You are on page 1of 27

TAXATION

History of Taxation importance of taxation to the taxpayers and to the government Kinds and Characteristics of Taxes Taxation System in the Philippines

Taxation
The system of compulsory contributions levied by a government or other qualified body on people, corporations and property in order to fund public expenditures. An inherent power of the state to raise income and to demand enforced contributions for public purposes.

History
During the reign of Egyptian Pharaohs
Scribes as tax collectors

In Greece
A tax referred to as Eisphora was imposed only in times of war

In Athens
A monthly tax called Metoikon was collected to foreigners

Ancient Greek Taxation


Taxation was used as an emergency power. Additional resources gained from war were used to refund tax previously collected from the people

Earliest taxes in Rome


Taxes known as Portoria were customs duties on imports and exports Augustus Caesar introduced the inheritance tax to provide retirement funds for the military. The tax was five percent on all inheritances except gifts to children and spouses

In England
Taxes were first used as an emergency measure Taxes on income or capital were a recent development as a result of increasing government intervention in the economy

In the Philippines
The pre-colonial society, being communitarian, did not have taxes

During the Spanish Period, revolutionary income-generating means were introduced by the government. Polo Y Servicio (Forced Labor) It is the forced labor for 40 days of men ranging from 16 to 60 years of age who wereobligated to give personal services to community projects. One could be exempted from the polo by paying a fee called falla (which was worth one and a half real) Manila-Acapulco Galleon Trade main source of income for the colony during its early years.. The Galleon trade brought silver from New Spain and silk from China by way of Manila.This way, the Philippines earned its income through buy and sell - that is, they bought silk fromChina for resale to New Spain and then bought American silver for resale to China.

Encomienda It comes from the word, encomendar which means to take charge of or to entrust. The encomenderos were given full authority to manage the encomienda by collecting tribute from the inhabitants and govern people living on it.

Tribute Tribute was the residence tax during the Spanish times. It may be paid in cash or kind,partly, or wholly. The rate was originally set as eight reales but was raised to ten in 1602 then totwelve reales in 1851 and 14 in 1874. In 1884, the tribute was replaced by the cedula personalor personal identity paper, equivalent to the present residence tax or community tax certificate(CTC)

What is a cedula?
In the 19th century, it was an identification card that had to be carried at all times. Aperson who could not present his or her cedula to a guardia civil could then be detained for being indocumentado. Andres Bonifacio and other Katipuneros tore their cedulas in August1896, signaling the start of the Philippine Revolution.On its present usage, a cedula or community tax certificate is a legal identity documentin the Philippines. Issued by cities and municipalities to all persons that have reached the age of majority and upon payment of a community tax, it is considered as a primary form of identification in the Philippines and is one of the closest single documents the Philippines has to a national system of identification, akin to a driver's license and a passport

The Four R's of Taxation Taxation has four main purposes or effects: Revenue The taxes raise money to spend on armies, roads, schools and hospitals, and on moreindirect government functions like market regulation or legal systems. Repricing Taxes are levied to address externalities; for example, tobacco is taxed to discouragesmoking, and a carbon tax discourages use of carbon-based fuels.

Redistribution Normally, this means transferring wealth from the richer sections of society to poorer sections. Representation The American revolutionary slogan "no taxation without representation" implied this:rulers tax citizens, and citizens demand accountability from their rulers as the other part of this bargain. Studies have shown that direct taxation (such as income taxes) generates the greatest degree of accountability and better governance, while indirect taxation tends to have smaller effects.

Characteristics of a sound Tax system

Fairness Clarity and Certainty Convenience Efficiency

Effects of Taxation
Personal Income Tax which is presumed to fall entirely on the legal taxpayers influences decisions to work, save, and invest. These decisions affect other people. Corporate Income Tax may simply result to lower corporate profits and dividends. It may reduce their income of all owners of property and businesses. The company may move toward raising the prices of their products

Taxation in the Philippines


The legislative branch enacts laws to continually revitalize the taxation policy of the country

BIR (Bureau of Internal Revenue)


Mandated to comprehend the assessment and collection of all national internal revenue taxes, fees and charges so as to promote a sustainable economic growth

Taxation in the Philippines


Republic Act No. 8424 (Comprehensive Tax Reform Act of 1997)
Tax Payer: any person subject to tax whose sources of income is derived from within the Philippines TIN (Taxpayer Identification Number) is required for any individual taxpayer

Taxation in the Philippines


Taxes are collected within a particular period of time know as taxable year
This is the calendar year or the fiscal year that covers an accounting period of 12 months ending on the last day of any month other that December.

Kinds of taxes
A) Personal, capitation or poll taxes. These are taxes of fixed amount upon residents or persons of a certain class without regard to their property or business.

