HIST 1 STUDY GUIDE | Taxation

🙇 🚬 💸 🚂
Taxation
Introduction, p. 1
Key Concepts, p. 1
Learning Resources, pp. 1-7
Study Questions, pp. 8
Learning Activity, p. 8
References, pp. 8-9

INTRODUCTION
In the past lesson, we learned about agrarian reform, which is one contemporary Philippine issue that
traces its evolution all the way back to the colonial eras. Because of the complex way we have been shaped by
our colonial experiences, social issues in the present do not happen out of the blue. Instead, they are produced
by several interrelated events that all stem from the reality that we had been under colonial rule.
One other contemporary issue in the Philippines that has deep roots in our colonial experience is taxation.
The following lesson discusses some highlights of taxation practices from the precolonial period, the Spanish
and American colonial periods, and the present day. The lesson is good for 1-2 hours. Shall we start?

KEY CONCEPTS
Taxation, buwis, tribute, cedula personal, residence tax, national taxes, local taxes, TRAIN Law

LEARNING RESOURCES
Taxation is one of those systems that has been around since the precolonial period, but continues to be in
use today. For the purpose of this class, let’s define taxation as the system of compulsory contribution to state
revenue (income), paid through
o The citizens’ income,
o Business profits, or
o The cost of goods and transactions.
In this way, taxes are the lifeblood of a government. In the modern sense especially, taxes are basically
what the government uses to pay for our public resources, like roads, schools, and hospitals.

Taxes in the precolonial period

As mentioned above, taxation was practiced in the Philippine islands even before the Spaniards arrived.
Precolonial Tagalog societies practiced the payment of buwis (tribute, sometimes in kind or in the form of rice
and crops) to their datu. In exchange for paying this buwis, persons were promised the datu’s protection
against their enemies.

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 HIST 1 STUDY GUIDE | Taxation

On a larger scale, small kingdoms also paid tributes to larger kingdoms so that the larger ones would be
under some obligation to come to the smaller ones’ aid in times of need. For instance, the Maguindanao
sultanate of Kudarat (who was also known as Cachil Corralat in other primary sources) was so vast and
influential that kingdoms as far as Iligan and Bukidnon were its tributaries. In the history of Cagayan de Oro,
the people of Himologan also paid tribute to Sultan Kudarat, even though they were not Muslims themselves.

Taxes in the Spanish and American colonial period

When the Spaniards arrived in the islands, the taxation practices they introduced were far more
systematic and large-scale. However, according to American studies of Spanish practices in the Philippines,
church funds and state funds were often mixed together. This led to frequent confusion (or cover-ups, really!)
about how taxes should be collected and allocated.
Many Spanish public officials also felt entitled to caidas (droppings), which were unofficial profits one
could acquire from holding public office.
Anyway, for us to appreciate better how taxes worked on the level of ordinary Filipinos, let’s first look at
how money itself was used, especially in the later part of the Spanish era. The information in the following
sections is from the 19th century.

Currency and wages in the 19th century
The silver real was the currency of Spain that was also used in the Philippine colony. Eight silver reales
were equivalent to one peso. Got that? Now let's look at common wages, starting with those in a tobacco
factory…
o Maestra primera (supervisor): 16 pesos / month
o Maestra segunda (assistant supervisor): 8 pesos / month
o Cigarrera (cigar roller): 2 to 2.50 pesos / month

Now let’s look at wages for other typical occupations of the natives…
o Cochero (driver), with a foreign master: 12 pesos / month
o Boradora or sastre (seamstress): in Manila, 12 pesos / month; in the provinces, 7.50 pesos / month
o Janitor: 5 pesos / month
o Lavandera: 3 pesos / month
o Criada (lady’s maid): 2 to 3 pesos / month

Do you think you would have survived in 19th-century Philippines? Let’s look at one more set of wages, for
more upper-class occupations…
o Government employee (usually Spaniards only): 60 pesos / month
o Governor-general: 40,000 pesos / year
o Businessman in the galleon trade: 140,000 pesos / year

Expenses in the 19th century

But the wages mean nothing if we do not know how expenses ran at the time. On the next page, let’s look
at the average household budget of an unmarried upper-class person in 1885.

