FINALS: TAXATION

Spanish Colonization (1521-1898)

Manila-Acapulco Galleon Trade (1565 1815) A ship that annually plied the Pacific from Manila to Acapulco, and back again.

Polo y Servicio

Men within the age of 16-60 years were required to render labor in the community for 40 days. Paying a falla (one and a half rea) could exempt the colonial subject from the forced labor.

Taxation

Modern taxation came with our colonial experience and the subsequent formation of the nation-state. When the archipelago was divided into political units, the people paid tributes to the , local datu or, in the case of Mindanao, the sultan. Nowadays, taxation is the government's mechanism to raise funds and improve the citizen's lives. The revenues are needed for the government to carry out its mission to protect its people.

Encomienda System

King Phillip II issued a decree in 1558 to distribute the lands in Cebu to loyal Spanish subjects. Encomenderos were given the right to collect taxes in their assigned areas. • Encomenderos were required by law to protect the natives, help the missionaries in converting natives to Christianity, and promote education. • Tribute or "buwis" could be paid in cash or kind. Aside from that, custom duties and income tax were also collected. • By 1884, the cedula replaced the tribute. Everyone at the age of 18 and above were required to pay. • The Contador de' Resultas, or the Chief Royal Accountant, was the head of the financial matters except when revoked by the Council of Indies.

Pre-Colonial Philippines

"Before 1521 we could have been anything and everything not Filipino; after 1565 we can be nothing but Filipino." (Joaquin, 2004. p. 21) There was no national government. The smallest political unit was called "barangay" (first documented by Antonio Pigafetta as balangaiand balanghai [Scott, 1994, p. 4]). A balangay or barangay is also a term for a large boat that would fit the pre- colonial society. No datu unified the archipelago as one territory, although a leader, called a rajah or a sultan, consolidated the small political units into a larger one. Pre-colonial Filipinos paid their taxes to be protected by their datu. This was called "buwis" or "handug.

Three classes in pre-colonial Visayan social structure:

1. Tumao. Noble rank, including the datu. 2. Timawa. The "free men," the warrior class, and the third rank of nobility. The class that paid taxes and could also acquire property, including slaves. 3. Oripun. Commoners and slaves. They did not pay taxes and rendered instead their services for debts or favors (Scott 1994).

The Bandala

A system requiring the Filipino farmers to sell their goods to the government. Imposed by Governor Sebastian Hurtado de Corcuera in the seventeenth century, the bandala allowed for abuse as the colonial government cnuld set the mandatory purchase of the goods at a lower price (Constantino, 1975, p. 51).

American Period (1898-1942)

• Commonwealth Act No. 465 was to impose resident tax, or cedula, which cost fifty centavos. Additional tax of one peso was also added, depending on one's income and properties. • In 1902, the first civil government was created under William H. Taft. The second civil governor, Luke E. Wright, passed the Reorganization Act No. 1189 in 1904, which created the Bureau of Internal Revenue

Post-War Philippines (1946-present)

• The BIR was re-established when the United States granted the Philippines its independence. • After the War, there was a severe lack of funds in many sectors of the government. • During the term of President Elipidio Quirino, new tax measures were passed, including higher corporate taxes. • The tax collection scheme remained problematic in the administrations that followed, since the lower class remained overburdened by taxes, while the elite who controlled the government engineered to avoid getting higher taxes. • The post-War republic saw a rise in government corruption. • The Congress did not pass any tax legislation between 1959 and 1968. • Under President Marcos, 70 percent of the total tax collection came from indirect taxes, or taxes from the consumers. Low tax yield was generated at an average annual rate of 15 percent. • Under President Corazon Aquino, the 1986 Tax Reform Program was established to improve the responsiveness of the tax system • Value-added tax (VAT) was introduced and put into effect in 1988. • The Department of Finance, along with its attached agency, Bureau of Internal Revenue, were restructured. As a result, the trust in BIR significantly increased and the tax revenue increased from 10.75 percent, in 1985, to 15.4 percent, in 1992.

Fiscal Policy (1946-present)

• Under Fidel V. Ramos, in 1997, the Comprehensive Tax Reform Program was implemented, which aimed to raise revenue in the government coffers. • His administration failed to sustain the increase in revenue because of continuous corporate tax evasions and the government's weakness to prosecute elite tax evaders. • when Gloria Macapagal-Arro president through EDSA Dos, increase in government spent having adjusted the tax collec resulting in large deficits from • Expanded Value Added Tax (E-VAT) was signed into law. • VAT tax rate increased from 10 to 12 percent.

Japanese Occupation (1942-1945)

• When World War II broke out, BIR was combined with the Customs Office, which was headed by the Director of Customs and Internal Revenue. • The Japanese issued a set of new money, which became known as the "Mickey Mouse money" because of its very low value as caused by the severe inflation. • War tax on Jews In 1943, the Japanese imposed a war tax on all Jews residing in the country. Wealthy Jews were forced to surrender 50 percent of their holdings.