WHAT IS TAX?

Direct Taxation - a type of tax which is paid for by an individual

 Collins English Dictionary: a compulsory financial directly to the government. It includes poll tax, land tax or income tax
contribution imposed by a government to raise revenue,
levied on the income or property of persons or  Roxas declined to not alienate allies in Congress
organizations, on the production costs or sales prices of  July 4, 1946 BIR re-established (BIR was combined with
goods and services, etc. Customs during Japanese Era)
 word first appeared in the fourteenth century  Oct 1, 1947 by virtue of Executive Order 94, BIR re-organized
 from Latin “taxare” which meant to assess or appraise  Oct 23, 1947 Revenue Regulations No. V-2 divided the country
into 31 inspection units under a Provincial Revenue Agent
WHERE DID TAXATION ORIGINATE FROM?
 Origin unknown but taxation is nearly as old as human ELPIDIO QUIRINO (1948-1953)
society  Impetus (driving force) for economic growth:
 Earliest tax records: Ancient city-state of Lagash (modern Implementation of import and exchange controls that led to
day Iraq), northwest of the Tigris and Euphrates Rivers IMPORT SUBSTITUTION DEVELOPMENT
o 6000 B.C.  Expansion of viable manufacturing sector reducing economic
o Clay tablets dependence on imports
o Bala system (means rotation)  Amendments on the National Internal Revenue Code
o Focus on one area of the citystate, assessing and (Commonwealth Act No. 466)
taxing one area each month o Republic Act No. 564, Aug 11, 1950
o Taxes included livestock, fish, grain, labour and o Republic Act No. 579, Sept 15, 1950
craft products o Republic Act No. 586, Sept 22, 1950
o Taxes were very low o Republic Act No. 587, Sept 22,1950
o War time: tax rate was ten percent of all goods,  Jan 1, 1951 2nd major reorganization within BIR
which were primarily composed of food.  New tax measures passed
 Republic Act 690 Implementation of Withholding Tax System
WHY PAY TAX?
 Lifeblood of government Withholding Tax - an income tax to be paid to the government by the
 Taxes und projects and expenditures that serve the public payer of the income rather than by the recipient of the income
interest
 Taxes are used to finance basic services such as education  This method of collecting income tax upon receipt of the
and health care income resulted to the collection of approximately 25% of the
 Taxes are vital to the economy's growth and improvement total income tax collected during the said period
of the country’s citizens' lives  Increased government revenues
 Republic Act No. 722
o June 6, 1952
HISTORY OF PHILIPPINE TAXATION o An Act to Exempt the Holding of Operas,
- Pre-colonial Concerts, Recitals, Dramas, Painting and Art
- Spanish Era Exhibitions, Flowers Shows, and Literary,
- American Era Oratorical or Musical Programs from the
- Japanese Era Payment of Any National or Municipal
- 1946-present Amusement Tax
o Post War Era  Tax revenue: increased twofold 1953 vs 1948
o Manuel Roxas
o Elpidio Quirino RAMON MAGSAYSAY (1953-1957)
o Ramon Magsaysay  March 1, 1954 3rd major reorganization
o Carlos P. Garcia  Republic Act No. 991
o Diosdado Macapagal o June 4, 1954
o Ferdinand Marcos Admin o An Act Amending the First Paragraph of Sec.
