1

Chapter 4
Learning Objectives:

 Analyze social, political, economic and cultural issues in the Philippines using the lens of
the society.
 To recognize that the problems of today are consequences of decisions and events that
happened in the past.
 To understand several enduring issues in Philippine society through history.
 To propose recommendations or solutions to present day problems based on the
understanding of the past and anticipation of the future through the study of history.

This chapter is dedicated to enduring issues in Philippine society, which history could
lend a hand in understanding, hopefully, proposing solutions. These topics include the
mandated discussion on the Philippine constitution, policies on agrarian reform and
taxation. It is hoped that these discussions will help us propose recommendations or
solutions to present day problems based on our understanding of root causes and how
we anticipate future scenarios in the Philippine setting.

Evolution of the Philippine Constitution

The Constitution is defined as a set of fundamental principles or established precedents
according to which state or other organization is governed, thus, the word itself means to be a
part of a whole, the coming together of distinct entities into one group, with the same
principles and ideals. These principles define the nature and extent of government.

The Constitution of the Philippines, the supreme law of the Republic of the Philippines,
has been in effect since 1987. There were only three other constitutions that have effectively
governed the country; the 1935 Commonwealth Constitution, the 1973 Constitution and the
1986 Freedom Constitution. However, there were earlier constitutions attempted by Filipinos in
the struggle to break free from the colonial yoke.
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1897: Constitution of Biak-na-Bato

The Constitution of Biak-na-Bato was the provisionary Constitution of the
Philippine Republic during the Philippine Revolution, and was promulgated by the Philippine
Revolutionary Government on 1 November 1897. The Constitution, borrowed from Cuba, was
written by Isabelo Artcho and Felix Ferrer in Spanish, and later on translated into Tagalog.

The organs of the government under the Constitution were: (1) the Supreme Council,
which was vested with the power of the Republic, headed by the president and four
department secretaries: the interior, foreign affairs, treasury and war; (2) the Consejo Supremo
de Gracia Y Justicia (Supreme Council of Grace and Justice), which was given the authority to
make decisions and affirm or disprove the sentences rendered by other courts and to dictate
rules for the administration of justice; and (3) the Asamblea de Representantes (Assembly of
Representatives), which was to be convened after the Revolution to create a new Constitution
and to elect a new Council of Government and Representatives of the people.

The Constitution of Biak-na-Bato was never fully implemented, since a truce, the Pact of
Biak-na-Bato, was signed between the Spanish and the Philippine Revolutionary Army.

Primary Source: Preamble of the Biak-na-Bato Constitution

The separation of the Philippines from the Spanish monarchy and their formation into
independent state with its own government called the Philippine Republic has been the
end sought by the Revolution in the existing war, begun on the 24 th of August, 1896, and
therefore, in its name and by the power delegated by the Filipino people, interpreting
faithfully their desires and ambitions , we the representatives of the Revolution, in a
meeting at Biak-na-Bato, November 1, 1897, unanimously adopted the following articles
for the constitution of the State.

1899: Malolos Constitution

After the signing of the truce, the Filipino Revolutionary leaders accepted a payment
from Spain and ent to exile in HongKong. Upon the defeat of the Spanish to the Americans in
the battle of manila bay on 1 may 1898, the United States Navy transported Aguinaldo back to
the Philippines. The newly reformed Philippine Declaration of Independence was issued on 12
June 1898, together with several decrees that formed the first Philippine Republic. The Malolos
Congress was elected, which selected a commission to draw up a draft constitution on 17
September 1898, which was composed of wealthy and educated men.
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The document they came up with, approved by the Congress on 29 November 1898,
and promulgated by Aguinaldo on 21 January 1899 was titled “The Political Constitution of
1899” and written in Spanish. The constitution has 39 articles divided into 14 titles, with 8
articles of transitory provisions, and a final additional article. The document was patterned after
the Spanish Constitution of 1812, with influences from the charters of Belgium, Mexico, Brazil,
Nicaragua, Costa Rica and Guatemala, and the French Constitution of 1793. According to Felipe
Claderon, main author of the constitution, these countries were studied because they shared
similar social, political, ethnological and governance conditions with the Philippines. Prior
constitutional projects in the Philippines also influenced the Malolos Constitution, namely, the
Kartilya and the Sangunian-Hukuman, the charter of laws and morals of the katipunan written
by Emilio Jacinto in 1896; the Biak-na-Bato Constitution of 1897 planned by Isabelo Artacho;
Mabini’s Consitutional Program of the Philippine Republic of 1898; the provisional
constitutions; and the autonomy projects of Paterno in 1898.

Primary Source: Preamble of the Political Constitution of 1899

We, the Representatives of the Filipino people, lawfully convened, in order to establish
justice, provide for common defense, promote the general welfare and insure the benefits of
liberty, imploring the aid of the Sovereign Legislator of the Universe for the attainment of these
ends, have voted, decreed and sanctioned the following political constitution.

As direct challenge to colonial authorities of the Spanish empire, the sovereignty was
retroverted by the people, a legal principle underlying the Philippine Revolution. The people
delegate governmental functions to civil servants while they retained actual sovereignty. The 27
articles of Title IV detail the natural rights and popular sovereign of Filipinos, the enumeration
of which does not imply the prohibition of any other rights not expressly stated. Title III, Article
V also declares that the State recognizes the freedom and equality of all beliefs, as well as the
separation of Church and State. These are direct reactions to features of the Spanish
government in the Philippines, where the friars were dominant agents of the state.

The form of government, according to Title II, Article IV is to be popular representative,

alternative and responsible and shall exercise three distinct powers- legislative, executive and
judicial. The legislative power was vested in a unicameral body called the Assembly of
Representatives, members of which are elected for terms of four years. Secretaries of the
government were given seats in the assembly, which meet annually for the period of at least
three months. Bills could be introduced either by the president or by a member of the
assembly. Some powers not legislative in nature were also given to the body, such as the right
to select its own officers, right of censure and interpellation, and the right of impeaching the
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government, cabinet members, the chief justice of the Supreme Court, and the Solicitor-
general. A permanent commission of seven, elected by the assembly and granted specific
powers by the constitution, was to sit during the intervals between sessions of the assembly.

Executive power was vested in the president, and elected by the constituent assembly
of the Assembly of Representatives and special representatives. The president will serve a term
of 4 years without re election. There was no vice president, and in case of vacancy, a president
was to be selected by the constituent assembly.

The 1899 Malolos Constitution was never enforced due to the ongoing war. The
Philippines was effectively a territory of the United States upon the signing of the treaty of Paris
between Spain and the United States, transferring sovereignty of the Philippines on 10
December 1898.

1935: The Commonwealth Constitution

It is worth mentioning that after the Treaty of Paris, the Philippines was subject to
power of the United States of America, effectively the new colonizers of the country. From
1898 to 1901, the Philippines would be placed under a military government until a civil
government would put into place.

Two ACTs of the United States Congress were passed that may be considered to have qualities
of constitutionality. First was the Philippine Organic Act of 1902, the first organic law for the
Philippine islands that provided for the creation of a popularly elected Philippine Assembly. The
act specified that legislative power would be vested in a bicameral legislature composed of the
Philippine Commission as the upper house and the Philippine Assembly as the lower house. Key
provisions of the act included a bill of rights for Filipinos and the appointment of two non-
voting Filipino Resident Commissioners of the Philippines as representative to the United States
House of Representatives. The second act that functioned as a constitution was the Philippine
Autonomy Act of 1916, commonly referred to as “Jones Law,” which modified the structure of
the Philippine government through the removal of the Philippine Commission, replacing it with
a Senate that served as the upper house and its members elected by the Filipino voters, the
first truly elected national legislature. It was also this Act that explicitly declared the purpose of
the United States to end their sovereignty over the Philippines and recognize Philippine
independence as soon as a stable government can be established.

