Circular Memo 97-2021 released august 16,2021 about taxation of any income received by social
influencers.
- TRC (tax residency certificate)
TWO TYPES OF INFLUENCERS
- REGISTERED INFLUENCERS- ( Professionals)
- UNREGISTERED INFLUENCERS ( who do not have tin id number )must file bir form 1901
-train law aims to make the Phil.tax system simpler, fairer , and more efficient to promote investment ,
create jobs and reduce poverty.
- TAX REFORM accelerated to TRAIN LAW ( release 2018)
- 250,000 exempted from income tax
- 21,000 monthly income exempted
Middle class
-Manager
-supervisor
( If they annually income 250,000 they are exempted ) as long as your salary will not get higher up to 8
million it will imposed up to 35%
TRAIN LAW AFFECTS THE Tax in
- Sweetened beverages
- excise tax fuels
- estate tax
- tobacco tax
- tax in cosmetic surgery
INDIRECT TAXES
-Excise Duty: Payable by the manufacturer who shifts the tax burden to retailers and wholesalers.
-Sales Tax: Paid by a shopkeeper or retailer, who then shifts the tax burden to customers by charging
sales tax on goods and services.
-Custom Duty: Import duties levied on goods from outside the country, ultimately paid for by consumers
and retailers.
Entertainment Tax: Liability is on the cinema owners, who transfer the burden to cinemagoers.
-Service Tax: Charged on services rendered to consumers, such as food bill in a restaurant.
DIRECTS TAXES
-Income Tax: Levied on and paid by the same person according to tax brackets as defined by the income
tax department.
Corporate Tax: Paid by companies and corporations on their profits.
-Wealth Tax: Levied on the value of property that a person holds.
Estate Duty: Paid by an individual in case of inheritance.
-Gift Tax: An individual receiving the taxable gift pays tax to the government.
-Fringe Benefit Tax: Paid by an employer that provides fringe benefits to employees, and is collected by
the state government.
Indirect tax, as mentioned above, include those taxes where the liability to pay the tax lies on a person
who then shifts the tax burden to another individual.
REGRESSIVE TAX
- is where low income individuals pay a higher percentage of their income taxes than richer individual.
EXAMPLE
Sales Tax
The sales tax is usually set as a flat rate across the board. Whether the rate is 5 percent, 10 percent, or
20 percent, that means the same rate on all goods in the economy.
Property Tax
Property taxes are usually based on the value of the home, so would suggest that it is fairly neutral. The
higher the house price, the higher the amount paid in tax.
Excise Tax
An excise tax is a tax that is imposed during the manufacturing process – so before it even reaches the
consumer.
Tariff
When tariffs increase, it makes the products coming into the country more expensive. It is essentially an
indirect tax that disproportionately hurts the poor.
Government Fees
Whether it’s applying for a driving license, fees for local parks, or other government services – the rate is
the same.
PRINCIPLES OF SOUND TAX SYSTEM
-fiscal adequacy
(the sources of revenue must be sufficient to meet government expenditures and other public needs.)
- administrative feasibility
(tax laws and regulations must be capable of being effectively enforced with the least inconvenience to
the taxpayer.
- theoretical justice
(that a sound tax system must be based on the taxpayers’ ability to pay)
INCOME TAX
- Tax payers ability to pay
TAX LAWS
- Political in nature
COMPROMISE PENALTY
imposed for each failure to file an information return, statement, or list, for neglect to keep any record,
or for failure to supply any information required by the Tax Code or by the Commissioner of Internal
Revenue on the prescribed date.
LOCAL TAX
A tax levied and collected by a state/province and or municipality. Local taxes are collected in order to
fund local government services, but they often are also used to pay coupons and principals on municipal
bonds. Local taxes sometimes come in the form of
income
sales taxes,
property tax( largest example)
EXAMPLES
-Basic Real Property Tax -is tax on real properties classed as follows: agricultural, commercial, industrial,
residential, timberland, and mineral.
-Franchise Tax -is imposed by LGUs on business franchises at a rate not more than 50% of 1% of the
gross annual receipts of the previous taxable year.
-Business of Printing and Publication Tax -is collected from any business that does printing or publication
of printed materials such as books, cards, pamphlets, posters, or tarpaulins.
-Professional Tax- is collected from doctors, lawyers, engineers, and other professionals engaged in the
exercise or practice of professions that require government examination or acquisition of license to
practice.
-Amusement Tax is tax -on all forms of entertainment such as movies, concerts, and plays. This tax is
usually already included in the ticket price.