o Corazon Aquino Admin Two Hundred and Sixty of the National Internal
o Fidel Ramos Admin Revenue Code by Reducing the Amusement
o Joseph Estrada Admin Tax on Boxing Exhibitions and Prohibiting
o Gloria Arroyo Admin Municipal Corporations from Levying Further
o Benigno Aquino III Admin Taxes on Such Exhibitions Except Up to the
o Rodrigo Duterte Admin Amount of Five Per Centum
 July 20, 1955 1st step towards decentralization
1946-PRESENT  1956 regionalization
 Jan 1957 Collector to Commissioner
MANUEL ROXAS (1946-1948)  Jose Aranas – last collector and 1st commissioner
 World War II lead to a disrupted agriculture-based economy  Republic Act No. 284
- Capital Manila grazed to the ground o June 14, 1955
- The rest of the Philippines left untouched o An Act to Exempt from Amusement Tax All
 USA declared PH independent but PH is dependent on US Athletic Meets, School Programs and
financially Exhibitions, and Other Educational Activities
- PH needs rehabilitation funds from US Conducted by Public Schools, by Amending the
 1949 Economic situation is so PROBLEMATIC National Internal Revenue Code
 No efforts made to improve tax collection  Republic Act 1504 – June 16, 1956 Amendment on NIRC
 US advised adoption of DIRECT TAXATION  Republic Act No. 1812
o June 22, 1957
 o An Act to Exempt from Amusement Tax, Under
Certain Conditions, Boxing Exhibitions Wherein
World Championship in any Division is at Stake,
Amending for the Purpose the National Internal
Revenue Code
CARLOS P. GARCIA (1957-1961)
 Joint Legislative-Executive Tax Commission (JLETC) or
created May 15, 1959 by means of Republic Act No. 2211
o Tax research institutionalized
o The Tax Commission shall have the following
purposes and objectives:
(a) To undertake a comprehensive study of the need
for additional revenue for accelerated national
development and the sources from which this
might most equitably be derived.
(b) To re-examine the existing tax system and tax
policy structure.
(c) To conduct researches on taxation for the purpose
of improving the tax system and tax policy.
(d) To pass upon all tax measures and revenue
proposals.
(e) To recommend such reforms or revisions as may be
necessary to improve revenue collection and
administration and to formulate sound tax policy
and a more efficient tax structure.
In its deliberations for re-studying and revising our tax
policy structure, the Tax Commission shall be
guided by the following fundamental principles:
(1) To avoid increasing the tax burden of the average
taxpayer.
(2) To assess sector of the economy not now bearing
their proportionate share of the costs of
Government.
(3) To place emphasis on progressive rather than
regressive factors in the tax system, with ability to
pay as the principal criterion.
(4) To avoid impairing appropriate business incentives
(5) To use the tax structure as a legitimate instrument
for achieving social and economic justice in the
distribution of the fruits of our national economy.
 Republic Act 233
o Rewards Law
o June 19, 1959
o To strictly enforce payment of taxes and
discourage tax evasion
o Informers rewarded 25% of the revenue
collected from tax evader
 Republic Act No. 3062
o June 17, 1961
o An Act Exempting the Philippine-American
Cultural Foundation from the Payment of
Customs Duties, Import Levy, Taxes and the
Margin Fee, as Well as Donations, Contributions
and Gifts Given Thereto
DIOSDADO MACAPAGAL (1961-1965)
 He sought to curb income tax evasion, particularly by the
wealthiest families, which cost the treasury millions of
pesos yearly
 His reforms, however, were crippled by a House of
Representatives and Senate
 Republic Act No. 3676
o June 22, 1963
o An Act Exempting the Ramon Magsaysay Award
Foundation from the Payment of Taxes and Fees,
Whether National or Local, as well as
Constructions, Gifts and Donations Given Thereto
POST WAR ERA
 Post-war fiscal policy remained regressive
 Indirect taxation still contributed to three quarters of tax
revenues
Progressive tax—A tax that takes a larger percentage of income from
high-income groups than from low-income groups.
Proportional tax—A tax that takes the same percentage of income
from all income groups.
Regressive tax—A tax that takes a larger percentage of income from
low-income groups than from high-income groups.
Vertical equity—The concept that people in different income groups
should pay different rates of taxes or different percentages of their
incomes as taxes. “Unequals should be taxed unequally.”
