ADDITIONAL NOTES:

I. GENERAL PRINCIPLES OF TAXATION

1.Tax exemption is the privilege of not being imposed a financial obligation to which others are subject.
2.Special assessment is an enforced proportional contribution from owners of land especially benefited by public
improvement. A charge imposed on land for special benefits derived resulting from public improvements.
o Characteristics: It is levied on land, not a personal liability of the persons assessed, and is based solely on the
benefit derived by the owners of the land.
3.Nature of taxation: The power is granted by legislative action/essentially legislative in character, inherent in
sovereignty, and subject to inherent and constitutional limitations.
4.To determine the place of taxation: Source of the income, citizenship of the taxpayer, and residence of the taxpayer.
5.Proportional is tax based on a fixed percentage of the amount of property, income or other basis to be taxed.
Example is Value added tax (VAT)
6.Regressive is a tax system where the revenues are supplied mostly by indirect taxes.
o Is a tax where the rate decreases as the tax base increases.
7.Progressive is a tax system where the greater bulk of the tax revenues is derived by direct taxes.
o Is a tax where the rate increase as the tax base increases.
8.Fundamental powers of the state:
a.Power of imminent domain is the power to acquire private property upon payment of just compensation for
public purpose.
o Eminent domain may not raise money for the government.
b.Police power is the power to regulate liberty and property to promote the general welfare. This power is superior
to the non-impairment clause and is broader in application because it is a power to make and implement laws.
Most superior and least limitable among the fundamental powers of the state.
c.Power of taxation is the power to demand proportionate contributions from persons and property to defray the
expenses of the government. The strongest of all inherent powers of the state because without it, the government
can neither survive nor dispense any of its other powers and functions effectively.
 Police power and the power of taxation may be exercised only by the government while the power of eminent
domain may be exercised by some private entities.
 In power of taxation, the compensation received is the protection afforded to the citizens; in police power the
compensation received is the altruistic feeling that somehow you contributed to the promotion of the general
welfare; in power of eminent domain, the compensation received is the just compensation paid for the property
taken.
9.Basic Principle of a sound tax system:
a.Equality or theoretical justice is the tax imposed should be proportionate to the taxpayer’s ability to pay.
Describes the statement, “the more income earned by the taxpayer, the more tax he has to pay.”
b.Fiscal adequacy is the sources of revenue as a whole, should be sufficient to meet the demands of public
expenditures. The government should not incur a deficit.
c.Administrative feasibility is the tax laws must be capable of convenient, just and effective administration.
10. Uniformity in taxation is the persons or things belonging to the same class shall be taxed at the same rate.
11. Equality in taxation is the tax should be proportional to the relative value of the property to be taxed.
12. Theory of taxation is the existence of the government is a necessity and that the state has the right to compel all
individuals and property within its limits to contribute.
13. Basis of taxation is the reciprocal duties of support and protection between the people and the government.
14. Scope of taxation is subject to inherent and constitutional limitations, the power of taxation is regarded as
supreme, plenary, unlimited and comprehensive.
15. Aspect of taxation is the levying or imposition of tax and the collection of the tax are processes which constitute
the taxation system.
16. Impact of taxation is the point on which a tax is originally imposed.
17. Incidence of taxation is the point on which a tax burden finally rest or settles down.
18. National internal revenue laws are civil in nature.
19. Taxes are enforced proportional contributions from persons and property levied by the state by virtue of its
sovereignty for the support of the government and for all public needs. The amount required is dictated by the
needs of the government. Imposed on persons, property and property rights.
20. Taxation is the process or means by which the sovereign, through law making body raises income to defray the
expenses of the government. May be used to implement the police power of the state.
21. Shifting is an escape from taxation where the tax burden is transferred by the one on whom the tax is imposed or
assessed to another.
22. Transformation is an escape from taxation where the producer or manufacturer pays the tax and endeavors to
recoup himself by improving his process of production thereby turning out his units of products at a lower cost.
23. Capitalization is an escape from taxation where there is a reduction in the price of the taxed object equal to the
capitalized value of future taxes which the taxpayer expects to be called upon to pay.
24. Evasion is the use of illegal or fraudulent means to avoid or defeat the payment of tax.
25. Avoidance is the use of legal or permissible means to minimize or avoid taxes.
26. Tax dodging is synonymous for tax evasion; Tax minimization is synonymous to tax avoidance.
27. Personal, poll or capitation is the tax of a fixed amount imposed upon all persons residing within a specified
territory without regard to their property or occupation they may be engaged.
28. Property is the tax imposed on personal or real property in proportion to its value or on some other reasonable
method of apportionment.
29. Excise is the tax imposed upon performance of an act, the enjoyment of privilege or the engaging in an
occupation.
o Example of excise tax: Income tax, transfer tax, and sales tax.
30. Direct is the tax which is demanded from the person whom the law intends or desires to pay it. A tax wherein
both the incidence of or the liability for the payment of the tax as well as the burden of the tax falls on the same
person.
31. Indirect is the tax which is demanded from one person in the expectation and intention that he shall indemnify
himself at the expense of another.
32. Specific is the tax which imposes a specific sum by the head or number or by some standard of weight or
measurement and which requires no assessment other than a listing or classification of the objects to be taxed.
33. Ad-valorem is the tax of a fixed proportion of the amount or value of the property with respect to which the tax.
34. The power of taxation is exercised by the congress.
35. Characteristics of internal revenue law: generally prospective in application, civil in nature, and may operate
retrospectively if congress so provides.
36. Characteristics of tax: generally payable in money.
37. There is no power of taxation in barrios.
38. Toll is a demand of ownership.
39. Tax is distinguished from debt based in law.
40. Tax may be collected in an unlimited amount; License fee may be collected in an unlimited amount (a charge
imposed under police power).
41. Tax is a demand of sovereignity. It is imposed to raise revenue.
42. A state has the power to tax even if not granted by the constitution. The power to tax may include the power to
destroy.
43. In the Philippines, there may be double taxation.
44. Tax is imposed regardless of public improvements.
II. INDIVIDUAL TAXPAYERS
1.RA 8424 is the National Internal Revenue Code of 1988.
2.Personal exemption is an exemption which is determined according to the status of the taxpayer.
3.Additional exemption is an exemptions allowed based on presence of qualified dependent children.