1

Chapter 4
Learning Objectives:
 Analyze social, political, economic and cultural issues in the Philippines using the lens of the society.
 To recognize that the problems of today are consequences of decisions and events that happened in
the past.
 To understand several enduring issues in Philippine society through history.
 To propose recommendations or solutions to present day problems based on the understanding of
the past and anticipation of the future through the study of history.

This chapter is dedicated to enduring issues in Philippine society, which history could lend a hand in
understanding, hopefully, proposing solutions. These topics include the mandated discussion on the
Philippine constitution, policies on agrarian reform and taxation. It is hoped that these discussions will
help us propose recommendations or solutions to present day problems based on our understanding
of root causes and how we anticipate future scenarios in the Philippine setting.

Evolution of the Philippine Constitution

The Constitution is defined as a set of fundamental principles or established precedents according to
which state or other organization is governed, thus, the word itself means to be a part of a whole, the coming
together of distinct entities into one group, with the same principles and ideals. These principles define the
nature and extent of government.
The Constitution of the Philippines, the supreme law of the Republic of the Philippines, has been in
effect since 1987. There were only three other constitutions that have effectively governed the country; the
1935 Commonwealth Constitution, the 1973 Constitution and the 1986 Freedom Constitution. However, there
were earlier constitutions attempted by Filipinos in the struggle to break free from the colonial yoke.

1897: Constitution of Biak-na-Bato

The Constitution of Biak-na-Bato was the provisionary Constitution of the Philippine Republic
during the Philippine Revolution, and was promulgated by the Philippine Revolutionary Government on 1
November 1897. The Constitution, borrowed from Cuba, was written by Isabelo Artacho and Felix Ferrer in
Spanish, and later on translated into Tagalog.
The organs of the government under the Constitution were: (1) the Supreme Council, which was
vested with the power of the Republic, headed by the president and four department secretaries: the interior,
foreign affairs, treasury and war; (2) the Consejo Supremo de Gracia Y Justicia (Supreme Council of Grace and
Justice), which was given the authority to make decisions and affirm or disprove the sentences rendered by
other courts and to dictate rules for the administration of justice; and (3) the Asamblea de Representantes
(Assembly of Representatives), which was to be convened after the Revolution to create a new Constitution
and to elect a new Council of Government and Representatives of the people.
The Constitution of Biak-na-Bato was never fully implemented, since a truce, the Pact of Biak-na-Bato,
was signed between the Spanish and the Philippine Revolutionary Army.

Primary Source: Preamble of the Biak-na-Bato Constitution

The separation of the Philippines from the Spanish monarchy and their formation into independent
state with its own government called the Philippine Republic has been the end sought by the
Revolution in the existing war, begun on the 24 th of August, 1896, and therefore, in its name and by
the power delegated by the Filipino people, interpreting faithfully their desires and ambitions , we the
representatives of the Revolution, in a meeting at Biak-na-Bato, November 1, 1897, unanimously
adopted the following articles for the constitution of the State.
1899: Malolos Constitution
 2

After the signing of the truce, the Filipino Revolutionary leaders accepted a payment from Spain and
end to exile in HongKong. Upon the defeat of the Spanish to the Americans in the battle of Manila Bchay on 1
may 1898, the United States Navy transported Aguinaldo back to the Philippines. The newly reformed
Philippine Declaration of Independence was issued on 12 June 1898, together with several decrees that
formed the first Philippine Republic. The Malolos Congress was elected, which selected a commission to draw
up a draft constitution on 17 September 1898, which was composed of wealthy and educated men.
The document they came up with, approved by the Congress on 29 November 1898, and promulgated
by Aguinaldo on 21 January 1899 was titled “The Political Constitution of 1899” and written in Spanish. The
constitution has 39 articles divided into 14 titles, with 8 articles of transitory provisions, and a final additional
article. The document was patterned after the Spanish Constitution of 1812, with influences from the charters
of Belgium, Mexico, Brazil, Nicaragua, Costa Rica and Guatemala, and the French Constitution of 1793.
According to Felipe Claderon, main author of the constitution, these countries were studied because they
shared similar social, political, ethnological and governance conditions with the Philippines. Prior constitutional
projects in the Philippines also influenced the Malolos Constitution, namely, the Kartilya and the Sangunian-
Hukuman, the charter of laws and morals of the katipunan written by Emilio Jacinto in 1896; the Biak-na-Bato
Constitution of 1897 planned by Isabelo Artacho; Mabini’s Consitutional Program of the Philippine Republic of
1898; the provisional constitutions; and the autonomy projects of Paterno in 1898.
Primary Source: Preamble of the Political Constitution of 1899
We, the Representatives of the Filipino people, lawfully convened, in order to establish justice,
provide for common defense, promote the general welfare and insure the benefits of liberty, imploring the aid
of the Sovereign Legislator of the Universe for the attainment of these ends, have voted, decreed and
sanctioned the following political constitution.
As direct challenge to colonial authorities of the Spanish empire, the sovereignty was retroverted by
the people, a legal principle underlying the Philippine Revolution. The people delegate governmental functions
to civil servants while they retained actual sovereignty. The 27 articles of Title IV detail the natural rights and
popular sovereign of Filipinos, the enumeration of which does not imply the prohibition of any other rights not
expressly stated. Title III, Article V also declares that the State recognizes the freedom and equality of all
beliefs, as well as the separation of Church and State. These are direct reactions to features of the Spanish
government in the Philippines, where the friars were dominant agents of the state.
The form of government, according to Title II, Article IV is to be popular representative, alternative
and responsible and shall exercise three distinct powers- legislative, executive and judicial. The legislative
power was vested in a unicameral body called the Assembly of Representatives, members of which are elected
for terms of four years. Secretaries of the government were given seats in the assembly, which meet annually
for the period of at least three months. Bills could be introduced either by the president or by a member of the
assembly. Some powers not legislative in nature were also given to the body, such as the right to select its own
officers, right of censure and interpellation, and the right of impeaching the government, cabinet members,
the chief justice of the Supreme Court, and the Solicitor- general. A permanent commission of seven, elected
by the assembly and granted specific powers by the constitution, was to sit during the intervals between
sessions of the assembly.
Executive power was vested in the president, and elected by the constituent assembly of the
Assembly of Representatives and special representatives. The president will serve a term of 4 years without re
election. There was no vice president, and in case of vacancy, a president was to be selected by the constituent
assembly.
The 1899 Malolos Constitution was never enforced due to the ongoing war. The Philippines was
effectively a territory of the United States upon the signing of the treaty of Paris between Spain and the United
States, transferring sovereignty of the Philippines on 10 December 1898.