In 1932, with the efforts of the Filipino independence mission led by Sergio Osmeña and
Manuel Roxas, the United States Congress passed the Hare-Hawes Cutting Act with the promise
of granting Filipinos’ independence. The bill was opposed by then Senate President Manuel L.
Quezon and consequently, rejected by the Philippine Senate.
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By 1934, another law, the Tydings-McDuffie Act, also known as the Philippine
Independence Act, was passed by the United States Congress that provided authority and
defined mechanisms for the establishment of a formal constitution by a constitutional
convention. The members of the convention were elected and held their first meeting on 30
July 1934, with Claro M. Recto unanimously elected as president.

The constitution was crafted to meet the approval of the United States government, and
to ensure that the United States would live up to its promise to grant independence to the
Philippines.

Primary Source: Preamble of the 1935 Commonwealth

The Filipino people, imploring the aid of Divine Providence, in order to establish a government
that shall embody their ideals, conserve and develop the patrimony of the nation, promote the
general welfare, and secure to themselves and their posterity the blessings of independence
under a regime of justice, liberty and democracy, do ordain and promulgate this constitution.

The Constitution created the Commonwealth of the Philippines, an administrative body

that governed the Philippines from 1935 to 1946. It is a transitional administration to prepare
the country toward its full achievement of independence. It is originally provided for a
unicameral National Assembly with a president and vice president elected to a six-year term
without re-election. It was amended in 1940 to have a bicameral Congress composed of a
Senate and a House of Representatives, as well as the creation of an independent electoral
commission, and limited the term of office of the president and vice president to four years,
with one re-election. Rights to suffrage were originally afforded to male citizens of the
Philippines who are twenty- one years of age or over and are able to read and write, this was
later on extended to women within two years after the adoption of the constitution.

While the dominant influence in the constitution was American, it also bears traces of
the Malolos Constitution, the German, Spanish, and the Mexican constitutions, constitutions of
several South American countries, and the unwritten English Constitution.

The draft of the Constitution was approved by the constitutional convention on 8

February 1935, and ratified by then US President Franklin B. Roosevelt on 25 March 1935.
Election were held in September 1935 and Manuel L. Quezon was elected President of the
Commonwealth.

The Commonwealth was briefly interrupted by the events of the World War II, with the
Japanese occupying the Philippines was declared an independent republic on 4 July 1946.
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1973: Constitutional Authoritarianism

In 1965, Ferdinand E. Marcos was elected president, and in 1967, Philippine Congress
passed a resolution calling for a constitutional convention to change the 1935 Constitution.
Marcos won the re-election in 1969, in a bid boosted by campaign overspending and use of
government funds. Elections of the delegates to the constitutional convention were held on 20
November 1970, and the convention began formally on 1 June 1971, with former President
Carlos P. Garcia being elected as convention president. Unfortunately, he died, and was
succeeded by another former president, Diosdado Macapagal

Before the convention finished its work, martial Law was declared. Marcos cited a
growing communist insurgency as reason for the Martial Law, which was provided for in the
1935 Constitution. Some delegates of the ongoing constitutional convention were placed
behind bars and others went into hiding or were voluntary exiled. With Marcos as dictator, the
direction of the convention turned, with accounts that the president himself be able to hold on
to power for as long as he could. On 29 November 1972, the convention approved its proposed
constitution.

The constitution was supposed to introduce a parliamentary-style government, where

legislative power was vested in a unicameral national Assembly, with members being elected to
a 6 year term. The president was to be elected as the symbolic and ceremonial head of the
state chosen from the members of the National Assembly. The president would serve a 6 year
term and could be elected to an unlimited number of terms. Executive power was relegated to
the Prime Minister, who was also the head of government and Commander-in-Chief of the
Armed Forces who was also to be elected from the national Assembly.

President Marcos issued Presidential Decree No. 73 setting the date of the plebiscite to
ratify or reject the proposed constitution on 30 November 1973. This plebiscite was postponed
later on since Marcos feared that the public might vote to reject the constitution. Instead of a
plebiscite, Citizen Assemblies were held, from 10-15 January 1973, where the citizens coming
together and voting by hand, decided on whether to ratify the constitution, suspend the
convening of the Interim national Assembly, continue Martial Law, or place a moratorium on
elections for a period of at least several years. The president, on 17 January 1973, issued a
proclamation announcing that the proposed constitution had been ratified by an overwhelming
vote of the members of the highly irregular Citizen Assemblies.

The constitution was amended several times. In 1976, Citizen Assemblies, once again,
decided to allow the continuation of Martial Law, as well as approved the amendments: an
Interim Batasang Pambansa to substitute for the Interim National Assembly, the president also
become the Prime Minister and continue to exercise legislative powers until Martial Law was
 7

lifted and authorized the President to legislate on his own on an emergency basis. An
overwhelming majority would ratify further amendments succeeding. In 1980, the retirement
age of members of the judiciary was extended to 70 years. In 1981, the parliamentary system
was formally modified to a French-style, semi-presidential system where executive power was
restored to the president, who was once again, to be directly elected; an Executive Committee
was to be created, composed of the Prime Minister and 14 others, that served as the
president’s Cabinet; and some electoral reforms were instituted. In 1984, the Executive
Committee was abolished and the position of the vice president was restored.

After all the amendments introduced, the 1973 Constitution was merely a way for the
President to keep executive powers, abolish Senate, and by any means, never acted as a
parliamentary system, instead functioned as an authoritarian presidential system, with all the
real power concentrated in the hands of the president, with the backing of the constitution.

The situation in the 1980s had been very turbulent. As Marcos amassed power,
discontentment has also been burgeoning. The tide turned swiftly hen in August 1983, Benigno
Aquino Jr. opposition leader and regarded as the most incredible alternative to President
Marcos, was assassinated while under the military escort immediately after his return from
exile in the United States. There was widespread suspicion that the orders to assassinate
Aquino came from top levels of the government and the military. This event caused the coming
together of the non-violent opposition against the Marcos authoritarian regime. Marcos was
then forced to hold “snap” elections a year early, and said elections were marred by
widespread fraud. Marcos declared himself winner despite international condemnation nad
nationwide protests. A small group of military rebels attempted to stage a coup, but failed;
however, this triggered what came to be known as the EDSA People Power Revolution of 1986,
as people from all walks of life spilled onto the streets. Under pressure from the United States
of America, who used to support Marcos and his Martial Law, the Marcos family fled into exile.
His opponent in the snap elections, Benigno Aquino Jr.’s widow Corazon Aquino, was installed
as president on 25 February 1986.

1987: Constitution after Martial Law

President Corazon Aquino’s government had three options regarding the constitution:
revert to the 1935 Constitution, retain the 1973 Constitution and be granted the power to make
reforms, or start anew and break from the “vestiges of a disgraced dictatorship.” They decided
to make a new constitution that, according to the president herself, should be “truly reflective
of the aspirations and ideals of the Filipino People.
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The Constitution begins with a preamble and 18 self contained articles. It established
the Philippines as a “democratic republican State” where “sovereignty resides in the people and
all government authority emanates from them.” It allocates governmental powers among the
executive, legislative and judicial branches of the government.

