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Corporate Tax

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GENERAL PRINCIPLES OF TAXATION
TAXATION Concept:
Taxation is the inherent power of the State to impose and demand contribution for public purpose. (Cooley 72-73)
• INHERENT POWER OF THE STATE means that taxation is essential to the existence of the government. Thus,
it exists without necessity of any specific grant of power by the constitution.
• TO IMPOSE AND DEMAND CONTRIBUTION means that taxation is not a voluntary payment or donation
since its imposition is dependent upon the will or assent of the taxpayer.
• FOR PUBLIC PURPOSE means that taxation must have for objective the support of the government in the
performance of various services and the satisfaction of recognized public network.
Hence, proceeds of the tax must be used:
(a) for the support of the government;
(b) for some of the recognized objects of the government;
(c) to promote the welfare of the community.
PURPOSE OF TAXATION
Primary Purpose - is to provide funds or property with which the government discharges its appropriate functions for
the protection and general welfare of the its citizens.
Non Revenue Objectives
Aside from purely financing government operational expenditures, taxation is also utilized as a tool to carry out the
national objective of social and economic development.
1. to strengthen anemic enterprises by granting them tax exemptions or other conditions or incentives for growth;
2. to protect local industries against foreign competition by increasing local import taxes;
3. as a bargaining tool in trade negotiations with other countries;
4. to counter the effects of inflation or depression;
5. to reduce inequalities in the distribution of wealth;
6. to promote science and invention, finance educational activities or maintain and improve the efficiency of local
police forces;
7. to implement police power and promote general welfare.
BASIC PRINCIPLES OF A SOUND TAX SYSTEM
1. Fiscal adequacy which means that sources of revenue be sufficient to meet the demands of public expenditures.
The sources (proceeds) of tax revenue should coincide with and approximate needs of government expenditures.
2. Equality or Theoretical justice which means that the burden should be in proportion to the taxpayer’s ability
to pay. (Principles of Pol. Eco. Vol. 11)
3. Administrative Feasibility which means that the tax laws should be capable of convenient, just effective and
effective administration. The tax system should be capable of being properly and efficiently administered by the
government and enforced with the least inconvenience to the taxpayer.
LIMITATIONS ON THE POWER OF TAXATION
The power of taxation, is however, subject to constitutional and inherent limitations.
Constitutional Limitations are those provided for in the constitution or implied from its provisions, while Inherent
Limitations are restrictions to the power to tax attached to its nature.
Inherent Limitations
1. Purpose. Taxes may be levied only for public purpose;
2. Territoriality. The State may tax persons and properties under its jurisdiction;
3. International Comity. the property of a foreign State may not be taxed by another.
4. Exemption. Government agencies performing governmental functions are exempt from taxation
5. Non-delegation. The power to tax being legislative in nature may not be delegated. (subject to exceptions)

