NAME: Chris Anne Joy T.

Capistrano YEAR/SEC: BSE-Social Studies1

TAX SYSTEM IN THE PHILIPPINES

I.INTRODUCTION

Taxation is the process of the enforced by the government payment of

money aimed to support the financial welfare of the country and its citizens.

Taxation was introduced thousands years ago and the human civilization is

mostly associated with money and taxation. With the creation of the first well-

organized settlements, and the whole countries people have become required to

pay taxes in order to support and provide the settlement with everything it needs

and receive protection and ability to work there legally. Taxation has the same

functions, because people are asked to pay taxes to be able to work in safety,

walk along the safe streets, drive on the good roads, receive medical care, get

help of a policemen or fireman when something bad happens. The most

important and useful taxation is met in the sphere of education. When parents

want their children attend good school, they will have to pay taxes to provide

schools with the required appliances needed for studying (computers, chalk,

paint, food in the canteen, etc.). Then, taxes are imposed on people to support

military services; without constant donation the army will not exist, the

development of new weapon will be also impossible. Finally, taxes are imposed

to provide people with energy (mostly electrical, as all appliances and technique

works due to electricity nowadays). So, taxation is imposed nearly on everything

what exists in the country and there were incidents in the human history when

the kings imposed insane taxes on such things as air and sunshine and naturally

it provoked strikes and rebellions. The country cannot live without taxation,

because every sphere of human activity is based on donations and support of the

citizens.

The laws governing taxation in the Philippines are contained within the

National Internal Revenue Code. This code underwent substantial revision with

passage of the Tax Reform Act of 1997. This law took effect on January 1, 1998.

Taxation is administered through the Bureau of Internal Revenue which comes

under the Department of Finance. The chief executive of the Bureau of Internal

Revenue is the Commissioner who has exclusive and original jurisdiction to

interpret the provisions of the code and other tax laws. The commissioner also

has the powers to decide disputed assessments, grant refunds of taxes, fees and

other charges and penalties, modify payment of any internal revenue tax and

abate or cancel a tax liability. Taxpayers can appeal decisions by the

Commissioner directly to the Court of Tax Appeals. The BIR has existing

electronic systems for taxpayers such as E-Registration; Electronic Filing &

Payment System (EFPS); E-BIR Forms; E-submissions, e.g., Summary List of

Sales & Purchases (SLSP), Monthly Alphalist of Payees (MAP), Summary

Alphalist of Withholding Tax (SAWT), etc.

The BIR issued Revenue Memorandum Order (RMO) 21-2000 prescribing

the policies and procedures in the processing and approval of taxpayer’s

Application for Permit to Adopt Computerized Accounting System (CAS) and its
components as amended by RMO 29-2002. RMO No. 21-2000 specifies the

components in the preparation of “1) general journal, general ledger, and other

subsidiary records; 2) sales, purchases, accounts receivable, accounts payable,

inventory, payroll, ledgers and other accounting records; 3) generation of official

accounting documents such as official receipts (OR), sales and cash invoices,

cash vouchers, journal vouchers, billing statements, sales tickets, etc.; and 4)

generation of reports as required by the BIR.“ In August 2013, BIR issued

Revenue Memorandum Circular (RMC) 55-2013 to reiterate a taxpayer’s

obligations in relation to online business transactions. The taxation rules and

guidelines on non-online transactions are similar to online transactions. Despite

these regulations, online sellers and freelancers find it difficult to comply with the

requirements since the guidelines for the issuance of official receipts online is not

clear. Creating a system or application and having it approved by the BIR may

take too much time and resources for each merchant to work on. There is a

demand for easily accessible, usable invoicing and official receipt tools for use by

freelancers, online direct sellers, and small e-commerce sites online.

II. PRESENTATION AND CRITICAL ANALYSIS OF DATA

A.REALITY

Individual resident foreigners who derive their income from all sources in

the Philippines and in foreign countries are taxed from 1-35% on gross

compensation income (arising from an employer-employee relationship) and net

on non-compensation (business and other) income are taxed accordingly: twenty

percent (20%) on royalties, prizes, and winnings. Twenty percent (20%) interest

on bank deposit and substitute arrangements, and five percent (5%) capital gains

tax on sale of realty.

