Nature and Concepts of Taxation and Taxes A. Meaning of Taxation B. Purposes of Taxation C. Essential Characteristics of Taxes D.

Theory/Basis of the Power of Taxation E. Nature of the Power of Taxation F. Basic Principles of Taxation G. Basic Classification of Taxes A. Meaning of Taxation B. Act of laying down tax C. Process or means by which the sovereign thru its law-making body raises income or revenue to finance government expenses. D. Process of dividing the cost of government expenses among those who in some way are privileged to share the benefits and bear the burden of payments. E. It is basically a power- an inherent power of the state to demand or enforced contribution for public purposes. B. Purposes of Taxation 1. To provide the government with public funds. 2. To promote the general welfare of its citizens. 3. To finance government activities, programs and projects. C. Essential Characteristics of Taxes 1. Enforced contribution 2. Pecuniary character 3. Proportionate in character 4. Levied or imposed on persons, property, property rights 5. Levied or imposed by the law-making body of the state 6. Levied for a public purpose 7. Levied or imposed by the state which has jurisdiction on persons or property.

8. Commonly required to be paid annually or at specific intervals. D. Theory/Basis of the Power of Taxation 1. Existence of the government is a necessity. 2. Benefits-Received Principle * mutual support and protection between the state and its citizens E. Nature of the Power of Taxation 1. Its is inherent in the sovereignty; it is essential to the existence of every government. 2. It is legislative in character. 3. It is subject to constitutional and inherent limitations. F. Basic Principles of Taxation 1. Fiscal Adequacy - the sources of government revenues must be sufficient to meet fiscal expenses. 2. Ability to pay - tax burden should be in proportion to the taxpayers ability to pay. 3. Administrative feasibility tax laws should be capable of convenience and just; not burdensome and discouraging to the taxpayer. G. Basic Classification of Taxes 1. As subject matter/object to be taxed a. personal b. property c. excise 2. As to who bears the burden a. Direct b. Indirect 3. As to the determination of amount to be paid a. Specific b. Ad valorem

4. As to scope of authority a. national b. local 5. As to rate of tax a. progressive - tax increase as the income of the tax payer increases. b. regressive - tax decreases as the income of the tax payer increases. c. Proportional - a fixed percentage tax imposed on income, sales on other forms of revenue regardless of the amount. 6. As to purpose of the tax a. general or revenue b. special or regulatory