General Principles of Taxation

Taxation Defined
Taxation is a mode of raising revenue for public
purpose. The term is ordinarily used to express the
exercise of the sovereign power to raise a revenue for
the expense of the government. It is the act of laying
a tax, i.e. the process or means by which the taxing
power is exercised. (1 Cooley on Taxation. 72-73)

A. Lifeblood Theory it is said that taxes are

what we pay for civilized society. Without taxes,
the government would be paralyzed for lack of
the motive power to activate and operate it.
Hence, despite the natural reluctance to
surrender part of ones hard-earned income to the
taxing authorities, every person who is able to
must contribute his share in running of the
government.
B. Necessity Theory the power to tax is an
attribute of sovereignty emanating from necessity.
It is a necessary burden to preserve the States
sovereignty and a means to give the

citizenry an army to resist an aggression, a

navy to defend its shores from invasion, a
corps of civil servants to serve, public
improvements designed for the enjoyment of
the citizenry and those which come within the
States territory, and facilities and protection
which a government is supposed to provide.
C. Benefits-Protection Theory taxation is
described as a symbolic relationship whereby
in exchange of the benefits and protection
that the citizens get from the Govt, taxes are
paid.

Scope or Coverage of Taxation

Taxation covers two separate areas or aspects of
government activity, namely:
1. Levying or imposition of the tax. This is generally
a legislative act. In the Philippines, the taxing power
is exercised by Congress.
2. Collection of the tax. This is essentially executive
or administrative in nature.
The national agency charged with the function of
collecting internal revenue taxes
is the Bureau of Internal Revenue.

The Power to Tax

The Constitution has vested in Congress the power to tax
(Art.VI, Philippine Constitution)
Congress may make all the laws which shall be necessary
and proper for carrying into execution the foregoing
power.
The power to tax is the one great power upon which the
whole national fabric is based. It is as necessary to the
existence and prosperity of a nation as is the air he
breathes to the natural man. It is not only the power to
destroy, but it is also the power to keep alive (Nicol v.
Ames, 173 U.S. 509)

A. Amount or rate of tax

B. Apportionment of the tax
C. Kind of tax
D. Method of collection
E. Purpose/s of its levy, provided it is for
public purpose
F. Subject to be taxed, provided it is within
its jurisdiction
G. Situs of taxation

A. Inherent power of the sovereign state

B. Exclusively lodged with the legislature

C. Subject to inherent, constitutional and

contractual limitations

Limitation on the Power to Tax

The power to tax is subject to three limitations,
namely:
(1) Constitutional limitations
(2) Contractual limitations
(3) Inherent limitations

Constitutional Limitations
These are limitations imposed by the Constitution. They are:
(a) No person shall be deprived of life, liberty or property without due
process of law, nor shall any person be denied the equal protection of the
laws (Art.III, Sec. 1)
(b) No person shall be imprisoned for debt or nonpayment of a poll tax
(Art.III, Sec. 20)
(c) The rule of taxation shall be uniform and equitable, The congress shall
evolve a progressive system of taxation (Art. VI, Sec.28(1)).
(d) Charitable institutions, churches and parsonages or convents appurtenant
thereto, mosques, non-profit cemeteries, and all lands, buildings, and
improvements, actually, directly and exclusively used for religious,
charitable, or educational purposes shall be exempt from taxation.
(e) No law granting any tax exemption shall be passed without the
concurrence of a majority of all the members of the Congress. (Act VI,
Sec.28(4)).
(f) No law impairing the obligation of contracts shall be passed (Art.III, Sec.
10).

Contractual Limitations
These are restrictions on the taxing power imposed by
previously existing contracts entered into by the
government with another party who may be another
state or its own citizens.
When it is unilaterally granted by law, and the same it
withdrawn by virtue of another law
When the exemption is granted under a franchise it
may be withdrawn at any time

Inherent Limitations
These are restrictions arising from the very nature of the power to tax itself.
They are:
(a)Public purpose of taxes
(b)Non-delagability of the taxing power
(c)Territoriability or Situs of taxation
(d)Tax exemption of the government
(e)International comity
TESTS IN DETERMINING PUBLIC PURPOSE the ends are public benefit and
welfare
1.Duty Test-whether the thing to be furthered by the appropriation of public
revenue is something which is the duty of the State, as a government, to
provide.
2.Promotion of General Welfare Test-whether the proceeds of the tax will
directly or indirectly promote the welfare of the community in equal
measure.

