Taxation means laying a tax through which the government generates income to
defray its expenses.
It is away to raise funds for government programs and services that benefit Filipino
citizens.
Economic investments and businesses in the Philippines have created several
definitions of taxation enforced by national or local laws for income collection and
development of the government.
A tax is enforced as a contribution, but it is proportionate to the citizen’s ability to
pay.
The imposition of taxes is done by law through the Bureau of Internal Revenue
(BIR).
TYPES OF TAXES: NATIONAL AND LOCAL
NATIONAL – are the one paid to the government through the BIR.
The national taxation system is based on the National Internal Revenue Code of
1997 or the RA no. 8424 otherwise known as the Tax Reform Act of 1997, as
amended.
Types:
1. Capital Gains Tax – is 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 sale (a sale with a condition for
repurchase) and other forms of conditional sale.
2. Documentary Stamp Tax – is a tax on documents, instruments, loan
agreements, and papers evidencing the acceptance, assignment, sale, or
transfer of an obligation, rights, or property incident thereto. 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.
3. Donor’s Tax – is a tax on a donation or gift. It is also imposed on the
gratuitous transfer of property between two or more persons who are living
at the time of the transfer. A donor’s tax is based on a graduated schedule of
tax rate.
4. Estate Tax – is a tax on the right of the deceased person to transmit his/her
estate to lawful heirs or beneficiaries at the time of death and on certain
transfer which are made by law as equivalent to testamentary disposition. It
is not a tax on property. Estate tax is also based on a graduated schedule of
tax rate
5. Income Tax – is a tax on all annual profits made from property ownership,
profession, trades or offices. It is also a tax on a person’s income,
emoluments, profits and the like. Individual income tax is based on graduated
schedule of tax rate, while corporate income tax is based on a fixed rate
prescribed by the tax law or special law.
6. Percentage Tax – is a business tax imposed on person 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 taxpayers. Percentage taxes are usually based on fixed
rate. They are usually paid monthly by businesses or professionals. However,
some special industries and transactions pay percentage tax on a quarterly
basis.
7. Value-Added Tax – is a business tax imposed collected from the seller in the
course of trade or business on every sale of properties (real or personal),
lease of goods or properties, or vendors of services. It 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 consumers.
8. Excise Tax – is a tax imposed on goods manufactured or produced in the
Philippines for domestic sale or consumption of any other disposition. It is
also imposed on things that are imported.
9. Withholding Tax on Compensation – is the tax withheld from individuals
receiving purely compensation income arising from an employer-employee
relationship.
10.Expanded Withholding Tax – is prescribed only for certain payors like those
withheld on rental income and professional income.
11.Final Withholding Tax – s a kind of withholding tax which is prescribed only
for certain payors and is not creditable against the income tax due of the
payee for the taxable year.
12.Withholding Tax on Government Money Payments – is the withholding tax
withheld by government offices including government-owned or -controlled
corporations and local government units, before making any payments to
private individuals, corporations, partnership and/or associations.
LOCAL – is based on the local government taxation in the Philippines as stated in
Republic Act 7160 or the Local Government Code of 1991, as amended. These
taxes, fees, or charges imposed by the local government units, which as provinces,
cities, municipalities and barangays.
Types:
1. Tax on Transfer of Real Property Ownership – is imposed on the sale,
donation, barter, or on any other mode of transferring ownership of real
property.
2. Tax on Business of Printing and Publication – is imposed on printing and
publication businesses like that o books, cards, posters, leaflets, handbills,
certificates, receipts, pamphlets, and others of similar nature.
3. Franchise Tax – is a tax on franchised businesses, at the rate not exceeding
fifty percent (50%) of one percent (1%) the gross annual receipts of the
preceding calendar year based on the incoming receipt (the annual earning)
within the territorial jurisdiction where franchise is selling in.
4. Tax on Sand, Gravel, and other Quarry Resources – is imposed on ordinary
stones, sand, gravel, earth, and other quarry resources, as defined under the
National Internal Revenue Code, as amended.
5. Professional Tax – is an annual tax on each person engaged in the exercise or
practice of his or her profession that requires government examination, like
licensure examinations.
6. Amusement Tax – is a tax collected from the proprietors, lessees, or
operators of theaters, cinemas, concert halls, circueses, boxing stadia, and
other place of amusement.
7. Annual Fixed Tax for Every Delivery Truck or Van of Manufacturers or
Producers, Wholesalers of, Dealer, 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.
8. Tax o Business – is imposed by cities or municipalities on 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.
9. Fees for 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.
10.Fishery Rentals, Fees, and Charges – are imposed by the municipality/city to
grantees of fishery privileges in the municipality/city waters especially the
privilege to build fish corrals, oysters, mussels, or other aquatic beds or
bangus fry areas and others as specified in the Local Government Code.
11. Community Tax – is the 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, or who I engaged in
business or occupation, or who owns real property with an aggregate
assessed value of one thousand pesos (₱1,000.00) or more, or who is
required by law to file an income tax return.
12.Taxes levied by the Barangays on Stores or Retailers with Fixed Business
Establishments with gross sales of receipts of the preceding calendar year
amounting to fifty thousand pesos (₱50,000.00) or less, (for city barangays)
and thirty thousand pesos (₱30,000.00) or less, (for municipal barangays), at
a rate not exceeding one percent (1%) on such gross sales or receipts.
