Taxation in Business Essay

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1. Define Taxation Taxation is a power to raise & accumulate revenue from its inhabitants to pay the necessary expenses of the government 2. Why is taxation important? - It is important for the continuous existence of a nation - Exercised to raise revenue for the very existence of the govt - Without taxation, other inherent powers would be paralyzed 3. What are the bases of exercise of tax power? a. Necessity - Right to compel all its citizens to contribute money - A necessary burden to preserve the state’s sovereignty - Lifeblood or bread & butter of govt b. Reciprocal Duties - Benefits received principle - Symbiotic relationship: indispensable partnership between the people and the govt 4. Explain briefly the three main purposes in exercising taxation power 1. Revenue Purpose - To raise revenue by collecting funds and property 2. Regulatory Purpose - Sumptuary: secondary objective of imposing tax - Regulate inflation, achieve economic and social stability, and a key instrument for social control - Used as a tool and weapon international relations - Duties: a. Discriminatory duty- to offset foreign discrimination against our local commerce b. Countervailing duty- imposed to offset any foreign subsidy granted to imported goods to the prejudice of local industries c. Marking duty- additional duty tax with improper classifications d. Dumping duty- imposed on imported goods with lower prices compared to their fair market values 3. Compensatory Purpose - A tax may be used to make up for the benefit received - Imposed for the equitable distribution of wealth and income - Higher taxes are collected from those who earn more 5. Explain briefly the nature of police, eminent domain and taxation powers of the state. 1. Police Power - To legislate for the protection of health, welfare & morals of the community - Guard against abuses - Restricted by due process clause- cannot be

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