General Rule-the power of taxation is

exclusively exercised by the legislature. For
the power emanates from, through and by
the people. Hence, a delegated authority
could no longer be furthered delegated.
Exceptions to Non delegability:
1. Authority of the President to fix tariff
rates, import and export quotas, tonnage
and wharfage dues, and other duties
2. Power of the local govt to levy taxes,
fees and charges

The power to tax is limited only to persons,

property or businesses within the jurisdiction
or territory of the taxing power.
FACTORS THAT DETERMINE THE SITUS OF TAXATION
1. Kind or classification of the tax being levied
2. Situs of the thing or property taxed
3. Citizenship of the taxpayer
4. Residence of the taxpayer
5. Source of the income tax
6. Situs of the excise, privelege, business or
occupation being taxed

Kind of Tax
Personal-Community tax
Real Property Tax
Business Tax
Transfer Tax

Sales Tax
Income Tax
Corporate Tax

Situs
Residence of taxpayer
Location of property
Place of business
Residence or citizenship of
the taxpayer or location
of property
Where the sale is
consummated
Consider (1) citizenship, (2)
residence and (3) source
of income
Law on incorporation

As a matter of public policy, property of the

state and of its municipal subdivisions devoted to
govt uses and purposes is deemed to be exempt
from taxation although no express provision in the
law is made therefore.
RULES GOVERNING TAX IMMUNITY OF THE GOVT
1. Administrative Agencies-tax exempt unless when the
law expressly provides for tax
2. GOCCs-income is taxable at the rate imposed upon
corporations engaged in similar business, industry or
activity. Exception: GSIS, SSS, PHIC and PCSO (Sec
27(C), NIRC) but PAGCOR exemption was lifted by RA
9337

3.

Government Educational Institutions

a. Property or real estate tax-property
actually, directly and exclusively used for
educational purposes-exempt but income of
whatever kind and character from any of
their properties, real or personal, regardless
of the disposition, is taxable.
b. Incomes received by them as such are
exempt from taxes. However, their income
from any of their activities conducted for
profit regardless of the disposition is taxable.

These principles limit the authority of the

government to effectively impose taxes on a
sovereign state and its instrumentalities, as
well on its property held and activities
undertaken in that capacity. International
laws dictates peace and harmony among states
hence, no state shall assert superiority over
the other by imposing taxation.

Basic Principles of a Sound Tax System

1. Fiscal Adequacy - which means that the sources of
revenue should be sufficient to meet the demands of
public expenditures;
2. Equality or Theoretical Justice - which means that the
tax imposed should be proportionate to the taxpayer's
ability
to pay; must be progressive (rate increases as the tax
base increases) and
3. Administrative Feasability - which means that the tax
laws should be capable of convenient, just and effective
administration
(Report of 1st Tax Commission, Vol.1)

TAXATION
1. Purpose- to raise revenue
2. Amount of Exaction-no limit
3. Benefits Received-no special or direct benefit received
is received by the taxpayer, merely general benefit of
protection
4. Non impairment of contracts- contracts may not be
impaired
5. Transfer of property rights- taxes paid become part of
public funds
6. Scope-all persons, property and excise

POLICE POWER-is the inherent power of the

sovereign state that interferes with private rights to
promote general welfare
1. Purpose-to promote public purpose through regulations
2. Amount of Exaction-limited to the cost of regulation,
issuance of the license or surveillance
3. Benefits Received-no direct benefit is received, a
healthy economic standard of society is attained
4. Non impairment of contracts-contracts may be
impaired
5. Transfer of property rights-no transfer but only
restraint in its exercise
6. Scope-all persons, property, rights and privileges

EMINENT DOMAIN-inherent power of the sovereign

state to take private property upon payment of just
compensation for public use
1. Purpose-to facilitate the States need of property for
public use
2. Amount of exaction-no exaction; but private property is
taken by the State for public purposes
3. Benefits Received-a direct benefit results in the form of
just compensation to the property owner
4. Non impairment of contracts-contracts may be impaired
5. Transfer of property rights-transfer is effected in favor
of the State
6. Scope-only upon a particular property

Definition:
.... Taxing the same property twice when it
should be taxed but once.
Kinds of Double Taxation:
1. Direct Duplicate Taxation-double taxation in
the objectionable or prohibited sense and
constitutes a violation of substantive due
process.

