12/12/2023

BUWIS-BUHAY:
History of Taxation in
the Philippines

Intended Outcome/Learning
Objectives:
 At the end of the lesson the
students will be able to:
 Explain the historical
development of Philippine
taxation, its nature and
purpose;
 Identify the types of
national and local taxes;
 Argue for or against a
current taxation issues
and reforms.

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Introduction
 Taxation means laying a tax through
which the government generates
income to defray its expenses. It is a
way to raise funds for government
program and services that benefit
Filipino citizens. A tax enforced as a
contribution but it is proportionate to
the citizen’s ability to pay. It levied on
persons and property as well as
business transactions, privileges, and
benefits.

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What is Taxation?
Definition and Rationale Taxation
 is the imposition of a mandatory levy
on the citizens and/or the businesses
of a country by their government.
 It is where the government derives a
majority of its revenues for financing
public services from taxation.

CONCEPT OF TAXATION….cont..

Taxation is the inherent power of the

State to impose and demand
contribution upon persons,
properties, or rights for the purpose
of generating revenues for public
purposes.

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PRINCIPLES AND THEORIES OF

TAXATION

1. The Benefit Principle

2. The Ability-to-Pay Principle
3. The Equal Distribution Principle

PRINCIPLES AND THEORIES OF

TAXATION

1. The Benefit principle. This principle

holds that individuals should be taxed in
proportion to the benefit they receive from the
government and that taxes should be paid by
those people who received the direct benefit of
the government programs and projects out of
taxes paid.

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PRINCIPLES AND THEORIES OF

TAXATION

2. The Ability-to-Pay Principle. This

principle holds that taxes should relate with
people’s income or the ability to pay, that is,
people with greater income or wealth can
afford to pay more taxes should be taxed at a
higher rate than with less wealth.

PRINCIPLES AND THEORIES OF

TAXATION

3. The Equal Distribution Principle.

This principle holds that income, wealth, and
transaction should be taxed at a fixed
percentage, that is, people who earn more and
buy more should pay more taxes, but will not
pay a higher rate taxes.

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Tax Structure in the Philippines

The Philippines follows a territorial tax system.

This means that only income generated within
the Philippines or from Philippine sources is
subject to taxes.
Income earned from foreign sources is generally
not taxed in the Philippines, with some
exceptions for certain types of income.

Government taxes and spending affect the

distribution of income, imposing burdens on
some and conferring benefits on others.
As a source of income, a tax system is classified
into three which are very important in income
distribution and for tax policy – the concept of
equity and equality.

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(3) STRUCTURES OF A TAX SYSTEM

1. A Tax is Proportional
2. A Tax is Regressive
3. A Tax is Progressive

(3) STRUCTURES OF A TAX SYSTEM

1. A Tax is Proportional. A proportional tax

means that government takes an amount of
money from a person which in proportion to
his/her income.
(For example , Ben’s salary is P10,000 and the government is
deducting 10% of his salary for tax. After a year his income
increases to P15,000 and the government now deducts 12% in
his salary for tax. Hence, the said tax is proportional)

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(3) STRUCTURES OF A TAX SYSTEM

2. A Tax is Regressive. A regressive tax means

that the government takes a larger
percentage of a person’s income tax, while he
is receiving a lower income.
(For example, Ben’s salary is P10,000 and the government is
asking him to pay 15% of his salary for tax which is contrary
to our given example in number 1)

(3) STRUCTURES OF A TAX SYSTEM

3. A Tax is Progressive. A progressive tax means

that the government takes a larger
percentage of his salary for tax due to his high
salary.
(For example, Ben has a monthly income of P30,000 and the
government deducted 20% of his salary for tax. Here, the tax
amount is proportionately equal to someone’s status in the
society. A rich man should pay more than a poor man)

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SIGNIFICANCE OF TAXATION

 The primary purpose of taxation is to generate

funds/revenues used to defray expenses incurred
by the government in promoting the general
welfare of the citizenry.
 In most nations, especially our country, taxes
are the major source of government income.
Others come from borrowings, sale of public
lands and other government properties, and
interests in investments. This manifest that
taxes are the lifeblood of a nation.

