Readings in the

Philippine History
Reinforcement Discussion
(Module 6A)
02/18/24
At the end of this section, you are
expected to trace the evolution of taxation
in the Philippines.
In compliance with the decree issued by King Philip II
in 1558, lands were distributed in Cebu to loyal
Spanish subjects. The system was known as the
Encomienda System (1570). The encomienda was
not actually a land grant but was a favor from the king
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. The
encomenderos were required by law to perform the
following duties: (a) to give protection to the natives,
(b) to help the missionaries convert the natives to
Christianity, and (c) to promote education (Funtecha
and Padilla, 2010).
By 1884, the tribute was replaced by the
Cedula Personal, wherein colonists were
required to pay for personal identification. This
form of compulsory tax collection shows
evidence and proof of the sovereignty of an
imperial government. They were compelled to
support both colonial government and that of
church organization. Everyone over the age of
18 was obliged to pay (Agoncillo, 2012).
 On July 4, 1902, the first civil government
was established under William H. Taft.
However, it was only during the 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.
 Local Tax Code were later subsumed into the
Local Government Code of 1991. The residence tax
and residence certificate were renamed into the
current community tax and community tax
certificate.
Lately, the current President of the Philippines,
President Rodrigo Duterte, implemented the TRAIN
Law or Tax Reform for Acceleration and
Inclusion which was signed last January 01, 2018,
which seeks to to correct a number of deficiencies in
the tax system to make it simpler, fairer, and more
efficient. Wherein the rich will have a bigger
contribution and the poor will benefit more from the
government’s program and services.
JANUARY 2018
 WHAT IS TRAIN?
TRAIN or the Tax Reform for Acceleration and Inclusion is the
first package of the comprehensive tax reform program (CTRP)
envisioned by President Rodrigo Roa Duterte’s administration.
MAY MAY NOV
SEP
29 31 28
DOF President House of Representatives Senate approval
submitted Duterte approval in third and final in third and final
TRAIN to certified TRAIN reading reading
Congress as an urgent (HB No. 5636) (SB No. 1592)
and priority 246 – 9 against – 1 abstain 17-1 in favor of
measure TRAIN

DEC DEC
JAN
11 19
1
The final President Rodrigo Roa
Duterte signed the Republic Implementation
bicameral
Act 10963 also known of the TRAIN
conference on
as TRAIN law law
TRAIN was held.
 WHAT DOES TRAIN AIM FOR?

TRAIN aims to make the

current tax system simpler,
fairer, and more efficient.
Reduce the poverty rate from 26% to 17
By 2020
% uplifting about 10 million Filipinos fro
m poverty
Achieve middle – income status
By 2040 Eradicate extreme poverty, provide
equal opportunities through inclusive
economic and political institutions
and achieve high income status.
 HIGHLIGHTS OF TRAIN
INCOME TAXES
Starting 1 January 2018, compensation earners,
self- employed and professional taxpayers (SEP)
whose annual taxable incomes are P250, 000 and
below or less than P21,000 a month is exempted
from the personal income tax (PIT).
SEPs whose gross receipts or sales are below P3
million have the option to choose from the 8%
flat tax rate or the TRAIN’s new personal income
tax table.

SEPs whose annual salaries are P500,000 and

below are exempt from 3% percentage tax.
 HIGHLIGHTS OF TRAIN

The 13th month pay and other bonuses

amounting to P90,000 are likewise tax-exempt.

TRAIN repeals Section 35 of the National Internal

Revenue Code on personal exemptions of
individual taxpayers. Whether the taxpayer is
single, married, head of the family, with or without
dependents, the taxpayer is exempted from paying
personal income tax (PIT) as long as he /she is
earning less than P21,000 a month.
 VALUE ADDED TAXES

Businesses with total annual sales of P3 million

and below are exempt from paying VAT.
The following are also exempted fr VAT- free starting 2019:
om VAT:
• Raw food Sale of drugs for
• Agricultural products
• Health and education
diabetes, high
• Senior citizens cholesterol , and
• PWDs hypertension
VAT- free starting 2021:
• Cooperatives
• Renewable energy
• Tourism enterprises
Socialized and mass
• BPOs in special economic zones housing projects P2
• Socialized housing (P450,000 and below) million and below
• Low cost housing (amounting to P3 million)
• Leases below P15,000/month
• Condominium association dues
 SUGAR-SWEETENED BEVERAGES

To promote a healthier Philippines,

sugar-sweetened beverages will be taxed.