FERDINAND MARCOS (1965-1986)
 1965 Blue Master Program - adopted to curb the abuses of
both the taxpayers and BIR personnel
 1965 Voluntary Tax Compliance Program
o designed to encourage professionals in the
private and government sectors to report their
true income and to pay the correct amount of
taxes
o tax payers learn for themselves how, what and
when to pay taxes
o tax evaders took it as pay as you like
 Republic Act No. 5448
o September 25, 1968
o An Act Imposing a Tax on Privately Owned
Passenger Automobiles, Motorcycles and
Scooters, and a Science Stamp Tax, to Constitute
a Special Science Fund, Defining the Programs,
Projects and Activities of Science Agencies to be
Financed Therefrom and for Other Purposes
 Republic Act No. 6110
o Omnibus Tax Law
o August 4, 1969 (Approved)
o September 1, 1969 (Signed)
o An Act Amending Certain Provisions of the
National Internal Revenue Code, as Amended
 Executive Order No. 206 – 1970 Payment of taxes through
banks
 1965 Implementation of the permanent Tax Account
Number (TAN)
 Presidential Decree No. 10, s. 1972
o October 2, 1972
o Reducing the Percentage Tax on Stock Relations
 Presidential Decree No. 69
o Omnibus Tax Bill for 1972
o November 24, 1972
o Designed to institute basic reforms in our
antiquated tax system by simplifying tax
incentive policies, increasing the financial
resources of the government, making it a more
effective tool for redistribution of income and
wealth and keeping it in step with modernization
 Presidential Decree No. 231, s. 1973
o June 28, 1973
o Enacting a Local Tax Code for provinces, cities,
municipalities and barrios
 Presidential Decree No. 896, s. 1976
o February 26, 1972
o Further amending RA No. 4136, otherwise known
as the Land Transportation and Traffic Code
 Presidential Decree No. 1157, s. 1977
o June 3, 1977
o Increasing the rate of Tax on winnings in Jai-Alai
and Horse-racing and the share of the
 Government from the Sweepstakes Total Prize
Fund
 Presidential Decree No. 1205, s. 1977 - October 3, 1977
Further amending PD No. 1183
 Tax system remained REGRESSIVE and UNRESPONSIVE
 1981-1985: Tax system heavily dependent on INDIRECT TAX
(70% of collection)
Indirect Tax - a tax collected by an intermediary (such as a retail store)
from the person who bears the ultimate economic burden of the tax
(such as the consumer)
 1981-1985: TAX EFFORT = 10.7%
Tax Effort – ratio between share of actual tax collection in gross
domestic product and predictable taxable capacity
The ratio of the actual tax collection to the predicted tax
revenue (taxable capacity)
An index of how effectively a country uses its available tax
instruments in collecting taxes, relative to what the country could be
reasonably expected to collect from these tax instruments
CORAZON AQUINO (1986-1992)
 Large fiscal deficit inherited from Marcos Administration
 1986 Tax Reform Program
o Major Reform: introduction of VALUE-ADDED
TAX
o Signed 1986, put to effect in 1998
o Uniform rate of 10% on sale of domestic and
imported goods and services and 0% on exports
and foreign currency denominated sales
o 10% in lieu of varied rates applicable to fixed
taxes, advanced sales tax, tax on original sale,
subsequent sales tax, compensating tax, miller’s
tax, contractor’s tax, broker’s tax, film lessors and
distributor’s tax, excise tax on solvents and
matches, and excise tax non processed
videotapes
o 2% tax on entities w/ annual sales or receipts less
than 5,200,000
o Adoption if tax credit method of calculating tax
by subtracting tax on inputs from tax on gross
sales
o Exemption of the sale of basic commodities such
as agriculture and marine food products in their
original state, price regulated petroleum
products and fertilizers
o Additional 20% tax on non-essential articles such
as jewelry, perfumes, toilet waters, yacht, and
other vessels for pleasure and sports
 Executive Order 127: Restructuring of Department of
Finance and Bureau of Internal Revenue (BIR)
o Tax collection intensified
o Computerization introduced
 Republic Act No. 7499
o May 15, 1992
o An Act Restructuring the Estate and Donor's
Taxes, amending for the Purpose Sections 77,
79(a), 83(b) and 92(a) and (b) on Transfer Taxes
of the National Internal Revenue Code, as
Amended
Estate Tax – is a tax on the right of the deceased person to transmit
his/her estate to his/her lawful heirs and beneficiaries at the time of
death and on certain transfers which are made by law as equivalent
to testamentary disposition.
Donor’s Tax – is a tax on a donation or gift, and is imposed on the
gratuitous transfer of property between two or more persons who
are living at the time of the transfer.
 Operation: Walang Lagay
o to promote the efficient and honest collection of
taxes.
