Taxation is the act of levying the tax, i.e., the process or means by which the sovereign, through its law-making body, raises income to defray the necessary expenses of the government. It is merely a way of apportioning the cost if the government among those who in some measures are privileged to enjoy its benefits and, therefore, must bear its burdens. (71 Am Jur. 2nd 342; 1 Cooley 72-73).
Tax is defined as the lifeblood of the government. Major revenue of the government is sourced from taxation so that in the most pressing times of financial and economic crisis, the agency authorized to administer taxes – the Bureau of Internal Revenue (BIR) should always be on the front line. As a matter of fact, BIR nowadays are becoming stricter in the implementation of the tax laws and are seeking ways to collect much revenue from taxes. Lately the BIR has widened the coverage of mandatory withholding of virtually all income payments certain taxpayers by the implementation of the Top Twenty Thousand Corporations (TTC) from the previous Top Ten Thousand Corporation list. Under the program, on top of those income payments subjected to expanded withholding tax, these corporations are required to withhold 1% for payments to its suppliers of goods and 2% for regular suppliers of services. Additionally, reportorial requirements are required to be submitted to BIR to monitor and verify compliance through its computer systems. Currently, the BIR is coming up with a similar scheme for individual taxpayers, expectedly, under the same procedures of TTC above. A draft regulation is now in place for comments at the BIR website.
By a simple definition, tax may be defined as an enforced proportional contribution levied by the law making body of the state to raise revenue to support the indispensable and all the necessary expenses of the government.
- Enforced as it involves the mandate of the law so that its imposition is mandatory to those covered by it. Unreasonable deviation from the mandate is subject to penalties imposable to an organized society which gives due respect to each and every humanly right. This implies that the sanction, nevertheless, undergoes a due process.
- Proportional as theoretically, tax is proportioned upon a taxpayer’s ability to pay. This goes to show that the cost of the entire governance in the state is being apportioned among the inhabitants through a certain rule of apportionment being put into play.
- Raise revenue goes with the very heart of taxation, to earn income for the government. Secondary however to this primary purpose, tax is being seconded to serve some other concerns for the majority. Example is the import duties and taxes of imported articles. At some point where quality of local and imported article is of no moment, imported ones prove to be more costly that the local ones because of this import duties and taxes being imposed as a way of encouraging the public to buy locally produced for the comparable quality.
- Support the expenses of the government is related to public purpose of the imposition of taxation. While the government is empowered to collect from among its inhabitants by the power of taxation, proceeds are bound to serve the public needs and expenditure only. For this purpose, a collection of taxes for a sugar industry was held to constitute as a public purpose for the sugar industry represents and directly affects the public.
Nature of the power of taxation as an inherent power
Power to tax, being inherent in an independent state for its existence and survival by the furtherance of its multifarious functions, the same does not require delegation from the supreme law of the land. However, exercise of such power upon the inhabitants is subject to limitations imposed by the power, by its very nature, or by the Supreme law of the land, the Philippine Constitution. To tax a subject matter, person, property or excise, there must be a valid law imposing the same. Validity of a tax measure presupposes the fact that it has overcome the test and scrutiny against it. Tax measures duly passed by the legislative department, the Congress or the local legislative under its delegated power, enjoy the presumption of validity and he who controverts has the duty of proving that the same is otherwise.
By nature, power to tax is inherent in a sovereign estate so that the grant of which is not necessary but the exercise is provided safeguards and limitations. This means that the state needs not be empowered by its constitution or any mandate for it to be allowed to tax. Such power co-exists with the state and thus, grant is not necessary. What are being provided by the supreme law of the land, the Constitution, are the guidelines and the limit on the exercise of the power. It wishes to curtail the exercise in such a way as not to abuse and misuse said power to the detriment of the majority and to the advantage of the selected few.
Under our tax system, compliance is initially voluntary on the part of the taxpayers. Nevertheless, the government through the administrative agency empowered to administer the tax, the BIR , is clothed with such remedies, under proper procedures, to imposed correct amount of taxes due to the government upon finding that the compliance based on the declarations in the return is insufficient. It can issue deficiency assessment and impose such measures provided under the law within the prescribed period to see to it that taxes are paid and that tax measures are complied with. This does not however follow that a taxpayer being assessed is doing an illegal business because non-payment of the tax does not make the business illegal.
Scope of the taxing power
To give a more meaningful power, power of taxation is essentially unlimited and plenary. This means that the state can tax on anything, anytime, anywhere, and at any amount. Example is the issue on taxing short messaging (SMS or commonly known as text message through mobile phones). The author in on the humble view that there could be nothing wrong on taxing this item as it primarily belongs to the state. What keeps them perhaps in the meantime is the impact to the poor and underprivileged depending primarily on the medium to communicate their loved ones from other places. This follows however, that the limitations and guidelines for the said purpose had been properly observed.
(N.B. In the next post will be the Limitations and other topics of General principles.)