-Community Tax- more commonly called Cedula, is required from individuals from a base fee of Php5.00
and additional Php1.00 for every Php1,000 income.
-Annual Fixed Tax -for Delivery Trucks and Vans amounting to Php500 is collected by the LGU from
trucks and vans which deliver goods such as beer, soda, and/or cigarettes.
-Barangay Tax- is subjected on sari-sari stores and retailers whose annual gross sales do not exceed
Php50,000 and is accrued on the first day of January of each year.
Barangay Clearance is paid as a legal permission for particular individuals, hosts, or companies to
conduct an event or start a business in a barangay.
NATIONAL TAX
National taxes are the ones paid to the government through the Bureau of Internal Revenue (BIR). Our
national taxation system is based on the National Internal Revenue Code of 1997 or the Republic Act No.
8424 also known as the Tax Reform Act of 1997, as amended.
EXAMPLES
Capital Gains- Tax is tax imposed on the proceeds from sale, exchange, or other disposition of capital
assets located in the Philippines. Examples of sold assets that are subject to capital gains tax include
properties, stocks, pieces of jewelry, and other high-value goods.
Documentary Stamp Tax- is imposed on documents, instruments, loan agreements, and papers that are
used as evidence of acceptance, assignment, sale or transfer of obligation, rights, or property.
Documentary stamps are usually found on deeds of sale and bank promissory notes, among others.
Donor’s Tax- is levied on a donation or gift for the gratuitous transfer of property between two or more
persons who are both still living at the time of transfer. Even relief goods sent for donation are charged
this type of tax.
Estate Tax -is required to be paid before an estate is transferred to the rightful beneficiary or heir of a
deceased person. This is based on a graduated schedule of tax rate.
Excise tax- is tax on goods produced for sale and subsequently sold within the country. It is considered
an indirect tax which means the manufacturer is supposed to recover it by adding the amount to the
selling price. Sin tax on tobacco and alcohol is an example of excise tax.
Income tax - is imposed on all compensation and income received or earned from practice of profession,
conduct of trade in business, and from properties.
Percentage tax- is a business tax imposed on businesses not covered by Value Added Tax and where
gross annual receipts for sale of good and services do not exceed Php750,000.
Value Added Tax or VAT- is another kind of indirect tax that is passed on to the end consumer. It is a
form of consumption tax making it the most common tax type because all final sales are almost always
charged this tax.
Withholding tax on compensation is tax- deducted from salaries of employees and it is the company’s
responsibility to remit the same to the government. Other kinds of withholding tax are Expanded
Withholding Tax, Final Withholding Tax, and Withholding Tax on Government Money Payments.
AD VALOREM TAX
-refers to the excise tax which is based on selling price or other specified value of the goods/articles.
EXAMPLES
-Property tax is an ad valorem tax that the owner of real estate or other commercial and residential
properties pays on the value of their property
-Sales tax
Sales tax is a tax charged at the point of purchase of certain goods and services. The tax may be included
in the price of the product or added at the point of sale. Sales tax is charged as a percentage by tax
authorities.
-VAT tax is sometimes referred to as a goods and services tax (GST) in some countries. It is charged on
the value added by a business on the goods and services it purchases from the market.
GRADUATED RATE
System where the rate of tax increases on marginal amounts as the amount of taxable income rises.
Synonym for progressive rate.
SYSTEM TAXATION
A REGRESSIVE TAX system levies the same percentage on products or goods purchased regardless of the
buyer's income and is thought to be disproportionately difficult on low earners.
A PROPORTIONAL TAX applies the same tax rate to all individuals regardless of income.
A PROGRESSIVE TAX
imposes a greater percentage of taxation on higher income levels, operating on the theory that high-
income earners can afford to pay more.
The Bureau of Internal Revenue is headed by a Commissioner and Deputy Commissioners numbering 4
The Commissioner of Internal Revenue has the exclusive and original jurisdiction to interpret the
provisions of the National Internal Revenue Code and other tax laws, subject to review by the Secretary
of Finance
HORN BOOK DOCTRINE
(a) statute will not be construed as imposing a tax unless it does so clearly, expressly, and
unambiguously.
(A) tax cannot be imposed without clear and express words for that purpose.
NET WORTH METHOD
It is an extension of the basic accounting principle “assets – liabilities = net worth”
ORDER TO CONSTITE DOUBLE TAXATION
It is imposed on the same property by the same government
It is imposed during the same period for the same purpose.
INTERNAL REVENUE
taxes are the primary source of the government's revenues or income .
PRINCIPLES OF TAXATION
are the fundamentals or basic truths on which our tax laws must be based upon.