1935: The Commonwealth Constitution

 3

It is worth mentioning that after the Treaty of Paris, the Philippines was subject to power of the
United States of America, effectively the new colonizers of the country. From 1898 to 1901, the Philippines
would be placed under a military government until a civil government would put into place.
Two ACTs of the United States Congress were passed that may be considered to have qualities of
constitutionality. First was the Philippine Organic Act of 1902, the first organic law for the Philippine islands
that provided for the creation of a popularly elected Philippine Assembly. The act specified that legislative
power would be vested in a bicameral legislature composed of the Philippine Commission as the upper house
and the Philippine Assembly as the lower house. Key provisions of the act included a bill of rights for Filipinos
and the appointment of two non-voting Filipino Resident Commissioners of the Philippines as representative
to the United States House of Representatives. The second act that functioned as a constitution was the
Philippine Autonomy Act of 1916, commonly referred to as “Jones Law,” which modified the structure of the
Philippine government through the removal of the Philippine Commission, replacing it with a Senate that
served as the upper house and its members elected by the Filipino voters, the first truly elected national
legislature. It was also this Act that explicitly declared the purpose of the United States to end their
sovereignty over the Philippines and recognize Philippine independence as soon as a stable government can be
established.
In 1932, with the efforts of the Filipino independence mission led by Sergio Osmeña and Manuel
Roxas, the United States Congress passed the Hare-Hawes Cutting Act with the promise of granting Filipinos’
independence. The bill was opposed by then Senate President Manuel L. Quezon and consequently, rejected
by the Philippine Senate.
By 1934, another law, the Tydings-McDuffie Act, also known as the Philippine Independence Act, was
passed by the United States Congress that provided authority and defined mechanisms for the establishment
of a formal constitution by a constitutional convention. The members of the convention were elected and held
their first meeting on 30 July 1934, with Claro M. Recto unanimously elected as president.
The constitution was crafted to meet the approval of the United States government, and to ensure
that the United States would live up to its promise to grant independence to the Philippines.
Primary Source: Preamble of the 1935 Commonwealth
The Filipino people, imploring the aid of Divine Providence, in order to establish a government that shall
embody their ideals, conserve and develop the patrimony of the nation, promote the general welfare, and
secure to themselves and their posterity the blessings of independence under a regime of justice, liberty and
democracy, do ordain and promulgate this constitution.
The Constitution created the Commonwealth of the Philippines, an administrative body that governed
the Philippines from 1935 to 1946. It is a transitional administration to prepare the country toward its full
achievement of independence. It is originally provided for a unicameral National Assembly with a president
and vice president elected to a six-year term without re-election. It was amended in 1940 to have a bicameral
Congress composed of a Senate and a House of Representatives, as well as the creation of an independent
electoral commission, and limited the term of office of the president and vice president to four years, with one
re-election. Rights to suffrage were originally afforded to male citizens of the Philippines who are twenty- one
years of age or over and are able to read and write, this was later on extended to women within two years
after the adoption of the constitution.
While the dominant influence in the constitution was American, it also bears traces of the Malolos
Constitution, the German, Spanish, and the Mexican constitutions, constitutions of several South American
countries, and the unwritten English Constitution.
The draft of the Constitution was approved by the constitutional convention on 8 February 1935, and
ratified by then US President Franklin B. Roosevelt on 25 March 1935. Election were held in September 1935
and Manuel L. Quezon was elected President of the Commonwealth.
The Commonwealth was briefly interrupted by the events of the World War II, with the Japanese
occupying the Philippines was declared an independent republic on 4 July 1946.
 4

1973: Constitutional Authoritarianism

In 1965, Ferdinand E. Marcos was elected president, and in 1967, Philippine Congress passed a
resolution calling for a constitutional convention to change the 1935 Constitution. Marcos won the re-election
in 1969, in a bid boosted by campaign overspending and use of government funds. Elections of the delegates
to the constitutional convention were held on 20 November 1970, and the convention began formally on 1
June 1971, with former President Carlos P. Garcia being elected as convention president. Unfortunately, he
died, and was succeeded by another former president, Diosdado Macapagal
Before the convention finished its work, martial Law was declared. Marcos cited a growing communist
insurgency as reason for the Martial Law, which was provided for in the 1935 Constitution. Some delegates of
the ongoing constitutional convention were placed behind bars and others went into hiding or were voluntary
exiled. With Marcos as dictator, the direction of the convention turned, with accounts that the president
himself be able to hold on to power for as long as he could. On 29 November 1972, the convention approved
its proposed constitution.
The constitution was supposed to introduce a parliamentary-style government, where legislative
power was vested in a unicameral national Assembly, with members being elected to a 6 year term. The
president was to be elected as the symbolic and ceremonial head of the state chosen from the members of the
National Assembly. The president would serve a 6 year term and could be elected to an unlimited number of
terms. Executive power was relegated to the Prime Minister, who was also the head of government and
Commander-in-Chief of the Armed Forces who was also to be elected from the national Assembly.
President Marcos issued Presidential Decree No. 73 setting the date of the plebiscite to ratify or reject
the proposed constitution on 30 November 1973. This plebiscite was postponed later on since Marcos feared
that the public might vote to reject the constitution. Instead of a plebiscite, Citizen Assemblies were held, from
10-15 January 1973, where the citizens coming together and voting by hand, decided on whether to ratify the
constitution, suspend the convening of the Interim national Assembly, continue Martial Law, or place a
moratorium on elections for a period of at least several years. The president, on 17 January 1973, issued a
proclamation announcing that the proposed constitution had been ratified by an overwhelming vote of the
members of the highly irregular Citizen Assemblies.
The constitution was amended several times. In 1976, Citizen Assemblies, once again, decided to
allow the continuation of Martial Law, as well as approved the amendments: an Interim Batasang Pambansa to
substitute for the Interim National Assembly, the president also become the Prime Minister and continue to
exercise legislative powers until Martial Law was lifted and authorized the President to legislate on his own on
an emergency basis. An overwhelming majority would ratify further amendments succeeding. In 1980, the
retirement age of members of the judiciary was extended to 70 years. In 1981, the parliamentary system was
formally modified to a French-style, semi-presidential system where executive power was restored to the
president, who was once again, to be directly elected; an Executive Committee was to be created, composed
of the Prime Minister and 14 others, that served as the president’s Cabinet; and some electoral reforms were
instituted. In 1984, the Executive Committee was abolished and the position of the vice president was
restored.
After all the amendments introduced, the 1973 Constitution was merely a way for the President to
keep executive powers, abolish Senate, and by any means, never acted as a parliamentary system, instead
functioned as an authoritarian presidential system, with all the real power concentrated in the hands of the
president, with the backing of the constitution.
The situation in the 1980s had been very turbulent. As Marcos amassed power, discontentment has
also been burgeoning. The tide turned swiftly hen in August 1983, Benigno Aquino Jr. opposition leader and
regarded as the most incredible alternative to President Marcos, was assassinated while under the military
escort immediately after his return from exile in the United States. There was widespread suspicion that the
orders to assassinate Aquino came from top levels of the government and the military. This event caused the
coming together of the non-violent opposition against the Marcos authoritarian regime. Marcos was then
 5

forced to hold “snap” elections a year early, and said elections were marred by widespread fraud. Marcos
declared himself winner despite international condemnation nad nationwide protests. A small group of
military rebels attempted to stage a coup, but failed; however, this triggered what came to be known as the
EDSA People Power Revolution of 1986, as people from all walks of life spilled onto the streets. Under pressure
from the United States of America, who used to support Marcos and his Martial Law, the Marcos family fled
into exile. His opponent in the snap elections, Benigno Aquino Jr.’s widow Corazon Aquino, was installed as
president on 25 February 1986.