SIGNIFICANCE OF TAXATION

Other purposes of taxation include:

1. To equitably distribute to the wealth of
the nation.
2. To protect new industries (by providing
tax exemptions to new or pioneering
industries); and
3. To protect local producers (by imposing
higher custom duties on cheap imported
goods)

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Classification of Taxes

As to subject matter
1. Personal, Poll, or Capitation Tax.
2. Property tax
3. Excise Tax

Classification of Taxes

As to subject matter
1. Personal, Poll, or Capitation Tax.
This tax means that there is a fixed
amount upon all persons residing
within specified territory without
regard to their property or the
occupation in which they are may be
engaged. Example: Residence Tax
(Cedula)

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Classification of Taxes

As to subject matter
2. Property tax. This tax refers to one
assessed on all property located within a
territory on a specified date in proportion to
its value, or in accordance with some other
reasonable methods of apportionment, the
obligation to pay which is absolute and
unavoidable and is not based upon any
voluntary action of an individual’s
assessment. Example: Real estate tax

Classification of Taxes

As to subject matter
3. Excise Tax. This tax refers to any
tax which does not fall within the
classification of a poll tax or a
property tax and embraces every
form of burden not laid directly upon
person property. Example: Value-
added Tax

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Classification of Taxes

As to who bears the burden

1. Direct Tax. This tax refers to a tax which is
demanded from an individual who tends to
buy or purchase a good or service. Example:
Income Tax
2. Indirect Tax. This refers to the tax paid
primarily by a person who can shift the
burden upon someone else, who is under no
legal obligation to pay him/her. Example:
Buying of goods and services (VAT)

Classification of Taxes

As to determination of account
1. Specific Tax. This tax is fixed or determinate sum
imposed by the head or number or some standard of
weight or measurement, and requires no assessment
beyond a listing and classification of the object to be
taxed. Example: Taxes on wine
2. Ad Valorem Tax. It is a tax of a fixed proportion of
the value of the property with respect to which the
tax is assessed, and requires the intervention of
assessors or appraisers to estimate the value of such
property before the amount due from each tax payer
can be determined. Ex. The value of Real estate tax

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Classification of Taxes

As to purpose
1. General Tax. It refers to the tax levied
to an individual for a general public
purpose. Almost all taxes are an
example of this classification.
2. Specific Tax. This tax is levied to an
individual for a particular or specific
purpose.

Entities Exempted from Taxation

The Constitution expressly grants tax exemption on

certain entities/institutions such as:
1. Charitable institutions, churches,
parsonages or convents appurtenant
thereto, mosques, and nonprofit cemeteries
and all lands, buildings and improvements
actually, directly and exclusively used for
religious, charitable or educational
purposes (Article VI, Section 28, Paragraph 3).
2. Non-stock non-profit educational
institutions used actually, directly, and
exclusively for educational purposes. (Article
XVI, Section 4 (3)).

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Exempted to tax as stated in the Article 283 of

Rules and Regulations Implementing Local
Government Code of 1991 (RA 7160):
 Local water districts
 Cooperatives duly registered under RA 6938, otherwise
known as the Cooperative Code of the Philippines
 Non-stock and non-profit hospitals and educational
institutions
 Printer and/or publisher of books or other reading
materials prescribed by DECS (now DepEd) as school
texts or references, insofar as receipts from the printing
and / or publishing thereof are concerned.
 Foreign Diplomats

Forms of Escape from Taxation

1. Tax avoidance - use by a taxpayer of

legally permissible means or methods in
order to avoid or reduce tax liability. It is
not punishable by law.
Tax Avoidance is the exploitation by
the taxpayer of legally permissible
methods in order to avoid or reduce tax
liability. This is also known as “tax
minimization.”

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 Can be done through shifting:

1.1 Forward shifting. It is one way of

passing the burden of tax from one person to
another. Ex. Taxes paid by the manufacturer
may be shifted to the consumer by adding the
amount of the tax paid to price of the product.
1.2 Backward shifting occurs when the
burden of tax is transferred from the consumer
to the producer or manufacturer.

Backward shifting

This occurs when a producer of a taxed

commodity transfers the money burden
of tax to the supplier of factors of
production, who in turn is paid a lower
price for the factors of production. Ex.
farmers are at time paid lower prices for
their produce when a tax is imposed on
the processor of the produce.

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2. Tax evasion

 use by the taxpayer of illegal or fraudulent means to

defeat or reduce the payment of a tax. It is
punishable by law.
 Tax evasion happens when there is fraud through
pretension and the use of other illegal devices to
lessen one’s taxes, there is tax evasion, under-
declaration of income, and non-declaration of
income and other items subject to tax, Under-
appraisal of goods subject to tariff , and over-
declaration of deductions
 - This is also known as “tax dodging.”

