Basic Principles

of Taxation
-

History

Jacqueline M. Calaycay, RN, MSN

of Taxation
importance of taxation to the taxpayers and
to the government
Kinds and Characteristics of Taxes
Taxation System in the Philippines

History
During

the reign of Egyptian Pharaohs

Scribes

In

as tax collectors

Greece
A

tax referred to as Eisphora was imposed only in times of

war

In

Athens
A

monthly tax called Metoikon was collected to foreigners

Ancient

Greek Taxation

Taxation

was used as an emergency power. Additional

resources gained from war were used to refund tax
previously collected from the people

Earliest taxes in Rome

Taxes

known as Portoria were customs duties on imports and

exports

Augustus

Caesar introduced the inheritance tax to provide

retirement funds for the military. The tax was five percent on
all inheritances except gifts to children and spouses

In England
Taxes

were first used as an emergency measure

Taxes

on income or capital were a recent development as a

result of increasing government intervention in the economy

In the Philippines
The

pre-colonial society, being communitarian, did not have

taxes

In

Modern Industrial Nations

The

government designates a tax

base (such as income, property
holdings, or a given commodity)

A Tax

Law is a body of rules passed

by the legislature by which the
government acquires a claim on tax
payers to convey, transfer and pay to
the public authority

Taxation

The system of compulsory contributions

levied by a government or other
qualified body on people, corporations
and property in order to fund public
expenditures.
An inherent power of the state to raise
income and to demand enforced
contributions for public purposes.

Purposes Taxation

to raise revenues for public needs so that persons can live in a civilized
society

The government increase taxes in order to stabilize prices and stimulate

greater production.

An instrument of fiscal policy influences the direction and structure of

money supply, investments, credits, production, interest rate, inflation,
prices and in general, of the national economy

Characteristics of a sound Tax

system

Fairness
Clarity and

Certainty
Convenience
Efficiency

Effects of
Taxation

Personal Income Tax which is presumed to

fall entirely on the legal taxpayers
influences decisions to work, save, and
invest. These decisions affect other
people.
Corporate Income Tax may simply result
to lower corporate profits and dividends.
It may reduce their income of all owners
of property and businesses. The company
may move toward raising the prices of
their products

Taxation in the
Philippines

The legislative branch enacts laws to continually

revitalize the taxation policy of the country

BIR

(Bureau of Internal
Revenue)

Mandated to comprehend the assessment and collection of

all national internal revenue taxes, fees and charges so as
to promote a sustainable economic growth

Taxation in the

Philippines
Republic Act No. 8424

(Comprehensive Tax Reform Act of

1997)
Tax

Payer: any person subject to tax

whose sources of income is derived
from within the Philippines

TIN

(Taxpayer Identification Number) is

required for any individual taxpayer

Taxation in the

Philippines
Tax Reforms:
Lower

income tax rates to enhance the

competitiveness of the Philippines in the region

Removal

of areas which provide avenues for tax

avoidance and abuse

Exemption

of OFWs from payment of tax for

income earned outside the Philippines

Simplification

of the tax system which

encourages payments from tax payers including
those from the underground economy

Taxation in the
Philippines

Taxes are collected within a

particular period of time know as
taxable year
This

is the calendar year or the fiscal

year that covers an accounting
period of 12 months ending on the
last day of any month other that
December.

Kinds of taxes

Income Tax
Tax on all yearly profits arising form
property, possessions, trades or offices
Tax on a persons income, emoluments and
profits

Donors Tax

Tax imposed on donations inter-vivos or

those made between living persons to take
effect during the lifetime of the donor.

Estate Tax

Tax on the right of the deceased person to

transmit property at death

Kinds of taxes

Value-added Tax (VAT)

Tax imposed and collected on every sale,

barter, exchange or transaction deemed sale of
taxable goods, properties, lease of goods,
services or properties in the course of trade as
they pass along the production and distribution
chain

Capital Gains Tax

Tax imposed on the gains presumed to have

been realized by the seller for the sale,
exchange or other disposition of real property
located in the Philippines, classified as capital
assets

Kinds of taxes

Excise Tax

Tax applicable to specified goods manufactured in the Philippines for domestic

sale or consumption

Specific tax: imposed on certain goods based on weight or volume capacity or any other
physical unit of measurement (Specific tax = volume x tax rate)

Alcohol products, petroleum products, tobacco products

Ad valorem tax: imposed on certain goods based on selling price or other specified value of
the goods
(Ad valorem tax = selling price x tax rate)

Mineral products, automobiles

Kinds of taxes

Documentary Tax

Tax on documents, instruments, loan agreements and

papers, agreements evidencing the acceptance,
assignments, sale or transfer of an obligation, rights or
property incident thereto

Withholding
tax
Expanded withholding tax:
A

system of collecting taxes

whereby the taxes withheld
on certain income
payments are intended to
equal or at least
approximate the tax due of
the payer on said income.

Withholding
tax
Final withholding tax:
A

system of collecting taxes

whereby the amount of income tax
withheld by the withholding agent
is constituted as a full payment of
the income tax due form the payer
on the said income. The payer is
not required to file an income tax
return for the particular income.

Withholding
tax
Withholding tax for

compensation income:
Commonly

referred to as pay
as you go or pay as you earn.
A method of collecting the
income tax at source upon
receipt of the income.

Shifting the incidence

of taxation
Shifting

taxation is the process of

passing the burden of the tax to others.

tax can be shifted when the taxpayer

is able to obtain a higher price for
something he sells or when he pays a
lower price for a commodity he
purchases.

Tax Evasion

When there is fraud through pretension and the use of

other illegal devices to lessen ones taxes, there is tax
evasion

Under-declaration of income

Non-declaration of income and other items subject to tax

Under-appraisal of goods subject to tariff

Over-declaration of deductions

Assignment
Write your answer in a 1 whole sheet of paper
Define the following:

1.

Poverty

Poverty line

Degradation

2.

Explain the causes of poverty

3.

What are the effects of poverty?