Module 4 Economic Development, Industrialization and Global

Economy
2. Learning Outcomes
At the end of the module, the students should be able to:

a. Explain the mechanics of Economic Development, Key Ideas in

Industrialization and role of Global Economy;

b. Identify the impact of international trade to our Philippine economy.

Content
Lesson 17

Economic Development

Economic Development is the creation of wealth from which community

benefits are realized. It is more than a jobs program; it’s an investment in
growing your economy and enhancing the prosperity and quality of life for all
residents.

Economic development means different things to different people. On a

broad scale, anything a community does to foster and create a healthy
economy can fall under the auspice of economic development. Today’s
economic development professionals are trying harder than ever to define
their field in terms that are more concrete and salient to policymakers, the
public, and other professionals.

From a public perspective, local economic development involves the

allocation of limited resources – land, labor, capitol and entrepreneurship in a
way that has a positive effect on the level of business activity, employment,
income distribution patterns, and fiscal solvency.

Economic development is a concerted effort on the part of the responsible

governing body in a city or county to influence the direction of private sector
investment toward opportunities that can lead to sustained economic
growth. Sustained economic growth can provide sufficient incomes for the
local labor force, profitable business opportunities for employers and tax
revenues for maintaining an infrastructure to support this continued growth.
There is no alternative to private sector investment as the engine for
economic growth, but there are many initiatives that you can support to
encourage investments where the community feels they are needed the
most.

It is important to know that economic development is not community

development. Community development is a process for making a community
a better place to live and work. Economic development is purely and simply
the creations of wealth in which community benefits are created. There are
only three approaches used to enhance local economic development. They
are:

Business Retention and Expansion – enhancing existing businesses

Business Expansion – attracting new business

Business Creation – encouraging the growth of new businesses

Indicators of development

The extent to which a country has developed may be assessed by

considering a range of narrow and broad indicators, including per capita
income, life expectancy, education, and the extent of poverty.

The Human Development Index (HDI)

The HDI was introduced in 1990 as part of the United Nations Development
Programme (UNDP) to provide a means of measuring economic development
in three broad areas – per capita income, heath and education. The HDI
tracks changes in the level of development of countries over time.

Each year, the UNDP produces a development report, which provides an

update of changes during the year, along with a report on a special theme,
such as global warming and development, and migration and development.

The introduction of the index was an explicit acceptance that development is

a considerably broader concept than growth, and should include a range of
social and economic factors.

The HDI has two main features:

A scale from 0 (no development) to 1 (complete development).

An index, which is based on three equally weighted components:

Longevity, measured by life expectancy at birth

Knowledge, measured by adult literacy and number of years children are

enrolled at school

Standard of living, measured by real GDP per capita at purchasing power

parity

What the figures mean:

An index of 0 – 0.49 means low development – for example, Nigeria was 0.42
in 2010.

An index of 0.5 – 0.69 means medium development – for example, Indonesia

was 0.6. 3.

An index of 0.7 to 0.79 means high development – for example, Romania

was 0.76. 4.

Above 0.8 means very high development – Finland was 0.87 in 2010.

The HDI is a very useful means of comparing the level of development of

countries. GDP per capita alone is clearly too narrow an indicator of
economic development and fails to indicate other aspects of development,
such as enrolment in school and longevity. Hence, the HDI is a broader and
more encompassing indicator of development than GDP, though GDP still
provides one third of the index
Lesson 18

Industrialization

Industrialization is the process by which an economy is transformed from

primarily agricultural to one based on the manufacturing of goods. Individual
manual labor is often replaced by mechanized mass production, and
craftsmen are replaced by assembly lines. Characteristics of industrialization
include economic growth, more efficient division of labor, and the use of
technological innovation to solve problems as opposed to dependency on
conditions outside human control.

Key Ideas in Industrialization

Industrialization is a transformation away from an agricultural- or resource-

based economy, toward an economy based on mass manufacturing.

Industrialization is usually associated with increases in total income and

living standards in a society.

