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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 POST WAR ERA
Certain Conditions, Boxing Exhibitions Wherein  Post-war fiscal policy remained regressive
World Championship in any Division is at Stake,  Indirect taxation still contributed to three quarters of tax
Amending for the Purpose the National Internal revenues
Revenue Code
Progressive tax—A tax that takes a larger percentage of income from
CARLOS P. GARCIA (1957-1961) high-income groups than from low-income groups.
 Joint Legislative-Executive Tax Commission (JLETC) or Proportional tax—A tax that takes the same percentage of income
created May 15, 1959 by means of Republic Act No. 2211 from all income groups.
o Tax research institutionalized Regressive tax—A tax that takes a larger percentage of income from
o The Tax Commission shall have the following low-income groups than from high-income groups.
purposes and objectives: Vertical equity—The concept that people in different income groups
(a) To undertake a comprehensive study of the need should pay different rates of taxes or different percentages of their
for additional revenue for accelerated national incomes as taxes. “Unequals should be taxed unequally.”
development and the sources from which this
might most equitably be derived. FERDINAND MARCOS (1965-1986)
(b) To re-examine the existing tax system and tax  1965 Blue Master Program - adopted to curb the abuses of
policy structure. both the taxpayers and BIR personnel
(c) To conduct researches on taxation for the purpose  1965 Voluntary Tax Compliance Program
of improving the tax system and tax policy. o designed to encourage professionals in the
(d) To pass upon all tax measures and revenue private and government sectors to report their
proposals. true income and to pay the correct amount of
(e) To recommend such reforms or revisions as may be taxes
necessary to improve revenue collection and o tax payers learn for themselves how, what and
administration and to formulate sound tax policy when to pay taxes
and a more efficient tax structure. o tax evaders took it as pay as you like
In its deliberations for re-studying and revising our tax  Republic Act No. 5448
policy structure, the Tax Commission shall be o September 25, 1968
guided by the following fundamental principles: o An Act Imposing a Tax on Privately Owned
(1) To avoid increasing the tax burden of the average Passenger Automobiles, Motorcycles and
taxpayer. Scooters, and a Science Stamp Tax, to Constitute
(2) To assess sector of the economy not now bearing a Special Science Fund, Defining the Programs,
their proportionate share of the costs of Projects and Activities of Science Agencies to be
Government. Financed Therefrom and for Other Purposes
(3) To place emphasis on progressive rather than  Republic Act No. 6110
regressive factors in the tax system, with ability to o Omnibus Tax Law
pay as the principal criterion. o August 4, 1969 (Approved)
(4) To avoid impairing appropriate business incentives o September 1, 1969 (Signed)
(5) To use the tax structure as a legitimate instrument o An Act Amending Certain Provisions of the
for achieving social and economic justice in the National Internal Revenue Code, as Amended
distribution of the fruits of our national economy.  Executive Order No. 206 – 1970 Payment of taxes through
banks
 Republic Act 233  1965 Implementation of the permanent Tax Account
o Rewards Law Number (TAN)
o June 19, 1959  Presidential Decree No. 10, s. 1972
o To strictly enforce payment of taxes and o October 2, 1972
discourage tax evasion o Reducing the Percentage Tax on Stock Relations
o Informers rewarded 25% of the revenue  Presidential Decree No. 69
collected from tax evader o Omnibus Tax Bill for 1972
 Republic Act No. 3062 o November 24, 1972
o June 17, 1961 o Designed to institute basic reforms in our
o An Act Exempting the Philippine-American antiquated tax system by simplifying tax
Cultural Foundation from the Payment of incentive policies, increasing the financial
Customs Duties, Import Levy, Taxes and the resources of the government, making it a more
Margin Fee, as Well as Donations, Contributions effective tool for redistribution of income and
and Gifts Given Thereto wealth and keeping it in step with modernization
 Presidential Decree No. 231, s. 1973
DIOSDADO MACAPAGAL (1961-1965) o June 28, 1973
 He sought to curb income tax evasion, particularly by the o Enacting a Local Tax Code for provinces, cities,
wealthiest families, which cost the treasury millions of municipalities and barrios
pesos yearly  Presidential Decree No. 896, s. 1976
 His reforms, however, were crippled by a House of o February 26, 1972
Representatives and Senate o Further amending RA No. 4136, otherwise known
 Republic Act No. 3676 as the Land Transportation and Traffic Code
o June 22, 1963  Presidential Decree No. 1157, s. 1977
o An Act Exempting the Ramon Magsaysay Award o June 3, 1977
Foundation from the Payment of Taxes and Fees, o Increasing the rate of Tax on winnings in Jai-Alai
Whether National or Local, as well as and Horse-racing and the share of the
Constructions, Gifts and Donations Given Thereto
Government from the Sweepstakes Total Prize
Fund  Operation: Walang Lagay
 Presidential Decree No. 1205, s. 1977 - October 3, 1977 o to promote the efficient and honest collection of
Further amending PD No. 1183 taxes.
