TAXATION

“What is Taxation?”
Refers to compulsory or coercive
money collection by a levying
authority, usually government.
Refers to the practice of a government
collecting money from its citizens to
pay for public services
 “Philippine Taxation”
Taxes are mandatory
contributions of everyone to
raise revenue for nation-
building.
Why does the government collect taxes?

To provide basic services such as

education, health, infrastructure,
and other social services for all .
Who pay taxes?
We pay taxes according to our income and/or level of
consumption

Income Tax
Consumption Tax
Income Tax
Ability-to-pay principle

Consumption Tax
The more you consume, the higher the tax
you pay
Where do my taxes go?
Taxes are used to fund social
services and investment in
infrastructure and human capital
development.
 “Legal Bases of Philippine
Taxation”
A. Constitution
Article VI, Section 28
– the rule of taxation shall be uniform and
equitable. The congress shall evolve a
progressive system of taxation.
 “Legal Bases of Philippine
Taxation”
B. National Law
1. Republic Act No. 8424 / Tax Reform Act
of 1997
• AN ACT AMENDING THE NATIONAL INTERNAL
REVENUE CODE, AS AMENDED, AND FOR OTHER
PURPOSES
B. National Law
2. Republic Act No. 10963 / Tax Reform for
Acceleration and Inclusion Act of 2017
 To ensure that the government is able to provide for the
needs of those under its jurisdiction and care through
the provision of better infrastructure, health, education,
jobs, and social protection for the people.
Section 2. Declaration of Policy. - It is hereby declared the policy of the State:

(a) To enhance the progressivity of the tax system through the rationalization of the Philippine
internal revenue tax system, thereby promoting sustainable and inclusive economic growth;

(b) To provide, as much as possible, an equitable relief to a greater number of taxpayers and
their families in order to improve levels of disposable income and increase economic activity;
and

(c) To ensure that the government is able to provide for the needs of those under its
jurisdiction and care through the provision of better infrastructure, health, education, jobs,
and social protection for the people.
B. National Law
3. Republic Act No. 7160/ Local
Government Code of 1991
SECTION 2. Declaration of Policy. –
(a)
 It is hereby declared the policy of the State that the territorial and
political subdivisions of the State shall enjoy genuine and meaningful
local autonomy to enable them to attain their fullest development as self-
reliant communities and make them more effective partners in the
attainment of national goals. Toward this end, the State shall provide for
a more responsive and accountable local government structure instituted
through a system of decentralization whereby local government units
shall be given more powers, authority, responsibilities, and resources.
The process of decentralization shall proceed from the National
Government to the local government units.
(b) It is also the policy of the State to ensure the accountability
of local government units through the institution of effective
mechanisms of recall, initiative and referendum.
(c) It is likewise the policy of the State to require all national
agencies and offices to conduct periodic consultations with
appropriate local government units, nongovernmental and
people’s organizations, and other concerned sectors of the
community before any project or program is implemented in
their respective jurisdictions.
Powers and Duties of the Bureau of
Internal Revenue
1. Reduction and collection
2. Enforcement of all forfeitures, etc…,
3. Give effect to the administer supervisory
and police powers
 “Kinds of Taxes”
Direct Taxes – paid from your
income and properties

Indirect Taxes – based on

consumption
A. Direct Tax
 Income Tax
Compensation Income - Salaries, wages
taxable bonuses, fringe benefits.
Business Income – practice of profession, trades,
gains from sale of assets, and other income not covered by
compensation.
Passive Income – Tax on deposits, royalties, and
dividends
Income tax schedule for individuals effective FY 2018 until
2022
Interest income – bank deposits, deposit
substitutes, trust funds is taxed at rate of
20%
Royalties – except on books, literary works
and musical compositions, are taxed at the
rate of 10%
Prizes – from PCSO lotto excess of P10,o00
ar taxed at the rate of 20%
Dividends - Cash and property dividend are
taxed at the rate of 10%.
Capital Gains – sales of shares of stock not
traded in stock exchange are taxed at the
rate of 15%,
Income tax for corporation – income tax
rate for corporations is 30%
B. Indirect Tax
1. Value-Added Tax – imposed on goods and services
passed on to the buyer as part of the selling price.
VAT rate since 2006 is 12%
2. Percentage Tax – business tax imposed on persons or
entities/transactions
3. Excise Tax – selected goods that have negative
externalities and are non essentials.
C. National Taxes
- are the ones paid to the government through the Bureau of Internal Revenue
(BIR). Our national taxation system is based on the National Internal Revenue
Code of 1997 or the Republic Act No. 8424 also known as the Tax Reform Act of
1997, as amended.
Income tax
Estate tax
Donor’s tax
Value added tax
Percentage Tax
Excise tax
Documentary Stamp tax
D. Local Taxes
- are what we pay to the local government units, which
include the provinces, municipalities, cities, and
barangays. The local government taxation in our country
is based on Republic Act 7160.

