Group 2 Income Taxation .pptx

Group 2
Limpios, Shekinah Grace
Lor, Reyca Mae
Olorvida, Rina Ville
Pajaron, Ernesto
Ramirez, Baby Rose
Nadate, Anica
Villas, Roselyn

Objectives:
• Definition of Taxation Law
• Sources of Tax Laws
• Types of Taxation Laws
• Distinction among Tax Laws, Revenues, Regulations
and Ruling
• Classification of Tax
• Elements of Tax

Objectives:
• Distinction of tax from other charges and fees
• Tax evasion and Tax Avoidance
• Double Taxation
• Tax system and its type
• Principles of a Sound Tax System
• How Tax is Administered
• Powers of BIR and BIR Commissioner

Definition of Taxation Law
Taxation Law refers to any law that arises from the
exercise of the taxation power of the State.
Nature of Internal Revenue Tax Laws
Philippine tax laws are civil and not political on
nature. They are effective even during periods of enemy
occupation. They are laws of the occupied territory and not by
the occupying enemy. Tax payments made during occupations
of foreign enemies are valid.

Nature of interval revenue tax laws
Internal Revenue Laws are not penal in nature because
they do not define crime. Their penalty provisions are merely
intended to secure taxpayers” compliance.
Tax Laws are civil and not penal in nature, although
there are penalties provided for their violation. The purpose of
of tax laws in imposing penalties for delinquencies is to
compel the timely payment of taxes or to punish evasion or
neglect of duty in respect thereof.

Sources of Tax Laws
1. Constitution
2. Tax Treaty and Conventions with Foreign Countries
3. The Tax Code (RA NO. 8424- National Internal Revenue
Code as amended, Tariff and Customs Code and portion of the
Local Government Code
4. Statutes and laws like RA 10963 (TRAIN LAW), RA 1125 ( an
Act creating the Court of Appeals), RA 7716 (E-VAT Law, RA
8424 (Tax Reform Act of 1997
5. Presidential Decrees

Sources of Tax Laws
6. Executive Orders
7. Court Decisions
8. Revenue regulations promulgated by the Department of
Finance
9. Administrative issuance of the BIR like Revenue
Memorandum Circulars, and those of the Bureau of Customs
like Customs Memorandum Orders.
10. BIR Rulings
11. Local Tax Ordinances

tax Definition
• Tax is an enforced proportional contribution levied by the
lawmaking body of the State to raise revenue for public
purpose.
• Tax, in general sense, is any contribution imposed by the
government upon.
• Individuals for the use and service of the State, whether
under the name of toll, tribute, tallage, gabel, duty, custom,
excise, subsidy, aid, supply.
• Tax is not a debt.

Types of Taxation Laws
• The National Internal Revenue
Code (NIRC)/Tax Code/TRAIN LAW
• (income tax, estate tax, donor’s tax,
VAT etc.)
• The Tariff and Customs Code
(import duties, export duties)
• The Local Tax Code
• The Real Property Tax Code
1. Tax Laws – tax laws that provide for the assessment and
collection of taxes.
Special Laws
• -Motor Vehicle Law-motor vehicle
fees
• -Private Motor Vehicle – private
motor vehicle tax
• -Phil. Immigration Act of 1990-
immigration tax
• -Travel Tax Law – travel tax
Examples :

Types of Taxation Laws
• The Minimum Wage Law
• The Omnibus Investment Code of 1987 (E.O. 226)
• Barangay Micro-Business Enterprise (BMBE ) LAW
• Cooperative Development Act
2. Tax Exemption Laws – laws that grant immunity from
taxation.
Examples :

Distinction of taxes with Similar items
Tax vs. Revenue
Tax refers to the amount imposed by the government for public
purpose.
Revenue refers to all income collections of the government which
includes taxes, tariff, licenses, toll, penalties and others.
The amount imposed is tax but the amount collected is revenue.

