Lemhar Dayaoen Reading in Philippines History BSITA1

Philippine Taxation and the History of the Bureau of Internal Revenue

I. INTRODUCTION

The process of the government collecting money from its citizens

to pay for public services is referred to as taxation. There would be

no public libraries, parks, or amenities if there were no revenue. The

government has something to offer its citizens. Residents of the

Philippines are taxed on all of their net income, both within and

outside of the Philippines. Non-residents, whether individuals or

corporations, are solely taxed on income earned in the Philippines.

The Bureau of Internal Revenue is entrusted with assessing and

collecting all national internal revenue taxes, fees, and levies. The

Bureau of Internal Revenue is an affiliated agency of the Department

of Finance, and it also enforces all for features, parties, and fines

associated with them.

II. THE ISSUE IN ITSELF

A. Brief History of the Issue

Prior to the colonization of the Philippines by the Spaniards.

The datus and rajahs already had a system of tax collection in the

form of crops or goods in exchange for security and protection. Since

the Maharlika and datus were once in charge of defending the people,

we have just paid taxes. Slaves did not pay taxes because they were

just there to serve. During the Spanish era, the Contador de Resultas

was the Chief Royal Accountant, with duties comparable to those of the
Commissioner of Internal Revenue. Various taxes were imposed during

this time period, including a tax on the value of jewels and gold

trinkets, as well as indirect taxes on tobacco, wine, cockpits,

burias, and powder. Other levies were tributo, forced labor or polo y

servicio, and encomienda. On July 2,1904, the Bureau of Internal

Revenue was established by Reorganization Act No. 1189 during the

American era. On August 1, 1904, the Bureau of Internal Revenue was

legally created and began operations under Henry Ide, Secretary of

Finance and author of the Internal Revenue Law. Filipino collectors

Wenceslao Trinidad, Juan Posadas Jr., and Alfredo Yatao were selected

in accordance with US President William Mackinley's Filipinization

Policy.

At the outbreak of World War II, the Bureau was amalgamated with the

customs office and was led by a Director of Customs and Internal

Revenue during the Japanese administration (1942-1945). The Bureau was

finally re-established separately on July 4, 1946. Executive Order No.

94 resulted in a restructuring on October 1, 1947. Revenue Regulations

No. V-2, enacted on October 23, 1947, split the nation into 31

inspection units, each of which was led by a Provincial Revenue Agent,

with the exception of some special units led by a municipal Revenue

Agent or Supervisors for distilleries and tobacco plants. The Bureau's

second significant restructuring occurred on January 1, 1951, with the

adoption of Executive Order No.3912. Three new departments were

established. The withholding Tax Unit was established by Memorandum

Order No. V-188 and was assigned to the Assessment Department's Income
Tax Division. R.A. 690 established a withholding tax system. Revenue

Memorandum Order (RMO) No.41 established the Bureau's third major

structure on March 1, 1954. RMO No. V-4-47 established a training unit

on September 1, 1954.

On July 20, 1955, the agency established its first regional offices in

Cebu and Davao under Revenue Memorandum Order No. V-536. The official

title of the Bureau's chief was changed from Collector to Commissioner

in January 1957. Jose Aranas was the final Collector and the first

Commissioner of the BIR. On June 19, 1959, R.A. No. 233, often known

as the Rewards Law, was enacted. Misael Vera was appointed

commissioner under the Marcos government in 1965, ushering the Bureau

into a new age of tax management. Several tax amnesty decrees were

issued by the President to allow erring taxpayers to start again. In

the year 1977. President Marcos issued the 1977 National Internal

Revenue Code, which amended the 1934 Tax Code. During Cory Aquino's

presidency, she initiated "Operation Walang Lagay" to encourage

efficient and honest tax collection. In 1988, the Value Added Tax

(VAT) was implemented. In 1989, Commissioner Jose Ong established the

Revenue Administration Program to boost tax collection and streamline

tax administration. This program makes use of the Taxpayer

Identification Number.

Liwayway Vinzons-Chato became the first lady commissioner under the

Ramos administration. The ACTS, or Action-Centered Transformation

Program, was implemented. In 1994, the Tax Computerization Project

was appointed as Commissioner of Internal Revenue at the inauguration

of President Estrada's government. The adoption of the Economic

Recovery Assistance Payment was one of the most significant reform

initiatives (ERAP). Humingi ng Resibo, Manalo ng libo-libo in 1999.

Under EO No.175, the Large Taxpayers Service (LTS) and the Excise

Taxpayers Service (ETS) were formed on September 1, 2000, to

strengthen the BIR's tax administration and enforcement capabilities.

Former Deputy Commissioner Atty. Rene G. Banez was appointed as the

new Commissioner of Internal Revenue by President Gloria Macapagal

Arroyo in January 2001. Through the Electronic Filling and Payment

Approach, a technology-based system that supports paperless filing of

tax returns and payment of taxes was also introduced (eFPS). Under the

P-NOY Aquino Administration, Atty. Kim S. Jacinto-Henares was

appointed as the new Commissioner Henares focused on filing tax

evasion cases under the RATE program, in accordance with President

Aquino's SONA statements.