Ex. Parking fees

 History of Philippine Taxation
Spanish Era
During the 17th and 18th centuries, the Contador de' Resultas served as the Chief Royal

Accountant
He was the Chief Arbitrator whose decisions on financial matters were final except when

revoked by the Council of Indies. During these times, taxes that were collected from the
inhabitants varied from tribute or head tax of one gold maiz annually;
tax on value of jewelries and gold trinkets; indirect taxes on tobacco, wine, cockpits, burlas

and powder.
From 1521 to 1821, the Spanish treasury had to subsidize the Philippines in the amount of P

250,000.00 per annum due to the poor financial condition of the country, which can be
primarily attributed to the poor revenue collection system.
American Era
 In 1902, the first civil government was established under
William H. Taft.
 term of second civil governor Luke E. Wright that 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
(author of the Internal Revenue Law of 1904)
 John S. Hord as the first Collector (Commissioner).
 first organization started with 69 employees, which
consisted of a Collector, Vice-Collector, one Chief Clerk,
one Law Clerk, one Records Clerk and three (3) Division
Chiefs.
 3 more American collectors, namely: Ellis Cromwell
(1909-1912), William T. Holting (1912-1214) and James J.
Rafferty (1914-1918).
 Bureau had its first reorganization on January 1, 1913
with the creation of eight divisions : Accounting, Cash,
Clerical, Inspection, Law, Real Estate, License and
Records
 Filipinization policy of then US President McKinley,
Filipino Collectors were appointed. The first three (3)
BIR Collectors were: Wenceslao Trinidad (1918-1922);
Juan Posadas, Jr. (1922-1934) and Alfredo Yatao (1934-
1938).
 May 1921, by virtue of Act No. 299, the Real Estate,
License and Cash Divisions were abolished and their
functions were transferred to the City of Manila.
 In 1937, the Secretary of Finance reorganizing the
Provincial Inspection Districts and maintaining in each
province an Internal Revenue Office supervised by a
Provincial Agent.
Japanese Era
 At the outbreak of World War II, under the Japanese
regime (1942-1945), the Bureau was combined with the
Customs Office and was headed by a Director of
Customs and Internal Revenue.
Post War Era
Post War Era
 The Bureau was eventually re-established separately
 divided the country into 31 inspection units, each of which
was under a Provincial Revenue Agent
 withholding tax system was adopted by virtue of Republic
Act (RA) 690. This method of collecting income tax upon
receipt of the income resulted to the collection of
approximately 25% of the total income tax collected
during the said period.
 In January 1957, the position title of the head of the
Bureau was changed from Collector to Commissioner.
The last Collector and the first Commissioner of the BIR
was Jose Aranas.
 1958 was the establishment of the Tax Census Division.
This was done to consolidate all statements of assets,
incomes and liabilities of all individual and resident
corporations in the Philippines into a National Tax
Census.
 Rewards Law was passed on June 19, 1959 whereby
informers were rewarded the 25% equivalent of the
revenue collected from the tax evader.
 In 1964, the Philippines was re-divided anew into 15
regions and 72 inspection districts. The Tobacco
Inspection Board and Accountable Forms Committee
were also created directly under the Office of the
Commissioner.
MarcosAdministration

