CHAPTER IV – SOCIAL, POLITICAL,

ECONOMIC AND CULTURAL ISSUES IN

PHILIPPINE HISTORY

3 – TAXATION
Prepared by:
PABLO S. GARCIA
Instructor
 SCOPE OF PRESENTATION
LEARNING OBJECTIVES
INTRODUCTION
EVOLUTION OF PHILIPPINE TAXATION
DEFINITION AND RATIONALE OF TAXATION
STRUCTURES OF A TAX SYSTEM
SIGNIFICANCE OF TAXATION
CLASSIFICATION OF TAXES
ENTITIES EXEMPTED FROM TAXATION
FORMS OF ESCAPE FROM TAXATION
TYPES OF NATIONAL TAXES
TYPES OF LOCAL TAXES
TRAIN LAW (TAX REFORM FOR ACCELERATION AND INCLUSION)
SUMMARY
LEARNING OBJECTIVES:
At the end of the lesson the students will be able to:
1.Explain the historical development of Philippine
taxation, its nature and purpose;
2.Identify the types of national and local taxes;
3.Argue for or against current taxation issues and
reforms.
INTRODUCTION:
Taxation means laying a tax through which the government generates
income to defray its expenses. It is a way to raise funds for government
program and services that benefit Filipino citizens. A tax enforced as a
contribution but it is proportionate to the citizen’s ability to pay. It levied
on persons and property as well as business transactions, privileges,
and benefits.
Thus, paying the right amount of taxes is a social responsibility to the
country that could probably use by the government in developing and
improving its facilities for the betterment of the life of the Filipinos. This
topic will focus mainly on the historical development of Philippine
taxation; the concept, principles and its importance; and lastly, the kinds
of national and local taxes imposed by the government.
EVOLUTION OF PHILIPPINE TAXATION
A. PRE-SPANISH PERIOD
The ancient Filipinos in the barangays started
the practice of paying taxes. The purpose of paying
taxes was simple: for the protection that they
received from the local chieftain, the Datu. The
collected taxes was called the “buwis” in which
members of the chieftain’s family naturally enjoying
exemption from paying taxes. Non-payment of Gold coins of our
“buwis” was already punishable during this period. ancestors called
“piloncitos
 
B. SPANISH PERIOD
1. The Tributo (tribute) and Cedula may be paid in any kind.
It was fixed at 8 reales and later, increased to cedula personal
15. Ten reales goes to the government, 1 to
the town community chest and 3 to the
church. Another one real was for the tithes
(diezmo pediales). Also collected is the
vandala, an annual enforced sale and
requisitioning of goods such as rice. Custom
duties and income tax are also collected. Polo
Later, they imposed cedula personal or personal identity paper wherein all
Indios aged from 18 to 60 are obliged to pay for personal identification. Polo is
the forced labor for 40 days of men ranging from 16 to 60 years of age who
were obligated to give personal service to community projects. One could be
exempted from polo by paying the falla, a daily fine of one and a half real. In
1884, it was reduced to 15 days
 2. The Ëncomienda System - is a land management system similar
to the feudal system in Europe; A meritorious Spaniard (called an
encomendero) is given control over a piece of land and its inhabitants.
The encomendero is duty-bound to defend his encomienda and keep
peace and order there. In return, he was granted the right to collect tribute
according to the limit. Part of this tribute goes to the encomendero and
the rest to the church and the government. This is subject, however to
several abuses.

3. The Manila-Acapulco Trade - is generally a trade between the

Chinese and Spaniards in Manila and the Spaniards in Mexico. This
has resulted into economic progress. But the negative effects of it far
outbalanced the advantages. Some income-producing economies
were completely neglected and too much burden were given to
Filipinos during their annual polo y servicio.
C. AMERICAN PERIOD

 Americans aimed to make the economy self-sufficient by

running the government with the possible sum revenue and
create surplus in the budget;
 From 1898 to 1903, the Americans followed the Spanish
system of taxation with some modifications
 Later on, the Urbana was replaced by tax on real estate, which
became known as land tax.
 The problem with the tax was that the land titling in the rural
area was very disorderly.
 
