TAX AND TAXATION

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 tax taxation
Is levied compulsorily by the government on its The imposition of financial charges or other levies, upon a
citizens to defray the expenses of the taxpayer (an individual or legal entity) by a state such that
government. failure to pay is punishable by law.

A tax, by definition, is a payment in return for which It is the inherent power by which the sovereign state imposes
no direct and specific quid pro quo is rendered to financial burden upon persons and property as a means
the taxpayer. of raising revenues in order to defray the necessary
expenses of the government
Why Tax?

The main purpose of taxation is to accumulate funds for the functioning of the
government machineries. No government in the world can run its
administrative office without funds and it has no such system incorporated in
itself to generate profit from its function.

The government’s ability to serve the people depend upon the taxes that are
collected. Taxes are indispensable in the government operation and without it,
the government will be paralyzed.
 important characteristics of tax.

a tax is a compulsory payment levied by the government on its citizens and

various business firms.

no direct quid pro quo relationship between the taxpayer and

the tax-levying authority.

a tax is levied to incur public expenditure for the

benefit of the country as a whole.

the basis of taxation cannot be the same for all periods. It

is reviewed periodically by the taxing authority.
 The Four R’s of Taxation
Repricing
encourages/discourages consumption

Revenue
collection of funds to spend on services
Representation
rulers tax citizens, who then
demand accountability

Redistribution
this refers to transferring wealth from
the richer sections of society to
poorer sections.
 The Philippine Tax System

LOCAL TAXES
refer to those imposed and collected by
the local government.

NATIONAL TAXES
refer to national internal revenue taxes imposed and
collected by the national government through the
Bureau of Internal Revenue (BIR)
The Forms of Taxes Imposed on Persons
and Property

A. Personal, capitation or poll taxes B. Property Taxes

Taxes of fixed amount upon residents or  Real Property Tax
persons of a certain class without  Estate Tax (Inheritance Tax)
regard to their property or  Gift or Donor’s Tax
business.  Capital Gains Tax

C. Income Taxes D. Excise or License Taxes

Taxes imposed on the income of the taxpayers Taxes imposed on the privilege, occupation
from whatever sources it is derived. Tax on and business not falling within the
all yearly profits arising from property, classification of poll taxes or property
possessions, trades. taxes.
Who should pay taxes?

1. Individuals
a. Resident Citizen
b. Non-resident Citizen
c. Resident Aliens
d. Non-resident Aliens

2. Corporations
a. Domestic Corporations
b. Foreign Corporations

3. Estate under judicial settlement

4. Trust irrevocable both as to the trust property and as to the income.

Who (or what) are those exempted in paying taxes?

1. Charitable institutions, churches, parsonages or convents

appurtenant thereto, mosques, and nonprofit cemeteries and all lands,
buildings and improvements actually, directly and exclusively used for
religious, charitable or educational purpose (Article VI, Section 28,
Paragraph 3).

2. Non-stock non-profit educational institutions used actually, directly,

and exclusively for educational purposes (Article XVI, Section 4(3)).

Exempted to tax as state in the Article 283 of Rules and Regulations

Implementing Local Government Code of 1991 (RA 7160)

 Local Water Districts

 Cooperatives duly registered under RA 6938, otherwise known as the Cooperative Code of the
Philippines
 Non-stock and non-profit hospitals and educational institutions
 Printer and/or publisher of books or other reading materials prescribed by DECS (now DepEd)
as school texts or references, insofar as receipts from the printing and /or publishing thereof are
concerned.
 What is Tax Evasion?

Tax evasion happens when a person intentionally avoids paying

any tax under the Tax Code of the Philippines. Because tax
evasion is a criminal offense, tax evaders are subject to serious
penalties and criminal charges.
 Tax Evasion Examples
According to the BIR, the following forms of tax evasion are considered
criminal liabilities under the Tax Code:

 Failure to pay taxes

 Non-filing of appropriate tax returns
 Over-declaring expenses/deductions
 Under-declaring income
 Hiding or transferring income
 Claiming personal expenses as business expenses (for tax shield)
 Failure to remit withholding taxes
 Failure to register with the BIR
 Having more than one book of accounts
 Fake entries in financial books and records
 Using fake accountable forms
Tax Evasion Penalties in the
Philippines

1. Surcharge of 25% or 50% of the Tax Due

2. Annual Interest of 20% on Unpaid Tax
3. Criminal Case and Imprisonment
4. Compromise Penalties of up to P50,000
5. Temporary Business Closure
Thank you!
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