1987: Constitution after Martial Law

President Corazon Aquino’s government had three options regarding the constitution: revert to the
1935 Constitution, retain the 1973 Constitution and be granted the power to make reforms, or start anew and
break from the “vestiges of a disgraced dictatorship.” They decided to make a new constitution that, according
to the president herself, should be “truly reflective of the aspirations and ideals of the Filipino People.
The Constitution begins with a preamble and 18 self contained articles. It established the Philippines
as a “democratic republican State” where “sovereignty resides in the people and all government authority
emanates from them.” It allocates governmental powers among the executive, legislative and judicial branches
of the government.
The Executive branch is headed by the president and his cabinet, whom he appoints. The president is
the head of the state and the chief executive, but his power is limited by significant checks from the two other
co- equal branches of the government, especially during times of emergency. This is put in place to safeguard
the country from the experience of martial law despotism during the presidency of Marcos. In cases of national
emergency, the president may still declare martial law, but not longer than a period of 60 days. Congress,
through the majority vote, can revoke this decision, or extend it for a period that they determine. The
Supreme Court may also review the declaration of martial law and decide if there were sufficient justifying
facts for the act. The president and the vice president are elected at large by a direct vote serving a single 6
year term.
The legislative power resides in a Congress divided into two Houses: the Senate and the House of
Representatives. The 24 senators are elected at large by popular vote, and can serve no more than two
consecutive 6 year terms. The House is composed of district representatives representing a particular
geographic area and makes up around 80% of the total number of representatives. There are 234 legislative
districts in the Philippines that elect their representatives to serve 3 year terms. The 1987 Constitution created
a party list system to provide spaces for the participation of under-represented community or groups. Party –
list representatives may fill up not more than 20% of the seats in the House.
Aside from the power of legislation, Congress may also declare war, through a two thirds vote in both
upper and lower houses. The power of legislation, however, is also subject to an executive check, as the
president retains the power to veto or stop a bill from becoming a law. Congress may only override this power
with a 2/3 vote in both houses.
The Philippine court system is vested with the power of the judiciary, and is composed of a Supreme
Court and lower courts as created by law. The Supreme Court is a 15 member court appointed by the president
without the need to be confirmed by Congress. The appointment the president makes, however, is limited to a
list of nominees provided by a constitutionally specified Judicial and Bar Council. The Supreme Court Justices
may hear, on appeal, any cases dealing with the constitutionality of any law, treaty or decree of the
government, cases dealing where questions of jurisdiction or judicial error are concerned, or cases where the
penalty is sufficiently grave. It may also exercise original jurisdiction over cases involving government or
international officials. The Supreme Court is also in charge of overseeing the functioning and administration of
the lower courts and their personnel.
The Constitution also established three independent Constitutional Commission namely, the Civil
Service Commission, a central agency in charge of government personnel; the Commission on Elections,
 6

mandated to enforce and administer all election laws and regulations; and the Commission on Audit, which
examines all funds, transactions and property accounts of the government and its agencies.
To further promote the ethical and lawful conduct of the government, the Office of the Ombudsman
was created to investigate complaints that pertain to public corruption, unlawful behavior of public officials
and other public misconduct. The Ombudsman can charge public officials before the Sandiganbayan, a special
court created for this purpose.

Changing the Constitution is a perennial issue that crops up, and terms such as “Cha-Cha,” “Con-Ass,” and “Con-
Con” are regularly thrown around. Article XVII of the 1987 Constitution provides for three ways by which the
Constitution can be changed.
Congress (House of Representatives and the Senate) may convene as a Constituent Assembly (or Con-Ass) to
propose amendments to the Constitution. It is not clear, however, if Congress is to vote as a single body
separately. How the Congress convenes as a Con-Ass is also not provided in the Constitution.
Another method is through the Constitutional Convention (Con-Con), where the Congress, upon a vote of 2/3 of all
its members, calls for a constitutional convention. In a Con-Con, delegates will propose amendments or revisions
to the Constitution, not Congress. The 1987 Constitution does not provide for a method by which delegates to the
Con-Con are chosen.
The third is called the “people’s Initiative” (or PI). In this method, amendments to the Constitution may be
proposed by the people upon a petition of at least 12% of the total number of registered voters. All legislative
districts must be presented by at least 12% registered votes therein. No amendment is allowed more than once
every five years since a successful PI. The 1987 Constitution directs the Congress to enact a law to implement
provisions of the PI, which has not yet materialized.
Amendments or revision to the institution shall be valid only when ratified by a majority of the votes cast in a
national referendum.

Only the House of Representatives can initiate the impeachment of the president, members of the Supreme
Court, and other constitutionally protected public officials such as the Ombudsman. The Senate will then try
the impeachment case. This is another safeguard to promote moral and ethical conduct in the government.
Attempt to Amend or Change the 1987 Constitution
The 1987 Constitution provided for three methods by which the Constitution can be amended, all
requiring ratification by a majority vote in a national referendum. These methods were Constituent Assembly,
Constitutional Convention, and People’s Initiative. Using these modes, there were efforts to amend or change
the 1987 Constitution, starting with the presidency of Fidel V. Ramos, who succeeded Corazon Aquino. The
first attempt was in 1995, when the Secretary of National Security Council Jose Almonte drafted a constitution,
but it was exposed to the media and it never prospered. The second effort happened in 1997, when a group
called PIRMA hoped and gather signatures from voters to change the constitution through a people’s initiative.
Many were against this, including then Senator Miriam Defensor Santiago, who brought the issue in court and
won- with the Supreme Court judging the people’s initiative cannot push through without an enabling law.
The succeeding president, Joseph E. Estrada, formed a study commission to investigate the issues
surrounding charter change focusing on the economic and judiciary provisions of the constitution. This effort
was also blocked by different entities. After President Estrada was replaced by another People Power and
succeeded by his Vice President , Gloria Macapagal Arroyo, then House Speaker Jose de Venecia endorsed
constitutional change through Constituent Assembly, which entails a 2/3 vote of the House to propose
amendments or revision to the Constitution. This initiative was also not successful since the term of president
 7

Arroyo was mirred in controversy and scandal, including the possibility of Ad,mentrroyo extending her term as
the president, which the Constitution does not allow.
The administration of the succeeding President Benigno Aquino III has no marked interest in charter
change, except those emanating from different members of Congress, including the Speaker of the House,
Feliciano Belmonte Jr. who attempted to introduce amendments to the Constitution that concern economic
provisions that aim toward liberation. This effort did not see the light of day.

