Taxation

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Questions and Answers

What is a state?

A political unit with the power to make laws and enforce them, residing within a specific territory. It is a sovereign system governed by a community of citizens who identify as a nation.

What are the four important factors of a state?

Population, Territory, Sovereignty, Government

What are the three powers of the state?

Police Power, Power of Eminent Domain, Power of Taxation (correct)

Police Power, Power of Eminent Domain, Power of Government

Police Power, Power of Eminent Domain, Power of Justice

Police Power, Power of Justice, Power of Taxation

Which of these is NOT a characteristic of taxes?

Taxes are a form of penalty. Signup and view all the answers

What specific provision in the Tariff and Customs Code of the Philippines allows for duty-free privileges on personal effects?

Section 105 of the Tariff and Customs Code of the Philippines (TCCP) Signup and view all the answers

Who are entitled to duty-free privileges in the Philippines?

Returning residents and Former Filipinos Signup and view all the answers

OFWs must have stayed abroad continuously for at least 6 months to qualify for duty-free privileges.

True Signup and view all the answers

What is taxation?

Taxation is the practice of collecting taxes from citizens based on their earnings and property, and represents a government mechanism to raise funds. Signup and view all the answers

Taxation is meant to only benefit individual citizens.

False Signup and view all the answers

What is the purpose of tax policies?

To generate capital for development, Allocate resources efficiently, Ensure fair distribution of economic effort, and Maintain economic difference. Signup and view all the answers

What are the main objectives of tax compliance?

To ensure that taxpayers are paying the right amount of tax at the right time and securing the correct tax allowances and tax reliefs. Signup and view all the answers

Tax non-compliance is punishable by the law.

True Signup and view all the answers

The type of tax levied on an employee's salary is called a ______ tax.

payroll Signup and view all the answers

What is the most common name for taxes levied at the point of sale?

Sales tax or Value-Added Tax (VAT) Signup and view all the answers

What type of tax is levied on airline tickets?

Travel tax Signup and view all the answers

What type of tax system did the ancient Filipinos utilize in the pre-colonial era?

Tribute system Signup and view all the answers

Who were the primary beneficiaries of the tribute system in the pre-colonial Philippines?

The datu and their families Signup and view all the answers

What is the name of the government in the pre-colonial Philippines?

Barangays Signup and view all the answers

What was the name of the tax system introduced by the Spanish in the Philippines?

All of the above Signup and view all the answers

What were the main challenges faced by the Spanish in collecting tributes from the Filipinos?

The dispersed nature of Filipino settlements made collecting tributes challenging. The Spanish aimed to centralize Filipinos into settlements called pueblos to make tax collection more efficient, which led to the reduction system. Signup and view all the answers

The Spanish imposed a tax exclusively on household income.

False Signup and view all the answers

What key development significantly impacted the Filipino economy during the Spanish period?

The establishment of the Manila-Acapulco Galleon Trade. Signup and view all the answers

What type of taxes did the Spanish introduce in 1878 that were based on individual's income?

Urbana Tax and Industria Tax Signup and view all the answers

The Spanish colonial government used a tobacco monopoly.

True Signup and view all the answers

What was the major element of Spanish colonial taxation in the Philippines that involved forced labor?

Polo y Servicio Signup and view all the answers

What significant economic impact did the Polo y Servicio system have?

The Polo y Servicio contributed to the widening gap between the rich and poor in the Philippines. Signup and view all the answers

What was the name of the Filipino tax that could be paid with food or labor?

All of the above Signup and view all the answers

What was the term for the fee that could exempt a person from the Polo y Servicio?

Falla or Multa Signup and view all the answers

What type of tax was the Diezmos Prediales?

Tax on agricultural produce Signup and view all the answers

What is the purpose of a Sanctorum tax?

The Sanctorum tax was paid directly to the local church, contributing to its upkeep and supporting the clergy Signup and view all the answers

What was the purpose of the Vinta tax?

The Vinta tax was levied on coastal provinces in Western Luzon to fund defense against Muslim pirates. Signup and view all the answers

What was the purpose of the Donativo de Zamboanga tax?

The Donativo de Zamboanga tax was allocated for military efforts and the conquest of Jolo. Signup and view all the answers

What happened to the tax system in the Philippines once the Americans arrived?