3. Tax Exemption is the grant of immunity

or freedom from a financial charge,
obligation, or burden to which others are
subjected.

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Four "R"s (4) of Taxation has

four main purposes or effects
1. Revenue
 Taxes raise money to spend on
roads, schools and hospitals,
and on more indirect
government functions like
market regulation or justice
systems.
 most widely known function.

2. Redistribution

 transferring wealth from the richer

sections of society to poorer
sections.
 This function is widely accepted in
most democracies, although the
extent to which this should happen is
always controversial.

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3. Repricing

Taxes are levied to address

externalities: tobacco is taxed,
for example, to discourage
smoking, and many people
advocate policies such as
implementing a carbon tax.

4. Representation
 The fourth consequential effect of
taxation in its historical setting has
been the representation.
 The American revolutionary slogan "no
taxation without representation"
implied this: ruler’s tax citizens and
citizens demand accountability from
their rulers as the other part of this
bargain.

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 Several studies have shown that direct

taxation (such as income taxes)
generates the greatest degree of
accountability and better governance,
while indirect taxation tends to have
smaller effects.

Purpose of Taxation
 is to accumulate funds for the
functioning of the government
machineries.
 No government in the world can run its
administrative office without funds and
it has no such system incorporated in
itself to generate profit from its
functioning

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Other important purposes of taxation

are as follows:
 Increase in effectiveness and productivity of
the nation
 Increase in the quantum of revenue collection
 Improvement in services of the government
 Improve employment at all industry verticals
 Induction of modern technology into the
system
 Rationalization of terms and condition of the
economic system
 Rationalization of employment terms and
condition

I. PRE - SPANISH PERIOD

 Ancient Filipinos started

the practice of paying
taxes.
 The purpose of paying
taxes was simple, it was
for the protection they
received from the dato.

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I. PRE - SPANISH PERIOD

 The collected tax was

called buwis. The
chieftains family members
were enjoying exception
from paying taxes.
 Non- payment of taxes
was already punishable
during this period.

Spanish Period

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SPANISH PERIOD

1. The tribute (buwis, later

replaced by the cedula personal
or personal identity paper)
2. Forced Labor (Polo y Servicio
3. Encomienda System
4. The Manila-Acapulco Trade

The Tribute and Cedula may be paid in any kind.

 It was fixed at 8 reales and later, increased to 15. Ten
reales goes to the government, 1 to the town
community chest and 3 to the church. Another one
real was for the tithes (diezmo pediales).
 Also collected is the vandala, an annual enforced
sale and requisitioning of goods such as rice.
 Custom duties and income tax are also collected.
 Later, they imposed cedula personal or personal
identity paper wherein all indios aged from 18 to 60
are obliged to pay for personal identification.

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 Polo is the forced labor for 40 days

of men ranging from 16 to 60 years
of age who were obligated to give
personal service to community
projects.
 One could be exempted from polo by
paying the falla, a daily fine of one
and a half real.
 In 1884, it was reduced to 15 days.

 The encomienda system is a land management

system similar to the feudal system in Europe.
 A meritorious Spaniard (called an encomendero) is
given control over a piece of land and its inhabitants.
 The encomendero is duty-bound to defend his
encomienda and keep peace and order there.
 In return, he was granted the right to collect tribute
according to the limit.
 Part of this tribute goes to the encomendero and the
rest to the church and the government.
 This is subject, however to several abuses.

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 The Manila-Acapulco Trade is

generally a trade between the
Chinese and Spaniards in Manila
and the Spaniards in Mexico.
 This has resulted into economic progress.
But the negative effects of it far
outbalanced the advantages.
 Some income-producing economies were
completely neglected and too much
burden were given to Filipinos during
their annual

Did you know?

 That in the 19th century, the “cedula”

served as an identification card that
had to be carried at all times?
 A person who could not present his
or her cedula to a guardia civil could
then be detained for being
“indocumentado”. Andres Bonifacio
and other Katipuneros tore their
cedulas in August 1896, signaling the
start of the Philippine Revolution.

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 The residence tax, and in turn, the cedula, were

abolished with the coming of the American rule
and no such tax would be imposed.
 January 1, 1940, Commonwealth Act No. 465
went into effect, mandating the imposition of a
base residence tax of fifty centavos and an
additional tax of one peso based on factors
such as income and real estate holdings.
 The payment of this tax would merit the issue of a
residence certificate. However, persons who are
ineligible to pay the residence tax may be issued a
certificate for twenty centavos.
 Corporations were also subject to the residence
tax.

