UNIT V

The Evolution
of
Philippine Taxation
BY:GROUP III
 Intended Learning
Outcomes:

Compare and
contrast the setting
Explain the of Philippine
Understand the
importance of taxation from Pre-
legal basis of the
taxation in a colonial era to
Philippine Taxation
holistic perspective Spanish era
through an
editorial
Introduction
First known taxation occurred in
Ancient Egypt around 3000–2800 BC.
Introduction
First known taxation occurred in
Ancient Egypt around 3000–2800 BC.
Taxation is a compulsory financial
charge imposed by governmental
organizations.
Introduction
First known taxation occurred in
Ancient Egypt around 3000–2800 BC.
Taxation is a compulsory financial
charge imposed by governmental
organizations.
It funds government spending and
public expenditures.
Introduction
First known taxation occurred in
Ancient Egypt around 3000–2800 BC.
Taxation is a compulsory financial
charge imposed by governmental
organizations.
It funds government spending and
public expenditures.
Failure to pay taxes is punishable by
law.
Introduction
First known taxation occurred in
Ancient Egypt around 3000–2800 BC.
Taxation is a compulsory financial
charge imposed by governmental
organizations.
It funds government spending and
public expenditures.
Failure to pay taxes is punishable by
law.
Taxes can be direct or indirect and
may be paid in money or labor
equivalent.
Pre-Co lonial
&
Spanish Era
Pre-colonial &
Spanish Era
Ancestors mainly involved in a subsistence economy. Payment of
tribute or taxes (buhis, buwis, handug) resembling taxation in early
Filipino communities. Spaniards imposed the payment of tributos
from Filipinos. Tributos aimed to finance the maintenance of the
islands, including salaries of government officials and expenses of
the clergy. Spaniards faced challenges in revenue collection due to
dispersed settlements. Introducing reduccion by creating PUEBLOS
where Filipinos were gathered and awarded lands to till.
Encomendero received rewards from the Spanish government for
their services. Principales, alcaldes, gobernadores, cabezas de
barangay, soldiers, civil guards, and government officials were
exempted from payment of tributos.
 Pre-colonial &
Spanish Era
Manila-Acapulco Trade is established toward the end of the 16th
century through Galleons. Galleons transported merchandise from
Asia to New Spain (Mexico) and back annually. Galleons
transported merchandise from Asia to New Spain (Mexico) and back
annually. Tax Collection is initially poor; subsidy from Spain was
required through the Situado Real delivered by the Mexican
treasury. In 1884, tribute payment ceased, replaced by a poll tax
collected through a certificate of identification called the Cedula
Personal. Required from every resident and must be carried while
traveling; payment is per person, not per family. Direct Taxes:
Added in 1878, including Urbana (tax on annual rental value of
urban estate) and Industria (taxes for salaries and dividends).
Government Income Sources: Included monopolies such as sale of
stamped paper, liquor, cockpits, opium, and tobacco. Tobacco
Monopoly started in 1781 and lasted until 1882; government
purchased tobacco at a dictated price from designated cultivation
areas.
Pre-colonial &
Spanish Era
Ancestors already engaged in trade with China, Japan, Siam, India,
Cambodia, Borneo, and the Moluccas. Spanish government
continued trade relations with these countries. Manila became the
center of commerce in the East. Spaniards closed ports of Manila to
all countries except Mexico. Manila–Acapulco Trade: Also known as
the "Galleon Trade"; a government monopoly. Galleon Details: Only
two galleons used - one sailed from Acapulco to Manila with
500,000 pesos worth of goods, spending 120 days at sea; the other
sailed from Manila to Acapulco with 250,000 pesos worth of goods,
spending 90 days at sea.
 Pre-colonial &
Spanish Era
Forced Labor is characterized Spanish colonial taxation in the
Philippines. Polo System is where Male Filipinos are obligated to
serve, resulting in increased death rate and flight to mountains.
Evolution of Polo and Servicios, became lighter and organized at
municipal level.
Types of Labor: Included public works, building of roads and
bridges, serving municipal offices, and acting as night guards.
Labor Requirements: Initially, males required to provide labor for
40 days a year, reduced to 15 days a year in 1884.
Option for Payment: Individuals could opt to pay "fallas" of three
pesos per annum, often lost to corruption, known as Caidas or
Droppings.
Term Change: Polos referred to as prestacion personal (personal
services) by the second half of the 19th century.
 Taxation
under the
American&
Commonwealth
Regime
1936
 1936

Income tax rates increased for every 10,000

increase in net income.
 1936

Income tax rates increased for every 10,000

increase in net income.

1937
 1936

Income tax rates increased for every 10,000

increase in net income.

1937

Cedula tax abolished; residence tax imposed

on citizens aged 18 and on corporations in
1940.
 1936 1939

Income tax rates increased for every 10,000

increase in net income.

1937

Cedula tax abolished; residence tax imposed

on citizens aged 18 and on corporations in
1940.
 1936 1939

Income tax rates increased for every 10,000 National Internal Revenue Code drafted by the
increase in net income. Commonwealth government, introducing
major changes:

1937

Cedula tax abolished; residence tax imposed

on citizens aged 18 and on corporations in
1940.
 1936
Income tax rates increased for every 10,000
increase in net income.
1937
Cedula tax abolished; residence tax imposed
on citizens aged 18 and on corporations in
1940.
1939
National Internal Revenue Code drafted by the
Commonwealth government, introducing
major changes:
1. Replacement of normal tax and surtax
with a single progressive tax.
2. Reduction of personal exemptions.
3. Introduction of taxes on inherited estates
or gifts.
4. Replacement of cumulative sales tax with
a single turnover tax on luxuries.
5. Increase in taxes on liquors, cigarettes,
forestry products, and mining.
6. Taxation of dividends introduced.
 WW2 Impact Economic Impact

Activity halted, Japanese administrators took Desperate economic situation during and after
control. the war; Japanese issued military notes to
cover war costs.