13.Service Fees or Charges – are collected by the regulation or the use of
barangay-owned properties or service facilities, such as palay, copra, or
tobacco dryers.
14.Barangay Clearance – is a 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
office or a private company.
EVOLUTION OF TAXATION IN THE PHILIPPINES
PRE-COLONIAL PERIOD
- Centuries before Spaniards came to the Philippines, the early Filipinos lived in
separate and independent village-states called barangays. Each barangay
had its own government headed by a ruler called datu or raja.
- Like other states, there is social stratification, pre-Spanish Filipinos were also
divided into social classes. These were the nobles, freemen and the slaves.
- Nobles – the rulers and their families, occupied the highest class. (Gat, Lakan,
Raja or Datu)
- Freemen – the working class / middle class.
- Slaves – lowest class. Classified into two: aliping mamamahay (not a full-
pledge slave) and the aling sagigilid.
- During this period, natives started paying taxes but only freemen were
required. The tax collected was called buwis or handog; it was for the
protection they received from the datu. The chieftain’s family members were
enjoying exemption from paying taxes. Non-payment of taxes were already
punishable during this period.
SPANISH PERIOD (1521-1898)
- The practice of tax collection was in accordance with the First Filipino Spanish
Treaty signed between Miguel Lopez dd Legaspi and King Tupaz of Cebu on
June 4, 1565. This was intended to support the construction government
offices, build roads and bridges, ports, markets, schools, finance the
operation of the Churches, pay the salaries of government officials, improve
the transportation and communication and effectively administer the colony.
- Under Spanish occupation, common taxes collected include tributos
(tributes), cedula, sanatorium, donativo de Zamboanga, vinta, falla,
encomienda, excise taxes on certain products, industrial taxes, royalties on
forest products, documentary stamp tax and postal tax.
May or may not be included in ppt
- Tributos were collected to support government and church operations.
- Cedula or community tax certificate served as identification card when has to
be carried by the person at all times.
- Sanctorum is another form of tax included in tribute with an amount of three
reales that is used for church purposes.
- Donativo de Zamboanga which is imposed between 1635 up to the middle of
the 19th century is collected to crush the Moro raids.
- VInta – amounts to one-half real or one ganta of rice for every year used in
financing coastal patrols around Metro Manila and in the western coast of
Luzon.
- Falla is as sum of money amounting to seven pesos, in order to be exempted
from polo (forced personal services). (job included wood cutting for naval
costruction and smelting of weapons and cannons, cleaning and building,
watching over the prisoners in the Royal Houses of the capital of the
province, night rounds of the towns, fixing streetgates, cleaning of rivers and
building ships including churches). (every polista was entitled to some salary
which he seldom received, the polistas had a monthly stipend for fod
consisting of rice at 4 pesos, taken from small amount contributed annually
by all the natives.)
-
- Diezmos prediales or tithes consisting of one-tenth of the products of one’s
land is collected while goods covered by excise taxes include jewelries,
trinkets, burlas and powder.
- Encomienda refers to a special right bestowed upon a person by the King to
possess and enjoy all the fruits of a piece of land in a particular place
including the power to impose and collect tax upon inhabitants thereof, in
recognition to his deeds and contributions for the country, for the King or for
Spain. Two kinds ; royal encomienda and private encomienda
MALOLOS REPUBLIC (1899)
- When the First Philippine Republic or Malolos Republic was inaugurated on
January 23, 1899 various taxes were imposed.
- Chinese poll tax; railway and freight tax; fees collected in state courts by
state representatives; rental of post office boxes; and the sale of printed
books, particularly the Heraldo Filipino (official newspaper of the
government). Ther was also tax for unclaimed property, property tax, tax on
mines (10% going to the government), tax on forest products, coining of
money; sale of stamped paper or adhesive draft tax (now documentary
stamp tax); signature fees; registry and notarial fees; and tax and fees from
labor works of prisoners.
- To discourage people from engaging in vices, a tax on sale of lottery and
opium was imposed. Properties of religious orders were also taxed. For
merchant vessels, tonnage dues were imposed. Other taxes imposed include:
5% tax on the market value of all merchandise transported and 1% tax on
the value of real property.
AMERICAN PERIOD (1898-1946)
- Internal Revenue Law of 1904
o The “Internal Revenue Law of Nineteen Hundred and Four”, enacted by
the Philippine Commission on July 2, 1904, repealed all old Spanish
laws, then remaining in force and imposing internal taxes. The internal
revenue taxes that were collected were as follows: manufacturers of
alcohol and tobacco products, licenses and dealers in alcohol and
tobacco products, licenses, merchants, manufacturers and common
carriers licenses, occupations, trades and professions, mines and
mining concessions, banks and bankers, insurance companies,
documentary stamp taxes, cedula personal, and taxes on forest
products. The law was also created the Bureau of Internal Revenue.
- Internal Revenue Law of Nineteen Hundred and Four (Act No. 2339)
o the Internal Revenue Law of Nineteen Hundred and Four only
broadened the scope of internal revenue taxes.