A
sample
cedula
in the
1920s

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Why is “cedula” important?

 A person is required to present a

cedula when he or she acknowledges a
document before a notary public;
 takes an oath of office upon election
or appointment to a government
position;
 receives a license, certificate or permit
from a public authority;
 pays a tax or fee; receives money from
a public fund;
 transacts official business; or
 receives salary from a person or
corporation.

Philippine independence, the same provisions

were kept in effect.
 1973 significant amendments were put into effect
following the enactment of the local tax code, with
amendments on the allocation of the residence tax and
on who are covered under it, as well as payment
provisions.
 Local Tax Code were later subsumed into the
LGC of 1991.
 The residence Tax and residence certificate were
renamed into current community tax and
community tax certificate.

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 The problem with land tax was that

land titling in the rural area was very
disorderly, the appraising of land
value was influenced by political and
familial factors.
 Tax evasion was prevalent among
elites.

 Internal Revenue Law of 1904 was passed as a

reaction problems in land tax:
1. License taxes on firms dealing in alcoholic beverages and
tobacco;
2. Excise taxes on alcoholic beverages and tobacco products;
3. Taxes on Banks and banker;
4. Documentary stamp taxes;
5. Cedula;
6. Taxes on insurance and insurance company;
7. Taxes on forest product;
8. Mining Concession;
9. Tax on Business and manufacturing; and
10. Occupational Licenses.

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 In 1913, the Underwood-

Simmon Tariff Act was passed,
resulting to a reduction in the
revenue of the government as
export taxed levied on sugar,
tobacco, and copra were lifted.

 New measures and legislation were

introduced to make the taxation system
appear more equitable;
 Income Tax rates were increased in 1936,
adding a surtax rate on individual net
incomes in excess of 10,000 pesos;
 Increased in the Income Tax rates of
Corporation;
 In 1937, the cedula tax was abolished
 In 1940, a residence tax was imposed

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 In 1939, the Commonwealth government drafted

the National Internal Revenue Code as follow:
1. Normal Tax of three percent and the surtax on income
was replaced by a single tax:
2. Personal exemption were reduced;
3. Corporation income tax was slightly increased
4. The cumulative sales income tax replace by a single
turnover over tax of 10% on luxuries:
5. Taxes on liquors, cigarettes, forestry products; and
mining were increased.
6. Dividend were made taxable.

 The Japanese military administration in the

Philippines during WWII immediately continued the
system of collection introduced during the
commonwealth but the exempted Japanese forces.
 Foreign trade fell, and the main sources of taxation
came from amusements, manufactures, professions,
and business license.
 As war raged, tax collection was difficult task, and
additional incomes of the government were derived
from the sales of National Sweepstakes and sale of
government bonds.

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Fiscal policy from 1946 to present

The impact of the war on the Philippine

economy was effectively disparate, as
Manila, the capital, was razed to the
ground while the rest of the Philippines
was relative untouched.
In 1949, there was a severe lack of
funds in many aspects of governance,
such as the military and education
sectors

Fiscal policy from 1946 to present

President Elpidio Quirino

New taxes measure were also passed,
which included higher corporate tax
rates that increased government
revenues;
Tax revenue in 1953 increased
twofold compared to 1948.

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Fiscal policy from 1946 to present

 President Magsaysay, Garcia,

and Macapagal promised to study
the tax structure and policy of the
country to make a way for more robust
and efficient tax collection scheme

Fiscal policy from 1946 to present

 Post-war fiscal remained regressive,

characterized by the overburdening of
the lower classes while the landed elite
who held business interest in legislation
 From 1959 to 1968, Congress did not
passed any legislation despite
important changes in the economy, and
the vested interests of Filipino
Businessmen in Congress

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Fiscal policy from 1946 to present

 Indirect taxation still contributed to

three-quarters of tax revenue, and
omnibus tax law of 1969 did not
increase the ratio of income tax revenues.
 Collection of taxes remained poor, tax
structure is still problematic, and much of
public funds were lost to corruption,
which left the government incapable of
funding projects geared towards
development.

Fiscal policy from 1946 to present

 Under the Marcos

Administration, the tax system
remained regressive. During the
latter part of the Marcos years
(1981 – 1985), the tax system was
still heavily dependent on indirect
taxes which made up to 70% of
total tax collection.

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Fiscal policy from 1946 to present

 The appointment of BIR

Commissioner Misael Vera- marked
the new direction in tax
administration.
 Notable programs: “Blue Master
Program” and “Voluntary Tax
Compliance Program”
 Providing each tax payer with
permanent Tax Account Number.