President Rodrigo Duterte signed the Tax Reform for Acceleration and

Inclusion (TRAIN) Law on December 19, 2017, exempting all taxpayers

with a yearly income of less than or equal to Php 250,000 from paying

taxes.

B. Laws Enacted
1. Revenue Memorandum Order No. V-536- stipulated that each Regional

Office was headed by a Regional Direction assisted by Chiefs pf 5

Branches namely: 1. Tax Audit; 2.

Collection; 3. Investigation; 4 Legal; and 5. Admistrative.

2. Republic Act No. 233 or the Rewards Law- this was paused on June

19, 1959 whereby informs were rewarded the 25% equivalent of the

revenue collected from the Tax evader.

3. Executive Order No.206- this allowed tax payers to pay taxes

through banks as well as the implementation of the package audit

investigation by industry.

4. National Internal Revenue Code of 1977- updated the 1934 Tax Code.

5. Executive Order No.127- under this executive order The Bureau was

reorganize to to two major functional groups headed and supervised by

at deputy commissioner namely: 1. The assessment and collection group

and 2. The legal and Internal administration group.

6. Memorandum order from the office of Pres. Cory Aquino dated May

24,1988- This memorandum abolished the revenue information system

services inc. and transferred back to the BIR.

7. Executive order No. 430- streamlining of the BIR was approved

through this executive order.

8. Executive order No. 175- through this executive order large

taxpayers service and excise tax service where established to

reinforce the tax and administration and enforcement capabilities of

the BIR.

9. Executive order No. 306 - resulted in the integration of the

functions of a large taxpayer service and excise tax payer services.

President Duterte that exempts all taxpayers whose annual income is

less than or equal to 250,000 pesos to pay their taxes.

11. Reorganization Act No. 1189 – duly signed on July 2,1904 under the

second civil governor Luke E Wright created the Bureau of Internal

Revenue (BIR).

12. Act No.299- by virtue of this Act, the Real Estate, License and

Cash Divisions were abolished and their Functions were transferred to

the city of Manila.

13. Regulation No.95- by virtue of this Regulation No.95, Secretary of

Finance promulgated the reorganization of Provincial Inspection

Districts, maintaining in each province in Internal Revenue Office

supervised by a Provincial Agent.

14. Executive Order No.94- duly signed on Oct.1, 1947. This led to a

reorganization of the Bureau resulting to:the Accounting Unit and the

Revenue Account and Statistical Divisions were merged into one all

records in the Record Section under the Administrative Division were

consolidated and all legal wook were centralized in the Law Division.

15. Revenue Regulation No. V-2- dated Oct 23,1947, divided the country

into 31 inspection units, each of which was under the Provincial

Revenue Agent except in certain special units which were headed by a

city Revenue Agent or Supervisors for distilleries and tabacco

factories.

16. Executive Order No.392- led to the creation of the three new

departments namely: Legal, Assessment and Collection.

was placed under the Income Tax Division of the Assessment Department.

18. Republic Act No. 690- by virtue of this Act the implementation of

withholding tax system was adopted.

19. Revenue Memorandum Order No.11- this led to the creation of the

following offices: 1. Specific Tax Division; 2. Litigation Section; 3.

Processing Section; and the 4. Office of the city Revenue Examiner.

20. Revenue Memorandum Order No. V-4-47- this led to the creation of a

Training Unit.

III. YOUR STAND/ REACTION/ SOLUTION

POSITIVE STAND

The government's practice of collecting money from its citizens

in the form of taxes is Democratic in the sense that the government is

also carrying out its obligations. The government meets the demands of

its citizens through providing public services such as health care,

education, communication, and transportation, among other things. Our

government strives to ensure the safety of every person; without

taxes, the state is unable to offer public services for everyone's

safety, protection, and convenience.

NEGATIVE STAND

Our government's system for collecting taxes is inefficient.

Since the Spanish time, one of the primary causes for our financial

difficulties has been attributed to a weak revenue collecting system.

is powerless to catch them. The majority of active taxpayers are from

the middle class. More businessmen and, in the worst-case scenario,

government officials refuse to submit their income tax forms, refuse

to pay taxes, or deliberately under-declare their income. As a result,

the aim of collecting the projected amount is not met. The collecting

system's transparency is likewise problematic.

FINAL STAND AND JUSTIFICATION

Based on the information provided, the Philippine government attempted

and continues to attempt to modernize the Bureau's system,

particularly its collection system. Under different administrations,

executive orders and Republic acts are halted in order to alter

infective clauses. Following WWII, RA No.233, often known as the

Rewards Law, was suspended in order to aggressively enforce tax

payment and deter tax fraud. The informers were compensated with 25%

of the income seized from tax evaders. Under the Cory Administration,

“operation walang lagay” was also initiated to improve efficient and

effective tax collection. Regardless, the issue of tax avoidance

remains unaddressed.

Individuals and corporations with the greatest incomes are the most

likely to dodge taxes. On the other hand, the majority of active

taxpayers are middle-class persons. The question is, why can't the

authorities track them down? If honesty in paying taxes is enforced

may be the best government agency to meet the needs of its citizens.