Chapter 1 - Introduction to Taxation

Taxation – is an act of imposing tax.

Tax - enforced contribution levied by a sovereign state on persons, property and rights/privileges within its jurisdiction, exercised through its legislative branch, for the purpose of raising revenues to defray the expenses of the government and for public purposes. Nature of taxation – an inherent legislative power of any independent state. Scope of taxation - unlimited and comprehensive but subject to inherent and constitutional limitations or limitations depending on the sense of responsibility of the state to its people.

Inherent limitations:
1. for public purpose.
2. Power to tax cannot be delegated
3. Double taxation should be avoided or prevented.
4. Government agencies and instrumentalities are exempted from tax.
5. Imposed only within the territorial jurisdiction of the state. Double taxation is taxing twice, by the same public authority, within the same jurisdiction or taxing district, for the same purpose in the same year or taxing period. Constitutional limitations: 1. Non-impairment of existing contracts.
2. No person shall be imprisoned for non- payment of debt or poll tax.
3. Taxation must be uniform and equitable.
4. All kinds of land, buildings and improvements actually, directly or exclusively used for religious or charitable purposes are exempt from taxation. Basic Principles of a Sound Tax System * Fiscal adequacy – revenue enough to sustain the finances of the government * Theoretical justice – based on taxpayer’s ability to pay. * Administrative feasibility – collected efficiently and effectively.

Taxes distinguished from eminent domain” Concept of eminent domain – it is the power of the state to take or control private property for public use after paying the owner a just compensation to be determined