 Tax Administration Program
o Commissioner Jose Ong (1989)
o to improve tax collection and simplify tax
administration
o use of the Taxpayer Identification Number (TIN)
o adoption of the New Payment Control System
and Simplified Net Income Taxation Scheme
 1992: TAX EFFORT = 15.4%
FIDEL V. RAMOS (1992-1998)
 Five-year Tax Computerization Project (TCP) undertaken,
1994
o Establishment of a modern and computerized
Integrated Tax System and Internal
Administration System
 Executive Order No. 430
o July 28, 1997
o Further streamlining the BIR in line with its
Computerized Integrated Tax System
o Provide and prepare for the full implementation
of the Computerized Integrated Tax System
(CITS) within the years 1997 and 1998
 Republic Act No. 7716 (1994)
o VAT Tax System restructured
o VAT base broadened to include services
o VAT exemptions for all cooperatives restored
(share capital per member ≤ P515,000)
o Expanded coverage of term “simple processes”
o Expanded coverage of term “original state”
o Exempted from VAT: Importation of meat, sale or
importation of coal and natural gas, educational
services by private schools accredited by CHED,
etc.
 Improved VAT law through Republic Act 7716
 RA 7717 (1994) –Shares of Stocks
 RA 7729 (1994) – Excise Tax rates on Quarry resources
reduced
 RA 8184 (1994) – Excise Tax on petroleum products
restructured
Excise Tax – is a tax imposed on goods manufactured or produced in
the Philippines for domestic sale or consumption or any other
disposition. It is also imposed on things that are imported.
 February 1994
o Presidential Task Force to develop a new
Comprehensive Tax Reform Program (CTRP) to
increase revenue by adjusting and simplifying the
tax code
o Several parts of reform package adopted and
passed separately by congress during 1996
 RA 8240 (1996) – Amendments on NIRC, taxes imposed on
distilled spirits, wines, fermented liquors, cigars and
cigarettes
 RA 8241 (1996) – Amendments on RA 7716 (VAT expanded)
and NIRC
 Republic Act No. 8424
o Tax Reform Act of 1997
o December 11, 1997
o Make tax system broad-based, simple and with
reasonable tax rates
o Minimize tax avoidance allowed by flaws and
loopholes in the system
 o Encourage payments by increasing tax
exemptions levels and lowering the highest tax
rates
o Rationalize grant of tax incentives
o Gradual rate reduction from 35% to 32% for both
corporate income and the top margin of
individual income
o Set a 2% minimum for corporate income tax
o Imposed a final withholding tax on dividends
o Increased personal income exemptions
From
Changed to
o Expanded VAT to include basic necessities such as
rice, corn, fresh, dried and canned fish, fresh
pork, beef, and poultry, fresh eggs, fresh
vegetables, root crops, coffee, sugar, cooking oil,
salt, laundry soap, detergents, firewood,
charcoal, candles and drugs classified as essential
by the DOH
JOSEPH ESTRADA (1998-2001)
 Economic Recovery Assistance Payment (ERAP) Program
o Commissioner Beethoven Rualo
o 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
 Raffle Promo: “Humingi ng Resibo, Manalo ng Libo-Libo”
o Institutionalized in 1999
o encourage and educate consumers/taxpayers to
demand sales invoices and receipts
 Large Taxpayers Monitoring System
o To closely monitor tax compliance of large
taxpayers
 RA 8761 (2000) – VAT imposed on professional services
performed by actors, singers, broadcasters, TV and stage
directors, etc., services rendered by banks, etc., and service
rendered by stock brokers, etc.
GLORIA MACAPAGAL ARROYO (2001-2010)
 Commissioner Rene Bañez (2001)
o Voluntary Assessment Program and Compromise
Settlement Program
o Electronic Filing and Payment System (eFPS) -
technology-based system that promotes the
paperless filing of tax returns and payment of
taxes
 Commissioner Guillermo Parayno (2002)
o Voluntary Assessment and Abatement Program
(VAAP) - taxpayers with under-declared
sales/receipts/income
o 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 web-based TIN application and processing
o electronic raffle of invoices/receipts
o provision of e-payment gateways
o e-substituted filing of tax returns and electronic
submission of sales reports
o Run After Tax Evaders (RATE) Program
 RA 9040 (2001) – Exempting from tax certain allowances
and benefits of AFP
 RA 9238 (2004) – Excluding several services from coverage
of VAT
 RA 9294 (2004) – Restoring tax exemption of offshore
banking units, etc.
