30261883 Memory Aid Taxation 1 Ok

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San Beda College of Law 2001 Centralized Bar Operations

Memory AidTaxation LawTABLE OF CONTENTS

I. GENERAL PRINCIPLES .................................................................... 2 A. Power of Taxation........................................................................... 2 B. Situs of Taxation ............................................................................. 4 C. Limitations on the Power of Taxation .............................................. 4 D. Double Taxation ............................................................................. 6 E. Forms of Escape from Taxation ...................................................... 6 F. Tax Enforcement and Administration .............................................. 7 II. NATIONAL TAXATION ...................................................................... 9 A. Income Tax.................................................................................... 9 B. Transfer Taxes ............................................................................ 14 C. Expanded Value Added Tax ........................................................ 17 III. LOCAL TAXATION ......................................................................... 19 IV. REAL PROPERTY TAXATION ....................................................... 19 V. TARIFF AND CUSTOMS LAWS...................................................... 20 VI. TAX REMEDIES ............................................................................. 22 A. Under the National Internal Revenue Code ................................ 22 B. Under the Local Government Code ............................................ 29 C. Under the Tariff and Customs Code ........................................... 30 VII. COURT OF TAX APPEALS........................................................... 33 VIII. ANNEX A: COMPARATIVE TABLE OF TAX REMEDIES ........... A-1 IX. ANNEX B: INCOME TAX TABLES .............................................. B-1

SAN BEDA COLLEGE OF LAW, 2000-2001

MEMORY AID IN TAXATION LAWAny form of reproduction of this copy is strictly prohibited!!!

I.GENERAL PRINCIPLES THE POWER OF TAXATION Definitions:1. Taxation: Power by which the sovereign raises revenue to defray the necessary expenses of the government from among those who in some measure are privileged to enjoy its benefits and must bear its burden. 2. Taxes: Enforced proportional contribution from properties and persons levied by the State by virtue of its sovereignty for the support of government and for public needs.

b. Oliver Wendell Holmes Dictum Power to tax is not the power to destroy while this court (US Supreme Court) sits power to tax knows no limits except those expressly stated in the Constitution. Marshall and Holmes Dictums Reconciled: Although the power to tax is almost unlimited, it must not be exercised in an arbitrary manner. We have courts to which people may seek redress in case of irregularities. 3. Benefits-Protection Theory There exist reciprocal duties of protection and support between State and its inhabitants. Inhabitants pay taxes and in return receive benefits and protection from the State.

Importance of TaxesTaxes are the lifeblood of the government and so should be calculated without unnecessary hindrance; therefore, their prompt and imperious availability is an imperious need.

Characteristics of Taxes:1. 2. 3. 4. forced charge; generally payable in money; levied by the legislature; assessed with some reasonable rule of apportionment; 5. imposed by the State within its jurisdiction; 6. levied for public purpose.

General Rule: Taxes are personal to thetaxpayer. Illustrations: 1. Corporations tax delinquency cannot be enforced against the stockholder (Corporate Entity Doctrine). Exception: Stockholders may be held liable for unpaid taxes of a dissolved corporation if the corporate assets have passed into their hands. 2. Transfer tax on the estate cannot be assessed against the heirs. Exception: Heirs may be held liable for the transfer tax on the estate, if prior to the payment of the same, the properties of the decedent have been distributed to the heirs.

Theories or bases of taxation:1. Lifeblood Theory Taxes are the lifeblood of the nation. Without revenue raised from taxation, the government will not survive, resulting in detriment to society. Without taxes, the government would be paralyzed for lack of motive power to activate and operate it. (CIR vs Algue, Inc., et. al.) Illustrations of Lifeblood Theory: a. Collection of taxes may not be enjoined by injunction. b. Taxes could not be the subject of compensation and set-off. c. A valid tax may result in destruction of the taxpayer's property. 2. Necessity Theory Existence of a government is a necessity and cannot continue without any means to pay for expenses. a. Marshall Dictum Power to tax is the power to destroy describes the unlimitedness of the power and the degree of vigor with which the taxing power may be employed in order to raise revenue.

Nature of the Taxing Power1. attribute of sovereignty and emanates from necessity, relinquishment of which is never presumed; 2. legislative in character; and 3. subject to inherent and constitutional limitations.

Purpose and Objectives of Taxation:1. Revenue 2. Non-Revenue (still a tax but imposed under 2 its non-revenue objective) KEY: PR EP a. Regulation; b. Promotion of general welfare; c. Reduction of social inequity; d. Encouragement of economic growth; and e. Protectionism.

