LESSON 10: PHILIPPINE TAXATION

Taxes

the inherent power of the state, acting through the legislature to impose and collect revenues to support the government and are funds used by the government to finance basic social services that are vital to the lives of citizens and economic growth.

The Tax Reform Act of 1997

states the following have the duty to pay taxes in the country.

🠶 Citizens

🠶 Nonresident citizens:

🠶 Overseas contract workers:

🠶 Alien individuals:

🠶 Domestic corporation:

🠶 Foreign corporation:

The Tax Reform Act of 1997 says that the following have the duty to pay taxes in the country:

tributos

The Spaniards imposed the payment of this from the Filipinos. The purpose is to generate resources to finance the maintenance of the islands, such as salaries of government officials and expenses of the clergy.

principales: alcaldes, gobernadores, cabezas de barangay, soldiers, members of the civil guard, government officials and vagrants

Exempted from payment of tributos were the

cedula personal

 the payment of tribute was put to a stop and was replaced by a poll tax collected through a certificate of identification. This is required from every resident and must be carried while traveling. Unlike the tribute, the payment of cedula is by person, not by family. Payment of the cedula is according to income categories.

The Internal Revenue of Law of 1904

This was passed as a reaction to the problems of collecting land tax. It prescribed ten major sources of revenue:

Republic Act 9337

the Expanded Value-Added Tax (E-VAT). This expanded the VAT base, subjecting to VAT energy products such as coal and petroleum products and electricity generation, transmission, and distribution. In February 2006, the VAT tax rate was also increased from 10% to 12%.

Republic Act 10351

was passed, and government revenues from alcohol and tobacco excise taxes increased

The Sin Tax Reform

This was an exemplar on how tax reform could impact social services as it allowed for the increase of the Department of Health Budget (triple in 2015) and free health insurance premiums for the poor people enrolled in PhilHealth increased (from 55.2 million in 2012 to 515,4 million in 2015).

Kind of taxes under existing laws: As to who bears the burden:

🠶 Direct taxes

🠶 Indirect taxes

Direct taxes

these are paid and shouldered directly by the taxpayer. These include personal income taxes and estate tax.

Indirect taxes

these are paid by the taxpayer but which he can shift or pass on to others, particularly those who avail of his goods and services. Example, Value added tax (VAT).

Kind of taxes under existing laws: As to subject matter or object:

🠶 Personal, Poll or Capitation

🠶 Property tax

🠶 Excise tax -

Personal, Poll or Capitation

refers to tax of fixed amount imposed on an individual residing within a specified territory, whether a citizen or not, and regardless of property or the occupation, they engaged in.

Property tax

refers to the amount imposed on property, whether real or personal, in proportion either to its value or by some other reasonable method or appointment.

Excise tax

refers to any tax which does not fall within the classification of a poll tax or a property tax.

Classification of taxes As to purpose

🠶 General, Fiscal or Revenue Tax

🠶 Individual or Regulatory Tax

General, Fiscal or Revenue Tax

imposed for the general purpose of the government to raise funds for its needs.

Individual or Regulatory Tax

imposed for a particular purpose to achieve some social or economic ends, irrespective of whether revenue raised or not.

As to scope or authority imposing the tax:

🠶 National Tax

🠶 Local Tax

As to the determination of account

🠶 Specific tax
🠶 Ad Valorem Tax

Specific tax

refers to the fixed amount imposed by the head or number, or by some standard or weight or measurement which requires assessment other than a listing or classification of the subjects to be taxed.

Ad Valorem Tax

 a fixed proportion of the value of the property concerning which the tax is assessed and determines the amount due to each taxpayer. Example, excise tax on cigarettes.

NATIONAL TAXES

Taxes imposed by the national government.

Capital Gains Tax

This is the tax an individual or business pays for when they sell an asset for profit. Capital gains are usually realized from the sale of stocks, jewelry, property and other high-value goods.

Documentary Stamp Tax

This refers to tax on documents, loan agreements and papers evidencing the sale or transfer of an obligation or ownership of a property.

Donor's Tax

Yes, even gifts and donations are taxed. Relief goods sent during calamities are an example.

Typhoon Yolanda was a different case, however. BIR scrapped taxes on goods delivered to Yolanda-ravaged areas as long as they were coursed through the proper government agencies.

Estate Tax

a tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death and on certain transfers, which are made by law as equivalent to testamentary disposition. It is not a tax on property. It is a tax imposed on the privilege of transmitting property upon the death of the owner. This is based on the laws in force at the time of death notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary.

Excise Tax

This is the tax imposed on goods produced for sale, and sold, in the country. It is considered an indirect tax, meaning the producer or seller is expected to recover the tax by raising prices of his or her product. For instance, taxes imposed on "sin" products tobacco and alcohol.

Income Tax

This is tax on a person's income or profit arising from property, practice of profession, or conduct of trade or business.

Percentage Tax

This is a business tax. It is imposed on persons who sell or lease goods, properties or services in the course of their business, are not VAT-registered, and whose gross annual sales and/or receipts do not exceed P750,000.

Value-Added Tax or VAT

A form of consumption tax that is imposed on a product whenever value is added at a stage of production and at final sale. It is an indirect tax; it is passed on to consumers.

Withholding Tax

Income tax that employers withhold from employees' salaries, and pay directly to the government.

LOCAL TAXES

- imposed by the municipal or public corporations.

Basic Real Property Tax

- This is tax on real properties that covers 6 classes: agricultural, commercial, industrial, residential, timberland and mineral.

Franchise Tax

- LGUs may impose tax on a business franchise at a rate not exceeding 50% of 1% of the gross annual receipts for the preceding calendar year.

Business of Printing and Publication Tax

- LGUs may collect tax from printing or publication of books, cards, posters, tarpaulins, pamphlets, and other published or printed materials. 

Sand, Gravel and other Quarry Resources Tax -

LGUs may collect not more than 10% of fair market value in the locality per cubic meter of ordinary stones, sand, gravel, earth, and other quarry resources extracted from public lands or from the beds of seas, lakes, rivers, streams, creeks, and other public waters.

Professional Tax

- This tax is imposed on persons engaged in the exercise or practice of their professions requiring government examination. Doctors, lawyers, engineers, and other professionals are covered by this tax.

Amusement Tax

- All forms of entertainment such as movies, plays and concerts are taxed. The tax is usually included in the admission price.

Community Tax

- This tax, which is also called buwis pampamayanan, requires one to pay a base fee of P5 and an additional increase of P1 for every P1,000 of income.

Annual Fixed Tax for Delivery Trucks and Vans

- Trucks and vans delivering goods such as soft drinks, cigarettes, beer, etc. pay LGUs roughly P500 annually

Barangay Tax

- Sari-sari stores and retailers whose annual gross sales or receipts are not greater than P50,000 are subject to barangay tax. This tax shall accrue on the first day of January of each year.

Barangay Clearance

- This clearance serves as legal permission for a particular individual/host/company to conduct an event or start a business in a barangay.