 The most notable programs implemented were the "Blue

Master Program" and the "Voluntary Tax Compliance
Program“ . The first program was adopted to curb the
abuses of both the taxpayers and BIR personnel, while
the second program was designed to encourage
professionals in the private and government sectors to
report their true income and to pay the correct amount
of taxes.
 Providing each taxpayer with a permanent Tax Account
Number (TAN) in 1970
 President Marcos promulgated the National Internal
Revenue Code of 1977, which updated the 1934 Tax Code.
 On August 1, 1980, the Bureau was further reorganized
under the administration of Commissioner Ruben
Ancheta
AquinoAdministration

 "Operation: Walang Lagay" was launched to promote

the efficient and honest collection of taxes.
 January 30, 1987, the Bureau was reorganized under the
administration of Commissioner Bienvenido Tan, Jr.
pursuant to Executive Order (EO) No. 127
 Value-Added Tax (VAT) in 1988
 Taxpayer Identification Number (TIN) (Commissioner
Jose Ong in 1989)
Ramos Administration
1993 – implemented the ACTS to realign
and direct the entire organization,
1993 – a five-year TCP was undertaken
Jul 1997 – BIR was urther streamlined to
support the implementation of the
Computerized Integrated Tax System.
Estrada Administration
Beethoven Rualo – enhanced the voluntary
compliance and implemented the ERAP
program.
1997 – the raffle promo “humingi ng Resibo,
Manalo ng Libo-Libo” was institutionalized
to courage consumers to demand sales
invoices and receipts.
Estrada Administration
2000 – Commissioner Dakila Fonacier
implemented the full utilizationof tax
computerization in the Bureau’s operation
LTS & ETS – established to reindorce the tax
administration and enforcement capabilities
of the BIR.
Estrada Administration
ITS/Rollout Acceleration Program –
was implemented by BIR to facilitate
the full utilization of tax
computerization.
Arroyo Administration
2001 – Atty. Rene G Banez implemented changes
that made the tax system simpler and suited to the
Philippine culture.
 Voluntary Assessment Program
 Compromise Settlement Program
 Expansion of coverage of the creditable
withholding tax system.
 Electronic Filling and Payment System (eFPS)
Arroyo Administration
2002 – Gullermo L. Parayno, JR offered a
VAAP to taxpayers with under-declared
sales/ receipts/ income.
 RELIEF System – to detect under-declarations of
taxable income taxpayers.
 Electronic broadcasting system to enhance the
security of tax payments
Arroyo Administration
2006 – Jose Mario C. Bunag expanded the
RATE program to the regional Offices
- Nationwide Rollout of Computerized
Systems (NCRS) was also undertaken to
extend the use of the Bureau’s Integrated Tax
System
Arroyo Administration
2007 – NPSTAR, a program funded by
various international development agencies.
2007 – Commissioner Lilian B. Hefti
embarked on data matching of income
payments of withholding agents against the
reported income of the concerned
recipients.
Arroyo Administration
2007 – NPSTAR, a program funded by
various international development agencies.
2007 – Commissioner Lilian B. Hefti
embarked on data matching of income
payments of withholding agents against the
reported income of the concerned
recipients.
Arroyo Administration
Computer-Assisted Audit Tools and
Techniques(CAATTs) was used to enhance
the Bureau’s audit capabilities.
2008 – Commisioner Sixto S. Esquivias IV
closed erring busness establishments under
the “Oplan Kandado” Program
Arroyo Administration
Taxpayer Feedback Mechanism –
established where complaints on erring
BIR employees and taxpayers, taxpayers
who do not pay taxes and do not issue
ORs/invoices can be reported
Arroyo Administration
2009 – Commissioner Joel L. Tan-
Torres pursued high visibility public
awareness campaign on the Bureau’s
enforcement and taxpayers’ service
programs.
Aquino Administration
Commissioner Kim S. Jacinto-
Henares – Focused on the filing of
tax evasion cases.
Duterte Administration
Republic Act 10963 or the Tax
Reform for Inclusion and
Acceleration Act of 2017 – lowered
personal income tax rates but
increased taxes on certain goods,