Civil Government in the Philippines:
 William H. Taft (1902)
 Luke E. Wright (1904)
o July 2, 1904 – Bureau of Internal Revenue (BIR) was created through the
passage of Reorganization Act No. 1189
o August 1, 1904 – the BIR was formally organized and made operational
under Secretary of Finance Henry Ide (author of the Internal Revenue
Law of 1904), with John S. Hord as the first Collector (Commissioner). The
first organization started with 69 employees, which consisted of a Collector,
Vice-Collector, one Chief Clerk, one Records Clerk, and three division
Chiefs; The following are the three more Collectors: 1) Ellis Cromwell
(1909-1912); William T. Holting (1912-1914); and James J. Rafferty (1914-
1918) appointed by the Governor-General with the approval of Philippine
Commission and the US President.
o The Bureau is mandated by law to assess and all international revenue
taxes, fees, and charges.
Internal Revenue Law of 1904 - was passed as a reaction to the
problems of collecting land tax. It prescribed major sources of revenue:
o License taxes on firms dealing in alcoholic beverages and tobacco;
o Excise taxes on alcoholic beverages and tobacco products;
o Taxes on Banks and banker;
o Documentary stamp taxes;
o Cedula;
o Taxes on business
o Taxes on insurance and insurance company;
o Taxes on forest product;
o Mining Concession;
o Tax on Business and manufacturing;
o Occupational Licenses.
1907: Changes in cedula and industrial tax
In 1913, the Underwood-Simmon Tariff Act was
passed, resulting to a reduction in the revenue of
the government as export taxed levied on sugar,
tobacco, and copra were lifted.
a)New measures and legislation were introduced
to make the taxation system appear more  
Underwood-Simmon Tariff Act
equitable; Authored by Representative
Oscar Underwood of
b)Income Tax rates were increased in 1936, Alabama
adding a surtax rate on individual net incomes
in excess of 10,000 pesos;
c) Increased in the Income Tax rates of
Corporation;
1913 Reorganization of the Bureau: the creation of new divisions namely:
1) Accounting;
2) Cash
3) Clerical
4) Inspection
5) Law
6) Real Estate
7) Records
 
In line with the Filipinization policy of US President McKinley, Filipino
collectors were appointed. The first three BIR Collectors were: Wenceslao
Trinidad (1918-1922); Juan Posadas Jr (1922-1934); and Alfredo Yatao (1934-
1938)
 
New sources of tax were introduced:
Income Tax (1914)
Inheritance Tax (1919)
May 1921: by virtue of Act No. 299, the Real Estate, License and Cash
Divisions were abolished and their functions were transferred to the City
of Manila. As a result of this transfer, the Bureau was left with five (5)
divisions, namely:
1) Administrative 2. Law 3. Accounting 4. Income Tax 5. Inspection
 
In 1937, the Secretary of Finance promulgated Regulation No. 95,
reorganizing the Provincial Inspection Districts and maintaining in each
province an Internal Revenue Office supervised by a Provincial Agent.
In 1939, the Commonwealth government drafted the National
Internal Revenue Code as follow:
o Normal Tax of three percent and the surtax on income was
replaced by a single tax:
o Personal exemption were reduced;
o Corporation income tax was slightly increased
o The cumulative sales income tax replace by a single
turnover over tax of 10% on luxuries:
o Taxes on liquors, cigarettes, forestry products; and mining
were increased.
o Dividend were made taxable.

In 1940, a residence tax was imposed

D. JAPANESE PERIOD

o The Japanese military administration in the Philippines during

WWII immediately continued the system of collection introduced
during the commonwealth but they exempted Japanese forces.
Foreign trade fell, and the main sources of taxation came from
amusements, manufactures, professions, and business license.
As war raged, tax collection was difficult task, and additional
incomes of the government were derived from the sales of
National Sweepstakes and sale of government bonds.
E. POST-WAR PERIOD

o July 4, 1946 – declaration of Philippine Independence, BIR was

established separately that led to its reorganization on October 1,
1947 by virtue of Executive Order No. 94.
o In January 1957, the position of the head of the Bureau was
changed from Collector to Commissioner. The last collector and the
first Commissioner of BIR was Jose Aranas.
o 1973 significant amendments were put into effect following the
enactment of the local tax code, with amendments on the allocation
of the residence tax and on who are covered under it, as well as
payment provisions.
 