B. REFLECTION

Expatriates living in the Philippines who are not yet citizens are

considered resident aliens while foreigners who do not live in the Philippines are

considered as non-resident aliens. If you're already a citizen but you are not

living in the country, you're a non-resident citizen. Generally, the following

principles apply in terms of individual taxation in the Philippines: citizens living in

the country are taxable on all income derived from sources within and outside the

Philippines; non-resident aliens and non-resident citizens are taxable only on

their income within the Philippines; and Philippine citizens working as an

overseas contract worker is only taxable from his income within the Philippines.

In terms of businesses, domestic corporations (created within the Philippines) are

taxable on all income within and outside the country; and foreign corporations
whether engaged or not in trade or business in the Philippines, is taxable only on

income derived from sources within the country.

As a theory of justice seem to be suggesting by not committing his theory

to the specific design of a tax system. Ironically, in applying the perspective if

limitations in designing a tax system, Rawls first principle of justice which

concerns equal political liberties is more important than his second principle,

which concerns economic inequalities are justifiable only if they benefit the least

advantaged, can be satisfied through the combination of a variety of institution of

which the tax system is only one. Inequalities in taxation that fail to benefit the

most disadvantaged may be outweighed by other economic arrangements and

provisions that benefits those who are worst off. Only a tax system that burdens

exclusively the poorest group would be foreclosed on account of the difference

principle, because that scheme of public finance would necessarily entail some

redistribution in the form of public goods at least form the worst off to the better

off.

C. RESPONSE

President Duterte’s plan to overhaul our tax system is arguably his most

highly-anticipated and consequential policy thus far into his term. The plan,

originally crafted by the Department of Finance, aims for a "simpler, fairer, and

more efficient" tax system that will promote investments, create jobs, and reduce

poverty. Many sectors have expressed support for it, including a group of former

DOF and NEDA secretaries. But some lawmakers have branded the tax proposal
as "heartless" and "anti-poor" because of, say, the planned increase on fuel

taxes. Others have also questioned certain spending items in the General

Appropriations Act of 2017 that do not merit the additional revenues that tax

reform will yield. We focus on 5 issues which, to our mind, demonstrate best the

present deficiencies (or "structural weaknesses") of our tax system. In each, we

show how the current state of things deviates from well-known principles of

taxation.

-High income taxes could discourage firms from producing more goods or

employees from working more hours. Hence, a good tax system makes sure that

income tax rates are not too high so as to discourage economic activity.

- A good way to reduce high tax rates is to expand the tax base, or the set

of goods and services which are taxed. The same (or even a larger) tax revenue

can be collected as before by imposing a lower tax rate on as many goods and

services as possible.

-The rules of the tax system should be as plain and simple as possible.

Not only will it be easier for taxpayers to understand their liabilities and to

comply, but it will also minimize the administrative costs of collection.

III. SUMMARY, CONCLUSION AND RECOMMENDATION

The time is ripe for tax reform. Unfortunately, the Philippine tax system is

currently deficient in both respects. Not only do our taxes disproportionately

burden the poor and benefit the rich, but they also yield too little revenue given

the distortions they create. The present Council Tax system must end. Any new

system of Local Government taxation should continue to be one of general tax

contributing to the general funding of local services, rather than a system of

charges for specific services. he new system should offer greater flexibility to

Local Government and thereby strengthen local democracy.

 Local rate-setting wherever possible should be an explicit feature of

reform. As far as possible, any new system should be designed to minimize the

need for complex relief schemes for individuals or households. Such a system

should ensure that any reliefs that are available are straightforward to understand

and administer and that take-up is increased. Local and central government must

make substantial efforts to increase public understanding of local taxation and

how Local Government receives funding and spends money. This should be

clear and transparent to taxpayers throughout their experience of the system.

Any move to a fairer tax system will also inevitably lead to a situation

where some individuals will pay less and some will pay more. We therefore

believe it is vital to establish a transitional framework to enable taxpayers to

adjust to the new system and new tax liabilities. The cost of such assistance

should be assessed and considered as part of any projections of how much

revenue would be raised by the new system. A new system will also mean the

distribution of central government funds to local authorities will need to be

reviewed and adjusted. We believe that local authorities with lower tax bases

should not lose out as a result of any such shift in system, whilst retaining

meaningful local flexibility in levels of local taxation.

Local authorities will also need to have sufficient means under the new

system to mitigate risks by managing fluctuations in revenues across the

economic cycle, in-year and during gaps between liability arising and receipt of

payment. To meet these principles, any move to a fairer system will therefore
need time. We believe this means reform should be thought of and put forward

as a programme, with the public offered a longer-term vision and actions which

can be taken in the short term identified.