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timawa class,
warrior class or the the third rank of nobility" and "free men,
neither chiefs nor slaves". required to render military service to
the datu in hunts, land wars or sea raids .
They could acquire property, acquire any job they want, pick
their own wives, and acquire an Alipin. They were however
expected to pay taxes, and support the Maginoo class. They are
the only class to pay taxes, and hence their importance in the
community.
By 1884, the tribute was replaced by the Cedula personal, wherein colonists
were required to pay for personal identification. Everyone over the age of 18
was obliged to pay.
During the 17th and 18th centuries, the Contador de' Resultas served as
the Chief Royal Accountant whose functions were similar to the
Commissioner of Internal Revenue. He was the Chief Arbitrator whose
decisions on financial matters were final except when revoked by the Council
of Indies. During these times, taxes that were collected from the inhabitants
varied from tribute or head tax of one gold maiz annually; tax on value of
jewelries and gold trinkets; indirect taxes on tobacco, wine, cockpits, burlas
and powder. From 1521 to 1821, the Spanish treasury had to subsidize the
Philippines in the amount of P 250,000.00 per annum due to the poor
which a special fund was created has been fulfilled or abandoned, the balance, if
any, shall be transferred to the general funds of the government.(Chan R.)
(2) No money shall be paid out of the Treasury except in pursuance of
an appropriation made by law.(Chan R.)
(3) No public money or property shall be appropriated, applied, or
used, directly or indirectly, for the use, benefit, or support of any sect, church,
denomination, sectarian institution, or system of religion, or for the use, benefit, or
support of any priest, preacher, minister, or other religious teacher or dignitary as
such, except when such priest, preacher, minister, or dignitary is assigned to the
armed forces or to any penal institution, orphanage, or leprosarium.(Chan R.)
Section 12.
(1) The rule of taxation shall be uniform.
(2) The National Assembly may, by law, authorize the President,
subject to such limitations and restrictions as it may impose, to fix, within specified
limits, tariff rates, import or export quotas, and tonnage and wharfage duties.
(3) Cemeteries, churches and parsonages or convents appurtenant
thereto, and all lands, buildings and improvements used exclusively for religious,
charitable or educational purposes, shall be exempt from taxation.
Japanese regime (1942-1945)
Section 13. In times of war or other national emergency, the National
Assembly may by law authorize the President, for a limited period and subject
to such restrictions as it may prescribe, to promulgate rules and regulations
to carry out a declared national policy.
Section 14. When the National Assembly is not in session, the President may,
in cases of urgent necessity, promulgate rules and ordinances which shall
have the force and effect of law until disapproved by resolution before the
end of the next regular session of the National Assembly.
Japanese regime (1942-1945)
During July 23, 1943, The Japanese occupation administration in the
Philippine Islands has imposed a special war tax on all Jews, according to a
report appearing in the Deutsche Beobachter in Asian, a copy of which was
received here today.
The German report states that wealthy Jews, who own real estate and
big business concerns will be forced to surrender (50%)fifty percent
of their holdings. Other Jews will be obliged to pay a tax equivalent to
one-third the value of all their possessions.
The Jews have been given until the end of the year to pay, the publication
discloses, adding that those unable to pay the levy by then will have their
possessions sold at auction to satisfy the tax. (According to the most recent
statistics available, there are only about 1,500 Jews in the Philippine Islands,
500 of whom are long-time residents and the other 1,000 refugees who
settled there since the Nazis came to power.)
It was reported that the Japanese had established a ghetto for the Philippine
Jews at Manila, because, they charged, the Jews were aiding the guerrillas.
Post War Era
July 4, 1946, when the Philippines gained its independence from the United
States, the Bureau was eventually re-established separately.
October 1, 1947,This led to a reorganization, by virtue of Executive Order No.
94, wherein the following were undertaken:
informers were rewarded the 25% equivalent of the revenue collected from
the tax evader.
1964, the Philippines was re-divided anew into 15 regions and 72 inspection
districts. The Tobacco Inspection Board and Accountable Forms
Committee were also created directly under the Office of the Commissioner.
Marcos Administration (1965-1986)
1965,The appointment of Misael Vera as Commissioner led the Bureau.