Fiscal policy from 1946 to present

TAX ACCOUNT NUMBER

• In 1965, the BIR came up with a system that
assigned Tax Account Number (TAN) to
every taxpayer to facilitate the
identification of taxpayers and
verification of tax records. The TAN
was an eight-digit combination where the
first four digits were the number proper and
the last four digits were check numbers.

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As Corazon Aquino took helm of the

government after the EDSA Revolution, she
reformed the tax system through the

Aim to improve the responsiveness of the

tax system;
a)Promote equity by ensuring that
similarly situated individuals and firms
bear the same tax burden;
b)Promote growth by modifying taxes

Greater political stability during the administration

of Fidel Ramos in 1992 allowed for continued
economic growth.
Commissioner Liwayway Vinzons-Chato
Action-Centered Transformation Program (ACT)- a
comprehensive and integrated program
1994- Tax Computerization Project (TCP) was
undertaken involving the establishment of modern
and Computerized Integrated Tax System and
Internal Administration System.

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Fidel Ramos..Cont…

Its comprehensive tax reform program was

implemented to:
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;
4. Rationalize the grant of tax incentives, which
was estimated to be worth 31.7 Billion in 1994.

The succeeding term of President

Estrada in 1998 was too short to effect
change in the tax system.
 Appointed Beethoven Rualo as BIR
Commissioner;
Significant reform was the Economic
Recovery Assistance Payment (ERAP)
program
Large Taxpayers Monitoring System

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Arroyo, undertook increased government

spending without adjusting tax collection
resulted to deficits.
Appointed Atty. Rene G. Bañez as BIR
Commissioner;
Finance Undersecretary Cornelio C.
Gison replaced Bañez; and later on
replaced Guillermo Parayno Jr.
In 2006, the VAT Tax rate was also
increase from 10% to 12%.

 Appointed Atty. Kim S.

Jacinto-Henares-focused on
filing tax evasion cases
 In 2010, under Aquino
administration, a Sin Tax Reform
took effect adjusting excise tax on
liquor and cigarettes

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National Tax Law

 1987 Constitution stipulates limitations on the
exercise of the power to tax:
a) all money collected on any tax levied for
special purpose shall be treated purely special
fund. If the purpose for which the special fund
was created has been fulfilled or abandoned,
the balance shall be transferred to the general
funds of Government.

b) Congress may authorize the President to fix

limitations of tariff rates, import and export quotas
and other duties within the national development
program

c) In Local budgets, the Supreme Court has the

power to revise, review, reverse and modify laws
relating to legalities of taxes, tolls and penalties in
relation to taxes imposed

d) Laws governing taxation are contained within

the national Internal Revenue Code

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 Local Government Tax Law

 Local governments have the power to impose

local taxes
 Local government units shall have just share in
the national taxes
 Local government taxation shall include real
property taxation, shares in the Proceeds of
national taxes, credit financing and local
budgets

Fundamental Principles of LGU Tax

Powers

Taxation shall be uniform in each local

government unit;

Taxes, fees, charges and other

impositions shall:

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Common Revenue-Raising
Powers
1. Service Fees and Charges
2. Public Utility Charges
3. Toll Fees or Charges

What are NATIONAL TAXES?

CAPITAL GAINS TAX EXCISE TAX
DOCUMENTARY STAMP TAX WITHOLDING TAX ON
COMPENSATION
DONOR’S TAX EXPANDED WITHOLDING
ESTATE TAX TAX
FINAL WITHOLDING TAX
INCOME TAX WITHOLDING TAX ON
PERCENTAGE TAX GOVERNMENT MONEY
PAYMENTS
VALUE-ADDED TAX BACK

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What is a CAPITAL GAINS TAX?

Tax imposed on gains that may have

been realized by a seller from the sale,
exchange, or other disposition of
capital assets located in the Philippines
including pacto de retro sales (a sale
with a condition for repurchase) and
other forms of conditional sale. (6% of
the property’s selling price or its fair
market value, whichever is higher)

What is a DOCUMENTARY STAMP TAX?

Tax on documents, instruments, loan

agreements, and papers evidencing
the acceptance, assignment, sale, or
transfer of an obligation, rights, or
property incident thereto.

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What is a DOCUMENTARY STAMP TAX?

Documentary Stamp taxes are

evident on documents like bank
promissory notes, deed of sale, and
deed of assignment on transfer of
shares of corporate stock
ownership.