Federalism in the Philippines was supported by President Duterte in the 2016 presidential elections, saying that it will
evenly distribute wealth in the Philippines instead of concentrating it in Manila, the capital of the country. As a form
of government, a central governing authority and constituent political units constitutionally share sovereignty.
Applied to the Philippines, the country will be broken into autonomous regions. Each region will be further divided
into local government units. The regions will have the primary responsibility of industry development, public safety
and instruction, education, healthcare, transportation and many more. Each region will also take charge of their own
finances, plans for development, and laws exclusive to their area. The national government, on the other hand, will
only handle matters of national interest such as foreign policy and defense, among others. In this system, it is possible
for the central government and the regions to share certain powers.
Our current system is that of a unitary form, where the administrative powers and resources are concentrated in the
national government. Majors and governors would have to rely on allocations provide them through a proposed
budget that is also approved by the national government, a system prone to abuse.
There are many pros to a federal form of government. Each region may custom fit to solutions to problems brought
about by their distinct geographic, cultural, social and economic contexts. Regions also have more power over their
finances, since they handle majority of their income and only contributes to a small portion to the national
government. They can choose to directly fund their own development projects without asking for the national
government’s go signal. A federal system could also promote specialization, since the national government could
focus on nationwide concerns while regional governments can take care of administrative issues.
A federalism form of government could also solve a lot of decade-old problems of the country. It may a solution to
the conflict in Mindanao, since a separate Bangsamoro region could be established for Muslim Mindanao. It could
address the inequality in wealth distribution and lessen the dependence to Metro Manila, since regions can proceed
with what they have to do without needing to consider the situation in the capital.
There are also cons be a challenge to achieving unity in the country. There might be regions which are not ready to
govern themselves, or have lesser resources, which could mire them deeper in poverty and make development
uneven in the country. There could be issues regarding overlaps in jurisdiction, since ambiguities may arise where
additional ends and regional begins, or vice versa. As a proposed solution to the conflict in Mindanao, we must also
remember that the Autonomous Region in Muslim Mindanao (ARMM) has already been created, and the conflict still
continues. Federalism may not be enough for those who clamor separation.
Any effort to shift the system of government also entails costs, and it would not be cheap. It would cost billions to
dismantle the current system and would take a long time before the system normalizes and irons out its kinks.

In an upsurge of populism, President Rodrigo Duterte won the 2016 presidential elections in a
campaign centering on a law and order, proposing to reduce crime by killing tens of thousands of criminals. He
is also a known advocate of federalism, a compound mode of government combing a central or federal
government with regional governments in a single political system. This advocacy is in part an influence of his
background, being a local leader in Mindanao that has been mired in poverty and violence for decades. On
December 07, 2016, President Duterte signed an executive order creating a consultative committee to the
review the 1987 Constitution.

Policies on Agrarian Reform

 8

Agrarian reform is essentially the rectification of the whole system of agriculture, an important aspect
of the Philippine economy because nearly half of the population is employed in the agricultural sector, and
most citizens live in rural areas. Agrarian reform is centered on the relationship between production and the
distribution of land among the farmers. It is also focused on the political and economic class character of the
relations of production and distribution in farming and related enterprises, and how these connect to the
wider class structure. Through genuine and comprehensive agrarian reform, the Philippines would be able to
gain more from its agricultural potential and uplift the Filipinos in the agricultural sector, who have been for
the longest, suffering in poverty and discontent.
In our attempt to understand the development of agrarian reform in the Philippines, we turn our
attention to our country’s history, especially our colonial past, where we could find the root of the agrarian
woes the country has experienced up to this very day.

Land Ownership in the Philippines under Spain

When the Spaniards colonized the country, they brought with them a system of pueblo agriculture,
where rural communities, often dispersed and scattered in nature, were organized into a pueblo and given
land to cultivate.
Families were not allowed to own their land- the King of Spain owned tha lamd, and Filipinos were
assigned to these lands to cultivate them, and they paid their colonial tributes to the Spanish authorities in the
form of agricultural products.
Later on, through the Law of Indies, the Spanish crown awarded tracts of land to (1) religious orders;
(2) repartamientos for Spanish military as a reward for their service; and (3) Spanish encomenderos, those
mandated to manage the encomienda or the lands given to them, where Filipinos orked and paid for their
tributes to the encomendero. Filipinos were not given the right to own land, and only worked in them so that
they might have a share of the crops and pay tribute. The encomienda system was an unfair and abusive
system as “compras y vandalas” became the norm for the Filipino farmers working the land- they were made
to sell their products at a very low price or surrender their products to the encomenderos, who resold this at a
profit. Filipinos in the encomienda were also required to render services to their encomenderos that were
unrelatedto farming.
From the encomienda system, the hacienda system developed in the beginning of the 19 th century as
the Spanish government implemented policies that would fast track the entry of the colony into the capitalist
world. The economy was tied to the world market as the Philippines became an exporter of raw materials and
importer of goods. Agricultural exports were demanded and the hacienda system was developed as a new
form of ownership. In the 1860’s, Spain enacted a law ordering landholders to register their landholdings, and
only those who knew benefitted from this. Lands were claimed and registered in other’s people’s names, and
many peasant families who were “assigned” to the land in the earlier days of colonization were driven out or
forced to come under the power of these people who claimed and registered in other people’s names, and
many peasant families who were “assigned” to the land in the earlier days of colonization were driven out or
forced to come under the power of these people who claimed rights to the land because they held title.
This is the primary reason why revolts in the Philippines were often agrarian in nature. Before the
colonization, Filipinos had a communal source of hatred and discontentment for the Filipinos. Religious orders,
the biggest landowners in the Philippines, also became a main source of abuse and exploitation for the
Filipinos, increasing in rent paid by the Filipinos on a whim.
Filipinos fought the Philippine Revolution in a confluence of motivations, but the greatest desire for
the freedom would be the necessity of owning land. Upon the end of the Philippine Revolution, the
revolutionary government would declare all large estates, especially the confiscated friar lands as government
property. However, the first Philippine republic was short lived. The entrance of the Americans would signal a
new era of colonialism and imperialism in the Philippines.
 9

Landownership in the Philippines under the Americans

The Americans were aware that the main cause of social unrest in the Philippines was landlessness,
and they attempted to put an end to the deplorable conditions of the tenant farmers of passing several land
policies to increase the small landholders and distribute ownership to a bigger number of Filipino tenants and
farmers. The Philippine Bill of 1902 provided regulations on the disposal of public lands. A private individual
may own 16 hectares of land while corporate landholders may have 1,024 hectares. Americans were also given
rights to own agricultural lands in the country. The Philippine Commission also enacted Act No. 496 or the Land
Registration Act, which introduced the Torrens system to address the absence of earlier records of issued land
titles and conduct accurate land surveys. In 1903, the homestead program was introduced, allowing the tenant
to enter into an agricultural business by acquiring a farm of at least 16 hectares. This program, however, was
limited to areas in Northern Luzon and Mindanao, where colonial penetration had been difficult for Americans,
a problem they inherited from the Spaniards.
Landownership did not improve during the American period; in fact, it even worsened, because there
was no limit to the size of landholdings people could possess and the accessibility of possession was limited to
those who could afford to buy, register, and acquire fixed property titles. Not all friar lands were sold or leased
to American and Filipino business interest. This early land reform program was implemented without support
mechanisms- if a landless peasant farmers. Some lands were sold or leased to American and Filipino business
interest. This early land reform program was also implemented without support mechanisms- if landless
peasant farmer received land, he only received land, nothing more. Many were forced to return to tenancy
and wealthy Filipino hacienderos purchased or forcefully took over the lands from the farmers who could not
afford to pay debts. The system introduced by the Americans enabled more lands to be placed under tenancy
which led to widespread uprising, such as the Colorum and Sakdal Uprising in Luzon. Peasants and workers
found refuge from the millenarian movements that gave them hope that change could still happen through
militancy.

