Business of

Transfer Tax
Prepared by: Atty. Wilson C.
Abrasaldo
 INTRODUCTION
TAXATION - is the process or means by
which the sovereign, through its
lawmaking body, raises income to
defray the necessary expenses of
government.
Expressed in another way, it is a method
of apportioning the cost of government
among those who in some measures are
privileged to enjoy its benefits and must,
therefore, bear its burdens.
 Purpose of Taxation
1. Primary Purpose - The purpose of taxation by the
government is to raise funds with which to promote
the general welfare and protection of its citizens
and to enable it to finance its multifarious activities.
2. Non-revenue objectives - Aside from purely
financing government operational expenditures,
taxation is also utilized as a tool to carry out the
national objective of social and economic
development.
a. For instance, taxation can encourage
investments in enterprises engaged in preferred areas of
activities by giving a tax exemption to these enterprises.
 Purpose of Taxation
b. Local industries may be protected against
foreign competition through imposition of high
customs duties on imported goods.
c. Taxation may be used to reduce
inequalities in wealth and income by imposing
progressively higher tax rates as in the case of
income taxes.
d. Likewise, taxation may be employed to
prevent or reduce inflation by increasing taxes, or to
expand business during periods of slump by
decreasing them.
 Taxes defined.
Taxes are the enforced proportional
and pecuniary contributions levied by
the lawmaking body of the State, by
virtue of its sovereignty, upon the
persons or property within its
jurisdiction for the support of the
government and all public needs.
 1 It is an enforced contribution, for tis imposition is
not dependent upon the will or assent of the
person taxed;
2 It is generally payable in money, although
the law may provide payment in kind;
Essential
3 It is laid by some rules of apportionment usually
characteristics
based on the ability to pay;
of taxes
4 It is levied on persons or property and on acts,
transactions, rights, or privileges;
5 It is levied by the State which has jurisdiction
over the person or property;

6 It is levied by the lawmaking body of the State;

7 It is levied for public purpose.
 Underlying theory and
basis of taxation
1 The power of taxation proceeds
upon the theory that the existence
of government is a necessity; that
it cannot continue without means
to pay its expenses; and that for
those means it has the right to
compel all citizens and property
within its limits to contribute.
 Underlying theory and
basis of taxation
2 The basis of taxation is found in the
reciprocal duties of protection and
support between the State and its
inhabitants. The State receives taxes
that it may be enabled to carry its
mandates into effect and perform the
functions of government and the citizen
pays the portion of taxes demanded in
order that he may, by means thereof, be
secured in the enjoyment of the benefits
of organized society.
 Underlying theory and
basis of taxation
3 It is subject to constitutional and
inherent limitations. The first are
those provided in the fundamental
law (e.g., equal protection of the
laws, due process of law, rule of
uniformity and equality in taxation,
etc.) or implied therefrom, while the
second spring from the nature of the
taxing power itself.
 1 territoriality, which requires that the person or
property taxed must be subject to the
jurisdiction of the taxing State;
Inherent 2 International comity, under which the property of
a foreign state may not be taxed by another;
limitations
3 exemption of the governmental agencies
(performing governmental functions) from
The last two (2) taxation (but there is no prohibition against the
are also government taxing itself;
limitations implied
4 prohibition against the delegation of the
from the
Constitution. legislation power; and
the requirement that the levy of tax must be for a
5
public purpose.
 Scope or aspects of
taxation
1. Levying or imposition of the tax,
which is a legislative act; and
2. Collection of the tax levied,
which is essentially
administrative in character.