The most notable programs implemented were the "Blue Master Program"
adopted to curb the abuses of both the taxpayers and BIR personnel and the
"Voluntary Tax Compliance Program was designed to encourage professionals
in the private and government sectors to report their true income and to pay the
correct amount of taxes
It was also during Commissioner Vera's administration that the country was
further subdivided into 20 Regional Offices and 90 Revenue District Offices, in
addition to the creation of various offices which included the Internal Audit
Department (replacing the Inspection Department), Administrative Service
Department, International Tax Affairs Staff and Specific Tax Department.
Marcos Administration (1965-1986)
1970,Providing each taxpayer with a permanent Tax Account Number (TAN)
not only facilitated the identification of taxpayers but also resulted to faster
verification of tax records.
Similarly, the payment of taxes through banks (per Executive Order No. 206),
as well as the implementation of the package audit investigation by industry
are considered to be important measures which contributed significantly to
the improved collection performance of the Bureau.
September 21, 1972, The proclamation of Martial Law marked the advent of
the New Society and ushered in a new approach in the developmental efforts
of the government.
(1972-1980),Organization-wise, the Bureau had also undergone several
changes during the Martial Law period.
Marcos Administration (1965-1986)
1976, under Commissioner Efren Plana's administration, the Bureau's
National Office transferred from the Finance Building in Manila to its own 12storey building in Quezon City, inaugurated on June 3, 1977.
Year 1977 that President Marcos promulgated the National Internal
Revenue Code of 1977, which updated the 1934 Tax Code.
August 1, 1980, the Bureau was further reorganized under the administration
of Commissioner Ruben Ancheta. New offices were created and some
organizational units were relocated for the purpose of making the Bureau
more responsive to the needs of the taxpaying public.
Corazon Aquino Administration (1986 1992)
February 1986, After the People's Revolution, a renewed thrust towards an
effective tax administration was pursued by the Bureau. "Operation:
Walang Lagay" was launched to promote the efficient and honest collection
of taxes.
On January 30, 1987, the Bureau was reorganized under the administration of
Commissioner Bienvenido Tan, Jr. pursuant to Executive Order (EO) No.
127. Under the said EO, two (2) major functional groups headed and
rates, import and export quotas, tonnage and wharfage dues, and other
duties or imposts within the framework of the national development program
of the Government (Article VI, Section 28, paragraph 2) The President shall
have the power to veto any particular item or items in an appropriation,
revenue or tariff bill, but the veto shall not affect the item or items to which
he does not object. (Article VI, Section 27, second paragraph)
Philippine Taxing System
The Supreme Court shall have the power to review, revise, reverse, modify
or affirm on appeal or certiorari, as the law or the Rules of Court may provide,
final judgments and orders of lower courts in all cases involving the legality of
any tax, impost, assessment, or toll or any penalty imposed in relation
thereto. (Article VIII, Section 5, paragraph)
Tax exemptions are limited to those granted by law. However, no law
granting any tax exemption shall be passed without the concurrence of a
majority of all the members of the Congress. (Article VI, Section 28, par. 4).
The Constitution expressly grants tax exemption on certain
entities/institutions such as (1) charitable institutions, churches, parsonages
or convents appurtenant thereto, mosques, and nonprofit cemeteries and all
lands, buildings and improvements actually, directly and exclusively used for
religious, charitable or educational purposes (Article VI, Section 28,
paragraph 3); (2) non-stock non-profit educational institutions used actually,
directly and exclusively for educational purposes. (Article XVI, Section 4(3))
In addition to national taxes, the Constitution provides for local government
taxation. (Article X, Section 5) (Article X, Section 6) Parenthetically, the Local
Government Code provides that all local government units are granted
general tax powers, as well as other revenue-raising powers like the
imposition of service fees and charges, in addition to those specifically
granted to each of the local government units. But no such taxes, fees and
charges shall be imposed without a public hearing having been held prior to
the enactment of the ordinance. The levy must not be unjust excessive,
oppressive, confiscatory or contrary to a declared national economic policy
(Section 186 and 187) Further, there are common limitations to the grant of
the power to tax to the local government, such that taxes like income tax,
documentary stamp tax, etc. cannot be imposed by the local government.
