PHILIPPINE

TAXATION

BSIT – [3]
SUN | 5:00 – 8:00 pm
Philippine History
Dr. Costales
 Evolution of Philippine Taxation
 In today's world, taxation is a reality that all
citizens must contend with for the primary
reason that governments raise revenue from
the people they govern to be able to function
fully. In exchange for the taxes that people
pay, the government promises to improve the
citizens' lives through good governance.
Taxation, as a government mechanism to raise
funds, developed and evolved through time,
and in the context of the Philippines, we must
understand that it came with our colonial
experience.
 Taxation in Spanish Philippines

 Firstly, Philippines may have the abundance of

natural resources (nickel, silver, gold, & etc.) even
before Spanish colonization. Moreover, ancestors
were generally involved in a subsistence economy,
and while payment of tribute or taxes
(buhis/buwis/handug) or the obligation to provide
labor sevices to the datus in some early Filipino
communities may resemble taxation. It is essentially
different from the contemporary meaning of this
sort of concept as well.
 Taxation in Spanish Philippines

 During the colonization, Spaniards gradually change this

subsistence system and imposed the payment of tributos
(tributes) from the Filipinos, similar on what they've been
practicing for a long time. Its main purpose is to generate
resources for the government and in able to provide salary for
the officials, maintenance of the islands, or expenses of the
clergy. Other than that, the hindrance which being faced by
the Spaniards is the collection of revenue which they solved
by introducing the system of reduccion by creating pueblos,
where Filipinos were gathered and awarded plots of land to
till. It is headed by encomenderos who receives the reward
from the Spanish crown. Exempted from the payment of
tributos were the principales: alcaldes, gobernadores,
cabezas de barangay, soldies, members of the civil guard,
government officials, and vargants.
 Taxation in Spanish Philippines

 The Filipinos who were once satisfied with the agricultural

production for subsistence had to increase production to
meet the demands of payments and a more intensive
agricultural system had to be introduced. Later on, half of
the tribute was paid in cash and the rest with produce. This
financed the conquest of the Philippines.
 Taxation in Spanish Philippines

 During the end of the 16th century, the Manila-Acalpulco

trade was established through the galleons, a way by which
the Spaniards could make sure that European presence
would be sustained. Once a year, the galleon would be
loaded up with merchandise from Asia and sent to New
Spain (Mexico) and back. This improved the economy of
the Philippines and reinforced the control of the Spaniards
all over the country. Tax collection was still very poor and
subsidy from spain would be needed through the galleons.
However, subsidy was stopped as the Mexico became
independent in 1820.
 Taxation in Spanish Philippines

 In 1884, payment of tribute has stopped and replaced by a

poll tax collected through a certificate of identification
called the cedula (Community Tax Certificate).
 A document which being issued by the government to
individuals upon payment of the community tax.
 Burden for the peasants because of the greatly increased
of revenue collection.
 Taxation in Spanish Philippines

 1878 - (2) direct taxes were added. Urbana and Industria.

 Urbana - a tax on the annual rental value of an urban real state.
 Industria - is a tax on salaries, dividend, and profits.
 During the late 19th century, economic growth increased
exponentially because of the further raise of revenue by means of
importing and exporting.
 Colonial govt. also gained more income from monopolies, such as
sale of stamped paper, liquor, cockpits, and opium.
 1781 to 1882 - The biggest of the state monopolies was tabacco
which later being halted.
 Taxation in Spanish Philippines

 17th Century – forced labor was a character of Spanish

colonial taxation in the Philippines and was required from
the Filipinos. It proved useful in defending the territory of
the colony and augmenting the labor required by wood-
cutting and ship-building especially during the time of the
Galleon Trade.
 Polo Y Servicios - a practice employed by Spanish
colonizers for over 250 years that required the forced labor
of all Filipino males from 16 to 60 years old for 40-day
periods. The workers could be placed on any project the
Spanish wanted, despite hazardous or unhealthy
conditions.
 Taxation in Spanish Philippines
 Under the Polo y servicios, male were required to labor for
40 days a year (reduced to 15 days a year in 1884). They
may opt out by paying the fallas of three pesos per annum
 Taxation under the Americans

 The Americans who acquired the Philippines aimed to make

the economy self-sufficient by running the government with
the smallest possible sum of revenue and create surplus in
the budget. From 1898 to 1903, the Americans followed the
Spanish system of taxation with some modifications, noting
that the system introduced by the Spaniards were outdated
and regressive. The military govt. suspended the contracts
for the sale of opium, lottery, and mint charges for the
coinage of money. Later on, the urbana would be replaced
by tax on real estate, which became known as the land tax.
The land tax was levied on both urban and rural real states.
 Taxation under the Americans

 The problem with land tax was that tilting in the rural area
was very disorderly: the appraising of land value was
influenced by political and familial factors and the intro. of
a taxation system on agricultural land faced objections for
the landed elite. Tax evasion was prevalent, especially
among the elites.
 Taxation under the Americans

 The Internal Revenue Law of 1904 was passed as a reaction

to the problems of collecting land tax. It prescribed ten
major sources of revenue: (1) licensed taxes on firms
dealing in alcoholic beverages and tobacco, (2) excise
taxes on alcoholic beverages and tobacco products, (3)
taxes on banks and bankers, (4) document stamp taxes, (5)
the cedula, (6) taxes on insurance and insurance
companies, (7) taxes on forest products, (8) mining
concessions, (9) taxes on business and manufacturing, and
(10) occupational licenses.
 Taxation under the Americans

 The cedula went through changes in the new law as the

rate was fixed per adult male, which resulted in a great
decline in revenues. In 1907, some provinces were
authorized to double the fee for the cedula to support the
construction and maintenance of roads. The industria tax
was levied on the business community and became highly
complex system that assign a certain tax to an industrial or
commercial activity according to their profitability. The new
act also imposed a percentage tax on sales payable
quarterly.
 Taxation under the Americans

 In 1913, the Underwood-Simmons Tariff Act was passed,

resulting in a reduction in the revenue of the govt. as
export taxes levied on sugar, tobacco, hemp, and copra
were lifted. To make up for the loss, Governor General
Francis Burton Harrison urged that tax receipts be
increased to make up for the loss. Minor changes were
made to the 1904 Internal Revenue act such as the
imposition of taxes on mines, petroleum products, and
dealers of petroleum products and tobacco.
 Taxation under the Americans

 New sources of taxes were introduced later on. In 1914, an

income tax was introduced; in 1919, an inheritance tax was
created; and in 1932, a national lottery was established to
create more revenue for the govt. However, these new
creations were not enough to increase govt. revenues.