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Constitutional Limitations
1. Observance of due process of law and equal protection of the laws. (sec, 1, Art. 3) Any deprivation of life ,
liberty or property is with due process if it is done under the authority of a valid law and after compliance with fair
and reasonable methods or procedure prescribed. The power to tax, can be exercised only for a constitutionally
valid public purpose and the subject of taxation must be within the taxing jurisdiction of the state. The government
may not utilize any form of assessment or review which is arbitrary, unjust and which denies the taxpayer a fair
opportunity to assert his rights before a competent tribunal. All persons subject to legislation shall be treated alike
under like circumstances and conditions, both in the privileges conferred in liabilities imposed. Persons and
properties to be taxed shall be group, and all the same class shall be subject to the same rate and the tax shall be
administered impartially upon them.
2. Rule of uniformity and equity in taxation (sec 28(1)Art VI) All taxable articles or properties of the same class
shall be taxed at the same rate. Uniformity implies equality in burden not in amount. Equity requires that the
apportionment of the tax burden be more or less just in the light of the taxpayers ability to bear the tax burden.
3. No imprisonment for non-payment of poll tax (sec. 20, Art III) A person cannot be imprisoned for non-
payment of community tax, but may be imprisoned for other violations of the community tax law, such as
falsification of the community tax certificate, or for failure to pay other taxes.
4. Non-impairment of obligations and contracts, sec 10, Art III . the obligation of a contract is impaired when
its terms and conditions are changed by law or by a party without the consent of the other, thereby weakening the
position or the rights of the latter. IF a tax exemption granted by law and of the nature of a contract between the
taxpayer and the government is revoked by a later taxing law, the said law shall not be valid, because it will impair
the obligation of contract.
5. Prohibition against infringement of religious freedom Sec 5, Art III, it has been said that the constitutional
guarantee of the free exercise and enjoyment of religious profession and worship, which carries the right to
disseminate religious belief and information, is violated by the imposition of a license fee on the distribution and
sale of bibles and other religious literatures not for profit by a non-stock, non-profit religious corporation.
6. Prohibition against appropriations for religious purposes, sec 29, (2) Art. VI, Congress cannot appropriate
funds for a private purpose, or for the benefit of any priest, preacher or minister or for the support of any sect,
church except when such priest, preacher, is assigned to the armed forces or to any penal institutions, orphanage
or leprosarium.
7. Exemption of all revenues and assets of non-stock, non-profit educational institutions used actually,
directly, and exclusively for educational purposes from income, property and donor’s taxes and
custom duties (sec. 4 (3 and 4) art. XIV.
8. Concurrence by a majority of all members of Congress in the passage of a law granting tax
exemptions. Sec. 28 (4) Art. VI.
9. Congress may not deprive the Supreme Court of its jurisdiction to review, revise, reverse, modify or
affirm on appeal or certiorari, final judgments and orders of lower courts in all cases involving the
legality of any tax, impost, assessment or any penalty imposed in the relation thereto.
ASPECTS OF TAXATION
1. Levying of the tax- The imposition of tax requires legislative intervention. In the Philippines, it is Congress that
levies the tax;
2. Collection of the tax levied. This is essentially an administrative function.
The two processes together constitute the taxation system.
CLASSIFICATION OF TAXES
1. AS TO SUBJECT MATTER OR OBJECT
A. Personal, Poll Or Capitation- tax of a fixed amount on individuals residing within a specified territory,
without regard to their property, occupation or business. Ex. Community tax (basic)
B. Property- imposed on property, real or personal, in proportion to its value, or in accordance with
some reasonable method or apportionment. Ex. Real estate Tax
C. Excise- imposed upon the performance of an act, the enjoyment of a privilege, or the engaging in an
occupation, profession or business. Ex. Income tax, VAT, Estate Tax, Donor’s Tax

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 GENERAL PRINCIPLES OF TAXATION TAXATION Concept: Taxation is the inherent power of the State to impose and demand contribution for public purpose. (Cooley 72-73) • INHERENT POWER OF THE STATE means that taxation is essential to the existence of the government. Thus, it exists without necessity of any specific grant of power by the constitution. • TO IMPOSE AND DEMAND CONTRIBUTION means that taxation is not a voluntary payment or donation since its imposition is dependent upon the will or assent of the taxpayer. • FOR PUBLIC PURPOSE means that taxation must have for objective the support of the government in the performance of various services and the satisfaction of recognized public network. Hence, proceeds of the tax must be used: (a) for the support of the government; (b) for some of the recognized objects of the government; (c) to promote the welfare of the community. PURPOSE OF TAXATION Primary Purpose - is to provide funds or property with which the government discharges its appropriate functions for the protection and general welfare of the its citizens. Non Revenue Objectives Aside from purely financing government operational expenditures, taxation is also utilized as a tool to carry out the national objective of social and economic development. 1. to strengthen anemic enterprises by granting them tax exemptions or other conditions or incentives for growth; 2. to protect local industries against foreign competition by increasing local import taxes ...
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