Principles of

Taxation
 Taxes
Are the lifeblood of an economy or
government.
 Taxation
The act of levying a tax that is the process
or means by which the sovereign, through
its law making body, raises income to
defray the necessary expenses of the
government.
TAX VS. TAXATION
TAX VS. TOLL
TAX VS. PENALTY
TAX VS. DEBT
TAX VS. CUSTOM
DUTIES
TAX VS. LICENSE
 Essential Elements of a Tax
Enforced contribution
Payable in money.
Proportionate in character.
It is levied on persons, property or the exercise of a right or
privilege.
It is levied by the state which has jurisdiction over the subject or
object of taxation.
It is levied by the law-making body of the state.
It is levied for public purpose/s.
 Purposes of Taxes
1. To raise revenue for the government to cover its own
expenditure on the provision of social services such as
education, health, public infrastructures etc. as well as
the salaries and benefits of public servant.
2. As an instrument of fiscal policy in regulating the level
of total spending (or aggregate demand) in the
economy so as to stabilize the economy.
3. To alter the distribution of income and wealth.
4. To control the volume of imports into the country.
 Classification of Taxes
As to the Subject Matter or Object
a. 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, e.g. Community Tax
b. Property Tax tax imposed on property, real or personal, in
proportion to its value or in accordance with some other reasonable
method of apportionment.
c. Exercise Tax a charge imposed upon the performance of an act,
the enjoyment of a privilege, or the engagement in a occupation.
 As to Purpose
a. General/Fiscal/Revenue Tax a tax imposed for the
purpose of raising public funds for the service of the
government.
b. Special/Regulatory Tax is primarily imposed for the
regulation of useful or non-useful occupation or
enterprises or for the regulation or protection of
industries imbued with public interest, and secondarily
for the purpose of raising public funds.
 As to Bears the Burden
a. Direct Taxes are taxes levied by government on the income and
wealth received by households and businesses in order to raise
government revenue and as an instrument of fiscal policy.
b. Indirect Taxes are taxes levied by government on goods and
services in order to raise revenue and as an instrument of fiscal
policy.
. Individual income tax taxes that are levied on households.
. Corporate income tax taxes on businesses.
Why is it indirect?
 As to the Scope of the Tax
a. National Tax a tax imposed by the national
government.
b. Local Tax is imposed by municipal corporations or
local government units LGUs.
 As to the Determination of Amount
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.
b. Ad valorem tax is a tax of fixed proportion of the value
of the property with respect to which the tax is assessed.
 As to Graduation or Rate
a. Proportional Tax tax based on a fixed percentage of the amount of the
property receipts or other basis to be taxed, e.g. Real estate tax
b. Progressive or graduated tax the tax rate which increases as the tax
base or bracket increases, e.g. Income tax
c. Degressive tax rate progressive rate stops at a certain point.
Progression halts at a particular stage.
Not to be confused with Progressive system of taxation, wherein the
number of indirect taxes outnumber the direct taxes.
d. Regressive tax tax the rate of which decreases as the tax base or
bracket increases. There is no such tax in the Philippines.
 Individual income tax taxes that are
levied on households.
Corporate income tax taxes on
businesses.
Basic Principles of Taxation
1.Adequacy
2.Broad basing
3.Compatibility
4.Convenience
5.Earmarking
6.Efficiency
7.Equity
8.Neutrality
Approaches of Taxation
Ability to pay
Benefit approach
Tax incident approach
 Income Tax
- Is a tax on a persons income, emoluments,
profit arising from property, practice of
profession, conduct of trade or business or
on the pertinent items of gross income
specified in the Tax Code of 1997 less the
deductions and/or personal and additional
exemptions, if any, authorized for such types
of income, by the Tax Code or other special
 The Individual Income Tax
Resident citizens receiving income from sources
within or outside the Philippines.
Non-resident citizens receiving income from sources
within the Philippines.
Citizens working abroad receiving income from
sources within the Philippines.
Aliens, whether resident or not, receiving income
from sources within the Philippines.
 How to compute income tax?
1. Determine your taxable income
2. Using you taxable income, compute your income tax by
referring to the Bureau of Internal Revenue tax table
Taxable Income = Monthly salary/semi
less: SSS, PhilHealth, Pag-Ibig, Absences,
Tardiness, Undertime
Income Tax = Exemption + [(Taxable Income Amount in the
Table) x % over
 Example
Charlene is married with one dependent, and has a basic
monthly pay of P25,000. Based on the tables of
government contributions. Charlene will pay P581.30 for
SSS, P312.50 for PhilHealth contribution and P100 for
Pag-Ibig.
 Example
Mr. G receives a monthly income of P50,000 with 3
dependent child. P450 for SSS, P300 for PhilHealth
contribution and P100 for Pag-Ibig. Compute for the
Income Tax of Mr. G.
 Example
Uvuvwevwe receives P18,000 as a monthly regular
compensation and P7,000 as supplementary compensation
for December 2016 for a total of P25,000. How much is
Income tax of Uvuvwevwe for the month of December?
Uvuvwevwe will pay P500 for his SSS, and P100 for his
Pag-Ibig contribution.
 Example
Kemeru has a semi-monthly salary of P7500. She has 3
children; 22 yrs old special child, 19 yrs old that works in
Mcdonalds as part time and a 15 yrs old grade 9 student.
Kemeru will pay P499 for SSS and P300 for Pag-Ibig.
Compute for the monthly income tax of kemeru.