The Sakdal (or Sakdalista) Uprising was a peasant rebellion in Central Luzon that lasted for two days, May 2-
3, 1935. It was easily crushed by the government forces then, but this historical event tells of the social
inequality brought about by issues in land ownership and tenancy in the country.
The Filipino word “sakdal” means to “accuse”, which is the title of the newspaper helmed by Benigno
Ramos. He rallied support from Manila and nearby provinces through the publication, which led to the
establishment of the Partido Sakdalista in 1933. They demanded reforms from the government, such as the
abolition of taxes and “equal or common” ownership of land, among others. They also opposed the
dominant Nacionalista party’s acceptance of gradual independence from the United States, and instead
demanded immediate severance of ties with America.

For a new part with a small clout, they did well in the 1934 general elections, scoring three seats in the
House of Representatives and several local posts. This encouraged them to attempt an uprising in 1935.
Upon being crushed, Ramos fled to Tokyo and the Partido Sakdalista collapsed.

During the years of the Commomwealth government, the situation further worsened as peasant uprisings
increased and landlord-tenant relationship became more and more disparate. President Quezon laid down a
social justice program focused on the purchased of haciendas, which were to be divided and sold to tenants.
His administration also created the National Rice and Corn Corporation (NARIC) to assign public defenders to
assist peasants in court battles for their rights to the land, and the Court of Industrial Relations to exercise
jurisdiction over disagreements arising from the landowner-tenant relationship. The homestead program also
continued through the national Settlement Administration (NLSA). Efforts toward the agrarian reform by the
 10

Commonwealth failed because of many problems such as the budget allocation for the settlement program
and widespread peasant uprisings. World War II put a halt to all interventions to solve these problems as the
Japanese occupied the country.
Post-War Interventions Toward Agrarian Reform
Rehabilitation and rebuilding after the war were focused on providing solutions tyo the problems of
the past. The administration of President Roxas passed Republic Act No. 34 to establish a 70-30 sharing
arrangement between the tenant and the landlord, respectively, which reduced the interest of landowners’
loans to tenants at six percent or less. The government also attempted to redistribute hacienda lands, falling
prey to the woes of similar attempts since no support was given to small farmers who were given lands.
Under the term of Pres. Elpidio Quirino, the Land Settlement Development Corporation (LASEDECO)
was established to accelerate and expand the resettlement program for peasants. This agency later on became
the National Resettlement and Rehabilitation Administration (NARRA) under the administration of President
Ramon Magsaysay.
The Magsaysay saw the importance of pursuing genuine land reform program and convinced the
Congress, majority of which were landed elites, to pass legislation to improve the land reform situation.
Republic Act No. 1199 or the Agricultural Tenancy Act was passed to govern the relationship between
landholders and tenant farmers, protecting the tenurial rights of tenants and enforced tenancy practices.
Through this law, the Court of Agricultural Relations was created in 1955 to improve tenancy security, fix land
rentals of tenanted farms, and resolve land disputes filed by the landowners and peasant organizations. The
agricultural Tenancy Commission was also established to administer problems created by tenancy. The
Agricultural Credit and Cooperative Financing Administration (ACCFA) was also created mainly to provide
warehouse facilities and assist farmers in marketing their products. The administration spearheaded the
establishment of the Agricultural and Industrial Bank to provide easier terms in applying for homestead and
other farmlands.
NARRA accelerated the government’s resettlement program and distribution of agricultural lands to
landless tenants and farmers. It also aimed to convince members of the Huks, a movement of rebels in Central
Luzon, to resettle in areas where they could start their lives as peaceful citizens.
Despite a more vigorous effort toward the agrarian reform, the situation for the farmers remained
dire since the government lacked funds and provided inadequate support services for the programs. The
landed elite did not fully cooperate and they criticized the programs.
A major stride in land reform arrived during the term of President Diosdado Macapagal through the
Agricultural Land Reform Code (Republic Act No. 3844).
Primary Source: Declaration of Policy Under RA No. 3844 or Agricultural Land Reform Program
Source: Section 2. Declaration of Policy- It is the Policy of the State:
(1) To establish owner-cultivatorship and the economic family-size farm as the basis of Philippine
agriculture and, as a consequence, diver landlord capital in agriculture to industrial development.
(2) To achieve a dignified existence for the small farmers free from pernicious institutional restraints
and practices;
(3) To create a truly viable social and economic structure in agriculture conducive to greater and
productivity and higher farm incomes;
(4) To apply all labor laws equally and without discrimination to both industrial and agricultural wage
earners;
(5) To provide a more vigorous and systematic land resettlement program and public land
distribution program; and
(6) To make the small farmers more independent, self reliant and responsible citizens, and a source
of genuine strength in our democratic society.
This Code abolished share tenancy in the Philippines and prescribed a program to convert tenant-
farmers to lessees and later on owner- cultivators. It also aimed to free tenants from tenancy and emphasize
 11

owner-cultivatorship and farmer independence, equity, productivity improvement, and public land
distribution. Despite being one of the most comprehensive pieces of land reform legislation ever passed in the
Philippines, Congress did not make any effort to come up with a separate bill to fund its implementation,
despite the fact that it proved beneficial in the provinces where it was pilot tested.

Agrarian Reform Efforts under Marcos

President Marcos declared martial Law in 1972, enabling him to essentially wipe out the landlord-
dominated Congress. Through his “technocrats,” he was able to expand executive power to start a
“fundamental restructuring” of government, including its efforts in solving the deep structural problems of the
countryside. Presidential Decree No. 27 or the Code of Agrarian Reform of the Philippines became the core of
agrarian reform during the Marcos regime.
Primary Source: Presidential Decree No. 27, October 21, 1972
This shall apply to tenant farmers of private agricultural lands primarily devoted to rice and corn
under the system of sharecrop or lease-tenancy, whether classified as landed estate or not, shall be
deemed owner of a portion constituting a family sized farm of five (5) hectares if not irrigated and (3)
hectares if irrigated;
In all cases, the landowner may retain an area of not more than seven (7) hectares if such landowner
is cultivating such area or will now cultivate it;
For the purpose of determining the cost of the land to be transferred to the tenant-farmer pursuant
to this Decree, the value of the land shall be equivalent to two and one-half (2 ½) times the average
harvest of three normal crop years immediately preceding the promulgation of this Decree.
The total cost of the land, including interest at the rate of six (6) percent per annum, shall be paid by
the tenant in (15) years of fifteen (15) equal annual amortizations;
In case of default, the amortization due shall be paid by the farmer’s cooperative in which the
defaulting tenant-farmer is a member, with the cooperative having a right of recourse against him;
The Government shall guaranty such amortizations with shares of stock in government-owned and
government-controlled corporations;
No title to the land owned by the tenant-farmers under this Decree shall be actually issued to a
tenant-farmer unless and until the tenant-farmer has become a full-fledged member of a duly
recognized farmer’s cooperative;
Title to land acquired pursuant to this Decree or the land Reform Program of the Government shall be
transferable except by hereditary succession or to the Government in accordance with the provisions
of this Decree, the Code of Agrarian Reforms and other existing laws and regulations;
The Department of Agrarian Reform through its Secretary is herby empowered to promulgate rules
and regulations for the implementation of this Decree.
“Operation Land Transfer” on lands occupied by tenants of more than 7 hectares on rice and corn
lands commenced, and through legal compulsion and an improved delivery of support services to small
farmers, agrarian reform seemed to be finally achievable. Under the rice self-sufficiency program “Masagana
‘99”, farmers were able to borrow from banks and purchase three-hectare plots of lands and agricultural
inputs. However, the landlord class still found ways to circumvent the law, some landlords only needed to
change crops to be exempted from the program, such as coconut and sugar lands. Lands worked by wage labor
were also exempted from the program, so the landed elite only had to evict their tenants and hired workers
instead. Landlessness increased, which made it all the more difficult for the program to succeed because
landless peasants were excluded from the program. Many other methods were employed by the elite to find
way to maintain their power and dominance. Which were worsened by the corruption of Marcos and his
cronies who were also involved in the agricultural sector.
Post 1986 Agrarian Reform
 12