Early industrialization occurred in Europe and North America during the 18th
and 19th centuries, and later in other parts of the world.

Numerous strategies for industrialization have been pursued in different

countries over time, with varying levels of success.

What are the factors involved in industrialization?

A major factor in industrialization is the development of new technologies.

Industrialization relies on advances in materials and equipment, allowing
businesses to harness sources of power such as coal or steam and turn
natural resources into materials that can handle the stress of being used in
large-scale machinery, such as steel.
Some argue that one factor involved in industrialization was the stock
market. Previously, individuals had provided financing for most enterprises,
but that wasn’t enough to fund implementation of the steam engine or other
technologies needed for mass production. The rise of stock markets and the
corresponding access to capital made it easier for companies to get long-
term financing and for entrepreneurs to buy expensive equipment for use in
factories.

Communication and transportation technology are also important parts of

industrialization. When people and information can move quickly, that helps
ideas and production techniques to diffuse faster, which can lead to speedy
advances in manufacturing technology. Improved transportation also
increases the labor pool for new manufacturers because they can draw
workers from a larger geographical area.

What are the effects of industrialization?

Industrialization rearranges a country’s economy from one based on farming

to one that focuses on industry. Fewer people work on farms, as new
agricultural methods reduce the need for labor and more jobs emerge in
manufacturing.

Many manufacturing businesses need employees to run and maintain

machinery around the clock. These businesses don’t need large amounts of
land to produce goods, unlike farms. As a result, factories usually
concentrate in a city, which causes people to move there for work. The US
underwent this process of urbanization, as cities like New York ballooned in
population during industrialization.

Changes in a country’s infrastructure also accompany industrialization.

Often, this means a focus on improved transportation, such as better roads
and the construction of railroads. This makes it easier for businesses to
acquire raw materials from far away and to ship goods around the country or
export them.

Industrialization improves productivity, which can increase a country’s gross

domestic product (GDP) — the value of everything a country produces
domestically. Where most of the country once focused on subsistence,
industrialization allows more workers to produce an economic surplus,
increasing incomes, GDP, and GDP per capita (per person). That typically
translates to a higher standard of living.

Industrialization can also have negative impacts. In Britain and other

countries, many workers experienced long hours and poor conditions, and
lived crammed together in slums. Some children were forced to work instead
of going to school. Many factories polluted the local environment and, over
time, contributed to global climate change.

What is the importance of industrialization?

Industrialization is important because it formed the basis of many modern

economies. All developed countries have experienced industrialization and
now have industrial economies rather than agrarian ones. Even countries
that rely heavily on the farming industry, like New Zealand, have
industrialized agriculture to increase output.
Industrialization is also relevant because it’s an ongoing process. Some
countries are newly industrialized or currently undergoing industrialization.
Understanding the process and how it affects a country’s economy and
society can help industrializing nations comprehend and drive the changes
they are experiencing.

Many people argue that industrialization helps reduce poverty and improve
living standards, making it an important part of economic development.
Understanding industrialization can also help countries manage its side
effects, such as environmental pollution and carbon emissions.

Knowing the history of industrialization can also help societies reckon with a
shift toward what is sometimes called a post-industrial economy — one that
moves away from manufacturing toward a service or information-based
economy. Though the processes are different, both involve an upheaval in
the economic and social order of a country. Learning from past changes can
help countries understand the transitions they may experience in the future.

Lesson 19

International Trade

International trade allows countries to expand their markets and access

goods and services that otherwise may not have been available
domestically. As a result of international trade, the market is more
competitive. This ultimately results in more competitive pricing and brings a
cheaper product home to the consumer.

Understanding International Trade

International trade was key to the rise of the global economy. In the global
economy, supply and demand—and therefore prices—both impact and are
impacted by global events.

Political change in Asia, for example, could result in an increase in the cost of
labor. This could increase the manufacturing costs for an American sneaker
company that is based in Malaysia, which would then result in an increase in
the price charged for a pair of sneakers that an American consumer might
purchase at their local mall.

