Philippine Taxation under American Period (1898-1935)

 1898-1903: Americans followed the Spanish system of taxation.

The urbana which is a tax on the annual rental value of an urban real estate was
replaced known as land tax that charge both urban and rural real estate
Civil Government in the Philippines:
- William H. Taft (1902)
- Luke E. Wright (1904)
 July 2, 1904: Bureau of Internal Revenue (BIR) was created through the
passage of Reorganization Act No. 1189
 August 1, 1904: the BIR was formally organized and made operational.
The bureau is mandated by law to assess and collect all national internal revenue
taxes, fees, and charges
 1904: The Internal Revenue Law of 1904
-licensed and excise taxes, taxes on banks, doc. Stamp taxes, cedula,
taxes on insurance company, forest products, mining concessions,
taxes on business, occupational licenses
 1907: Changes in cedula and industria tax
The cedula under the new law went through changes as the rate was fixed per
adult male. Some places were authorized to double the fee for the cedula. The
industria tax was charged
 October 3, 1913: Underwood-Simmons Tariff Act
U.S Pres. Woodrow Wilson
Governor-General Francis Burton Harrison
Its purpose was to reduce levies on manufactured and semi-manufactured goods
and to eliminate duties on most raw materials.
New sources of tax were introduced:
 Income tax (1914)
 Inheritance Tax (1919)
  National Lottery (1932)
Taxation during the Commonwealth Period (1935-1945)
 1936: Addition of a surtax rate
 Nov. 15, 1937: Abolition of Cedula Tax
The cedula tax was abolished by the National Assembly of the Philippines because
of the heavy burden that brings to the poor people.
 January 1, 1940: Imposing of Residence Tax
Every inhabitant of the Philippines over eighteen years of age who has been
regularly employed on a wage or salary basis and on every corporation no matter
how created or organized is subject to residence tax. Exemptions are the ff.:
-US high commissioner and member of his staff,
-Commissioned officers and enlisted soldiers of US army and navy
-Representative and officers of foreign powers
-Transient visitors staying less than 3 months in Philippines
National Internal Revenue Code of 1939
-New tax sytem during commonwealth
Economic activity during World War 2

For many years I have realized that the existing revenue laws of the Philippines needed
revision, for the reason that since the first internal revenue law was enacted in the
year 1904, no scientific study has been attempted to adjust them to our changing
economic and social conditions. In fact, what we have today is a hodgepodge of
various revenue acts enacted piecemeal by the lawmaking body without regard to the
paying ability of the taxpayer or the effects of each tax upon the different economic
classes of the nation. During the last decade economists and statesmen the world over
have devoted much time to the study of the science of public finance; new concepts of
justice in taxation have been evolved; new sources of revenue have been tapped; taxation
has been given a new meaning and an additional social utility; notable improvements
have been made in the machinery of collecting taxes; and many nations have endeavored
to perfect their own system of balancing income and expenditures.

In the Philippines, agriculture has made material progress; commerce and industry have
been given impetus; the wealth and income of the nation have materially increased and
their distribution has been altered; and a new political structure has been erected to meet
our forthcoming responsibilities as a sovereign state. But our tax machinery has remained
unchanged. It is out of line with modern economic concepts; it is not responsive to the
expanding fiscal requirements of the Government; it fails to distribute the tax burden in
proportion to the ability and resources of the different economic classes of the people;
and its administrative features are not abreast with the standards set by progressive
nations.

Moreover, the present system of taxation is a source of a grave injustice. A cursory

examination of our tax laws shows that a majority of the existing internal revenue taxes
are paid by the consumer; hence, they weigh heavily upon the masses of the people and
too lightly upon those better able to pay them. The measure recommended by the Tax
Commission will remove this inequality.

Abolition of Cedula Tax

It will be known throughout the Philippines today that we have abolished a certain
legislation which has been the cause of bitter sufferings and hardships among the
common people, much more to our mothers. Today we abolish the cedula tax. The
younger generation who have been reared in an atmosphere of ease and comfort
will not understand the real reason for the abolition of the cedula, but we who
suffered during the Spanish régime and are still living now, still remember that our
chief complaint arose from the payment of the cedula tax. One of the promises of our
leaders of the Revolution was to abolish the cedula should they win. We triumphed
against the Spaniards, but the cedula was not abolished; it was only decreased slightly.
It should have been abolished long ago, but the plan was not carried out for want of a
remedial substitute. Now we know where to get that substitute, and what the people will
get today is the relief they will get from the abolition of the cedula.

I am not going to tell you where we are going to get the money as substitute for the money
realized from the cedula tax, but we are abolishing this because this is a tax that is a
burden to the poor. It is not just that the unemployed, that the individuals to whom the
Government has not given any job be taxed. If they have no source of income and no
work from which to get an income, they must not be compelled in justice to them to bear
a burden like the cedula tax. This is not justice, and from the bottom of my heart I am
happy to tell you that, by virtue of a legislative enactment, the National Assembly has
abolished the cedula tax.

From now on, no tax shall be collected that will not be based on the ability of the tax-
paying public to pay. Until now the poor are heavily taxed in our country. The rich may
say that they are paying more taxes, because they are paying thousands of pesos in
taxes sometimes, but I am prepared to agree with anybody who is paying this much that
if he gave me the wealth from which he derives his income to pay his taxes to the
government, I would pay taxes twice as much. What the rich pay for taxes are only taken
from their surplus, but the poor get their money to pay their taxes from their means of
subsistence and the subsistence of their families. I do not mean to say that the poor
should not pay any taxes. The sacred duty of the citizens is to support their government.
What I mean to say is that the taxes that they should pay must be based on their ability
to pay. For example, by the abolition of the cedula tax, do the poor people think they are
not paying any taxes? No. Is it not true that if today a poor man buys cloth and orders a
suit to be made, coming from Europe or America, he pays taxes based on the value of
the clothes? That is why I say that the great portion of the collections realized from
internal-revenue taxes comes from the poor although the rich also pay their taxes.

So that there will be equality between the rich and the poor in the payment of their taxes,
I will ask the National Assembly to impose more taxes upon the wealthy class because
they are in a position to pay. In this way, taxes will not be a burden to anybody and it
would not be difficult for the Government to work out its problems.