Chapter 10

Philippine
Taxation
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Chapter 10

Philippine Taxation

What is Taxation?
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Chapter 10

Philippine Taxation

Taxation
- It is the inherent power by which the
sovereign state imposes financial burden
upon persons and property as a means of
raising revenues in order to defray the
necessary expenses of the government (Tax
Digest by Crescencio Co Untian, 2002).
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Chapter 10

Philippine Taxation

Taxation is the imposition of financial

charges or other levies, upon a taxpayer (an
individual or legal entity) by a state such that
failure to pay is punishable by law.

Chapter 10

Philippine Taxation

It is a mode by which government make

exactions for revenue in order to support their
existence and carry out their legitimate
objectives (Tax Law and Jurisprudence by Justice
Vitug, 2000).
It is the most pervasive and the
strongest of all the powers of the government.
Taxes are the lifeblood of the government,
without which, it cannot subsist.
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Chapter 10

Philippine Taxation

History of Taxation
The first known system of taxation
was in Ancient Egypt around 3000 BC
- 2800 BC in the first dynasty of the
Old Kingdom.
In Biblical times, tax is already
prevalent. According to Genesis

Chapter 10

Philippine Taxation

History of Taxation
In Biblical times, tax is already
prevalent. According to Genesis
47:24:
"But when the crop comes in, give a fifth of it
to Pharaoh. The other four-fifths you may
keep as seed for the fields and as food for
yourselves and your households and your
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children".

Chapter 10

Philippine Taxation

History of Taxation
Earliest taxes in Rome are called as portoria
were customs duties on imports and exports
Augustus Caesar introduced the inheritance
tax to provide retirement funds for the
military. The tax was five percent on all
inheritances except gifts to children and
spouses .
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Chapter 10

Philippine Taxation

History of Taxation
In England, taxes were first used as
emergency measures.

Chapter 10

Philippine Taxation

History of Taxation in the Philippines

The pre-colonial society, being communitarian, did not have taxes.

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Chapter 10

Philippine Taxation

History of Taxation in the Philippines

During the Spanish Period, new income-generating
means were introduced by the government such as the :
Manila-Acapulco Galleon Trade
Polo Y Servicio (Forced Labor)
Bandala
Encomienda System
Tribute
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Chapter 10

Philippine Taxation

History of Taxation in the Philippines

Manila-Acapulco Galleon Trade was the main
source of income for the colony during its early
years.
The Galleon trade brought silver from Nueva
Castilla and silk from China by way of Manila.
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Chapter 10

Philippine Taxation

History of Taxation in the Philippines

Polo Y Servicio is the forced labor for 40 days, of men
ranging from 16 to 60 years of age who were obligated to
give personal services to community projects. One could
be exempted from the polo by paying a fee called falla
(which was worth one and a half real).
Bandala is one of the taxes collected from the Filipinos. It
comes from the Tagalog word mandala, which is a round
stock of rice stalks to be threshed.
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Chapter 10

Philippine Taxation

History of Taxation in the Philippines

Encomienda are large tracts of land given to a person as
reward for a meritorious act. The encomenderos were
given full authority to manage the encomienda by
collecting tribute from the inhabitants and govern people
living on it.
Tribute was the residence tax during the Spanish times.
It may be paid in cash or kind, partly, or wholly.
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Chapter 10

Philippine Taxation

History of Taxation in the Philippines

But in 1884, the tribute was replaced by the cedula
personal or personal identity paper, equivalent to the
present community tax certificate.

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Chapter 10

Philippine Taxation

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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Chapter 10

Philippine Taxation

The Development of the Community Tax

The cdula was imposed by the Americans on January 1,

1940, when 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. Corporations were also subject to the
residence tax.
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Chapter 10

Philippine Taxation

A sample cedula in the 1920s.

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Chapter 10

Philippine Taxation

What is a cedula?
Also known as a residence certificate, is a legal identity
document in the Philippines.
Issued by cities and municipalities to all persons that have
reached the age of majority and upon payment of a
community tax, it is considered as a primary form of
identification in the Philippines and is one of the closest
single documents the Philippines has to a national system of
identification, akin to a driver's license and a passport.
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Philippine Taxation

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.
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Chapter 10

Philippine Taxation

The Four Rs of Taxation

Taxation has four main purposes or effects:
1. Revenue
2. Redistribution
3. Repricing
4. Representation
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Chapter 10

Philippine Taxation

The Four Rs of Taxation

Revenue
The taxes raise money to spend on armies, roads,
schools and hospitals, and on more indirect government
functions like market regulation or legal systems.

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Chapter 10

Philippine Taxation

The Four Rs of Taxation

Redistribution
This refers to the transferring wealth from the richer
sections of society to poorer sections.
Repricing
Taxes are levied to address externalities; for
example, tobacco is taxed to discourage smoking, and a
carbon tax discourages use of carbon-based fuels.

