LESSON TWO: CLASSIFICATION OF TAXES

NAME: ________________________________ DATE: __________________

STUDENT NO.: ___________________________

ASSESSMENT2
Classification of Taxes

Read each statement carefully and complete the correct thought of each statement by
encircling the letter of the correct answer. If the score obtained is 70 percent or better,
proceeding to learn the lesson is not necessary. However, if the score obtained is below 70
percent, continuing to discover the module thoroughly is recommended.

1. __________ refers to the burden or enforced contribution imposed by the government

based on its power of taxation, upon persons, properties, or rights.
A. Tax
B. Taxation
C. Both A and B

2. __________ is an act of using legitimate or lawful means permitted or allowed by our tax
laws in order to minimize or totally avoids one’s tax liability.
A. Tax Evasion C. Tax Avoidance
B. Tax Exemption D. Tax Shifting

3. __________ is an act of legitimately passing on one’s tax liability or payment to another

person in accordance with the provisions of the tax laws.
A. Tax Evasion C. Tax Avoidance
B. Tax Exemption D. Tax ShiftinG

4. __________ is a fraudulent act of using pre-tenses or forbidden devices in order to lessen

tax liability or payment.
A. Tax Evasion C. Tax Avoidance
B. Tax Exemption D. Tax Shifting

5. All are essential characteristics of a tax, except:

A. It is an enforced contribution. C. It is payable in money or in kind.
B. It is imposed for public purpose. D. It is a proportionate burden.

6. __________ refer to those taxes imposed upon persons, properties, rights which amount of
tax increases as the bracket or layer increases.
A. Community Taxes C. Progressive Taxes
B. Property Taxes D. Regressive Taxes

7. __________ refer to those taxes imposed for special purposes and the proceeds of which
go to certain special funds.
A. General Taxes C. Specific Taxes
B. Special Taxes D. Ad Valorem Taxes
8. Statement 1 Tax avoidance is a form of tax escape.
Statement 2 Tax evasion is not punishable.
A. Only Statement 1 is correct. C. Both statements are correct.
B. Only Statement 2 is correct. D. Both statements are incorrect.

9. Statement 1 There is no regressive tax in the Philippines at present.

Statement 2 Tax is considered the bread and butter or the lifeblood of the government.
A. Only Statement 1 is correct. C. Both statements are correct.
B. Only Statement 2 is correct. D. Both statements are incorrect.

10. A taxpayer is self-employed with a total sales of Php 4,500,000.00 and a total expense of
Php 1,800,000.00. To minimize the tax, the taxpayer declared a total expense of
Php2,200,000.00. This situation is considered __________.

A. Tax evasion because of the overstatement of expenses.

B. Tax evasion because of the understatement of expenses.
C. Both A and B are incorrect.
 LESSON2
Classification of Taxes

Tax refers to the burden or enforced contribution imposed by the government based on
its power of taxation, upon persons, properties, or rights. Tax is the bread and butter or the
lifeblood of the government hence, no court shall be empowered to interfere with or restrain the
collections of taxes.

ESSENTIAL CHARACTERISTICS OF A TAX

1 Enforced contribution
2 Imposed for public purpose
3 Proportionate in character
4 Generally paid in money
5 Imposed upon persons, properties, or rights
6 Imposed to raise government revenues

CLASSIFICATIONS of TAXES
• Classes of Taxes as to Subject Matter
1. Personal Taxes or Capitation Taxes. These refer to those fixed amounts of taxes
imposed upon certain class of persons, or upon persons residing within the
territorial jurisdiction of the state regardless of their property, professions or
occupations. (Community Tax)
2. Property Taxes. These refer to those taxes imposed upon the taxpayer’s property,
real or personal, situated within the territorial jurisdiction of the state in proportion
to its value or some other reasonable method of apportionment. (Real Property
Tax)
3. Excise Taxes or Privilege Taxes. These refer to those taxes imposed on the
taxpayer’s exercising their rights and privileges of performing an act or engaging
in an occupation. (Donors Tax and Income Tax)
• Classes of Taxes as to Scope of Authority
1. National Taxes. These refer to those taxes imposed by the national government
enforced by or through the Bureau of Internal Revenue or the Bureau of
Customs. (Corporate Income Tax and Customs Duties and Tariff)
2. Local Taxes. These refer to those taxes imposed by the local government such
as barangays, cities, municipalities or provinces. (Real Estate Tax and
Community Tax)
• Classes of Taxes as to Purpose
1. General Taxes. These refer to those taxes imposed for general purposes and the
proceeds of which go to the national or general fund. (Estate Tax)
2. Special Taxes. These refer to those taxes imposed for special purposes and the
proceeds of which go to certain special funds. (Gasoline Tax)
• Classes of Taxes as to Liabilities
1. Direct Taxes. These refer to those taxes imposed upon persons directly bound
to pay the tax, which cannot be passed on or shifted to other person for payment.
(Individual Income Tax)
2. Indirect Taxes. These refer to those taxes imposed upon persons liable to pay
said taxes but which are permitted by law to be shifted or passed on to other
persons for payment. (Value Added Tax)
• Classes of Taxes as to Determination of Amounts
1. Specific Taxes. These refer to those taxes imposed upon property/rights which
amounts are determined based on volume capacity or any physical unit of
measurement. (Excise Tax on Liquors)
2. Ad-Valorem Taxes. These refer to those taxes imposed upon property/rights which
amounts are determined based on the sales price or other specified values of the
properties. (Value Added Tax and Real Property Tax)
• Classes of Taxes as to Graduation or Rate
1. Progressive Taxes. These refer to those taxes imposed upon persons, properties,
rights which amount of tax increases as the bracket or layer increases. (Individual
Income Tax)
 2. Regressive Taxes. These refer to those taxes imposed upon persons which
amount of tax decreases as the bracket or layer increases. At present, there is no
regressive tax in the Philippines.

TAX ESCAPES. These are ways and means that can be availed of by the taxpayers in order to
reduce their tax liabilities or payments.

• Tax Credits. These are tax payments directly made by the taxpayer or thru withholding
agents that are expressly allowed by law as deductions directly against the basic taxes
due.
• Tax Exemption. This is a grant of immunity, express or implied, to a particular person,
right, transaction or property, from a particular tax to which other persons generally within
the same taxing authority or territory.
• Tax Avoidance. This is an act of using legitimate or lawful means permitted or allowed
by our tax laws in order to minimize or totally avoids one’s tax liability.
• Tax Evasion or Tax Dodging. This is a fraudulent act of using pre-tenses or forbidden
devices in order to lessen tax liability or payment. This is an illegal means of reducing or
avoiding taxes hence, prohibited and punishable by law. This includes understatement
of income and overstatement of expenses wherein if the understatement or
overstatement is 30 percent and above, there is an occurrence of fraud.
• Tax Shifting. This is an act of legitimately passing on one’s tax liability or payment to
another person in accordance with the provisions of the tax laws.