History of Taxation in the Philippines

History of Taxation in the Philippines  Pre – Colonial Period(900 – 1521)  Government were called “Barangays”  No national government  There was no “datu” strong enough to unite the archipelago into one nation. Some barangays however united to form a confederation. It was headed by a ruler called “datu” or raja”.  Ancient Filipinos practice paying taxes for the protection from their “datu”.  The collected tax or tribute was called “buwis” or “handug”.  Pre – Colonial Period(900 – 1521)  The chieftain’s family members were enjoying exemption from paying taxes.  Non-payment of taxes was already punishable during this period.  Judicial process was influenced by religion and by waiting the intervention of the deities. Wherein Datu served as the chief judge who was assisted by group of elders in the barangay that acted as members of the jury.  Pre – Colonial Period(900 – 1521)  Three classes. ◦ ”tumao” class (includes datu) were the nobility of pure royal descent. ◦ ”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. ◦ ”oripun” class (commoners and slaves),  renders services to the tumao and timawa for debts or favors.  The Alipin did not likely make any money for their services, and hence did not pay taxes.  The priestly class were scribes that are tasked to record history, and keep track of tributes and taxes that were expected from the governed.  Spanish Period (1521 to 1898) The government introduced a “New Income – Generating means” Examples:  Manila – Acapulco Galleon Trade (1565 – 1815)  A ship trade going back and forth yearly between Manila and Acapulco.  Fundamental income – generating business for the Spanish  The Galleon trade brought silver from Nueva Castilla and silk from China by way of Manila.  Spanish Period (1521 to 1898)

Polo Y Servicio (Forced Labor)  Evolved within the framework of the Encomienda System  40 days, of men ranging from 16 to 60 years of age who were obligated to give personal services to community projects. One could be exempted from the polo by paying a fee called falla (which was worth one and a half real).  Spanish Period (1521 to 1898)  Bandala  System implemented by Spanish authorities in the Philippines that required native Filipino farmers to sell their goods to the government.  Also collected were the “mandalâ” , a round stack of rice stalks to be threshed), an annual enforced sale and requisitioning of goods such as rice.  Spanish Period (1521 to 1898)  Encomienda System (1570)  A Compliance with the decree issued by King Philip II in 1558, distributed lands in Cebu to loyal Spanish subjects. The encomienda was not actually a land grant but was a favor from the kind under which the Spaniard receiving his favor was given the right to collect tributes–or taxes–from the inhabitants of the area assigned to him. The man who received this favor was called an encomendero. The encomienda was, therefore, a public office. The encomenderos were required by law to perform the following duties:  #1. to give protection to the natives  #2. to help the missionaries convert the natives to Christianity  #3. to promote education  Spanish Period (1521 to 1898)  Tribute “Buwis”  which could be paid in cash or kind, was initially fixed at 8 reales (one real= 12.5 centavos) and later increased to 15reals, apportioned as follows: ◦ 10 reals buwis, one real diezmos prediales(tithes) ◦ 1 real to the town community chest ◦ 1 real sanctorum tax ◦ 3 reales for church support  Custom duties and income tax were also collected. 

 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

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financial condition of the country, which can be primarily attributed to the poor revenue collection system. American Period (1898 – 1946) January 1, 1940,The cédula was imposed by the Americans, when Commonwealth Act No. 465 went into effect, mandating the imposition of a base residence tax of fifty centavos and an additional tax of one peso based on factors such as income and real estate holdings. American Period (1898 – 1946) The payment of this tax would merit the issue of a residence certificate. Corporations were also subject to the residence tax. However, persons who are ineligible to pay the residence tax may be issued a certificate for twenty centavos. Example of Cedula Cedula “Residence Certificate”, is a legal identity document in the Philippines. Issued by cities and municipalities to all persons that have reached the age of majority and upon payment of a community tax, It is one of the closest single documents the Philippines has to a national system of identification. A person is required to present a cedula when he or she acknowledges a document before a notary public Takes an oath of office upon election or appointment to a government position; receives a license, certificate or permit from a public authority; pays a tax or fee; receives money from a public fund; transacts official business; or receives salary from a person or corporation. American Period (1898 – 1946) During 1973, significant amendments were put into effect following the enactment of the Local Tax Code, with amendments on the allocation of the residence tax and on who are covered under it, as well as payment provisions. During 1991,Local Tax Code were later subsumed into the Local Government Code. The residence tax and residence certificate were renamed into the current community tax and community tax certificate. American Perio (1898 – 1901) 1902, the first civil government was established under William H. Taft. However, it was only during the term of second civil governor Luke E. Wright that the Bureau of Internal Revenue (BIR) was created through the passage of Reorganization Act No. 1189 dated July 2, 1904. August 1, 1904, the BIR was formally organized and made operational under the Secretary of Finance, Henry Ide, with John S. Hord as the first Collector (Commissioner). The first organization started with 69 employees, which consisted of a Collector, Vice-Collector, one Chief Clerk, one Law Clerk, one Records Clerk and three (3) Division Chiefs. Following the tenure of John S. Hord were three (3) more American collectors, namely: Ellis Cromwell (1909-1912), William T. Holting (1912-1214) and James J. Rafferty (1914-1918). They were all appointed by the Governor-General with the approval of the Philippine Commission and the US President. During the term of Collector Holting, the Bureau had its first reorganization on January 1, 1913 with the creation of eight (8) divisions, namely: 1)

