. Equity requires that the apportionment of the tax burden be more or less just in the
light of the taxpayers ability to bear the tax burden.
No imprisonment for non-payment of poll tax (sec. 20, Art III) A person cannot be imprisoned
for non-payment of community tax, but may be imprisoned for other violations of the
community tax law, such as falsification of the community tax certificate, or for failure to pay
other taxes.
Non-impairment of obligations and contracts, sec 10, Art III . the obligation of a contract is
impaired when its terms and conditions are changed by law or by a party without the
consent of the other, thereby weakening the position or the rights of the latter. IF a tax
exemption granted by law and of the nature of a contract between the taxpayer and the
government is revoked by a later taxing law, the said law shall not be valid, because it will
impair the obligation of contract.
Prohibition against infringement of religious freedom Sec 5, Art III, it has been said that the
constitutional guarantee of the free exercise and enjoyment of religious profession and
worship, which carries the right to disseminate religious belief and information, is violated by
the imposition of a license fee on the distribution and sale of bibles and other religious
literatures not for profit by a non-stock, non-profit religious corporation.
Prohibition against appropriations for religious purposes, sec 29, (2) Art. VI, Congress cannot
appropriate funds for a private purpose, or for the benefit of any priest, preacher or minister
or for the support of any sect, church except when such priest, preacher, is assigned to the
armed forces or to any penal institutions, orphanage or leprosarium.
exemption of all revenues and assets of non-stock, non-profit educational institutions used
actually, directly, and exclusively for educational purposes from income, property and
donors taxes and custom duties (sec. 4 (3 and 4) art. XIV.
Concurrence by a majority of all members of Congress in the passage of a law granting tax
exemptions. Sec. 28 (4) Art. VI.
Congress may not deprive the Supreme Court of its jurisdiction to review, revise, reverse,
modify or affirm on appeal or certiorari, final judgments and orders of lower courts in all
cases involving the legality of any tax, impost, assessment or any penalty imposed in the
relation thereto.
Every assessee wants to escape from paying taxes, which encourages them to use various means to
avoid such payment. Tax Avoidance and Tax Evasion are two techniques which are used by many
people to reduce their tax liability. They do so by taking expert advice. Tax Avoidance is completely
lawful while Tax Evasion is considered as a crime in the whole world.
In spite of many differences in the two practices, people use them interchangeably which is incorrect.
So, this article will help you to know the significant differences between Tax Avoidance and Tax
Evasion.
Content: Tax Avoidance Vs Tax Evasion
1. Comparison Chart
2. Definition
3. Key Differences
4. Conclusion
Comparison Chart
Basis for
Comparison
Tax Avoidance
Tax Evasion
Meaning
Concept
Deliberate manipulations in
accounts resulting in fraud.
Which type of
means used?
Happened when
Type of act
Legal
Criminal
Consequences
Penalty or imprisonment
because it is a fraudulent activity, because it involves the acts which are forbidden by the law and
hence it is punishable.
Double taxation is a taxation principle referring to income taxes paid twice on the same source
of earned income. It can occur when income is taxed at both the corporate level and personal level.
Double taxation also occurs in international trade when the same income is taxed in two different
countries.
1. Situation where a country levies tax on an income that has already been taxed in the same or
another country. For example, corporate profits are taxed when they are earned, and then taxed
again as personal income when distributed to stockholders (shareholders) as dividend or (in case of
an owner-manager) as salary.
2. Tax on tax. Sales tax (unlike a value added tax) is imposed on the gross price (seller's net cost
price + sale tax paid on net price + seller's profit) of an item as it moves from one seller to the next
purchaser.