P6 per liter for drinks using sugar and artificial

sweeteners P12 per liter for drinks using high fructose
corn syrup

All kinds of milk, 3-in-1 coffee, natural fruit and

vegetable juices, and medically indicated beverages
are exempted.

KEY EXEMPTIONS: 3-1 Coffee, Milk and 100% Juices

 PETROLEUM EXCISE TAX
Through appropriately taxing dirty fuel,
environmental and health concerns can be
addressed. TRAIN increases the excise tax on fuel
which has not been adjusted since 1997.

Fuel (per liter) 2018 2019 2020

Diesel P2.50 P4.50 P6

LPG P1 per kg P2 per kg P3 per kg

Regular and Unleaded P7 P9 P10
Premium Gasoline
 AUTOMOBILE EXCISE TAX

Non-
Hybrids
PRICE Hybrid
Cars Cars
Up to 600,000 4% 2%
Over 600,000 to 1 Million 10% 5%
Over 1 Million to 4 Million 20% 10%
Over 4 Million 50% 25%

Pick-up trucks and electric vehicles are

exempted from excise taxes.
 TOBACCO EXCISE TAX

TAX IMPOSED SCHEDULE

P32.50 1 January 2018 - 30 June 2018

P35 1 July 2018 – 31 December 2019

P37.50 2020 – 2021

P40 2022 – 2023
Annual 4%
increase 2024 onwards
COSMETICS TAX DONOR’S TAX ESTATE TAX

A 5% tax will be A single tax rate of A single tax rate

imposed on 6% of net donations of 6% based on the
cosmetic surgery or will be imposed for net value of the
medical procedures gifts above P250,000 estate with a
for purely aesthetic yearly regardless of standard deduction
purposes. relationship to the of P5 million will be
donor. imposed.
 Coal (Mineral Products)

Excise Tax 2018 2019 2020

Coal P50 P100 P150

Nonmetallic Minerals and Quarry Resources

Nonmetallic minerals
and quarry resources TRAIN
Copper and other metallic 4%
minerals
Gold and chromite 4%
Indigenous petroleum 6%
 WHAT ARE THE BENEFITS OF TRAIN?

EDUCATION
Create a more conducive learning environment
with the ideal teacher-to-student ratio

In the next 5 years, the tax reform can fund 629,120 public
school classrooms, or 2,685,101 public school teachers.
 WHAT ARE THE BENEFITS OF TRAIN?

HEALTHCARE SERVICES

In the next 5 years, the tax reform can fund

60,483 rural health units, or 484,326 barangay

health stations, or 1,324 provincial hospitals.
 WHAT ARE THE BENEFITS OF TRAIN?
INFRASTRUCTURE PROGRAMS
Additional funds from the tax reform will be used for the
projects of the Department of Public Works and
Highways which consists of major highways,
expressways, and flood control projects.

In the next 5 years, the tax reform can fund:

35,745 km of paved roads, or

786,400 km of temporary bridge upgrades, or

2.6 million hectares of irrigated land.

References

Republic Act 10963

@ http://www.ntrc.gov.ph/images/Publications/train/tax-changes-
you-need-to-know.pdf
http://www.ntrc.gov.ph/images/Publications/train/tax-changes-you-
need-to-know.pdf
Train Law @ https://www.pwc.com/ph/en/publications/pdf/TRAIN
%20Law%20(PwC%20Philippines).pdf
https://www.pwc.com/ph/en/publications/pdf/TRAIN%20Law
%20(PwC%20Philippines).pdf
https://prezi.com/0_l6jtj4mnxu/1943-constitution/
https://twitter.com/sunstarcebu/status/1377150092562423814
https://prezi.com/p/7p_x9hrecc9k/1973-phil-constitutiton/
https://whatistrainlaw.wordpress.com/2018/03/11/history-of-
taxation-in-the-philippines/