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CONCEPTS OF TAXATION AND INCOME TAXATION

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John Allan de Villa

on 17 September 2013

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Transcript of CONCEPTS OF TAXATION AND INCOME TAXATION

CONCEPTS OF TAXATION AND INCOME TAXATION
Definition
Process by which the sovereign, through its law-making body, raises revenues used to defray expenses of government.
Means of the government in increasing its revenue under the authority of the law, purposely used to promote welfare and protection of its citizenry.
Collection of the share of individual and organizational income by a government under the authority of the law.

Concept
Taxation is Inherent power of the state to impose and demand contribution upon persons, properties, or rights for the purpose of generating revenues for public purposes.
The power of taxation rests upon necessity and is inherent in every government or sovereignty.
This power is legislative in nature and it is essential to the existence of any independent government.
The power of taxation is based upon the theory that no government can exist or stand without taxation, thus taxation is an utmost necessity.


Concept
This theory of taxation is that taxes are imposed for the support of the government in return for the general advantages, protections and welfare which the government affords the taxpayers, their properties, and rights and that where there is no benefit, there is no power to tax.
The basis of the power to tax is the reciprocal duties of protection and support between the state and those that are subjected to its authority, and that is the people.
Taxation is a demand and is a mandatory contribution to the government to acquire revenue for any government activity.
Revenue is important in producing goods and services that we are going to use, so the government should be equipped with corresponding operational funds.

Principles and Theories
The Benefit Principle
Holds that the individual should be taxed in portion to the benefit they receive from the government and taxes should be paid by those people who received the direct benefit of the government programs and projects out of the taxes paid. However, it does not follow that only those individuals who pay their corresponding taxes can enjoy programs of the government. Everybody can, even those individuals who do not pay their corresponding tax, for it is the duty owned by the government to its citizenry. An argument of this principle states that individual should pay their taxes in accordance to their use of public utilities.

Principles and Theories
The Ability-to-Pay Principle

Holds that taxes should relate with the peoples income or the ability to pay, that is, people with greater income or wealth can afford to pay more taxes should be taxed at a higher rate than people with less wealth. (example: individual income tax)

Conclusion
Full transcript