The Americans initially maintained the Spanish taxation system with some adjustments, recognizing that some aspects of it were outdated. The American military government stopped contracts for opium sales, lotteries, and mint charges and replaced the “Urbana” tax with a land tax payable annually. This change shifted the taxation framework from residential property to land ownership, covering urban and rural areas, and aimed to modernize the system. Signup and view all the answers

The American government in the Philippines introduced a national income tax in 1914.

True Signup and view all the answers

What important law was enacted by the Americans to address issues with land tax collection?

The Internal Revenue Law of 1904 Signup and view all the answers

What key tax reforms were implemented during the Commonwealth period?

The Commonwealth period saw significant tax reforms, including increased income tax rates, the abolition of the Cedula tax and its replacement with a residence tax in 1940, and the introduction of the National Internal Revenue Code in 1939. These reforms aimed to create a more equitable tax system and improve revenue collection. Signup and view all the answers

What major event happened during World War II that greatly impacted the Philippine tax system?

World War II led to a disruption in foreign trade, which crippled the Philippine economy and forced a reliance on domestic taxation. Signup and view all the answers

The Philippine economy recovered quickly after World War II.

False Signup and view all the answers

What was a major challenge facing the Philippines in the post-war period?

All of the above Signup and view all the answers

What was a primary reason why President Roxas rejected the US recommendation to implement direct taxes?

President Roxas feared that implementing direct taxes would upset his political allies. Signup and view all the answers

What major tax reform was introduced by President Corazon Aquino in 1986?

The Value Added Tax (VAT) Signup and view all the answers

What was the main benefit of Aquino's VAT reform?

Aquino's VAT reform led to a significant increase in tax revenue, helping to bolster the country's economic growth. Signup and view all the answers

President Fidel Ramos implemented the VAT in the Philippines.

False Signup and view all the answers

What major tax reform was introduced by President Gloria Macapagal-Arroyo?

The Expanded Value-Added Tax (E-VAT) Signup and view all the answers

What was the focus of President Benigno Aquino III's tax reform efforts?

President Aquino III focused on adjusting existing taxes rather than introducing new ones. This included increases in excise taxes on alcohol and cigarettes as part of the Sin Tax Reform. Signup and view all the answers

What was a key impact of the Sin Tax Reform?

The Sin Tax Reform led to increased revenue collection and funded health services, significantly raising the budget of the Department of Health. Signup and view all the answers

What is the TRAIN Law?

The Tax Reform for Acceleration and Inclusion (TRAIN) Law, introduced by President Rodrigo Duterte in 2018, exempted Filipinos earning P250,000 or less from income tax, and included new taxes on fuel, cars, and sugary drinks. Signup and view all the answers

The Philippine fiscal policy has largely been successful in achieving its goals without any challenges.

False Signup and view all the answers

What are the key objectives of the Philippine tax system?

The primary objectives are to achieve a more equitable tax system, generate sustainable economic growth and address corruption by fostering a transparent and accountable government. Signup and view all the answers

What is the primary goal of President Ferdinand Marcos Jr.'s CREATE MORE Act?

This Act aims to enhance job creation, promote economic growth, and encourage investment by simplifying tax procedures and offering incentives to businesses. Signup and view all the answers

What specific measure was introduced by President Marcos Jr. to address the issue of local taxation?

The CREATE MORE Act introduced changes to local taxation, particularly during the Income Tax Holiday, to encourage businesses to invest in the Philippines. Signup and view all the answers

Study Notes

Taxation in the Philippines

Taxation is a crucial government function for revenue generation and citizen welfare improvement.
The Philippines' taxation system has evolved significantly through historical periods such as colonial rule and the development of the country.

What is a state?

A state is a political entity with the power to make and enforce laws within a defined territory.
It's a sovereign system of government responsible for its citizens.
Key factors of a state include population, territory, and sovereignty (supreme governing power).
Government is a system of social control.

Important Factors of a State

Population: The total number of people living in a specific area (e.g., country, city).
Territory: A geographical area under a state's control and jurisdiction.
Sovereignty: The supreme power of a state to govern itself without outside interference.

Powers of the State

Police Power: The authority to create laws protecting citizens' welfare, health, and safety (the most comprehensive of the three).
Power of Eminent Domain: The right to use private property for public use.
Power of Taxation: The authority to levy taxes on goods and services to fund the government.

