Taxation

FISCAL POLICY AND FISCAL POLICY AND TAXATIONTAXATION

Prepared by: Prepared by: Arnel O. RiveraArnel O. RiveraMAT-SSMAT-SS

Review:Review:Review:Review:

Perfect competitionPerfect competition Oligopoly, Monopolistic Oligopoly, Monopolistic

Competition & CartelsCompetition & Cartels MonopolyMonopoly MonopsonyMonopsony

Fiscal PolicyFiscal Policy It is the It is the processprocess by which revenues are by which revenues are

generated used to defray expenses of generated used to defray expenses of government.government.

The authority of the law in The authority of the law in increasing its increasing its revenuerevenue under, purposely used to promote under, purposely used to promote welfare and protection of its citizenry.welfare and protection of its citizenry.

It is the It is the collectioncollection of the share of individual of the share of individual and organizational income by a and organizational income by a government under the authority of the law. government under the authority of the law.

Concept of TaxationConcept of TaxationConcept of TaxationConcept of Taxation

TaxationTaxation is the inherent is the inherent power of the state to power of the state to impose and demand impose and demand contribution upon persons, contribution upon persons, properties, or rights for the properties, or rights for the purpose of generating purpose of generating revenues for public revenues for public purposes.purposes.

Significance of TaxationSignificance of TaxationSignificance of TaxationSignificance of TaxationPrimary purpose:Primary purpose: To generate funds to defray expenses incurred by To generate funds to defray expenses incurred by

the government in promoting the general welfare the government in promoting the general welfare of its citizenry.of its citizenry.

Other purposes:Other purposes: to equitably contribute to the wealth of the nationto equitably contribute to the wealth of the nation to protect new industriesto protect new industries to protect local producersto protect local producers

Principles and Theories of Principles and Theories of TaxationTaxation

Principles and Theories of Principles and Theories of TaxationTaxation

The Benefit PrincipleThe Benefit Principle. . This principle This principle holds the holds the individuals should be taxed in individuals should be taxed in proportion to the benefits they receive proportion to the benefits they receive from the governmentsfrom the governments and that taxes and that taxes should be paid by those people who should be paid by those people who receive the direct benefit of the receive the direct benefit of the government programs and projects out of government programs and projects out of the taxes paid.the taxes paid.

Principles and Theories of Principles and Theories of TaxationTaxation

Principles and Theories of Principles and Theories of TaxationTaxation

The Ability-to-Pay PrincipleThe Ability-to-Pay Principle.. This This principle holds that principle holds that taxes should relate taxes should relate with the people’s income or the ability to with the people’s income or the ability to paypay, that is, people with greater income or , that is, people with greater income or wealth and can afford to pay more taxes wealth and can afford to pay more taxes should be taxed at a higher rate than should be taxed at a higher rate than people with less wealth. Ex. Individual people with less wealth. Ex. Individual income tax.income tax.

Principles and Theories of Principles and Theories of TaxationTaxation

Principles and Theories of Principles and Theories of TaxationTaxation

The Equal-Distribution PrincipleThe Equal-Distribution Principle. . This This principle states that principle states that income, wealth, and income, wealth, and transaction should be taxed at a fixed transaction should be taxed at a fixed percentagepercentage; that is, people who earn more ; that is, people who earn more and buy more should pay more taxes, but and buy more should pay more taxes, but will not pay a higher rate of taxes.will not pay a higher rate of taxes.

Characteristics of TaxCharacteristics of TaxCharacteristics of TaxCharacteristics of Tax It is enforced contribution.It is enforced contribution. Its payment is not voluntary Its payment is not voluntary

nature, and the imposition is not dependent upon the will nature, and the imposition is not dependent upon the will of the person taxed.of the person taxed.

It is generally payable in cash.It is generally payable in cash. This means that payment This means that payment by checks, promissory notes, or in kind is not accepted.by checks, promissory notes, or in kind is not accepted.

It is proportionate in character.It is proportionate in character. Payment of taxes should Payment of taxes should be base on the ability to pay principle; the higher income be base on the ability to pay principle; the higher income of the tax payer the bigger amount of the tax paid.of the tax payer the bigger amount of the tax paid.

It is levied (It is levied (to impose; collectto impose; collect) on person or property.) on person or property. There are taxes that are imposed or levied on acts, There are taxes that are imposed or levied on acts, rights or privileges. Ex. Documentary tax.rights or privileges. Ex. Documentary tax.

Classification of TaxesClassification of TaxesClassification of TaxesClassification of Taxes

I.I. As to who bears the burdenAs to who bears the burden Direct Tax (ex. Income Tax)Direct Tax (ex. Income Tax) Indirect Tax (ex. R-VAT)Indirect Tax (ex. R-VAT)

II.II. As to purpose As to purpose General Tax (ex. Almost All Taxes)General Tax (ex. Almost All Taxes) Special Tax Special Tax

III.III. As to scopeAs to scope National Tax (ex. National Revenue National Tax (ex. National Revenue

Taxes)Taxes) Local Tax Local Tax

Entities Exempted from TaxationEntities Exempted from TaxationEntities Exempted from TaxationEntities Exempted from Taxation

Religious InstitutionsReligious Institutions Charitable InstitutionsCharitable Institutions Non-Profit, Non-Stock Educational Non-Profit, Non-Stock Educational

InstitutionsInstitutions Non-profit CemeteriesNon-profit Cemeteries Government InstitutionsGovernment Institutions Foreign DiplomatsForeign Diplomats

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