 Tax system remained REGRESSIVE and UNRESPONSIVE  Tax Administration Program
 1981-1985: Tax system heavily dependent on INDIRECT TAX o Commissioner Jose Ong (1989)
(70% of collection) o to improve tax collection and simplify tax
administration
Indirect Tax - a tax collected by an intermediary (such as a retail store) o use of the Taxpayer Identification Number (TIN)
from the person who bears the ultimate economic burden of the tax o adoption of the New Payment Control System
(such as the consumer) and Simplified Net Income Taxation Scheme
 1992: TAX EFFORT = 15.4%
 1981-1985: TAX EFFORT = 10.7%
FIDEL V. RAMOS (1992-1998)
Tax Effort – ratio between share of actual tax collection in gross  Five-year Tax Computerization Project (TCP) undertaken,
domestic product and predictable taxable capacity 1994
The ratio of the actual tax collection to the predicted tax o Establishment of a modern and computerized
revenue (taxable capacity) Integrated Tax System and Internal
An index of how effectively a country uses its available tax Administration System
instruments in collecting taxes, relative to what the country could be  Executive Order No. 430
reasonably expected to collect from these tax instruments o July 28, 1997
o Further streamlining the BIR in line with its
CORAZON AQUINO (1986-1992) Computerized Integrated Tax System
 Large fiscal deficit inherited from Marcos Administration o Provide and prepare for the full implementation
 1986 Tax Reform Program of the Computerized Integrated Tax System
o Major Reform: introduction of VALUE-ADDED (CITS) within the years 1997 and 1998
TAX  Republic Act No. 7716 (1994)
o Signed 1986, put to effect in 1998 o VAT Tax System restructured
o Uniform rate of 10% on sale of domestic and o VAT base broadened to include services
imported goods and services and 0% on exports o VAT exemptions for all cooperatives restored
and foreign currency denominated sales (share capital per member ≤ P515,000)
o 10% in lieu of varied rates applicable to fixed o Expanded coverage of term “simple processes”
taxes, advanced sales tax, tax on original sale, o Expanded coverage of term “original state”
subsequent sales tax, compensating tax, miller’s o Exempted from VAT: Importation of meat, sale or
tax, contractor’s tax, broker’s tax, film lessors and importation of coal and natural gas, educational
distributor’s tax, excise tax on solvents and services by private schools accredited by CHED,
matches, and excise tax non processed etc.
videotapes  Improved VAT law through Republic Act 7716
o 2% tax on entities w/ annual sales or receipts less  RA 7717 (1994) –Shares of Stocks
than 5,200,000  RA 7729 (1994) – Excise Tax rates on Quarry resources
o Adoption if tax credit method of calculating tax reduced
by subtracting tax on inputs from tax on gross  RA 8184 (1994) – Excise Tax on petroleum products
sales restructured
o Exemption of the sale of basic commodities such
as agriculture and marine food products in their Excise Tax – is a tax imposed on goods manufactured or produced in
original state, price regulated petroleum the Philippines for domestic sale or consumption or any other
products and fertilizers disposition. It is also imposed on things that are imported.