Tax vs. License Fee
• Tax has broader subject than license. Tax emanates from the taxation power and
imposed upon any object/subject as persons, properties or privileges to raise
revenues
• License fee emanates from police power and is imposed to regulate the exercise
of a privilege such as the commencement of a business or a profession.
• Taxes are imposed after the commencement of a business or profession
(post activity imposition)
• License fee is imposed before engagement in those activities. (pre-activity
Imposition)

Tax vs Toll
• Tax is a levy of government; a demand of sovereignty.
• Toll is a charge for the use of other’s property ; a demand of
ownership.
• Tax amount depends upon the needs of the government.
• Toll amount is dependent upon the value of the property
leased.
• Toll amount can be imposed by both the private entities and
the government.
• Tax amount can only be imposed by the government.

Tax vs. Debt
• Tax arises from the law.
• Debt arises from private contracts.
• Non-payment of tax leads to imprisonment.
• Non payment of debt does not lead to imprisonment.
• Tax cannot be subject to set-off.
• Debt can be subject to set-off
• Tax is generally payable in money.
• Debt can be paid in kind and in money.

Tax vs. Debt
• Tax draws interest only when the taxpayer is delinquent.
• Debt draws interest when it is so stipulated by the contracting
parties or when the debtor incurs a legal delay.
Tax vs. Tariff
• Tax is an amount imposed upon persons , privileges, transactions
or properties.
• Tariff is an amount imposed on imported or exported
commodities.

Tax vs Penalty
• Tax is an mount imposed for the support of the government.
• Penalty is an amount imposed to discourage an act.
• Tax arises from law.
• Penalty may arise from law and contract and be imposed by both
the government and private individuals.

Tax vs. Special Assessment
• Tax is an amount imposed upon persons, properties or privileges.
• Special Assessment is levied by the government on lands, adjacent to a public
improvement; imposed on land only and is intended to compensate the
government for a part of the cost of the improvement
• Special Assessment is based on the benefit in terms of the appreciation in land
value caused by the public improvement.
• Tax is levied without expectation of a direct proximate benefit.
• Special Assessment attaches to the land it will not become a personal obligation of
the land owner; non-payment of special assessment will not result to
imprisonment of the owner.
• Non-payment of tax will result to imprisonment of the taxpayer.

classification of tax
1. According to Subject Matter
- Personal, Poll or Capitation Tax - tax of a fixed amount imposed
upon individual, whether citizens or not, residing within specified
territory without regard to their property or the occupation I which he
may be engaged (e.g. basic community tax)
- Property Tax- tax imposed on property, whether real or personal, in
proportion either to its value or in accordance with some other
reasonable method of apportionment (e.g. real estate tax).
- Excise Tax – any tax which does not all within the classification of a
poll or property tax. This is a tax on the exercise of certain rights and
privileges (e.g. income taxes, estate tax, donor’s tax)

2.According to Who Bears the Burden/As to Incidence
-Direct Tax (e.g. income tax, estate tax, donor’s tax)
-Imposed on the person obliged to pay the same and this burden
cannot be shifted or passed on to another.
-A tax in which the taxpayer who pays the tax is directly liable
therefor, that is, the burden of paying the tax falls directly on the
person paying the tax.
-Demanded from the very person who, as intended, should pay the
tax which he cannot shift to another.

- Indirect Tax (e.g. VAT, excise tax on sin products)
- Payment is demanded from a person who is allowed to
transfer the burden of taxation is to another
- A tax is paid by a person who is not directly liable
therefor, and who may therefor shift or pass the tax to another person or
entity, which ultimately assumes the tax burden
-Is demanded in the first instance from one person with
the expectation that he can shift the burden to someone else, not as a
tax but as part of the purchase price.

3.According to Determination of Amount
-Specific Tax – this is a fixed amount based on volume, weight or quantity
quantity of goods as measured by tools, instrument or standards.
A tax of a fixed amount fixed imposed on a per unit basis such as per
kilo, liter, meter (e.g. excise tax on cigars and liquors)
-Ad Valorem Tax – this imposition is based on the value of the property
subject to tax.