Imports and Exports

A product that is sold to the global market is called an export, and a product
that is bought from the global market is an import. Imports and exports are
accounted for in the current account section in a country's balance of
payments.

Global trade allows wealthy countries to use their resources—for example,

labor, technology, or capital—more efficiently. Different countries are
endowed with different assets and natural resources: land, labor, capital, and
technology, etc. This allows some countries to produce the same good more
efficiently—in other words, more quickly and with less of a cost. Therefore,
they may sell it more cheaply than other countries. If a country cannot
efficiently produce an item, it can obtain it by trading with another country
that can. This is known as specialization in international trade.
For example, suppose Country A and Country B both produce cotton
sweaters and wine. Country A produces ten sweaters and six bottles of wine
a year, while Country B produces six sweaters and ten bottles of wine a year.
Both can produce a total of 16 units. Country A, however, takes three hours
to produce the ten sweaters and two hours to produce the six bottles of wine
(a total of five hours). Country B, on the other hand, takes one hour to
produce ten sweaters and three hours to produce six bottles of wine (a total
of four hours).

Comparative Advantage

These two countries realize that they could produce more by focusing on
those products with which they have a comparative advantage. Country A
begins to produce only wine, and Country B begins to produce only cotton
sweaters. Each country can now create a specialized output of 20 units per
year and trade equal proportions of both products. As such, each country
now has access to 20 units of both products.

We can see then that for both countries, the opportunity cost of producing
both products is greater than the cost of specializing. More specifically, for
each country, the opportunity cost of producing 16 units of both sweaters
and wine is 20 units of both products (after trading). Specialization reduces
their opportunity cost and, therefore, maximizes their efficiency in acquiring
the goods they need. With the greater supply, the price of each product
would decrease. Thus, their choice to engage in specialization provides an
advantage to the end consumer as well.

Note that, in the example above, Country B could produce both wine and
cotton more efficiently than Country A. In other words, it takes Country B
less time to produce both wine and cotton. This is called an absolute
advantage. Country B may have this advantage because of a higher level of
technology.

Other Possible Benefits of Trading Globally

International trade not only results in increased efficiency, it also allows

countries to participate in a global economy, encouraging the opportunity for
foreign direct investment (FDI). In theory, economies can therefore grow
more efficiently and can more easily become competitive economic
participants.

For the receiving government, FDI is a means by which foreign currency and
expertise can enter the country. It raises employment levels, and
theoretically, leads to a growth in gross domestic product (GDP). For the
investor, FDI offers company expansion and growth, which means higher
revenues.

Free Trade vs. Protectionism

As with all theories, there are opposing views. International trade has two
contrasting views regarding the level of control placed on trade between
countries.

Free Trade
Free trade is the simpler of the two theories. This approach is also
sometimes referred to as laissez-faire economics. With a laissez-faire
approach, there are no restrictions on trade. The main idea is that supply
and demand factors, operating on a global scale, will ensure that production
happens efficiently. Therefore, nothing needs to be done to protect or
promote trade and growth, because market forces will do so automatically.

Protectionism - holds that regulation of international trade is important to

ensure that markets function properly. Advocates of this theory believe that
market inefficiencies may hamper the benefits of international trade, and
they aim to guide the market accordingly. Protectionism exists in many
different forms, but the most common are tariffs, subsidies, and quotas.
These strategies attempt to correct any inefficiency in the international
market.

As it opens up the opportunity for specialization, and therefore more efficient

use of resources, international trade has the potential to maximize a
country's capacity to produce and acquire goods. Opponents of global free
trade have argued, however, that international trade still allows for
inefficiencies that leave developing nations compromised. What is certain is
that the global economy is in a state of continual change, and, as it
develops, so too must its participants.

Lesson 20

Global Economy

The global economy refers to the interconnected worldwide economic

activities that take place between multiple countries. These economic
activities can have either a positive or negative impact on the countries
involved.

Characteristics of Global Economy

Globalization: Globalization describes a process by which national and

regional economies, societies, and cultures have become integrated through
the global network of trade, communication, immigration, and
transportation. These developments led to the advent of the global economy.
Due to the global economy and globalization, domestic economies have
become cohesive, leading to an improvement in their performances.

