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Nature and Concepts of Taxation and Taxes

A. Meaning of TaxationB. Purposes of TaxationC. Essential Characteristics of TaxesD. Theory/Basis of the Power of TaxationE. Nature of the Power of TaxationF. Basic Principles of TaxationG. Basic Classification of TaxesA. Meaning of TaxationB. Act of laying down taxC. Process or means by which the sovereign thru its law-making body raises income or revenue to

finance government expenses.

D. Process of dividing the cost of government expenses among those who in some way areprivileged to share the benefits and bear the burden of payments.

E. It is basically a power- an inherent power of the state to demand or enforced contribution forpublic purposes.

B. Purposes of Taxation

1. To provide the government with public funds.2. To promote the general welfare of its citizens.3. To finance government activities, programs and projects.C. Essential Characteristics of Taxes

1. Enforced contribution2. Pecuniary character3. Proportionate in character4. Levied or imposed on persons, property, property rights5. Levied or imposed by the law-making body of the state6. Levied for a public purpose7. Levied or imposed by the state which has jurisdiction on persons or property.

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8. Commonly required to be paid annually or at specific intervals.D. Theory/Basis of the Power of

Taxation

1. Existence of the government is a necessity.

2. Benefits-Received Principle

* mutual support and protection between the state and its citizens

E. Nature of the Power of Taxation

1. Its is inherent in the sovereignty; it is essential to the existence of every government.2. It is legislative in character.3. It is subject to constitutional and inherent limitations.F. Basic Principles of Taxation1. Fiscal Adequacy - the sources of government revenues must be sufficient to meet fiscal expenses.

2. Ability to pay - tax burden should be in proportion to the taxpayers ability to pay.

3. Administrative feasibility tax laws should be capable of convenience and just; not burdensome

and discouraging to the taxpayer.

G. Basic Classification of Taxes

1. As subject matter/object to be taxeda. personal

b. property

c. excise

2. As to who bears the burden

a. Direct

b. Indirect

3. As to the determination of amount to be paid

a. Specific

b. Ad valorem

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4. As to scope of authority

a. national

b. local

5. As to rate of tax

a. progressive

- tax increase as the income of the

tax payer increases.

b. regressive

- tax decreases as the income of the

tax payer increases.

c. Proportional

- a fixed percentage tax imposed on income, sales on other forms of revenue regardless of the

amount.

6. As to purpose of the tax

a. general or revenue

b. special or regulatory