The birth of an independent state presupposes the existence of its essential elements and inherent attributes that allows the sovereign to continue on existing. A state stands identified with its essential elements which are, the government, citizens, territory and the sovereignty. One of these elements, the government, serve as the agent of the state in exercising its three inherent powers. First, the police power, which is the power of the state to promote public welfare by restraining and regulating the use of liberty and property. Second, is the power of taxation, power exercised by the state to raise revenue for the support of the government. Third, is the power of eminent domain used by the state to acquire private property for public use with payment of just compensation.
These powers are inherent to the state in the sense that their exercises is guaranteed by the mere existence of the state. They are all legislative in nature and a way of the state to interfere with private rights and property. They all exist independently of the Constitution, therefore, they can be exercised even without Constitutional grant. Among these powers, the power of taxation is held as the most absolute inherent power of the state, without which the state can neither endure nor exist.
Taxation is the inherent power by which the independent state, through its law-making body, raises revenue to finance the necessary expenditures of the government. Taxation is a process of levying taxes by the legislature of the state to enforce proportional contributions from its subject. It is a mode of apportioning the cost of the government among those who, in some measure, are privileged to enjoy its benefits and must therefore bear its burden. This burden is also known as tax, an enforced proportional contributions from the persons and property levied by the law-making body of the State by virtue of its sovereignty for the running of the government.
In some instances, one may wonder about the essence of taxation and likely ask questions such as,
Why taxes exist? Why is it important to pay taxes? Why must one surrender a part of his/her hard earned income to the taxing authorities? Who imposes tax? What benefits does one receives in paying taxes? Where does the taxes go? Are there means to escape tax? What are the consequences if one does not pay taxes?
To deduce the answer to the questions aforementioned, one must comprehend the rationale behind the imposition of tax. It is crucial for stakeholders, who are the subject to taxation to know the justification behind the burden they pay, for this will allow them to understand the enforcement of taxation and assures their compliance therewith. As such, it is important to discuss and emphasize the necessity of taxation to both government and its inhabitant, its basis and underlying theories, which will give insights to the subject of taxation on why should they comply with their obligations as a taxpayer.
“ Taxation is a power emanating from necessity.
Taxes are what we pay for a civilized society.”
The existence of a government is a necessity and the power to tax proceeds upon this theory. A system of government is indispensable in every society for without it the people will not enjoy the benefits of an organized society. This two-way relation which is a relationship based on the give and take is the basis of taxation, which is also known as Doctrine of Symbiotic Relationship. This means that the government impose taxes through its legislature or the law-making body, from its subjects in order that it may be able to discharge its functions and the citizens, pay taxes in order to receive general advantages and protection in the form of tangible (public utilities and infrastructures) and intangible (privileges and protection) benefits from the state.
“Taxes are the lifeblood of the government.”
The basic function of government is to serve and protect its citizens. In carrying out this function the government incurs necessary expenses. Without the means to pay for its expenses, the government can neither exist nor endure. In order for the government to carry on with its operations, it needed to raise revenue, which is the primary purpose of taxation. This revenue is used by the government in performing its part by providing funds or property that promotes the protection of the general welfare. By reason of the government’s necessity for funding, the states gives it the right to compel all subjects and objects within its limits to contribute, for without such funding the government would be paralyzed for lack of motive power to activate and operate.
The term within its limits is highlighted for the nature of the state’s power to tax is bound to certain limitations such as, taxes must not be harsh and oppressive and it must be equitable or taxpayers ability to pay must be taken into consideration. This results to equitable taxation which is made possible through the progressive system which prevents, the undue concentration of wealth in the hands of few individuals. This system is keystoned on the principle that those who are able to pay should shoulder the bigger portion of the tax burden which leads to reduction of social inequality. This exhibits the secondary purpose of taxation, where taxation is used as a device for regulation or control which is the way of the government to achieved its envisions.
However, it is important to take note that, the consideration of the taxpayers ability to pay does not mean that one has a choice whether or not to pay taxes. Taxes are compulsory contribution and is not voluntary or donation. Taxes are not subject to set-off or compensation for the government and the taxpayer’s are not mutually debtor and creditor of each other. This is an implication of the lifeblood doctrine, where the government should collect taxes without unnecessary hindrance.
Additionally, power to tax carries along with it the power to destroy. Taxation is a destructive power that interferes with the personal and property rights of the people and takes from them a portion of their property for the support of the government. As a result, one cannot invalidate the collection of taxes because of reason that it will leave him insolvent and as well as use the reason of not receiving benefits from the government as an excuse of escaping the responsibility of paying taxes. For all the subject of taxation who resides within the territory of the state is presumed to receive the benefits of protection provided by such state, and therefore, is bound to bear the necessary burden.
Although, tax is a compulsory contribution, there are means to avoid or minimize its burden. These means includes tax minimization, shifting, capitalization, transformation and tax exemptions which are legal permissible means to avoid the burden of paying tax. Aforesaid, the tax exemptions is highly disfavored by law and he who claims an exemption must be able to justify his claim by the clearest grant of law. It is not favored as the state is denied of its right to raise revenue. Tax evasion, on the other hand , is the illegal or fraudulent means to defeat or lessen the payment of tax in which is punishable by law. The State, however, may give an absolute waiver to tax evaders who wish to come clean by giving them an opportunity to straighten out their record, this is known as tax amnesty. The reason for such forgiveness stems from the lifeblood theory.
In conclusion, taxation power emanated from a necessity. The existence of government is a necessity and it needs taxes, as means to pay for its existence. The citizens, on the other hand pays taxes for it needs the presence of the government. This reciprocal relationship is the rationale of taxation, that states, one should pay taxes to the state, within it limits to contribute, in order to relish the benefits of a civilized and orderly society.