F. MARCOS ADMINISTRATION
o The appointment of Misael Vera as Commissioner in 1965 led the
Bureau to a "new direction" in tax administration.
o The most notable programs implemented were the "Blue Master
Program" and the "Voluntary Tax Compliance Program". The first
program was adopted to curb the abuses of both the taxpayers and BIR
personnel, while the second program was designed to encourage
professionals in the private and government sectors to report their true
income and to pay the correct amount of taxes.
o It was also during Commissioner Vera's administration that the country
was further subdivided into 20 Regional Offices and 90 Revenue District
Offices, in addition to the creation of various offices which included the
Internal Audit Department (replacing the Inspection Department),
Administrative Service Department, International Tax Affairs Staff and
Specific Tax Department.
o Providing each taxpayer with a permanent Tax Account
Number (TAN) in 1970 not only facilitated the identification of
taxpayers but also resulted to faster verification of tax
records.
o The proclamation of Martial Law on September 21, 1972
marked the advent of the New Society and ushered in a new
approach in the developmental efforts of the government.
Several tax amnesty decrees issued by the President were
promulgated to enable erring taxpayers to start anew.
Organization-wise, the Bureau had also undergone several
changes during the Martial Law period (1972-1980).
o In 1976, under Commissioner Efren Plana's administration,
the Bureau's National Office transferred from the Finance
Building in Manila to its own 12-storey building in Quezon City,
which was inaugurated on June 3, 1977.
o The same year that President Marcos promulgated the National
Internal Revenue Code of 1977, which updated the 1934 Tax
Code.
o On August 1, 1980, the Bureau was further reorganized under the
administration of Commissioner Ruben Ancheta. New offices
were created and some organizational units were relocated for
the purpose of making the Bureau more responsive to the needs
of the taxpaying public.
G. AQUINO ADMINISTRATION
o After the People's Revolution in February 1986, a renewed thrust
towards an effective tax administration was pursued by the Bureau.
"Operation: Walang Lagay" was launched to promote the efficient
and honest collection of taxes.
o On January 30, 1987, the Bureau was reorganized under the
administration of Commissioner Bienvenido Tan, Jr. pursuant to
Executive Order (EO) No. 127. Under the said EO, two (2) major
functional groups headed and supervised by a Deputy Commissioner
were created, and these were: 1) the Assessment and Collection
Group; and 2) the Legal and Internal Administration Group.
o In 1988, the value-added tax (VAT) was implemented that aimed to
promote and encourage compliance with the requirements of the VAT
was launched. The adoption of the VAT system was one of the
structural reforms provided for in the 1986 Tax Reform Program, which
was designed to simplify tax administration and make the tax system
more equitable.
o The abolition of Revenue Information Systems Services Inc. (RISSI) in
1988 and transferred back to the BIR by virtue of a Memorandum Order
from the Office of the President dated May 24, 1988.
o The entry of Commissioner Jose Ong in 1989 was the implementation
of the "Tax Administration Program", embodying the Bureau's mission to
improve tax collection and simplify tax administration. The Program
contained several tax reform and enhancement measures, which
included the use of the Taxpayer Identification Number (TIN) and the
adoption of the New Payment Control System and Simplified Net
Income Taxation Scheme.   
H. RAMOS ADMINISTRATION
o The year 1993 marked the entry of the first lady Commissioner in the Bureau,
Liwayway Vinzons-Chato. In order to attain the Bureau's vision of
transformation, a comprehensive and integrated program known as the ACTS
or Action-Centered Transformation Program was undertaken to realign and
direct the entire organization towards the fulfillment of its vision and mission.
o In 1994, Chato implemented a five-year Tax Computerization Project (TCP)
that involved the establishment of a modern and computerized Integrated
Tax System and Internal Administration System.
o Further streamlining of the BIR was approved on July 1997 through the
passage of EO No.430, in order to support the implementation of the
computerized Integrated Tax System. Highlights of the said EO included the: 1)
creation of a fourth Revenue Group in the BIR, which is the Legal and
Enforcement Group (headed by a Deputy Commissioner); and 2) creation of
the Internal Affairs Service, Taxpayers Assistance Service, Information Planning
and Quality Service and the Revenue Data Centers.
I. ESTRADA ADMINISTRATION
o Beethoven Rualo, was appointed as Commissioner of Internal
Revenue and undertook priority reform measures to enhance
voluntary compliance and improve the Bureau's productivity. One of
the most significant reform measures was the implementation of the
Economic Recovery Assistance Payment (ERAP) Program,
which granted immunity from audit and investigation to taxpayers
who have paid 20% more than the tax paid in 1997 for income tax,
VAT and/or percentage taxes.
o Encourage and educate consumers/taxpayers of demanding sales
invoices and receipts, which was institutionalized in 1999 through the
raffle promo "Humingi ng Resibo, Manalo ng Libo-Libo".
o The Large Taxpayers Monitoring System was also established under
Commissioner Rualo's administration to closely monitor the tax
compliance of the country's large taxpayers.
o The coming of the new millennium, Dakila Fonacier was appointed as the new
Commissioner of Internal Revenue. The most significant of these measures