The two (2) processes together constitute

the taxation system.
 Basic principles of a
sound tax system
1. Fiscal adequacy, which means that the
sources of revenue should be sufficient to
meet the demands of public expenditures;
2. Equality or theoretical justice, which
means that the tax burden should be
proportionate to the taxpayer's ability to pay
(this is the ability to pay principle); and
3. Administrative feasibility, which means
that the tax laws should be capable of
convenient, just, and effective
administration.
 Classification of
taxes
1. As to subject matter or object:
a. Personal, pool, or capitation - A
personal tax is a tax of a fixed amount imposed
on individuals residing within a specified
territory, without regard to their property or the
occupation in which they may be engaged.
b. Property - A property tax is a tax
imposed on property, whether real or personal,
in proportion either to its value or in
accordance with some other reasonable
method of apportionment. Ex. real estate tax.
 Classification of
taxes
1. As to subject matter or object:
c. Excise - An excise tax is a tax imposed
upon the performance of an act, the enjoyment
of a privilege, or the engaging in an
occupation. The term is used synonymously with
privilege tax. Ex.: estate tax, donor's tax,
income tax, value-added tax, other percentage
taxes, and professional tax.
 Classification of
taxes
2. As to who bears the burden:
a. Direct - A direct tax is a tax demanded
from the person who is intended or bound to pay
it. Ex. community tax (formerly residence tax);
income tax; and
b. Indirect - An indirect tax is a tax imposed
upon goods before they reach the customer who
ultimately pays for it not as a tax but as part of
the purchase price; or a tax which the taxpayer
can shift to another. Ex. taxes on business such
as VAT, other percentage taxes, excise taxes
and customs duties.
 Classification of
taxes
3. As to determination of amount:
a. Specific - A specific tax is a tax of a fixed
amount imposed by the head or number, or by some
standard of weight or measurement; it requires no
assessment other than a listing or classification of
the subjects to be taxed. Ex. excise tax on distilled
spirits, wines, fermented liquor, cigars, and
cigarettes.
b. Advalorem - An advalorem tax is a tax of
fixed proportion of the value of the property with
respect to which the tax is assessed. Ex. Excise
taxes on automobiles and non-essential goods such
as jewelry and perfumes.
 Classification of
taxes
4. As to purpose:
a. General, fiscal, or revenue - A general
tax is a tax imposed for the general purposes of
the government, i.e., to raise revenue for
governmental needs. Ex.: income tax, VAT, and
practically all business taxes; and
b. Special or regulatory - A special tax is
imposed for a special purpose, i.e., to achieve
some social or economic ends, irrespective of
whether revenue is raised or not. Ex.: protective
customs duties or tariffs.
 Classification of
taxes
5. As to authority imposing the tax:
a. National - A national tax is imposed by
the national government. Ex.: national internal
revenue taxes, customs duties, national taxes
imposed by special laws; and
b. Municipal or local - A local tax is
imposed by municipal corporations (local
government units). Ex.: real property taxes,
professional tax.
 Classification of
taxes
6. As to graduation or rate:
a. Proportional - A proportional tax is based
on a fixed percentage of the amount of the
property, income, or other basis to be taxed. Ex.:
real property taxes, VAT, other percentage taxes;
b. Progressive or graduated- A progressive
tax is where the rate increases as the tax base
increases. Ex.: income tax;
c. Regressive - A regressive tax is a tax
where the rate decreases as the tax base
increases. We have no regressive taxes.
 Remedies available to the
government to collect tax

A. Administrative
1. distraint of personal property, either actual or
constructive;
2. levy of real property;
3. enforcement of forfeiture of property;
4. enforcement of tax lien
5. entering into compromise of tax cases;
6. requiring proof of filing of bonds to assure
compliance with certain tax laws or regulations;
7. requiring proof of filing of income tax returns
before a license to engage in business or
occupation is issued;
8. giving of rewards to informers who gave
information regarding violations of any tax law.
 Remedies available to the
government to collect tax
9. imposition or surcharges and interest for non-
payment or late payment of tax;
10. marking arrest, search, and seizure in certain
cases;
11. deportation of aliens who violate any tax law;
12. inspection and examination of books of
accounts and other accounting records of the
taxpayers;
13. use of the national tax register;
14. obtaining information on potential taxpayers
from government offices and officers and from
other persons;
15. inventory taking of stock-in-trade and
conducting surveillance of business operations of a
taxpayer;
 Remedies available to the
government to collect tax
16. prescribing presumptive gross sales and
receipts;
17. termination of the taxable period;
18. prescribing real property values;
19. inquiring into bank deposit accounts of a
decedents; a taxpayer who offers to compromise
his tax liability, or a specific taxpayer subject of a
request for the supply of tax information from a
foreign tax authority pursuant to international
convention or agreement on tax matters to which
the Phils. is a signatory or party;
20. requiring the registration of taxpayers;
 Remedies available to the
government to collect tax

A. Judicial
1. ordinary civil action; and
2. criminal action
 Remedies available to the taxpayer in
connection with the collection of tax
A. Administrative:
1. Before payment -
a. filing of petition for reconsideration or reinvestigation;
b. entering into compromise.

2. After payment -
a. filing of claim for credit; and
b. filing of claim for refund.
B. Judicial
1. Civil action -
a. appeal to the Court of Tax Appeals;
b. action to contest forfeiture of chattel;
c. action for damages;
2. Criminal action - filing of criminal complaint against erring
Bureau of Internal Revenue officials and employees.
THANK YOU
VERY MUCH