4. According to Purpose (e.g. VAT, income tax, donor’s tax and
estate tax)
- Fiscal/General/Revenue Tax – levied without a specific or pre-
determined purpose; tax imposed for general purpose (e.g. income
tax, donor’s tax and estate tax
-Sumptuary Tax – those intended to achieve some social or
economic goals;
-Regulatory Tax - a tax imposed to regulate business, conduct, acts or
transactions (e.g. tariff and certain duties on imports)

5. According to Jurisdiction/Scope of Authority (e.g. tariff and
certain duties on imports)
National Tax – imposed by the National Government
a. income tax – tax on annual income, gains or profits
b. estate tax – tax on gratuitous transfer of properties by a
decedent upon death
c. donor’s tax – tax on gratuitous transfer of property by a living
donor
d. Value Added Tax -consumption tax collected by non-Vat
business taxpayers
e. other percentage tax – consumption tax collected by VAT
business taxpayers

f. excise tax - tax on sin products and non-essential commodities
such as alcohol, cigarettes and metallic minerals.
g. documentary tax – a tax on documents, instruments, loan
agreement and papers evidencing the acceptance, assignment, sale or
transfer of an obligation . right or property incident thereto
Local Tax – imposed by municipal corporations (e.g. real estate tax)
a. real property tax
b. professional tax
c. business taxes, fees and charges, community tax
d. tax on banks and other financial institutions

6. According to Graduation or Rate
- Proportional/Flat Rate Tax – unitary or single rate (e.g. Vat)
- Progressive/Graduated Tax – as the tax base grows the tax rate
increases. (e.g. income tax on individuals, estates, trusts, estate tax,
donor’s tax)
- Regressive Tax – the tax rate decreases as the tax base increases. -
Mixed Tax – this tax manifest tax rates which is a combination of
any
of the above types of tax.

elements of a valid tax
1.Tax must be levied by the taxing power having jurisdiction over the
object of taxation.
2.Tax is an enforced contribution.
3.Tax must not violate constitutional and inherent limitations.
4.Tax must be uniform and equitable.
5.Tax must raise revenue for the government.
6.Tax must be for public purpose.
7.Tax must be proportionate in character.
8.Tax is generally payable in money.

tAX AVOIDANCE
Some Examples of Tax Avoidance Strategies
• Taking legitimate tax deductions to minimize business expenses and
lower your business tax bill.
• Setting up a tax deferral plan such as an IRA, SEP-IRA, or 401(k) plan to
delay taxes until a later date.
• Taking tax credits for spending money for legitimate purposes, like taking
a tax credit for giving your employees paid family leaves.
Tax avoidance is the legitimate minimizing of taxes and maximize after-tax
income, using methods included in the tax code. Businesses avoid taxes by
taking all legitimate deductions and tax credits and by sheltering income
from taxes by setting up employee retirement plans and other means, all
legal and under the Internal Revenue Code or state tax codes.

tAX EVASION
Examples of Tax Evasion/Tax Fraud Practices
• In general, it's considered tax evasion if you
knowingly fail to report income or you don't
file an income tax return. Some practices
considered tax evasion/tax fraud:
• Under-reporting income (claiming less
income than you actually received from a
specific source, particularly cash income.
• Not reporting an income source.
Tax evasion, on the other hand, is using illegal means to avoid paying taxes. Usually,
tax evasion involves hiding or misrepresenting income. This might be underreporting
income, inflating deductions without proof, hiding or not reporting cash transactions,
or hiding money in offshore accounts.
• Providing false information to the IRS about
business income or expenses
• Deliberately underpaying taxes owed.
• Keeping two sets of books.
• Making false entries in books and records.
• Claiming personal expenses as business
expenses.
• Claiming false deductions without having
documents to support them
• Hiding or transferring assets or income.

double taxation
DOUBLE TAXATION occurs when the same taxpayer is taxed twice by the same
tax
jurisdiction for the same thing.
-refers to the imposition of taxes on the same income, assets or financial
transaction at two different points of time.
Example : stockholders' dividends are taxed after taxing the corporate earnings.
Elements of double taxation
1. Primary element : same object
2. Secondary elements:
a. Same type of tax
b. Same purpose of tax
c. Same taxing jurisdiction
d. Same tax period

double taxation
Types of Double Taxation
1. Direct double taxation – this occurs when all the elements of double
taxation exist for both impositions.
Example:
a. An income tax of 10% on monthly sales and a 2% income tax on the
annual sales
b. A 5% tax on bank reserve deficiency and another 1 % penalty per day as
a consequence of such reserve deficiency.
2. Indirect double taxation – occurs when one of the secondary elements of
double taxation is not common for both impositions.

