This presentation was used during our report in Fundamentals of Accountancy Business and Management. Hope you like it.

2. THE FOLLOWING ARE CONSIDERED AS THE
BASIC PRINCIPLES OF SOUND TAX SYSTEM.
• Fiscal Adequacy which requires that the source of revenue as
a whole must be sufficient to meet the expanding
governmental expenses regardless of business conditions,
exchange rates, trade balances and other problems of
economic adjustments.
• Administrative Feasibility which demands that the tax system
must be clear to the taxpayers, rules reasonably enforceable,
is convenient and not burdensome or discouraging to a
business activity.

3. • Consistency or compatibility with economic goals which
necessitates that tax laws should be consistent with the
economic goals of the state.
• Equality & Theoretical Justice refers to the uniformity of
the application of tax laws and the imposition of taxes
based on the relative ability of taxpayers to shoulder the
burden which are primarily made to depend on the level
of the taxable basis and the proportionate benefits they
receive from the maintenance of an orderly society.

4. TAX EVASION PRACTICES
• On income tax
• Failure to file an income tax return;
• Accounting record does not reflect the correct taxable
income;
• Misclassification of income and expenses such as:
income taken up as liabilities or ordinary gain classified
as capital gain.

5. • Sales of domestic branches shown as sale as sales of
foreign head offices;
• False allocations of income and expenses among
several corporation or entities;
• Establishment of partnership or corporation, using
dummy, partners or stockholders;
• Fictitious or padding of purchases.
• Equipment or major repairs or improvements claims
as deductions;

6. • Expenses or salaries given to stockholders when it
should be classified as dividend declarations or in case
of proprietorship, such expenses of salaries are actually
withdrawals;
• Claiming depreciation expenses on non-existing assets
or assets fully depreciated;
• Falsification of children’s ages or category; and
• Fictitious spouse or dependents.

7. • On business Tax
• Keeping falsified books of accounts
• Understatement of sales, through non-issuance of
sales invoices;
• Overstatement of cost of sales; and
• Non-filling of returns

8. • On Estate Tax
• Non-filling of returns;
• Omission of some properties in the return of
undervaluation of the market value of the
property of the estate; and
• Claim of fictitious items like liabilities and funeral
expenses

9. • On Donors Tax
• Non-filling of returns
• Omission of prior donations made during the
taxable year; and
• Undervaluation of the market value of the
property donated, or intentional misclassification
of the donating party.

10. • On Excise Taxes
• Misclassification of articles subject to excise tax;
• Illegal manufacturer of articles subject to excise
tax;
• Unlawful possession of cigarette papers; and
• Unlawful use of denatured alcohol

11. TAXES IMPOSE UNDER THE NATIONAL
INTERNAL CODE
• Income Tax- it is a tax imposed on the yearly profits
arising from property, professions, trades and offices.
• Donor’s tax- it is an exercise tax imposed on the transfer
of property by way of gift inter vivo.
• Estate tax- it is a tax levied upon of the net state the
transfer of the net state of a decedent to his heirs.

12. • Value added tax(Vat)- It is a tax imposed only on
the increase in the worth, merit or importance of
goods properties or services, and not on the total
value of the goods or services being sold or
rendered.
• Percentage tax- refers to a tax imposed on a fixed
ratio between the gross sales or receipts and the
burden imposed upon the tax payer.

13. • Excise tax- it is a tax impose upon the performance of
an act, the enjoyment of a privilege or the engaging in
an occupation.
• Documentary stamp tax- is an exercise upon the
privilege, opportunity or facility offered at changes
for transaction of the business. It is an excise upon the
facilities used in the transaction of the business.

14. FORM OF ESCAPE FROM TAXATION
• Shifting- refers to the transfer of the tax burden by the
person on whom it is imposed by law to another who
bears it. Shifting may be forward, backward, onward.
• Forward shifting- is the transfer of the tax from a factor
of production (manufacturer) through the factors of
distribution (wholesaler or retailer) until the burden
finally rests with the consumer. This shifting results to
increase in selling price.

15. • Backward shifting- is the transfer of the tax from the
point of consumption through the factors of
distribution to the factors of production. This shifting
results to a decrease in selling price.
• Onward shifting- occurs when the tax is shifted two
or more times either forward or backward. Onward
shifting involves two or more shifts.

16. BASIC CONCEPTS AND PRINCIPLES OF
TAXATION
oCapitalization- is a form of backward shifting whereby future taxes on
property sold are capitalized at the time of purchase and deducted in
lump sum from the selling price. In this case, the taxes are shifted
backward from the buyer to the seller, and the result is a reduction in
price.
oTransformation- this escape from taxation is effected through the
process of production. The producer on whom the tax is imposed,
fearing the loss of his additional expense by improving his method of
production thereby turning out units of lesser cost. Here the tax is
transformed into a gain through the medium of production.

17. • Evasion- is a form of escape from taxation which is accomplished by
breaking the letter of the law. It is tantamount to, fiscally speaking, the
absence of taxation. This is illegal and punishable by law.
• Avoidance- refers to the legal means to lessen or avoid tax by taking
advantage of the loopholes of law. It is legal and permissible by law.
Tax evasion is also known as tax dodging, and tax avoidance is known
as tax minimization. In other words, the tax evader breaks the law,
whereas the tax avoider circumvents the law
• Exemption- this topic is discussed in reasonable detail in the
preceding section of this chapter.

18. • Double Taxation may be direct duplicate or indirect
duplicate taxation. Direct double taxation is double
taxation in its strict legal sense, which means taxing
twice some of property within the territorial
jurisdiction without taxing all of them for the second
time. This double taxation is prohibited by the
constitution as it violates the rule of uniformity in
taxation. Indirect duplicate taxation is double taxation
excluding direct duplicate taxation.

19. • Tax is an enforce contribution from persons and
properties levied by the state virtue of its sovereignty
for the support of the government and for its entire
public needs. In other words, a tax is an exaction of
revenue for the support of the government.

20. • A tax is a force burden, charge, exaction, imposition,
or contribution assessed in accordance with some
reasonable rule of apportionment by authority of the
sovereign state upon persons, properties or property
rights within its jurisdiction for purposes of raising
revenue to support governmental expenses. In reality,
a tax is a protection money.