Evolution of Philippine Taxation

Introduction

The Philippine archipelago was colonized with different country with different
culture, people, and traditions. One of the colonizers was the Spaniards who were abusive,
opportunist and controlled the Philippines as their own country but our fellow countrymen
fought with their lives and bloods to raise revolutionary groups towards the Spaniards. Before
the colonization of the Spaniards, Philippines don’t have a government system but according to
our history that every town or city has what we called as “Balangay”, in our modern term it was
already redirected as “Barangay” in our local towns. Balangay is a form of government usually
governed by the “Raja” or the chief who was the decision maker and/or the leader of a particular
Balangay. In some researches, tax was not actually imposed by the chief but the villagers are
voluntarily offered their food and other necessities for them to share it with other villager who
were in need of those. “Bayanihan” is actually a tradition of our ancestors and some of the
Filipinos in the modern society still practicing this kind of attitude/ tradition. Skipping or going
back to Spaniard colonization, the Philippines was already called as the latter after the name of
King Philips, the ruler of the Spain during the reign of Spaniards in the Philippines. We had been
colonized for 333 years (1521- 1898) under the control of the Spaniards and tax was strictly
imposed in every towns, cities and barangays here in the Philippines, our own fellowmen was
stocked as slaves and punching bags from the hands of the Spaniards. Tears were dropped
everywhere, blood shred, gun shots heard and bomb exploded. No wonder Filipinos now has the
guts and courage to create revolutionary actions against the Government.

Tax is defined as a compulsory contribution to state revenue, levied by the

government on workers income and business profits or added to the cost of some goods, services
and transactions. As our economy grows, our tax is getting higher especially this 2018 our
inflation rate increases to more than 6%, doubled or twice from the last year’s inflation rate with
more than 3%. Due to the Train law for today’s tax, other taxes being imposed are lower than the
old tax law but other tax were increased resulting for the substantial increase of our commodities
being purchased of the Filipino. Tax is the life blood of our government but our tax now a days is
getting higher from its realization. How come our country doesn’t grow or don’t have a big
progress throughout the year? How did our government spend wisely the money or the payment
of our fellowmen in exchange of their unfriendly and worse services in the government? In fact,
Philippines is one of the highest income tax here in ASEAN but other countries are more
progressive than us who were paying low taxes.
 Body/Discussion
History and Development

During the 17th and 18th centuries, the Contador de' Resultas served as the Chief Royal
Accountant whose functions were similar to the Commissioner of Internal Revenue. He was the
Chief Arbitrator whose decisions on financial matters were final except when revoked by the
Council of Indies. During these times, taxes that were collected from the inhabitants varied from
tribute or head tax of one gold maiz annually; tax on value of jewelries and gold trinkets;
indirect taxes on tobacco, wine, cockpits, burlas and powder. From 1521 to 1821, the Spanish
treasury had to subsidize the Philippines in the amount of P 250,000.00 per annum due to the
poor financial condition of the country, which can be primarily attributed to the poor revenue
collection system.

In the early American Era from the period 1898 to 1901, the Philippines was ruled by American
military governors. In 1902, the first civil government was established under William H. Taft.
However, it was only during the term of second civil governor Luke E. Wright that the Bureau of
Internal Revenue (BIR) was created through the passage of Reorganization Act No. 1189 on July
2, 1904. On August 1, 1904, the BIR was formally organized and made operational under the
Secretary of Finance, Henry Ide the author of the Internal Revenue Law of 1904, with John S.
Hord as the first Collector. The first organization started with 69 employees, which consisted of a
Collector, Vice-Collector, one Chief Clerk, one Law Clerk, one Records Clerk and three Division
Chiefs.

The implementation of the withholding tax system was adopted by virtue of Republic Act (RA)
690. This method of collecting income tax upon receipt of the income resulted to the collection
of approximately 25% of the total income tax collected during the said period.

A significant step undertaken by the Bureau in 1958 was the establishment of the Tax Census
Division and the corresponding Tax Census Unit for each Regional Office. This was done to
consolidate all statements of assets, incomes and liabilities of all individual and resident
corporations in the Philippines into a National Tax Census.

To strictly enforce the payment of taxes and to further discourage tax evasion, RA No. 233 or the
Rewards Law was passed on June 19, 1959 whereby informers were rewarded the 25%
equivalent of the revenue collected from the tax evader.

In 1964, the Philippines was re-divided anew into 15 regions and 72 inspection districts. The
Tobacco Inspection Board and Accountable Forms Committee were also created directly under
the Office of the Commissioner.

The appointment of Misael Vera as Commissioner in 1965 during the Marcos Administration,
led the BIR to a "new direction" in tax administration. 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.

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.
Similarly, the payment of taxes through banks, as well as the implementation of the package
audit investigation by industry are considered to be important measures which contributed
significantly to the improved collection performance of BIR.

The proclamation of Martial Law on September 21, 1972 marked 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 implemented to disable errors and for the taxpayers to start anew.
On 1977, President Marcos promulgated the National Internal Revenue Code of 1977, which
updated the 1934 Tax Code.

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.
With the advent of the value-added tax (VAT) in 1988, a massive campaign program 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. It was also in 1988 that the Revenue Information Systems Services Inc. (RISSI)
was abolished and transferred back to the BIR by virtue of a Memorandum Order from the
Office of the President dated May 24, 1988. This transfer had implications on the delivery of the
computerization requirements of the Bureau in relation to its functions of tax assessment and
collection.
The entry of Commissioner Jose Ong in 1989 saw the advent of the "Tax Administration
Program" which is the embodiment of 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.