Elements of Direct Duplicate Taxation:

a. The same property or subject matter is
taxed twice when it should be taxed only
once
b. Both taxes are levied for the same
purpose
c. Imposed by the same taxing authority
d. Within the same jurisdiction
e. During the same taxing period
f. Covering the same kind or character of tax

Indirect Duplicate Taxation-legal/permissible.

The absence of one or more of the elements
of direct duplicate taxation makes the double
taxation indirect.
REMEDIES AGAINST DOUBLE TAXATION
2.

1. Tax sparing rule e.g. Sec 28(B)(5)(b), NIRC

2. Tax deductions e.g. Vanishing deductions
3. Tax credits
4. Exemptions
5. Treaties with other states
6. Principle of reciprocity

Shifting-the process by which the tax burden is

transferred from the statutory taxpayer to
another without violating the law
Capitalization-a mere increase in the value of
the property is not income but merely an
unrealized increase in capital. No income until
after the actual sale or other disposition of the
property in excess of its original cost.
Tax Avoidance-the exploitation by the taxpayer
of legally permissible alternative tax rates or
methods of assessing taxable property or
income, in order to avoid or reduce tax liability

Transformation-the manufacturer or producer

upon whom the tax has been imposed, fearing
the loss of his market if he should add the tax
to the price, pays the tax and endeavors to
recoup himself by improving his process of
production, thereby turning out his units at a
lower cost.
Tax Evasion-the use by the taxpayer of illegal or
fraudulent means to defeat or lessen the
payment of the tax
Tax Exemption-a grant of immunity to particular
persons from the obligation to pay taxes

As to Basis
1. Constitutional-immunities from taxation
which originate from the constitution
2. Statutory-those which emanate from
legislation
As to Form
1. Express-expressly granted by organic or
statute law
2. Implied-when particular persons, property
or excises are deemed exempt as they fall
outside the scope of the taxing provision itself

As to Extent
1. Total-absolute immunity
2. Partial-one where a collection of a part of
the tax is dispensed with
As to Object
1. Personal-granted directly in favor of
certain persons
2. Impersonal-granted directly in favor of a
certain class of property

Tax Defined
Tax is the enforced proportional contribution from
persons and property, levied by the State, by virtue of
its sovereignty, for the support of government and for
all public needs (1 Cooley on Taxation)
A tax has been defined as an enforced, proportional,
pecuniary contribution, from persons and property
within the taxing jurisdiction, levied by the State by
virtue of its sovereign power to tax, to raise
revenue for the support of the government and for its
public needs (Taxation Review, Camillo).

Purpose of tax
Taxed are the lifeblood of the government. Without
taxes, no government can function. Taxes must be levied
in order to defray the various governmental functions
(Taxation review, Camillo.)

Essential Elements or Characteristics

of a Tax
1.Enforced contribution
2. Exacted pursuant to legislative authority
3. For raising revenue for public needs
4. Proportionate in character or uniform
5. Payable in money

Canons of a Tax
1. Proportional to one's ability to pay
2. Certain and not arbitrary
3. Convenient to pay
4. Economical to collect (Taxation Review. Camillo)

Classification of Taxes

A. According to scope or exercising authority

1. National tax - tax is levied and collected by the national government.
Example: Income tax, Estate tax, Donor's Tax
2. Municipal or local tax - tax is imposed and collected by local government.
Example: Occupation tax, real estate tax
B. According to subject matter or object
1. Personal tax - tax is a fixed amount imposed upon persons, or upon persons
of a certain class, residing within the jurisdiction of the taxing authority,
without regard to their property or occupation or business in which they may
be engaged.
Example: Community tax
2. Property tax - a tax imposed on property, in proportion to its value or some
other reasonable method of appointment.
Example: Real estate tax
3. Excise tax - a tax upon the performance of an act, or the exercise of a
right or privilege,or the engaging in business, practice of profession or pursuit
of occupation.
Example: Value-added tax, donor's tax, income tax, occupation tax, estate
tax
4. Custom Duties-duties charged upon the commodities on their being
imported into or exported from a country

