Social, political, economic, and

cultural issues in Philippine History

-TAXATION-
taxation
 TAXATION
Modern taxation came with our colonial
experience and the subsequent formation of the
nation-state. When the archipelago was divided
into political units, the people paid tributes to the
local datu or, in the case of Mindanao, the sultan.

Nowadays, taxation is the government’s

mechanism to raise funds and improve the
citizen’s lives. The revenues are needed for the
government to carry out its mission to protect
its people.

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 PERIODIZATION:

• Pre-colonial Philippines (Before 1521)

• Spanish Colonization (1521-1898)
• American Period (1898-1942)
• Japanese Occupation (1942-1945)
• Post-War Philippines (1946-present)

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Pre-Colonial Philippines
“Before 1521 we could have
been anything and everything not
Filipino;
after 1565 we can be nothing but
Filipino.” (Joaquin, 2004, p. 21)

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 Pre-Colonial Philippines
o There was no national government. The smallest political unit
was called “barangay” (first documented by Antonio Pigafetta as
balangai and balanghai [Scott, 1994, p. 4]).

o A balangay or barangay is also a term for a large boat that

would fit the pre-colonial society.

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 Pre-Colonial Philippines
o No datu unified the archipelago as on territory, although a
leader, called rajah or a sultan, consolidated the small political
units into a larger one.

o Pre-colonial Filipinos paid their taxes to be protected by their

datu. This was called “buwis” or “handug”.

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 Spanish Colonization (1521-1898)
• Manila-Acapulco Galleon Trade
(1565-1815)

A ship that annually plied the

Pacific from Manila to Acapulco, and
back again.

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 Polo y Servicio
o Men within the age of 16-60 years were required
to render labor in the community for 40 days.
o Paying a falla (one and a half real) could exempt
the colonial subject from the forced labor.

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 The Bandala
o A system requiring the Filipino farmers to sell their goods to the
government.
o Imposed by Governor Sebastian Hurtado de Corcuera in the 17th
century, the bandala allowed for abuse as the colonial government could
set the mandatory purchase of the goods at lower price (Constantion,
1975, pg. 51).

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Spanish Colonization (1521-1898)

Encomienda System
- King Phillip II issued a decree in 1558
to distribute the lands in Cebu to loyal
Spanish subjects.

- Encomenderos were given the right

to collect taxes in their assigned areas.

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Spanish Colonization (1521-1898)

o Encomenderos were required by law to protect the natives, help the

missionaries in converting natives to Christianity, and promote education.

oTribute or “buwis” could be paid in cash or kind. Aside from that, custom
duties and income tax were also collected.

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 Spanish Colonization (1521-1898)
o By 1884, the cedula replaced the tribute. Everyone at the age of 18 and
above were required to pay.

o The Contador de Resultas, or the Chief Royal Accountant, was the head of
the financial matters except when revoked by the Council of Indies.

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 Spanish Colonization (1521-1898)
o Commonwealth Act No. 465 was to impose resident tax, or cedula, which
costs fifty centavos. Additional tax of one peso was also added, depending
on one’s income and properties.

o In 1902, the first civil government was created under William H. Taft. The
second civil governor, Luke E. Wright, passed the Reorganization Act No.
1189 in 1904, which created the Bureau of Internal Revenue (BIR).

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 American Period (1898-1942)
o The first reorganization of the BIR, during the
term of Collector William T. Holting, created
eight divisions:
(1) Accounting
(2) Cash
(3) Clerical
(4) Inspection
(5) Law
(6) Real Estate
(7) License
(8) Records

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 American Period (1898-1942)
o Although the Americans had forbidden the clergy from
collecting tax, they retained the head tax, or the cedula,
which burdened the peasants more than it did the elite,
thereby demonstrating the opposite of their professed aim
of uplifting the entire nation (Abinales & Amorso, 2017,
pp. 122-23).

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 American Period (1898-1942)
o First three Filipino BIR Collectors:

1. Wenceslao Trinidad (1918-1922)

2. Juan Posadas, JR. (1922-1934)
3. Alfredo Yatao (1934-1938)

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 American Period (1898-1942)
o In May 1921, the Real Estate, License, and Cash Divisions were
transferred to the City of Manila, leaving the bureau with five
divisions: (1) Administrative, (2) Law, (3) Accounting, (4) Income
Tax, and (5) Inspection.

o The bureau thus established the Examiner’s Division and the

Secret Service Section.

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 Japanese Occupation (1942-1945)
• When World War II broke out, BIR
was combined with the Customs
Office, which was headed by the
Director of Customs and Internal
Revenue.

• The Japanese issued a set of new

money, which became known as the
“Mickey Mouse money” because of
its very low value as caused by the
severe inflation.

