FORMS OF ESCAPE FROM TAXATION

1. SHIFTING
Shifting is one way of passing the burden of tax from one person to another. For
example, taxes paid by the manufacturer may be shifted to the consumer by
adding the amount of the tax paid to the price of the product .
KINDS OF SHIFTING
A. Forward Shifting – Occurs when the burden of the tax is transferred from a
factor of production to the factor of distribution.
B. Backward Shifting – Occurs when the burden of tax is transferred from the
consumer to the producer of manufacturer.
C. Onward Shifting – Occurs when tax is shifted to two or more times either
forward or backward.

2. CAPITALIZATION
This refers to the reduction in the price of the taxed object to the capitalized
value of future taxes which the purchaser expects to be called upon to pay. An
example is a reduction made by the seller, on the price of the real estate, in
anticipation of the future tax to be shouldered by the future buyer.

3. TRANSFORMATION
Transformation occurs when the manufacturer or producer upon whom the tax
has been imposed pays the tax and endeavor to “recoup” himself/herself by
improving his/her process of production.

4. TAX EVASION
Tax evasion is the practice by the taxpayer through illegal or fraudulent means to
defeat or lessen the amount for tax. This is also known as “tax dodging”. Tax
evasion presupposes malice, fraud, bad faith, or willful intent on the part of
taxpayer as in the case of substantial under declaration of income for four
consecutive years. An example is the deliberate and/or malicious failure to
report income to defeat tax liability.

5. TAX AVOIDANCE
Tax avoidance is the exploitation by the taxpayer of legally permissible methods
in order to avoid or reduce tax liability. This is also known as “tax maximization”.
An example is exhausting and/or utilizing all allowable deductions or exemptions
in law to lessen or reduce the tax burden.
6. TAX EXEMPTION
Tax exemption is the grant of immunity or freedom from a financial charge,
obligation or burden to which others are subjected.
GROUNDS FOR TAX EXEMTION
A. Contract, wherein the government is the contracting party
B. Public policy
C. Reciprocity

KINDS OF TAXES UNDER EXISTING LAW

1. NATIONAL TAXES
These taxes imposed by the national government. Some existing national tax
laws in the Philippines include:
a. National International Revenue Code
b. Tariffs and Customs Code of the Philippines
c. The Sugar Adjustment Act
d. The Narcotics Drug Act
e. The Special Education Fund Law
f. The Travel Tax
g. The Private Motor Vehicle
h. The Energy Taxes
i. Republic Act Nos. 1093; 1125; 2211
j. Presidential Decree No. 477

2. LOCAL TAXES
These are taxes imposed by the local government. Some of the existing local tax
laws include:
a. The Local Tax Code
b. The Real Property Tax Code
c. The Tax Ordinance of the respective barangay, municipality, and province