The Executive branch is headed by the president and his cabinet, whom he appoints.
The president is the head of the state and the chief executive, but his power is limited by
significant checks from the two other co- equal branches of the government, especially during
times of emergency. This is put in place to safeguard the country from the experience of martial
law despotism during the presidency of Marcos. In cases of national emergency, the president
may still declare martial law, but not longer than a period of 60 days. Congress, through the
majority vote, can revoke this decision, or extend it for a period that they determine. The
Supreme Court may also review the declaration of martial law and decide if there were
sufficient justifying facts for the act. The president and the vice president are elected at large by
a direct vote serving a single 6 year term.

The legislative power resides in a Congress divided into two Houses: the Senate and the
House of Representatives. The 24 senators are elected at large by popular vote, and can serve
no more than two consecutive 6 year terms. The House is composed of district representatives
representing a particular geographic area and makes up around 80% of the total number of
representatives. There are 234 legislative districts in the Philippines that elect their
representatives to serve 3 year terms. The 1987 Constitution created a party list system to
provide spaces for the participation of under-represented community or groups. Party –list
representatives may fill up not more than 20% of the seats in the House.

Aside from the power of legislation, Congress may also declare war, through a two
thirds vote in both upper and lower houses. The power of legislation, however, is also subject
to an executive check, as the president retains the power to veto or stop a bill from becoming a
law. Congress may only override this power with a 2/3 vote in both houses.

The Philippine court system is vested with the power of the judiciary, and is composed
of a Supreme Court and lower courts as created by law. The Supreme Court is a 15 member
court appointed by the president without the need to be confirmed by Congress. The
appointment the president makes, however, is limited to a list of nominees provided by a
constitutionally specified Judicial and Bar Council. The Supreme Court Justices may hear, on
appeal, any cases dealing with the constitutionality of any law, treaty or decree of the
government, cases dealing where questions of jurisdiction or judicial error are concerned, or
cases where the penalty is sufficiently grave. It may also exercise original jurisdiction over cases
involving government or international officials. The Supreme Court is also in charge of
overseeing the functioning and administration of the lower courts and their personnel.
 9

The Constitution also established three independent Constitutional Commission namely,

the Civil Service Commission, a central agency in charge of government personnel; the
Commission on Elections, mandated to enforce and administer all election laws and
regulations; and the Commission on Audit, which examines all funds, transactions and property
accounts of the government and its agencies.

To further promote the ethical and lawful conduct of the government, the Office of the
Ombudsman was created to investigate complaints that pertain to public corruption, unlawful
behavior of public officials and other public misconduct. The Ombudsman can charge public
officials before the Sandiganbayan, a special court created for this purpose.

Changing the Constitution is a perennial issue that crops up, and terms such as “Cha-Cha,” “Con-Ass,” and “Con-
Con” are regularly thrown around. Article XVII of the 1987 Constitution provides for three ways by which the
Constitution can be changed.

Congress (House of Representatives and the Senate) may convene as a Constituent Assembly (or Con-Ass) to
propose amendments to the Constitution. It is not clear, however, if Congress is to vote as a single body
separately. How the Congress convenes as a Con-Ass is also not provided in the Constitution.

Another method is through the Constitutional Convention (Con-Con), where the Congress, upon a vote of 2/3 of all
its members, calls for a constitutional convention. In a Con-Con, delegates will propose amendments or revisions
to the Constitution, not Congress. The 1987 Constitution does not provide for a method by which delegates to the
Con-Con are chosen.

The third is called the “people’s Initiative” (or PI). In this method, amendments to the Constitution may be
proposed by the people upon a petition of at least 12% of the total number of registered voters. All legislative
districts must be presented by at least 12% registered votes therein. No amendment is allowed more than once
every five years since a successful PI. The 1987 Constitution directs the Congress to enact a law to implement
provisions of the PI, which has not yet materialized.
Only the House of Representatives can initiate the impeachment of the president,
Amendments or revision to the institution shall be valid only when ratified by a majority of the votes cast in a
members of the Supreme Court, and other constitutionally protected public officials such as the
national referendum.
Ombudsman. The Senate will then try the impeachment case. This is another safeguard to
promote moral and ethical conduct in the government.

Attempt to Amend or Change the 1987 Constitution

The 1987 Constitution provided for three methods by which the Constitution can be
amended, all requiring ratification by a majority vote in a national referendum. These methods
were Constituent Assembly, Constitutional Convention, and People’s Initiative. Using these
modes, there were efforts to amend or change the 1987 Constitution, starting with the
presidency of Fidel V. Ramos, who succeeded Corazon Aquino. The first attempt was in 1995,
when the Secretary of National Security Council Jose Almonte drafted a constitution, but it was
 10

exposed to the media and it never prospered. The second effort happened in 1997, when a
group called PIRMA hoped and gather signatures from voters to change the constitution
through a people’s initiative. Many were against this, including then Senator Miriam Defensor
Santiago, who brought the issue in court and won- with the Supreme Court judging the people’s
initiative cannot push through without an enabling law.

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government and the regions to share certain powers.
The administration of the succeeding President Benigno Aquino III has no marked
Our current system is that of a unitary form, where the administrative powers and resources are
interest in charter change, except those emanating from different members of Congress,
concentrated in the national government. Majors and governors would have to rely on allocations provide
including the Speaker of the House, Feliciano Belmonte Jr. who attempted to introduce
them through a proposed budget that is also approved by the national government, a system prone to
amendments to the Constitution that concern economic provisions that aim toward liberation.
abuse.
This effort did not see the light of day.
There are many pros to a federal form of government. Each region may custom fit to solutions to problems
brought about by their distinct geographic, cultural, social and economic contexts. Regions also have more
power over their finances, since they handle majority of their income and only contributes to a small
portion to the national government. They can choose to directly fund their own development projects
without asking for the national government’s go signal. A federal system could also promote specialization,
since the national government could focus on nationwide concerns while regional governments can take
care of administrative issues.

A federalism form of government could also solve a lot of decade-old problems of the country. It may a
solution to the conflict in Mindanao, since a separate Bangsamoro region could be established for Muslim
Mindanao. It could address the inequality in wealth distribution and lessen the dependence to Metro
Manila, since regions can proceed with what they have to do without needing to consider the situation in
the capital.

There are also cons be a challenge to achieving unity in the country. There might be regions which are not
ready to govern themselves, or have lesser resources, which could mire them deeper in poverty and make
development uneven in the country. There could be issues regarding overlaps in jurisdiction, since
ambiguities may arise where additional ends and regional begins, or vice versa. As a proposed solution to
the conflict in Mindanao, we must also remember that the Autonomous Region in Muslim Mindanao
(ARMM) has already been created, and the conflict still continues. Federalism may not be enough for those
who clamor separation.

Any effort to shift the system of government also entails costs, and it would not be cheap. It would cost
billions to dismantle the current system and would take a long time before the system normalizes and irons
out its kinks.
 11

In an upsurge of populism, President Rodrigo Duterte won the 2016 presidential

elections in a campaign centering on a law and order, proposing to reduce crime by killing tens
of thousands of criminals. He is also a known advocate of federalism, a compound mode of
government combing a central or federal government with regional governments in a single
political system. This advocacy is in part an influence of his background, being a local leader in
Mindanao that has been mired in poverty and violence for decades. On December 07, 2016,
President Duterte signed an executive order creating a consultative committee to the review
the 1987 Constitution.