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Chapter 10

Philippine Taxation

The Four Rs of Taxation

Representation
As what goes with the slogan
"no taxation without representation" ,
it implies that: rulers tax citizens, and
citizens demand accountability from
their rulers as the other part of this
bargain.
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Chapter 10

Philippine Taxation

Why Tax?
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Chapter 10

Philippine Taxation

Types of Taxation System

1. Regressive Tax
- Is a tax where lower-income entities pay a higher fraction
of their income in taxes than do higher-income entities.
(Regressive taxes can also be thought of as taxes where
the marginal tax rate is less than the average tax rate.

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Chapter 10

Philippine Taxation

Types of Taxation System

2. Proportional Tax (sometimes called a flat tax)
- Is a tax where everyone, regardless of income, pays
the same fraction of income in taxes. (Proportional taxes can
also be thought of as taxes where marginal and average tax
rates are the same.)

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Chapter 10

Philippine Taxation

Types of Taxation System

3. Progressive Tax
- Is a tax where lower-income entities pay a lower
fraction of their income in taxes than do higher-income
entities. (Progressive taxes can also be thought of as
taxes where the marginal tax rate is higher than the
average tax rate.)
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Chapter 10

Philippine Taxation

Why Tax?
The main 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.
The governments ability to serve the people depends
upon the taxes that are collected. Taxes are indispensable
in the government operation and without it, the government
will be paralyzed.
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Chapter 10

Philippine Taxation

The Philippine Tax System

Tax law in the Philippines covers national and local
taxes. National taxes refer to national internal revenue taxes
imposed and collected by the national government through
the Bureau of Internal Revenue (BIR) and local taxes refer to
those imposed and collected by the local government. The
1987 Philippine Constitution sets limitations on the exercise
of the power to tax. The rule of taxation shall be uniform and
equitable. The Congress shall evolve a progressive system
of taxation. (Article VI, Section 28, Paragraph 1).
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Chapter 10

Philippine Taxation

What is Tax Evasion?

Tax evasion happens when
there is fraud through pretension and
the use of other illegal devices to
lessen ones taxes, there is tax evasion,
under-declaration of income, and nondeclaration of income and other items
subject to tax, Under-appraisal of
goods subject to tariff , and overdeclaration of deductions
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Chapter 10

Philippine Taxation

The Branches of Government vis--vis the Tax Law

The Congress may, by law, authorize the President to
fix within specified limits, and subject to such limitations and
restrictions as it may impose, tariff rates, import and export
quotas, tonnage and wharfage dues, and other duties or
imposts within the framework of the national development
program of the Government (Article VI, Section 28,
Paragraph 2).

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Chapter 10

Philippine Taxation

The Branches vis--vis the Tax Law

The President shall have the power to veto any
particular item or items in an appropriation, revenue, or tariff
bill, but the veto shall not affect the item or items to which he
does not object (Article VI, Section 27, Paragraph 2).

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Chapter 10

Philippine Taxation

The Branches vis--vis the Tax Law

The Supreme Court has the power to: review, revise,
reverse, modify, or affirm on appeal or certiorari, as the law
or the Rules of Court may provide, final judgments and
orders of lower courts in all cases involving the legality of
any tax, impost, assessment, or toll, or any penalty imposed
in relation thereto (Article VIII, Section 5, Paragraph 2b).

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Chapter 10

Philippine Taxation

The Forms of Taxes Imposed on Persons and Property

A) Personal, capitation or poll taxes
These are taxes of fixed amount upon residents or
persons of a certain class without regard to their property or
business
B) Property taxes
1. Real Property Tax - an annual tax that may be
imposed by a province or city or a municipality on real
property such as land, building, machinery and other
improvements affixed or attached to real property.

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Chapter 10

Philippine Taxation

The Forms of Taxes Imposed on Persons and Property

B) Property taxes
2. Estate Tax (Inheritance Tax) - a tax on the right of
transmitting property at the time of death and on the privilege
that a person is given in controlling to a certain extent the
disposition of his property to take effect upon death.
3. Gift or Donors Tax - a tax on the privilege of
transmitting ones property or property rights to another or
others without adequate and full valuable consideration. a

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Chapter 10

Philippine Taxation

The Forms of Taxes Imposed on Persons and Property

B) Property taxes
2. Estate Tax (Inheritance Tax) - a tax on the right of
transmitting property at the time of death and on the privilege
that a person is given in controlling to a certain extent the
disposition of his property to take effect upon death.
3. Gift or Donors Tax - a tax on the privilege of
transmitting ones property or property rights to another or
others without adequate and full valuable consideration. a

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Chapter 10

Philippine Taxation

The Forms of Taxes Imposed on Persons and Property

B) Property taxes
4. Capital Gains Tax - tax imposed on the sale or
exchange of property . Those imposed are presumed to have
been realized by the seller for the sale, exchange or other
disposition of real property located in the Philippines, classified
as capital assets.

