TAXATION and ISSUES

DEFINITION OF TERMS:
TAXATION - is a process or means by which the sovereign, through its lawmaking
body, raises income to defray the necessary expenses of the government.
(Income Taxation by Omar Erasmo G. Ampongan)

TAX – are the enforced proportional contributions from persons and property levied by
the law-making body of the state by virtue of its sovereignty for the support of the
government and all public needs.
(The Fundamentals of Taxation by Hector S. De Leon)

INCOME TAX- taxes that are taken from the money that you earn.

SALES TAX – taxes collected when a good or service is purchased. (pangkalahatang

buwis naipinapataw)

PAYROLL TAX – taxes collected from you and your employment when you get paid.

PROPERTY TAX – taxes collected based on the property you own.

SIN TAX – taxes collected when a specific good or service is purchased

LICENSE/OCCUPATIONAL TAX – tax to purchase a license or job certificate.

(https://www.youtube.com/watch?v=WCSz3lbRge)

ESTATE TAX – is a tax on the right of the deceased person to transmit his estate to his
lawful heirs or beneficiaries.

INHERITANCE TAX – is a tax on the right of heirs or beneficiaries to receive the

estate of the deceased person.

VALUE-ADDED TAX (VAT) – is a uniform tax (0% or 10%) imposed on each sale,
barter, exchange, or lease of goods, properties, or services in the course of trade or
business as they pass along the production and distribution chain, the tax being limited
only to the value added to such goods, properties, or services y the seller, transferor or
lessor.
EXCISE TAX – as used in the Tax Code, are taxes imposed on certain specified goods
or articles manufactured or produced in the Philippines for domestic sale or
consumption or for any other disposition and to things imported into the Philippines.
(The Fundamentals of Taxation by Hector S. De Leon)
HISTORY OF TAXATION
PRE-COLONIAL PERIOD (900-1521)

 Government were called “Barangays”

 No national government
 Ancient Filipinos practice paying taxes for the protection from their “datu”
 The collected tax or tribute was called “buwis” or “handug”
 Three classes: Tumao (includes datu), Timawa (warrior class), Oripun (slaves, they did
not pay taxes)

SPANISH PERIOD (1521-1898)

The government introduced a “New Income - Generating means”
Examples:
 Manila - Acapulco Galleon Trade (1565 – 1815).
A ship trade going back and forth yearly between Manila and Acapulco.
 Polo Y Servicio (Forced Labor).
40 days, of men ranging from 16 to 60 years of age who were obligated to give personal
services to community projects. One could be exempted from the polo by paying a fee
called falla (which was worth one and a half real)
 Bandala. A system implemented by Spanish authorities in the Philippines that required
native Filipino farmers to sell their goods to the government.
 Encomienda System (1570). A Compliance with the decree issued by King Philip II
in 1558, distributed lands in Cebu to loyal Spanish subjects. The encomienda was not
actually a land grant but was a favor from the kind under which the Spaniard receiving
his favor was given the right to collect tributes–or taxes–from the inhabitants of the area
assigned to him. The man who received this favor was called an encomendero. The
encomienda was, therefore, a public office.
By 1884, the tribute was replaced by the Cedula personal, wherein colonists were required to
pay for personal identification. Everyone over the age of 18 was obliged to pay.
Eventually, Cedula Personal became the Community Tax today.
AMERICAN PERIOD (1898 – 1946)

 January 1, 1940,The cédula was imposed by the Americans. The payment of this tax
would merit the issue of a residence certificate.
 Residence Certificate (cedula), is a legal identity document in the Philippines. Issued
by cities and municipalities to all persons that have reached the age of majority and upon
payment of a community tax. Corporations were also subject to the residence tax.
 During 1991,Local Tax Code were later subsumed into the Local Government Code.
 the Bureau of Internal Revenue (BIR) was created through the passage of
Reorganization Act No. 1189 dated July 2, 1904.
 August 1, 1904, the BIR was formally organized and made operational under the
Secretary of Finance, Henry Ide, with John S. Hord as the first Collector
(Commissioner).
(https://dlscrib.com/queue/history-of-taxation-in-the-
philippines_58af189d6454a73e2eb22f13_pdf?queue_id=59844125dc0d60eb52300d20)
 PURPOSE OF TAXATION

1. REVENUE PURPOSE – to raise revenue by collecting funds or property for the

support of the government to promote the general welfare and protection of its
citizens and to enable to finance its multifarious activities. (Income Taxation by
Omar Erasmo G. Ampongan)

2. REGULATORY PURPOSE – to regulate inflation, achieve economic and social

stability, and serve as key instrument for social control. (Income Taxation by Omar
Erasmo G. Ampongan)

3. COMPENSATORY PURPOSE - The compensatory purpose of

taxation is to implement the social justice provisions of the constitution through
the progressive system of taxation, which would result to equal distribution of
wealth, etc. Progressive income taxes alleviate the margin between rich and poor.
(Cursehero.com)

NATIONAL TAXES and LOCAL TAXES

NATIONAL TAXES are those that we pay to the government through the Bureau of
Internal Revenue. Our National Taxation is based on the National Internal Revenue
Code of 1997 of the Republic Act of 1997, as amended.
Includes: Income Tax, VAT, Estate Tax, Excise Tax, etc.

LOCAL TAXES / LOCAL GOVERNMENT TAXATION in the Philippines are based

on the Republic Act 7160 or otherwise known as the Local Government Code of 1991, as
amended. These taxes, fees or charges are imposed by the Local Government Units, such
as provinces, cities, municipalities, and barangays, who have been given the power to
levy such taxes by the code.
Includes: Community Tax, Barangay Clearance, Tax on Business, etc.

(Bureau of Internal Revenue, Department of Republic Act No. 8424 [as amended], and
Republic Act 7160 [as amended], Republic Act No. 1937 [as amended]