What is a DONOR’S TAX?

Donor’s tax is a tax on a donation or

gift. It is also tax imposed on the
gratuitous transfer of property between
two or more persons who are living at
the time of transfer. (In excess of
PHP250,000-6%)

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What is a DONOR’S TAX?

It shall apply whether the transfer is in

trust or otherwise, whether the gift is
direct or indirect, and whether the
property is real or personal, tangible or
intangible.

What is an ESTATE TAX?

Tax on the right of the deceased

person to transmit his/her estate to
lawful heirs and beneficiaries at the
time of death and on certain transfers
which are made by law as equivalent
to testamentary disposition.

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What is an ESTATE TAX?

 It is not a tax on property.
 It is a tax imposed on the privilege
of transmitting property upon
death of the owner.
 The estate tax is based on the laws
in force at the time of death
notwithstanding postponement of
the actual possession or
enjoyment of the estate by the
beneficiary.

What is an INCOME TAX?

Tax on all annual profits made from

property ownership, profession, trades
or offices. It is also a tax on a person’s
income, emoluments (salary), profits,
etc.

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What is a PERCENTAGE TAX?

Business tax imposed on people or

entities who sell or lease goods,
properties, or services in the course of
trade or business whose gross annual
sales or receipts do not exceed the
amount required to register as VAT-
registered tax payers.

What is a VALUE-ADDED TAX?

Business tax imposed and collected

from the seller in the course of trade or
business on every sale or properties, or
vendors of services. This is an indirect
tax, thus, it can be passed on to the
buyer, causing the increase of prices
of most goods and services bought
and paid by customers.

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What is an EXCISE TAX?

Tax imposed on good manufactured or

produced in the Philippines for
domestic (local) sale or consumption
or any other disposition. It is also
imposed on things that are imported to
the Philippines.

What is a WITHHOLDING TAX ON COMPENSATION?

Tax withheld (restrained) from

individuals receiving purely
compensation income arising from an
employer-employee relationship. This
is being remitted by the employer to
the government through the BIR or
authorized accrediting agent.

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What is an EXPANDED WITHHOLDING TAX?

Prescribed only for certain payors like

those withheld on rental income and
professional income.

What is a FINAL WITHHOLDING TAX?

Kind of withholding tax prescribed only

for certain payors and is not creditable
against the income tax due of the
payee for the taxable year. An
example is tax withheld by banks on
the interest income earned on bank
deposits.

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What is a WITHHOLDING TAX ON GOVERNMENT MONEY PAYMENTS?

Withholding tax withheld by

government offices including
government-owned or –controlled
corporations and local government
units, before making any payments to
private individuals, corporations,
partnerships, and/or associations.

What are LOCAL TAXES?

Taxes based on the local government

taxation in the Philippines as stated in
the Republic Act 7160 or the Local
Government Code of 1991, as
amended. These are taxes, fees, or
charges are imposed by the local
government units such as provinces,
cities, municipalities, and barangays.

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What are LOCAL TAXES?

Tax on Transfer of Real Property Ownership
Tax on Business of Printing and Publication
Professional Amusement Franchise
Tax Tax Tax
Tax on Sand, Gravel, and Other Quarry Resources
Annual Fixed Tax for Every Delivery Truck or Van
of manufacturers or Producers, Wholesalers of,
Dealers, or Retailers in, Certain Products
Tax on Business

What are LOCAL TAXES?

Fees for Sealing and Licensing of Weights and Measures

Fishery Rentals, Fees, and Charges

Community Tax Service Fees or Charges
Tax Levied by the Barangays on Stores or
Retailers with Fixed Business Establishments
Barangay Clearance

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What is TAX ON TRANSFER OF REAL PROPERTY OWNERSHIP?

Tax imposed on the sale, donation,

barter, or on any other mode of
transferring ownership of real property.

What is TAX ON BUSINESS OF PRINTING AND PUBLICATION?

Imposed on printing and publication

businesses like that of books, cards,
posters, leaflets, handbills, certificates,
receipts, pamphlet, and others of
similar nature.

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What is FRANCHISE TAX?

Tax on franchised businesses, at the

rate not exceeding 50% of 1% of the
gross annual receipts of the preceding
calendar year based on the incoming
receipt (annual earning) with the
territorial jurisdiction where the
franchise is selling in.

What is TAX ON SAND, GRAVEL, AND OTHER QUARRY RESOURCES?

