DISCUSSION QUESTIONS - Income Taxation Chap 1

1. Taxation is a State power, a legislative process, and a mode of government cost distribution.
2. The theory of taxation is the government’s necessity for funding, while the basis of taxation is
the government providing benefits to the people in the form of public services.
3. The benefit received theory presupposes that the more benefit a person receives from the
government, the more taxes he/she should pay. The ability to pay theory presupposes that
taxation must consider the taxpayer’s ability to pay.
4. The vertical equity provides a gross concept and proposes that the extent of one's ability to pay
is directly proportional to the level of his tax base. While horizontal equity provides a net
concept and requires consideration of the particular circumstance of the taxpayer.
5. The Lifeblood Doctrine discusses the government’s right to compel its citizens a contribution for
tax. Upon the tax received is the government’s ability to serve their citizens for whose benefit
taxes are collected.
6. Inherent Powers of the State:
a. Taxation Power- the power of the state to enforce proportional contribution from is
subjects to sustain itself
b. Police Power- the general power of the state to enact laws to protect the well-being of
the people
c. Eminent Domain- the power of the state to take private property for public use after
paying just compensation
7. Differences
a. The exercise authority of Taxation and Police power are from the Government, while
the Eminent domain is from the government and private utilities.
b. The purpose of taxation is to support the government, the police power is to protect the
general welfare of the people, and eminent domain is for public use.
c. Both taxation and police power have the community or class of individuals as the
persons affected, while for eminent domain, it is only the owner of the property.
d. Taxation has unlimited amount of imposition, police power has limited, and eminent
domain has no amount.
e. For the importance, taxation is the most important, police power is the most superior,
and eminent domain is important.
f. Both police power and eminent domain is superior to the “non-impairment clause” of
the constitution, while taxation is inferior.
g. Taxation has constitutional and inherent limitations, police power has public interest
and due process limitations, and eminent domain has public purpose and just
compensations limitations.
Similarities
a. All necessary attributes of sovereignty
b. All inherent to the state
c. All legislative in nature
d. All ways in which the State interferes which private rights and properties
e. All exists independently of the constitution
8. The scope of the taxation power is comprehensive, plenary, unlimited and supreme.
9. Substantive due process provides that tax must be imposed only for public purpose under the
authority of a valid law and only by the taking power having jurisdiction. Procedural due process
provides that there should be now arbitrariness in assessment and collection of taxes.
10. The concept of equality provides that taxpayers should be treated equally in rights and
obligations. The concept of uniformity provides that taxpayers under dissimilar circumstances
should not be taxed the same.
11. The non-payment of debt has a Constitutional guarantee of no imprisonment while non-
payment of tax is similar to a crime, which means their imprisonment is possible.
12. Religious, charitable or educational entities, non-profit cemeteries, churches and mosques,
lands, buildings, and improvements
13. Non-appropriation of public funds or property for the benefit of any church, sect, or system of
religion
14. Stages of the Exercise of Taxation Power
a. Levy or imposition- it involves the enactment of a tax law by Congress
b. Assessment and collection- it involves the assessment or the determination of the tax
liabilities of taxpayers and collection
15. Concept of Situs serves as frames of reference in gauging whether the tax object is within or
outside the tax jurisdiction of the taxing authority.
16. Marshall doctrine states that taxation power carries with it the power to destroy, while Holme’s
doctrine states that taxation power is not the power to destroy because there is court.
17. The Strict construction of tax laws provides the taxation as the general rule unless there is a
clear exemption.
18. Double taxation occurs when the same taxpayer is taxed twice by the same tax jurisdiction of
the same thing.
Elements: Primary Element: same object
Secondary elements: same type, purpose, taxing jurisdiction, and tax period
Types: Direct double taxation and Indirect double taxation
19. Those that result to loss of government revenue
a. Tax evasion- act that tends to illegally reduce or avoid tax payment
b. Tax avoidance- act the reduces or totally escapes taxes by any illegal means
c. Tax exemption- immunity, privilege or freedom from being subject to a tax
Those that do not result to loss of government revenue
a. Shifting- process of transferring tax burden to other taxpayers
b. Capitalization- pertains to adjustment of the value of an asset caused by changes in tax
rates
20. Tax amnesty covers both civil and criminal liabilities, which operates retrospectively by forgiving
past violations. While tax condonation covers civil liabilities only, which applies prospectively to
any unpaid balance of the tax.

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1. Taxation is a State power, a legislative process, and a mode of government cost distribution.

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