double taxation
Example:
a. The national government levies business tax on the sales or gross receipts of business
while the local government levies business tax upon the same sales or receipts.
10
b. The national government collects income tax from a taxpayer on his income while the
local government collects community tax upon the same income.
c. The Phil government taxes foreign income of domestic corporations and resident
citizens while a foreign government also taxes the same income ( international double
taxation)
How to minimize double taxation
1. Provision of tax exemption
2. Allowing foreign tax credit (deductions from taxes paid abroad) 3. Allowing reciprocal
tax treatment between the home country and a foreign country
4. Entering into treaties or bilateral agreements

Tax system and its type
Tax system refers to the methods or schemes of imposing,
assessing, and collecting taxes. It includes all the tax laws and
regulations, the means of their enforcement, and the government
offices, bureaus, and the withholding agents which are part of the
machineries of the government in tax collection. The Phil.
Tax system is divided in two: the national tax system and the
local tax system.

Types of Tax systems According to Imposition
1.Progressive – employed in the taxation of income of
individuals, and transfers of properties by individuals
2.Proportional – employed in taxation of corporate
income and business
3.Regressive = not employed on the Phil.

Types of Tax system According to Impact
1. Progressive system
–is one that emphasizes direct taxes. A
direct taxcannot be shifted. Hence, it
encourages economic efficiency as it leavesno
other resort to taxpayers than to be efficient.
This type of tax systemimpacts more upon the
rich.

2. Regressive system
- is one that emphasizes indirect taxes.
Indirect taxes are shifted by businesses to
consumers, hence the impact of taxation rests upon
the bottom end of the society. In effect, a regressive
tax system is anti poor. Despite the constitutional
guarantee of a progressive taxation the Phil has
dominantly regressive tax system due to the
prevailing business tax.

tax collection system
1.Withholding system – the payer of the income tax
withholds or deducts the tax on the income before releasing
the same to the payee and remits the same to the
government. The following are the withholding taxes
collected under this system:
a. Withholding tax on compensation – a tax withheld by the
employer from payments of compensation income to employees.
b. Expanded withholding tax - a withholding tax prescribed on
certain income payments and is creditable against the income tax
due of the payee for the taxable quarter in which the particular
income was earned.

c. Final withholding tax – a kind of withholding tax which
is prescribed on certain income payments and is not
creditable against any oncome tax due of the payee for the
taxable year.
d. Withholding tax on government payments - the tax
withheld by the national government agencies and
instrumentalities including government- owned and
controlled corporation on their payments to taxpayers,
suppliers or payees.

2. Voluntary compliance system – the taxpayer himself
determines his income, reports through income tax returns
and pays the tax to the government. This system is also
referred to as the self - assessment method. A portion of the
tax due payable herein may have been withheld under the
withholding system such as:
a. Withholding tax on compensation by compensation
earners

b. Expanded withholding tax by taxpayer engaged in
business or exercise of profession. The taxes withheld are
treated as tax credit (deduction) against the tax due of the
taxpayer in the income tax return. The taxpayer shall pay any
balance still due after such credit or claim refund or tax
credit for excess tax withheld.
3. Assessment or enforcement system – the government
identifies noncompliant taxpayers, assess their tax duties
and penalties and enforces collections by coercive means
such as summary proceeding or judicial proceedings when
necessary.

principles of a sound tax system
1.Fiscal Adequacy – the sources of revenue are sufficient to meet
government expenditures. The government must not incur deficit. A
budget deficit paralyzes the government’s ability to deliver the essential
public services to the people. Hence, taxes should increase in response to
increase in government spending.
2.Administrative Feasibility - the tax laws must be capable of
convenient, just and effective administration to encourage compliance.
Government should make it easy for the taxpayer to comply by avoiding
administrative bottlenecks and reducing compliance costs.

principles of a sound tax system
The following are applications of the principle of administrative feasibility:
a.E-filing and e-payment of taxes
b.Substituted filing system for employees
c.Final withholding tax on non-resident aliens or corporations
d.Accreditation of authorized agent banks in the filing and payment of
taxes.
3.Theoretical Justice or Equality - the tax imposed must be proportionate
to taxpayer’s ability to pay. It also suggests that the exercise of taxation
should not be oppressive, unjust or confiscatory.