Scope of legislative taxing power (MS

Page 235 Taxation Law Committee :Eric Recalde (Chairperson), Jose Voltaire Bautista (Subject Head & EDP); Subject Heads: Cel Carungay, George Ortha II, Jennifer Rocetes Members: Russel Alabado, Acel Alisuaga, Pete Cadavos, Clarence De Guzman,Trina De Vera, Maricel Echavez, Tria Galang, Abraham Guiao, Zharone Japzon, Leah Jimenez, Arnold Kabanlit, Richard King, Leah Lee, Rhouan Loseriaga, Kelly Mallillin, Jun Manuel, Almar Marimla, Risa Mendoza, Karen Narcise, Liza Nofuente, Jeannette Negre, Ferdinand Perez , Ana Liza Pural, Albert Rebosa, Roy Relato, Allan Rosauro, Rowena Ruiz, Day Sacdalan, Bombet Sevillano, Nancy Siy, Mary Anne Sy

SAN BEDA COLLEGE OF LAW, 2000-2001

MEMORY AID IN TAXATION LAWAny form of reproduction of this copy is strictly prohibited!!!

SAPAK): 1. Subject to be taxed, provided it is within its jurisdiction; 2. Amount or rate of the tax; 3. Purposes for its levy, provided it be for public purpose; 4. Kind of tax to be collected; 5. Apportionment of the tax; 6. Situs of taxation; and 7. Method of collection.

TAXATION

POLICE POWER

EMINENT DOMAIN

Effect of transfer: Taxes paid become part of the public funds

No transfer but only restrain on the exercise of property rights

Property is taken by the State upon payment of just compensation It affects only the particular property comprehended Necessity of the public for private property

Aspects of Taxation:1. Levy or imposition of the tax; and 2. Enforcement or tax administration

Scope:It affects all persons, property, and excises It affects all persons, property, privileges, and even rights Public necessity and right of State and of public to selfprotection and selfpreservation

Basic Principles of a sound tax system:A sound tax system must be: 1. sufficient to meet governmental expenditures (fiscal adequacy); 2. capable of being effectively enforced (administrative feasibility); and 3. based on the taxpayers ability to pay (theoretical justice).

Basis:Public necessity

TAXATION, POLICE POWER AND EMINENTDOMAIN DISTINGUISHED TAXATION POLICE POWER Purpose: To raise To promote public welfare revenue through regulations EMINENT DOMAIN To facilitate the States need of property for public use

Impositions not strictly considered astaxes: 1. Toll amount charged for the cost and maintenance of property used; 2. Compromise penalty amount collected in lieu of criminal prosecution in cases of tax violations; 3. Special assessment levied only on land based wholly on the benefit accruing thereon as a result of improvements or public works undertaken by government within the vicinity; 4. License fee regulatory imposition in the exercise of the police power of the State; 5. Margin fee exaction designed to stabilize the currency; 6. Custom duties and fees duties charged upon commodities on their being imported into or exported from a country; 7. Debt a tax is not a debt but is an obligation imposed by law.

Amount ofexaction: Not limited Limited No exaction; just compensation is paid by the Government Direct benefits result in the form of just compensation

Benefits:No special or direct benefits are received by the taxpayer No direct benefits are received; damnum absque injuria is attained

Nonimpairment of contracts: Contracts may not be impaired

LICENSE FEE VS. TAXLICENSE FEE Basis: Police power Purpose: To regulate TAX Power of taxation. To raise revenue.

Contracts may be impaired

Contracts may be impaired

Page 335 Taxation Law Committee :Eric Recalde (Chairperson), Jose Voltaire Bautista (Subject Head & EDP); Subject Heads: Cel Carungay, George Ortha II, Jennifer Rocetes Members: Russel Alabado, Acel Alisuaga, Pete Cadavos, Clarence De Guzman,Trina De Vera, Maricel Echavez, Tria Galang, Abraham Guiao, Zharone Japzon, Leah Jimenez, Arnold Kabanlit, Richard King, Leah Lee, Rhouan Loseriaga, Kelly Mallillin, Jun Manuel, Almar Marimla, Risa Mendoza, Karen Narcise, Liza Nofuente, Jeannette Negre, Ferdinand Perez , Ana Liza Pural, Albert Rebosa, Roy Relato, Allan Rosauro, Rowena Ruiz, Day Sacdalan, Bombet Sevillano, Nancy Siy, Mary Anne Sy

SAN BEDA COLLEGE OF LAW, 2000-2001

MEMORY AID IN TAXATION LAWAny form of repr