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Part III
Taxation System in the Philippines
Topic Discussion * Define Taxation and state the purpose and importance of taxation * Discuss the theories and basic principles of the sound tax system * Identify the different classification of taxes as to subject matter, purpose and burden of tax * Discuss the EVAT and other developments /updates
What is Taxation?? * The system of compulsory contributions levied by a government or other qualified body on people, corporations and property in order to fund public expenditures. * An inherent power of the state to raise income and to demand enforced contributions for public purposes.
Purpose of Taxation * Revenue or Fiscal * The primary purpose of taxation on the part of the government is to provide funds or property with which to promote the general welfare and the protection of its citizens and to enable it to finance its multifarious activities. * Non-revenue or regulatory

* Taxation may also be employed for purposes of regulation or control.
a) Imposition of tariffs on imported goods to protect local industries.
b) The adoption of progressively higher tax rates to reduce inequalities in wealth and income.
c) The increase or decrease of taxes to prevent inflation or ward off depression.
Importance of Taxation * Raise revenue
- No government can exist without it, it cannot promote the welfare of the people. * Social Services * Public Utilities * Education * Governance * Military Readiness * Regulate property. * Distribute equally the wealth of the nation. * Encouraging savings and investment * Control mechanism
Theories of Taxation * Lifeblood Theory -Taxes are what we pay for civilized society. * Necessity Theory -The power to tax is an attribute of sovereignty emanating from necessity. * Benefits-Protection Theory -Taxation is described as a symbiotic relationship whereby in exchange of the benefits and protection that the citizens get from the Government, taxes are paid.
Principles of the Sound Tax System * Fiscal Adequacy -Sufficiency to meet government expenditures and other public needs. * Administrative Feasibility -Capability of being effectively enforced. * Theoretical Justice -Based on the taxpayer’s ability to pay; must be progressive. (Ability to Pay Theory)
Classification of Taxes * As to subject matter * Personal Tax – Taxes are of fixed amount upon all persons of a certain class within the jurisdiction without regard to property, occupation or business in which they may be engaged. * Property Tax – assessed on property of a certain class * Excise Tax – imposed on the exercise of a privilege * Customs Duties – Duties charged upon the commodities on their being imported into or exported from a country. * As to burden of tax * Direct Tax – both the incidence of and liability for the payment of the tax as well as the impact or burden of the tax falls on the same person. * Indirect Tax - The incidence of or liability for the payment of the tax falls on one person but the burden thereof can be shifted or passed on to another.