C. According to who bears the burden of the tax

1. Direct Tax-a tax payable by the person upon whom it is
directly imposed by law.
Example- Income Tax
2. Indirect Tax-the burden of the tax can be legally shifted to
or passed on to others.
Example-VAT, Excise Taxes, Customs Duties
D. According to purpose
1. General or revenue tax - the tax is levied without a
specific or pre-determined purpose. Thus, the revenue collected can
be appropriated for general public purposes.
Example: Income tax, value added tax
2. Special - tax is imposed for a special purpose.
E. According to the rate applied
1. Proportional - the tax is based on a fixed percentage of
the property or amount of income or receipts
Example: Real estate tax, value-added tax
2. Progressive - the tax rate increases as the tax base
increases. Example-Income tax, Donors Tax, Estate Tax

3. Regressive- the rate of tax decreases as the tax

base increases. There are no regressive taxes in the
Philippines.
F. According to measurement of the amount due
1. Specific-tax is a fixed amount measured by the
head or number, or by some standard of weight or
measurement, and requires no assessment other
than a listing or classification of the subjects to be
taxed.
Example-Excise taxes on lubricating oils, waxes and
petroleum, leaded premium gasoline and liquified
petroleum gas

2. Ad Valorem Tax-tax of a fixed proportion of

the amount or value of the property with
respect to which the tax is assessed and
requires the intervention of assessors or
appraisers in certain cases.
Example-Real Estate Tax, Excise Taxes on
fermented liquors, cigarettes packed by
machine and automobiles

Toll-amount charged for the cost and

maintenance of the property used.
Penalty-punishment for the commission of a
crime
Compromise penalty-amount collected in lieu
of criminal prosecution in cases of tax
violations
Special Assessment-levied only on land based
wholly on benefit accruing thereon as a result
of improvement or public works undertaken
by government within the vicinity

License or Fee-regulatory imposition in the

exercise of the police power
Margin Fee-exaction designed to stabilize the
currency
Debt-a sum of money due upon contract or one
which is evidenced by judgment
Subsidy-a legislative grant of money in aid of a
private enterprise deemed to promote the
public welfare
Customs Duties and Fees-duties charged upon
commodities on their being transported into or
exported from the country

Revenue-a broad term that includes taxes

and income from other sources as well
Impost-in its general sense, it signifies any
tax, tribute or duty. In its limited sense, it
means a duty on imported goods and
merchandise
Tithe-imposes by a church or sect
Tribute-imposes by a monarch

Definition:
Sets of rules that provide means for the State
to raise revenues burden upon its citizens.
How to make a tax law?
Generally, all revenue bills (proposal) must
originate from the House of Representatives.
After passing 3 readings by a majority vote in
technical committee and deliberation of
congress. It shall be elevated to Senate, which
needs to pass the same 3 readings before the
President signs a bill into law for its
implementation.

Republic Act/Statutes/Tax Code

Presidential Decrees
Executive Orders
Court Decisions
Revenue Regulations (lease source of tax
laws)

Nature or Construction of Tax Laws

1. Tax laws prospective, generally.
Tax laws, like other statues, are to be constructed as having only a prospective
operation unless the purpose and intention of the legislature to give retrospective
effect is expressly declared or is necessarily implied from the language used (Lorenzo
v. Posadas, 64Phil.353).
There is a presumption that the legislature intended its amendment to operate only in
the future. And in case of every doubt, the doubt must be resolved against the
retrospective operation (Tan Chiu v. Collector, C.T.A. Case No. 451, Dec. 27, 1958).
2. Tax exemptions to be constructed strictly.
Legal provisions providing for tax exemptions are to be constructed strictly against the
grant and liberally in favor of the taxing power
Exemption from taxation are highly disfavored in law and he who claims an exemption
must be able to justify his claim by the clearest grant organic or statue law
3. Revenue laws are not political in nature.
Our internal revenue laws are not political in nature and as such were continued in
force during the period of enemy occupation and in effect were actually enforced by
the occupation government
4. Tax laws are civil and not penal in nature although there are penalties provided for
their violation.

