CONCEPT, NATURE AND CHARACTERISTICS OF

TAXATION AND TAXES

DEFINITION OF TAXATION

 the act of laying a tax, i.e., the process by

which the sovereign, through its law – making
body, raises revenue to defray the necessary expenses
of the government
PURPOSE AND IMPORTANCE

To provide funds with which to promote the general

welfare and protection of its citizens, and to enable it
to finance its multifarious activities.
DEFINITION OF TAXES

The enforced proportional contributions from

persons and property levied by the law-making body
of the state for the support of the government and all
public needs
ESSENTIAL CHARACTERISTICS OF TAX
It is an enforced contribution
Tax is not a voluntary payment or donation
Its imposition is no way dependent upon the will or
assent of the persons tax
It is generally payable in money
It is an exaction to be discharged alone in money which
must be in legal tender
It is proportionate in character
It is ordinarily based on the ability to pay

It is levied on persons or property

Tax may be imposed on acts or transactions or
contracts
It is levied by the state which has jurisdiction over the
person or property
The persons or property must be subject to the
jurisdiction of the taxing state
It is levied by the law – making body of the state
The power to tax is a legislative power which only the
legislative body can exercise through the enactment of
statutes or ordinances
It is levied for public purposes
Taxation and tax involves a charge or burden imposed
to provide income for public purposes
THEORY AND BASIS OF TAXATION
The power of taxation proceeds upon the
theory that the existence of government is a
necessity
 It cannot continue without means to pay its expenses
 It has a right to compel all its citizens and property
within its limits to contribute
The basis of taxation is found in the
reciprocal duties of protection and support
between the state and its inhabitants
The taxpayer receives benefits and protection from the
government
NATURE OF TAXATION
It is inherent in sovereignty
The power of taxation is inherent to sovereignty by
being essential to the existence of every government
It is legislative in character
Under the Constitution only legislative body can
impose taxes
Power to tax is also granted to local government subject
to limitations
It is subject to constitutional and inherent
limitations
The limitations are specifically provided in the
fundamental law or implied therefrom while the rest
spring from the nature of taxing power
ASPECTS OF TAXATION
1. Levying or imposition of the tax which is a
legislative act

2. Collection of the tax levied which is essentially

administrative in character
BASIC PRINCIPLES OF SOUND
TAX SYSTEM
Fiscal adequacy
The sources of revenue should be sufficient to meet the
demands of public expenditure
Equality or theoretical justice
The tax burden should be proportionate to the
taxpayer’s ability to pay
Administrative feasibility
Tax laws should be capable of convenient , just, and
effective administration
CALSSIFICATION OF TAXES
AS TO SUBJECT MATTER
Personal, poll or capitation
Tax of a fixed amount imposed on individuals, residing
within specified territory, whether citizens or not,
without regard to their property or the occupation in
which they may be engaged.
Example: community tax
Property
Tax imposed on property, whether real or personal, in
proportion either to its value or in accordance with
some other reasonable method of apportionment
Example: real estate tax

Excise
Any tax which does not fall within the classification of a
poll tax or property tax.
Example: value-added tax, income tax
AS TO PURPOSE
General, fiscal or revenue
Tax imposed for the general purposes of the
government to raise revenue
Example: income tax, almost all taxes

Special or regulatory
Tax imposed for a special purpose
Example: protective tariffs or custom duties on imports,
to protect local industries against foreign competition
AS TO SCOPE
National
Tax imposed by national government
Example: national internal revenue taxes

Municipal or local
Tax imposed by municipal or public corporations
Example: real estate taxes
AS TO DETERMINATION OF ACCOUNT
Specific
Tax of a fixed amount imposed by the head or number,
or by some standard of weight or measurement
Example: excise taxes on wines, cigars, gasoline

Ad valorem
Tax of a fixed proportion of the value of the property
with respect to which the tax is assesed
Example: real estate tax, value-added tax
AS TO WHO BEARS THE BURDEN
Direct
Tax which is demanded from the person who also
shoulders the burden of the tax; or tax which the
taxpayer cannot shift to another
Example: community tax, income tax

Indirect
Tax which is demanded from one person in the
expectation and intention that he should indemnify
himself at the expense of another
Example: all business taxes, VAT
AS TO GRADUATION OR RATE
Proportional
Tax based on fixed percentage of the amount of
property, income or other basis to be taxed
Example: real property tax

Progressive or graduated
Tax based on the rate of which increases as the tax base
or bracket increases
Example: income tax, estate tax, donor’s tax

Regressive
Tax base on the rate of which decreases as the tax base
or bracket increases
TAX DISTINGUISHED FROM OTHER TERMS
Revenue
Refers to all the funds or income derived by the
government whether from tax or any other source
Refers to the amount collected

Internal revenue
Refers to taxes imposed by the legislature or other than
duties on imports and exports
Custom duties
Taxes imposed on goods exported from or imported
into a country
Debt
A generally based contract that is assignable, maybe
paid in any kind and is not punishable (by
imprisonment) if not paid
Penalty
Any sanction imposed as a punishment by violation of
law or acts deemed injurous
CLASSIFICATIONS
Constitutional OF LIMITATIONS
Limitations that are expressly found in the Constitution
or implied by its own provisions which are enumerated:
Due process of law
Equal protection of the laws
Rule of uniformity and equity in taxation
No imprisonment of non-payment of poll tax
Non-impairment of the obligation of contracts
Non-infringement of religious freedom
No appropriation for religious purpose
Exemption of religious, charitable and educational
entities, non-profit cemeteries and churches from
taxation
Exemption of non-stock, non-profit educational
institutions from taxation
Concurrence by majority of all members of Congress for
the passage of a law granting tax exemption
Authority of the President to veto the particular items
in a revenue or tariff bill
Non-impairment of the jurisdiction of the Supreme
Court intaxes
Inherent
Limitations which restrict the power although they are
not embodied in the Constitution which are
enumerated:
Requirement that levy must be for public purpose
Non-delegation of the legislative power to tax
Exemption from taxation of government entities
International comity
Territorial jurisdiction
REQUIREMENT OFofEQUAL
Equal protection the lawsPROTECTION
signifies that all persons
subject to legislation shall be treated alike under like
circumstances and conditions both in the privileges
conferred and liabilities imposed
There is no violation of the protection:
 where those with different incomes are made to pay different
rates for taxes
 Where foreign corporations are made to pay higher amount

of taxes than that paid by domestic corporations