THE HISTORY OF TAXATION IN THE PHILIPPINES

 Taxation is used to raise the government’s revenue from the people they govern to be
able to function fully.
EVOLUTION OF TAXATION

PRE-COLONIAL TAXATION
(bago pa dumating ang mga espanyol meron na rin tayong way sa pagbabayad ng buwis, eto
yung tinatawag na handug.)
Buhis/ Buwis/ Handug
- The payment of the tribute or taxes.
- It is the obligation of the filipinos to provide labor services to the datus bilang kapalit sa
kanilang pamumuno.

ARRIVAL OF THE SPANIARDS

(sa mga past lessons natin, natutunan natin na yung mga Pilipino noon ay kalat-kalat, meron sa
baybayin at meron din sa kabundukan. So nung dumating ang mga Espanyol, naisip nila na
gawin ang sistemang reduccion)
Reduccion
- Filipinos were forced to move from different areas (papunta sa isang lugar para mas
mapadali ang pagtuturo ng mga prayle ng mga doktrinang kristyano at mga dasal na
kailangan sa pagbibinyang ng mga Pilipino bilang mga kristiyano)
- Spaniards attempted to tame the Filipinos by Christian indoctrination using the
convent/casa real/plaza
- (binansagan rin nila tayo noon na “little brown Spaniards” and pinaadopt sa atin ang
Hispanic culture and civilization.)
- Those are not in favor of the reduccion were called as remontados, cimarrones, ladrones
monteses, malhechores or tulisanes (na nagtago at tumira sa mga kabundukan para
makaiwas sa reduccion)
- Creating pueblos which is led by a Gobernadorcillo (yung pueblo ay grupo ng mga
barangays kung saan ang mga Pilipino ay binibigyan ng mga lupang sakahan na kanilang
ihahanda para maging maganda ang tubo ng mga pananim) (ang gobernadorcillo naman
ay ang pinuno ng Pueblo; ito ang pinakamataas na posisyon na maaaring maabot ng isang
Pilipino)
- Settlements were handled by the encomenderos (sila yung taga kolekta ng buwis,
panatilihin maayos ang Encomienda na ipinagkaloon ng Spanish crown bilang kapalit ng
 kanilang serbisyo. Sila din ay isa sa mga tumutulong na maipalaganap ang Kristiyanismo
sa bansa)

TAXATION IN THE SPANISH PHILIPPINES

Tributos
- May be paid in cash or in kind (palay, tobacco, chicken, textiles, or even wax and special
regional produce)
- In 1570s, the tribute was fixed at 8 reales. (ang isang real = 12.5 centavos) and was raised
to 15 reales until the end of Spanish period.
- Other forms of payment: gold blankets, cotton, rice, bells
Exempted from the payment of tributos:
- Alcaldes (Mayor)
- Gobernadores (Governor)
- Cabeza de barangay (Barangay captain)
- Soldiers
- Members of the civil guard
- Government officials
- Vagrants (Beggars)
Agricultural Production
- Filipinos had to increase their production of crops to meet the demands of payments
(dahil yung ibang Pilipino ay walang kakayahan na magbayad ng buong pera)
- Half of the payment were paid in cash and the rest is with the products.
- These products were also used to finance the conquest of the Philippines
Samboangan or Donativo de Zamboanga
- It is a Special tax of ½ real or rice was collected
- This was used to crush the Moro raids (and was collected from 1635 to mid-19th century)
and vinta (gathered since 1781 to 1851, with some interruptions)
- Falua, collected in Camarines Sur, Cebu, Misamis and other littoral provinces (eto yung
the counterpart of vinta)
Special privileges of tax exemptions were granted to the descendants of the Filipino chiefly class
who served in the pacification campaigns conducted by the conquistadores, this includes:
1. Carlos Lakandula of Manila
2. Pedro Mojica of Cavite
3. Rajah Tupas of Cebu
4. Laborers of the arsenal and artillery yard of Cavite
5. Mediquillos (Filipinos who had medical experience but no title)
 6. Vaccinators
7. College and University students of Santo Tomas, San Jose, San Juan de Letran and San
Carlos (Cebu)

Bandala
- From the Tagalog word mandala means “a round stacks of rice stalks to be threshed”
- Was imposed to increase the funds for wars against other European explorers
- Farmers are forced to sell their produce to the government
- Government would buy the harvest but would only give them promissory note
Other Taxes to Pay (mid-19th century)
1. Tribute of 10 reales
2. Diezmos prediales (Tithes) of 1 real
3. Town community chest = 1 real
4. Sanctrum tax = 3 reales
Sumatotal: ang binabayaran ng mga Pilipino noon ay 15 reales
Encomienda system
- From the word encomendar, means “to entrust”
- Encomendero was a duty-bound to defend his encomienda from external incursions
- The encomendero can impose tributes according to the limit and kind set by the
authorities.
- Country was divided into parcels and these parcels are called encomienda
2 types of encomiendas
1. Realenga or Encomienda de la real corona (Royal or Crown Encomienda)
- owned by the king of Spain
- includes the principal towns and ports (such as Bagumbayan that is now called as
Luneta park, Santa Ana de Sapa, Tondo, Navotas, Malabon, etc)
2. Private encomiendas
- granted to individuals who were either King’s proteges or men