TAX IMPOSITION
One that provides a burden

TAX EXEMPTION
One that provides immunity

Public purpose is always presumed

Legislative intention must be considered
Where the language is plain and there is no
doubt tax laws must be given their ordinary
meaning
A statute will not be construed as imposing a
tax unless it does so clearly and expressly
In case of doubt, it is construed most
strongly against the Govt, and liberally in
favor of the taxpayer

Provisions of a taxing act are not to be extended

by implication
Tax laws operate prospectively unless the
purpose of the legislature to give retrospective
effect is expressly declared or may be implied
from the language used
Tax laws are special laws and prevail over
general law
Tax laws are civil in nature, not political
Neither are tax laws penal in nature.
Neither can the Constitutional prohibition against
passage of laws be invoked in taxation

Exemptions from taxation are highly disfavored in law and

are not presumed
He who claims as exemption must be able to justify his
claim by the clearest grant of organic or statute law by
words too plain to be mistaken.
He who claims exemption should prove by convincing proof
that he is exempted
Taxation is the rule, tax exemption is the exceptions
Tax exemption must be strictly construed against the
taxpayer
Tax exemptions are not presumed
Constitutional grants of tax exemption are self-executing
Tax exemptions are personal

These are interpretations of an administrative body (BIR)

intended to clarify or explain the tax laws and carry into
effect its general provisions by providing the details of
administration and procedure. They are deemed necessary
to the proper enforcement and execution of tax laws.
REQUISITES OF TAX REGULATIONS
It must be reasonable
Within the authority conferred
Not contrary to law
Must be published
Prospective, unless it is beneficial to the taxpayer, which
may be given retroactive application

NOTE: It is provided that the Secretary Of Finance upon the

recommendation of the Commissioner of Internal Revenue shall
promulgate all needed rules and regulations of the tax code.

BIR issues a general interpretation of tax

laws usually upon a request of a taxpayer
to clarify a provision of law

ADMINISTRATIVE INTERPRETATIONS
These interpretations are given great
weight but are not laws
JUDICIAL INTERPRETATIONS
These are courts decisions which are
considered part of the law of the land

Tax and Licensed Fee Distinguished

1. The purpose of a tax is the revenue that is to be
derived therefrom for the support of the
government. Whereas, the purpose of a license is to
regulate certain act, business, industries, or or
professions which, unless regulated, may become
harmful to the public.
2. Taxation is an exercise of the power of taxation
and, therefore subject to these limitations on the
power to tax. Licensing is an exercise of the police
power to guard and safeguard the interest and
welfare of the public. It is not subject to the three
limitations on taxation.

3. Tax- amount is unlimited

Licensed Fee-amount is limited to the cost
of issuing the license and inspection and
surveillance
4. Tax- non-payment does not make the
business illegal but maybe a ground for
criminal prosecution
Licensed Fee-non payment makes the
business illegal

Assessment Defined
It is the process by which persons subject to taxation
are listed, their property described, and its value
ascertained and stated.
Assessment is merely a notice to the effect that the
amount therein stated is due as tax and a demand for
the payment thereof. It is a step preliminary, but
essential to warrant of distraint and levy, if still
feasible, and also to establish a cause for judicial
action.
Assessment fixes and determines the tax liability of
taxpayer. As soon as it is served, an obligation arises
on the part of the taxpayer concerned to pay the
amount assessed and demanded.

Special Assessment Defined

A special assessment is in the nature of a tax upon
property levied according to benefits conferred in the
property. The whole theory of a special assessment is
based on the doctrine that the property against which
it is levied derives some special benefit from the
improvement xxx their property being increased in
value by the expenditure to an amount at least equal
to the sum they are required to pay.

