Philippine Taxation System

Kinds of Taxes

Excise Tax

Kinds of Taxes

• Tax applicable to specified goods manufactured in the Philippines for domestic sale or consumption. It is also imposed on things that are imported.

Capital Gains Tax

• Specific tax: imposed on certain goods based on weight or volume capacity or any other physical unit or measurement.

• It is incurred by individuals and corporations.

Kinds of Taxes

• Tax imposed on the gains presumed to have been realized by the seller for the sale, exchange or other disposition of real property located in the Philippines, classified as capital assets.

• Value-added Tax (VAT)

• Ad valorem tax: imposed on certain goods based on selling price or other specified value of the goods

• It is an indirect tax, which can be passed on to the buyer.

Kinds of Taxes

Documentary Tax

• Tax collected on every sale, barter, exchange or transaction of taxable goods, properties, lease of goods, services, or properties on the course of trade as they pass along the production and distribution chain.

• A.K.A. Documentary Stamp Tax

Kinds of Taxes

Estate Tax

• Tax on documents, instruments, loan agreements and papers, agreements evidencing the acceptance, assignments, sale or transfer of an obligation, rights or property, incident thereto.

• Tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death and on certain transfers, which are made by law as equivalent to testamentary disposition.
• Tax imposed on the privilege of transmitting property upon the death of the owner.

Kinds of Taxes

• Income Tax
• A kind of tax wherein all yearly

profits arise from property, possessions, trades,

or offices

• Donor’s Tax
• A kind of tax that is imposed on donations inter-vivos

• It shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect and whether the property is real or personal, tangible or intangible.

Philippine Taxation System

WITHHOLDING TAX

History of Taxation

Process of Taxation

Powers and Duties of

BIR

the amount of an employee's pay withheld by the employer and sent directly to the government as partial payment of income tax.

BIR

Taxation in the Philippines

Ancient Egypt

3000-2800 B.C.

Understanding the taxation system in the Philippines

1. Levy or Imposition

Bureau of Internal Revenue

2 Types of Taxes

2. Assessment and Collection

Genesis 47:24

• Assessment and collection of all internal revenue taxes, fees and charges

• Enforcement of all forfeitures, penalties, and fines connected therewith, including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts

• It shall also give effect to the administer supervisory and police powers conferred to it by the National Internal Revenue Code and special laws.

-the country’s leading tax collecting

agency contributing over 75% of total national government (NG) tax revenue

National Taxes- imposed by the national government through the National Revenue Code and other laws

Local Taxes- refer to those imposed and collected by the local government

3. Payment

In the Philippines...

Withholding Tax

• Manila Acapulco-Galleon Trade

• Polo Y Servicio (Forced Labor)

• Bandala

• Tribute

• Encomienda System

Taxation

Expanded withholding tax

• A system where the taxes withheld on certain income payments are intended or equal or at least approximate the tax due of the payer on said income.

Final withholding tax

- is the process of tax collection.

Who should pay

TAXES?

A system where the amount of income tax withheld by the withholding agent is constituted as a full payment of the income tax due from the payer on the said income

Who (or what) are those exempted in paying TAXES?

Withholding tax for compensation income

It covers the passing of the law by the government, making of rules by the Government, entire set of people appointed as tax commissioners, assessment; the appellate authorities & so on

4 Canons for Good

T a x a t i o n

Definition of

- A compulsory contribution to state revenue, levied by the government on worker's income, business profit and added to the cost of some goods, services and transactions

“Pay as you go or pay as you earn”

A method of collecting the income tax at source upon receipt of the income.

Tax Evasion

An illegal practice where a person, organization, corporation intentionally avoids his or her tax paying liability

Reasons for Tax Evasion

• Weak surveillance system
• Rampant corruption in tax department
• Complicated Tax Laws and Filing Mechanism
• Tax deductions offering loopholes to Tax Evaders
• Absence of social security system
• Tax rates are too high
• Lack of Transparency in Government Expenditures

Purposes of Taxation

1. Individuals

a. Resident Citizen

b. Non- resident Citizen

c. Resident Alien

d. Non- resident Aliens

2. Corporations

a. Domestic Corporations

b. Foreign Corporations

3. Estate under judicial settlement

4. Trusts irrevocable both as to the trust property and as to the income

• Religious Institutions
• Charitable Institutions
• Non-Profit, Non-Stock Educational Institutions
• Non-profit Cemeteries
• Government Institutions
• Foreign Diplomats

Primary purpose:

• Equity - Taxation must be based on the ability to pay

• Certainty- The amount to be paid, as well the time and manner for payment, must be certain

• Convenience- The time for payment and the manner of collection must not be oppressive

• Economy- The tax to be levied must be just enough to sustain the government and its function

to generate funds or revenues

Other purposes

• to equitably contribute to the wealth of the nation
• to protect new industries
• to protect local producers

-Adam Smith

The Wealth of Nations

4 R's of Taxation

• Revenue

• Redistribution

• Repricing

• Representation

Effects of

Taxation