Manila-Acapulco Trade (end of 16th century)

- Established through the galleons
- A government monopoly that lasted for 250 years
- Loaded up with merchandise from Asia to New Spain and back once a year.
- The galleons carried spices, porcelain, ivory, lacquerware, and silk
 - The trip lasts for 200 days and the return trip lasted for 70 days
- Only elite people can benefit from this trade and they need to buy a ticket called
BOLETA which costs P250
- Improved the economy of the Philippines
- Strengthen the control of the Spaniards in the Philippines
Cedula personal (1884)
- Name, age, sex, birthplace, marital state, occupation, place of residence, and nationality
are indicated
- A poll tax collected through a certificate of identification
- It is required from every citizen
- The payment is by person, not by family and should be 18 years old and above
- It is according to income categories
- must be carried while travelling
- the Chinese in the Philippines pay for a discriminatory cedula Contribuciones directs:
Urbana and Industria (1878)
 Urbana – a tax on annual rental value of an urban real estate
 Industria – a tax on salaries, dividends, and profits
Contribuciones indirectas: Custom Duties
- Imposed on exports and imports to further raise revenue.
Monopoly
- The biggest of the monopolies is tobacco certain areas were assigned to cultivate tobacco
- The sale of stamped paper, manufacture and sale of liquor, cockpits and opium
- Farmers had a quota to produce and were sold to government for a very low price
- Failure to meet the quota means having fines
Polo Y Servicio (Forced Labor)
- Polo is a adaptation of the Tagalog pulong means “meeting of persons and things” or
“community labor”
- Laborers, either Filipinos or Chinese male mestizos and are called as polistas ranging 16-
60 years old, were obliged to serve and give personal service to community projects such
as constructions, repair of infrastructures, church construction, and cutting logs in forests
- They are required to provide their service for 40 days
- In 1884, labor was reduced to 15 days
- One could be exempted by paying the falla
Negative effects of Polo y Servicio to the Filipinos
1. Forced separation from the families
2. Relocation to different places
 3. Decimation of male population
4. Polo was made at the same time as planting and harvesting

PRIMARY SOURCE: MARIANO HERBOSA WRITES TO RIZAL ABOUT TAXES

“The tax! With regard to your question on this, the answer is very long, as it is the cause of the
prevailing misery here. What I can write you will be only one-half of the story and even Dumas,
senior, cannot exhaust the subject. Nevertheless, I’ll try to write what I can, though I may not be
able to give a complete story, you may at least know half of it.
“Here, there are many kinds of taxes. What they call irrigated rice land, even if it has no water,
must pay a tax of 50 cavanes of palay (unhusked rice), and land with six cavanes of seed pay 5
pesos in cash. The land they call dry land that is planted to sugar cane, maize, and others pay
different rates. Even if the agreed amount is 30 pesos for land with six cavanes of seed, if they
see that the harvest is good, they increase the tax, but they don’t decrease it, if the harvest is
poor. There is land whose tax is 25 pesos or 20 pesos, according to custom.
“The most troublesome are the residential lots in the town. There is no fixed rule that is
followed, only their whim. Hence, even if it is only one span in size, if a stone wall is added, 50
pesos must be paid, the lowest being 20 pesos. But a
nipa or cogon house pays only one peso for an area of ten fathoms square. Another feature of this
system is that on the day you accept the conditions, the contract will be written which cannot be
changed for four years, but the tax is increased every year. For these reasons, for two years now
the payment of tax is confused and little by little the fear of the residents here of the word
“vacant” is being dispelled, which our ancestors had feared so much. The result is bargaining,
like they do in buying fish. It is advisable to offer a low
figure and payment can be postponed, unlike before when people were very much afraid to pay
after May.
“I’m looking for a receipt to send you, but I cannot find any, because we don’t get a receipt
every time we pay. Anyway it is value-less as it does not state the amount paid; it only says that
the tax for that year was paid, without stating whether it is five centavos, twenty-five centavos,
one hundred, or one thousand pesos. The residents who ask or get the said receipt accept it with
closed eyes. The receipt has no signature in the place where the amount paid ought to be,
although it bears their name. Until now I cannot comprehend why some are signed and others are
not. This is more or less what is happening here in the payment of the land tax and it has been so
for many years since I can remember.
“Besides this, the taxes on the plants in the fields that are far from the town, like the land in
Pansol, are various. The tax on the palay is separate from the tax on maize, mongo, or garlic.
There is no limit to this tax, for they fix it themselves. Since July no one buys sugar and since
June locusts are all over the town and they are destroying palay and sugar cane, which is what
we regret here. The governor gave 50 pesos to pay the catchers of locusts, but when they took
them to the town hall they were paid only 25 cents a cavan and a half; and it seems that the
locusts are not decreasing. According to the guess of the residents here only 300 cavanes of
locusts have been caught in this town. Many still remain. Though the governor has not sent any
more money, the people have not stopped catching them.”
TAXATION UNDER THE AMERICANS