Characteristics of Taxes

Compulsory: Taxes are legally mandated payments to the government.
Contribution: Taxes are community contributions and assist the government in covering its expenses.
Public Benefit: Taxes benefit society as a whole, not just specific individuals.
No Direct Benefit: Individuals do not directly receive rewards from the government for paying taxes.
Paid Out of Income: Taxes are paid from the income received by the taxpayer.
Tax is not the cost of the benefit. The taxes paid don't determine the worth or quality of the services rendered.
Taxes are for economic growth and welfare. Maximizing social wellbeing is the primary motive of governments.
Tax is not a penalty. No additional punishment accompanies tax payment.
Tax is not a debt: Tax itself is not a debt, while failure to pay is punishable by law
Taxes must be equal and equitable to all

BIR Revenue Regulation No. 1-2011

This regulation defines Overseas Contract Workers (OFWs) or Overseas Filipino Workers (OFWs).
Key elements of this regulation include income tax for OFWs and details on the tax treatment of income earned by them.

Duty and Tax-Free Privileges

Privileges are granted under the Tariff and Customs Code of the Philippines (Section 105).
Some individuals can bring in personal effects and household goods duty-free.
Returning residents who have worked or resided abroad for more than six months and former Filipinos who have gotten foreign citizenship qualify.
The value of the exempt personal effects/household items is limited and can only be claimed once a calendar year.

Extent of Duty and Tax-Free Privileges

Returning Residents: Exempt for personal effects and household items used abroad as long as the value doesn't exceed P10,000. A 50% duty applies to excess value.
Overseas Filipino Workers (OFWs): Have privileges granted to returning residents allowing bringing certain amounts of used home appliances duty-free, but subject to limitations.
OFWs must declare the privilege under oath.

Pre-Colonial Taxation

The government was called "barangays.".
Ancient Filipinos practice paying their taxes to the leader who protects them.
The different societies had different rules on who was paying the taxes
Different payment methods included food or tribute.
Non-payment of taxes was a punishable offense.
The ruling class didn't have to pay the taxes.

Pre-Colonial Era (3 Classes)

Three social classes were defined: Tumao, Timawa, and Alipin.
The ruling class (Tumao) typically did not pay taxes.
The Timawa (warrior class) and free men paid taxes.
Slaves (Alipin) did not pay taxes.

Spanish Period (1521-1821)

The Spanish introduced the reducción system.
Collecting tributes from the Filipinos
Establishing settlements and managing them.
Notably, the principales (local elites), alcaldes, gobernadores, and soldiers were exempt from paying tributos.
The Cedula Personal was a personal identification required to stop the payment of tribute.
The Manila-Acapulco galleon trade developed during this time.
Direct and indirect taxes were introduced.
They profit from monopolies.

American Period (1898-1901)

The goal under American rule was to make the economy self-sufficient.
They mostly kept the Spanish taxation system.
The military governments stopped the opium sales, the lottery, and mint charges.
The "urbana" tax on the annual rental of urban real estate was replaced with a land tax.
The new Internal Revenue Law provided ten major revenue sources (e.g., license taxes on alcoholic beverages and tobacco).
Taxes are now imposed based on specific goods and services.
Implementing taxes on certain goods, including alcohol, tobacco, and cigarettes, was common.

Tax Policies are Crafted To:

Generate capital for development
Allocate resources efficiently
Ensure fair distribution of economic effort
Maintain economic growth

C

Commonwealth Period (1935-1946)

Several significant tax reforms were implemented during this period to create a more equitable and just taxation system that aimed to address economic disparities among citizens.
In 1936, the government made a notable move by increasing income tax rates specifically for higher earners, reflecting a progressive tax policy designed to ensure that wealthier individuals contributed a fairer share to public finances.
The cedula tax, which was a form of tax on individual identity cards, was abolished in 1937. However, this was replaced by a residence tax, a shift intended to simplify taxation and enhance compliance among citizens based on their residency rather than income status.
Overall, the reformed system aimed to improve revenue collection significantly to support governmental functions and public services, ensuring that adequate funds were available for national development during a challenging economic period.

Fiscal Policy from 1946 to Present

World War II had mixed effects on the Philippine economy.
Reliance on U.S. aid continued to be an issue.
Implementing direct taxes was recommended but never fully implemented in most cases.
A continuous struggle against corruption and elite influence has been persistent.

Types of Taxes in the Philippines

Local Taxes: Involve the local government
National Taxes: Involve the Central government

Major Revenue Agencies

Bureau of Internal Revenue (BIR): Collects various taxes.
Bureau of Customs: Manages import and export activities.

