Theories on imposition of estate tax

Below are theories behind the levy and imposition of estate tax in the Philippines. They are almost the same theories that justify taxation in general.

[1] STATE-PARTNERSHIP THEORY. This is also called the "privilege theory." The State, through the three (3) branches of government, especially through the President's economic and foreign policies and the lawmaking body's enactment of laws that invite more investors into the country, is the citizen's silent partner in his enjoyment of return of investment and growth and his accumulation of property. Thus, it has the right to collect the share due it.

[2] BENEFIT THEORY. This is also called the "benefits-protection theory." It is the primary duty of the State to serve and protect the people via government programs and projects that benefit them. Correlative to this duty is the right to a share in the distribution of the estate of the decedent who and whose family benefited from the efforts of the State.

[3] ABILITY-TO-PAY THEORY. The fact that the decedent had property at the time of his death to transmit to his heirs proves that he has the ability to pay taxes. Also, on the part of the heirs, their receipt of their share in the inheritance is considered an "unearned wealth" which justifies the payment of the tax. This is the same theory used to support the levy and collection of inheritance tax (different from estate tax) in other jurisdictions (which does not exist under Philippine tax laws).

[4] WEALTH REDISTRIBUTION THEORY. The 1987 Constitution says that one of the goals of the national economy are a more equitable distribution of opportunities, income, and wealth. Estate tax is a way by which the government makes sure that  people who have the property to transmit via succession participate in strengthening the national economy. The collection of estate taxes prevents the widening of wealth inequality in the country.

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