The overthrow of Marcos and the 1987 Constitution resulted in a renewed interest and attention to
agrarian reform as President in a renewed interest and attention to agrarian reform as President Corazon
Aquino envisioned agrarian reform to be the centerpiece of her administration’s social legislation, which
proved difficult because her background betrayed her- she came from a family of a wealthy and landed clan
that owned the Hacienda Luisita.
On the 22nd of July 1987, Aquino issued Presidential Proclamation 131 and Executive Order 229, which
outlined her land reform program. In 1988, the Congress passed Republic Act No. 6657 or the Comprehensive
Agrarian Reform Law (CARL), which introduced the program with the name redistribution of agricultural lands
to tenant- farmers from landowners, who were pain in exchange by the government through just
compensation and allowed them to retain not more than five hectares. Corporate landowners were, however,
allowed under law to voluntarily divest a proportion of their capital stock, equity or participation in favor of
their workers or other qualified beneficiaries instead of turning over their land to the government.
CARP was limited because it accomplished very little during the administration of Aquino. It only
accomplished 22.5% of land distribution in six years owing to the fact that Congress, dominated by the landed
elite, was unwilling to fund the high compensation costs of the program. It was also mired in controversy, since
Aquino seemingly bowed down to the pressure of her relatives by allowing the stock redistribution option.
Hacienda Luisita reorganized itself into a corporation and distributed stocks to farmers.
Under the term of President Ramos, CARP implementation was speeded in order to meet the ten year
time frame, despite limitations and constraints in funding, logistics and participation of involved sectors. By
1996, the Department of Agrarian Reform (DAR) distributed only 58.25% of the total area target to be covered
by the program. To address the lacking fund and the dwindling time for the implementation of CARP, Ramos
signed Republic Act No. 8532 in 1998 to amend the CARL and extend the program to another 10 years.
CARPER and the Future of Agrarian Reform in the Philippines
The new deadline of CARP expired in 2008, leaving 1.2 million farmer beneficiaries and 1.6 million
hectares of agricultural land to be distributed to farmers. In 2009, President Arroyo signed Republic Act No.
9700 or the Comprehensive Agrarian Reform Program Extension with Reforms (CARPER), the amendatory law
that extended the deadline to five more years. Section 30 of the law also mandates that any case and/or
proceeding involving the implementation of the provisions of CARP, as amended, which may remain pending
on June 30, 2014 shall be allowed to proceed to its finality and executed even beyond such date.
From 2009 to 2014, CARPER has distributed a total of 1 million hectares of land to 900, 000 farmer
beneficiaries. After 27 years of land reform and two Aquino administrations, 500, 000 hectares of lands remain
undistributed. The DAR and the Department of Environment and Natural Resources (DENR) are the
government agencies mandated to fulfill CARP and CARPER, but even the combined effort and resources of the
two agencies have proved incapable of fully achieving the goal of agrarian reform in the Philippines. The same
problems have plagued its implementation: the powerful landed elite and the ineffectual bureaucracy of the
Philippine government. Until these two challenges are surmounted, genuine agrarian reform in the Philippines
remains but a dream to Filipino farmers who have been fighting for their right to landownership for centuries.
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 citizen’s 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

The Philippines may have abundant natural resources even before the encroachment of the
Spaniards, but our ancestors were mainly involved in subsistence economy, and while the payment of tribute
or taxes (buhis/buwis/handug) or the obligation to provide labor services to the datus in some early Filipino
 13

communities in the Philippines may resemble taxation, it is essentially different from the contemporary
meaning of the concept.
The arrival of the Spaniards altered this subsistence system because they imposed the payment of
tributes (tributes) from the Filipinos, similar to what had been practiced in all colonies in America. The purpose
is to generate resources to finance the maintenance of the islands, such as salaries of government officials and
expenses of the clergy. The difficulty faced by the Spaniards in revenue collection through the tribute was the
dispersed nature of the settlements, which they solved by introducing the system of reduccion by creating
pueblos, where gathered and awarded plots of land to till. Later on, the settlements will be handled by
encomenderos who received rewards from the Spanish crowned for their services. Exempted from the
payment of tributes were the principales: alcaldes, gobernadores, cabezas de barangay, soldiers, members of
the civil guard, government officials and vagrants.
The Filipinos who were once satisfied with 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.
Toward the end of the 16 th century, the Manila-Acapulco 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 the Spain would be needed through the situado real delivered
from the Mexican treasury to the Philippines through the galleons. This subsidy stopped as Mexico became
independent in 1820.
In 1884, the payment of tribute was put to stop and was replaced by a poll tax collected through a
certificate of identification called the CEDULA PERSONAL. This required from every resident and must be
carried while traveling. Unlike the tribute, the payment of cedulas is by person not by family. Payment of the
cedula is progressive and according to income categories. This system, however, was a heavy burden for the
peasants and was easy for the wealthy. But because of this, revenue collection greatly increased and became
the main source of government income. The Chinese in the Philippines were also made to pay their
discriminary cedula which was bigger than what the Filipinos paid.
Two direct taxes were added in 1872 and imposed on urban incomes. Urbana is a tax on the annual
rental value of an urban real estate and industria is a tax on salaries, dividends and profits. These taxes were
universal and affected all kinds of economic activity except agriculture, which was exempt to encourage
growth.
The colonial government also gained income from monopolies, such as the sale of stamped paper,
manufacturer and sale of liquor, cockpits and opium, but the biggest of the state monopolies was tobacco,
which began in 1781 nad halted in 1882. Only certain areas were assigned to cultivate tobacco, which the
government purchased at a price dictated to the growers. This monopoly made it possible for the colony to
create a surplus of income that made it self-sufficient without the need for the situado real and even
contributed to the Treasury of Spain.
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
woodcutting and shipbuilding especially during the time of the galleon trade. Through the polo system, male
Filipinos were obliged to serve, a burden that resulted in an increase in death rate and flight to the mountains,
which led to a decrease in population in the 17 th century. This changed later on, as polos and servicios became
lighter, and was organized at the municipal level. Labor provided was used in public works. Such as the building
of roads and bridges. Some were made to serve the municipal office or as night guards.
Males were required to provide 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, which was usually lost to corruption because it was
 14