Philippine Taxing System
II. Laws
The basic source of Philippine tax law is the National Internal Revenue Law,
which codifies all tax provisions, the latest of which is embodied in Republic
Act No. 8424 (The Tax Reform Act of 1997). It amended previous
national internal revenue codes, which was approved on December 11, 1997.
A copy of the Tax Reform Act of 1997, which took effect on January 1, 1998,
Local taxation is treated separately in this Guide. There are, however, special
laws that separately provide special tax treatment in certain situations.
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III. Treaties
The Philippines has entered into several tax treaties for the avoidance of
double taxation and prevention of fiscal evasion with respect to income
taxes. At present, there are 31 Philippine Tax Treaties in force. Copies
are available at the BIR Library and the International Tax Affairs Division of
the BIR, which is under the Deputy Commissioner for Legal and Inspection
Group.
The Philippine Treaty Series, edited and annotated by Haydee Yorac and
published by Law Publishing House, University of the Philippines, is available
in seven (7) volumes, covering the years 1944 to 1978 . The Philippine
Treaty Index, by Benjamin Domingo, covers the years 1978 to 1982. A
copy of the Philippine Treaty Index is available in the Department of Foreign
Affairs (DFA) Library. These publications contain treaties entered into by the
Philippines. Tax privileges and exemptions granted under treaties to which
the Philippines is a signatory are recognized under Philippine tax law. Copies
of treaties entered into by the Philippines with other countries and/or
international organizations, from 1983 up to the present.
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IV.
Administrative Material
The Secretary of Finance, upon the recommendation of the Commissioner,
promulgates needful rules and regulations for the effective enforcement of
the provisions of the Tax Code (Section 244, Tax Code of 1997). The
Commissioner of Internal Revenue, however, has the exclusive and original
power to interpret the provisions of the Tax Code, but subject to review by the
Secretary of Finance.
Administrative issuances which may be relied upon in interpreting the
provisions of the Tax Code, which are signed by the Secretary of Finance,
or the Commissioner of Internal Revenue, or his duly authorized
representative, come in the form of Revenue Regulations, Revenue
Memorandum Orders, Revenue Memorandum Rulings, Revenue Memorandum
Circulars, Revenue Memorandum Rulings, and BIR Rulings.
Revenue Regulations (RRs) are issuances signed by the Secretary of
Finance, upon recommendation of the Commissioner of Internal Revenue,
that specify, prescribe or define rules and regulations for the effective
enforcement of the provisions of the National Internal Revenue Code (NIRC)
and related statutes.
Philippine Taxing System
Revenue Memorandum Orders (RMOs) are issuances that provide
directives or instructions; prescribe guidelines; and outline processes,
operations, activities, workflows, methods and procedures necessary in the
implementation of stated policies, goals, objectives, plans and programs of
the Bureau in all areas of operations, except auditing.
Revenue Memorandum Rulings (RMRs) are rulings, opinions and
interpretations of the Commissioner of Internal Revenue with respect to the
provisions of the Tax Code and other tax laws, as applied to a specific set of
facts, with or without established precedents, and which the Commissioner
may issue from time to time for the purpose of providing taxpayers guidance
on the tax consequences in specific situations. BIR Rulings, therefore, cannot
contravene duly issued RMRs; otherwise, the Rulings are null and void ab
initio.
Revenue Memorandum Circular (RMCs) are issuances that publish
pertinent and applicable portions, as well as amplifications, of laws, rules,
regulations and precedents issued by the BIR and other agencies/offices.
BIR Rulings are the official position of the Bureau to queries raised by
taxpayers and other stakeholders relative to clarification and interpretation of
tax laws.
Revenue Regulations, Revenue Memorandum Orders, Revenue Memorandum
Rulings, Revenue Memorandum Circulars, Revenue Memorandum Rulings.
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V. Case Law
In the Philippines, Supreme Court decisions form part of the law of the
land. As such, decisions by the Supreme Court in the exercise of its power to
review, revise, reverse, modify or affirm on appeal or certiorari, as the law or
the Rules of Court may provide, final judgments and orders of lower courts
cases involving the legality of any tax, impost, assessment, or toll or any
penalty imposed in relation thereto are adhered to and recognized as binding
interpretations of Philippine tax law. Court of Appeals and Court of Tax
Appeals decisions which have become final and executory are also
recognized interpretations of Philippine tax law.