International trade: International trade is considered to be an impact of

globalization. It refers to the exchange of goods and services between
different countries, and it has also helped countries to specialize in products
which they have a comparative advantage in. This is an economic theory
that refers to an economy's ability to produce goods and services at a lower
opportunity cost than its trade partners.

International finance: Money can be transferred at a faster rate between

countries compared to goods, services, and people; making international
finance one of the primary features of a global economy. International
finance consists of topics like currency exchange rates and monetary policy.

Global investment: This refers to an investment strategy that is not

constrained by geographical boundaries. Global investment mainly takes
place via foreign direct investment (FDI).
Importance of Global Economy

1. Economic importance at a micro and macro level: The increase in the

world’s population has led to emerging markets growing economically,
making them one of the primary engines of world economic growth. The
growth and resilience shown by emerging markets is a good sign for the
world economy. Before delving into the next point, you need to understand
the concept of microeconomics. It refers to the study of the behaviour of
households, individuals, and firms with respect to the allocation of resources
and decision-making. In simpler terms, this branch of economics studies how
people make decisions, what factors affect their decisions, and how these
decisions affect the price, demand, and supply of goods in the market.
Therefore, from the perspective of microeconomics, some of the largest
firms with high market value and a few of the richest individuals in the world
hail from these emerging markets, which has helped in the higher
distribution of income in these countries. However, many of these emerging
countries are still plagued by poverty, and work still needs to be done to
work towards eradicating it.

2. Long-term world economic outlook: According to financial and economic

projections based on demographic trends and capital productivity models,
the GDP in emerging market economies in 2019 are likely to keep increasing
at a positive rate. According to an emerging markets economic forecast for
2019 conducted by Focus Economics, the economy is set to increase by 7.5%
in India, 6.6% in Philippines, 6.3% in China, 5.3% in Indonesia, 5.1% in Egypt,
4.9% in Malaysia, 3.8% in Peru and 3.7% in Morocco.

How does the global economy work?

The functioning of the global economy can be explained through one word —
transactions. International transactions taking place between top economies
in the world help in the continuance of the global economy. These
transactions mainly comprise trade taking place between different countries.
International trade includes the exchange of a variety of products between
countries. It ranges all the way from fruits and foods, to natural oil and
weapons. Such transactions have a number of benefits including:

Providing a foundation for worldwide economic growth, with the international

economy set to grow by 4% in 2019 (source: World Trade Organisation);

Encouraging competitiveness between countries in various markets;

Raising productivity and efficiency across countries;

Helping in the development of underdeveloped countries by allowing them

to import capital goods (machinery and industrial raw materials) and export
primary goods (natural resources and raw materials).

What are the effects of global economy?

Nearly every country in the world is in some way affected by things that
happen in what may seem at times, like unrelated countries - due to the
influence of the global economy.

The main cause of these effects is economics — based on the production and
exchange of goods and services. Restrictions on the import and export of
goods and services can potentially hamper the economic stability of
countries who choose to impose too many.

The purpose of international trade is similar to that of trading within a

country. However, international trade differs from domestic trade in two
aspects:

The currencies of at least two countries are involved in international trade,

so they must be exchanged before goods and services can be exported or
imported;

Occasionally, countries enforce barriers on the international trade of certain

goods or services which can disrupt the relations between two countries.

Countries usually specialize in those products that they can produce

efficiently, which helps in reducing overall manufacturing costs. Then,
countries trade these products with other countries, whose product
specialization is something else altogether. Having greater specialization
helps countries take advantage of economies of scale. Economies of scale
refer to the proportionate saving in costs gained by an increased level of
production. Manufacturers in these countries can focus all their efforts on
building factories for specialized production, instead of spending additional
money on the production of various types of goods.

Occasionally countries add barriers to international trade. Some of these

barriers include trade tariffs (taxes on imports) and trade quotas (limitation
on the number of products that can be imported into a country). Trade
barriers often affect the economies of the trading countries, and in the long
run, it becomes difficult to keep employing such barriers.