 RA 9334 (Dec 2004) – Increasing excise tax rates imposed
on alcohol and tobacco products
 Increased government spending NO TAX COLLECTIONS
ADJUSTMENT
 Large deficits 2002-2004
 Republic Act No. 9337
o Value Added Tax Reform Law or Reformed Value
Added Tax (RVAT) Law
o May 24, 2005
o increased the corporate income tax rate from
32% to 35% but to be later on reduced to 30%
effective January 1, 2009
o removed the income tax exemption of
government-owned or controlled corporations
and instrumentalities except GSIS, SSS, PHIC and
the PCSO
o gross receipt tax on royalties, rentals of property,
real or personal, profits from exchange and all
other items treated as gross income of banks
increased from 5% to 7%.
o The following previously exempt goods and
services were made subject to the VAT, viz.:
 Domestic transport of passenger by air
and sea;
 Generation, transmission and
distribution of electricity;
 Coal and natural gas;
 Petroleum products and their raw
materials;
 Electric cooperatives;
 Non-food agricultural products;
 Marine and forest products;
 Cotton and cotton seeds;
 Importation of passenger/cargo vessels
more than 5,000 tons;
 Works of art, literary works, musical
compositions and similar creations;
 Doctors of medicine duly registered
with the Professional Regulation
Commission (PRC); and
 Lawyers registered with the Integrated
Bar of the Philippines (IBP).
 2006 VAT tax rate increased from 10% to 12%
 RA 9361 (2006) / RA 9504 (2008) – Further Amendments on
NIRC of 1997
 RA 9648 (2009) – Exempting from Documentary Stamp Tax
Shares of Stocks
Documentary Stamp Tax - a tax on documents, instruments, loan
agreements, and papers evidencing the acceptance, assignment,
sale, or transfer of an obligation, rights, or property incident thereto.
  RA 10001 (2010) – Reducing taxes on Life Insurance Policies
 RA 10026 (2010) – Income Tax exemption to local water
districts
BENIGNO AQUINO III (2010-2016)
 Republic Act No. 10351
o December 19, 2012 / January 1, 2013
o Sin Tax Reform Law
o primarily a health measure with revenue
implications
o helps finance the Universal Health Care
program of the government
o addresses public health issues relating to
alcohol and tobacco consumption
o Excise tax on liquor and cigarettes increased
o 2015 Tax from tobacco and alcohol = 1.1% of
GDP
o DOH budget increased
o Free health insurance premiums for the poor
people enrolled in Philhealth increased (55.2M
2012 to 515.4M in 2015)
o Collections from tobacco and alcohol in 2015
made up 1.1% of the Gross Domestic Product
 RA 10378 (2013) – Principle of Reciprocity as basis for the
grant of income Tax exemptions
 RA 10653 (2015) – Adjusting the 13th month pay and
other benefits ceiling excluded from the computation of
Gross Income for Purposes of Income Taxation
RODRIGO DUTERTE (2016-present)
 Republic Act No. 10963
o Comprehensive Tax Reform Program (CTRP)
o Tax Reform For Acceleration and Inclusion
(TRAIN)
o December 19, 2017
o Amendments on personal income taxation,
passive income for both individuals and
corporation, estate tax, donor’s tax, VAT, excise
tax, DST, and tax administration
o Introduced new taxes such as the excise tax on
cosmetic surgery and sugar sweetened
beverages
 Personal Income Tax (Compensation Income Earners)
From
To (effective Jan 1, 2018)
To (effective Jan 1, 2023)
o Retains income tax exemption of minimum
wage earners
o Retains exemption from tax de minimis benefits
as well as non-taxability of mandatory
contributions
o Increases amount of tax-exempt benefits ceiling
(13th month pay and other benefits) from
P82,000 to P90,000
o Imposes 20% final tax on PCSO and lotto
winnings exceeding P10,000
 Donor’s Tax
o Simplifies donor’s tax schedule from an 8-
bracket schedule rates with rates ranging from
2% to 15%, to a single rate of 6% of total gifts in
excess of P250,000
o Deletes the provision exempting from the
donor’s tax dowries or gifts made by parents to
