Subjects or objects to be taxed

The taxation subject is the individual or company, fulfilling taxation obligations in accordance to the ownership of the taxation object. Every citizen of a state is a taxation subject. If the state has the right to deduct a part of the income, this relates to the obligation of each citizen to offer a part of his/her wealth to the state. In this context, one should not forget the distinction between the taxpayer and the tax carrier. The former is the entity that initially pays the tax; the latter is the entity carrying the tax as a result of economic processes and transfers. This takes place primarily at the deduction of secondary taxes.

The taxation object is the object or phenomenon, which, according to law, is being taxed. Taxation objects can be classified in the following way: income (income tax), wealth (real estate, land), wealth transfers (estate and donor's tax), consumption (excises and VAT), or the import and export of goods (customs duties). Income taxation is divided into the taxation of earned and unearned income. Earned income tax relates to salaries, fees of people engaged in freelance occupations, the income of individual juridical persons. Taxation of unearned but legal income refers to dividends, interest revenue, capital expansion, land and real estate rents. The taxation object materializes as a result of legal events (actions, events, conditions), which affect the obligation of the subject to pay the tax: the sale of goods, works and services; the transit of goods though a customs territory, ownership of wealth, the receipt of inheritance rights, the receipt of revenue in one or another form.

The subjects or objects to be taxed are the coverage and the kind or nature of the tax. They may be persons, whether natural or juridical; property, whether real or personal, tangible or intangible; businesses, transactions, rights, or privileges. A state is free to select the subject of taxation and it has been repeatedly held that that inequalities which result from a singling out of one particular class for taxation or exemption infringe no constitutional limitation so long as such exemption is reasonable and not arbitrary. (98 Phil. 148) Thus, it can be said that the power to tax carries with it the power to grant exemption therefrom.