o Additional 20% tax on non-essential articles such
as jewelry, perfumes, toilet waters, yacht, and  February 1994
other vessels for pleasure and sports o Presidential Task Force to develop a new
 Executive Order 127: Restructuring of Department of Comprehensive Tax Reform Program (CTRP) to
Finance and Bureau of Internal Revenue (BIR) increase revenue by adjusting and simplifying the
o Tax collection intensified tax code
o Computerization introduced o Several parts of reform package adopted and
 Republic Act No. 7499 passed separately by congress during 1996
o May 15, 1992  RA 8240 (1996) – Amendments on NIRC, taxes imposed on
o An Act Restructuring the Estate and Donor's distilled spirits, wines, fermented liquors, cigars and
Taxes, amending for the Purpose Sections 77, cigarettes
79(a), 83(b) and 92(a) and (b) on Transfer Taxes  RA 8241 (1996) – Amendments on RA 7716 (VAT expanded)
of the National Internal Revenue Code, as and NIRC
Amended  Republic Act No. 8424
o Tax Reform Act of 1997
Estate Tax – is a tax on the right of the deceased person to transmit o December 11, 1997
his/her estate to his/her lawful heirs and beneficiaries at the time of o Make tax system broad-based, simple and with
death and on certain transfers which are made by law as equivalent reasonable tax rates
to testamentary disposition. o Minimize tax avoidance allowed by flaws and
Donor’s Tax – is a tax on a donation or gift, and is imposed on the loopholes in the system
gratuitous transfer of property between two or more persons who
are living at the time of the transfer.
o Encourage payments by increasing tax o Reconciliation of Listings for Enforcement or
exemptions levels and lowering the highest tax RELIEF System - to detect under-declarations of
rates taxable income by taxpayers and the electronic
o Rationalize grant of tax incentives broadcasting system to enhance the security of
o Gradual rate reduction from 35% to 32% for both tax payments
corporate income and the top margin of o web-based TIN application and processing
individual income o electronic raffle of invoices/receipts
o Set a 2% minimum for corporate income tax o provision of e-payment gateways
o Imposed a final withholding tax on dividends o e-substituted filing of tax returns and electronic
o Increased personal income exemptions submission of sales reports
From 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
Changed to  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 Expanded VAT to include basic necessities such as o removed the income tax exemption of
rice, corn, fresh, dried and canned fish, fresh government-owned or controlled corporations
pork, beef, and poultry, fresh eggs, fresh and instrumentalities except GSIS, SSS, PHIC and
vegetables, root crops, coffee, sugar, cooking oil, the PCSO
salt, laundry soap, detergents, firewood, o gross receipt tax on royalties, rentals of property,
charcoal, candles and drugs classified as essential real or personal, profits from exchange and all
by the DOH other items treated as gross income of banks
increased from 5% to 7%.