leading to a net increase in revenue
 “Tax Reform Program”
Redesigning Tax System to be
simpler, fairer, and more efficient
for all, while also raising the
resources needed to invest in our
infrastructures and people
 “Tax Reform Program”
Tax Reform for Acceleration and
Inclusion(TRAIN)- the first
package of the comprehensive tax
reform program(CTRP )envisioned
by Pres. Duterte’s administration.
What will the Tax Reform Fund
A. Education
1. Achieve the 100% enrolment and
completion rates
2.Build 113,553 more classroom
3.Hire 181,980 more teachers between 2017
and 2020
B. Healthcare Services
a. Upgrade 704 local hospitals and establish 25
local hospitals
b. Achieve 100% PhilHealth coverage at higher
quality of services
c. Upgrade and/or relocate 263 rural and urban
health units to disaster-resilient facilities
d. Build 15,988 new barangay health stations
 e. Build 2,424 new rural health units and urban
health center
f. Between 2017 and 2022, hire an additional 4,424
doctors, 29,466 nurses, 1,114 dentists, 3,288
pharmacists, 2,682 medical technologists, 911
public health associates, and 2,497 UHC
implementers
What will the Tax Reform Fund
C. Infrastructure
1. Bonifacio Global City – Ortigas Center
Link Road
2. UP- Miriam- Ateneo Viaduct along
C-5/Katipunan
3. Camarinus Sur/Albay Diversion Road
What will the Tax Reform Fund
C. Infrastructure
4. Pulilan-Baliuag Diversion Road
5. Maasin City By-Pass Road cum Sea Wall
6. Tacloban City By-Pass Road
7. Panay East-West Road
8. Daang Maharlika (Alternate Roue)
What will the Tax Reform Fund
C. Infrastructure
9. Cagayan De Oro Diversion Road,
Cagayan de Oro City
10. Valencia City- Pangantucan Diversion
Road
 “TRAIN LAW”
Tax Reform for Acceleration and Inclusion
Major features
1. Lowering the Personal Income Tax (PIT)
2. Simplifying the Estate and Donor’s Tax
3. Expanding the Value-Added Tax (VAT) base
4. Increasing the Excise Tax of Petroleum Products
5. Increasing the Excise Tax of Automobiles
6. Excise Tax on Sweetened Beverages
 “TRAIN LAW”
1. Lowering Personal Income Tax
Those with annual taxable income below P250,000 are
exempt from paying PIT
The top individual taxpayers whose annual taxable
income exceeds P8 million, face a higher tax rate from
the current 32% to 35%.
 “TRAIN LAW”
2. Simplifying the Estate and Donor’s Tax
Estate and Donor’s tax will be lowered and
harmonized so it does not matter if the person passed
away, wants to transfer a property.
ESTATE TAX DONOR TAX
tax rate 6% based on the net tax rate of 6% of net donations
value of the estate with a is imposed for gifts above
standard deduction of P5 P250,00 yearly regardless of
million. relationship to the donor.
 “TRAIN LAW”
3. Expanding the Value-Added Tax (VAT) base
Philippines has one of the highest VAT rates
but also the highest number of exemption in
the Southeast Asian region.
It aims to clean up VAT system
Limit the VAT zero-rating to direct
exporters who actually export goods out of
the country.
 “TRAIN LAW”
4. Increasing the Fuel Excise Tax
TRAIN increases the excise of petroleum
products, which has not been adjusted since
1997.
Fuel Excise is wrongly perceived to be anti-poor
Expanding the VAT base and adjusting excise
taxes would raise prices of some commodities
faced by consumers
 “TRAIN LAW”
5. Increasing the Excise Tax of Automobiles
Lower-priced cars continue to be taxed at lower
rates while more expensive cars are taxed at
higher rates
 “TRAIN LAW”
6. Excise Tax on Sweetened Beverages
SSB excise tax will help promote a
healthier Philippines
Address the worsening number of diabetes
and obesity cases in the country
Encourage consumption of healthier
products
 “TRAIN LAW”
Why impose a tax on SSBs
Most of the sugar-sweetened beverage,
with some notable exceptions provide
unnecessary or empty calories with a little
or no nutrition.
 “TRAIN LAW”
Why impose a tax on SSBs
SSBs are relatively affordable especially
children and poor who are the most
vulnerable to its negative effects on health
SSB products are easily to accessible and
can be found in almost any store, unlike
other sweetened products.
 “TRAIN LAW”
Why impose a tax on SSBs