Tax and Special Assessment Distinguished

1. A special assessment can be levied only on land;
2. A special assessment cannot (at least in most states) be
made a personal liability of the person assessed;
3. A special assessment is based wholly on benefits; and
4. A special assessment is exceptional both as to time and
locality.
The imposition of a charge on all property, real and
personal, in a prescribed area, is a tax and not an
assessment, although the purpose is to make a local
improvement on a street or highway. A charge imposed
only on property owners benefited is a special assessment
rather than a tax notwithstanding the statue calls it a
tax. If property is exempt from real property tax, it is
also exempt from special assessment.

TAX

DEBT

An obligation imposed by law

Created by contract

Due to the govt in its sovereign

capacity

May be due to the govt but in its

corporate capacity

Payable in money

Payable in money, property or

sevices
Draws interest if stipulated or
delayed

Does not draw interest except in

case of delinquency
Not assignable
Non payment is punished by
imprisonment except in poll
tax
Imposed only by public authority

Assignable
No imprisonment in case of non
payment (Art III Sec 20 of
Constitution)
Can be imposed by private
individual

Meaning of Uniformity of Taxation

Uniformity means that the same class of
persons or properties falling under the same
circumstances should be taxed the same kind and
rate tax.

Meaning of Equality of Taxation

The rule of equality required no more than that the same

means and methods be applied impartially to all the
constituents of each class, so that the law shall operate
equally and uniformly upon all persons in similar
circumstances.

Taxpayers Suit
This suit can only be allowed if the act involves a direct and
illegal disbursement of public funds derived from taxation

Equitable Recoupment
This states that a claim for refund which is prevented by
prescription may be allowed to be used as payment of
unsettled tax liabilities if both taxes arise from the same
transaction in which overpayment is made and
underpayment is due

Tax Amnesty
This is an immunity from all criminal and civil obligations
arising from non payment of taxes. It is a general pardon
given to all taxpayers; it applies only to past periods.

Taxes Imposed under National Internal

Revenue Code
1. Income Tax
2. Estate Tax
3. Donor's Tax
4. Value-added Tax
5. Other percentage taxes
6. Excise taxes
7. Documentary stamp taxes

It is a system involving assessment,

collection, and enforcement of taxes,
including the execution of judgement
in all tax cases decided in favor of the
BIR by the courts.

Bureau of Internal Revenue-national taxes

Agents of the BIR:
1. Commissioner of Customs with respect to
taxes on imported goods
2. Head of the appropriate govt office with
respect to energy tax
3. Banks duly accredited by the CIR
Bureau of Customs-customs law enforcement
(international taxes)
Provincial, city and municipal assessors and
treasurers-local and real property taxes (local
taxes)

BIR is under the supervision and control

of the Dept of Finance (Sec 2, NIRC) under the
office of the President.
Who compose the BIR?
One Commisioner
Four Deputy Commissioners
Regional Revenue Director
Revenue District Officer
Revenue Officer

Power and Duties of the Bureau of

Internal Revenue
The powers and duties of the Bureau of Internal Revenue shall
comprehend:
1.The assessment and collection of all national internal revenue
taxes, fees and charges;
2. The enforcement of all forfeitures, penalties and fines
connected therewith;
3. The execution of judgements in all cases decided in its favor
by the Court of Tax Appeals and the ordinary courts;
4. Shall give effect to and administer the supervisory and police
power conferred to it by the Tax Code or other laws.

Power to interpret tax law and decide tax

cases
1. Interpret provisions of this Code and other tax laws
subject to review of the Secretary of Finance
2. Decide cases
a. Disputed assessments
b. Refunds of internal revenue taxes, fees and
charges
c. Penalties impose in relation thereto
d. Other matters arising from this Code or other laws
or portions thereof administered by the BIR subject
to the exclusive appellate jurisdiction of the CTA

Power to obtain information, summon,

examine, and take testimony of persons
1. The Commissioner is authorized:
a. To examine any relevant book, paper, record or
other data
b. To obtain any information (costs, volume of
production, receipts, sales, gross income, etc) on a
regular basis from
c. To summon (sub phoena duces decum)
d. To take the testimony of the person concerned
under oath as may be relevant to the inquiry
e. To cause revenue officers and employees to make
a canvass of any revenue district or region

