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CHAPTER 1 Inherent powers- naturally exist as essential force Police power- inherent power to legislate Due process clause-

provides that no person may be deprived of life, liberty or property Eminent domain- power to take private property for public purpose Just compensation- paying the full monetary equivalent of property taken Power- inherent power to demand contribution Process- passes a legislative undertaking to raise revenue to pay expenses of government Means- way of collecting and apportioning cost National government- exercises inherent power Public taxes- public money Privity of relationship- implies contractual support afforded by govt to its citizen residing outside the country International comity- courteous recognition accorded by one nation to the laws of another Exemption from taxation- grant of tax immunity Taxation power- strongest of all inherent powers Taxation- lifeblood/ bread and butter of govt Revenue purpose- primary purpose of taxation Fiscal policy of govt- based on the rule that receipts should be equal to annual govt expenditures Regulatory purpose- SUMPTUARY; secondary purpose Discriminatory duty- special duty, offset foreign discrimination Countervailing duty- offset any foreign subsidy granted to imported goods Marking duty- additional duty on goods with improper classifications Dumping duty- additional duty tax on goods with lower prices Objects of taxation- refer to the subject to w/c taxes are imposed Natural persons- indl taxpayers Juridical person- corporations Real property- immovable properties Personal property- movable Tangible properties- may be felt or touched, corporeal, real or personal Intangible properties- rights Transaction- act of conducting activities related to bus. Privilege- benefit derived through gratuitous transfer Right- power faculty or demand Interest- advantage accruing form anything Inherent limitations- natural restrictions Constitutional limitations- provisions of the fundamental law of land Due process of law- mandates a fundamental right of protection Equal protection of law- all persons subject to legislation shall be treated alike Progressive system of taxation- tax laws shall give emphasis on the ability-to-pay principle Non-impairment clause- provides that no law impairing obligation of valid contracts shall be passed Veto power- executives power to refuse to sign into law

Item veto power- power to veto items w/o affecting other provision Pocket veto power- disapproval by inaction of president Power of judicial review- limited to interpretation and application of tax laws Poll tax- tax imposed on a person as a resident w.in a territory w/o regard to his property, etc. Levy- imposition of taxes, passage of tax laws Assessment- act of administration and implementation of tax laws Payment of tax- process involving act of compliance, tax collection Fiscal adequacy- sources of revenue should be sufficient to meet the demand of public expenditures Surplus in budget- revenue is greater than govt expenses Budget deficit- govt expenses are greater than revenue Balanced budget- revenue equals expenditures Equality or theoretical justice- tax burden must be proportionate to taxpayers ability to pay Administrative feasibility- tax laws must be convenient, just and uniform in their administration Prospective application of tax laws- tax bill must only be applicable after becoming a law Ex post facto- rule that is not applicable for tax purposes Tax imprescriptibility- taxes in general are not cancelable. Prescriptive period- applicable only to taxes that were returnable Double taxation- act of sovereign by taxing twice for the same purpose Indirect double taxation- double taxation in its broad sense, extends to all cases in which there is a burden of two or more pecuniary impositions Direct double taxation- double taxation I its strict sense; prohibited because it comprises imposition of same tax on same property Doctrine of escape from taxation- permits taxpayer to minimize payment of tax by lawful means Tax evasion- uses unlawful means to evade; prohibited, subject to civil/criminal penalties Tax avoidance- TAX MINIMIZATION; reducing or totally escaping through legally permissible means Tax option- taxpayer may choose to pay lower tax rate in some transactions Shifting- transfer of tax burden to another without violating the law Transformation- producer absorbs the pay tax to reduce the prices Expressed exemption- statutory laws in nature Implied exemption/by omission- either intentional or accidental Contractual exemption- lawfully entered into by the government in contracts Equitable recoupment- tax claim for refund may be allowed to be used as payment for unsettled tax liabilities Set-off taxes- taxes are not subject to set-off or legal compensation Taxpayer suit- only allowed if act involves a direct and illegal disbursement of public funds derived from taxation Compromises- allowed and enforceable when subject matter is not prohibited from being compromised BIR Commissioner- authorized to compromise for both civil & criminal liabilities Collector of Customs- has power to compromise with custom duties Customs of Commissioner- has power to compromise in imposition of fines

Marshall Dictum- power to tax includes the power to destroy Holmes Doctrine- burden in only a means to nation building Situs of taxation- place of taxation; defines boundaries Protection- basic consideration that justifies tax situs **GENERAL RULE OF TAX SITUS** W/in Outside | Fil/Res/Al/NonRes (Yes) | FilRes only (Yes) | Fil/Res/Al/NonRes (Yes) | Fil & Res only (Yes) | Yes | No

