Taxes are compulsory contributions imposed by a government to fund public expenditures. There are several theories that seek to justify taxation, including the necessity doctrine which argues that taxes are necessary to support essential government functions that benefit society. Taxes are also seen as a means of redistributing wealth to benefit society as a whole. The primary purposes of taxation are to raise revenue, regulate behavior, and redistribute resources. For a tax to be valid, it must be imposed within the jurisdiction of the taxing authority, for a public purpose, in a uniform and equitable manner without infringing on constitutional rights.
Taxes are compulsory contributions imposed by a government to fund public expenditures. There are several theories that seek to justify taxation, including the necessity doctrine which argues that taxes are necessary to support essential government functions that benefit society. Taxes are also seen as a means of redistributing wealth to benefit society as a whole. The primary purposes of taxation are to raise revenue, regulate behavior, and redistribute resources. For a tax to be valid, it must be imposed within the jurisdiction of the taxing authority, for a public purpose, in a uniform and equitable manner without infringing on constitutional rights.
Taxes are compulsory contributions imposed by a government to fund public expenditures. There are several theories that seek to justify taxation, including the necessity doctrine which argues that taxes are necessary to support essential government functions that benefit society. Taxes are also seen as a means of redistributing wealth to benefit society as a whole. The primary purposes of taxation are to raise revenue, regulate behavior, and redistribute resources. For a tax to be valid, it must be imposed within the jurisdiction of the taxing authority, for a public purpose, in a uniform and equitable manner without infringing on constitutional rights.
Chapter 1 Tax Rate – is the burden ratio, usually the
Taxation in General percentage at which a person, property
privileges or occupation is taxed. A. Definitions: Taxes – are the enforced proportional B. Theories contributions from persons, property, - 1. Necessity / Lifeblood Doctrine – It has the levied by the State by the virtue of its right to compel all citizens and property within sovereignty, for the support of government its limits to pay taxes. and for all public needs. - - It constitutes as the lifeblood of the nation and are greatly needed to support the Taxation government. Government’s Perspective: - - It should be collected without unneccesary - is the power by which the sovereign, hindrance. through its law-making body, raises revenue- - Claims for refund or tax credit should be to defray the necessary expenses of exercised within the time foxed by law; should government. not be delayed or hampered by incidental matters. Taxpayer’s Perspective: - -Neglect or omission of government officials -is the compulsory transfer of money (or entrusted with the collection of taxes should goods) from private individuals, institutions, not be allowed to bring harm or detriment to or groups to the government. (May be levied the people upon wealth or income, or in the form of a- -Primary purpose is to generate funds for the surcharge on prices. State to finance the needs of citizenry and to -It is a destructive power which interferes advance the common weal. with the personal and property rights of the people and takes from them a portion of 2. Benefits-Protection Theory/Theory of their property for the support of the Reciprocity/Symbiotic Relationship -It is government. when a citizen pays from his property the portion demanded in order that he may by Economic’s Perspective: means be secured in the enjoyment of the It is a non-penal, yet compulsory transfer of benefits of organized society. resources from the private to the public sector levied on a basis predetermined 3. Taxation as Government Violation of the criteria and without reference to specific Non-aggression Principle and the Social benefit received. Contract Theory – under this view, taxation wrongfully presumes that the government Tax base – measure upon which the has a higher claim on property than the assessment or determination of tax liability owner. is based or the wealth within a jurisdiction that is liable to taxation. i.e. taxable income C. The 6 Rs of Purposes and Effect of is the tax base income tax and assessed Taxation value is the tax base. 1. Raise Revenues – The primary purpose is revenue/ to generate funds or property for the Sate to 4. Imposed, levied, and collected for finance the needs of the citizens. the purpose of raising revenue – 2. Regulatory Purpose – Be levied with imposed primarily to generate funds a regulatory purpose covering but have regulatory or economic matters which are affected with purpose. public interest as to be within the 5. Used for public or governmental police power of the state. purposes -cannot be used for private 3. Redistribution of Wealth/ Reduction purposes. of Social Inequality - used to 6. Levied by the authority which has redistribute resources between jurisdiction over the person, individuals or classes in the property, transaction, rights and population. It is an act of privileges – Attributes of sovereignty transferring wealth from the richer and the jurisdiction to exercise the sections to the poorer sections. power is coterminous with the 4. Repricing – levied to address bounds of the sovereign jurisdiction. externalities. Externality is the cost or benefit that is not transmitted Requisites of a Valid Tax: through prices and is incurred by a a. The person or property taxed party who was not involved either a should be within the jurisdiction buyer or seller of the goods or of the taxing authority services causing the cost or benefit. b. The assessment and collection of i.e. Pigouvan Tax certain kinds of taxes guarantee 5. Resuscitate Economy – A first aid against injustice measure to resuscitate an economy c. It should be for public purpose in distress. d. Shall be uniform and equitable 6. Representation – “There is no e. Must not impinge on the taxation without represtation”. Shall inherent and Constitutional originate in the House of limitations Representatives. E. Nature of Taxing Power D. Characteristics and Requisites of Taxes Two-Fold Nature: 1. An enforced contribution – it is - Inherent Power – an essential and inherent involuntary and does not depend on attribute of sovereignty, belonging as a the will or acquiescence of the matter of right to every independent taxpayer. It is mandatory in nature. government. 2. Exacted pursuant to legislative - Legislative authority – power is exercised only - The power is not granted in the constitution by the legislative department except - It is a contract between the state and its in case of valid delegations of the citizens power or when there is - It is not political in nature constitutional grant. - Taxes are personal 3. Contribution being in the form of - It is unlimited in range money - It is imprescriptible F. * Aspects of Taxation: 1. Levy – determination of the persons, property or exercise to be taxed, amount to be raised, rate to be imposed and the manner of implementation. It is exercised by the Legislature. 2. Assessment and Collection – manner of enforcing the obligation of taxes already levied upon taxpayer. This is the act of administration and implementation by the Executive Department. 3. Payment and /or Exercise of Remedies – It is the compliance and resistance by the taxpayer. The exercise of remedy is initially either through the Executive or the Legislature and ultimately through the Judiciary.
Grant of Exemption is an Exercise of
the Power of Taxation
G. Sound Tax System
1. Canons of Taxation a. Canon of Equity b. Canon of Certainty c. Canon of Convenience d. Canon of Economy e. Canon of Productivity f. Canon of Elasticity g. Canon of Simplicity h. Canon of Diversity 2. Basic Principles of Sound Tax System a. Fiscal Adequancy – means that sources of revenues must be adequate to meet government expenditures and their variations. (Balanced budget principle) b. Theoretical Justice -