Imposed on ordinary stones, sand, gravel,

earth, and other quarry resources, as
defined under the National Internal
Revenue Code, as amended. This refers to
the above materials extracted from public
lands or from beds of seas, lakes, rivers,
streams, creeks, and other public waters
within its territorial jurisdiction.

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What is PROFESSIONAL TAX?

Annual tax on each person engaged

in the exercise or practice of his or her
profession that requires government
examination, like licensure
examinations.

What is AMUSEMENT TAX?

Tax collected from the proprietors,

lessees, or operators of theaters,
cinemas, concert halls, circuses,
boxing stadia, and other places of
amusement.

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What is ANNUAL FIXED TAX FOR EVERY DELIVERY

TRUCK OR VAN OF MANUFACTURERS OR PRODUCERS,
WHOLESALERS OF, DEALERS, OR RETAILERS IN,
CERTAIN PRODUCTS?

Annual fixed tax for every truck, car, or

any vehicle used by manufacturers,
producers, wholesalers, dealers, or
retailers in the delivery or distribution of
distiller spirits, fermented liquors, soft
drinks, cigars and cigarettes…

What is ANNUAL FIXED TAX FOR EVERY DELIVERY

TRUCK OR VAN OF MANUFACTURERS OR PRODUCERS,
WHOLESALERS OF, DEALERS, OR RETAILERS IN,
CERTAIN PRODUCTS?

…and any other products to sales,

outlets, or consumers, whether directly
or indirectly, within the province.

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What is ANNUAL FIXED TAX FOR EVERY DELIVERY

TRUCK OR VAN OF MANUFACTURERS OR PRODUCERS,
WHOLESALERS OF, DEALERS, OR RETAILERS IN,
CERTAIN PRODUCTS?

This type of tax is usually imposed as

determined by the local provincial
councils through which the truck or
trucks pass through or deliver their
cargo.

What is TAX ON BUSINESS?

Imposed by cities or municipalities o

businesses before they will be issued a
business license or permit to start
operations based on the schedule of
rates prescribed by the local
government code, as amended.

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What is TAX ON BUSINESS?...cont..

Businessmen pay this tax if they apply

for a Mayor’s Permit to conduct their
business in the local government unit.
Rates of these taxes vary among cities
and municipalities.

What are FEES FOR SEALING AND LICENSING

OF WEIGHTS AND MEASURES?

Imposed for the sealing and licensing

of weights and measures. This is to
impose regulations with regards to
such weights and measures as
prescribed by the city, provincial, or
municipal council.

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What are FISHERY RENTALS, FEES, AND

CHARGES?

Imposed by the municipality/city to

grantees of fishery privileges in the
municipality/city waters especially the
privilege to build fish corals, oysters,
mussels, or other aquatic beds or
bangus fry areas and others as
specified in the Local Government
Code.

What is COMMUNITY TAX?

Tax levied by cities or municipalities to

every Filipino or alien living in the
Philippines, eighteen (18) years of age
or over, who has been regularly
employed on a wage or salary basis
for at least thirty (30) consecutive
working days during any calendar
year.

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What is COMMUNITY TAX?

Community tax is also imposed on

every corporation not matter how
created or organized, whether
domestic or resident foreign, engaged
in or doing business in the Philippines.
*Cedula

What are TAXES LEVIED BY THE BARANGAYS ON

STORES OR RETAILERS WITH FIXED BUSINESS
ESTABLISHMENTS?

Imposed on stores with gross sales of

receipts of the preceding calendar
year amounting to P50,000.00 or less
(for city barangays) and P30,000.00 or
less for municipal barangays) at a rate
not exceeding 1% on such gross sales
or receipts.

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What are SERVICE FEES OR CHARGES?

Collected by the barangay for services

rendered in connection with the
regulation or the use of barangay-
owned properties or service facilities,
such as palay, copra, or tobacco
driers.

What is a BARANGAY CLEARANCE?

Fee collected by barangays upon

issuance of barangay clearance, a
document required for many
government transactions, such as
when getting a business permit from a
city or municipal government or
applying for a job in a government
office or a private company.

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1997 Income Tax

Taxable Income Tax Rates
Not over P10,000 5%
P10,001 – P30,000 P500 + 10% of excess over
P10,00P
P30,001 – P70,000 P2,500 + 15% of excess over
P30,000
P70,001 – P140,000 P8,500 + 20% of excess over
P70,000
P140,001 – P250,000 P22,500 + 25% of excess over
P140,000
P250,001 – P500,000 P50,000 + 30% of excess over
P250,000
Over P500-000 P125,000 + 32% of excess
over P500,000

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TRAIN LAW (TAX REFORM

FOR ACCELERATION AND
INCLUSION)

TRAIN Law…cont…

 On December 19, 2017, President Rodrigo

Duterte has signed into law Republic Act
10963, otherwise known as the “Tax
Reform For Acceleration and
Inclusion (TRAIN) Law”, which
amended 69 Sections of the National
Internal Revenue Code (NIRC), as amended,
created 8 new sections and repealed 3
sections.