Lesson 21

The Benefits of Global Economy

Free trade: Free trade is an excellent method for countries to

exchange goods and services. It also allows countries to specialize
in the production of those goods in which they have a comparative
advantage.

Movement of labor: Increased migration of the labor force is

advantageous for the recipient country as well as for the workers. If
a country is going through a phase of high unemployment, workers
can look for jobs in other countries. This also helps in reducing
geographical inequality.

Increased economies of scale: The specialization of goods

production in most countries has led to advantageous economic
factors such as lower average costs and lower prices for customers.

Increased investment: Due to the presence of global economy, it has

become easier for countries to attract short-term and long-term
investment. Investments in developing countries go a long way in
improving their economies.
Factors affecting global economy

Natural resources;

Infrastructure;

Population;

Labor;

Human capital;

Technology;

Law

Reference

Manapat, Carlos L.,Pedrosa, Fernando T. Economics, Taxation and

Agrarian Reform. C & E Publishing. 2018

Module 5 Taxation, Agrarian and Land Reform Program

1. Introduction/Overview
This module will discuss the importance of taxation from the national and
local levels. A special discussion will be made about Agrarian Reform
Program from its beginnings up to the current administration.

2. Learning Outcomes
At the end of the module, the students should be able to:

a. Assess the importance of taxation in Philippine Economy;

b. Explain the types of tax imposed in the national and local levels.

c. Identify the key issues in Philippine Agrarian Reform Program

3. Content
Lesson 22

Taxation

Taxation means laying a tax through which the government generates

income to defray its expenses. It is a way to raise funds for government
programs and services that benefits Filipino citizens. Economic investments
and businesses in the Philippines have created several definitions of taxation
enforced by national or local laws for income collection and development of
the government.

A tax is enforced as a contribution but it is proportionate to the citizen’s

ability to pay. It is levied on persons ( who actually pay with money ) and
property as well on business transactions, privileges, and benefits. The
imposition of taxes is done by law through the Bureau of Internal Revenue.

Types of Taxes

There are two types of taxes: national and local. National taxes are the
ones paid to the government through the Bureau of Internal Revenue. The
national taxation is based on the National Internal Revenue Code of 1997 or
the Republic Act No. 8924 otherwise known as the Tax Reform Act of 1997,
as amended.

The types of national taxes are as follows:

1. Capital Gains Tax is a tax imposed on gains that may have been
realized by a seller from the sale, exchange or other disposition of capital
assets located in the Philippines, including pacto de retro sales ( a sale with
a condition for repurchase )and other forms of conditional sale.

2. Documentary Stamp Tax is tax on documents, instruments, loans,

agreements, and papers evidencing the acceptance, assignment, sale or
transfer of an obligation, rights, or property incident thereto. Documentary
stamp taxes are evident on documents like bank promissory notes, deed of
sale, and deed of assignment on transfer of shares of corporate stock
ownership.

3. Donor’s Tax is a tax on donation or gift. It is also a tax imposed on the

gratuitous transfer of property between two or more persons who are living
at the time of transfer. It shall apply whether the transfer is in trust or
otherwise, whether the gift is direct or indirect and whether the property is
real or personal, tangible or intangible. A donor’s tax is based on a
graduated schedule of tax rate.

4. Estate Tax is a tax on the right of the deceased person to transmit

his/her estate to lawful heirs and beneficiaries at the time of death on certain
transfers which are made by law as equivalent to testamentary dispositions.
It is not a tax on property. It is imposed on the privilege of transmitting
property upon the death of the owner. The estate tax is based on the laws in
force at the time of death notwithstanding the postponement of the actual
possession or enjoyment of the estate by the beneficiary. Estate tax is also
based on a graduated schedule of tax rate.