B) Property taxes. Taxes assessed on things or property of a certain class.


Under this are the following:

Property taxes.
a. Real property Taxes - an annual tax that may be imposed by a province or city or amunicipality on real property such as land, building, machinery and other improvements affixedor attached to real property.

b. Estate Tax (Inheritance tax) - a tax on the right of transmitting property at the timeof death and on the privilege that a person is given in controlling to a certain extent the disposition of his property to take effect upon death.

Property taxes.
c. Gift or Donor[s Tax - a tax on the privilege of transmitting ones property or propertyrights to another or others without adequate and full valuable consideration. Taxable gifts mayeither be real, personal, tangible or intangible. Tax imposed on donations inter-vivos or thosemade between living persons to take effect during the lifetime of the donor. d. Capital gains tax (sale of capital assets) - tax imposed on the sale or exchange of property . Tax imposed on the gains presumed to have been realized by the seller for the sale,exchange or other disposition of real property located in the Philippines, classified as capital assets

Kinds of taxes
C) Income Taxes - Taxes imposed on the income of the taxpayers from whatever sources it isderived. Tax on all yearly profits arising form property, possessions, trades or offices. These aretaxes on a person's income, emoluments and profits

D) Excise or License taxes - Taxes imposed on the privilege, occupation or business notfalling within the classification of poll taxes or property taxes. These are imposed on alcoholproducts (except tuba, basi, tapuy and similar domestic fermented liquor) On tobacco products;on petroleum products like lubricating oils, grease, processed gas etc; on mineral products suchas coal and coke and quarry resources; on miscellaneous articles such as automobiles.

Kinds of taxes

Under these, we have the following:

Excise or License taxes


1. Documentary stamp tax - a tax imposed upon documents, instruments, loan agreements and papers and upon acceptance of assignments, sales and transfers of obligation,rights or property incident thereto. 2. Value Added Tax (VAT) - is imposed on any person who, in the course of trade or business sells, barters, exchanges, leases, goods or properties, renders services, or engages insimilar transactions. It is an indirect tax and the amount of the tax may be shifted or passed onthe to buyer, transferee or lessee of the goods, properties or services.Tax imposed and collected on every sale, barter, exchange or transaction deemed saleof taxable goods, properties, lease of goods, services or properties in the course of trade as they pass along the production and distribution

chain. The present value-added tax inclusive inthese sales is in twelve percent (12%)

Who should Pay Taxes?


A. Individuals
a. Resident citizens. b. Non-resident citizens. c. Resident aliens. d. Non-resident aliens
who may either be: a) Engaged in trade or business (the term denotes habituality or sustained activity) a. b) Not engaged in trade or business.

Who should Pay Taxes?


B. Corporations
A. Domestic corporations or corporations B. Foreign corporations
which may either be: a) Resident foreign corporation (engaged in trade or business). b). Non-resident foreign corporations (not engaged in trade or business).

C. Estate under judicial settlement


D. Trusts

Who are Exempted to Pay Taxes?


The Constitution expressly grants tax exemption on certain entities/institutions such as

1. Charitable institutions, churches, parsonages or convents appurtenant there to, mosques, and nonprofit cemeteries and all lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educational purposes
2. Non-stock non-profit educational institutions used actually, directly, and exclusively for educational purposes.

Who are Exempted to Pay Taxes?


On the other hand, exempted to tax as stated 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 Business enterprise certified by the Board of Investments (BOI) as pioneer or non-pioneer for a period of six and four years, respectively, from the date of registration

Business entity, association, or cooperative registered under RA 6810


Printer and/or publisher of books or other reading materials prescribed by DECS (nowDepEd) as school texts or references, insofar as receipts from the printing and / or publishing thereof are concerned

What is Tax Evasion?


When there is fraud through pretension and the use of other illegal devices to lessen ones taxes, there is tax evasion
Under-declaration of income Non-declaration of income and other items subject to tax Under-appraisal of goods subject to tariff Over-declaration of deductions

What is Tax Avoidance?

legal rearrangements of one's economic activities in order to lower the tax liability. This is done by moving capital or labor to areas, geographical or otherwise, where tax rates are lower and/or by manipulating the tax parameters through the legal means to spread or defer the tax liability over time thereby effectively reducing the tax rate. Tax evasion is done by a taxpayer either singly or in collusion with some tax collection functionary, while tax avoidance is done singly or with the help of some tax expert likea lawyer and an accountant.

Shifting the incidence of taxation


Shifting taxation is the process of passing the burden of the tax to others. A tax can be shifted when the taxpayer is able to obtain a higher price for something he sells or when he pays a lower price for a commodity he purchases.

You might also like