Policies on Agrarian Reform

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Agrarian reform is essentially the rectification of the whole system of agriculture, an

important aspect of the Philippine economy because nearly half of the population is employed
in the agricultural sector, and most citizens live in rural areas. Agrarian reform is centered on
the relationship between production and the distribution of land among the farmers. It is also
focused on the political and economic class character of the relations of production and
distribution in farming and related enterprises, and how these connect to the wider class
structure. Through genuine and comprehensive agrarian reform, the Philippines would be able
to gain more from its agricultural potential and uplift the Filipinos in the agricultural sector, who
have been for the longest, suffering in poverty and discontent.

In our attempt to understand the development of agrarian reform in the Philippines, we

turn our attention to our country’s history, especially our colonial past, where we could find the
root of the agrarian woes the country has experienced up to this very day.

Land Ownership in the Philippines under Spain

When the Spaniards colonized the country, they brought with them a system of pueblo
agriculture, where rural communities, often dispersed and scattered in nature, were organized
into a pueblo and given land to cultivate.

Families were not allowed to own their land- the King of Spain owned tha lamd, and
Filipinos were assigned to these lands to cultivate them, and they paid their colonial tributes to
the Spanish authorities in the form of agricultural products.

Later on, through the Law of Indies, the Spanish crown awarded tracts of land to (1)
religious orders; (2) repartamientos for Spanish military as a reward for their service; and (3)
Spanish encomenderos, those mandated to manage the encomienda or the lands given to
them, where Filipinos orked and paid for their tributes to the encomendero. Filipinos were not
given the right to own land, and only worked in them so that they might have a share of the
crops and pay tribute. The encomienda system was an unfair and abusive system as “compras y
vandalas” became the norm for the Filipino farmers working the land- they were made to sell
their products at a very low price or surrender their products to the encomenderos, who resold
this at a profit. Filipinos in the encomienda were also required to render services to their
encomenderos that were unrelatedto farming.

From the encomienda system, the hacienda system developed in the beginning of the
th
19 century as the Spanish government implemented policies that would fast track the entry of
the colony into the capitalist world. The economy was tied to the world market as the
Philippines became an exporter of raw materials and importer of goods. Agricultural exports
 13

were demanded and the hacienda system was developed as a new form of ownership. In the
1860’s, Spain enacted a law ordering landholders to register their landholdings, and only those
who knew benefitted from this. Lands were claimed and registered in other’s people’s names,
and many peasant families who were “assigned” to the land in the earlier days of colonization
were driven out or forced to come under the power of these people who claimed and
registered in other people’s names, and many peasant families who were “assigned” to the
land in the earlier days of colonization were driven out or forced to come under the power of
these people who claimed rights to the land because they held title.

This is the primary reason why revolts in the Philippines were often agrarian in nature.
Before the colonization, Filipinos had a communal source of hatred and discontentment for the
Filipinos. Religious orders, the biggest landowners in the Philippines, also became a main source
of abuse and exploitation for the Filipinos, increasing in rent paid by the Filipinos on a whim.

Filipinos fought the Philippine Revolution in a confluence of motivations, but the

greatest desire for the freedom would be the necessity of owning land. Upon the end of the
Philippine Revolution, the revolutionary government would declare all large estates, especially
the confiscated friar lands as government property. However, the first Philippine republic was
short lived. The entrance of the Americans would signal a new era of colonialism and
imperialism in the Philippines.

Landownership in the Philippines under the Americans

The Americans were aware that the main cause of social unrest in the Philippines was
landlessness, and they attempted to put an end to the deplorable conditions of the tenant
farmers of passing several land policies to increase the small landholders and distribute
ownership to a bigger number of Filipino tenants and farmers. The Philippine Bill of 1902
provided regulations on the disposal of public lands. A private individual may own 16 hectares
of land while corporate landholders may have 1,024 hectares. Americans were also given rights
to own agricultural lands in the country. The Philippine Commission also enacted Act No. 496 or
the Land Registration Act, which introduced the Torrens system to address the absence of
earlier records of issued land titles and conduct accurate land surveys. In 1903, the homestead
program was introduced, allowing the tenant to enter into an agricultural business by acquiring
a farm of at least 16 hectares. This program, however, was limited to areas in Northern Luzon
and Mindanao, where colonial penetration had been difficult for Americans, a problem they
inherited from the Spaniards.
 14

Landownership did not improve during the American period; in fact, it even worsened,
because there was no limit to the size of landholdings people could possess and the
accessibility of possession was limited to those who could afford to buy, register, and acquire
fixed property titles. Not all friar lands were sold or leased to American and Filipino business
interest. This early land reform program was implemented without support mechanisms- if a
landless peasant farmers. Some lands were sold or leased to American and Filipino business
interest. This early land reform program was also implemented without support mechanisms- if
landless peasant farmer received land, he only received land, nothing more. Many were forced
to return to tenancy and wealthy Filipino hacienderos purchased or forcefully took over the
lands from the farmers who could not afford to pay debts. The system introduced by the
Americans enabled more lands to be placed under tenancy which led to widespread uprising,
such as the Colorum and Sakdal Uprising in Luzon. Peasants and workers found refuge from the
millenarian movements that gave them hope that change could still happen through militancy.

The Sakdal (or Sakdalista) Uprising was a peasant rebellion in Central Luzon that lasted for two days, May 2-
3, 1935. It was easily crushed by the government forces then, but this historical event tells of the social
inequality brought about by issues in land ownership and tenancy in the country.

The Filipino word “sakdal” means to “accuse”, which is the title of the newspaper helmed by Benigno
Ramos. He rallied support from Manila and nearby provinces through the publication, which led to the
establishment of the Partido Sakdalista in 1933. They demanded reforms from the government, such as the
For a new
abolition ofpart with
taxes anda“equal
small clout, they didownership
or common” well in theof1934
land,general
amongelections, scoring
others. They alsothree seatsthe
opposed in the
House of Nacionalista
dominant Representatives andacceptance
party’s several local
ofposts. This
gradual encouraged them
independence to attempt
from the an uprising
United States, in 1935.
and instead
Upon beingimmediate
demanded crushed, Ramos fled of
severance toties
Tokyo and
with the Partido Sakdalista collapsed.
America.

During the years of the Commomwealth government, the situation further worsened as
peasant uprisings increased and landlord-tenant relationship became more and more disparate.
President Quezon laid down a social justice program focused on the purchased of haciendas,
which were to be divided and sold to tenants. His administration also created the National Rice
and Corn Corporation (NARIC) to assign public defenders to assist peasants in court battles for
their rights to the land, and the Court of Industrial Relations to exercise jurisdiction over
disagreements arising from the landowner-tenant relationship. The homestead program also
continued through the national Settlement Administration (NLSA). Efforts toward the agrarian
reform by the Commonwealth failed because of many problems such as the budget allocation
for the settlement program and widespread peasant uprisings. World War II put a halt to all
interventions to solve these problems as the Japanese occupied the country.
 15

Post-War Interventions Toward Agrarian Reform

Rehabilitation and rebuilding after the war were focused on providing solutions tyo the
problems of the past. The administration of President Roxas passed Republic Act No. 34 to
establish a 70-30 sharing arrangement between the tenant and the landlord, respectively,
which reduced the interest of landowners’ loans to tenants at six percent or less. The
government also attempted to redistribute hacienda lands, falling prey to the woes of similar
attempts since no support was given to small farmers who were given lands.