Accounting, 2) Cash, 3) Clerical, 4) Inspection, 5) Law, 6) Real Estate, 7) License and 8) Records. Collections by the Real Estate and License Divisions were confined to revenue accruing to the City of Manila.  American Perio (1898 – 1901)  In line with the Filipinization policy of then US President McKinley, Filipino Collectors were appointed. The first three (3) BIR Collectors were: Wenceslao Trinidad (1918-1922); Juan Posadas, Jr. (1922-1934) and Alfredo Yatao (19341938).  May 1921, by virtue of Act No. 299, the Real Estate, License and Cash Divisions were abolished and their functions were transferred to the City of Manila. As a result of this transfer, the Bureau was left with five (5) divisions, namely: 1) Administrative 2) Law 3) Accounting 4) Income Tax 5) Inspection. Thereafter, the Bureau established the following: 1) the Examiner's Division, formerly the Income Tax Examiner's Section which was later merged with the Income Tax Division and 2) the Secret Service Section, which handled the detection and surveillance activities but was later abolished on January 1, 1951. Except for minor changes and the creation of the Miscellaneous Tax Division in 1939, the Bureau's organization remained the same from 1921 to 1941.  In 1937, the Secretary of Finance promulgated Regulation No. 95, reorganizing the Provincial Inspection Districts and maintaining in each province an Internal Revenue Office supervised by a Provincial Agent.  Japanese regime (1942-1945)  At the outbreak of World War II, the Bureau was combined with the Customs Office and was headed by a Director of Customs and Internal Revenue.  1942,The first issue in consisted of denominations of 1, 5, 10 and 50 centavos and 1, 5, and 10 Pesos.  1943, The next year brought "replacement notes" of the 1, 5 and 10 Pesos.  1944, ushered in a 100 Peso note and soon after an inflationary 500 Pesos note. a box of matches cost more than 100 Mickey Mouse pesos. During January, Inflation plagued the country with the devaluation of the Japanese money, evidenced by a 60% inflation.  1945, the Japanese issued a 1,000 Pesos note. This set of new money, which was printed even before the war, became known in the Philippines as “Mickey Mouse Money” due to its very low value caused by severe inflation. A kilogram of camote cost around 1000 Mickey Mouse Money.  Japanese regime (1942-1945) CONSTITUTION OF THE REPUBLIC OF THE PHILIPPINES (Effective During the Japanese Occupation) [CHAN ROBLES VIRTUAL LAW LIBRARY]  under Article 3 : The Legislative  Section 11. (1) All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. If the purpose for

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:

1) the Accounting Unit and the Revenue Accounts and Statistical Division were merged into one; 2) all records in the Records Section under the Administrative Division were consolidated; 3) all legal work were centralized in the Law Division.  October 23, 1947, Revenue Regulations No. V-2 dated divided the country into 31 inspection units, each of which was under a Provincial Revenue Agent (except in certain special units which were headed by a City Revenue Agent or supervisors for distilleries and tobacco factories).  Post War Era  January 1, 1951, The second major reorganization of the Bureau took place on through the passage of Executive Order No. 392. Three (3) new departments were created, namely: 1) Legal, 2) Assessment 3) Collection.  On the latter part of January of the same year, Memorandum Order No. V-188 created the Withholding Tax Unit, which was placed under the Income Tax Division of the Assessment Department. Simultaneously, the implementation of the withholding tax system was adopted by virtue of Republic Act (RA) 690. This method of collecting income tax upon receipt of the income resulted to the collection of approximately 25% of the total income tax collected during the said period.  Post War Era  March 1, 1954 ,The third major reorganization of the Bureau took effect, through Revenue Memorandum Order (RMO) No. 41. This led to the creation of the following offices: 1) Specific Tax Division 2) Litigation Section, 3) Processing Section 4) Office of the City Revenue Examiner.  September 1, 1954, a Training Unit was created through RMO No. V-4-47.  Post War Era  The Bureau's organizational set-up expanded beginning 1956 in line with the regionalization scheme of the government. Consequently, the Bureau's Regional Offices increased to (8) eight and later into ten (10) in 1957. The Accounting Machine Branch was also created in each Regional Office.  January 1957, the position title of the head of the Bureau was changed from Collector to Commissioner. The last Collector and the first Commissioner of the BIR was “Jose Aranas”.  1958,A significant step undertaken by the Bureau. The establishment of the Tax Census Division and the corresponding Tax Census Unit for each Regional Office. This was done to consolidate all statements of assets, incomes and liabilities of all individual and resident corporations in the Philippines into a National Tax Census.  Post War Era  June 19, 1959 ,To strictly enforce the payment of taxes and to further discourage tax evasion, RA No. 233 or the Rewards Law was passed, whereby

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

supervised by a Deputy Commissioner were created, and these were: 1) the Assessment and Collection Group; 2) the Legal and Internal Administration Group.  Corazon Aquino Administration (1986 – 1992)  1988 , the advent of the value-added tax (VAT) in, a massive campaign program aimed to promote and encourage compliance with the requirements of the VAT was launched.  The adoption of the VAT system was one of the structural reforms provided for in the 1986 Tax Reform Program, which was designed to simplify tax administration and make the tax system more equitable.  Corazon Aquino Administration (1986 – 1992)  1988, that the Revenue Information Systems Services Inc. (RISSI) was abolished and transferred back to the BIR by virtue of a Memorandum Order from the Office of the President dated May 24, 1988. This transfer had implications on the delivery of the computerization requirements of the Bureau in relation to its functions of tax assessment and collection.  The entry of Commissioner Jose Ong in 1989 saw the advent of the "Tax Administration Program" which is the embodiment of the Bureau's mission to improve tax collection and simplify tax administration. The Program contained several tax reform and enhancement measures, which included the use of the Taxpayer Identification Number (TIN) and the adoption of the New Payment Control System and Simplified Net Income Taxation Scheme.  Ramos Administration (1992 – 1998)  The year 1993 marked the entry into the Bureau of its first lady Commissioner, Liwayway Vinzons-Chato. In order to attain the Bureau's vision of transformation, a comprehensive and integrated program known as the ACTS or Action-Centered Transformation Program was undertaken to realign and direct the entire organization towards the fulfillment of its vision and mission.  It was during Commissioner Chato's term that a five-year Tax Computerization Project (TCP) was undertaken in 1994. This involved the establishment of a modern and computerized Integrated Tax System and Internal Administration System.  Further streamlining of the BIR was approved on July 1997 through the passage of EO No.430, in order to support the implementation of the computerized Integrated Tax System. Highlights of the said EO included the: 1) creation of a fourth Revenue Group in the BIR, which is the Legal and Enforcement Group (headed by a Deputy Commissioner) 2) creation of the Internal Affairs Service, Taxpayers Assistance Service, Information Planning and Quality Service and the Revenue Data Centers.  Estrada Administration (1998 – 2001)  With the advent of President Estrada's administration, a Deputy Commissioner of the BIR, Beethoven Rualo, was appointed as Commissioner of Internal Revenue. One of the most significant reform measures was the implementation of the Economic Recovery Assistance Payment (ERAP) Program, which 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.