include: full utilization of tax computerization in the Bureau's operations;
expansion of the use of electronic Documentary Stamp Tax metering
machine and establishment of tie-up with the national government
agencies and local government units for the prompt remittance of
withholding taxes; and implementation of Compromise Settlement
Program for taxpayers with outstanding accounts receivable and
disputed assessments with the BIR.
o In September 1, 2000, the Large Taxpayers Service (LTS) and the Excise
Taxpayers Service (ETS) were established under EO No. 175 to reinforce the
tax administration and enforcement capabilities of the BIR.
o The passage of the Electronic Commerce Act of 2000 on June 14, the
Bureau implemented a Full Integrated Tax System (ITS) Rollout Acceleration
Program to facilitate the full utilization of tax computerization in the Bureau's
operations. Under the Program, seven (7) ITS back-end systems were
released in stages in RR 8 - Makati City and the Large Taxpayers Service.
J. ARROYO ADMINISTRATION
o After the EDSA II in January 2001, newly-installed President Gloria
Macapagal-Arroyo appointed a former Deputy Commissioner, Atty. René
G. Bañez, as the new Commissioner of Internal Revenue.
o Baňez implemented of change initiatives that were directed to: 1) reform the
tax system to make it simpler and suit the Philippine culture; 2) reengineer
the tax processes to make them simpler, more efficient and transparent; 3)
restructure the BIR to give it financial and administrative flexibility; and 4)
redesign the human resource policies, systems and procedures to
transform the workforce to be more responsive to taxpayers' needs.
o Implementation of the Voluntary Assessment Program and Compromise
Settlement Program and expansion of coverage of the creditable
withholding tax system. A technology-based system that promotes the
paperless filing of tax returns and payment of taxes was also adopted
through the Electronic Filing and Payment System (eFPS).
o With the resignation of Commissioner Bañez on August 19, 2002,
Finance Undersecretary Cornelio C. Gison was designated as interim
BIR Commissioner. Eight days later (on August 27, 2002), former
Customs Commissioner, Guillermo L. Parayno, Jr. was appointed as
the new Commissioner of Internal Revenue (CIR).
o Commissioner Parayno offered a Voluntary Assessment and
Abatement Program (VAAP) to taxpayers with under-declared
sales/receipts/income and adopted the use of new systems such as the
Reconciliation of Listings for Enforcement or RELIEF System to
detect under-declarations of taxable income by taxpayers and the
electronic broadcasting system to enhance the security of tax payments.
o Moreover, under Parayno, the BIR expanded its electronic services to
include the web-based TIN application and processing; electronic
raffle of invoices/receipts; provision of e-payment gateways; e-
substituted filing of tax returns and electronic submission of sales
reports.
o The conduct of special operations on high profile tax evaders, which
resulted to the filing of tax cases under the Run After Tax Evaders
(RATE) Program as well as the conduct of Tax Compliance Verification
Drives and accreditation and registration of cash register machines
and point-of-sale machines.
o October 28, 2006, Deputy Commissioner for Legal and Inspection Group, Jose
Mario C. Buñag was appointed as full-fledged Commissioner of Internal Revenue
and undertook the expansion of the RATE Program to the Regional Offices;
inclusion of new payment gateways, such as the Efficient Service Machines and
the G-Cash and SMART Money facilities; implementation of the Benchmarking
Method and installation of the Bureau’s e-Complaint System, a new e-Service that
allows taxpayers to log their complaints against erring revenuers through the BIR
website.
o The Nationwide Rollout of Computerized Systems (NRCS) was also undertaken to
extend the use of the Bureau’s Integrated Tax System across its non-computerized
Revenue District Offices.
o In 2007, the National Program Support for Tax Administration
Reform (NPSTAR), a program funded by various international
development agencies, was launched to improve the BIR efficiency
in various areas of tax administration (i.e. taxpayer compliance, tax
enforcement and control, etc.).
o On June 29, 2007, replaced by Lilian B. Hefti, making her the
second lady Commissioner of the BIR. Information sharing between
the BIR and the Local Government Units (LGUs) was also
intensified through the LGU Revenue Assurance System, which
aims to uncover fraud and non-payment of taxes.
o To enhance the Bureau’s audit capabilities, the use of Computer-
Assisted Audit Tools and Techniques (CAATTs) was also introduced
in the BIR under her term.
o October 2008, former BIR Deputy Commissioner for Legal and Enforcement
Group, Sixto S. Esquivias IV was appointed as the new Commissioner of
Internal Revenue which he launched the “Oplan Kandado” Program and a
Taxpayer Feedback Mechanism (through the eComplaint facility accessible
via the BIR Website) was also established.
o In 2009, the Bureau revived its “Handang Maglingkod” Project where the
best frontline offices were recognized for rendering effective taxpayer service.
o In November 2009, Joel L. Tan-Torres assumed the position of
Commissioner of Internal Revenue. He institutionalized several
programs/projects to improve revenue collections, and these include Project
R.I.P (Rest in Peace); intensified filing of tax evasion cases under the re-
invigorated RATE Program; conduct of Taxpayers Lifestyle Check and
development of Industry Champions.
o Linkages with various agencies (i.e. LTO, SEC, BLGF, PHALTRA, etc.) were
also established through the signing of several Memoranda of Agreement to
improve specific areas of tax administration.
K. P-NOY AQUINO ADMINISTRATION

