Origins and General Principles

of Taxation
 Tax

Comes from the Latin word Taxo meaning I
estimate. This is to impose a financial charge or
other levy upon a taxpayer or legal entity by the
State and failure to pay is punishable by law.
 The Four R of Taxation

1.Revenue- to raise money for the construction of on roads,
schools and hospitals, and on other indirect government
functions like good regulation or justice system.
2.Redistribution-to transfer wealth from the richer sections
of society to poorer sections.
3.Repricing- to address externalities; a tobacco is taxed to
discourage smoking.
4.Representation The citizens demand accountability from
their rulers as the other part of the bargain for governance.
 History of Taxation

Taxes are as old as government. The general levels of
taxes have change through the years, depending on
the role of the government.
 Egypt

According to Rehnquist (1992) the first known
system of taxation was in Ancient Egypt around
3000BC-2800BC in the first dynasty of the Old
Kingdom. The earliest and most widespread form of
taxation was the corvee and tithe.
 Greece

In times of war the Athenians imposed a tax referred
to as eisphora. No one was exempt from the tax
which was used to pay for special wartime
expeditures.
 Roman Empire

The earliest taxes in Rome were customs duties on
imports and portoria for exports. Caesar Augustus
was considered by many to be the most brilliant tax
strategists for the Roman Empire.
 Great Britain

Prominent taxes imposed were taxes on land and
various excise taxes. To pay for the army
commanded by Oliver Cromwell, Parliament, in
1643, imposed excise taxes on essential commodities
(grain, meat, etc).
 United States

In 1794, the settlers west of the Alleghenies, in
opposition to Alexander Hamiltons excise tax of
1791, led the rebellion known as Whiskey
Rebellion. The excise tax was considered
discriminatory and the settlers protested against the
tax collectors.
 Taxation In The
Philippines

In thee Philippines, during the Spanish Period to
support the colony, several forms of taxes and
monopolies were imposed. The earliest political
system used during the conquista period was the
encomienda system, which resembled the feudal
system in medieval Europe.
 Buwis and Cedula
System

The buwis (tribute), which could be paid in cash or
in kind (tobacco, chickens, produce, gold, blankets,
cotton, ice, etc., depending on the region of the
country),was initially was fixed at 8 reales (one real
being 8 centavos) and later increased to 15 reales,
apportioned as follows: ten reales buwis, one real
diezmosprediales (tithes), one real to the town
community chest, one real sanctorum tax, and three
reales for church support.
 Forced Labor or Polo y
Servicios

The system of forced labor known as polo y servicios
evolved from the encomienda system, introduced
into the Latin American colonies by the
Conquistadores and Catholic priests who
accompanied them.
 1. Productivity
The chief goal of a tax system is to generate the
revenue a government needs to pay its expenses. When
a tax system produces such revenue, it satisfies the

principles of productivity. If a tax system fails to
produce the needed revenue, the government may have
to add to its debt by borrowing money.

2. Equity
Most people agree that a tax system should be
equitable to the taxpayers. Economists refer two kinds
of equity-horizontal and vertical. Horizontal equity
means that taxpayers who have the same amounts of
income should be taxed at the same rate. Vertical equity
implies that wealthier people should pay more taxes
than poorer people. This is sometimes called the
principle of ability to pay.
 Principles of Taxation

A good tax system must satisfy several general
principles of taxation. According to Vito Tanzi, an
Economist from Harvard University and Director of
International Monetary Fund (IMF), the main
principle of taxation includes the following:
 3. Elasticity
A tax system should be elastic so that it can satisfy
the changing financial needs of a government. Under
the elastic system, taxes help stabilize the economy,. For

example, taxes increase during period of economic
growth help prevent inflation or the rapid price
increases. Increasing taxes would leave less money for
consumers to spend lesser purchase to go up. Similarly,
taxes decrease during a decline in economic activities to
help prevent a recession.

Theories And Bases of Taxation

In De Veras (2011) Quick Notes in Taxation cited
that the three theories and basis of taxation.
 1. Lifeblood Theory
It is said that taxes are what we pay for civilized society.
Without taxes, the government would be paralyzed for lack of the
motive power to activate and operate it. Hence, despite the natural
reluctance to surrender part of ones hard earned income to the

taxing authorities, every person who is able to must contribute his
share in running affairs of the government.
2. Necessity Theory
The power to tax is an attribute of sovereignty emanating
from necessity. It is necessary burden to preserve the States
sovereignty and a means to give the citizenry an army to resist an
aggression, a navy to defend its shores from invasion, a corps of
civil servants to serve, public improvements designed from the
enjoyment of the citizenry and other people and facilities and
protection.
 3. Benefits Protection Theory
Taxation is described as a symbiotic relationship
whereby in exchange of the benefits and protection that
the citizens get from the Government, taxes are paid.