5. Income Tax is a tax on all annual profits made from the property
ownership, profession, trades and offices. It is also a tax on a person’s
income, emoluments, profits and the like. Self employed individuals and
corporate taxpayers pay quarterly income taxes from the first quarter to the
third quarter. And instead of filing quarterly income tax on the fourth
quarter, they file and pay their annual income tax returns for the taxable
year. Individual income tax is based on graduated schedule of tax rate, while
corporate income tax is based on a fixed rate prescribed by the tax law or
special law.

6. Percentage Tax is a business tax imposed on persons or entities who

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

7. Value-Added Tax is a business tax imposed and collected from the

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

Republic Act no. 9337 signed on May 24, 2005 by President Gloria Arroyo is
known as the “expanded value-added tax” or the “E-VAT” law.

8. Excise Tax is a tax imposed on goods manufactured or produced in the

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

9. Withholding tax on compensation is the tax withheld from individuals

receiving purely compensation income arising from an employer-employee
relationship. This tax is what employers withheld in their employees’
compensation income and remit to the government through the BIR or
authorized accrediting agent.

10. Expanding Withholding Tax is prescribed only for the certain payors
like those withheld on rental income and professional income. It is creditable
against the income tax due to the payee for the taxable quarter year.

11. Final Withholding Tax is a kind of withholding tax which is prescribed

only for certain payors and is not creditable against the income tax due of
the payee for the taxable year. An example of final withholding tax is the tax
withheld by banks on the interest income earned on bank deposits.

12. Withholding Tax on Government Money Payments is the

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

Local taxes, on the other hand, is based on the local government taxation in
the Philippines as stated in Republic Act 7160 or the Local Government Code
of 1991, as amended. These taxes , fees, or charges are imposed by the
local government units, such as provinces, cities, municipalities and
barangays.

Lesson 23

Local taxes, on the other hand, include:

1. Tax on Transfer of Real Property Ownership is imposed on the sale,

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

2. Tax on Business of Printing and Publications is imposed on printing

and publication businesses like that of books, cards, posters, leaflets,
handbills, certificates, receipts, pamphlets and others of similar nature.
3. Franchise Tax is a tax on franchised businesses, at the rate not
exceeding fifty percent ( 50%) of one percent (1%) of the gross annual
receipts of the preceding calendar year based on the incoming receipt ( the
annual earning) within the territorial jurisdiction where the franchise is
selling in.

4. Tax on Sand, Gravel and other Quarry Resources is imposed on

ordinary stones, sand, gravel, earth and other quarry resources, as defined
under the National Internal Revenue Code, as amended. This refers to the
above materials that are extracted from public lands or from the beds of
seas, lakes, rivers, streams, creeks and other public waters within its
territorial jurisdiction.

5. Professional Tax is an annual tax on each person engaged in the

exercise or practice of his or her profession that requires government
examinations, like licensure examinations.

6. Amusement Tax is a tax collected from the proprietors. lessees, or

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

7. Annual Fixed Tax for Every Delivery Truck or Van of

Manufacturer or Producers, Wholesalers of, Dealers, or Retailers in,
Certain Products is an annual fixed tax for every truck, van or any vehicle
used by manufacturers, producers, wholesalers, dealers, or retailers in the
delivery or distribution of distilled spirits, fermented liquors, soft drinks,
cigars and cigarettes, and other product to sales, outlets, or consumers,
whether directly or indirectly, within the province. This type of tax is usually
imposed as determined by the local provincial councils through which the
truck or trucks pass through or deliver their cargo.

8. Tax on Business is imposed by cities or municipalities on businesses

before they will be issued a business license or permits to start operations
based on the schedule of rates prescribed by the local government code, as
amended.

9. Fees for Sealing and Licensing of Weights and Measures are

imposed for the sealing and licensing weights and measures. This is to
impose regulations with regards to such weights and measures as prescribed
by the city, provincial or municipal council.

10. Fishery Rentals, Fees, and Charges are imposed by the

municipality/city to grantees of fishery privileges in the municipality/city
waters especially the privilege to build fish corrals, oysters, mussels or other
aquatic beds or bangus fry areas and others as specified in the Local
Government Code.

