GENERAL PRINCIPLES

Basic Features: Present Income Tax System (1996)

What are the basic features of the present income tax system"?
SUGGESTED ANSWER:Our present income tax system can be said to have
the following basic features:

(a) It has adopted a COMPREHENSIVE TAX SITUS by using the

nationality, residence, and source rules. This makes citizens and
resident aliens taxable on their income derived from all sources while
non-resident aliens are taxed only on their income derived from within
the Philippines. Domestic corporations are also taxed on universal
income while foreign corporations are taxed only on income from
within.

. (b) The individual income tax system is mainly PROGRESSIVE IN

NATURE in that it provides a graduated rates of income tax.
Corporations in general are taxed at a flat rate of thirty five
percent (35%) of net income.

. (c) It has retained MORE SCHEDULAR THAN GLOBAL

FEATURES with respect to individual taxpayers but has
maintained a more global treatment on corporations.

Note: Thefollowingmightalsobecitedbythebarcandidatesas features of

the income tax system:

a. Individual compensation income earners are taxed on modified

Gross Income (Gross compensation income less personal
exemptions). Self-employed and professionals are taxed on net
income with deductions limited to seven items or in lieu thereof
the forty percent (40%) maximum deduction plus the personal
exemptions. Corporations are generally taxed on net income
except for non-resident foreign corporations which are taxed on
gross income.

b. The income tax is generally imposed via the self- assessment system
or pay-as-you-file concept of imposing the tax although certain
incomes. Including income of non-residents, are taxed on the
pay-as- you-earn concept or the so called withholding tax.

c. The corporate income tax is a one-layer tax in that distribution of

 profits to stockholders (except to non- residents) are not subject
to income tax.

Basic Stages or Aspects of Taxation (2006)

Enumerate the 3 stages or aspects of taxation. Explain each. (5%)

SUGGESTED ANSWER:The aspects of taxation are:

. (1) LEVYING — the act of the legislature in choosing the persons,

properties, rights or privileges to be subjected to taxation.

. (2) ASSESSMENT and COLLECTION — This is the act of executing

the law through the administrative agencies of government.

. (3) PAYMENT—theactofthetaxpayerinsettlinghis tax obligations.