1893 to 1903
- followed the Spanish system of taxation with some modifications.
- Military government suspends the contracts for the sale of opium, lottery, and mint
charges.
- Urbana was replaced land tax.
Internal Revenue Law Of 1904
- Prescribed 10 major sources of revenue:
1. License taxes on firms dealing in alcohol beverages, and tobacco
2. Excise taxes on alcoholic beverages and tobacco products
3. Taxes on banks and bankers
4. Document stamp taxes
5. The cedula
6. Taxes on insurance and insurance companies
7. Taxes on forest products
8. Mining concessions
9. Tax on business and manufacturing
10. Occupational licenses
Alteration to the Cedula Y Personal
- Rate was fixed per adult male
- In 1907, some province were authorized to double the fee for the cedula
- The industria tax was imposed on the business community
Revenue Act of 1913: Underwood-Simmons Tariff Act (1913)
- removing quotas placed on Philippine imports to the United States and more or less
installing a policy of free trade

Changes in the Internal Revenue Act of 1904

- imposition of taxes on mines, petroleum products, and dealers of petroleum products and
tobacco.
New Sources of Taxes
1. Income tax (1914)
2. Inheritance tax (1919)
3. National Lottery (1832)
TAXATION DURING THE COMMONWEALTH PERIOD
- In 1936, income tax rates were increased,
- Income tax rates of corporations were also increased
- In 1937, cedula tax was abolished
- In 1940, a residence tax was imposed on every citizen aged 18 years old and above on
every corporation
National International Revenue Code (1939)
1. The normal tax of three percent and the surtax on income was replaced by a single tax at
a progressive rate.
2. Personal exemptions were reduced
3. Corporation income tax was slightly increased by introducing taxes on inherited estates
or gives donated in the name of dead persons
4. The cumulative sales tax was replaced by a single turnover tax of 10% on luxuries
5. Taxes on liquors, cigarettes, forestry products and mining were increased
6. Dividends were made taxable.
World War II: Japanese Administration
- Economic activity was put to a stop
- The Japanese military administration immediately continued the system of tax collection
but exempted the articles
- Foreign trade fell and the main sources of taxation
- Tax collection became a difficult task
- Additional incomes of the government were derived from the sales of the National
Sweepstakes and sale of government bonds.
FISCAL POLICY FROM 1946 TO PRESENT

Roxas Administration
- President Manuel Roxas declined United States’ advice to adopt the direct taxation.
Quirino Administration
- Implemented the import and exchange controls that led to import substitution
development
- Tax revenue in 1953 increased twofold compared to 1948
Magsaysay, Garcia, Macapagal Administration
- Promised to study the tax structure and policy of the country (Tax Commission in 1959
by means of Republic Act 2211)
 - Fiscal policy remained regressive
- Post war republic saw a rise of corruption
- Congress did not pass any tax legislation (1959-1968)
- Indirect taxes still contributed to three quarters of tax revenues
- Collection of taxes remained poor
Marcos Administration
- Tax system remained regressive and unresponsive
- Tax were heavily dependent on indirect taxes with 70%of total tax collection (latter part
of the Marcos years)
- Average of Tax Annual rate: 15% with low tax yield
- Tax effort: 10.7 %
C. Aquino Administration
- reformed the tax system through the 1986 Tax Reform Program
A major reform in the tax system introduced under the term of Aquino was the introduction of
the value-added tax (VAT), with the following features:

a. uniform rate of 10% on sale of domestic and imported goods and services and zero
percent on exports and foreign-currency denominated sales;
b. ten (10) percent in lieu of varied rates applicable to fixed taxes (60 nominal rates),
advance sales tax, tax on original sale, subsequent sales tax, compensating tax, miller's
tax, contractor's tax, broker's tax, film lessors and distributor's tax, excise tax on solvents
and matches, and excise tax on processed videotapes;
c. two percent tax on entities with annual sales or receipts of less than P200,000;
d. adoption of tax credit method of calculating tax by subtracting tax
e. on inputs from tax on gross sales: exemption of the sale of basic commodities such as
agriculture and marine food products in their original state, price-regulated petroleum
products, and fertilizers; and
f. additional 20% tax on non-essential articles such jewelry, perfumes, toilet waters, yacht
and other vessels for pleasure and sports.