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Lowering the personal income tax (PIT)

 TRAIN will lower personal income tax (PIT)

for all taxpayers except the richest.
 Those with taxable income below P250,000
will be exempt from paying PIT, while the
rest of taxpayers, except the richest, will see
lower tax rates ranging from 15% to 25% by
2020.
 The personal income tax system of TRAIN
will exempt some 83% of current taxpayers.

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Known as the Tax Reform for

Acceleration and Inclusion (TRAIN)
law, the tax program overhauls the
country's 20-year-old tax regime in a bid to
make the tax system fairer and simpler.
Under the TRAIN, personal income tax
rates will be adjusted to shift the
burden off lower-income segments
toward the "ultra-rich.“

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 Starting mid-January, the retail price of a one-liter

bottle of Coca-Cola, for instance, is projected to
increase to P43 from the current P31, an increase of
P12.
 This is because of the P12-per-liter tax on drinks
using high fructose corn syrup. For drinks using
sugar and artificial sweeteners, a P6-per-liter tax has
been imposed. However, all kinds of milk, 3-in-1
coffee, natural fruit juices, vegetable juices, and
medically-indicated beverages are exempt.

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Expanding the Value-Added Tax (VAT)

base
 The Philippines has one of the highest VAT rates but also
the highest number of exemptions in the Southeast Asia
region.
 These tax exemptions have created much confusion,
complexity, and discretion in our tax system resulting in
leakages and opening doors for negotiation, corruption,
and tax evasion.
 TRAIN aims to clean up the VAT system to make it fairer
and simpler and lower the cost of compliance for both the
taxpayers and tax administrators.
 The TRAIN will direct the way to protect the poor and
vulnerable compared to the tax exemptions and blind
subsidies that are inefficient and largely beneficial to the
rich since they have higher purchasing power.

Expanding the Value-Added Tax (VAT)

base

 TRAIN repeals 54 out of 61 special laws with non-

essential VAT exemptions, thereby making the
system fairer.
 Purchases of senior citizens and persons with
disabilities, however, will continue to be exempt
from VAT.
 Housing that cost below P2 million will be exempt
from VAT beginning 2021
 Medicines for diabetes, high cholesterol, and
hypertension will be exempt beginning 2019.

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Expanding the Value-Added Tax (VAT)

base

 The VAT threshold is increased from P1.9 million to P3

million to protect the poor and low-income Filipinos and
small and micro businesses and for manageable
administration. This effectively exempts the sale of goods
and services of marginal establishments from VAT.
Under TRAIN, VAT exempt taxpayers will have the
following options:
● PIT schedule with 40% OSD on gross receipts or gross sales plus 3%
percentage tax

● PIT schedule with itemized deductions plus 3% percentage tax, or

● Flat tax of 8% on gross sales or gross revenues in lieu of percentage

tax and personal income tax.

EXAMPLES:

 For a CALL CENTER AGENT who receives a

monthly salary of P21,000 with mandatory annual
deductions of P15,166.00 consisting of SSS,
Philhealth, and Pag-ibig contributions, the income
tax is computed as:
A. Annual Basic Salary Php 252,000.00

B. 13th Month Pay and Other Benefits 21,000.00

C. Mandatory Contributions 15,166.00
Computation of Income Tax
Annual Gross Income (A+B) Php 273,000.00
Deductions and Exemptions (B+C) 36,166.00
Net Taxable Income Php 236,834.00

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 Income Tax Rate:

 Not over P250,000 = 0 %
 TAX DUE Php 0.00

 2. For a public school TEACHER (SG14, Step1) who

receives a monthly salary of Php26,494.00 with annual
mandatory deductions of Php34,185.00 consisting of
GSIS, Philhealth, and Pag-ibig contributions, the
income tax is computed as:

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 Income Tax Rate:

 Not over Php250,000 = 0 %
 Over Php250,000 – P400,000 = 20% of Excess over
Php250,000
 TAX DUE : Php250,000.00 = Php 0.00
 33,743.00 x 20% = Php 6,748.60

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