o Following the highly-acclaimed inauguration of President Benigno

C. Aquino III on June 30, 2010, a former BIR Deputy
Commissioner, Atty. Kim S. Jacinto-Henares, was appointed as
the new Commissioner of Internal Revenue. During her first few
months in the BIR, Commissioner Henares focused on the filing of
tax evasion cases under the RATE Program, in compliance with
the SONA pronouncements of President Aquino;
o Enacted the Sin Taxes against cigarettes and alcohol products, as
well as foreign investors perceived improvement and in sincere
efforts to fight graft and corruption.
Local Tax Code were later subsumed into the LGC of 1991.
1)The residence Tax and residence certificate were renamed into
current community tax and community tax certificate.
2)The problem with land tax was that land titling in the rural area
was very disorderly, the appraising of land value was
influenced by political and familial factors.
3)Tax evasion was prevalent among elites.
National Tax Law
1987 Constitution stipulates limitations on the exercise of the power
to tax:
a) All money collected on any tax levied for special purpose shall be
treated purely special fund. If the purpose for which the special fund was
created has been fulfilled or abandoned, the balance shall be transferred
to the general funds of Government.
b) Congress may authorize the President to fix limitations of tariff rates,
import and export quotas and other duties within the national development
program
c) In Local budgets, the Supreme Court has the power to revise, review,
reverse and modify laws relating to legalities of taxes, tolls and penalties
in relation to taxes imposed
d) Laws governing taxation are contained within the national Internal
Revenue Code
Local Government Tax Law
o Local governments have the power to impose local taxes
o Local government units shall have just share in the national taxes
o Local government taxation shall include real property taxation,
shares in the Proceeds of national taxes, credit financing and local
budgets
Fundamental Principles of LGU Tax Powers
o Taxation shall be uniform in each local government unit;
o Taxes, fees, charges and other impositions shall:
o Common Revenue-Raising Powers
o Service Fees and Charges
o Public Utility Charges
o Toll Fees or Charges
DEFINITION AND RATIONALE TAXATION

o It is the imposition of a mandatory levy on the citizens and/or

the businesses of a country by their government.
o It is where the government derives a majority of its revenues
for financing public services from taxation.
o Taxation is the inherent power of the State to impose and
demand contribution upon persons, properties, or rights for the
purpose of generating revenues for public purposes.
PRINCIPLES AND THEORIES OF TAXATION
1. The Benefit principle. This principle holds that individuals should be
taxed in proportion to the benefit they receive from the government
and that taxes should be paid by those people who received the direct
benefit of the government programs and projects out of taxes paid.
2. The Ability-to-Pay Principle. This principle holds that taxes should
relate with people’s income or the ability to pay, that is, people with
greater income or wealth can afford to pay more taxes should be taxed
at a higher rate than with less wealth.
3. The Equal Distribution Principle. This principle holds that income,
wealth, and transaction should be taxed at a fixed percentage, that is,
people who earn more and buy more should pay more taxes, but will
not pay a higher rate taxes.
STRUCTURES OF A TAX SYSTEM
Government taxes and spending affect the distribution of income,
imposing burdens on some and conferring benefits on others.
As a source of income, a tax system is classified into three which are
very important in income distribution and for tax policy – the concept of
equity and equality.
1) A Tax is Proportional. A proportional tax means that government
takes an amount of money from a person which in proportion to
his/her income.
(For example, Ben’s salary is P10,000 and the government is
deducting 10% of his salary for tax. After a year his income
increases to P15,000 and the government now deducts 12% in his
salary for tax. Hence, the said tax is proportional)
2) A Tax is Regressive. A regressive tax means that the
government takes a larger percentage of a person’s income tax,
while he is receiving a lower income. (For example, Ben’s salary is
P10,000 and the government is asking him to pay 15% of his
salary for tax which is contrary to our given example in number
3) A Tax is Progressive. A progressive tax means that the
government takes a larger percentage of his salary for tax due to
his high salary. (For example, Ben has a monthly income of
P30,000 and the government deducted 20% of his salary for tax.
Here, the tax amount is proportionately equal to someone’s status
in the society. A rich man should pay more than a poor man)
SIGNIFICANCE OF TAXATION
o The primary purpose of taxation is to generate funds/revenues used
to defray expenses incurred by the government in promoting the
general welfare of the citizenry.
o In most nations, especially our country, taxes are the major source of
government income. Others come from borrowings, sale of public
lands and other government properties, and interests in investments.
This manifest that taxes are the lifeblood of a nation.
OTHER PURPOSES OF TAXATION INCLUDE:
o To equitably distribute to the wealth of the nation.
o To protect new industries (by providing tax exemptions to new or
pioneering industries);
o To protect local producers (by imposing higher custom duties on
cheap imported goods)
CLASSIFICATION OF TAXES
1. As to subject matter
1.1. Personal, Poll, or Capitation Tax. This tax means that there is a fixed
amount upon all persons residing within specified territory without regard to
their property or the occupation in which they are may be engaged.
Example: Residence Tax (Cedula)
1.2. Property tax. This tax refers to one assessed on all property located
within a territory on a specified date in proportion to its value, or in
accordance with some other reasonable methods of apportionment, the
obligation to pay which is absolute and unavoidable and is not based upon
any voluntary action of an individual’s assessment. Example: Real estate tax
1.3. Excise Tax. This tax refers to any tax which does not fall within the
classification of a poll tax or a property tax and embraces every form of
burden not laid directly upon person property. Example: Value-added Tax
2. As to who bears the burden
2.1. Direct Tax. This tax refers to a tax which is demanded from an individual
who tends to buy or purchase a good or service. Example: Income Tax
2.2. Indirect Tax. This refers to the tax paid primarily by a person who can shift
the burden upon someone else, who is under no legal obligation to pay
him/her. Example: Buying of goods and services (VAT)
3. As to determination of account
3.1. Specific Tax. This tax is fixed or determinate sum imposed by the head or
number or some standard of weight or measurement, and requires no
assessment beyond a listing and classification of the object to be taxed.
Example: Taxes on wine
3.2. Ad Valorem Tax. It is a tax of a fixed proportion of the value of the property
with respect to which the tax is assessed, and requires the intervention of
assessors or appraisers to estimate the value of such property before the
amount due from each tax payer can be determined. Ex. The value of Real
estate tax
4. As to purpose
4.1. General Tax. It refers to the tax levied to an individual for a
general public purpose. Almost all taxes are an example of this
classification.
4.2. Specific Tax. This tax is levied to an individual for a particular or
specific purpose.