Under the term of Pres. Elpidio Quirino, the Land Settlement Development Corporation
(LASEDECO) was established to accelerate and expand the resettlement program for peasants.
This agency later on became the National Resettlement and Rehabilitation Administration
(NARRA) under the administration of President Ramon Magsaysay.

The Magsaysay saw the importance of pursuing genuine land reform program and
convinced the Congress, majority of which were landed elites, to pass legislation to improve the
land reform situation. Republic Act No. 1199 or the Agricultural Tenancy Act was passed to
govern the relationship between landholders and tenant farmers, protecting the tenurial rights
of tenants and enforced tenancy practices. Through this law, the Court of Agricultural Relations
was created in 1955 to improve tenancy security, fix land rentals of tenanted farms, and resolve
land disputes filed by the landowners and peasant organizations. The agricultural Tenancy
Commission was also established to administer problems created by tenancy. The Agricultural
Credit and Cooperative Financing Administration (ACCFA) was also created mainly to provide
warehouse facilities and assist farmers in marketing their products. The administration
spearheaded the establishment of the Agricultural and Industrial Bank to provide easier terms
in applying for homestead and other farmlands.

NARRA accelerated the government’s resettlement program and distribution of

agricultural lands to landless tenants and farmers. It also aimed to convince members of the
Huks, a movement of rebels in Central Luzon, to resettle in areas where they could start their
lives as peaceful citizens.

Despite a more vigorous effort toward the agrarian reform, the situation for the farmers
remained dire since the government lacked funds and provided inadequate support services for
the programs. The landed elite did not fully cooperate and they criticized the programs.

A major stride in land reform arrived during the term of President Diosdado Macapagal
through the Agricultural Land Reform Code (Republic Act No. 3844).
 16

Primary Source: Declaration of Policy Under RA No. 3844 or Agricultural Land

Reform Program
Source: Section 2. Declaration of Policy- It is the Policy of the State:

(1) To establish owner-cultivatorship and the economic family-size farm as the basis of
Philippine agriculture and, as a consequence, diver landlord capital in agriculture to
industrial development.

(2) To achieve a dignified existence for the small farmers free from pernicious
institutional restraints and practices;

(3) To create a truly viable social and economic structure in agriculture conducive to
greater and productivity and higher farm incomes;

(4) To apply all labor laws equally and without discrimination to both industrial and
agricultural wage earners;

(5) To provide a more vigorous and systematic land resettlement program and public
land distribution program; and

(6) To make the small farmers more independent, self reliant and responsible citizens,
and a source of genuine strength in our democratic society.

This Code abolished share tenancy in the Philippines and prescribed a program to
convert tenant-farmers to lessees and later on owner- cultivators. It also aimed to free tenants
from tenancy and emphasize owner-cultivatorship and farmer independence, equity,
productivity improvement, and public land distribution. Despite being one of the most
comprehensive pieces of land reform legislation ever passed in the Philippines, Congress did
not make any effort to come up with a separate bill to fund its implementation, despite the fact
that it proved beneficial in the provinces where it was pilot tested.

Agrarian Reform Efforts under Marcos

President Marcos declared martial Law in 1972, enabling him to essentially wipe out the
landlord-dominated Congress. Through his “technocrats,” he was able to expand executive
power to start a “fundamental restructuring” of government, including its efforts in solving the
deep structural problems of the countryside. Presidential Decree No. 27 or the Code of Agrarian
Reform of the Philippines became the core of agrarian reform during the Marcos regime.
 17

Primary Source: Presidential Decree No. 27, October 21, 1972

This shall apply to tenant farmers of private agricultural lands primarily devoted to rice
and corn under the system of sharecrop or lease-tenancy, whether calssified as landed
estate or not, shall be deemed owner of a portion constituting a family sized farm of five
(5) hectares if not irrigated and (3) hectares if irrigated;

In all cases, the landowner may retain an area of not more than seven (7) hectares if
such landowner is cultivating such area or will now cultivate it;

For the purpose of determining the cost of the land to be transferred to the tenant-
farmer pursuant to this Decree, the value of the land shall be equivalent to two and
one-half (2 ½) times the average harvest of three normal crop years immediately
preceding the promulgation of this Decree.

The total cost of the land, including interest at the rate of six (6) percent per annum,
shall be paid by the tenant in (15) years of fifteen (15) equal annual amortizations;

In case of default, the amortization due shall be paid by the farmer’s cooperative in
which the defaulting tenant-farmer is a member, with the cooperative having a right of
recourse against him;

The Government shall guaranty such amortizations with shares of stock in government-
owned and government-controlled corporations;

No title to the land owned by the tenant-farmers under this Decree shall be actually
issued to a tenant-farmer unless and until the tenant-farmer has become a full-fledged
member of a duly recognized farmer’s cooperative;

Title to land acquired pursuant to this Decree or the land Reform Program of the
Government shall be transferable except by hereditary succession or to the Government
in accordance with the provisions of this Decree, the Code of Agrarian Reforms and
other existing laws and regulations;

The Department of Agrarian Reform through its Secretary is herby empowered to

promulgate rules and regulations for the implementation of this Decree.

“Operation Land Transfer” on lands occupied by tenants of more than 7 hectares on rice
and corn lands commenced, and through legal compulsion and an improved delivery of support
services to small farmers, agrarian reform seemed to be finally achievable. Under the rice self-
sufficiency program “Masagana ‘99”, farmers were able to borrow from banks and purchase
three-hectare plots of lands and agricultural inputs. However, the landlord class still found ways
 18

to circumvent the law, some landlords only needed to change crops to be exempted from the
program, such as coconut and sugar lands. Lands worked by wage labor were also exempted
from the program, so the landed elite only had to evict their tenants and hired workers instead.
Landlessness increased, which made it all the more difficult for the program to succeed because
landless peasants were excluded from the program. Many other methods were employed by
the elite to find way to maintain their power and dominance. Which were worsened by the
corruption of Marcos and his cronies who were also involved in the agricultural sector.

Post 1986 Agrarian Reform

The overthrow of Marcos and the 1987 Constitution resulted in a renewed interest and
attention to agrarian reform as President in a renewed interest and attention to agrarian
reform as President Corazon Aquino envisioned agrarian reform to be the centerpiece of her
administration’s social legislation, which proved difficult because her background betrayed her-
she came from a family of a wealthy and landed clan that owned the Hacienda Luisita.

On the 22nd of July 1987, Aquino issued Presidential Proclamation 131 and Executive
Order 229, which outlined her land reform program. In 1988, the Congress passed Republic Act
No. 6657 or the Comprehensive Agrarian Reform Law (CARL), which introduced the program
with the name redistribution of agricultural lands to tenant- farmers from landowners, who
were pain in exchange by the government through just compensation and allowed them to
retain not more than five hectares. Corporate landowners were, however, allowed under law to
voluntarily divest a proportion of their capital stock, equity or participation in favor of their
workers or other qualified beneficiaries instead of turning over their land to the government.