collected at the municipal level and were known as caidas or droppings. The polos would be called prestacion
personal (personal services) by the second half of the 19 th century.
Taxation in the Philippines during the Spanish colonial period was characterized by the heavy burden
placed on the Filipinos, and the corruption of the principales, or the former datus and local elites who were co-
opted by the Spaniards to subjugate and control the natives on their behalf. The principales who were given
positions such as the cabezas de barangay or alcaldes in the local government were able to enrich themselves
by pocketing tributes and or fallas, while the peasants were left to be abused. Taxation appeared progressive
but the disparity between the less taxed principales and the heavily peasants made the rich richer and the
poor poorer.
Primary Source: Mariano Herbosa Writes to Rizal About Taxes
Source: Mariano Herbosa to Jose Rizal, Calamba, August 29, 1886, Letters BetweenRizal and Family
Members (Manila: National Heroes Commission, 1964) 239-241
The tax! With regard to your question on this, the answer is very long, as it is the cause of the
prevailing misery here. What I can write you will be one-half of the story and even Dumas, senior,
cannot exhaust the subject. Nevertheless, I’ll try to write what I can, though I may not be able to give
a complete story, you may at least know half of it.
Here, there are many kinds of taxes. What they call irrigated rice land, even it is has no water, must
pay tax of 50 cavanes of palay (unhusked rice) and land with 6 cavanes of seed pay 5 pesos in cash.
The land they call dry land that is planted to sugar cane, maize and others pay different rates. Even if
they see that the harvest is good, they increase the tax, but they don’t decrease it, if the harvest is
poor. There is land whose tax is 25 pesos or 20 pesos, according to custom.
The most troublesome are the residential lots in the town. There is no fixed rule that is followed, only
their whim. Hence, even if it is only one span in size, it a stone wall is added, 50 pesos must be paid,
the lowest being 20 pesos. But a nipa or cogon house pays only 1 peso for an area of ten fathoms
square. Another feature of this system is that on the day you accept the conditions, the contract will
be written which cannot be changed for 4 years, but the tax is increased every year. For these
reasons, two years now the payment of tax is confused and little by little the fear of the residents
here of the word “vacant” is being dispelled, which our ancestors had feared so much. The result is
bargaining, like they do fishing. It is advisable to offer a low figure and payment can be postponed,
unlike before when people were very much afraid to pay after May.
I’m looking for a receipt to send you, but I cannot find any, because we don’t get receipt everytime
we pay. Anyway it is value-less as it does not state the amount paid; it only says that the tax for that
year was paid., without stating whether it is five centavos, twenty-five centavos, one hundred, or one
thousand pesos. The residents who ask or get the said receipt accept it with closed eyes. The receipt
has no signature in the place where the amount paid ought to be, although it bears their name.. Until
now I cannot comprehend why some are signed and others are not. This is more or less what is
happening here in the payment of land tax and it has been so for many years since I can remember.
Besides this, the taxes on the plants in the fields that are far from the toen, like the land in Pansol, are
various. The tax on the palay is separate from the tax on maize, mongo or garlic. There is no limit to
this tax, for they fix it themselves. Since July no one buys sugar and since June locusts are all over the
town and they are destroying palay and sugar cane, which is what we regret here. The governor gave
50 pesos to pay the catchers of locusts, but when they took them to the town hall they were paid only
25 cents a cavan and a half; and it seems that the locusts are not decreasing. According to the guess
of the residents here only 300 cavanes of locusts have been caught in this town. Many still remain.
Though the governor has not sent any more money, the people have not stopped catching them.

Taxation Under the Americans

 15

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 government suspended the contracts
for the sale of opium, lottery, and mint charges for 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 estates.
The problem with land tax was that land titling in the rural areas was very disorderly: the appraising of
land value was influenced by political and familial factors and the introduction of a taxation system on
agricultural land faced objections from the landed elite. Tax evasion was prevalent, especially among the
elites.
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.
The cedula went through change in the new law as the rate was fixed per adult male, which resulted
in 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 and
community and became a highly complex system that assigned 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.
In 1913, the Underwood-Simmons Tariff Act was passed, resulting in a reduction in the revenue of the
government as export taxes levied on sugar, tobacco, hemp and copra were lifted. To make up for the loss,
then Governor 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.
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 Government.
HOWEVER, these new creations were not enough to increase government revenues.
Taxation during the Commonwealth Period
New measures and legislation were introduced to make the taxation system appear more equitable during the
Commonwealth. Income tax rates were increased in 1936, adding a surtax rate on individual net incomes in
excess of 10,000 pesos. Income tax rates of corporations were also increased. In 1937, cedula tax was
abolished, wich appeared to be a progressive move; but in 1940, a residence tax was imposed on every citizen
aged 18 years old and on every corporation.
In 1939, the Commonwealth government drafted the Nation Internal Revenue Code, introducing major
changes in the new tax system, as follows:
1. The normal tax of three percent and the surtax on income was replaced by single tax at progressive
rate.
2. Personal exemptions were reduced.
3. Corporation income tax was slightly increased by introducing taxes on inherited estates or gifts
donated in the name of dead persons.
4. The cumulative sales tax was replaced by a single turnover tax of 10% on luxuries.
5. Taxes on liquors, cigarettes, forestry products, and mining were increased.
6. Dividends were made taxable.
The introduced tax structure was an improvement of the earlier system introduced by the Americans,
but still remained inequitable. The lower class still felt the bulk of the burden of taxation, while the
upper class, the landed elite or the people in political positions, were able to maneuver the situation
 16

