EVOLUTION OF PHILIPPINE TAXATION

Taxation
- is a real must contend with for the primary reason that governments raise revenue from the
people they govern to be able to function fully.
- In exchange for the taxes that people pay, the government promises to improve the citizens'
lives through good governance.

Taxation in Spanish Philippines

- Have abundant natural resources even before the encroachment of the Spaniards.
- The payment of tribute or taxes (buhis/buwis/handug) or the obligation to provide labor
services to the datus
in some early Filipino communities in the Philippines may resemble taxation.
- The arrival of the Spaniards altered this subsistence system because they imposed the
payment of tributos from the Filipinos.

- The purpose is to generate resources to finance the maintenance of the islands, such as
salaries of government officials and expenses of the clergy.
- The difficulty faced by the Spaniards in revenue collection through the tribute was the
dispersed nature of the settlements (solved by introducing the system of reduction by creating
pueblos) where Filipinos were gathered and awarded plots of received awards from the
Spanish crown for their services.

Exemptions: Alcaldes
Gobernador
cabeza de barangay
soldiers
members of the civil guard
government offcials
vagrants

16TH CENTURY - the Manila Acapulco trade was established through the galleons.
(Spaniards could make sure that European presence would be sustained)
- Once a year, the galleon would be loaded up with merchandise from Asia and sent to
New Spain(Mexico), and back.

- Improved the economy and reinforced the control of the Spaniards all over the
country.

1884 - The payment of tribute was put to a stop and was replaced by a poll tax collected
through a certificate of identification called CEDULA PERSONAL.
(Required from every resident and must be carried while traveling.
 - This system was a heavy burden for the peasant and was easy for the wealthy. (The
revenue collection greatly increased and became the main source of government income.)

1878 - Two direct taxes were imposed.

1) Urbana - is a tax on salaries, dividends, and profits.

2) Indirect taxes - imposed on exports and imports to further raise revenue.

The colonial government also gained income from monopolies, such as the sale of stamped
paper manufacture and selling liquor, cockpits, and opium, but the biggest of the state
monopolies was tobacco.

This monopoly made it possible for the colony to create a surplus of income.

FORCED LABOR - proved useful in defending the territory of the colony and augmenting the
labor required by wood cutting and shipbuilding, especially during the time of the galleon trade.
- Males were required to provide labor for 40 days a year.

Taxation during the Spanish colonial period was characterized by the heavy burden placed on
the Filipinos and the corruption of the principales.

TAXATION UNDER AMERICAN

- Aimed to make the economy self-sufficient by running the government with the smallest
possible sum of
revenue and create a surplus in the budget.

1898 - 1903
- The Americans followed the Spanish system of taxation with some modifications, noting
that the system introduced by the Spaniards was outdated and regressive.

The military government suspended the contracts for the sale of opium, lottery, and mint
charges for coinage money.
Urbana was replaced by a tax on real estate (land tax) and was levied on both urban and rural
real estate.

LAND TAX(PROBLEM)

- Land titling in the rural area was very disorderly.

- The appraising of land value was influenced by political and familial factors and the
introduction of a taxation system on agricultural land faced objections from the landed elite.

Internal Revenue Law of 1904

- was passed as a reaction to the problem of collecting land tax.
- prescribed ten significant sources of revenue

CEDULA
- went through changes
- the rate was fixed per adult male (resulting in a great decline in revenues.
- double the fee for the cedula (1907)

1913
- Underwood-Simmons Tariff Act was passed, resulting in a reduction in the revenue of the
government as export taxes levied on sugar, tobacco, hemp, and copra were lifted.

1914 - income tax

1919 - inheritance tax
1932 - national lottery

TAXATION DURING THE COMMONWEALTH

1936 - Income tax rates were increased

1937 - cedula tax was abolished
1940 - residence tax was imposed on every citizen aged 18 years old and on every corporation

1939 - drafted the National Internal Revenue Code (introducing major changes in the new tax
system

The lower class still felt the bulk of the burden of taxation, while the upper class, the landed elite
or the people in political positions
(were able to maneuver the situation in a way that would benefit them more.

WORLD WAR II

-Economic activity was put to a stop and the Philippines bowed to a new set of
administrators(Japanese)
- Continued the tax system of the commonwealth except the articles belonging to the Japanese
armed forces.

FISCAL POLICY FROM 1946 - Present

- The economic situation was so problematic (1949)
- There was a severe lack of funds in many aspects of governance (military and education
sectors)
- No efforts were made to improve tax collection
-The impetus for economic growth came during the time of President Elpidio Quirino

(the implementation of import and export exchange controls)

- that led to import substitution development.
- Allows the expansion of a viable manufacturing sector that reduced economic dependence
on imports

New tax measures were also passed.

1) Higher corporate tax (increased government revenues

2) Tax revenue (1953) increased twofold compared to 1948

MACAPAGAL - GARCIA - MAGSAYSAY (PROMISED TO STUDY THE TAX STRUCTURE

AND POLICY OF THE COUNTRY THROUGH
CREATION OF A TAX COMMISSION IN 1959 UTILIZING REPUBLIC ACT NO. 2211 TO
MAKE FOR A MORE ROBUST AND EFFICIENT TAX COLLECTION SCHEME

POST-WAR
- Rise in corruption
- 1959 - 1968 ( congress did not pass any tax legislation despite important changes in the
economy

MARCOS - THE TAX SYSTEM REMAINED REGRESSIVE AND UNRESPONSIVE.

- Tax effort, defined as the ratio between the share of the actual tax collection in gross domestic
product and
prediction taxable capacity was at low 10.7%

C. AQUINO - Reformed the tax system through the 1986 Tax Reform
- aims to improve the responsiveness of the tax system, promote equity, promote
growth, and improve tax administration

FIDEL RAMOS - Greater political stability

- Comprehensive Tax reform program
- rationalize the grant tax incentives

Gloria Arroyo - undertook increased government spending without adjusting tas collections
(resulting in large deficits)
- the government had to look for additional sources of revenue
 - Expanded Value Added Tax was signed into law as RA 9337

Benigno Aquino III - promised no new taxes would be imposed and additional revenue would
have to come from adjusting existing taxes
- ventured into adjustments of excise tax on liquor and cigarettes or the Sin
Tax Reform
- RA 10351 was passed (Sin Tax Law of 2012)

DUTERTE - promised tax reform

- lower income rates (shouldered by working Filipinos