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 Japanese Occupation (1942-1945)
• War tax on Jews

In 1943, the Japanese

imposed a war tax on all Jews
residing in the country. Wealthy
Jews were forced to surrender 50
percent of their holdings.

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Post-War Philippines (1946-present)

• The BIR was re-established when the United States granted the
Philippines its independence.
• After the War, there was a severe lack of funds in many sectors of
the government.
• During the term of President Elpidio Quirino, new tax measures
were passed, including higher corporate taxes.

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 Post-War Philippines (1946-present)
o The tax collection scheme remained problematic in the
administrations that followed, since the lower class remained
overburdened by taxes, while the elite who controlled the
government engineered to avoid getting higher taxes.

o The post-War republic saw a rise in government corruption.

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Post-War Philippines (1946-present)
o The Congress did not pass any tax legislation between 1959
and 1968.

o Under President Marcos, 70 percent of the total tax collection

came from indirect taxes, or taxes from the consumers. Low
tax yield was generated at an average annual rate of 15
percent.

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Post-War Philippines (1946-present)
o Under President Corazon Aquino, the 1986 Tax Reform Program
was established to improve the responsiveness of the tax system.
o Value-added tax (VAT) was introduced and put into effect in 1988.
o The Department of Finance, along with its attached agency, Bureau
of Internal Revenue, were restricted. As a result, the trust in BIR
significantly increased and the tax revenue increased from 10.75
percent, in 1985, to 15.4 percent, in 1992.

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 Fiscal Policy from 1946-Present
o Under Fidel V. Ramos, in 1997, the Comprehensive Tax Reform
Program was implemented, which aimed to raise revenue in the
government coffers.
o His administration failed to sustain the increase in revenue
because of continuous corporate tax evasions and the
government’s weakness to prosecute elite tax evaders.

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 Fiscal Policy from 1946-Present
o When Gloria Macapagal-Arroyo became president through EDSA Dos,
there was an increase in government spending without having adjusted
the tax collections, thus, resulting in large deficits from 2002 to 2004.

o Expanded Value Added Tax (E-VAT) was signed into law.

o VAT tax rate increased from 10 to 12 percent.

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 Fiscal Policy from 1946-Present
o The administration of Benigno Aquino III made no new tax reforms but
implemented the Republic Act 1305, or the Sin Tax Reform.

o The Sin Tax Reform adds extra taxes on liquor and cigarettes.

o Revenues from the Sin Tax enabled the increase in budget of the
Department of Health and in the free health premium insurance for
PhilHealth members.

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 Fiscal Policy from 1946-Present
o President Rodrigo Duterte promised to lower income tax rates of
the working Filipinos but implemented the Tax Reform for
Acceleration and Inclusion (TRAIN) instead.

o President Duterte also signed RA No. 11346, imposing a higher

tax on cigarettes and e-cigarettes, as part of the government’s
initiative to implement the Universal Health Program (UHC) of the
Philippines.

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 Suggested Reading
o Read about the Tax Reform for Acceleration and Inclusion Act (TRAIN):

https://www.bir.gov.ph/images/bir_files/internal_communications_1/Full%20Te
xt%20RR%202018/RR%20No.%202-2018/RR%20No.%202-2018.pdf

How does this tax reform differ from the previous tax reform programs?
How will the changes affect Filipinos?

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summary
This is the government's mechanism to raise funds and
improve the citizen's lives. The revenues from the
citizens are needed so that the government will be able
to function fully.
The concept of taxation came
with our colonial experience.
In pre-colonial Philippines, the nearest
form of government was called
"barangays," but there was no "Datu"
strong enough to unite the barangays into
one nation.

Spanish colonization established new

Ancient Filipinos paid their taxes to systems of income-generation, like the
be protected by their Datu. This was Manila-Acapulco Galleon trade, polo у
called "buwis" or "handug." servicio, and the bandala system.
summary The Bureau of Internal Revenues (BIR) was
created during this period.

During the American

colonization, cedula was imposed
and became a legal identity
document for Filipinos.
During the Japanese occupation, "Mickey
Mouse money" was issued. The War tax
on Jews was also imposed.

When the Philippines gained its After the War, there was a severe lack of
independence from the United States, funds, so tax collection schemes were
in 1946, the BIR was re-established. created to address the problem.
summary Different tax reform programs were created
during the postwar administrations.

Tax collection schemes, however,

remained problematic in the
administrations that followed, since the
lowest classes were overburdened with
tax.

END.
 For our group assessment activity, produce
a synthesis that examines the different tax
reform policies and systems during the
different periods (the pre-colonial, Spanish
TAXATION colonization, American period, Japanese
occupation, and the post-war
administrations). Compare them with
TRAIN. Reflect on how our tax reform
policies have evolved through time.
- Group Activity-
The outputs may come in the form of a
paper, diorama, video presentation, and
other creative ways you see fit for your
presentation.
thank you