5. As to scope

5. 1. National - tax imposed by the national government

5. 2. Municipal or local - tax imposed by local government units.
Entities Exempted from Taxation
The Constitution expressly grants tax exemption on certain
entities/institutions such as:
1. Charitable institutions, churches, parsonages or convents appurtenant
thereto, mosques, and nonprofit cemeteries and all lands, buildings and
improvements actually, directly and exclusively used for religious,
charitable or educational purposes (Article VI, Section 28, Paragraph 3).
2. Non-stock non-profit educational institutions used actually, directly, and
exclusively for educational purposes. (Article XVI, Section 4 (3)).
3. Exempted to tax as stated in the Article 283 of Rules and Regulations
Implementing Local Government Code of 1991 (RA 7160):
4. Local water districts
5. Cooperatives duly registered under RA 6938, otherwise
known as the Cooperative Code of the Philippines
6. Non-stock and non-profit hospitals and educational
institutions
7. Printer and/or publisher of books or other reading
materials prescribed by DECS (now DepEd) as school texts
or references, insofar as receipts from the printing and / or
publishing thereof are concerned.
8. Foreign Diplomats
FORMS OF ESCAPE FROM TAXATION
1. Tax avoidance - use by a taxpayer of legally permissible means or
methods in order to avoid or reduce tax liability. It is not punishable by law;
Tax Avoidance is the exploitation by the taxpayer of legally permissible
methods in order to avoid or reduce tax liability. This is also known as “tax
minimization.” Can be done through shifting:
1.1. Forward shifting. It is one way of passing the burden of tax from one
person to another. Ex. Taxes paid by the manufacturer may be shifted to the
consumer by adding the amount of the tax paid to price of the product.
 1.2. Backward shifting - occurs when the burden of tax is transferred from
the consumer to the producer or manufacturer; this occurs when a producer
of a taxed commodity transfers the money burden of tax to the supplier of
factors of production, who in turn is paid a lower price for the factors of
production. Ex. farmers are at time paid lower prices for their produce when
a tax is imposed on the processor of the produce.
2. Tax evasion - used by the taxpayer of illegal or fraudulent
means to defeat or reduce the payment of a tax. It is punishable
by law; Tax evasion happens when there is fraud through
pretension and the use of other illegal devices to lessen one’s
taxes, there is tax evasion, under-declaration of income, and non-
declaration of income and other items subject to tax, Under-
appraisal of goods subject to tariff, and over-declaration of
deductions; This is also known as “tax dodging.”
 
