TAXATION
is a general concept for devices used
by governments to extract money or
other valuable things from people and
organizations by the use of law.
An inherent power of the state to
raise income and to demand enforced
contributions for public purposes.
FORMS OF TAXATION
Direct Taxes
Indirect Taxes
What is Tax ?
- is a financial charge or other levy
imposed upon a taxpayer by a state or
the functional equivalent of a state
such that failure to pay is punishable
by law.
- Taxes are payments people are
required to pay to local, state and
national governments.
Purposes of Taxation
-
Expenditures on war, the enforcement
of law and public order, protection
of property, economic infrastructure
(roads, legal tender, enforcement of
contracts, etc.), public works, social
engineering, subsidies, and the
operation of government itself.
Governments also use taxes to
fund welfare and public services.
Characteristics of Tax
1. It is an enforced contribution
2. It is generally payable in form of
money
3. It is proportionate in character
4. It is levied on person or property
5. It is levied by the state, which has
the jurisdiction over the person or
property
6. It is levied by the law-making body of the
state
7. It is levied for public purposes
Basic Principles of a Sound Tax
System
1. Fiscal Adequacy this means that the
resources of revenue should be
sufficient to meet the demands of
public expenditures
2. Equality or theoretical justice tax
burden should be proportioned to the
taxpayers ability to pay
3. Administrative feasibility tax laws
should be capable of convenient, just
and effective administration
Classification of taxes:
According to Subject
1.Personal, poll or capitalization.
Tax of a fixed amount is imposed on
individuals residing within the
specified territory, whether he is a
citizen or not, regardless of his
property or his occupation in which he
is engaged.
Example: Residence Tax
2. Property Tax. tax imposed on
property whether it is a real or
personal. It is proportion either to its
value, or in accordance with some
reasonable method of apportionment.
Example: Real Estate Tax.
3. Excise Tax. Tax imposed upon
the performance of an act, the
enjoyment of a privilege, or the
engagement of an occupation.
Example : Privilege Taxes on business
or occupation, profession or business;
estate, donors and income taxes.
According to purpose
1.General Fiscal or Revenue. This
type of Tax is imposed for the general
purpose of the government.
Example: Income Tax, Sales Tax
2.Special or Regulatory. It is a
taxed imposed for a special purpose,
to achieve some special economic and
1.
2.
1.
2.
3.
4.
irrespective of whether it is actually
raised or not.
According to Scope
1. National. This is the tax imposed
by national government.
2. Municipal or local. It is the tax
imposed by the municipal government
.
According to determination of
amount
Specific. This is tax of affixed amount
imposed by the head or number, or by
some standard of weight or
measurement that requires no
assessment.
Ad valorem. This is a fixed proportion
tax imposed on property with respect
to its assessed value. It requires the
intervention of assessors or appraiser
to estimate the value of such property
before the amount value.
According to graduation rate
Proportional. This tax is based on a
fixed percentage of the amount of
property, income and other bases.
Progressive or graduated. This is the
tax imposed in accordance to the
specified bracket in which the based
on.
Regressive. This is the tax imposed in
accordance to the rate of which
decrease as the tax base brackets
increases.
Degressive-increase of rate is not
proportionate to the increase of tax
base.
Distinction of Taxes from other
Related Terms
1. Revenue - It refers to all the funds or
income derived from the government,
whether it comes from tax or any
other source.
- refers to the amount
collected, while tax refers to the
amount imposed.
2. Internal Revenue refers to
taxes imposed by the legislature to
duties on imports and exports.
3. Custom Duties Taxes imposed
on goods exported from a country or
imported into a country.
4. Tarif The term is simply
explained by considering these ideas
of concepts.
a. This may be the book of rates,
which is usually drawn, in alphabetical
order. It contains names of several
lands or merchandise together with
their corresponding payments.
b. This may be the duties
payable on goods imported or
exported.
c. This might be system or
principle of imposing duties on the
importation or exportation of goods.
5. Debt A tax is not a debt and the
two are distinguished as follows:
a. A debt is generally based
on contract, while a tax is based on
laws.
b. A debt is assignable, while
a tax is generally payable in money.
c. A debt may be paid in kind, while a
tax is generally payable in money.
d. A debt may be the subject of set-of
or compensation, while a tax is
generally not; and
e. A person cannot be imprisoned of
non-payment of debt while
imprisonment is a sanction for nonpayment of tax.
6. Toll defined as a sum of money
for the use of something, generally
applied to consideration, which is paid
for the use of roads, bridges or of
public purposes.
7. License or permit fee It is a
charge imposed under the police
power for the purpose of regulation.
8. Penalty It is any sanction
imposed as a punishment for violation
of law or acts injurious.
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