Seminars Schedules

Classifications of Taxes

To further understand the concept of taxes, the following classifications are commonly provided:

According to subject matter (What is being taxed?):

a. Property tax – imposed upon the property located in a particular community. Example is real property tax under the Local Government Code of the Philippines.
b. Personal tax – imposed upon a person belonging to a particular community. Example is the community tax certificates or sedula in common language.
c. Excise tax – imposed upon the exercise of certain rights and privileges.

According to who bears the burden (who actually pays the tax?):

a. Direct tax – the one who is required by law to shoulder the tax is the same person who is bound to remit the tax to the government. Examples: Income tax, the taxpayer who earns taxable income is the one taxed on such income and is the same person who is required to remit the tax due to the government; in donor’s tax, the donor is the one being taxed and is the one required to remit the tax due to the government. In case of non-payment, the government will run after the taxpayer.

b. Indirect tax – the one who is required by law to shoulder the tax is different from the one who is bound to remit the tax to the government. Typical example is the value-added tax (VAT), which is an indirect tax where the customers are being passed on the 12% but it is the seller establishment that is bound to remit the tax. In case the seller establishment fails to remit the tax, then, it is the one liable and not the consumers.

According to how amounts are determined:
a. Ad valorem – taxes imposed as a certain percentage based on the value of the taxable subject or article. Example, income tax is a percentage of taxable income – 30% if corporation, 5%-32% for individuals; value-added tax is 12% of the gross sales or gross receipts.

b. Specific tax – taxes imposed at a certain amount based on a unit of measure such as weight or volume. Example is excise tax on alcoholic products, a certain centavos/pesos based on volume of say, 100ml; tax on cigarettes that is a certain amount per pack of a particular cigarette grade.

According to administering authority:

a. National internal revenue tax or national tax – those imposed by the national government. Examples are VAT, income tax, donor’s tax, estate tax, other percentage tax.

b. Local taxes – those imposed by the local government units such as real property tax, community tax certificates, business taxes, idle lands tax, sand and gravel tax, etc. N.B. Special levy or special assessment is not a tax in technical sense because its purpose is not to raise revenue but simply to recover or to seek reimbursement of the cost of the public expenditure.

According to the purpose of the tax:
a. General – those whose proceeds go to the general fund of the government through the National Treasury, Bureau of Treasury (BTr). In government accounting, they are called general funds. As a rule, government revenues goes to the BTr through the general fund, appropriated to government agencies and instrumentalities through the Appropriations Act of the Congress, and from such budget, government agencies and instrumentalities disburse.
b. Special – those imposed for a particular or specific purpose. This is commonly imposed by special laws such as the Sugar Adjustment Act before that was used above as an example.

According to graduation
a. Proportional tax
b. Progressive tax
c. Regressive tax

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