Note:
Tax Exemption is the grant of immunity or freedom from a financial
charge, obligation, or burden to which others are subjected.
TYPES OF NATIONAL TAXES
1. CAPITAL GAINS TAX
Tax imposed on gains that may have been realized by a seller from the
sale, exchange, or other disposition of capital assets located in the
Philippines including pacto de retro sales (a sale with a condition for
repurchase) and other forms of conditional sale.
 2.DOCUMENTARY STAMP TAX
Tax on documents, instruments, loan agreements, and papers
evidencing the acceptance, assignment, sale, or transfer of an
obligation, rights, or property incident thereto.
  DOCUMENTARY STAMP TAX
Documentary Stamp taxes are evident on documents like bank
promissory notes, deed of sale, and deed of assignment on transfer of
shares of corporate stock ownership.
3. DONOR’S TAX
Donor’s tax is a tax on a donation or gift. It is also tax imposed on the
gratuitous transfer of property between two or more persons who are
living at the time of transfer. It shall apply whether the transfer is in trust
or otherwise, whether the gift is direct or indirect, and whether the
property is real or personal, tangible or intangible.
 4. ESTATE TAX
Tax on the right of the deceased person to transmit his/her estate to
lawful heirs and beneficiaries at the time of death and on certain
transfers which are made by law as equivalent to testamentary
disposition.
It is not a tax on property. It is a tax imposed on the privilege of
transmitting property upon death of the owner. The estate tax is based
on the laws in force at the time of death notwithstanding postponement
of the actual possession or enjoyment of the estate by the beneficiary.
5. INCOME TAX
Tax on all annual profits made from property ownership, profession,
trades or offices. It is also a tax on a person’s income, emoluments
(salary), profits, etc.
6. PERCENTAGE TAX
Business tax imposed on people or entities who sell or lease goods,
properties, or services in the course of trade or business whose gross
annual sales or receipts do not exceed the amount required to register
as VAT-registered tax payers.
 7. VALUE-ADDED TAX
Business tax imposed and collected from the seller in the course of
trade or business on every sale or properties, or vendors of services.
This is an indirect tax, thus, it can be passed on to the buyer, causing
the increase of prices of most goods and services bought and paid by
customers.
8. INCOME TAX
Tax on all annual profits made from property ownership, profession,
trades or offices. It is also a tax on a person’s income, emoluments
(salary), profits, etc.
 9. PERCENTAGE TAX
Business tax imposed on people or entities who sell or lease goods,
properties, or services in the course of trade or business whose gross
annual sales or receipts do not exceed the amount required to register
as VAT-registered tax payers.
 10. VALUE-ADDED TAX
Business tax imposed and collected from the seller in the course of
trade or business on every sale or properties, or vendors of services.
This is an indirect tax, thus, it can be passed on to the buyer, causing
the increase of prices of most goods and services bought and paid by
customers.
 11. FINAL WITHHOLDING TAX
Kind of withholding tax prescribed only for certain payors and is not
creditable against the income tax due of the payee for the taxable
year. An example is tax withheld by banks on the interest income
earned on bank deposits.
 
12. WITHHOLDING TAX ON GOVERNMENT MONEY PAYMENTS
Withholding tax withheld by government offices including
government-owned or –controlled corporations and local government
units, before making any payments to private individuals,
corporations, partnerships, and/or associations.
LOCAL TAXES
Taxes based on the local government taxation in the Philippines as
stated in the Republic Act 7160 or the Local Government Code of 1991,
as amended. These are taxes, fees, or charges are imposed by the
local government units such as provinces, cities, municipalities, and
barangays.
 
