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).
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