 1999 ,In order to encourage and educate consumers/taxpayers to demand sales invoices and receipts, the raffle promo "Humingi ng Resibo, Manalo ng Libo-Libo" was institutionalized. The Large Taxpayers Monitoring System was also established under Commissioner Rualo's administration to closely monitor the tax compliance of the country's large taxpayers.  The coming of the new millennium ushered in the changing of the guard in the BIR with the appointment of Dakila Fonacier as the new Commissioner of Internal Revenue. ◦ Under his administration, measures that would enhance taxpayer compliance and deter tax violations were prioritized. The most significant of these measures include: full utilization of tax computerization in the Bureau's operations; expansion of the use of electronic Documentary Stamp Tax metering machine and establishment of tie-up with the national government agencies and local government units for the prompt remittance of withholding taxes; and implementation of Compromise Settlement Program for taxpayers with outstanding accounts receivable and disputed assessments with the BIR.  Estrada Administration (1998 – 2001)  Memoranda of Agreement were also forged with the league of local government units and several private sector and professional organizations (i.e. MAP, TMAP, PCCI, FFCCCI, etc.) to help the BIR implement tax campaign initiatives.  September 1, 2000, the Large Taxpayers Service (LTS) and the Excise Taxpayers Service (ETS) were established under EO No. 175 to reinforce the tax administration and enforcement capabilities of the BIR. Shortly after the establishment of said revenue services, a new organizational structure was approved on October 31, 2001 under EO No. 306 which resulted in the integration of the functions of the ETS and the LTS.  In line with the passage of the Electronic Commerce Act of 2000 on June 14, the Bureau implemented a Full Integrated Tax System (ITS) Rollout Acceleration Program to facilitate the full utilization of tax computerization in the Bureau's operations. Under the Program, seven (7) ITS back-end systems were released in stages in RR 8 - Makati City and the Large Taxpayers Service.  Arroyo Administration (2001 – 2010)  Following the momentous events of EDSA II in January 2001, newly-installed President Gloria Macapagal-Arroyo appointed a former Deputy Commissioner, Atty. René G. Bañez, as the new Commissioner of Internal Revenue.  Under Commissioner Bañez's administration, the BIR’s thrust was to transform the agency to make it taxpayer-focused. This was undertaken through the implementation of change initiatives that were directed to: 1) reform the tax system to make it simpler and suit the Philippine culture 2) reengineer the tax processes to make them simpler, more efficient and transparent 3) restructure the BIR to give it financial and administrative flexibility

4) redesign the human resource policies, systems and procedures to transform the workforce to be more responsive to taxpayers' needs.  Measures to enhance the Bureau's revenue-generating capability were also implemented, the most notable of which were the implementation of the Voluntary Assessment Program and Compromise Settlement Program and expansion of coverage of the creditable withholding tax system. A technology-based system that promotes the paperless filing of tax returns and payment of taxes was also adopted through the Electronic Filing and Payment System (eFPS).  August 19, 2002With the resignation of Commissioner Bañez, Finance Undersecretary Cornelio C. Gison was designated as interim BIR Commissioner. Eight days later (on August 27, 2002), former Customs Commissioner, Guillermo L. Parayno, Jr. was appointed as the new Commissioner of Internal Revenue (CIR).  Arroyo Administration (2001 – 2010)  Barely a month since his assumption to duty as the new CIR, Commissioner Parayno offered a Voluntary Assessment and Abatement Program (VAAP) to taxpayers with under-declared sales/receipts/income. To enhance the collection performance of the BIR, Commissioner Parayno adopted the use of new systems such as the 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. It was also under Commissioner Parayno’s administration that the BIR expanded its electronic services to include the web-based TIN application and processing; electronic raffle of invoices/receipts; provision of e-payment gateways; e-substituted filing of tax returns and electronic submission of sales reports.  The conduct of special operations on high profile tax evaders, which resulted to the filing of tax cases under the Run After Tax Evaders (RATE) Program marked Commissioner Parayno’s administration as well as the conduct of Tax Compliance Verification Drives and accreditation and registration of cash register machines and point-of-sale machines. To improve taxpayer service, the Bureau also established a BIR Contact Center in the National Office and eLounges in Regional Offices.  Arroyo Administration  On October 28, 2006, Deputy Commissioner for Legal and Inspection Group, Jose Mario C. Buñag was appointed as full-fledged Commissioner of Internal Revenue. Under his administration, the Bureau attained success in a number of key undertakings, which included the expansion of the RATE Program to the Regional Offices; inclusion of new payment gateways.  2007, the National Program Support for Tax Administration Reform (NPSTAR), a program funded by various international development agencies, was launched to improve the BIR efficiency in various areas of tax administration (i.e. taxpayer compliance, tax enforcement and control, etc.).  June 29, 2007, Commissioner Buñag relinquished the top post of the BIR and was replaced by Deputy Commissioner for Operations Group, Lilian B. Hefti, making her the second lady Commissioner of the BIR. Commissioner Hefti focused on the strengthening of the use of business intelligence by embarking on data matching of income payments of withholding agents