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 HIST 1 STUDY GUIDE | Taxation

Pesos / Month

Por la parte de alquiler que le 40 pesos rental of a home shared 10

corresponde de casa, siendo cuatro los by 4 people
que vivan juntos y costando el alquiler
40 pesos

Gasto diario á razón de medio peso Average daily living expenses 15

Por la parte de almacen que le Grocery approximately 40 pesos 10

corresponde, suponiendo el gasto per month, for a household of 4
habido en el mes en 40 pesos
people

Sueldo y manutencion de su criado Salary and support to servant 5

Lavado y planchado de ropa Washing and ironing of clothes 4

Por alquiler de vehiculos en Transport expenses altogether 5

comandita

Reposicion de calzado y ropas interiores Maintenance of shoes, and inner 8

y esteriores and outer clothing

Gastos de correo, escrito y fumar Postage, writing, and smoking 4

Total monthly expense 61

Common taxes in the 19th century
Now that we have an idea of how wages and expenses worked at this time, let’s see how people were
typically taxed.

Tribute or personal tax, for every family 8 reales / native family** (later raised
composed of a married man, his wife, and his to 12 reales in 1851)
underage children*

Tithe (diezmos prediales) 1 real / taxpayer (2 reales for Chinese

mestizos)

Community fund (caja de comunidad) 1 real / taxpayer

Church (sanctorum) 3 reales / taxpayer

Donativo de Zamboanga, for the conquest of ½ real / taxpayer

Jolo, 1635-1850s

Vintas, in Pampanga and Bulacan, 1781-1850s ½ real

Vassalage, for negritos and infidels (non- 1 real / head (or you could just
Christians) become a Christian)

* Before 1851, every unmarried male over 20 years and unmarried female over 25 years living with
parents was required to pay half the tribute (4 reales). This rate was paid until the unmarried person reached
60 years old. After 1851, the minimum age was lowered to 18 for males, and 20 for females.

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 HIST 1 STUDY GUIDE | Taxation

** Spaniards did not pay tribute. Also exempted from paying tribute Filipino tax-collectors (alcaldes,
gobernadores, cabezas de barangay) and their wives and first-born sons; soldiers and militia men, and their
wives or widows, and sons who lived under their roof; members of the guardia civil with their wives and sons;
tobacco inspectors and storekeepers, with their spouses and sons; government employees receiving a fixed
salary; beggars; and some miscellaneous people.

The cedula personal
In 1884, the tribute, tithe, caja de comunidad, and sanctorum taxes were abolished. Instead, the Spanish
colonial government began to implement a new poll tax system, which cost people something between 0.50
to 37.50 pesos, depending on their income bracket.

Cedula personal of a Binondo merchant, 1896

Upon paying this tax, the person received a cedula personal, a certificate of identification which had many
purposes. Everyone was required to pay for this cedula, because the cedula had to be presented every time
any of the following was done:
à Getting employed by royal or insular à Paying any direct taxes
authority à Exercising any civil rights
à Entering any provincial or municipal office à Establishing identity
à Making any form of contract à Depositing or withdrawing money
à Presenting any claim in court à Bidding in public auctions
à Bringing any action to court à Joining any association
à Enrolling in school à Traveling beyond one’s town
à Entering any employment or profession

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 HIST 1 STUDY GUIDE | Taxation

By tying so many day-to-day activities to the cedula, the government made sure that everyone would be forced
to pay the poll tax. With this additional means of control, it is no longer surprising then that one of the things
the Katipuneros did at the start of the Tagalog Revolution, as discussed in previous lessons, was to tear their
cedulas.

Is this making sense so far?

When the nation was turned over to American colonizers, one notable thing they did was to retain the
cedula system of the Spaniards. By paying a residence tax, a person was given a residence certificate.

Residence certificate of Mr. Angel Trinidad, a native of Polo, Bulacan, 1920

This residence tax is today called community tax, but we continue to call the community tax certificate a
“cedula.”

Taxation in the present day

At present, our taxes are divided into two (2) types: national and local.
o National taxes are paid to the government through the Bureau of Internal Revenue (BIR). These
include documentary stamp tax, donor’s tax, estate tax, excise taxes, income tax, and value-added tax
(VAT).
o Local taxes are paid to our respective local government units (LGUs). These include franchise taxes,
professional taxes, amusement taxes, community tax, barangay tax, and barangay clearance payments.

