1. Fiscal Adequacy- The sources (proceeds) of tax revenue should coincide with and approximate needs of government expenditures. The sources of revenue should be sufficient and elastic to meet the demands of public expenditures;
2. Theoretical Justice- The tax system should be fair to the average taxpayer and based upon his ability to pay.
3. Administrative Feasibility- The tax system should be capable of being properly and efficiently administered by the government and enforced with the least inconvenience to the taxpayer.
Limitation on the power of taxation
The power of taxation, is however, subject to constitutional and inherent limitations.
Constitutional limitations are those provided for in the constitution or implied from its provisions, while inherent limitations are restrictions to the power to tax attached to its nature.
The following are the inherent limitations.
1. Purpose. Taxes may be levied only for public purpose;
2. Territoriality. The State may tax persons and properties under its jurisdiction;
3. International Comity. the property of a foreign State may not be taxed by another.
4. Exemption. Government agencies performing governmental functions are exempt from taxation
5. Non-delegation. The power to tax being legislative in nature may not be delegated. (subject to exceptions)
Situs of taxation
SITUS OF TAXATION- literally means the place of taxation, or the country that has jurisdiction to levy a particular tax on persons, property, rights or business.
Basis: Symbiotic relationship. The jurisdiction, state or political unit that gives protection has the right to demand support.
The situs of taxation is determined by a number of factors
a. Subject matter- or what is being taxed. He may be a person or it may be a property, an act or activity;
b. Nature of tax- or which tax to impose. It may be an income tax, an import duty or a real property tax;
c. Citizenship of the taxpayer
d. Residence of the taxpayer.
SITUS OF PERSONS
1. Residence tax- place where the person resides
2. Income Tax-
a. citizenship, or the country of which he is a citizen
b. legal residence
c. place where the income is derived.
3. Estate Tax- residence of the decedent at the time of his death
4. Donor’s Tax- residence of the donor at the time of donation
5. Business/occupation tax- where the business is done or the occupation is engaged in;
SITUS OF TAXATION OF PROPERTY
1. Real Property- location of the property
2. Tangible personal property- location of the property
3. Intangible personal property- domicile or residence of the owner
Most countries impose taxes on income earned or gains realized within that country regardless of the country of residence of the person or firm. Most countries have entered into bilateral double taxation treaties with many other countries to avoid taxing nonresidents twice—once where the income is earned and again in the country of residence (and perhaps, for U.S. citizens, taxed yet again in the country of citizenship)—however, there are relatively few double-taxation treaties with countries regarded as tax havens. To avoid tax, it is usually not enough to simply move one’s assets to a tax haven. One must also personally move to a tax haven (and, for U.S. citizens, renounce one’s citizenship) to avoid tax
is the illegal evasion of taxes by individuals, corporations and trusts. Tax evasion often entails taxpayers deliberately misrepresenting the true state of their affairs to the tax authorities to reduce their tax liability and includes dishonest tax reporting, such as declaring less income, profits or gains than the amounts actually earned, or overstating deductions. Tax evasion is an activity commonly associated with the informal economy. One measure of the extent of tax evasion (the “tax gap”) is the amount of unreported income, which is the difference between the amount of income that should be reported to the tax authorities and the actual amount reported.
is the legal usage of the tax regime to one’s own advantage, to reduce the amount of tax that is payable by means that are within the law. Tax sheltering is very similar, and tax havens are jurisdictions which facilitate reduced taxes. The term tax mitigation is sometimes used; its original use was by tax advisers as an alternative to the pejorative term tax avoidance. “Tax aggressive” strategies fall into the grey area between commonplace and well-accepted tax avoidance (such as purchasing municipal bonds in the United States) and evasion. However, the uses of these terms varies.