BORROW FROM LOCAL AND INTERNATIONAL BANKS INVEST IN CORPORATION GENERATE FUNDS COLLECT TAX SELL PUBLIC LANDS AND GOVERNMENT PROPERTIES
TAX VS TAXATION % FROM INCOME, PROPERTIES, TRANSACTIONS A FEE/ BURDEN TO SUPPORT THE “SERVICES” OF THE GOVERNMENT
SYSTEM OF RAISING/ COLLECTING POWER OF THE LEGISLATURE REGULATES FLOW OF INCOME TO CHECK INFLATION
PURPOSE OF TAXATION • to stabilize prices and stimulate greater/lesser production • To increase domestic production: how does tax work on import? • Capital deficient businesses? • Detrimental or luxurious businesses?
PLACES OF TAXATION: INCOME TAX • Paid either in the place where income is earned or the place of residence of the taxpayer. • E.g. Ms. L resides in Quezon City and works in Makati.
PLACES OF TAXATION: REAL PROPERTY TAX • This is paid where the property is situated. • You were born in Pasig. Your current house is situated in Makati and you work in Taguig. Where is your place of payment for your Real Property Tax?
PLACES OF TAXATION: BUSINESS OCCUPATION TAXES • This is paid in the place where the business or occupation is located. • Ms. S resides in Caloocan City and has a beauty parlor in Manila.
PLACES OF TAXATION: PERSONAL PROPERTY TAX • Taxes on tangible properties are paid in the place where the property is located • Taxes of intangible properties (immovable) is the owner’s domicile • This refers to the place of permanent residence of the owner
ALLOWABLE EXEMPTIONS (AE) • P 50,000 for each individual, regardless of status and P25, 000 per qualified dependent, • not exceeding 4 DEPENDENTS. • These dependents are below 21 years old, unemployed and unmarried; or with disabilities
I. GROSS INCOME (GI) • Gross income (Monthly Income) x 12
II. TAXABLE INCOME (TI) • GROSS INCOME – ALLOWABLE EXEMPTIONS • (P50,000 (STATUS) + NO. OF DEPENDENTS (not to exceed 4) x P25,000
III. TAX DUE (TD) • Refer to the tax rate table • AMOUNT UNDER THE RATE COLUMN + [ PERCENTAGE (TAXABLE INCOME – AMOUNT UNDER THE OVER COLUMN)]
IV. WITHHOLDING TAX (WT) • Refer to the withholding tax table • Step 1: check the status • ME1 OR S1 • ME: MARRIED EMPLOYEE • S: SINGLE • 1: NUMBER OF QUALIFIED DEPENDENT • Step 2: Align the monthly income to the nearest possible amount not exceeding its subsequent constant numerical value • Step 3: monthly income – matched nearest amount • Step 4: multiply the result from step 3 to the indicated % • Step 5: add the result to the “exemption amount” • WITHHOLDING TAX SHOULD CLOSELY MATCH THE TAX DUE
V. TAX PAYABLE VS TAX REFUND • TAX DUE – WITHHOLDING TAX • TAX REFUND • NEGATIVE: RETURN OF EXCESS TAX • TAX PAYABLE • MORE THAN 0: ADDITIONAL CREDIT FOR THE GOVERNMENT
EXAMPLE • MR. O, MARRIED, HAS A MONTHLY SALARY OF P32,000. HE HAS 7 CHILDREN. FOUR ARE ALREADY WORKING. TWO ARE STILL IN HIGH SCHOOL & ONE IN ELEMENTARY. • FIND THEIR: • (A) GROSS INCOME, • (B) NET INCOME, • (C) TAX DUE, • (D) WITHHOLDING TAX, • (E) TAX PAYABLE OR TAX REFUND