Taxation refers to compulsory or coercive money collection by a levying authority, usually a government.

The money collected is used to finance the government’s expenditure.

*Tax is used to encourage and discourage certain economic decisions. Also used to pay for public
services. No taxation means no public libraries. Gov. Provides basic services such as education health,
infrastructure, and other social services for all. Taxes pay for this

Legal Bases of Philippine Taxation

1. Constitution Article 6, Section 28. “The rule of taxation shall be uniform and equitable.
Congress shall evolve a progressive system of taxation”

(Progressive tax is a tax in which the tax rate increases as the taxable amount increases.)

2. NIRC RA 8424. TRAIN RA 10963. Local Government Code of 1991 RA 7160

Taxes on National level are collected by BIR

Taxes on Local Level are collec ted by a local treasurer’s office

Powers and limitations of BIR.

1. Reduction and collection of all internal revenue taxes
2. Enforcement of all forfeitures, penalties and fines connected therewith, including the
execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the other courts
3. It shall also give effect to the administer supervisory and police powers conferred to it by NIRC

Kinds of taxes:
1. Direct
2. Indirect.

Direct Taxes
> Taxes that are paid from your income and properties
1. Income tax
> Compensation Income
> Business Income
> Passive Income

Indirect Taxes
> Taxes that are collected based on consumption.

1. Value-Added Tax (VAT)

*VAT is a form of indirect tax imposed on goods and services both imported and domestic goods and
services are covered by VAT

2. Percentage Tax
*Tax imposed on peersons or entities/ transactions: who sell or lease goods, properties or services in the
course of trade or businesss and are exempt from VAT.

3. Excise Tax
*Indirect tax on selected goods that have negative externalities and are non-essentials. Technically some
things have a different and higher tax because it is either bad for the community or are not needed. *

> Specific.
1. Sintax, Gasoline.
*Based on weight, volume capacity or any other physical unit of measurement *
> Ad Valorem
1.Miscellaneous articles, and mineral products
*According to Value. Miscellaneous articles consider automobiles, jewelry, perfume and toilet waters,
yachts, and other vessels intended for pleasure or sports.

National and Local Taxes.

>National taxes are imposed by the national government of the Philippines.
> Local taxes are imposed by the local government of the Philippines. Includes Real property tax,
Business of Printing and Publication. Franchise Tax, Professional tax etc.
*Real property tax is the tax on the transfer of its ownership. Printing and Publication are for
writers. Franchise Tax is tax on businesses enjoying a franchise. Professional taxes are tax on each
person engaged in the exercise or practice of his profession. *

> Exercised by Provinces, Cities. Municipalities, and barangays

Who Are taxed?

I. Individuals
A. Citizen
1. Resident Within Ph Outside of Ph
2. Non-Resident Within Ph Not Outside
B. Aliens
1. Resident Within Ph Not Outside
2. Non-Resident Not within not outside

*Resident means they have lived inside the country for atleast 183 days. No nresident means
they have not lived inside the country for atleast 183 days. *

C. Estate and Trusts same rules

II. Corporations
A. Domestic Within Ph. Outside of Ph
B. Foreign.
1. Resident Within Ph Not outside
2. Non-resident Within Ph. Not outside

*Domestic means most of the Incorporators are Citizens of the Philippines *