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Important concepts on

taxation

Classification of taxes

As to subject matter or object


1.

Personal, poll or capitation tax

Tax of a fixed amount imposed on persons residing within a specified territory,


whether citizens or not, without regard to their property or the occupation or business
in which they may be engaged, i.e. community tax.
2.

Property tax

Tax imposed on property, real or personal, in proportion to its value or in


accordance with some other reasonable method of apportionment.

3.

Excise tax

A charge imposed upon the performance of an act, the enjoyment of a


privilege, or the engaging in an occupation.

As to purpose
1.

General/fiscal/revenue tax

A general/fiscal/revenue tax is that imposed for the


purpose of raising public funds for the service of the
government.
2.

Special/regulatory tax

A special or regulatory tax is imposed primarily for the


regulation of useful or non-useful occupation or
enterprises and secondarily only for the purpose of
raising public funds.

As to who bears the burden


1.

Direct tax

A direct tax is demanded from the person who also shoulders the
burden of the tax. It is a tax which the taxpayer is directly or
primarily liable and which he or she cannot shift to another.
2.

Indirect tax

An indirect tax is demanded from a person in the expectation and


intention that he or she shall indemnify himself or herself at the
expense of another, falling finally upon the ultimate purchaser or
consumer. A tax which the taxpayer can shift to another.

As to scope of the tax


As to scope of the tax
1.
National tax
A national tax is imposed by the national
government.
2.

Local tax

A local tax is imposed by municipal corporations


or local government units (LGUs).

As to the determination of amount


1.

Specific tax

A specific tax is a tax of a fixed amount imposed by the head or


number or by some other standard of weight or measurement. It
requires no assessment other than the listing or classification of the
objects to be taxed.
2.

Ad valorem tax

An ad valorem tax is a tax of a fixed proportion of the value of the


property with respect to which the tax is assessed. It requires the
intervention of assessors or appraisers to estimate the value of such
property before the amount due from each taxpayer can be
determined.

As to gradation or rate

1.

Tax based on a fixed percentage of the amount of the property receipts or


other basis to be taxed. Example: real estate tax.

2.

Tax the rate of which increases as the tax base or bracket increases. Example:
income tax.

Digressive tax rate: progressive rate stops at a certain point. Progression halts
at a particular stage.

3.

Tax the rate of which decreases as the tax base or bracket increases. There is
no such tax in the Philippines.

Proportional tax

Progressive or graduated tax

Regressive tax

Three basic principles of a


sound tax system

1.

It means that the sources of revenue should be sufficient to meet the demands of
public expenditures. [Chavez v. Ongpin, 186 SCRA 331]

2.

It means that the tax burden should be proportionate to the taxpayers ability to pay.
This is the so-called ability to pay principle.

3.

It means that tax laws should be capable of convenient, just and effective
administration.

Fiscal adequacy

Equality or theoretical justice

Administrative feasibility