Except where otherwise noted, the contents of this Study Guide are licensed to Ena Jessa Kristine Jarales
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 HIST 1 STUDY GUIDE | Taxation

The TRAIN Law

In 2017, President Rodrigo Duterte signed into law the latest change in our
current taxation system. The Tax Reform for Acceleration and Inclusion (TRAIN) Law
is best known for exempting minimum-wage earners from paying personal income
tax.
Keep in mind, though, that taxes are what funds the activities of the government,
so if millions of Filipinos have been exempted from paying income tax, the government
has to be funded by other means, such as:
à Increasing the excise tax on petroleum products (gasoline, diesel, LPG);
à Increasing the excise tax on automobiles; and
à Increasing the tax on sugar-sweetened beverages.

The TRAIN Law took effect on January 2018 and provoked mixed reactions at the
time it was implemented. To get an idea of how it has affected Filipinos from different
walks of life, watch two pre-selected videos from the GMA investigative show Brigada.
You can scan the two QR codes here to access those videos on YouTube!

By the way, the TRAIN Law also stipulated how the income from the law was to be spent. The 70/30
allocation of funds was in fact one of the criticisms about the program, since a larger proportion was dedicated
to infrastructure instead of to social welfare. Read for yourself this section from R.A. 10963 below.

Excerpts from Republic Act No. 10963

Section 82. Section 288 of the NIRC [National Internal Revenue Code], as amended, is hereby further
amended to read as follows:
Incremental Revenues from the Tax Reform for Acceleration and Inclusion (TRAIN). — For five (5)
years from the effectivity of this Act, the yearly incremental revenues generated shall be automatically
appropriated as follows:
(1) Not more than seventy percent (70%) to fund infrastructure projects such as, but not limited
to, the Build, Build, Build program and provide infrastructure programs to address congestion through
mass transport and new road networks, military infrastructure, sports facilities for public schools, and
potable drinking water supply in all public places; and
(2) Not more than thirty percent (30%) to fund:
(a) Programs under Republic Act No. 10659, otherwise known as the “Sugarcane Industry
Development Act of 2015,” to advance the self-reliance of sugar farmers that will increase
productivity, provide livelihood opportunities, develop alternative farming systems and
ultimately enhance farmers’ income;
(b) Social mitigating measures and investments in: (i) education, (ii) health, targeted
nutrition, and anti-hunger programs for mothers, infants, and young children, (iii) social
protection, (iv) employment, and (v) housing that prioritize and directly benefit both the poor and
near-poor households;

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 HIST 1 STUDY GUIDE | Taxation

(c) A social welfare and benefits program where qualified beneficiaries shall be provided
with a social benefits card to avail of the following social benefits:
(i) Unconditional cash transfer to households in the first to seventh income deciles of
the National Household Targeting System for Poverty Reduction (NHTS-PR), Pantawid
Pamilyang Pilipino Program, and the social pension program for a period of three (3) years
from the effectivity of this Act: Provided, That the unconditional cash transfer shall be Two
hundred pesos (P200.00) per month for the first year and Three hundred pesos (P300.00)
per month for the second and third year, to be implemented by the Department of Social
Welfare and Development (DSWD);
(ii) Fuel vouchers to qualified franchise holders of Public Utility Jeepneys (PUJs);
(iii) For minimum wage earners, unemployed, and the poorest fifty percent (50%) of
the population:
(1) Fare discount from all public utility vehicles (except trucks for hire and
school transport service) in the amount equivalent to ten percent (10%)
of the authorized fare;
(2) Discounted purchase of National Food Authority (NFA) rice from
accredited retail stores in the amount equivalent to ten percent (10%) of
the net retail prices, up to a maximum of twenty (20) kilos per month; and
(3) Free skills training under a program implemented by the Technical Skills
and Development Authority (TESDA).
Provided, That benefits or grants contained in this Subsection shall not be
availed in addition to any other discounts.
(iv) Other social benefits programs to be developed and implemented by the
government.

A final word of caution!

Even though you don’t file BIR forms and other paperwork, you students are affected by the taxation
system and the TRAIN Law! J Many working people pay taxes directly, through income tax or withholding
tax. However, even more people pay taxes indirectly, through excise taxes and especially through VAT. Most
of you still belong to this second category. When you ride public transportation, you pay tax through the excise
tax imposed on the jeepney’s fuel. When you buy a meal in Jollibee, you pay tax through the VAT that is
currently worth 12% of what you paid for your Chickenjoy (thigh part) with fries and softdrink.
But while the Philippine government is responsible for facilitating the taxation system, very, very
technically, all the money earned in that system belongs to the Filipino people. When politicians spend for
their constituents, they are not spending that which belongs to them; that money comes from the people
themselves. That is why we are always within our rights to know and ask questions about how the government
is using our taxes.