Power to make assessments, prescribe

additional requirements for tax
administration and enforcement
1. Examination of returns and determination of tax due
2. Terminate taxable period
3. Prescribe real property value
4. Authority to inquire into bank deposit
5. Notwithstanding RA 1405 (Bank Secrecy Law) the Commissioner is
authorized to inquire into the bank deposits of:
a. A decedent to determine his gross estate
b. A taxpayer who has filed an application to
compromise
payment of tax liability by reason of financial incapacity
6. Authority to register tax agents
7. Authority to prescribe additional requirements

Authority to delegate power

1. The Commissioner may delegate the powers vested in
him to subordinate officials with rank equivalent to Division
Chief or higher, subject to limitations/restrictions imposed
under the rules and regulations

EXCEPT: The following powers should not be delegated

1. Power to recommend the promulgation of rules and
regulations by the Sec of Finance
2. Power to issue rulings of first impressions or to reverse,
revoke, modify any existing rule of the BIR
3. Power to compromise or abate any tax liability
4. Power to assign or reassign internal revenue officers to
establishments where articles subject to excise tax are kept

Other Powers
1. Duty to ensure the provision and distribution of forms,
receipts, certificates, and the acknowledgement of
payment of taxes
2. Authority to administer oaths and to take testimony
3. Authority to make arrests and seizures
4. Authority to employ, assign or reassign internal revenue
officers involved in excise tax functions to establishments
where articles subject to excise tax are produced or kept
5. Authority to assign or reassign internal revenue officers
and employees of the BIR to other or special duties
connected with the enforcement or administration of the
revenue laws

An income tax is one levied on the

income from property or an occupation. It is
a direct tax upon the thing called income.
It is imposed upon persons within the
jurisdiction of the state to raise revenue for
the support of the government.

Income tax is a tax on income, either gross or net,

realized during the taxable year.
It is imposed on net income of citizens, resident
aliens, domestic corporations, and non resident aliens and
foreign corporations engaged in trade or business within
the Philippines.
It is also imposed on the gross income of non resident
aliens and foreign corporations not doing business in the
Philippines.
It is further imposed as a final tax on certain passive
income (interests, royalties, prizes and other winnings),
cash and other property dividends, capital gains from the
sale of domestic shares of stock and real property
classified as capital assets located in the Philippines.

To raise revenue to defray the expenses of

the government

To mitigate the evils arising from the

inequalities of wealth by a progressive
scheme of taxation which places the burden
on those best able to pay

A national tax-imposed and collected by the national

government throughout the country
A general tax-levied without a specific or a predetermined
purpose. Thus, the revenue from income tax may be
appropriated for general public purposes.
An excise tax-imposed on the right or privilege of a person
to receive or earn income. It is not a personal tax or
property tax.
A direct tax-payable by the person upon whom it is
directly imposed by law. It cannot be shifted or passed on
to others.
A progressive tax-based upon ones ability to pay. The rate
of income tax increases as the tax base increases.

Income means all wealth which flows into the

taxpayer other than a mere return of capital.
It includes gain derived from the sale or
other disposition of capital assets.
Income is a gain derived from labor or
capital, or both labor and capital, and
includes the gain derived from the sale or
exchange of capital assets.
Income is the amount of money coming to a
person or corporation within a specified
time, whether as payment for services,
interest or profit from investment.

CAPITAL
Capital is a fund
Capital is wealth

Capital is a tree

INCOME
Income is a flow
Income is the service
(fruit) of wealth
Income is the fruit

Income from sources within the Philippines

Income from sources without the Philippines
Income from sources partly within and partly
without the Philippines

For income tax purposes, the word

source refers to the activity or property or
labor that gave rise or produced the income.
Source is the origin of the income.

The situs of income is the place of

taxation of the income or the country which
has jurisdiction to impose the tax. For
income tax purposes, income may be taxed
in one or more or all of the following places
or countries:
1. The place where taxpayer is a citizen
2. The place where the taxpayer is a
resident
3. The place where the income was
earned or derived

Gross Income Taxation-whereby a final tax is

imposed on the gross amount of specified
types of income such as interest, royalty,
prize, dividend, and capital gains.
Net Income Taxation-whereby certain
deductions are allowed and subtracted from
the aggregate of incomes not subject to final
tax and the tax computed based on the
resulting net income therefrom.