CARP was limited because it accomplished very little during the administration of
Aquino. It only accomplished 22.5% of land distribution in six years owing to the fact that
Congress, dominated by the landed elite, was unwilling to fund the high compensation costs of
the program. It was also mired in controversy, since Aquino seemingly bowed down to the
pressure of her relatives by allowing the stock redistribution option. Hacienda Luisita
reorganized itself into a corporation and distributed stocks to farmers.

Under the term of President Ramos, CARP implementation was speeded in order to
meet the ten year time frame, despite limitations and constraints in funding, logistics and
participation of involved sectors. By 1996, the Department of Agrarian Reform (DAR)
distributed only 58.25% of the total area target to be covered by the program. To address the
lacking fund and the dwindling time for the implementation of CARP, Ramos signed Republic
Act No. 8532 in 1998 to amend the CARL and extend the program to another 10 years.

CARPER and the Future of Agrarian Reform in the Philippines

 19

The new deadline of CARP expired in 2008, leaving 1.2 million farmer beneficiaries and
1.6 million hectares of agricultural land to be distributed to farmers. In 2009, President Arroyo
signed Republic Act No. 9700 or the Comprehensive Agrarian Reform Program Extension with
Reforms (CARPER), the amendatory law that extended the deadline to five more years. Section
30 of the law also mandates that any case and/or proceeding involving the implementation of
the provisions of CARP, as amended, which may remain pending on June 30, 2014 shall be
allowed to proceed to its finality and executed even beyond such date.

From 2009 to 2014, CARPER has distributed a total of 1 million hectares of land to 900,
000 farmer beneficiaries. After 27 years of land reform and two Aquino administrations, 500,
000 hectares of lands remain undistributed. The DAR and the Department of Environment and
Natural Resources (DENR) are the government agencies mandated to fulfill CARP and CARPER,
but even the combined effort and resources of the two agencies have proved incapable of fully
achieving the goal of agrarian reform in the Philippines. The same problems have plagued its
implementation: the powerful landed elite and the ineffectual bureaucracy of the Philippine
government. Until these two challenges are surmounted, genuine agrarian reform in the
Philippines remains but a dream to Filipino farmers who have been fighting for their right to
landownership for centuries.

Evolution of Philippine Taxation

In today’s world, taxation is a reality that all citizens must contend with for the primary
reason that governments raise revenue from the people they govern to be able to function
fully. In exchange for the taxes that people pay, the government promises to improve the
citizen’s lives through good governance. Taxation, as a government mechanism to raise funds,
developed and evolved through time, and in the context of the Philippines, we must
understand that it came with our colonial experience.

Taxation in Spanish Philippines

The Philippines may have abundant natural resources even before the encroachment of
the Spaniards, but our ancestors were mainly involved in subsistence economy, and while the
payment of tribute or taxes (buhis/buwis/handug) or the obligation to provide labor services to
the datus in some early Filipino communities in the Philippines may resemble taxation, it is
essentially different from the contemporary meaning of the concept.

The arrival of the Spaniards altered this subsistence system because they imposed the
payment of tributes (tributes) from the Filipinos, similar to what had been practiced in all
colonies in America. The purpose is to generate resources to finance the maintenance of the
islands, such as salaries of government officials and expenses of the clergy. The difficulty faced
 20

by the Spaniards in revenue collection through the tribute was the dispersed nature of the
settlements, which they solved by introducing the system of reduccion by creating pueblos,
where gathered and awarded plots of land to till. Later on, the settlements will be handled by
encomenderos who received rewards from the Spanish crowned for their services. Exempted
from the payment of tributes were the principales: alcaldes, gobernadores, cabezas de
barangay, soldiers, members of the civil guard, government officials and vagrants.

The Filipinos who were once satisfied with agricultural production for subsistence had to
increase production to meet the demands of payments and a more intensive agricultural
system had to be introduced. Later on, half of the tribute was paid in cash and the rest with
produce. This financed the conquest of the Philippines.

Toward the end of the 16th century, the Manila-Acapulco trade was established through
the galleons, a way by which the Spaniards could make sure that European presence would be
sustained. Once a year, the galleon would be loaded up with merchandise from Asia and sent to
New Spain (Mexico) and back. This improved the economy of the Philippines and reinforced the
control of the Spaniards all over the country. Tax collection was still very poor and subsidy from
the Spain would be needed through the situado real delivered from the Mexican treasury to the
Philippines through the galleons. This subsidy stopped as Mexico became independent in 1820.

In 1884, the payment of tribute was put to stop and was replaced by a poll tax collected
through a certificate of identification called the CEDULA PERSONAL. This required from every
resident and must be carried while traveling. Unlike the tribute, the payment of cedulas is by
person not by family. Payment of the cedula is progressive and according to income categories.
This system, however, was a heavy burden for the peasants and was easy for the wealthy. But
because of this, revenue collection greatly increased and became the main source of
government income. The Chinese in the Philippines were also made to pay their discriminary
cedula which was bigger than what the Filipinos paid.

Two direct taxes were added in 1872 and imposed on urban incomes. Urbana is a tax on
the annual rental value of an urban real estate and industria is a tax on salaries, dividends and
profits. These taxes were universal and affected all kinds of economic activity except
agriculture, which was exempt to encourage growth.

The colonial government also gained income from monopolies, such as the sale of
stamped paper, manufacturer and sale of liquor, cockpits and opium, but the biggest of the
state monopolies was tobacco, which began in 1781 nad halted in 1882. Only certain areas
were assigned to cultivate tobacco, which the government purchased at a price dictated to the
growers. This monopoly made it possible for the colony to create a surplus of income that made
 21

it self-sufficient without the need for the situado real and even contributed to the Treasury of
Spain.

Forced labor was a character of Spanish colonial taxation in the Philippines and was
required from the Filipinos. It proved useful in defending the territory of the colony and
augmenting the labor required by woodcutting and shipbuilding especially during the time of
the galleon trade. Through the polo system, male Filipinos were obliged to serve, a burden that
resulted in an increase in death rate and flight to the mountains, which led to a decrease in
population in the 17th century. This changed later on, as polos and servicios became lighter, and
was organized at the municipal level. Labor provided was used in public works. Such as the
building of roads and bridges. Some were made to serve the municipal office or as night guards.

Males were required to provide labor for 40 days a year (reduced to 15 days a year in
1884). They may opt out by paying the fallas of three pesos per annum, which was usually lost
to corruption because it was collected at the municipal level and were known as caidas or
droppings. The polos would be called prestacion personal (personal services) by the second half
of the 19th century.

Taxation in the Philippines during the Spanish colonial period was characterized by the
heavy burden placed on the Filipinos, and the corruption of the principales, or the former datus
and local elites who were co-opted by the Spaniards to subjugate and control the natives on
their behalf. The principales who were given positions such as the cabezas de barangay or
alcaldes in the local government were able to enrich themselves by pocketing tributes and or
fallas, while the peasants were left to be abused. Taxation appeared progressive but the
disparity between the less taxed principales and the heavily peasants made the rich richer and
the poor poorer.

Primary Source: Mariano Herbosa Writes to Rizal About Taxes

Source: Mariano Herbosa to Jose Rizal, Calamba, August 29, 1886, Letters BetweenRizal
and Family Members (Manila: National Heroes Commission, 1964) 239-241

The tax! With regard to your question on this, the answer is very long, as it is the cause
of the prevailing misery here. What I can write you will be one-half of the story and even
Dumas, senior, cannot exhaust the subject. Nevertheless, I’ll try to write what I can,
though I may not be able to give a complete story, you may at least know half of it.