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 HIST 1 STUDY GUIDE | Taxation

STUDY QUESTIONS
You may choose to answer the following questions mentally, or use this opportunity to write your answer
down in a notebook and rest your eyes from the computer screen.
1. How are the emojis on the front page related to today’s lesson? Use your imagination!
2. The British novelist L.P. Hartley writes, “The past is a foreign country: they do things differently there.”
Do you think this applies to the lesson on taxation? If yes, how?
3. If your family had lived in the 19th century, during the Spanish colonial era, how much would your
household have had to pay in taxes?
4. How does knowing the context of the tax system during the Spanish colonial era deepen our
understanding of the tearing of the cedula at Pugad Lawin / Balintawak in 1896?
5. What is the connection between a) our colonial experience as a whole, and b) the changes in our
taxation systems?
If you’re having difficulty making sense of the questions, don’t hesitate to get in touch with your teacher and
classmates! J

LEARNING ACTIVITY
Since taxation is a broad topic, for this learning activity let’s focus on our present situation. In the years to
come, the era of the TRAIN Law will be yet another chapter in the evolution of the Philippines’ taxation system.
Future historians and analysts will look back to the stories of Katherine Ana, Nanay Virginia, and Tatay
Cipriano — and give their own verdicts about the impacts made by the law in the lives of ordinary Filipino
taxpayers. Let’s add to the pool of primary sources that these future historians can use!
Interview any person in your household about their experience of the effects of TRAIN Law. Ask them if
they noticed any changes in their day-to-day lives since that law was passed. You may opt to write down your
interviewee’s answers verbatim (exactly as they were said), or paraphrase their responses to make them
clearer. Then compare their experience with your experience, and with the stories from the GMA Brigada
videos.
If you need more technical information about the TRAIN Law, you can scan the
QR code to access this quick guide produced by the Department of Finance – National
Tax Research Center.
o If there is nobody at home you are comfortable interviewing, or if you live
alone, please contact the instructor so that we can find you an alternative
activity.

REFERENCES
Coo, Stephanie Marie R. “Clothing and the colonial culture of appearances in nineteenth century Spanish
Philippines (1820-1896).” PhD diss., Université Nice Sophia Antipolis, 2014. https://tel.archives-
ouvertes.fr/tel-01126974/document.
GMA Public Affairs. “Brigada: Epekto ng TRAIN Law sa mga Pilipino, tinalakay sa ‘Brigada.’” YouTube video,
10:38. January 31, 2018. https://youtu.be/3JfVX6DMuls.
---. “Brigada: Ilang pamilyang Pinoy, aminadong apektado sa pag-arangkada ng TRAIN Law.” YouTube video,
9:01. January 31, 2018. https://youtu.be/XpBEreNnPUo.

Except where otherwise noted, the contents of this Study Guide are licensed to Ena Jessa Kristine Jarales
under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. 8
Only for classroom purposes for the Hist 01 subject at Xavier University – Ateneo de Cagayan.
 HIST 1 STUDY GUIDE | Taxation

Philippines – Department of Finance – National Tax Research Center. Tax Changes You Need to Know:
Republic Act No. 10963 Tax Reform for Acceleration and Inclusion (TRAIN). Manila: National Tax
Research Center, 2018. https://ntrc.gov.ph/images/train/Tax-Changes-You-Need-to-Know-under-
RA-10963.pdf.
Philippines – Congress of the Philippines. Republic Act No. 10963. 2017.
https://www.officialgazette.gov.ph/downloads/2017/12dec/20171219-RA-10963-RRD.pdf.
Plehn, Carl C. “Taxation in the Philippines.” Political Science Quarterly 16, no. 4 (December 1901): 680-711.
https://doi.org/10.2307/2140422.

📸 De Leon, Eduardo. Residence Certificate of Mr. Angel Trinidad, a native of Polo, Bulacan. 1920. Photograph
of residence certificate. N.d. Flickr, https://flic.kr/p/yVwUMb.

📸 The cedula personal of a Binondo merchant, 1896. Photograph of cedula personal. N.d. Philstar.com,
https://www.philstar.com/lifestyle/arts-and-culture/2019/11/11/1967609/bonifacio-
foreshadows-age-duterte.

Except where otherwise noted, the contents of this Study Guide are licensed to Ena Jessa Kristine Jarales
under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. 9
Only for classroom purposes for the Hist 01 subject at Xavier University – Ateneo de Cagayan.