Philippine Tax System

I. Introduction
The Philippine tax system is a fundamental component of the country’s fiscal policy,
designed to mobilize resources for nation-building. Taxes are collected to fund
infrastructure, social services, education, healthcare, defense, and government
operations. The system also plays a role in shaping economic behavior, encouraging
investment, and reducing inequality through progressive rates and targeted incentives.
Over the years, several reforms have been introduced to modernize tax laws, make
compliance easier, and promote inclusive economic growth.

II. Tax Types and Rates

A. Personal Income Tax (PIT)
The PIT in the Philippines is progressive, meaning the rate increases as income increases.
Under the current schedule, which took full effect in 2023 under the TRAIN Law, only
individuals earning above ₱250,000 annually are taxed. This reform aims to provide relief
to low- and middle-income earners while ensuring high earners contribute fairly.

2025 PIT Schedule:

• ₱0 – ₱250,000: 0%
• ₱250,001 – ₱400,000: 15%
• ₱400,001 – ₱800,000: 20%
• ₱800,001 – ₱2,000,000: 25%
• ₱2,000,001 – ₱8,000,000: 30%
• Above ₱8,000,000: 35%

B. Corporate Income Tax (CIT)

Corporations are taxed at a standard rate of 25%. However, with the CREATE MORE Act, a
reduced rate of 20% is available for Registered Business Enterprises (RBEs) operating under
the Enhanced Deductions Regime (EDR). This measure is intended to promote investments
in sectors that drive innovation and employment.

C. Value-Added Tax (VAT)

The VAT is a 12% consumption tax levied on the sale of goods and services. It is a major
revenue source for the government. Certain sectors, however, are exempt from VAT to
ease the burden on low-income groups and essential services.
Exemptions include:
• Basic agricultural products
• Educational services
• Books and newspapers
• Residential leases below ₱10,000/month

D. Excise Tax
Excise taxes are levied on specific goods to both generate revenue and regulate
consumption, especially for harmful products.
Examples:
• Tobacco: ₱40 per pack (with 4% annual increase)
• Sweetened Beverages: ₱12 per liter
• Non-Essential Goods: 20% tax (e.g., jewelry, perfumes)
• Coal: ₱150 per metric ton (to align with environmental goals)
E. Estate and Donor’s Tax
These are taxes on the transfer of wealth:
• Estate Tax: A flat 6% rate on the net value of the deceased’s estate.
• Donor’s Tax: Also 6%, applied to donations exceeding ₱250,000 annually. This
simplifies past systems and promotes fair taxation of wealth transfers.

III. Recent Tax Reforms

A. TRAIN Law (2017)
The Tax Reform for Acceleration and Inclusion (TRAIN) law restructured personal income
taxes and increased excise taxes on select goods.
Key Goals:
• Ease the tax burden on low- and middle-income earners
• Raise revenues for infrastructure and social programs (Build, Build, Build)
• Broaden the VAT base by limiting exemptions
• Encourage healthier lifestyles through higher excise taxes

B. CREATE MORE Act (2024)

An enhancement of the original CREATE law, this act focuses on reviving the economy
post-pandemic.
Key Provisions:
• Lowered CIT rate to 20% for eligible enterprises
• Introduced deductions for R&D and energy efficiency projects
• Extended tax incentives up to 27 years for long-term strategic industries (e.g.,
green tech, digital innovation)
• Aims to attract more foreign direct investments

C. Ease of Paying Taxes (EOPT) Act (2024)

This reform addresses the bureaucratic burden often faced by taxpayers, especially
MSMEs.
Key Features:
• Simplified and shorter tax returns
• Lower penalties and interest for late payments
• Creation of Small and Medium Taxpayer Division within the BIR for focused
assistance
• Encourages voluntary compliance and reduces corruption opportunities

IV. Tax Administration

A. Bureau of Internal Revenue (BIR)
The BIR is the main agency for tax collection, especially income and business taxes.
Key Responsibilities:
• Enforcing tax laws and collecting revenues
• Providing taxpayer education and services
• Issuing assessments and monitoring compliance
B. Bureau of Customs (BOC)
The BOC manages taxes and duties on imported goods.
Key Functions:
• Implementing customs and tariff regulations
• Collecting duties and import-related taxes
• Monitoring trade to prevent smuggling and fraud
• Playing a key role in securing borders and supporting local industries

V. Conclusion
The Philippine tax system continues to evolve with reforms aimed at fairness, simplicity,
and economic competitiveness. With changes such as the TRAIN, CREATE MORE, and
EOPT laws, the system now provides greater incentives for businesses, broader protections
for low-income groups, and simplified compliance for taxpayers. Staying informed about
these developments helps individuals and businesses

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Historical Development of Philippine Taxation by President

I. Title
Evolution of Tax Policies in the Philippines: A Presidential Perspective

II. Introduction

Background:
Taxation has always been a vital mechanism for the Philippine government to fund its
operations, provide public services, and support development initiatives. From
infrastructure and education to health care and national defense, taxes form the
lifeblood of the state. As political landscapes and economic conditions evolved, so too
did the nation’s tax policies, shaped significantly by the priorities and strategies of sitting
presidents.

Objective:
This paper aims to trace the historical development of taxation policies in the Philippines
from 1965 to the present, analyzing how each president’s administration influenced tax
reforms, collection efficiency, and the broader fiscal landscape.

Scope:
The scope covers the presidential administrations beginning with Ferdinand Marcos Sr.
(1965–1986) up to Ferdinand Marcos Jr. (2022–Present), presenting major tax reforms,
legislative changes, administrative improvements, and the political-economic contexts in
which they were enacted.

III. Methodology

Approach:
This research utilizes historical and comparative analysis by synthesizing secondary data. It
identifies key reforms and evaluates their outcomes, enabling a comprehensive
understanding of tax evolution through successive governments.