It was in 1994 that a five-year Tax Computerization Project (TCP) was undertaken. This involved
the establishment of a modern and computerized Integrated Tax System and Internal
Administration System.

During the President Estrada's administration, a priority reform measures were undertaken to
enhance voluntary compliance and improve the country'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, VA and percentage taxes.

In order to encourage and educate taxpayers to demand sales invoices and receipts, the raffle
promo "Humingi ng Resibo, Manalo ng Libo-Libo" was institutionalized in 1999. The Large
Taxpayers Monitoring System was also established under Estrada's administration to closely
monitor the tax compliance of the country's large taxpayers.
Under Estrada's administration, there were measures that were prioritized to enhance the
taxpayer compliance and that would deteriorate tax violation. The most significant of these
measures include the full utilization of tax computerization in the operation of BIR 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 early remittance of
withholding taxes.

In 2009, BIR revived its “Handang Maglingkod” Project where the best frontline offices were
recognized for rendering effective taxpayer service.

In President Rodrigo Duterte, the Philippines' economy went on a rollercoaster rid. While the
country's economy keeps boosted by public sector spending on infrastructure, the commodity
prices also rised up affecting poor households.
The economy as measured by the gross domestic product (GDP) grew by 6.7 percent for the
whole 2017, making the Philippines the third fastest growing economy in Asia next to China (6.9
percent) and Vietnam (6.8 percent.)
The GDP measures the value of goods and services produced by a nation in a given period.
For this year, the government is targeting to achieve a 7 to 8 percent growth.
In the first quarter of this year, the GDP grew 6.8 percent, which is below the 7 to 8 percent
target set by the economic team.
According to Socioeconomic Planning Secretary Ernesto Pernia (2018), economic growth should
have reached the upper range of the government’s target of 7 to 8 percent if not for the spikes
in inflation during the quarter.
The government is also targeting to keep inflation "manageable" to 2 to 4 percent.
But this target was missed because nflation has increased to 5 percent level due to faster
increase in prices of alcoholic beverages and tobacc, and housing, water, electricity, gas, and
other fuels.
Critics blame the Tax Reform for Acceleration and Inclusion (TRAIN) law for the faster inflation
rate due to reformed excise taxes on petroleum, but economic managers has disagreed and
pointed the rising commodity prices to the price movements of petroleum products in the
world market.
The Duterte administration also vowed to institute a progressive tax reform. This was achieved
through the enactment of Republic Act No. 10963 or TRAIN law, which took effect on January 1,
2018.
Those who are earning P250,000 a year or P21,000 a month are now exempted from paying
personal income tax, while income tax rates were reduced for those earning above P250,000.
Before TRAIN's implementation, personal income earners were taxed at 30 to 32 percent.
In able for them to offset the revenue from reduced personal income tax, the law has increased
excise taxes on petroleum products and automobiles and imposed a tax or fine on sugar
sweetened beverages.
In the first five months of the year, the government's revenue grew 19 percent to P1.186 trillion
from P996.5 billion. The 19-percent growth in national government revenue was attributed to
the TRAIN law and improvements in tax administration.
The Duterte administration is targeting to complete almost half or 32 of the 75 big-ticket
infrastructure projects by year 2022.
 Conclusion

I therefore conclude that in these days, taxation is the reason why a government is functioning.
The people pay taxes to the government and in exchange, the government give services and
good governance to them. Taxation has evolved through time wherein it became the reason
why the government raise its revenues.
The policy of ’’taxation in the Philippines’’’ is governed chiefly by the Constitution of the
Philippines and three Republic Acts: the Constitution, national law, and local law.
While the tax has been reduced, inflation of commodity prices makes the Filipinos suffer and
poorer. We are all aware that not all Filipinos are taxpayers, there are the vendors, drivers,
farmers, etc. They all are earning small profit from their small living in which the inflation cause
them to become poorer. But I really hope that this inflation problem would be resolved for us to
have a better living.
 References

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"Historical Background" (n. d.). NTRC. Retrieved 15 November 2018. Retrieved from
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"Republic Act 10963 - Tax Reform for Acceleration and Inclusion Act of 2017" (n. d.). The Corpus
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"Republic Act 7160 - Local Government Code of 1991" (n. d.). The Corpus Juris. Retrieved 17
November 2018. Retrieved from https://thecorpusjuris.com

"Republic Act 8424 - Tax Reform Act of 1997" (n. d.). The Juris Corpus. Retrieved 17 November
2018. Retrieved from https://thecorpusjuris.com

"Taxation in the Philippines" (n.d.). JSTOR. Retrieved 16 November 2018. Retrieved from
https://www.jstor.org
"The Constitution of the Republic Act of the Philippines" (n. d.). The Corpus Juris. Retrieved 17
November 2018. Retrieved from https://thecorpusjuris.com

"The economy under Duterte: The second year" (n. d.). GMA News. Retrieved 16 November
2018. Retrieved from https://www.gmanetwork.com

"The History" (n. d.). Bureau of Internal Revenue. Retrieved 15 November 2018. Retrieved from
https://www.bir.gov.ph

St. Scholastica's College Tacloban

Maharlika Highway, Brgy. Campetic, Palo, Leyte

A Project
in
Readings in the Philippine
History
Submitted by:
Lozada, Joshua C.
Rivera, Mary Rose
BSN 1-A

Submitted to:
Ms. Gloria Gariando