Here, there are many kinds of taxes. What they call irrigated rice land, even it is has no
water, must pay tax of 50 cavanes of palay (unhusked rice) and land with 6 cavanes of
seed pay 5 pesos in cash. The land they call dry land that is planted to sugar cane, maize
and others pay different rates. Even if they see that the harvest is good, they increase
 22

the tax, but they don’t decrease it, if the harvest is poor. There is land whose tax is 25
pesos or 20 pesos, according to custom.

The most troublesome are the residential lots in the town. There is no fixed rule that is
followed, only their whim. Hence, even if it is only one span in size, it a stone wall is
added, 50 pesos must be paid, the lowest being 20 pesos. But a nipa or cogon house
pays only 1 peso for an area of ten fathoms square. Another feature of this system is
that on the day you accept the conditions, the contract will be written which cannot be
changed for 4 years, but the tax is increased every year. For these reasons, two years
now the payment of tax is confused and little by little the fear of the residents here of
the word “vacant” is being dispelled, which our ancestors had feared so much. The
result is bargaining, like they do fishing. It is advisable to offer a low figure and payment
can be postponed, unlike before when people were very much afraid to pay after May.

I’m looking for a receipt to send you, but I cannot find any, because we don’t get
receipt everytime we pay. Anyway it is value-less as it does not state the amount paid; it
only says that the tax for that year was paid., without stating whether it is five centavos,
twenty-five centavos, one hundred, or one thousand pesos. The residents who ask or
get the said receipt accept it with closed eyes. The receipt has no signature in the place
where the amount paid ought to be, although it bears their name.. Until now I cannot
comprehend why some are signed and others are not. This is more or less what is
happening here in the payment of land tax and it has been so for many years since I can
remember.

Besides this, the taxes on the plants in the fields that are far from the toen, like the land
in Pansol, are various. The tax on the palay is separate from the tax on maize, mongo or
garlic. There is no limit to this tax, for they fix it themselves. Since July no one buys sugar
and since June locusts are all over the town and they are destroying palay and sugar
cane, which is what we regret here. The governor gave 50 pesos to pay the catchers of
locusts, but when they took them to the town hall they were paid only 25 cents a cavan
and a half; and it seems that the locusts are not decreasing. According to the guess of
the residents here only 300 cavanes of locusts have been caught in this town. Many still
remain. Though the governor has not sent any more money, the people have not
stopped catching them.

Taxation Under the Americans

The Americans who acquired the Philippines aimed to make the economy self. Sufficient
by running the Government with the smallest possible sum of revenue and create surplus in the
budget. From 1898 to 1903, the Americans followed the Spanish system of taxation with some
 23

modifications, noting that the system introduced by the Spaniards were outdated and
regressive. The military government suspended the contracts for the sale of opium, lottery, and
mint charges for coinage of money. Later on, the urbana would be replaced by tax on real
estate, which became known as the land tax. The land tax was levied on both urban and rural
real estates.

The problem with land tax was that land titling in the rural areas was very disorderly:
the appraising of land value was influenced by political and familial factors and the introduction
of a taxation system on agricultural land faced objections from the landed elite. Tax evasion
was prevalent, especially among the elites.

The internal Revenue Law of 1904 was passed as a reaction to the problems of collecting
land tax. It prescribed ten major sources of revenue: (1) licensed taxes on firms dealing in
alcoholic beverages and tobacco, (2) excise taxes on alcoholic beverages and tobacco products,
(3) taxes on banks and bankers, (4) document stamp taxes, (5) the cedula, (6) taxes on
insurance and insurance companies, (7) taxes on forest products (8) mining concessions, (9)
taxes on business and manufacturing, and (10) occupational licenses.

The cedula went through change in the new law as the rate was fixed per adult male,
which resulted in great decline in revenues. In 1907, some provinces were authorized to double
the fee for the cedula to support the construction and maintenance of roads. The industria tax
was levied on the business and community and became a highly complex system that assigned
a certain tax to an industrial or commercial activity according to their profitability. The new act
also imposed a percentage tax on sales payable quarterly.

In 1913, the Underwood-Simmonns Tariff Act was passed, resulting in a reduction in the
revenue of the government as export taxes levied on sugar, tobacco, hemp and copra were
lifted. To make up for the loss, then Governor Francis Burton Harrison urged that tax receipts
be increased to make up for the loss. Minor changes were made to the 1904 Internal Revenue
Act such as the imposition of taxes on mines, petroleum products, and dealers of petroleum
products and tobacco.

New sources of taxes were introduced later on. In 1914, an income tax was introduced; in 1919,
an inheritance tax was created; and in 1932, a national lottery was established to create more
revenue for the Government. HOWEVER, these new creations were not enough to increase
government revenues.

Taxation during the Commonwealth Period

 24

New measures and legislation were introduced to make the taxation system appear more
equitable during the Commonwealth. Income tax rates were increased in 1936, adding a surtax
rate on individual net incomes in excess of 10,000 pesos. Income tax rates of corporations were
also increased. In 1937, cedula tax was abolished, wich appeared to be a progressive move; but
in 1940, a residence tax was imposed on every citizen aged 18 years old and on every
corporation.

In 1939, the Commonwealth government drafted the Nation Internal Revenue Code,
introducing major changes in the new tax system, as follows:

1. The normal tax of three percent and the surtax on income was replaced by single tax at
progressive rate.

2. Personal exemptions were reduced.

3. Corporation income tax was slightly increased by introducing taxes on inherited estates
or gifts donated in the name of dead persons.

4. The cumulative sales tax was replaced by a single turnover tax of 10% on luxuries.

5. Taxes on liquors, cigarettes, forestry products, and mining were increased.

6. Dividends were made taxable.

The introduced tax structure was an improvement of the earlier system introduced by
the Americans, but still remained inequitable. The lower class still felt the bulk of the
burden of taxation, while the upper class, the landed elite or the people in political
positions, were able to maneuver the situation that would benefit them more. The
agriculture sector was still taxed low to promote growth, but there was no incentive for
industrial insvestment to take root and develop.

Finally, a common character of taxation during the American occupation in the

Philippines was not used to diversify the economy or direct economic development as
some sectors still carried the disproportionate share of thetax burden.

As World War 2 reached the Philippine shores, economic activity was put to a stop and
the Philippines bowed to a new set of administrators, the Japanese. The Japanese
military administration in the Philippines during World War 2 immediately continued the
system of tax collection introduced during the Commonwealth, but exempted the
articles belonging to the Japanese armed forces. Foreign trade fell and the main sources
of taxation came from amusements, manufactures, professions, and business licenses
As the war raged, tax collection was a difficult task and additional incomes of the
 25

Government were derived from the sales of the National sweepstakes and sale of
government bonds.

The expenditure of the Japanese military Government grew greatly. And they issued
military notes in order to cover the costs of the war.