National Taxes

Capital Gains Tax: Tax on profits from selling capital assets.
Documentary Stamp Tax: Tax on documents like loan agreements.
Donor's Tax: Tax on gifts or donations.
Estate Tax: Tax on a deceased person's estate.
Income Tax: Tax on annual profits from property.
Percentage Tax: Tax on businesses with below VAT threshold.
Value-Added Tax (VAT): Tax on the sale of goods and services.
Excise Tax: Tax on goods produced for domestic sale.
Withholding tax: A tax withheld from employee salaries, remitted to the government.
Expanded withholding tax: tax on specific payments, creditable against income tax.

Tax Compliance and Non-Compliance

Tax compliance is essential for the proper functioning of government.
Non-compliance (failure to pay in a timely manner and evasion or rebellion) is punishable by the law.

Specific Eras of Philippine Taxation

Pre-Colonial
Spanish period
American period
Commonwealth period

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Questions and Answers

What is a state?

What are the four important factors of a state?

What are the three powers of the state?

Which of these is NOT a characteristic of taxes?

What specific provision in the Tariff and Customs Code of the Philippines allows for duty-free privileges on personal effects?

Who are entitled to duty-free privileges in the Philippines?

OFWs must have stayed abroad continuously for at least 6 months to qualify for duty-free privileges.

What is taxation?

Taxation is meant to only benefit individual citizens.

What is the purpose of tax policies?

What are the main objectives of tax compliance?

Tax non-compliance is punishable by the law.

The type of tax levied on an employee's salary is called a ______ tax.

What is the most common name for taxes levied at the point of sale?

What type of tax is levied on airline tickets?

What type of tax system did the ancient Filipinos utilize in the pre-colonial era?

Who were the primary beneficiaries of the tribute system in the pre-colonial Philippines?

What is the name of the government in the pre-colonial Philippines?

What was the name of the tax system introduced by the Spanish in the Philippines?

What were the main challenges faced by the Spanish in collecting tributes from the Filipinos?

The Spanish imposed a tax exclusively on household income.

What key development significantly impacted the Filipino economy during the Spanish period?

What type of taxes did the Spanish introduce in 1878 that were based on individual's income?

The Spanish colonial government used a tobacco monopoly.

What was the major element of Spanish colonial taxation in the Philippines that involved forced labor?

What significant economic impact did the Polo y Servicio system have?

What was the name of the Filipino tax that could be paid with food or labor?

What was the term for the fee that could exempt a person from the Polo y Servicio?

What type of tax was the Diezmos Prediales?

What is the purpose of a Sanctorum tax?

What was the purpose of the Vinta tax?

What was the purpose of the Donativo de Zamboanga tax?

What happened to the tax system in the Philippines once the Americans arrived?

The American government in the Philippines introduced a national income tax in 1914.

What important law was enacted by the Americans to address issues with land tax collection?

What key tax reforms were implemented during the Commonwealth period?

What major event happened during World War II that greatly impacted the Philippine tax system?

The Philippine economy recovered quickly after World War II.

What was a major challenge facing the Philippines in the post-war period?

What was a primary reason why President Roxas rejected the US recommendation to implement direct taxes?

What major tax reform was introduced by President Corazon Aquino in 1986?

What was the main benefit of Aquino's VAT reform?

President Fidel Ramos implemented the VAT in the Philippines.

What major tax reform was introduced by President Gloria Macapagal-Arroyo?

What was the focus of President Benigno Aquino III's tax reform efforts?

What was a key impact of the Sin Tax Reform?

What is the TRAIN Law?

The Philippine fiscal policy has largely been successful in achieving its goals without any challenges.

What are the key objectives of the Philippine tax system?

What is the primary goal of President Ferdinand Marcos Jr.'s CREATE MORE Act?

What specific measure was introduced by President Marcos Jr. to address the issue of local taxation?

Study Notes

Taxation in the Philippines

What is a state?

Important Factors of a State

Powers of the State

Characteristics of Taxes

BIR Revenue Regulation No. 1-2011

Duty and Tax-Free Privileges

Extent of Duty and Tax-Free Privileges

Pre-Colonial Taxation

Pre-Colonial Era (3 Classes)

Spanish Period (1521-1821)

American Period (1898-1901)

Tax Policies are Crafted To:

C

Commonwealth Period (1935-1946)

Fiscal Policy from 1946 to Present

Types of Taxes in the Philippines

Major Revenue Agencies

National Taxes

Tax Compliance and Non-Compliance

Specific Eras of Philippine Taxation

Studying That Suits You

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