JOSEPH ESTRADA (1998-2001) o The following previously exempt goods and
 Economic Recovery Assistance Payment (ERAP) Program services were made subject to the VAT, viz.:
o Commissioner Beethoven Rualo  Domestic transport of passenger by air
o Granted immunity from audit and investigation and sea;
to taxpayers who have paid 20% more than the  Generation, transmission and
tax paid in 1997 for income tax, VAT and/or distribution of electricity;
percentage taxes  Coal and natural gas;
 Raffle Promo: “Humingi ng Resibo, Manalo ng Libo-Libo”  Petroleum products and their raw
o Institutionalized in 1999 materials;
o encourage and educate consumers/taxpayers to  Electric cooperatives;
demand sales invoices and receipts  Non-food agricultural products;
 Large Taxpayers Monitoring System  Marine and forest products;
o To closely monitor tax compliance of large  Cotton and cotton seeds;
taxpayers  Importation of passenger/cargo vessels
 RA 8761 (2000) – VAT imposed on professional services more than 5,000 tons;
performed by actors, singers, broadcasters, TV and stage  Works of art, literary works, musical
directors, etc., services rendered by banks, etc., and service compositions and similar creations;
rendered by stock brokers, etc.  Doctors of medicine duly registered
with the Professional Regulation
GLORIA MACAPAGAL ARROYO (2001-2010) Commission (PRC); and
 Commissioner Rene Bañez (2001)  Lawyers registered with the Integrated
o Voluntary Assessment Program and Compromise Bar of the Philippines (IBP).
Settlement Program  2006 VAT tax rate increased from 10% to 12%
o Electronic Filing and Payment System (eFPS) -  RA 9361 (2006) / RA 9504 (2008) – Further Amendments on
technology-based system that promotes the NIRC of 1997
paperless filing of tax returns and payment of  RA 9648 (2009) – Exempting from Documentary Stamp Tax
taxes Shares of Stocks
 Commissioner Guillermo Parayno (2002)
o Voluntary Assessment and Abatement Program Documentary Stamp Tax - a tax on documents, instruments, loan
(VAAP) - taxpayers with under-declared agreements, and papers evidencing the acceptance, assignment,
sales/receipts/income sale, or transfer of an obligation, rights, or property incident thereto.
 RA 10001 (2010) – Reducing taxes on Life Insurance Policies o Retains exemption from tax de minimis benefits
 RA 10026 (2010) – Income Tax exemption to local water as well as non-taxability of mandatory
districts contributions
o Increases amount of tax-exempt benefits ceiling
BENIGNO AQUINO III (2010-2016) (13th month pay and other benefits) from
 Republic Act No. 10351 P82,000 to P90,000
o December 19, 2012 / January 1, 2013 o Imposes 20% final tax on PCSO and lotto
o Sin Tax Reform Law winnings exceeding P10,000
o primarily a health measure with revenue  Donor’s Tax
implications o Simplifies donor’s tax schedule from an 8-
o helps finance the Universal Health Care bracket schedule rates with rates ranging from
program of the government 2% to 15%, to a single rate of 6% of total gifts in
o addresses public health issues relating to excess of P250,000
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 o Deletes the provision exempting from the
grant of income Tax exemptions donor’s tax dowries or gifts made by parents to
 RA 10653 (2015) – Adjusting the 13th month pay and each of their legitimate, recognized natural, or
other benefits ceiling excluded from the computation of adopted children on account of marriage
Gross Income for Purposes of Income Taxation  Value-Added Tax
o Broadens VAT base
RODRIGO DUTERTE (2016-present) o Includes electric cooperatives in the definition of
 Republic Act No. 10963 sale or exchange of subject to VAT
o Comprehensive Tax Reform Program (CTRP) o Withdrawal of zero-rated transactions
o Tax Reform For Acceleration and Inclusion  Removes foreign currency
(TRAIN) denominated sales from VAT zero-
o December 19, 2017 rating and subjects to the VAT indirect
o Amendments on personal income taxation, exporters and agents only upon the
passive income for both individuals and establishment and implementation of
corporation, estate tax, donor’s tax, VAT, excise an enhanced VAT refund system
tax, DST, and tax administration o Retention of VAT exemption:
o Introduced new taxes such as the excise tax on  Raw agricultural and marine products
cosmetic surgery and sugar sweetened  Educational services
beverages  Health services
 Personal Income Tax (Compensation Income Earners)  Cooperatives
From  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
To (effective Jan 1, 2018) 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
To (effective Jan 1, 2023) 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
o Retains income tax exemption of minimum 50% of the applicable tax rates on automobile
wage earners 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)