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VI. Treatises and other books
There are no Philippine treatises exclusively devoted to Philippine Tax
law but various Philippine authors have come up with annotated versions of
the Tax Code..
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VII. Periodicals
Periodicals on Philippine tax law are the:
(1) Philippine Revenue Service published by the BIR from 1969-1980;
(2) Philippine Revenue Journal which was both published by the Bureau of
Internal Revenue from 1969 to 2000; and
(3) the Tax Monthly, published by the National Tax Research Center (NTRC).
Philippine Taxing System
VIII. Local Government Tax Law
Local government taxation in the Philippines is based on the constitutional
grant of the power to tax to the local governments.
Local taxes may be imposed, as the Constitution grants, to each local
government unit, the power to create its own sources of revenues and to
levy taxes, fees, and charges which shall accrue to the local governments
(Article X, Section 5). With respect to national taxes, local Government units
shall have a just share, as determined by law, in the national taxes which
shall be automatically released to them (Article X, Section 6).
However, certain taxes, such as the following, may not be imposed by local
government units: (Section 133, Local Government Code and Tax Law and
Jurisprudence by Vitug & Acosta, copyright 2000)
(1) Income tax, except when levied on banks and other financial institutions;
(2) Documentary stamp tax;
(3) Taxes on estates, inheritance, gifts, legacies and other acquisitions mortis
causa, except as otherwise provided in the Local Government Code (Code)
(except taxes levied on the transfer of real property ownership under Section
135, and Section 151 of the Code);
Philippine Taxing System
(4) Customs duties, registration fees of vessels (except license fees imposed
under Section 149, and Section 151 of the Code), wharfage on wharves,
tonnage dues and all other kinds of customs fees, charges and dues except
wharfage on wharves constructed and maintained by the local government
unit concerned;
(5) Taxes, fees, charges and other impositions upon goods carried into or out
of, or passing through, the territorial jurisdictions of local governments in the
guise of charges for wharfage, tolls for bridges or otherwise, or other taxes in
any form whatever upon such goods or merchandise;
(6) Taxes, fees or charges on agricultural and aquatic products when sold by
marginal farmers or fishermen;
(7) Taxes on business enterprises certified by the Board of Investments as
pioneer or non-pioneer for a period of six and four years, respectively, from
the date of registration;
(8) Excise taxes on articles enumerated under the National Internal Revenue
Code and taxes, fees, or charges on petroleum products, but not a tax on the
business of importing, manufacturing or producing said products (Patron vs.
Pililla, 198 SCRA 82);
Philippine Taxing System
(9) Percentage tax or value-added tax on sales, barters or exchanges of
goods or services or similar transactions thereon (but not fixed graduated
taxes on gross sales or on volume of production);
(10) Taxes on the gross receipts of transportation contractors and persons
engaged in the transportation of passengers or freight by hire and common
carriers by air, land or water except as provided by the Code;
(11) Taxes on premiums paid for reinsurance or retrocession;
(12) Taxes, fees or charges for the registration of motor vehicles and for the
issuance of all kinds of licenses or permits for the driving thereof, except
tricycles;
(13) Taxes, fees, or other charges on Philippine products actually exported
except as provided by the Code (the prohibition applies to any local export
tax, fee, or levy on Philippine export products but not to any local tax, fee, or
levy that may be imposed on the business of exporting said products);
(14) Taxes, fees or charges on duly organized and registered Countryside and
Barangay Business Enterprises (R.A. No. 6810) and on cooperatives (R.A. No.
6938); and
(15) Taxes, fees or charges of any kind on the National Government, its
agencies and instrumentalities, and local government units (Section 133,
LGC)
Philippine Taxing System
IX. National Tax Research Center (NTRC)
Constituted under Presidential Decree 74, the NTRC is mandated to conduct
continuing research in taxation to restructure the tax system and raise the
level of tax consciousness among the Filipinos, to achieve a faster rate of
economic growth and to bring about a more equitable distribution of wealth
and income. Specifically, the NTRC performs the following functions:
1. Undertake comprehensive studies on the need for additional revenue for
accelerated national development and the sources from which this might
most equitably be derived;