History – Political Science Department

College of Arts & Sciences

Silliman University
General Education 2
Readings in Philippine History

Francis Robert U. Estolloso

Ge- 1

1. Define Taxation
A means by which governments finance their expenditure by imposing charges on
citizens and corporate entities.

Governments use taxation to encourage or discourage certain economic decisions.

For example, reduction in taxable personal (or household) income by the amount paid as
interest on home mortgage loans results in greater construction activity, and generates more
jobs.

source: http://www.businessdictionary.com/definition/taxation.html

2. Kinds of Taxes

National Taxes in the Philippines

 Capital Gains Tax – is a tax imposed on the gains presumed to have been realized
by the seller from the sale, exchange, or other disposition of capital assets located
in the Philippines, including pacto de retro sales and other forms of conditional sale.

 Documentary Stamp Tax – is a tax on documents, instruments, loan agreements

and papers evidencing the acceptance, assignment, sale or transfer of an obligation,
rights, or property incident thereto. Examples of documentary stamp tax are those
that are charged on bank promissory notes, deed of sale, and deed of assignment on
transfer of shares of corporate stock ownership.

 Donor’s Tax – is a tax on a donation or gift, and is imposed on the gratuitous

transfer of property between two or more persons who are living at the time of the
transfer. Donor’s tax is based on a graduated schedule of tax rate.
 Estate Tax – is 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. Estate tax is also
based on a graduated schedule of tax rate.

 Income Tax – is a tax on all yearly profits arising from property, profession, trades
or offices or as a tax on a person’s income, emoluments, profits and the like. Self-
employed individuals and corporate taxpayers pay quarterly income taxes from 1st
quarter to 3rd quarter. And instead of filing quarterly income tax on the fourth
quarter, they file and pay their annual income tax return for the taxable year.
Individual income tax is based on graduated schedule of tax rate, while corporate
income tax in based on a fixed rate prescribe by the tax law or special law.

 Percentage Tax – is a business tax imposed on persons or entities who sell or lease
goods, properties or services in the course of trade or business whose gross annual
sales or receipts do not exceed the amount required to register as VAT-registered
taxpayers. Percentage taxes are usually based on a fixed rate. They are usually paid
monthly by businesses or professionals. However, some special industries and
transactions pay percentage tax on a quarterly basis.

 Value Added Tax – is a business tax imposed and collected from the seller in the
course of trade or business on every sale of properties (real or personal) lease of
goods or properties (real or personal) or vendors of services. It is an indirect tax,
thus, it can be passed on to the buyer, causing this to increase the prices of most
goods and services bought and paid by consumers. VAT returns are usually filed
and paid monthly and quarterly.

 Excise Tax – is a tax imposed on goods manufactured or produced in the

Philippines for domestic sale or consumption or any other disposition. It is also
imposed on things that are imported.

 Withholding Tax on Compensation – is the tax withheld from individuals

receiving purely compensation income. This tax is what employers withheld in their
employees’ compensation income and remit to the government through the BIR or
authorized accrediting agent.

 Expanded Withholding Tax – is a kind of withholding tax which is prescribed

only for certain payors and is creditable against the income tax due of the payee for
the taxable quarter year. Examples of the expanded withholding taxes are those that
are withheld on rental income and professional income.

 Final Withholding Tax – is a kind of withholding tax which is prescribed only for
certain payors and is not creditable against the income tax due of the payee for the
 taxable year. Income Tax withheld constitutes the full and final payment of the
Income Tax due from the payee on the said income. An example of final
withholding tax is the tax withheld by banks on the interest income earned on bank
deposits.

 Withholding Tax on Government Money Payments – is the withholding tax

withheld by government offices and instrumentalities, including government-
owned or -controlled corporations and local government units, before making any
payments to private individuals, corporations, partnerships and/or associations.

Local Taxes in the Philippines

 Tax on Transfer of Real Property Ownership – tax imposed on the sale,

donation, barter, or on any other mode of transferring ownership or title of real
property.

 Tax on Business of Printing and Publication – tax on the business of persons

engaged in the printing and/or publication of books, cards, posters, leaflets,
handbills, certificates, receipts, pamphlets, and others of similar nature.

 Franchise Tax – tax on businesses enjoying a franchise, at the rate not exceeding
fifty percent (50%) of one percent (1%) of the gross annual receipts for the
preceding calendar year based on the incoming receipt, or realized, within its
territorial jurisdiction.

 Tax on Sand, Gravel and Other Quarry Resources – tax imposed on ordinary
stones, sand, gravel, earth, and other quarry resources, as defined under the National
Internal Revenue Code, as amended, extracted from public lands or from the beds
of seas, lakes, rivers, streams, creeks, and other public waters within its territorial
jurisdiction.

 Professional Tax – an annual professional tax on each person engaged in the

exercise or practice of his profession requiring government examination.

 Amusement Tax – tax collected from the proprietors, lessees, or operators of

theaters, cinemas, concert halls, circuses, boxing stadia, and other places of
amusement.

 Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or

Producers, Wholesalers of, Dealers, or Retailers in, Certain Products – an
 annual fixed tax for every truck, van or any vehicle used by manufacturers,
producers, wholesalers, dealers or retailers in the delivery or distribution of distilled
spirits, fermented liquors, soft drinks, cigars and cigarettes, and other products as
may be determined by the sangguniang panlalawigan, to sales outlets, or
consumers, whether directly or indirectly, within the province.

 Tax on Business – taxes imposed by cities, municipalities on businesses before

they will be issued a business license or permit to start operations based on the
schedule of rates prescribed by the local government code, as amended. Take note
that the rates may vary among cities and municipalities. This is usually what
businesses pay to get their Business Mayor’s Permit.

 Fees for Sealing and Licensing of Weights and Measures – fees for the sealing
and licensing of weights and measures at such reasonable rates as shall be
prescribed by the sangguniang bayan of the municipality or city.

 Fishery Rentals, Fees and Charges – rentals, fees or charges imposed by the
municipality/city to grantees of fishery privileges in the municipal/city waters, e.g.,
fishery privileges to erect fish corrals, oysters, mussels or other aquatic beds or
bangus fry areas and others as mentioned in the local government code, as amended.

 Community Tax – tax levied by cities or municipalities to every inhabitant of the

Philippines eighteen (18) years of age or over who has been regularly employed on
a wage or salary basis for at least thirty (30) consecutive working days during any
calendar year, or who is engaged in business or occupation, or who owns real
property with an aggregate assessed value of One thousand pesos (P1,000.00) or
more, or who is required by law to file an income tax return. Community tax is also
imposed on every corporation no matter how created or organized, whether
domestic or resident foreign, engaged in or doing business in the Philippines.

 Taxes that may be levied by the barangays on stores or retailers with fixed business
establishments with gross sales of receipts of the preceding calendar year of Fifty
thousand pesos (P50,000.00) or less, in the case of cities and Thirty thousand pesos
(P30,000.00) or less, in the case of municipalities, at a rate not exceeding one
percent (1%) on such gross sales or receipts.

 Service Fees or Charges – fees or charges that may be collected by the barangays
for services rendered in connection with the regulations or the use of barangay-
owned properties or service facilities, such as palay, copra, or tobacco dryers.

 Barangay Clearance – a reasonable fee collected by barangays upon issuance of

barangay clearance – a document required for many government transactions, such
as when applying for business permit with the city or municipality.
Reference: Bureau of Internal Revenue, Department of Republic Act No. 8424 (as
amended), and Republic Act 7160 (as amended), Republic Act No. 1937 (as amended).