Evolution of Philippine Taxation

In today's world, taxation is a reality that all citizens must contend with for the primary reason that
governments raise revenue from the people they govern to be able to function fully. In exchange for the
taxes that people pay, the government promises to improve the citizens' lives through good governance.
Taxation, as a government mechanism to raise funds, developed and evolved through time, and in the
context of the Philippines, we must understand that it came with our colonia! 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 a subsistence economy, and while the payment of tribute
or taxes (buhis/ buwis/hundug) or the obligation to provide services to the datus in some early
Filipino 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
tributos (tributes) from the Filipinos similar to what had been practiced in all colonies in America. The
purpose is to Renerate 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 Filipinos were gathered and awarded plots of land to till. Later on, the settlements
will be handled by encomenderos who received rewards from the Spanish crown for their services.
Exempted from payment of tributos were the principales alcaldes, gobernadores, cabezan 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 sixteenth 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 a stop and was replaced by a poll tax collected through a
certificate of identification called the cédula personal. This is required from every resident and must
be carried while traveling. Unlike the tribute, the payment of cédulas is by person, not by family.
Payment of the cédula 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 discriminatory cédula which was bigger than what the Filipinos paid.

In 1878 Two direct taxes were added and imposed on urban incomes. Urbana is 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.

Indirect taxes such as customs duties were imposed on exports and imports to further raise revenue,
especially during the nineteenth century when economic growth increased exponentially. There were
no excise taxes collected by the Spaniards throughout the years of colonialism.

The colonial government also gained income from monopolies, such as the sale of stamped paper,
manufacture and sale of liquor, cockpits, and opium, but the biggest of the state monopolies was
tobacco, which began in 1781 and 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 thePhilippines 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 seventeenth 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 collected at the municipal level and were known as caidas or droppings. The polos would be
called prestación personal (personal services) by the second half of the nineteenth century.

Taxation in the Philippines during the Spanish colonial period was characterized by the heavy hurden
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 cabezas de barangay or alcaldesin the local government were able to
enrich themselves by pocketing tributos 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
taxed 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, 29 August 1886, Letters Between Rizal and Family
Members (Manila: National Hermes 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 only 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 if it has no water, must pay
a tax of 50 cavanes of palay (unhusked rice) and land with six 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 the
agreed amount is 30 pesos for land with six cavanes of seed, 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, if a stone wall is added, 50 pesos must be paid, the
lowest being 20 pesos. But a nipa or cogon house pays only one 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 four years, but the tax is increased every year. For these reasons, for 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 in buying fish. 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 a receipt every time we
pay. Anyway it is value-less as it does not state the amount paid: it only says that the tax for that year
waspaid, without stating whether it is live centavos, twenty-five rentams ne hundred, or one thousand
peses. The residents who ask or get the sd recept 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 the 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 town, 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.

Discuss it

Mariano Herbosa’s letter to Jose Rizal, dated 29 August 1886, provides a detailed and critical assessment
of the taxation system in Calamba during that period. Here are the key points discussed in the letter:

Variety of Taxes: Herbosa outlines various types of taxes imposed in Calamba, including taxes on
irrigated rice land and dry land cultivated with crops like sugar cane and maize. The rates and methods
of assessment vary significantly, often based on subjective evaluations rather than consistent criteria.

Arbitrary Assessments: One of the major grievances highlighted is the arbitrary nature of tax
assessments. The amount levied on properties, particularly residential lots, seems to depend on the
discretion of officials rather than a transparent or standardized system. For instance, adding a stone wall
to even a small plot could result in a substantial increase in tax, while simpler structures like nipa or
cogon houses are taxed significantly less.

Contractual Obligations and Tax Increases: Herbosa mentions a contractual aspect where tax
agreements are set for four years but subject to annual increases. This lack of predictability and the
inability to renegotiate terms for four years adds to the frustration and economic burden on residents.

Receipt Issues: There are problems with documentation and accountability in tax collection. Receipts,
when issued, lack details such as the exact amount paid, making it challenging for taxpayers to verify the
correctness of charges. This lack of transparency contributes to widespread dissatisfaction and
confusion.

Local Economic Challenges: The letter also touches on broader economic challenges affecting the region,
such as poor harvests due to locust infestations and a decline in sugar sales. The response from
authorities, like paying locust catchers less than promised, exacerbates local economic woes and adds to
public disillusionment with governance.

Historical Context and Cultural Impact: Herbosa alludes to longstanding issues with taxation in Calamba,
suggesting that these problems have persisted over generations and have deeply affected local
perceptions of governance and authority.

In summary, Herbosa’s letter paints a vivid picture of the complexities and injustices inherent in the tax
system of Calamba during the late 19th century. It underscores not only economic hardships but also the
broader implications for social stability and governance legitimacy in the region.