Nathaniel D.

Arizala FIN 3209-2

BSBA FM 3-2 Prof. Ragrciel G. Manalo

Module 2 Chapter 3: Taxation Development

In ancient times, stretching back to the pre-colonial period, our ancestors already had an
early tax system for the development of society. Practiced in the spanish era and up until now,
taxes are the lifeblood of our growing economy. Although variations have been introduced
through time to time, the goal of taxes are still proportional way back and even to this date.
Various sectors are in-charge of handling the people’s taxes and let us dig deeper into what
their mandates are. Let us start first with the Department of Finance (DOF). The government's
guardian of responsible fiscal policy is the Department of Finance (DOF). It develops revenue
strategies that will guarantee funding for crucial government initiatives that advance the
wellbeing of our citizens and hasten economic growth and stability. The Department hopes that
by effectively and efficiently pursuing the vital tasks that fall under its purview—revenue
generation, resource mobilization, debt management, and financial market development—it will
lay the groundwork for the Philippine economy to become one of the most active and dynamic in
the world. Its significance is demonstrated by the fact that the Department of Finance was
established before the Philippine Republic. The Department of Defense (DOF), which was
established by the Philippine Revolutionary Government on April 24, 1897, has undergone
numerous structural and functional upgrades but has continued to be an important division. The
Department of Finance is currently responsible for the crucial functions of income production,
resource mobilization, and fiscal management. Infrastructure, education, healthcare, and other
fundamental services must be provided by the government, and the DOF must have the money
to pay for them. The DOF must also direct fiscal policies toward an environment that
encourages investment, as this is the engine of growth.

Now DOF has several government agencies under its supervision, first we have the
Bureau of Internal Revenue. The Department of Finance will oversee and manage the Bureau
of Internal Revenue, and it will be responsible for assessing and collecting all federal internal
revenue taxes, fees, and charges as well as enforcing any forfeitures, fines, or penalties related
to them. It will also be responsible for carrying out judgments in any cases where the Court of
Tax Appeals and regular courts rule in its favor. The Bureau shall give effect to and manage the
supervisory and policing functions assigned to it by this Code or other legislation. (National
Internal Revenue Code of 1997, Section 2). Next we have the Bureau of Customs. The
Philippine Customs Service was established centuries ago, according to historical documents,
before the country was discovered by eastern and western explorers. Although trade between
the Philippines and Southeast Asian nations was already thriving at the time, people still used
the barter system of commodities because money was not yet the primary form of exchange.
Before allowing people to practice their trade, the "datus" or "rajahs," who were in charge of the
barangays, demanded tribute payments from them. The act of collecting tributes was observed
and adhered to as the Customs Law of the Land, becoming a part of their culture. Following its
complete takeover of nearly all trade in the nation, Spain issued three significant laws: the
Spanish Customs Law, which was in effect from 1582 to 1828 and was modeled by the Indies'
customs law. Ad valorem taxes were imposed on imports and exports. A tariff board was then
constituted, and it created a set of fixed-value tariffs for all imported goods that were subject to a
standard 10% ad valorem levy. Then, in 1891, a new Tariff Law was implemented, and this one
persisted until the end of Spanish colonial control in the Philippines. It placed specified tariffs on
all imports and on some exports. After the agencies, let us discuss the tax system of our
country. Following its complete takeover of nearly all trade in the nation, Spain issued three
significant laws: the Spanish Customs Law, which was in effect from 1582 to 1828 and was
modeled by the Indies' customs law. Ad valorem taxes were imposed on imports and exports. A
tariff board was then constituted, and it created a set of fixed-value tariffs for all imported goods
that were subject to a standard 10% ad valorem levy. Then, in 1891, a new Tariff Law was
implemented, and this one persisted until the end of Spanish colonial control in the Philippines.
It placed specified tariffs on all imports and on some exports. According to Section 22(E) of the
NIRC, a non-resident citizen is one of the following: a) A Filipino national who demonstrates to
the Commissioner's satisfaction that he is physically present overseas with the purpose to stay
there; or b) A Filipino national who departs the nation during the tax year to live overseas, either
as an immigrant or for a long-term job; or c) A Filipino national who is employed overseas,
receives income from such employment, and is required to be physically present abroad for the
majority of the tax year as a result of that employment; or d) A citizen who has previously been
treated as a non-resident citizen and who enters the Philippines at any point during the tax year
with the intention of settling there permanently will also be treated as such for the tax year in
which he enters the country with regard to income derived from sources abroad up until the date
of his entry. The taxpayer must provide evidence to the Commissioner for this reason proving
his intention to leave the Philippines and live permanently overseas or to return and live there,
as applicable.

Now for income subject to tax. According to the NIRC, Taxable Income is defined as the
relevant gross income items less any personal and/or supplementary exemptions that may be
allowed for certain categories of income under the NIRC or other special legislation. Gross
income, as defined by Section 32(A), is all income, regardless of source including the following
items, but not exclusively: a) Payment in exchange for services rendered, in any form, including
but not limited to fees, salaries, wages, commissions, and similar goods; b) Gross income from
the operation of a business or from the practice of a profession; c) Gains from property
transactions; d) interest; e) Rents f) Royalties; g) Dividends; h) Annuities; i) Awards and gains; j)
Pensions; and k) The distributive share that each partner receives from the general professional
partnership's net income. For the Capital Gains Tax, The sale, exchange, or other disposition of
capital assets located in the Philippines is subject to capital gains tax, which is levied on gains
made or deemed to have been made by the seller. Pacto de retro sales and other types of
conditional sales are included in this tax. In accordance with the Philippine Tax System, there
are two types of capital gains taxes: 1.) Capital Gains from the Selling of Stock Not Listed for
Trading. The net capital gains achieved during the taxable year from the sale, barter, exchange,
or other disposition of shares of stock in a domestic corporation are subject to a final tax at the
rates outlined below, with the exception of shares sold or disposed of through the stock
exchange: not more than P100,000.00 – final tax of 5% and 10% of any amount over P100,000
will be deducted.
2. Capital Gains from Real Estate Sales.
Including pacto de retro sales and other types of conditional sales, a final tax of six percent
(6%), based on the gross selling price or fair market value (as determined by the Commissioner
of the Bureau of Internal Revenue or as shown in the schedule), is imposed on the gain
presumed to have been realized on the sale, exchange, or disposition of real property located in
the Philippines that are not actually used in the trade or business.

Now let us discuss the effects of the TRAIN Law which the Duterte Administration
deemed a success on their behalf. To be specific, how the Filipino consumers are affected by
the reforms. TRAIN, a tax program begun by the Rodrigo Duterte administration to kick off 2018,
decreased personal income taxes while raising levies on automobiles, tobacco,
sugar-sweetened beverages, and fuel. In order to incorporate the increased withholding tax
rates, payroll administrators have begun to modify their systems. Retailers of oil, convenience
stores, supermarkets, and even street sellers have started to update their price lists. An 8
January visit to Puregold store revealed that a pack of Marlboro Black 20s now costs P87.50, up
from P68 last year. Finance Secretary Carlos Dominguez III stated that the Department of Social
Welfare and Development (DSWD) is required to deliver targeted cash transfers to the poorest
10 million households in order to shield the poor from rising commodity costs. Each household
would receive P2,400 a year in 2018, P3,600 annually in 2019 and 2020. The cash transfer will
be put into effect, according to Dominguez, in the first quarter of 2018. According to him, DSWD
will determine Pantawid Pamilyang Pilipino Program and social pension beneficiaries based on
the [list]. The 2018 budget includes P25.7 billion for the unconditional cash transfer budget.