Sources of Data:

• Bureau of Internal Revenue (BIR): Official tax statistics, policy issuances, and
collection data
• Department of Finance (DOF): Legislative initiatives, reform programs, fiscal
strategies
• Official Gazette of the Philippines: Presidential issuances, laws, and executive orders
• Supreme Court Rulings: Jurisprudence affecting tax interpretation and
implementation
• News Portals: BusinessWorld, Philippine Star, Rappler, and [Link] for
contemporary updates and analyses
IV. Main Content: Taxation by Presidential Term

1. Ferdinand Marcos Sr. (1965–1986)

• Major Reform: National Internal Revenue Code (NIRC) of 1977

• Key Features: Consolidation of existing tax laws, streamlined collection systems,
institutional strengthening of the BIR.
• Impact: Improved tax administration and codified national tax policies; however,
the era was marred by authoritarianism, leading to concerns over fund misuse
despite increased revenues.

2. Corazon Aquino (1986–1992)

• Context: Post-martial law restoration; rebuilding democratic institutions

• Tax Policy Direction: Restoring trust in government and improving fiscal responsibility
• Reforms:
o Broadened tax base
o Introduced new tax measures aimed at equity and efficiency
o Revised NIRC to undo Marcos-era anomalies
• Impact: Stabilized public finances amid economic and political recovery

3. Fidel V. Ramos (1992–1998)

• Key Reform: Expanded Value-Added Tax (EVAT)

• Policy Goals: Liberalization, globalization, and fiscal discipline
• Impact:
o Increased VAT coverage to include more goods and services
o Enhanced revenue collection without raising income tax
o Helped attain higher GDP growth and investor confidence

4. Joseph Estrada (1998–2001)

• Policy Focus: Improved tax compliance and enforcement

• Challenges:
o Short term in office due to impeachment
o Weak institutional capacity limited substantial reforms
• Initiatives:
o Revenue enhancement through stricter collection
o Attempted reforms in tax administration, but most were unfulfilled

5. Gloria Macapagal-Arroyo (2001–2010)

• Major Reform: Revised EVAT Law of 2005

o Increased VAT rate from 10% to 12%
o Removed several VAT exemptions
• Other Initiatives:
o Introduced Comprehensive Tax Reform Program (CTRP)
o Sought to address fiscal deficits and growing debt burden
• Impact: Increased government revenues significantly, aided economic resilience
during the global financial crisis
6. Benigno Aquino III (2010–2016)

• Governance Philosophy: "Daang Matuwid" (Straight Path)

• Taxation Approach:
o Focused on good governance, transparency, and digital transformation
o Strengthened enforcement and reduced corruption in the BIR
• Key Results:
o Improved tax effort without raising tax rates
o Enhanced credibility of tax institutions and investor confidence

7. Rodrigo Duterte (2016–2022)

• Key Legislation:
o TRAIN Law (2017): Lowered personal income taxes but raised excise taxes
(e.g., fuel, sugary beverages)
o CREATE Act (2021): Reduced corporate income tax from 30% to 20% (for
MSMEs) and 25% (for larger corporations), rationalized fiscal incentives
• Other Reforms:
o Digitalization of tax services and e-filing expansion
o Strengthened fiscal autonomy of local government units under Mandanas
ruling
• Impact: More equitable tax system, but raised inflation concerns due to indirect tax
hikes

8. Ferdinand Marcos Jr. (2022–Present)

• Policy Orientation: Economic recovery post-pandemic, modernization of tax

processes
• Key Reform: Ease of Paying Taxes Act (2024)
o Codified digital tax services and taxpayer-friendly procedures
o Simplified filing, harmonized thresholds for small taxpayers
• Focus Areas:
o Digital transformation of tax collection
o Improve business climate to attract foreign investments
o Strengthen taxpayer rights and dispute resolution mechanisms

V. Comparative Analysis

Pre-Democracy vs. Post-Democracy Eras

• Marcos Sr. (Pre-Democracy):

o Centralized control over tax and spending
o Focused on codification and administration
o Low transparency and high corruption
• Post-Democracy Administrations:
o Emphasis on accountability, equity, and transparency
o Progressive reforms reflecting broader consultation and legislative oversight
Economic Impact of Tax Reforms

• Revenue Performance:
o EVAT and Revised EVAT significantly increased revenue capacity
o TRAIN and CREATE balanced tax relief with new revenue sources
• Investment Incentives:
o CREATE Act marked a turning point in attracting investors via rational
incentives
• Social Spending:
o Reforms often tied to social programs (e.g., 4Ps, free education) through
earmarked revenues

Administrative and Technological Trends

• From Manual to Digital:

o Increasing use of digital tax filing and payment systems (BIR eFPS, eBIRForms,
etc.)
• Service Orientation:
o Evolving from enforcement-heavy models to taxpayer service and facilitation
• Public Trust and Transparency:
o Greater focus on anti-corruption and audit transparency in recent
administration

VI. Conclusion

Summary of Evolution:

• The Philippine tax system has transformed from a centralized, opaque structure
under a dictatorship to a more transparent, modernized, and equitable system
today.
• Each administration contributed reforms tailored to its unique political and
economic context—whether it was through codifying tax laws, broadening the tax
base, simplifying compliance, or leveraging technology.

Future Directions:

• Continued modernization through AI, automation, and big data analytics

• Expansion of the tax base by formalizing the informal economy and curbing tax
evasion
• Decentralization and fiscal federalism to empower local governments in revenue
generation
• Green and digital taxation policies to align with sustainable development goals and
the digital economy

VII. References

• BIR Official Website: [Link]

• Department of Finance: [Link]
• Philippine Official Gazette
• BusinessWorld, Philippine News Agency, Reuters