Introduction to Taxation

John V. Balanquit

Objectives

After the presentation, students should be able to:• Identify the elements of a state• Define and distinguish the inherent powers

of a state• Explain the nature of taxation

Objectives (continued)

• Enumerate and explain the similarities and distinctions among the inherent powers

• Enumerate and explain the inherent and constitutional limitations of a state

• Explain the importance, basis and purpose of taxation

The State

• A civilized society characterized by urban comfort as well as peace and order.

Elements of a State

• People• Territory• Government• Sovereignty

Inherent Powers of a State

Police Power• The power to protect citizens and provide

for safety and welfare of society• A power limited by the due process clause

of the constitution

Inherent Powers of a State

Eminent Domain• The power to take private properties for

public purpose• Involves expropriation of private property• Limited to the just compensation clause of

the constitution

Inherent Powers of a State

Taxation• The power by which a sovereign state,

through its legislative body, raises and accumulates revenue from its inhabitants for public purpose

Nature of Taxation

• It is an inherent power• It is essentially a legislative function• It is for public purpose• It is territorial in operation

Nature of Taxation

• The government is generally tax exempt• The strongest inherent power• It is subject to inherent and constitutional

limitations

Similarities of the Inherent Powers

• They are inherent powers• They interfere with private rights and

properties• They are legislative in nature• They presuppose equivalent compensation

Similarities of the Inherent Powers

• They exist independently from constitutional provisions

• They are necessary attributes of sovereignty

Distinctions Among the Inherent Powers

• Taxation power is the strongest, because much of the needed government revenue are raised through taxation.

• Police power is broad in scope, taxation is governed by special law, while police power is governed by the general law

Distinctions Among the Inherent Powers

• In exercise of police power the amount imposed depends on whether the activity is useful or not

• Taxation and police power are applied to the community as a whole, eminent domain affects only the particular owner of real property.

Distinctions Among the Inherent Powers

• eminent domain is affecting only the particular person whose real property is needed by the government in its priority projects.

• Exercise of eminent domain is restricted by Constitutional “ just compensation” clause

Distinctions Among the Inherent Powers

• Police and eminent domain are superior to the “non-impairment” clause of the Constitution, taxation must observe this provision.

• Eminent domain may be exercised by private entities

Inherent Limitations to Taxation

• Taxes may be levied only for public purpose• Taxation cannot be delegated• Taxation is limited to territorial jurisdiction• Taxation is subject to international comity• The government is generally tax exempt

Constitutional Limitations

• Due process of law• Equal protection of law• Uniformity and equity in taxation• President’s veto power• Exemptions of certain institutions from

income and real property tax

Constitutional Limitations

• No public money shall be appropriated for religious purposed

• Majority of all members of congress granting tax exemption

• Non-imprisonment for not paying poll tax• Tax collections are general funds of gov’t

Importance of Taxation

• It is essential for the continuous existence of a nation

• The other inherent powers will be paralyzed in the absence of taxation

• Government functions will cease without taxation

Basis of Taxation

Necessity• Taxation is the life blood of a government• The government cannot exist without a

means to support its operations

Basis of Taxation

Reciprocal Duties• Taxation is based on the benefits received

theory• The government collects taxes while they

provide protection, proper business climate and peace and order.

Purpose of Taxation

• Revenue Purpose– To raise revenue

• Regulatory or Sumptuary Purpose– To control consumption or production

• Compensatory Purpose– To pay costs for benefits received

End of Lecture.

Thank You!