TAXATION

Readings in The Philippines History

Prepared by: Rizel Joy C. Bejerano, LPT

What is Taxes and Taxation?
 Taxes are the compulsory contributions the law-making bodies of the state
impose to gain revenue to support the needs of the government and the
people.
 Taxation is the practice of imposing legislation to collect financial obligations
from income-generating individuals and entities.
 imposition of compulsory levies on individuals or entities by governments.
Taxes are levied in almost every country of the world, primarily to raise
revenue for government expenditures, although they serve other purposes as
well.
 The money raised from taxation supports the government and allows it to fund
police and courts, have a military, build and maintain roads, along with many
others services.
In the Philippines today, these are the two
kinds of taxes
1. NATIONAL TAXES---- are imposed by the national
government through the National Internal Revenue Code, Tariff
and Customs Code.

2. Local taxes are those collected by the local government

units (LGUs) based on local Government Code. Some of these
are the real property tax and community tax. Taxes are paid for
the use of public services, construction of infrastructural
projects, for the salaries of the government employees, for
operating expenses, and others.
Different Types
of Taxation in
the Philippines
 1. Income Tax---This is a tax on an individual’s or business entity’s income, including salaries,
wages, profits, and other income-generating activities.
2. Value- Added Tax (VAT)--- A tax on the value added to goods and services at each stage of
production or distribution. The current VAT rate in the Philippines is 12%.
3. Excise Tax--- This is a tax on specific goods and services, such as tobacco, alcohol , and
petroleum products.
4. Documentary Stamp Tax--- This is a tax on certain legal documents, such as deeds,
contracts, and loan agreements
5. Estate Tax--- This is a tax on the transfer of a deceased person to their heirs or beneficiaries.
(estate tax in the Philippine is 6%)
6. Donor’s Tax--- This is a tax on gifts or donations exceeding a certain amount. (donors tax in the
Philippines is 6%)
7. Local Taxes--- Taxes are imposed by local government units on business taxes, real property
taxes, and amusement taxes.
8. Tariff and Customs--- These are taxes on imported goods, collected by the Bureau of Customs
 How tax are collected and used
 Taxation in the Philippines is primarily collected by the Bureau of Internal Revenue (BIR) and
the Bureau of Customs (BOC).
 The BIR is responsible for collecting taxes from individuals and businesses, while the BOC is
responsible for collecting taxes on imported goods.
 The tax revenue in the Philippines is used to fund public services and programs, including
education , healthcare, infrastructure development, and national defense. The government also
uses tax revenue to pay the salaries of government employees and to finance the operations of
government agencies.
 The tax system in the Philippines is progressive, meaning that individuals with higher incomes
are taxed at a higher rate than those with lower incomes.
 The government has implemented various tax reform in recent years. Including the TRAIN
LAW which lowered personal income tax rates and increased excise taxes on fuel and other
goods.
 The government also offers tax incentives to businesses to encourage investment and job
creation. These incentives include tax holidays, duty-free importation of capital equipment , and
tax credits for research and development.
 Laws about Taxation in the Philippines
1. National Internal Revenue---- This is the primary law covering taxation in the
Philippines. It covers all aspects of taxation. Including income tax , value-added tax,
excise tax and other types of taxes.
2. Tax Reform for Acceleration and Inclusion (TRAIN LAW)---- This law was enacted in
2017 and introduced several changes to the tax system, including lower income tax
rates for most taxpayers and higher excise taxes on certain goods.
3. Customs Modernization and tariff Act (CMTA)---- This law was enacted in 2016 and
aims to modernize the customs system in the Philippines. It includes provisions
related to tariff and customs duties.
4. Local Government Code (LGC)---- This law governs the taxation powers of local
government units in the Philippines. It allows local governments to impose certain
taxes, such as business taxes and real property taxes.
5. Tax Amnesty Act----This law provides for a one-time opportunity for taxpayers to
settle their tax obligations and pay reduced penalties.
6. Anti-Tax Avoidance (ATAA)---- This law aims to prevent tax avoidance schemes and
provides penalties for those who engage in such activities.
 Importance of Taxation
1. Funding Public Services---- Taxation is essential to fund public services and programs,
such as healthcare, education, and infrastructure development. Without taxes, the
government would not have the necessary funds to provide these services to citizens.
2. Promoting Economic Growth---- Taxation can be used to promote economic growth by
financing infrastructure development and other public investments. For examples, taxes can
be used to fund the construction of roads, bridges, and other infrastructure that can help to
attract businesses to an area and create jobs.
3. Encouraging Social Responsibility---- Taxation can be used to encourage social
responsibility by taxing activities that are harmful to society, such as pollution and tobacco use.
These taxes can help to reduce the negative impact of these activities on society an promote
healthier behaviors.
4. Supporting Government Operations---- Taxation is essential to fund the operations of
the government including the salaries of government agencies. Without taxes, the government
would not be able to function effectively.
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