Japanese Administration Post-War

Continued tax administration from the American government advised adoption of

Commonwealth; main tax sources shifted to direct taxation in 1949; Quirino's
amusements, manufacturers, professions, and administration focused on import and
business licenses. exchange to boost growth.
 Later Presidencies

Magsaysay, Garcia, and Macapagal promised

tax structure studies; Tax Commission created Gloria Arroyo: Introduced Expanded Value
in 1959 by RA 2211. Added Tax (EVAT) through RA 9337.

Corazon Aquino: Implemented tax reforms

through the 1986 Tax Reform Program, Benigno Aquino: Adjusted excise tax on liquor
introducing the value-added tax (VAT) in 1988. and cigarettes, known as SIN TAX REFORM.

Fidel Ramos: Launched Comprehensive Tax

Reform Program in 1997, broadening VAT
through RA 7716.
 TAXES IN
PHILIPPINES
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Taxation in the Philippines has
evolved significantly over
centuries, reflecting shifts in
governance, economic
development, and societal
needs.
 During the colonial era,
tribute and cedula taxes
were imposed by Spanish
colonizers, while
American rule
introduced income tax
and customs duties in
the late 19th century.
Post-independence, the National
Internal Revenue Code of 1939
was revised to suit the needs of
the newly independent nation .
 Under Martial Law, the Tax
Reform Act of 1977 introduced
the value-added tax (VAT)
and
expanded the tax base.
 Subsequent administrations
implemented reforms to enhance
tax administration and promote
economic growth, such as the
Comprehensive Tax Reform
Program (CTRP) in the 1990s.
Recent reforms like the Tax Reform
for Acceleration and Inclusion
(TRAIN) Law of 2017 aimed
to lower personal income tax rates
while increasing excise taxes to fund
infrastructure and
social services.
In year 2012, During the
Aquino administration,
taxation in the
Philippines saw reforms
like the Sin Tax Law
and improvements in tax
administration.
During the Aquino administration, some
of the major tax reforms included the
passage of the
Sin Tax Reform Law and measures to
improve tax administration such as the
Electronic Filing
and Payment System(eFPS) in year of
2012.
 During the Aquino administration,
several reforms were implemented.
These included promoting
transparency in government
spending, focusing on agriculture,
implementing the K to 12 program in
education, and promoting the PPP
program.
TAXATION

SOME TAXES OF THE

PHILIPPINES
1. Coporate income: is a tax imposed on the profits
earned by corporations.

2. Withholding tax: is a tax deducted at the source

of income, such as salaries or dividends,

3. Income Tax: Paid by individuals and corporations on

their earnings.

4. Value-Added Tax (VAT): Consumption tax on goods

and services.
5. Excise Tax: Levied on specific goods like alcohol and
tobacco
6. Real Property Tax: Tax on land, buildings, and
improvements

7. Documentary Stamp Tax (DST): Tax on legal

documents and transactions.

8. Estate Tax: Tax on the transf

9. Donor's Tax: Tax on the transfer of property by gift..

 TAX INCENTIVES FOR SMEs

Tax incentives are benefits or privileges

offered by the government to individuals
or businesses
to reduce their tax liabilities.
 two types of tax incentives for SMEs

1. Tax Reduction - Lower taxes or

tax exemption for SMEs.

2. Tax Payment Privilege -

Opportunity to defer tax
payments for SMEs.
 ANOTHER TWO TYPES OF INCENTIVES

Direct taxes and indirect taxes can

both play a role in incentivizing
small and medium-sized
enterprises (SMEs), but in different
ways.
Direct tax: is levied directly on individuals or
businesses and is based on their income or
wealth, such as income tax or property tax.

Indirect tax: on the other hand, is imposed

on goods and services and is paid indirectly
by consumers through the purchase of goods
or services, like value-added tax (VAT) or
sales tax.
 SOURCE OF TAX LAWS
1. Constitution: Fundamental legal document
defining government powers and limitations.

2. Statutes or Presidential Decrees: Laws enacted by

the legislative or executive branch.

3. Revenue Regulations by the Department of

Finance: Rules guiding tax law implementation.

4. Rulings by Commissioner of Internal Revenue &

Opinions by Secretary of Justice: Official
5. Decisions of Supreme Court & Court of Tax
Appeals: Legal judgments setting precedents on
tax issues.

6. Local Government Ordinances: Laws enacted

by local governments, subject to Local
Government Code limitations.

7. Treaties for Avoiding Double Taxation:

Agreements to prevent or minimize double
taxation. Mo
 In the Philippines, taxes are
mandatory payments made by
citizens and businesses to fund
government projects and services like
education, healthcare, and
infrastructure. There are different
types of taxes such as income tax,
value-added tax (VAT), and excise
tax that serve different purposes and
classifications.
 The evolution of taxation
in the Philippines has been
shaped by historical
legacies, economic
imperatives, and political
dynamics. The country has
made ongoing efforts to
ensure equity, efficiency,
and sustainable revenue
generation.