against the reported income of the concerned recipients. Information sharing between the BIR and the Local Government Units (LGUs) was also intensified through the LGU Revenue Assurance System, which aims to uncover fraud and non-payment of taxes. To enhance the Bureau’s audit capabilities, the use of Computer-Assisted Audit Tools and Techniques (CAATTs) was also introduced in the BIR under her term.  Arroyo Administration (2001 – 2010)  October 2008 , With the resignation of Commissioner Hefti, former BIR Deputy Commissioner for Legal and Enforcement Group, Sixto S. Esquivias IV was appointed as the new Commissioner of Internal Revenue. Commissioner Esquivias’ administration was marked with the conduct of nationwide closure of erring business establishments under the “Oplan Kandado” Program. ◦ A Taxpayer Feedback Mechanism (through the eComplaint facility accessible via the BIR Website) was also established under his term where complaints on erring BIR employees and taxpayers who do not pay taxes and do not issue ORs/invoices can be reported. In 2009, the Bureau revived its “Handang Maglingkod” Project where the best frontline offices were recognized for rendering effective taxpayer service.  November 2009, When Commissioner Esquivias resigned Senior Deputy Commissioner, Joel L. Tan-Torres assumed the position of Commissioner of Internal Revenue. Under his administration, Commissioner Tan-Torres pursued a high visibility public awareness campaign on the Bureau’s enforcement and taxpayers’ service programs. He institutionalized several programs/projects to improve revenue collections, and these include Project R.I.P (Rest in Peace); intensified filing of tax evasion cases under the re-invigorated RATE Program; conduct of Taxpayers Lifestyle Check and development of Industry Champions. Linkages with various agencies (i.e. LTO, SEC, BLGF, PHALTRA, etc.) were also established through the signing of several Memoranda of Agreement to improve specific areas of tax administration.  Benigno Aquino III Administration (2010 – Present)  Following the highly-acclaimed inauguration of President Benigno C. Aquino III on June 30, 2010, a former BIR Deputy Commissioner, Atty. Kim S. JacintoHenares, was appointed as the new Commissioner of Internal Revenue. During her first few months in the BIR, Commissioner Henares focused on the filing of tax evasion cases under the RATE Program, in compliance with the SONA pronouncements of President Aquino.  Philippine Taxing System I.1987 Philippine Constitution sets limitations on the exercise of the power to tax.  The rule of taxation shall be uniform and equitable. The Congress shall evolve a progressive system of taxation. (Article VI, Section 28, paragraph 1)  All money collected on any tax levied for a special purpose shall be treated as a special fund and paid out for such purpose only. If the purpose for 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. (Article VI, Section 29, paragraph 3)  The Congress may, by law, authorize the President to fix within specified limits, and subject to such limitations and restriction as it may impose, tariff

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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. Philippine Taxing System 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

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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. Philippine Taxing System 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.  Philippine Taxing System  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.  Philippine Taxing System  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..  Philippine Taxing System  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;

 2. Re-examine the existing tax system and tax policy structure;  3. Conduct researches on taxation for the purpose of improving the tax system and tax policy;  4. Pass upon all tax measures and revenue proposal;  5. Recommend of such reforms and revisions as may be necessary to improve revenue collection and to formulate sound tax policy and a more efficient tax structure.  Sources  http://www.bir.gov.ph/index.php/rulings-and-legal-matters/guide-tophilippines-tax-law-research.html  http://www.bir.gov.ph/index.php/transparency/bir-history.html  Barangay (pre-colonial). (n.d.) . In Wikipedia. Retrieved June 5, 2015, from https://en.wikipedia.org/wiki/Barangay_(pre-colonial)  Magpoc, K. (2013, May 28). Pre Spanish Period in the Philippines. Retrieved from http://www.slideshare.net/Kate_JRG/pre-spanish-period-in-the-philippines  Esteria, P. (2011, November 4). Social Structure of the Lowland Filipinos during Pre-Hispanic Era and the Maharlika. Retrieved from http://kahimyang.info/kauswagan/general-blogs/726/social-structure-of-thelowland-filipinos-during-prehispanic-era-and-the-maharlika  Santos, H. (1999, July 28). Literacy in Pre-Hispanic Philippines in A Philippine Leaf. Retrieved from http://www.bibingka.com/dahon/literacy/literacy.htm  BIR History, BIR Gov’t.Ph  THE 1943 CONSTITUTION OF THE REPUBLIC OF THE PHILIPPINES (Effective During the Japanese Occupation), [CHAN ROBLES VIRTUAL LAW LIBRARY]  Japanese Reported to Have Imposed Special “war Taxes” on Jews in Philippines, [1943], Zurich, The Global Jewish News Source  http://www.slideshare.net/JRLopezGonzales/taxation-101-basic-rules-andprinciples-in-philippine-taxation-by-jr-lopez-gonzales-for-msu-iit-politicalscience-seminar