Meaning of TaxationThe act of laying a tax, 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 of government among those who in some measure are privileged to enjoy its benefits, and, therefore, must bear its burdens.Purpose and scope of Taxation- To provide funds or property with which to promote the general welfare and protection of its citizens – Imposition of charge or burden by the sovereign power upon persons, property, or property rights (for government to function)Essential characteristics of tax- It is an enforced contribution- It is levied on persons or property- It is levied by the state which has jurisdiction over the person or property – It is levied by the law-making body of the state- It is levied for public purpose or purposesTheory and basis of taxation- Existence of government- Reciprocal duties of state and inhabitants- Public purpose requirement for lawful taxationNature of the power of taxation- It is inherent in sovereignty- It is legislative in character- It is subject to constitutional and inherent limitationsLimitations- The subjects or objects to be taxed- The purpose or object of the tax so long as it is a public purpose – The amount or rate of the tax- The manner, means, and agencies of collection of the taxPrinciples of a sound tax system- Fiscal adequacy- Equality or theoretical justice- Administrative feasibilityClassifications1. As to subject matter or objecta.
Personal, poll, or capitationb. Propertyc. Excise2.
As to who bears the burdena. Directb. Indirect3. As to determination of amounta. Specificb. Ad valorem4. As to purposea. General, fiscal, or revenueb.
Special or regulatory5. As to scope (or authority imposing)a. Nationalb. Local6. As to graduation or ratea.
Proportionalb. Progressive or graduatedc. RegressiveDistinctions1.
Toll – generally applied to the consideration which is paid for the use of a road, bridge or the like (demand or proprietorship vs. sovereign, used of another’s property vs. support of the government) 2. Penalty – acts deemed injurious (designed to regulate conduct vs. to raise revenue, imposed by individuals vs. government) 3. Special Assessment – contribution from owners of lands especially benefited by public improvements ( only on land, not a personal liability, wholly on benefits) 4.
License – imposed under thepolice power or purposes of regulation (regulation vs. revenue, exercise of police power vs. taxing power) 5. Debt – based on contract vs. based on law, assignable vs.
cannot be assigned, paid in kind vs. payable in moneyLimitations classified1. Constitutional limitations – expressly found in the constitution or implied 2. Inherent limitations – not embodied in the constitutionSitus of taxation – place of taxation