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TAXES, TAX LAWS, AND
TAX ADMINISTRATION

Prepared by:
James Dane T. Adayo
Tax/Audit Consultant
JMR Business Consulting Inc.

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TAXATION LAW

Taxation law refers to any law that arises

from the exercise of the taxation power the
State.
Types of taxation laws
Tax laws — these are laws that provide for
the assessment and collection of taxes.
Examples:
a. The National Internal Revenue Code
(NIRC)
b. The Tariff and Customs Code
c. The Local Tax Code
d. The Real Property Tax Code
Tax exemption laws —
These are laws that grant immunity from
taxation.
Examples:
a. The Minimum Wage Law
b. The Omnibus Investment Code of 1987
(E.O 226)
c.Barangay Micro-Business Enterprise
(BMBE) Law
d. Cooperative Development Act
GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (GAAP) VS. TAX LAWS
Generally accepted accounting principles
or GAAP are not laws, but are mere
conventions of financial reporting.

In the preparation and filing of tax returns,

taxpayers are mandated to follow the tax
law in cases of conflict with GAAP.
NATURE OF PHILIPPINE TAX LAWS
Philippine tax laws are civil and not political
in nature.

Our internal revenue laws are not penal in

nature because they do not define crime.
Their penalty provisions are merely
intended to secure taxpayers’ compliance.
TAX

Tax is an enforced proportional contribution

levied by the lawmaking body of the State
to raise revenue for public purpose.
Elements of a Valid Tax
1. Tax must be levied by the taxing power
having jurisdiction over the object of
taxation.
2. Tax must not violate constitutional and
inherent limitations.
3. Tax must be uniform and equitable.
4. Tax must be for public purpose.
5. Tax must be proportional in character
6. Tax is generally payable in money.
CLASSIFICATION OF TAXES
A. As to purpose
Fiscal or revenue- a tax imposed for
general purpose

Regulatory-A tax imposed to regulate

business,

Sumptuary — a tax levied to achieve some

social or economic objectives
CLASSIFICATION OF TAXES
B. As to subject matter
a. Personal, poll or capitation- a tax on
person who are residents of a particular
territory

b. Property tax - a tax on properties

c. Excise or privilege tax- a tax imposed upon

the performance of an act, or engagement
in an occupation
CLASSIFICATION OF TAXES
C. As to incidence
1. Direct tax - When both the, the tax is s impact
and incidence of taxation rest upon the same
taxpayer aid to be direct. The tax is collected
from the person who is intended to pay the
same. The statutory taxpayer is the economic
taxpayer.
2. Indirect tax When the tax is paid by any
person other than the one who is intended to
pay the same, the case of business taxes the
tax is said to be indirect. This where the
statutory taxpayer is not the economic
taxpayer. The statutory taxpayer is the person
named by law to pay the tax
CLASSIFICATION OF TAXES
D. As to amount

1. Specific tax -a tax of a fixed amount

imposed on a per unit basis such as per
kilo, liter or meter, etc.

2. Ad valorem- a tax of a fixed proportion

imposed upon the value of the object
CLASSIFICATION OF TAXES
E. As to rate
a. Proportional tax - This is a flat or fixed rate tax. The use of
proportional tax emphasizes equality as it subjects all
taxpayers with the same rate without regard to their ability to
pay.
b. Progressive or graduated tax -This is a tax which imposes
increasing rates as the tax base increase. The use of
progressive tax rates results in equitable taxation because it
gets more tax to those who are more capable. It aids in
lessening the gap between the rich and the poor.
c. Regressive tax — this tax imposes decreasing tax rates
as the tax base increase. This is the total reverse of
progressive tax. Regressive tax is regarded as anti-poor. It
directly violates the Constitutional guarantee of progressive
taxation.
d. Mixed tax — This tax manifest tax rates which is a
combination of any of the above types of tax.
CLASSIFICATION OF TAXES
F. As to imposing authority
1. National tax - tax imposed by the national government
Examples:
a. Income tax— tax on annual income, gains or profits
b. Estate tax — tax on gratuitous transfer of properties by a
decedent upon death
c. Donor’s tax — tax on gratuitous transfer of properties by a living
donor
d. Value Added Tax - consumption tax collected by VAT business
taxpayers
Other percentage tax — consumption
E. Tax collected by non-VAT business taxpayers
F. Excise tax — tax on sin products and non-essential as alcohol,
cigarettes and metallic minerals. differentiated with the privilege
tax which is also called excise tax.
G. Documentary stamp tax - a tax on documents, instruments, loan
agreements and papers evidencing the acceptance, assignment,
sale or transfer of an obligation, right or property incident thereto.
CLASSIFICATION OF TAXES
2. Local tax - tax imposed by the municipal or
local government
Examples:
a. Real property tax
b. Professional tax
c. Business taxes, fees, and charges
d. Community Tax
e. Tax on business and other financial
institution
TAXES WITH SIMILAR ITEMS

Tax refers to the amount imposed by the

government for public purpose.Revenue
refers to all income collections of the
government which includes taxes, tariff,
licenses, toll, penalties and others. The
amount imposed is tax but the amount
collected is revenue.
TAX VS License fee

Tax has a broader subject than license. Tax

emanates from taxation power.

License fee emanates from police power

and is imposed to regulate the exercise of a
privilege such as the commencement of a
business or a profession.
Tax vs. Toll

Tax is a levy of government; hence, it is a

demand of sovereignty.

Toll is a charge for the use of other’s

property; hence, it is a demand of
ownership.
Tax vs. Debt
Tax arises from law while debt arises from
private Contracts. Non-payment of tax
leads to imprisonment, but non-payment of
debt does not lead to imprisonment.

Debt can be subject to set-off but tax is

not. Debt can be paid in kind (dacion en
pago) but tax is generally payable in
money.
Tax vs. Special Assessment
Tax is an amount imposed upon persons,
properties,or privileges.

Special assessment is levied by the

government on lands adjacent to a public
improvement. It is imposed on land only
and is intended to compensate the
government for a part of the cost of the
improvement.
Tax vs. Tariff
Tax is broader than tariff. Tax is an amount
imposed upon persons, privilege,
transactions, or properties.

Tariff is the amount imposed on imported or

exported commodities.
Tax vs. Penalty
Tax is an amount imposed for the support
of the government.

Penalty is an amount imposed to

discourage an act.

Penalty may be imposed by both the

government and private individuals. It may
arise both from law or contract whereas tax
arises from law.
PRINCIPLES OF A SOUND TAX SYSTEM

According to Adam Smith, governments

should adhere to certain principles or
canons to evolve a sound tax system:

1. Fiscal adequacy
2. Theoretical justice
3. Administrative feasibility
PRINCIPLES OF A SOUND TAX SYSTEM

According to Adam Smith, governments

should adhere to certain principles or
canons to evolve a sound tax system:

1. Fiscal adequacy
2. Theoretical justice
3. Administrative feasibility
Fiscal adequacy

Requires that the sources of government

funds must be sufficient to cover
government costs. The government must
not incur a deficit.
Theoretical justice

Theoretical justice or suggests that taxation

should consider the taxpayer's ability to
pay.

It also suggests that the exercise of

taxation should not be oppressive, unjust,
or confiscatory.
Administrative feasibility
Administrative feasibility suggests that tax
laws should be capable of efficient and
effective administration to encourage
compliance.
The following are applications of the principle
of administrative feasibility:
1. E -filing and e -payment of taxes
2. Substituted filing system for employees
3. Final withholding tax on non-resident
aliens or corporations
4. Accreditation of authorized agent banks in
the filing and payment of taxes