how tax is administered ?
TAX ADMINISTRATION
Tax administration - refers to the management of the
tax system. Tax administration of the national tax
system in the Phil. Is entrusted to the Bureau of Internal
Revenue which is under the supervision and
administration of the Department of Finance.

how tax is administered ?
Chief Officials of the Bureau of Internal Revenue
1.1 Commissioner
2.4 Deputy Commissioners each to be designate to the
following:
a.Operational Group
b.Legal Enforcement Group
c.Information Systems Group
d.Resource Management Group

powers of bir and bir commissioner
Powers of the Bureau of Internal Revenue
1.Assessment and collection of taxes
2.Enforcement of all forfeitures, penalties and fine and
judgments in all cases
3.Giving effect to and administering the supervisory and
police power conferred to it by the NIRC and other laws
4.Assignment of internal revenue officer and other
employees to other duties

Powers of the Bureau of Internal Revenue
5. Provision and distribution of forms, receipts,
certificates, stamps, etc. to proper officials
6. Issuance of receipts and clearances
7. Submission of annual report, pertinent information to
Congress and reports to the Congressional Oversight
Committee in matters of taxation

Powers o f the BIR COMMISIONER
1.To interpret the provisions of the NIRC, subject to review by the
Secretary of Finance
2.To decide tax cases, subject to the exclusive appellate jurisdiction of
the Court of Tax Appeals, such as:
a.Disputed assessments
b.Refunds of internal revenue taxes, fees or other charges
c.Penalties imposed
d.Other NIRC and special law matters administered by the BIR

3.To obtain information and to summon, examine and take testimony of
persons to effect tax collection
Purpose of CIR to ascertain:
a.The correctness of any tax return or in making a return when none
has
been made by the taxpayer
b.The tax liability of any person for any internal revenue tax or in
correcting any such liability
c.Tax compliance of the taxpayer
Authorized acts:
a.To examine any book, paper, record or other data relevant to such
inquiry

b.To obtain on a regular basis any information from any person other
than the person whose internal revenue tax liability is subject to audit
c.To summon the person liable for tax or required to file a return, his
employees, or any person having possession and custody of his books of
accounts and accounting records to produce such books, papers, records
or other data and to give testimony
d.To take testimony of the person concerned, under oath, as may be
relevant or material to the inquiry
e.To cause revenue officers and employees to make canvass of any
revenue district

4.To make assessment and prescribe additional requirement
for tax administration and enforcement
5.To examine tax returns and determine tax due thereon
6.To conduct inventory taking and surveillance
7.To prescribe presumptive gross sales and receipts for a
taxpayer when
a.The taxpayer failed to issue receipts; or
b.The CIR believes that the books or other records of the
taxpayer do not correctly reflect the declaration in the return

8.To terminate tax period is:
a.Retiring from busines
b.Intending to leave the Phil.
c.Intending to remove, hide or conceal his property
d.Intending to perform any act tending to obstruct the proceedings
for the collection of the tax or render the same ineffective
The termination of the taxable period shall be communicated through a
notice to the taxpayer together with a request for immediate payment.
Taxes shall be due and demandable immediately.

9.To prescribe real property values
The CIR is authorized to divide the Phi. Into zones and prescribe real
property values after consultation with competent appraisers. The
values prescribed are referred to as zonal value.
For purposes of internal revenue taxes, fair value of real property shall
mean whichever is higher of:
a.Zonal value prescribed by the Commissioner
b.Assessed value per the Provincial and City Assessor’s Office
For purposes of local taxes, fair value of real property pertains to
the assessed value.

10.To compromise tax liabilities of taxpayers
11. To inquire into bank deposits only under the following instances:
a.Determination of the gross estate of a decedent
b.To substantiate the taxpayer’s claim of financial incapacity to pay tax
in an application for tax compromise
In case of financial incapacity, inquiry can proceed only if the taxpayer
waives his privilege under the Bank Deposit Secrecy Act
12. To accredit and register tax agents
13.To refund or credit internal revenue taxes

14.To abate or cancel tax liabilities in certain cases
15. To prescribe additional procedures or documentary requirements
16.To delegate his powers to any subordinate officer with a rank
equivalent to a division chief of an office

thank you !!!
GOD BLESS YOU ALL

Group 2 Income Taxation .pptx

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