 Escapes from Taxation

1. Tax Evasion also known as tax dodging is the
use of illegal means to defeat or lessen the payment
of the tax.
2. Tax Avoidance also known as tax
minimization is the use of illegally permissible
means to reduce tax liability.
3. Tax Exemption Grant of immunity to particular
class, from a tax which persons or corporation
generally within the same state or taxing district to
obliged to pay.
 Income Taxes

Income tax is a tax on a persons income,
emoluments, profits arising from property, practice
of profession, conduct of trade or business or on the
pertinent items of gross income specified in the Tax
Code of 1997 less reductions and personal and
additional exemptions, if any, authorized for such
types of income by the Tax Code or other special
laws.
 National and Local
Taxation

Taxes are the most important sources of government
revenue. Burkhead (2002) said that tax and taxation are
generally regarded as unpleasant subjects. Governments
may secure a command over resources by borrowing and
spending the proceeds or by creating money. Government
may also secure resources by profit from enterprises.
Occaionally governments maysecure funds from
reparations or from gifts. But the major sources of
government revenue are from taxes of the people. Thus
taxes involved a transfer from p;ersons or organizations
to the state. Texas are the major means for financing the
governments activity.
 INCOME TAX RATES

The tax shall be computed in accordance with and at
the rates established in the following schedule:
 Annual Tax Table

If Taxable Income is Tax Due is
Not over P10,000 5%
Over P10,000 but not over P30,000 P500+10% of the excess over
P10,000
Over P30,000 but not over P70,000 P2,5000+15% of the excess over
P70,000
Over P140,000 but not over P140,000 P8,5000+25%of the excess over
P140,000
Over P140,000 but not over P250,000 P22,5000+25% of the excess over
P140,000
Over P250,000 but not over P500,000 P50,000+30% of the excess over
P250,000
Over P500,000 P125,000+34%of the excess over
P500,000
 Gross Income

1. Compensation for services, in whatever form paid, including but
not limited to fees, salaries wages, commissions and similar item.
2. Gross income derived from the conduct of trade or business
or the exercise of profession.
3. Gains derived from dealings in property.
4. Interest
5. Rents
6. Royalties
7. Dividends
8. Annuities
9. Prizes and winnings
10. Pensions
11. Partners distributive share from the net income of the general
professional partnership
 Excluded from Gross Income

1. Life insurance

2. Amount Received by Insured as Return of Premium
3. Gifts, Bequests, and Devices
4. Compensation for Injuries or Sickness
5. Income Exempt under a |Treaty
6. Retirement Benefits, Pensions, Gratuities
7. Any amount received by an official or employee or by his heirs from the
employer as a consequence of separation of such official or employees.
8. The provisions of any existing law.
9. Payments of benefits due or to become due to any person residing in the
Philippines
10. Benefits received from or enjoyed under the Social Security System.
11. Benefits received from the GSIS under Republic Act No. 8291.
12. Miscellaneous Items
 Tax Rate on Passive
Income

1. Interest Income
2. Royalties Income
3. Prizes Income
4. Cash and/or Property Dividends
5. Capital Gains from Sale of Shares of Stock.
6. Capital Gains from Sale of Real Property
 Estate Tax

It is the tax in the form of percentage of the
taxable estate that is imposed on the property
owners right to transfer the property to others after
his or her death.
 Rates of Tax Payable by Donor

Over But Not The Tax Plus Of the
Over Shall be Excess Over
P100,000 Exempt
P100,000 200,000 0 2% P100,000
200,000 500,000 2,000 4% 200,000
500,000 1,000,000 14,000 6% 500,000
1,000,000 3,000,000 44,000 8% 1,000,000
3,000,000 5,000,000 204,000 10% 3,000,000
5,000,000 10,000,000 404,000 12% 5,000,000
10,000,000 1,004,000 15% 10,000,000
 Donors or Gift Tax

It is a tax imposed on the privilege of
transmitting property by gift. The tax shall apply
whether the transfer is in trust or otherwise, whether
the gift is direct or indirect, and whether the
property is real or personal, tangible or intangible.
 Expanded Value Added Tax

The Value Added Tax (VAT) Reform Act (Republic
Act 9337), more commonly known as the expanded
VAT (E-VAT) law, was passed by Congress in May
2005.
 The Local Government Units which
have taxing power

1. Provinces
2. Cities
3. Municipalities
4. Barangay
 Taxing Revenue-Raising Power
of Provinces

1. Tax on Transfer of Real Property Ownership
2. Tax on Business of Printing and Publication.
3. Franchise Tax.
4. Tax on Sand, Gravel, and Other Quarry
Resources
5. Professional Tax.
6. Amusement Tax.
7. Annual Fixed Tax for Every Delivery Truck or Van
of Manufacturers or Producers, of Certain Products.
 Group 6

Members: Porthia Mae Pidlaoan
Benson Bagayas
Lester Magasino
Reymart Arroyo