* As to purpose * General Tax – levied for the general or ordinary purposes of the Government. * Special Tax – levied for special purposes. What Is E-VAT?
The extended value-added tax law also known as RA 9337, is one of the most recent instruments of fiscal reform in the Philippines. * May 11, 2005
-The law was formally passed by the Senate.
Some of the salient features of R.A. 9337 are as follows:
(1) increase in corporate income tax from the current rate of 32% to 35%, provided that effective January 1, 2009, the said rate will be reduced to 30%;
(2) The new rate of limitation for the deductibility of interest expense from 38% to 42%;
(3) The “stand-by power” of the President to increase the VAT rate from 10% to 12% upon the recommendation of the Secretary of Finance under certain conditions starting January 1, 2006;
(4) lifting of VAT exemptions on the sale of power and electricity, fuel and petroleum products, air and sea transport services, and on services of doctors and lawyers, among others;
(5) additional exemption from VAT for the sale, importation or lease of passenger or cargo vessels and aircraft, including engine equipment and spare parts thereof for domestic or international transport operations as well as the importation of fuel, goods and supplies by international shipping or air transport operators;
(6) the new invoicing and accounting requirements for VAT-registered persons, including (a) the clarifications of the kind of transactions when to issue VAT invoice or official receipts, (b) the necessary information to be contained in the VAT invoice or official receipts (c) the separation of VAT from the gross value of goods or services on the face of the VAT invoice or official receipts;
7) The option granted to VAT exempt taxpayer to register for VAT;
(8) The limit on the application and carry-over of input tax credits which shall not exceed 70% of the total output tax for the quarter; and
(9) The removal of the option to claim for refund or credit against other internal revenue taxes for the input tax attributable to the domestic purchase or importation of capital goods.
TAXATION UPDATES
New Issuances (www. bir.gov.ph) * Revenue Regulations No. 18-2012 prescribes the policies and guidelines in the processing of Authority to Print (ATP) Official Receipts, Sales Invoices and other Commercial Invoices using the on-line ATP systems and provides for the additional requirements in the printing thereof. * Revenue Regulations No. 17-2012 prescribes the implementing guidelines on the revised tax rates on alcohol and tobacco products pursuant to the provisions of Republic Act No. 10351 and clarifies certain provisions of existing Revenue Regulations. * Revenue Memorandum Order No. 27-2012 creates the Alphanumeric Tax Code for certain income payments subject to Expanded Withholding Tax. * Revenue Memorandum Circular No. 90-2012 provides the initial classifications of alcohol and tobacco products according to the tax rates prescribed under Republic Act No. 10351. Full Text / Annex A-1 / Annex A-2 / Annex B-1a / Annex B-1b / Annex C / Annex D-1 / Annex D-2 * Revenue Memorandum Circular No. 89-2012 clarifies the tax implications and recording of deposits/advances made by clients of general professional partnerships for expenses. * Revenue Memorandum Circular No. 88-2012 clarifies the tax treatment of stock option plans. * Revenue Memorandum Circular No. 87-2012 gives notice on damaged accountable forms. * Revenue Memorandum Circular No. 86-2012 specifies the criteria for the identification and selection of BIR Annual Priority Programs.

References (URL) * 2012 Taxation SYLLABUS http://www.google.com.ph/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&ved=0CD8QFjAC&url=http%3A%2F%2Fsc.judiciary.gov.ph%2Fbar%2520admissions%2Fannouncements%2F2012%2520Taxation%2520SYLLABUS.pdf&ei=o9_mUNeEMIrukgWNkYGIAg&usg=AFQjCNGwqysQvoUOhSCk3k0y-qN9ejWrdA&bvm=bv.1355325884,d.dGI * http://www.angelfire.com/me4/francute/tax-gp2.htm * http://kwentongpinas.wordpress.com/2011/09/09/importance-of-taxation/ * http://evat-atenista.blogspot.com/2007/09/what-is-evat.htm * http://www.google.com.ph/url?sa=t&rct=j&q=theories+of+taxation+in+the+philippines&source=web&cd=5&cad=rja&ved=0CE8QFjAE&url=http%3A%2F%2Fxa.yimg.com%2Fkq%2Fgroups%2F22446262%2F816543573%2Fname%2FTAXATION%2BLAW.doc&ei=nw_nUIy3JIH9lAW7n4HQBA&usg=AFQjCNFkgdwBAraR5aY3mGNx3j0a4dadeQ&bvm=bv.1355534169,bs.1,d.aGc * http://www.google.com.ph/url?sa=t&rct=j&q=developments+or+updates+of+taxation+in+the+philippines&source=web&cd=1&cad=rja&ved=0CC4QFjAA&url=http%3A%2F%2Fwww.oecd.org%2Fdataoecd%2F5%2F24%2F43801273.pdf&ei=bf_mUNmmFtGRkgXAwYGwAg&usg=AFQjCNEZgnzpYulLhpsYWMJu8tkm7e9-Eg&bvm=bv.1355534169,bs.1,d.aGc * http://www.ehow.com/about_6545211_importance-taxes.html * http://jakir13.hubpages.com/hub/Role-of-Tax-in-the-Economic-Development-of-a-Country * http://www.bir.gov.ph/

Group III * Roque, Patricia Ann * Muico, Renevic * Buello, Diann * Berjuega, Ana Margarita * Doma, Jean Clarence * Dioquino, Megan Marie * Dulay, Gwyn Eloise * Borromeo, Emily * Bersabe, John Rey * Andes, Fermar Jake * Raymond * Ras, Marc Salvador * Arana, Jomar