- VAT Law was signed in 1986 and was put effect in 1988
- Administrative reforms: restructuring of the Department of Finance and its attached
agency, Bureau of Internal Revenue through Executive order 127
- Tax collection and audits were intensified
- Computerization was introduced
- Reduced corruption
- Tax and revenue effort rose, from 10.7% (1985) to 15.4% (1992)
Ramos Administration
- Comprehensive Tax Reform program (1997)
 Reasons why the Comprehensive tax reform was implemented:
1. Make the tax system broad-based, simple, and with reasonable tax rates
2. Minimize tax avoidance allowed by existing flaws and loopholes in the system
3. Encourage payments by increasing tax exemptions levels, lowering the highest tax rates,
and simplifying procedure
4. Rationalize the grant of tax incentives, which was estimated to be worth p31.7 billion in
1994.
- VAT base was also broadened (1997) through Republic Act 7716 (to include services)
Features of improved VAT law:
1. Restored the VAT exemptions for all cooperatives (agricultural), electric, credit or multi-
purpose, and others provided that the share capital of each member does not exceed
P15.000.
2. Expanded the coverage of the term "simple processes" by including broiling and roasting,
effectively narrowing the tax base for food products.
3. Expanded the coverage of the term "original state" by including molasses.
4. Exempted from the VAT are the following:
 Importation of meat
 Sale or importation of coal and natural gas in whatever form or state
 Educational services rendered by private educational institutions duly accredited by
the Commission on Higher Education (CHED)
 House and lot and other residential dwellings valued at P2 million and below, subject
to adjustment using the Consumer Price Index (CPI)
 Lease of residential units with monthly rental per unit of not more than P8,000,
subject to adjustment using CPI
 Sale, importation, printing, or publication of books and any newspaper

Estrada Administration (1988)

- Did not affect any change in the tax system
Arroyo Administration
- undertook increased government spending without adjusting tax collections
- resulted to large deficits from 2002 to 2004
- in 2005, the Expanded Value Added Tax (E-VAT) was signed into law as Republic Act
9337.
- In February 2006, the VAT tax rate was also increased from 10% to 12%
B. Aquino Administration
- promised that no new taxes will be imposed, and additional revenue would have to come
from adjusting existing faxes.
- ventured into the adjustment of excise tax on liquor and cigarettes or the Sin Tax Reform
- Republic Act 10351 was passed, and government revenues from alcohol and tobacco
excise taxes increased
 - Collections from tobacco and alcohol in 2015 made up 1.1% of the Gross Domestic
Product
- improvement in tax collection resulted to the Philippines receiving a credit rating upgrade
into investment grade status
Duterte Administration
- promised tax reform particularly in income taxes, to lower income tax rates shouldered
by the working Filipinos.
- The proposed tax reform also seeks to limit VAT exemptions and increase excise on
petroleum products and automobiles
- Implemented at the start of 2018, Package 1A or the Train law exempts those earning
annual taxable incomes of P250,000 and below from paying personal income taxes. In
exchange, new taxes were imposed on automobiles, fuel and sugar-sweetened beverages,
among others.
- The law also removed the value-added tax (VAT) on medicines for diabetes,
hypertension and high cholesterol; and lowering estate and donor taxes to a single rate of
6 percent to free up idle real properties for productive use
- Republic Act (RA) 11467, was signed into law on January 23. It imposes additional “sin”
taxes on alcohol, heated tobacco and vapor products.
- RA 11203 or “Rice Tariffication Law” (March 2019)
- The Duterte administration also passed an estate tax amnesty program under the partially
vetoed RA 11213 or the Tax Amnesty law in 2019.
- The amnesty covers the estate of the deceased who died on or before December 31, 2017.
An estate tax amnesty rate of 6 percent with a minimum tax amnesty amount of P5,000
shall be imposed on the deceased’s total net taxable estate at the time of his or her death
without penalties at every stage of property transfer.
- (Broken down, the BIR collected P5.13 billion in withholding taxes, P644.07 million in
income taxes, P91.13 million in VAT and percentage taxes, P81.11 million in
documentary stamp taxes and P469.13 million in other taxes from POGOs.)

REFERENCES:
https://slideplayer.com/slide/16945859/
https://ejournals.ph/article.php?id=7979
https://www.slideshare.net/MarcyTrinidad/spanish-colonial-government-part-iii