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Chapter 10

Philippine Taxation

The Forms of Taxes Imposed on Persons and Property

C. Income Taxes
Taxes imposed on the income of the taxpayers from
whatever sources it is derived. Tax on all yearly profits
arising form property, possessions, trades or offices.

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Chapter 10

Philippine Taxation

The Forms of Taxes Imposed on Persons and Property

D. Excise or License Taxes
Taxes imposed on the privilege, occupation or
business not falling within the classification of poll taxes or
property taxes. These are imposed on alcohol products; on
tobacco products; on petroleum products like lubricating oils,
grease, processed gas etc; on mineral products such as
coal and coke and quarry resources; on miscellaneous
articles such as automobiles.
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Chapter 10

Philippine Taxation

The Forms of Taxes Imposed on Persons and Property

D. Excise or License Taxes
Taxes imposed on the privilege, occupation or
business not falling within the classification of poll taxes or
property taxes. These are imposed on alcohol products; on
tobacco products; on petroleum products like lubricating oils,
grease, processed gas etc; on mineral products such as
coal and coke and quarry resources; on miscellaneous
articles such as automobiles.
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Chapter 10

Philippine Taxation

The Branches of Government vis--vis the Tax Law

Under these lies two other taxes:
1.Documentary Stamp Tax - a tax imposed upon
documents, instruments, loan agreements and papers and
upon acceptance of assignments, sales and transfers of
obligation and etc.
2. Value added tax- is imposed on any person who, in the
course of trade or business sells, barters, exchanges, leases,
goods or properties, renders services, or engages in similar
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transactions.

Chapter 10

Philippine Taxation

The Branches of Government vis--vis the Tax Law

Under these lies two other taxes:
1.Documentary Stamp Tax - a tax imposed upon
documents, instruments, loan agreements and papers and
upon acceptance of assignments, sales and transfers of
obligation and etc.
2. Value added tax- is imposed on any person who, in the
course of trade or business sells, barters, exchanges, leases,
goods or properties, renders services, or engages in similar
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transactions.

Chapter 10

Philippine Taxation

Who Should Pay Taxes?

1.Individuals
a. Resident Citizen
b. Non-resident Citizen
c. Resident Aliens
d. Non-resident Aliens
2. Corporations
a. Domestic Corporations
b. Foreign Corporations
3. Estate under judicial settlement
4. Trusts irrevocable both as to the trust property and as to the income.44

Chapter 10

Philippine Taxation

Who (or What) are those exempted in paying taxes?

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).
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Chapter 10

Philippine Taxation

Who (or What) are those exempted in paying taxes?

2. Non-stock non-profit educational institutions used
actually, directly, and exclusively for educational purposes.
(Article XVI, Section 4 (3)).
Exempted to tax as stated in the Article 283 of Rules and
Regulations Implementing Local Government Code of 1991
(RA 7160):

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Chapter 10

Philippine Taxation

Who (or What) are those exempted in paying taxes?

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.
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Chapter 10

Philippine Taxation

Top Celebrity Taxpayers in 2015

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Chapter 10

Philippine Taxation

Top Taxpayers in 2015

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Chapter 10

Philippine Taxation

Income Tax Computation

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Chapter 10

Philippine Taxation

SSS Contribution Table

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Chapter 10

Philippine Taxation

PhilHealth Contribution Table

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Chapter 10

Philippine Taxation

SSS Contribution Table

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Chapter 10

Philippine Taxation

Income Tax Computation

To compute your taxable income, follow this formula:
Taxable income = (Monthly Basic Pay + Overtime Pay + Holiday Pay +
Night Differential) - (SSS/PhilHealth/Pag-IBIG deductions - Tardiness Absences)
Let's say Employee A is married with one dependent, and has a basic
monthly pay of P25,000. Based on the tables of government
contributions, Employee A will pay:

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Chapter 10

Philippine Taxation

Income Tax Computation

To compute your taxable income, follow this formula:
Let's say Employee A is married with one dependent, and has a basic
monthly pay of P25,000. Based on the tables of government
contributions, Employee A will pay:
Php 581.30 - SSS Contribution
Php 312.50 PhilHealth Contibution
Php 100 Pag-IBIG Contribution
Taxable Income = Php 25,000 (581.30 + 312.50 + 100)
= Php 25,000 993.8
= Php 24,006.20
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Chapter 10

Philippine Taxation

Income Tax Computation

To compute your taxable income, follow this formula:
Let's say Employee A is married with one dependent, and has a basic
monthly pay of P25,000. Based on the tables of government
contributions, Employee A will pay:
Taxable Income = Php 25,000 (581.30 + 312.50 + 100)
= Php 25,000 993.8
= Php 24,006.20
Tax = Php 1,875 + [(24,006.20 17,917) X .25]
= Php 1,875 + (6,089.2 X .25)
= Php 1,875 + 1,522.3
= Php 3,397.30
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If you cant explain it simply,

you dont understand it well
enough.
- Albert Einstein
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End
of
Presentation
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