each of their legitimate, recognized natural, or
adopted children on account of marriage
 Value-Added Tax
o Broadens VAT base
o Includes electric cooperatives in the definition of
sale or exchange of subject to VAT
o Withdrawal of zero-rated transactions
 Removes foreign currency
denominated sales from VAT zero-
rating and subjects to the VAT indirect
exporters and agents only upon the
establishment and implementation of
an enhanced VAT refund system
o Retention of VAT exemption:
 Raw agricultural and marine products
 Educational services
 Health services
 Cooperatives
 Senior citizens
 Persons with Disabilities
o Adjustments to VAT-exempt thresholds
 Inflation
 Lease of residential units
 Sale of house and lot and other
residential dwellings
o Inclusion to the list of VAT exempt transactions
 Sale of gold to BSP
 Sale of drugs and medicines prescribed
for diabetes, high cholesterol and
hypertension (Jan 1, 2019)
 Association dues, membership fees
and other assessments and charges
collected by homeowners assoc. and
condo corp.
 Transfer of property in pursuance of a
plan of merger or consolidation
 Excise Tax on Automobiles
o Hybrid vehicles or vehicles powered by electric
energy in combination with gasoline, diesel, or
any other motive power shall be subject to the
50% of the applicable tax rates on automobile
o Purely electric vehicles and pick-up trucks shall
be exempt from excise tax on automobiles
 Excise Tax on Petroleum
o Increases tax rates on petroleum products in 3 o Mineral Products
tranches beginning Jan 1, 2018 to Jan 1, 2020

 Documentary Stamp Tax

o Increases DST rates by 100% except the DST on
debt instruments which only increases by 50%
and the DST policies of insurance upon property,
fidelity bonds and other insurance, indemnity
 Excise Tax on Sweetened Beverages bonds, deeds of sales, conveyances and
o P6.00 per liter of volume capacity donation of real property which remained
 Tax on sweetened beverages using unchanged
purely caloric sweeteners and purely  Other Taxes
non-caloric sweeteners, or a mix of o Foreign Currency Deposit Unit
caloric and non-caloric sweeteners o Capital Gains of Non-traded Stocks
o P12.00 per liter of volume capacity o Stock Transactions Tax
 Tax on sweetened beverages using o Cosmetic Procedures
purely high fructose corn syrup or in  5% of gross receipts, net excise tax and
combination with any caloric or non- VAT, derived from performance of
caloric services on invasive cosmetic
o Beverages covered: procedures, surgeries, and body
 Sweetened juice drinks enhancements directed solely towards
 Sweetened tea improving, altering, or enhancing the
 Flavored water patients appearance
 All carbonated beverages
 Energy and sports drink
 Cereal and grain beverages Tax Evasion vs Tax Avoidance
 Other powdered drinks not classified as
milk, juice, tea or coffee
 Other non-alcoholic beverages that
contain added sugar
o Sweetened beverages using purely coconut sap
sugar and purely steviol glycosides are exempt
o Beverages excluded:
 All milk products, including plain milk,
infant formula milk, powdered milk, etc.
 Meal replacement and medically-
indicated beverages
 Ground coffee, instant soluble coffee
and pre-packaged powdered coffee
products
 100% natural vegetable and fruit juices
 Other Excise Taxes
o Cigarettes
Tax Exemption
 the monetary exemption of persons, people, property,
income, or transactions from taxes that would otherwise
be levied on them. Tax-exempt status can provide
complete relief from taxes, reduced rates, or tax on only a
portion of items
 generally refers to a statutory exception to a general rule

Tax Amnesty
 a limited-time opportunity for a specified group of
taxpayers to pay a defined amount, in exchange for
forgiveness of a tax liability (including interest and
penalties) relating to a previous tax period or periods and
without fear of criminal prosecution
 Tax Amnesty Act of 2019 or the Republic Act No. 11213
(March 5, 2019)