that would benefit them more. The agriculture sector was still taxed low to promote growth, but
there was no incentive for industrial investment to take root and develop.
Finally, a common character of taxation during the American occupation in the Philippines was not
used to diversify the economy or direct economic development as some sectors still carried the
disproportionate share of thetax burden.
As World War 2 reached the Philippine shores, economic activity was put to a stop and the Philippines
bowed to a new set of administrators, the Japanese. The Japanese military administration in the
Philippines during World War 2 immediately continued the system of tax collection introduced during
the Commonwealth, but exempted the articles belonging to the Japanese armed forces. Foreign trade
fell and the main sources of taxation came from amusements, manufactures, professions, and
business licenses As the war raged, tax collection was a difficult task and additional incomes of the
Government were derived from the sales of the National sweepstakes and sale of government bonds.
The expenditure of the Japanese military Government grew greatly. And they issued military notes in
order to cover the costs of the war.
Fiscal policy from 1946 to present
The impact of the war on the Philippine economy was effectively disparate, as Manila, the capital, was
razed to the ground while the rest of the Philippines was relatively untouched. But the highly
agriculture based economy was disrupted. The united states may have declared the Philippines
independent, but as the country needed rehabilitation funds from the united states, the dependency
of the Philippines to the Americans was an opportunity to be taken advantage of by the former
colonial administrators. The economic situation was so problematic that by 1949, there was a severe
lack of funds in many aspects of governance, such as the military and education sectors. No effort
were made to improve tax collection and the united states advised the adoption of direct taxation.
The administration of president Manuel Roxas declined the proposal because it did not want to
alienate its allies in congress
The impetus for economic growth came during the time of president ELPIDIO QUIRIO through the
implementation of import and exchange controls that led to import substitutions development. This
policy allowed for the expansion of a viable manufacturing sector that reduced Economic dependence
on imports. New tax measured were also passed, which included higher corporate tax rates that
increased government revenue tax revenue in 1953 increased twofold compared to 1948, the year
when QUIRINO first assumed presidency
While the succeeding presidencies of Magsaysay, Garcia, and Macapagal promise to study the tax
structure and policy of the country (through the creation of a tax commission in 1959 by means of
Republic Act No. 2211) to make way for a more robust and efficient tax collection scheme, post-war
fiscal policy remained regressive, characterized by the overburdening of the lowest classes while the
landed elite who held business interests were in congress to ensure that taxes would not be levied to
them who belonged to the higher classes of society. The period of the post-war republic also saw a
rise in corruption. From 1959 to 1968, Congress did not pass any tax legislation despite important
changes in the economy and the vested interest of Filipino businessmen in congress would manifest
in many instances such as the rejection of taxes on imports. Indirect taxation still contributed to three
quarters of tax revenues and the omnibus Tax Law of 1969 did not increase the ratio of income tax to
general tax revenue. Collection of taxes remained poor; tax structure was still problematic; and much
of public funds were lost to corruption, which left the government incapable of funding projects
geared toward development.
Under the Marcos authoritarian regime, the tax system remained regressive. During the latter part of
the Marcos’s years (1981-1985), the tax system was still heavily dependent on indirect taxes, which
made up 70% of total tax collection. The tax system also remained unresponsive. Taxes grew at an
average annual rate of 15% and generated a low tax yield. Tax effort, defined as the ratio between the
 17

share of the Actual tax collection in gross domestic product and predictable taxable capacity, was at a
low 10.7%.
As Corazon Aquino took the helm of the government after the EDSA Revolution, she reformed the tax
system through the 1986 tax reform program. The aim was to improve the responsiveness of the tax
system, promote equity by ensuring that similarly situated individuals and firms bear the same tax
burden, promote growth by withdrawing or modifying taxes that reduce incentives to work or
produce, and improve tax administration by simplifying the tax system and promoting tax compliance.
A major reform in the tax system introduced under the term of Aquino was the introduction of the
value-added tax (VAT),with the following features:
1. Uniform rate of 10% on sale of domestic and imported goods and services and zero percent on
exports and foreign-currency denominated sales;
2. Ten (10) percent in lieu of varied rates applicable to fixed taxes (60 nominal rates),advance sales
tax, tax on original sale, subsequent sales tax, compensating tax, miller’s tax, contractor’s tax,
broker’s tax, film lessors and distributor’s tax, excise tax on solvents and matches, and excise tax
on processed videotapes;
3. Two percent tax on entities with annual sales or receipts of less than 5,200,000;
4. Adoption of tax credit method of calculating tax by subtracting tax on gross inputs from tax on
gross sales;
5. Exemption of the sale of basic commodities such as agriculture and marine food product in their
original state, price- regulated petroleum products and fertilizers; and
6. Additional 20% tax on non-essentials articles such jewelry, perfumes, toilet waters, yacht, and
other vessels for pleasure and sports.
The VAT law was signed in 1986 and put to effect in 1988. While it was a reliable source of revenue
for the government, new tax laws would reduce its reliability as legislated exemption grew.
Along with the tax reform came the administrative reforms, such as the restructuring of the
Department of Finance and its attached agency, the Bureau of Internal Revenue (BIR) through the Executive
Order 127. Tax collection and tax audits were intensified; computerization was introduced; corruption was
relatively reduced, which improved the trust in the BIR in general. As a result of the tax reform of the Aquino
administration, both tax and revenue effort rose, increasing from 10.7% in 1985 to 15.4% in 1992.
Greater political stability during the administration of Fidel Ramos in 1992 allowed for continued
economic growth. The Ramos administration ventured into its own tax reform program in 1997 through the
Comprehensive Tax Reform Pgrogram, which was implemented to (1) make the tax system broad-based
simple, and with reasonable tax rates; (2) minimize tax avoidance allowed by existing flaws and loopholes in
the system; (3) encourage payments by increasing tax exemptions level, lowering the highest tax rates, and
simplifying procedure; and (4) rationalize the grant of tax incentives, which was estimated to be worth 531.7
billion pesos in 1994.
The VAT was also broadened in 1997 to include services, through Republic Act 7716. The features of
the improved VAT law were as follows:
1. Restored the VAT exemptions for all cooperatives (agricultural, electric, credit or multipurpose,
and others) provided that the share capital of each member does not exceed 515,000 pesos.
2. Expanded the coverage of the term “simple processes” by including broiling and roasting,
effectively narrowing the tax base for food products.
3. Expanded the coverage of the term “original state” by including molasses.
4. Exempted from the VAT are the following:
 Importance of meat
 Sale or importation of coal and natural gas in whatever form or state
 Educational services rendered by private educational institutions duly accredited by the
Commission on Higher Education (CHED)
 18

 House and lot and other residential dwelling valued at 51 million and below, subject to
adjustment using the Consumer Price Index (CPI)
 Lease of residential units with monthly rental per unit of not more than 58,000, subject
to adjustment using CPI
 Sale, importation, printing or publication of books and any newspaper
The succeeding term of President Joseph Estrada in1998 was too short to constitute any change in the
tax system. Then Vice President Gloria Macapagal-Arroyo was swept to power through another EDSA
Revolution. As president, undertook increased government spending without adjusting tax
collections. This resulted in large deficits from 2002 to 2004. The government had to look for
additional sources of revenue and in 2005, the Expanded Value Added Tax (E-VAT) was signed into
law as Republic Act 9337. This expanded the VAT base, subjecting to VAT energy products such as coal
and petroleum products and electricity generation, transmission, and distribution. Select professional
services were also taxed. In February 2006, the VAT tax rate was also increased from 10% to 12%.
As President Benigno Aquino in 2010, he promised that no new taxes would be imposed and
additional revenue would have to come from adjusting existing taxes. The administration ventured
into the adjustment of excise tax on liquor and cigarette or the Sin Tax Reform, motivations for which
was primarily fiscal, public health, and social order related considerations. Republic Act No 10351 was
passed, and government revenues from alcohol in 2015 made up 1.1% of the Goss Domestic Product
and the improvement in tax collection resulted in the Philippines receiving a credit rating upgrade into
investment grade status. The Sin Tax Reform was an examplar on how tax reform could impact social
services as it allowed for the increased of the Department of Health budget (triple in 2015) and free
health insurance premiums for the poor people enrolled in PhilHealth increased (from 55.2 M in 2012
to 515.4 M in 2015).
The administration of the new President Rodrigo Duterte promised tax reform, particularly in
income taxes as it vowed to lower income tax rates shouldered by working Filipinos. The present
income tax scheme of the country is the second highest in Southeast Asia and the current laws of
income taxes were outdated as they were drafted two decades ago. The proposed tax reform also
seeks to limit VAT exemptions and increase excise taxes on petroleum products and automobiles. It is
hoped that reforms in the country’s tax policy will result in the much-desired economic development
that will be felt even by the lowest classes in society.