FIRST PRINCIPLE
FISCAL ADEQUACY
this is a funds generated must be sufficient to meet government expenditures, because the primary
reason why the government would imposed a taxes is to raise a funds , to raise revenue.
EQUALITY OR THEORITICAL JUSTICE
it is a taxes must be based on the taxpayer's ability to pay, so when the senate or the congress is drafting
or creating a tax law they must also consider the capacity of the ability of the tax payer to pay the tax
,they should know who are taxing with and who will pay this taxes
ADMINISTRATIVE FEASIBILITY
it is the tax laws must be capable of being effectively enforced .
THEORIES OF TAXATION
The economists have put forward many theories or principles of taxation at different times to guide the
state as to how justice or equity in taxation can be achieved. The main theories or principles in brief, are:
(i) Benefit Theory:
According to this theory, the state should levy taxes on individuals according to the benefit conferred on
them. The more benefits a person derives from the activities of the state, the more he should pay to the
government. This principle has been subjected to severe criticism on the following grounds:
Firstly, If the state maintains a certain connection between the benefits conferred and the benefits
derived. It will be against the basic principle of the tax. A tax, as we know, is compulsory contribution
made to the public authorities to meet the expenses of the government and the provisions of general
benefit. There is no direct quid pro quo in the case of a tax.
Secondly, most of the expenditure incurred by the slate is for the general benefit of its citizens, It is not
possible to estimate the benefit enjoyed by a particular individual every year.
Thirdly, if we apply this principle in practice, then the poor will have to pay the heaviest taxes, because
they benefit more from the services of the state. If we get more from the poor by way of taxes, it is
against the principle of justice?
(ii) The Cost of Service Theory:
Some economists were of the opinion that if the state charges actual cost of the service rendered from
the people, it will satisfy the idea of equity or justice in taxation. The cost of service principle can no
doubt be applied to some extent in those cases where the services are rendered out of prices and are a
bit easy to determine, e.g., postal, railway services, supply of electricity, etc., etc. But most of the
expenditure incurred by the state cannot be fixed for each individual because it cannot be exactly
determined. For instance, how can we measure the cost of service of the police, armed forces, judiciary,
etc., to different individuals? Dalton has also rejected this theory on the ground that there s no quid pro
qua in a tax.
(iii) Ability to Pay Theory:
The most popular and commonly accepted principle of equity or justice in taxation is that citizens of a
country should pay taxes to the government in accordance with their ability to pay. It appears very
reasonable and just that taxes should be levied on the basis of the taxable capacity of an individual. For
instance, if the taxable capacity of a person A is greater than the person B, the former should be asked
to pay more taxes than the latter.
It seems that if the taxes are levied on this principle as stated above, then justice can be achieved. But
our difficulties do not end here. The fact is that when we put this theory in practice, our difficulties
actually begin. The trouble arises with the definition of ability to pay. The economists are not unanimous
as to what should be the exact measure of a person's ability or faculty to pay. The main view points
advanced in this connection are as follows:
(a) Ownership of Property: Some economists are of the opinion that ownership of the property is a very
good basis of measuring one's ability to pay. This idea is out rightly rejected on the ground that if a
persons earns a large income but does not spend on buying any property, he will then escape taxation.
On the other hand, another person earning income buys property, he will be subjected to taxation. Is
this not absurd and unjustifiable that a person, earning large income is exempted from taxes and
another person with small income is taxed?
(b) Tax on the Basis of Expenditure: It is also asserted by some economists that the ability or faculty to
pay tax should be judged by the expenditure which a person incurs. The greater the expenditure, the
higher should be the tax and vice versa. The viewpoint is unsound and unfair in every respect. A person
having a large family to support has to spend more than a person having a small family. If we make
expenditure. as the test of one's ability to pay, the former person who is already burdened with many
dependents will have to' pay more taxes than the latter who has a small family. So this is unjustifiable.
(c) Income as the Basics: Most of the economists are of the opinion that income should be the basis of
measuring a man's ability to pay. It appears very just and fair that if the income of a person is greater
than that of another, the former should be asked to pay more towards the support of the government
than the latter. That is why in the modern tax system of the countries of the world, income has been
accepted as the best test for measuring the ability to pay of .
DOCUMENTARY STAMP TAX
EXAMPLE
DIPLOMA IN SCHOOL
DOCUMENT IN GOVERNMENT
GRATITOUS TRANSFERS
-morta -death causa-after
-inter- within vivos- life
ONEROUS
-VAT
-EXCISE TAX
-PERCENTAGE TAX
