CINDY N.
BITONG BSA-2A INCOME TAXATION
Aldersgate College, Inc.
Bachelor of Science in Accountancy
2022 – 2023
Topic: Taxes, Tax Laws and Tax Administration
Students: BSA 2A
Schedule: MT 5:30pm to 7:00pm
Assignment
Enumerate and/or discuss:
1. Types of taxation laws
a. Tax Laws- These are laws that provide for the assessment and collection of
taxes. Examples are; The National Internal Revenue Code, The Tariff and
Customs Code, The Local Tax Code, and The Real Property Tax Code.
b. Tax Exemption Laws- These are laws that grant certain immunity from
taxation. One example is The Minimum Wage Law
2. Distinction among tax laws, revenue regulations, and rulings
Tax Laws are laws that that provide for the assessment and collection of taxes.
Revenue regulations, on the other hand, are formal pronouncements
intended to clarify or explain the tax law and carry into effects its general
provisions by providing details of administration and procedure while rulings
are merely advisory or sort of information service to the taxpayer.
3. Tax, its elements, and classifications
Tax is an enforced proportional contribution levied by the lawmaking body of
the State to raise revenue for public purpose.
Elements of a Valid Tax
a. Tax must be levied by the taxing power having jurisdiction over the
object of taxation.
b. Tax must not violate constitutional and inherent limitations.
c. Tax must be uniform and equitable.
d. Tax must be for public purpose.
e. Tax must be proportional in character.
f. Tax is generally payable in money.
Classification of taxes
a. As to purpose
1. Fiscal or Revenue Tax- a tax imposed for general purpose.
2. Regulatory- a tax imposed to regulate business, conduct, acts
or transactions.
3. Sumptuary- a tax levied to achieve some social or economic
objectives.
b. As to subject matter
1. Personal, poll, or capitation- a tax on persons who are
residents of a particular territory.
2. Property Tax- a tax on properties, real or personal
3. Exercise or privilege tax- a tax imposed upon the performance
of an act, enjoyment of a privilege or engagement in an
occupation.
c. As to incidence
CINDY N. BITONG BSA-2A INCOME TAXATION
1. Direct Tax- When both the impact and incidence of taxation
rest upon the same taxpayer. The tax is collected from the
person who is intended to pay the same. The statutory
taxpayer is the economic taxpayer.
2. Indirect tax- When the tax is paid by any person other than
the one who is intended to pay the same. This occurs in the
case of business taxes where the statutory taxpayer is not the
economic taxpayer.
d. As to amount
1. Specific Tax- A tax of a fixed amount imposed on a per unit
basis such as per kilo, liter or meter, etc.
2. Ad Valorem- a ta of a fixed proportion imposed upon the
value of the tax object.
e. As to rate
1. Proportional Tax- This is a flat or fixed rate tax. It emphasizes
the quality as it subjects all taxpayers with the same rate
without regard to their ability to pay.
2. Progressive or graduated tax- Tax which imposes increasing
rates as the tax base increase. The use of progressive tax rates
results in equitable taxation because it gets more tax to those
who are more capable. It aids in lessening the gap between
the rich and the poor.
3. Regressive Tax- It imposes decreasing tax rates as the tax base
increase. This is the total reverse of progressive tax.
Regressive tax is regarded as anti-poor. It directly violates the
Constitutional guarantee of progressive taxation.
f. As to imposing authority
1. National Tax- tax imposed by the national government.
Examples are; Income tax, Estate tax, donor’s tax, value added
tax, other percentage tax, excise tax, and documentary stamp
tax.
2. Local Tax- tax imposed by the municipal or local government.
Examples are real property tax, professional tax, business
taxes, fees, and charges, community tax, and tax on banks and
other financial institutions.
4. Distinction of tax from similar items
a. Tax vs. Revenue- tax refers to the amount imposed by the government for
public purpose while revenue refers to all income collections of the
government. The amount imposed is tax but the amount collected is revenue.
b. Tax vs. License fee- Taxes are imposed after the commencement of a business
or profession whereas license fee is imposed before engagement in those
activities. In other words, tax is a post-activity imposition whereas license is a
pre-activity imposition.
c. Tax vs. Toll- Tax is a levy of government; hence, it is a demand of sovereignty.
Toll is a charge for the use of other’s property; hence, it is a demand of
ownership. Both government and private entities impose toll, but private
entities cannot impose taxes.
CINDY N. BITONG BSA-2A INCOME TAXATION
d. 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.
e. Tax vs. Special Assessment- Tax is an amount imposed upon persons,
properties, or privileges while special assessment is levied by the government
on lands adjacent to a public improvement.
f. Tax vs. Tariff- Tax is broader than tariff. Tax is an amount imposed upon
persons, privilege, transactions, or properties while tariff is the amount
imposed on imported or exported commodities.
g. Tax vs. Penalty- Tax is an amount imposed for the support of the government.