TYPES OF LOCAL TAXES
1. TAX ON TRANSFER OF REAL PROPERTY OWNERSHIP
Tax imposed on the sale, donation, barter, or on any other mode of
transferring ownership of real property.
 2. TAX ON BUSINESS OF PRINTING AND PUBLICATION
Imposed on printing and publication businesses like that of books,
cards, posters, leaflets, handbills, certificates, receipts, pamphlet, and
others of similar nature.
3. FRANCHISE TAX
Tax on franchised businesses, at the rate not exceeding 50% of 1% of the
gross annual receipts of the preceding calendar year based on the
incoming receipt (annual earning) with the territorial jurisdiction where the
franchise is selling in.
 4. TAX ON SAND, GRAVEL, AND OTHER QUARRY RESOURCES
Imposed on ordinary stones, sand, gravel, earth, and other quarry
resources, as defined under the National Internal Revenue Code, as
amended. This refers to the above materials extracted from public lands
or from beds of seas, lakes, rivers, streams, creeks, and other public
waters within its territorial jurisdiction.
 5. PROFESSIONAL TAX
Annual tax on each person engaged in the exercise or practice of his or
her profession that requires government examination, like licensure
examinations.
6. AMUSEMENT TAX
Tax collected from the proprietors, lessees, or operators of theaters,
cinemas, concert halls, circuses, boxing stadia, and other places of
amusement.
7. ANNUAL FIXED TAX FOR EVERY DELIVERY TRUCK OR VAN OF
MANUFACTURERS OR PRODUCERS, WHOLESALERS OF,
DEALERS, OR RETAILERS IN, CERTAIN PRODUCTS
Annual fixed tax for every truck, car, or any vehicle used by
manufacturers, producers, wholesalers, dealers, or retailers in the
delivery or distribution of distiller spirits, fermented liquors, soft drinks,
cigars and cigarette and any other products to sales, outlets, or
consumers, whether directly or indirectly, within the province. This type
of tax is usually imposed as determined by the local provincial councils
through which the truck or trucks pass through or deliver their cargo.
8. TAX ON BUSINESS
Imposed by cities or municipalities o businesses before they will be
issued a business license or permit to start operations based on the
schedule of rates prescribed by the local government code, as
amended.
9. TAX ON BUSINESS
Businessmen pay this tax if they apply for a Mayor’s Permit to conduct
their business in the local government unit. Rates of these taxes vary
among cities and municipalities.
10. FEES FOR SEALING AND LICENSING OF WEIGHTS AND
MEASURES
Imposed for the sealing and licensing of weights and measures. This is
to impose regulations with regards to such weights and measures as
prescribed by the city, provincial, or municipal council.
11. FISHERY RENTALS, FEES, AND CHARGES
Imposed by the municipality/city to grantees of fishery privileges in
the municipality/city waters especially the privilege to build fish
corals, oysters, mussels, or other aquatic beds or bangus fry areas
and others as specified in the Local Government Code.
 12. COMMUNITY TAX
Tax levied by cities or municipalities to every Filipino or alien living in
the Philippines, eighteen (18) years of age or over, who has been
regularly employed on a wage or salary basis for at least thirty (30)
consecutive working days during any calendar year.
Community tax is also imposed on every corporation not matter how
created or organized, whether domestic or resident foreign, engaged
in or doing business in the Philippines.*Cedula
13. TAXES LEVIED BY THE BARANGAYS ON STORES OR
RETAILERS WITH FIXED BUSINESS ESTABLISHMENTS
Imposed on stores with gross sales of receipts of the preceding
calendar year amounting to P50,000.00 or less (for city barangays) and
P30,000.00 or less for municipal barangays) at a rate not exceeding
1% on such gross sales or receipts.
 14. SERVICE FEES OR CHARGES
Collected by the barangay for services rendered in connection with the
regulation or the use of barangay-owned properties or service facilities,
such as palay, copra, or tobacco driers.
 15. BARANGAY CLEARANCE
Fee collected by barangays upon issuance of barangay clearance, a
document required for many government transactions, such as when
getting a business permit from a city or municipal government or
applying for a job in a government office or a private company.
TRAIN LAW (TAX REFORM FOR ACCELERATION AND INCLUSION)
o On December 19, 2017, President Rodrigo Duterte has signed into law
Republic Act 10963, otherwise known as the “Tax Reform For
Acceleration and Inclusion (TRAIN) Law”, which amended 69 Sections
of the National Internal Revenue Code (NIRC), as amended, created 8
new sections and repealed 3 sections.
o TRAIN will lower personal income tax (PIT) for all taxpayers except the
richest.
o Those with taxable income below P250,000 will be exempt from paying
PIT, while the rest of taxpayers, except the richest, will see lower tax
rates ranging from 15% to 25% by 2020.
o The personal income tax system of TRAIN will exempt some 83% of
current taxpayers.
o Known as the Tax Reform for Acceleration and Inclusion (TRAIN)
law, the tax program overhauls the country's 20-year-old tax
regime in a bid to make the tax system fairer and simpler.
o Under the TRAIN, personal income tax rates will be adjusted to
shift the burden off lower-income segments toward the "ultra-
rich.“
o Starting mid-January, the retail price of a one-liter bottle of Coca-
Cola, for instance, is projected to increase to P43 from the
current P31, an increase of P12.
o This is because of the P12-per-liter tax on drinks using high
fructose corn syrup. For drinks using sugar and artificial
sweeteners, a P6-per-liter tax has been imposed. However, all
kinds of milk, 3-in-1 coffee, natural fruit juices, vegetable juices,
and medically-indicated beverages are exempt.
o Expanding the Value-Added Tax (VAT) base
o The Philippines has one of the highest VAT rates but also the
highest number of exemptions in the Southeast Asia region. 
o These tax exemptions have created much confusion, complexity,
and discretion in our tax system resulting in leakages and opening
doors for negotiation, corruption, and tax evasion.
o TRAIN aims to clean up the VAT system to make it fairer and
simpler and lower the cost of compliance for both the taxpayers
and tax administrators. 
o The TRAIN will direct the way to protect the poor and vulnerable
compared to the tax exemptions and blind subsidies that are
inefficient and largely beneficial to the rich since they have higher
purchasing power.
 SUMMARY

LEARNING OBJECTIVES
INTRODUCTION
EVOLUTION OF PHILIPPINE TAXATION
DEFINITION AND RATIONALE OF TAXATION
STRUCTURES OF A TAX SYSTEM
SIGNIFICANCE OF TAXATION
CLASSIFICATION OF TAXES
ENTITIES EXEMPTED FROM TAXATION
FORMS OF ESCAPE FROM TAXATION
TYPES OF NATIONAL TAXES
TYPES OF LOCAL TAXES
TRAIN LAW (TAX REFORM FOR ACCELERATION AND INCLUSION)
 That’s All
Thank YouFolks ! Day !
and Good
REFERENCE TO/REFLECTION ON VALUE/THRUSTS
INTEGRATION

1. Evelyn J. Grey, Ph.D. and Ryan D. Beong, M.A.Ed. “Readings in

Philippine History.” Malones Printing Press and Publishing House,
Door 32, Zerrudo Commercial Complex, E. Lopez St., Jaro, Iloilo,
Philippines. 2017.
2. Jose Victor Torres. BATIS: Sources in Philippine History. C & E
Publishing, Inc. 839 EDSA, South Triangle, Quezon City. 2018.
3. Gabay, Bon Kristoffer G. et al. “Economics: Concepts and
Principles (with Agrarian Reform and Taxation).” Rex Book Store.
Sampaloc, Manila. 2013
4. https://www.bir.gov.ph