Fiscal policy from 1946 to present

The impact of the war on the Philippine economy was effectively disparate, as Manila,
the capital, was razed to the ground while the rest of the Philippines was relatively
untouched. But the highly agriculture based economy was disrupted. The united states
may have declared the Philippines independent, but as the country needed
rehabilitation funds from the united states, the dependency of the Philippines to the
Americans was an opportunity to be taken advantage of by the former colonial
administrators. The economic situation was so problematic that by 1949, there was a
severe lack of funds in many aspects of governance, such as the military and education
sectors. No effort were made to improve tax collection and the united states advised the
adoption of direct taxation. The administration of president Manuel Roxas declined the
proposal because it did not want to alienate its allies in congress

The impetus for economic growth came during the time of president ELPIDIO QUIRIO
through the implementation of import and exchange controls that led to import
substitutions development. This policy allowed for the expansion of a viable
manufacturing sector that reduced Economic dependence on imports. New tax
measured were also passed, which included higher corporate tax rates that increased
government revenue tax revenue in 1953 increased twofold compared to 1948, the year
when QUIRINO first assumed presidency

While the succeeding presidencies of Magsaysay, Garcia, and Macapagal promise to

study the tax structure and policy of the country (through the creation of a tax
commission in 1959 by means of Republic Act No. 2211) to make way for a more robust
and efficient tax collection scheme, post-war fiscal policy remained regressive,
characterized by the overburdening of the lowest classes while the landed elite who
held business interests were in congress to ensure that taxes would not be levied to
them who belonged to the higher classes of society. The period of the post-war republic
also saw a rise in corruption. From 1959 to 1968, Congress did not pass any tax
legislation despite important changes in the economy and the vested interest of Filipino
businessmen in congress would manifest in many instances such as the rejection of
taxes on imports. Indirect taxation still contributed to three quarters of tax revenues
and the omnibus Tax Law of 1969 did not increase the ratio of income tax to general tax
 26

revenue. Collection of taxes remained poor; tax structure was still problematic; and
much of public funds were lost to corruption, which left the government incapable of
funding projects geared toward development.

Under the Marcos authoritarian regime, the tax system remained regressive. During the
latter part of the Marcos’s years (1981-1985), the tax system was still heavily dependent
on indirect taxes, which made up 70% of total tax collection. The tax system also
remained unresponsive. Taxes grew at an average annual rate of 15% and generated a
low tax yield. Tax effort, defined as the ratio between the share of the Actual tax
collection in gross domestic product and predictable taxable capacity, was at a low
10.7%.

As Corazon Aquino took the helm of the government after the EDSA Revolution, she
reformed the tax system through the 1986 tax reform program. The aim was to
improve the responsiveness of the tax system, promote equity by ensuring that similarly
situated individuals and firms bear the same tax burden, promote growth by
withdrawing or modifying taxes that reduce incentives to work or produce, and
improve tax administration by simplifying the tax system and promoting tax compliance.

A major reform in the tax system introduced under the term of Aquino was the
introduction of the value-added tax (VAT),with the following features:

1. Uniform rate of 10% on sale of domestic and imported goods and services and zero
percent on exports and foreign-currency denominated sales;

2. Ten (10) percent in lieu of varied rates applicable to fixed taxes (60 nominal
rates),advance sales tax, tax on original sale, subsequent sales tax, compensating
tax, miller’s tax, contractor’s tax, broker’s tax, film lessors and distributor’s tax,
excise tax on solvents and matches, and excise tax on processed videotapes;

3. Two percent tax on entities with annual sales or receipts of less than 5,200,000;

4. Adoption of tax credit method of calculating tax by subtracting tax on gross inputs
from tax on gross sales;

5. Exemption of the sale of basic commodities such as agriculture and marine food
product in their original state, price- regulated petroleum products and fertilizers;
and

6. Additional 20% tax on non-essentials articles such jewelry, perfumes, toilet waters,
yacht, and other vessels for pleasure and sports.
 27

The VAT law was signed in 1986 and put to effect in 1988. While it was a reliable source
of revenue for the government, new tax laws would reduce its reliability as legislated
exemption grew.

Along with the tax reform came the administrative reforms, such as the restructuring of
the Department of Finance and its attached agency, the Bureau of Internal Revenue (BIR)
through the Executive Order 127. Tax collection and tax audits were intensified;
computerization was introduced; corruption was relatively reduced, which improved the trust
in the BIR in general. As a result of the tax reform of the Aquino administration, both tax and
revenue effort rose, increasing from 10.7% in 1985 to 15.4% in 1992.

Greater political stability during the administration of Fidel Ramos in 1992 allowed for
continued economic growth. The Ramos administration ventured into its own tax reform
program in 1997 through the Comprehensive Tax Reform Pgrogram, which was implemented to
(1) make the tax system broad-based simple, and with reasonable tax rates; (2) minimize tax
avoidance allowed by existing flaws and loopholes in the system; (3) encourage payments by
increasing tax exemptions level, lowering the highest tax rates, and simplifying procedure; and
(4) rationalize the grant of tax incentives, which was estimated to be worth 531.7 billion pesos
in 1994.

The VAT was also broadened in 1997 to include services, through Republic Act 7716. The
features of the improved VAT law were as follows:

1. Restored the VAT exemptions for all cooperatives (agricultural, electric, credit or
multipurpose, and others) provided that the share capital of each member does not
exceed 515,000 pesos.

2. Expanded the coverage of the term “simple processes” by including broiling and
roasting, effectively narrowing the tax base for food products.

3. Expanded the coverage of the term “original state” by including molasses.

4. Exempted from the VAT are the following:

 Importance of meat

 Sale or importation of coal and natural gas in whatever form or state

 Educational services rendered by private educational institutions duly

accredited by the Commission on Higher Education (CHED)
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 House and lot and other residential dwelling valued at 51 million and below,
subject to adjustment using the Consumer Price Index (CPI)

 Lease of residential units with monthly rental per unit of not more than
58,000, subject to adjustment using CPI

 Sale, importation, printing or publication of books and any newspaper

The succeeding term of President Joseph Estrada in1998 was too short to constitute any
change in the tax system. Then Vice President Gloria Macapagal-Arroyo was swept to
power through another EDSA Revolution. As president, undertook increased
government spending without adjusting tax collections. This resulted in large deficits
from 2002 to 2004. The government had to look for additional sources of revenue and in
2005, the Expanded Value Added Tax (E-VAT) was signed into law as Republic Act 9337.
This expanded the VAT base, subjecting to VAT energy products such as coal and
petroleum products and electricity generation, transmission, and distribution. Select
professional services were also taxed. In February 2006, the VAT tax rate was also
increased from 10% to 12%.

As President Benigno Aquino in 2010, he promised that no new taxes would be

imposed and additional revenue would have to come from adjusting existing taxes. The
administration ventured into the adjustment of excise tax on liquor and cigarette or the
Sin Tax Reform, motivations for which was primarily fiscal, public health, and social
order related considerations. Republic Act No 10351 was passed, and government
revenues from alcohol in 2015 made up 1.1% of the Goss Domestic Product and the
improvement in tax collection resulted in the Philippines receiving a credit rating
upgrade into investment grade status. The Sin Tax Reform was an examplar on how tax
reform could impact social services as it allowed for the increased 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 M in 2012 to 515.4 M in 2015).

The administration of the new President Rodrigo Duterte promised tax reform,
particularly in income taxes as it vowed to lower income tax rates shouldered by
working Filipinos. The present income tax scheme of the country is the second highest in
Southeast Asia and the current laws of income taxes were outdated as they were
drafted two decades ago. The proposed tax reform also seeks to limit VAT exemptions
and increase excise taxes on petroleum products and automobiles. It is hoped that
reforms in the country’s tax policy will result in the much-desired economic
development that will be felt even by the lowest classes in society.
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