INCOME TAX TRANSFER TAX BUSINESS TAX

Taxes- forced burdens; obligations created by law Congress- makes tax laws Ability to pay principle- basic rule in collecting taxes Money- preferred payment Revenue/Fiscal- purpose of raising revenue Regulatory, Special or Sumptuary- achieving some social/economic goals Compensatory- for equitable distribution of wealth and income Personal, poll or capitation- fixed & imposed on person residing w/in specified territory Property- imposed on personal or real property Excise- imposed upon performance of a right/ act Ad valorem- fixed amounts in proportion to the value of property; req. intervention of assessors Specific- fixed amounts based on some standard; independent assessment Direct- non-transferrable taxes Indirect- transferrable taxes; imposed on commodities National- collected by national govt Local/Municipal- collected by municipal govt Proportional or Flat rate- based of fixed percentage of amt. of property Progressive or Graduated rate- rate increases as tax bases increases Regressive rates- rate decreases as tax base increases Digressive rates- fixed rate is imposed but diminishes gradually, increase in rate is not proportionate to increase in tax base Mixed tax- uses combination of diff. tax rates Penalty- sanctioned imposed as punishment Revenue- funds or income derived by the govt Debt- obligation to pay or render service Imprisonment- not covered by non-payment of debt Toll- compensation for use of somebody elses property License fee- contribution enforced to restrain and regulate business Customs duties- imposition on imported goods Subsidy- monetary aid directly granted to indl or private enterprises beneficial to public Tariff- schedule or list of rates Margin fee- tax on foreign exchange Special assessment- amt. collected for purpose of reimbursing for extended benefits Tax law- body of laws codifies all national tax laws Internal revenue law- includes all laws legislated pertaining to natl govt taxes Internal revenue taxes- taxes imposed by legislative body other than custom duties

Supreme court- has exclusive power of constructing and interpreting tax laws. Pari Materia- tax laws should be interpreted with reference to other tax legislations Tax code- special law in relation to civil code BIR Commissioner- issues BIR Rulings Revenue regualtions- issued by DOF to cover implementing guidelines Constitution- body of rules and maxims, Supreme or fundamental law of the land Statutes- laws enacted and established by the will of legislative department of govt Judicial decisions- decisions for application made concerning tax issues, may be Supreme Court or Court of Tax Appeals Executive Orders- regulations issued by the President Tax treaties and conventions- treaties or intl agreements w/ foreign countries Secretary of Finance- promulgate all needful rules and regulations Revenue Regulations- rules or orders having force of law issued by executive authority BIR Revenue Memorandum Circulars & Bureau of Customs Memorandum Ordersadministrative rulings or opinions; maintain uniform application of tax laws Memoranda- have the status of advisory or sort of info service BIR Rulings- expressed official interpretations applied to specific transactions Local tax ordinances- tax ordinances issued by province by LGC & property tax code. CHAPTER 2 Tax administration- system of collecting taxes Department of Finance- responsible for fiscal policies & general management BIR-assess and collect all taxes Bureau of Customs & Tariff Commission- tasked to enforce the Tariff & Customs Code Land Transportation Office- collect registration fees & motor vehicle tax Duly & lawfully authorized collectors- persons/agencies authorized to collect taxes Secretary of Justice- Chief Legal Officer of govt, ascertain the validity of tax laws Commissioner of Internal Revenue- chief official of BIR, interpret provisions of NIRC & other tax laws Other tax laws- special laws granting tax incentives to certain taxpayers BIR Commissioner- has power to decide disputed assessments Jeopardy assessment- termination of tax period Secrecy of Bank Deposit Law P500- annual registration fee *on or before last day of January every year BIR Form 1901- self-employed, mixed income individuals BIR Form 1902- indl earning purely compensation BIR Form 1903- cor and part BIR Form 1904- one-time taxpayer BIR Form1905- updating/cancellation of registration BIR Form 605- accomplished upon payment of registration fee for new business Sales or Commercial Invoice- document issued by seller of goods Receipt- document issued for sales of services BIR Form 1906- accomplished by taxpayers every time printing of receipts &invoices is needed Tax return- formal report prepared by the taxpayer showing an enumeration of taxable amt. and description of taxable transactions BIR Form Nos. 1700 & 1701- AITR for individual

BIR Form No. 1702- for corporations and partnerships BIR Form No. 1800- donors tax return BIR Form No. 1801- estate tax return Tax remedies- procedures or actions available both to the government & to taxpayers Lifeblood doctrine- government applies various tax remedies to collect taxes Tax assessment- formal letter made by the BIR demanding taxpayer to settle his tax liability Self-assessment-taxpayer himself Prospective assessment- PRE-ASSESSMENT NOTICE w/c informs taxpayer about findings regarding tax deficiency Deficiency assessment- made by tax assessor showing correct amt. after tax audit Jeopardy assessment- assessment w/out the benefit of complete or partial audit Disputed assessment- assessment questioned by taxpayer as to its validity/legality Final assessment- official assessment w/c was not disputed Illegal/void assessment- assessment w/out authority or made in violation of law Assessment period- span of time allowed by law to investigate taxpayers discrepancy ITR w/out fraud- w/in 3 years ITR w/ fraud- w/in 10 years or no assessment needed Pre-assessment notice- letter that requests explanation from taxpayer stating why he should not be subject to assessment notice; due process requirement to collection of deficiency tax Notice for Informal Conference (NIC) - sent by RO w/ noted tax discrepancy Preliminary Assessment Notice (PAN) if result of review has established sufficient basis to assess to assess for any deficiency tax