Penalty may be imposed by both the government and private individuals. It
may arise both from law or contract whereas ta arises from law.
5. Tax system and its types
Tax system refers to the methods or schemes of imposing, assessing, and
collecting taxes.
TYPES OF TAX SYSTEM 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 in the Philippines.
TYPES OF TAX SYSTEM ACCORDING TO IMPACT
1. Progressive system- it emphasizes direct taxes. Direct tax cannot be
shifted. Hence, it encourages economic encourages economic
efficiency as it leaves no other resort to taxpayers than to be efficient.
This type of tax system impacts more upon the rich.
2. Regressive system- The one that emphasizes indirect taxes. Indirect
taxes are shifted by businesses to consumers; hence, the impact of
taxation resort upon the bottom end of the society.
TAX COLLECTION SYSTEMS
A. Withholding system on income tax- The payor of the income
withholds or deduct the tax on the income before releasing the same
to the payee and remits the same to the government.
B. Withholding system on business tax- When the national government
agencies and instrumentalities including government-owned and
controlled corporations purchase goods or services from private
suppliers, the law requires withholding of the relevant business tax.
C. Voluntary compliance system- the taxpayer himself determines his
income, reports the same through income tax returns and pays the
tax to the government.
D. Assessment or enforcement system- the government identifies non-
compliant taxpayers, assesses their tax dues including penalties,
demands of taxpayer’s voluntary compliance or enforces collections
by coercive means such as summary proceeding or judicial
proceedings when necessary.
6. The principles of a sound tax system
1. Fiscal adequacy- requires the sources of the government funds must be
sufficed to cover government costs.
CINDY N. BITONG BSA-2A INCOME TAXATION
2. Theoretical justice- suggests that taxation should consider the taxpayers
ability to pay. It also suggests that the exercise of taxation should not be
oppressive, unjust, or confiscatory.
3. Administrative feasibility- suggests that tax laws should be capable of efficient
and effective administration to encourage compliance.
7. How tax is administered
Tax administration of the national tax system in the Philippines is entrusted t
the Bureau of Internal Revenue which is under the supervision and
administration of the Department of Finance.
8. The powers of the BIR and Commissioner of Internal Revenue (CIR) and the non-
delegated powers of the CIR
POWERS OF THE BIR
1. Assessment and collection of taxes
2. Enforcement of all forfeitures, penalties and fines, and judgments in all
cases decided in its favor by the courts
3. Giving effect to, and administering the supervisory and police powers
conferred to it by the NIRC and other laws.
4. Assignment of internal revenue officers and other employees to other
duties.
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 OF THE CIR
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. Disrupted 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.
NON-DELEGATED POWERS OF CIR
1. The power to recommend the promulgation of rules and regulations
to the Secretary of Finance.
2. The power to issue rulings of first impression or to reverse, revoke or
modify any existing rulings of the Bureau.
3. The power to compromise or abate any tax liability.
4. The power to assign and reassign internal revenue officers to
establishments where articles subject to excise tax are produced or
kept.
9. The criteria for selection of large tax payers
A. As to payment
1. Value added tax- At least P200,000 per quarter for the preceding year.
2. Excise tax- At least P1,000,000 tax paid for the preceding year.
CINDY N. BITONG BSA-2A INCOME TAXATION
3. Income Tax- At least P1,000,000 annual income tax paid for the
preceding year.
4. Withholding tax- At least P1,000,000 annual withholding tax
payments or remittances from all types of withholding taxes.
5. Percentage Tax- At least P200,000 percentage tax paid or payable per
quarter for the preceding year.
6. Documentary stamp tax- At least P1,000,000 aggregate amount per
year.
B. As to financial conditions and results of operations
1. Gross receipts or sales- P1,000,000,000 total annual gross sales or
receipts
2. Net worth- P300,000,000 total net worth at the close of each calendar
or fiscal year
3. Gross purchases- P800,000,000 total annual purchases for the
preceding year
4. Top corporate taxpayer listed and published by the Securities and
Exchange Commission.
Automatic classification of taxpayers as large taxpayers
1. All branches of taxpayers under the Large Taxpayer’s Service
2. Subsidiaries, affiliates, and entities of conglomerates or group of
companies of a large taxpayer
3. Surviving company in case of merger or consolidation of a large
taxpayer
4. A corporation that absorbs the operation or business in case of spin-
off of any large taxpayer.
5. Corporation with an authorized capitalization of at least P300,000,000
registered with the SEC.
6. Multinational enterprises with an authorized capitalization or
assigned capital of at least P300,000,000.
7. Publicly listed corporations
8. Universal, commercial, and foreign banks
9. Corporate taxpayers with at least P100,000,000 authorized capital in
banking, insurance, telecommunication, utilities, petroleum, tobacco,
and alcohol industries.
10. Corporate taxpayers engaged in the production of metallic minerals