11. Community Tax is the tax levied by cities or municipalities to every

Filipino or alien living in the Philippines, eighteen (18) years of age or over,
who has been regularly employed on a wage or salary basis for at least thirty
(30) consecutive working days during any calendar year, or who is engaged
in business or occupation, or who owns real property with an aggregate
assessed value of one thousand value (Php 1,000.00) or more, or who is
required by law to file an income tax return. Community tax is also imposed
on every corporations no matter how created or organized, whether
domestic or resident foreign, engaged in or doing business in the Philippines.
12. Taxed levied by the barangays on stores or retailers with fixed
business establishment with gross sales of receipts of the preceding
calendar year amounting to fifty thousand pesos ( Php 50,000.00) or less,
( for city barangays) and thirty thousand pesos ( Php 30,000.00) or less, (for
municipal barangays), at a rate not exceeding one percent (1%) on such
gross sales or receipts.

13. Service Fees or Charges are fees or charges collected by the

barangays for services rendered in connection with the regulations or the
use of barangay-owned properties or service facilities, such as palay, copra,
or tobacco dryers.

14. Barangay Clearance is a fee collected by barangays upon issuance of

barangay clearance, a document required for many government
transactions, such as when getting a business permit from a city or
municipal government or applying a job in a government office or a private
company.

For more information about Philippine Tax Law, visit this website:

[Link]
[Link]

Internal Revenue Allotment

[Link]
allotment-ira

Lesson 24

History of Agrarian Reform in the Philippines

Pre-Spanish Period

Before the Spaniards came to the Philippines, Filipinos lived in villages or

barangays ruled by chiefs or datus. The datus comprised the nobility. Then
came the maharlikas (freemen), followed by the aliping mamamahay (serfs)
and aliping saguiguilid (slaves).

However, despite the existence of different classes in the social structure,

practically everyone had access to the fruits of the soil. Money was unknown,
and rice served as the medium of exchange.

Spanish Period

When the Spaniards came to the Philippines, the concept of encomienda

(Royal Land Grants) was introduced. This system grants that Encomienderos
must defend his encomienda from external attack, maintain peace and order
within, and support the missionaries. In turn, the encomiendero acquired the
right to collect tribute from the indios (native).

The system, however, degenerated into abuse of power by the

encomienderos The tribute soon became land rents to a few powerful
landlords. And the natives who once cultivated the lands in freedom were
transformed into mere share tenants.
First Philippine Republic

When the First Philippine Republic was established in 1899, Gen. Emilio
Aguinaldo declared in the Malolos Constitution his intention to confiscate
large estates, especially the so-called Friar lands.

However, as the Republic was short-lived, Aguinaldo’s plan was never

implemented.

American Period

Significant legislation enacted during the American Period:

Philippine Bill of 1902 – Set the ceilings on the hectarage of private

individuals and corporations may acquire: 16 has. for private individuals and
1,024 has. for corporations.

Land Registration Act of 1902 (Act No. 496) – Provided for a comprehensive
registration of land titles under the Torrens system.

Public Land Act of 1903 – introduced the homestead system in the

Philippines.

Tenancy Act of 1933 (Act No. 4054 and 4113) – regulated relationships
between landowners and tenants of rice (50-50 sharing) and sugar cane
lands.

The Torrens system, which the Americans instituted for the registration of
lands, did not solve the problem completely. Either they were not aware of
the law or if they did, they could not pay the survey cost and other fees
required in applying for a Torrens title.

Commonwealth Period

President Manuel L. Quezon espoused the "Social Justice" program to arrest

the increasing social unrest in Central Luzon.

Significant legislation enacted during Commonwealth Period:

1935 Constitution – "The promotion of social justice to ensure the well-being

and economic security of all people should be the concern of the State"

Commonwealth Act No. 178 (An Amendment to Rice Tenancy Act No. 4045),
Nov. 13, 1936 – Provided for certain controls in the landlord-tenant
relationships

National Rice and Corn Corporation (NARIC), 1936 – Established the price of
rice and corn thereby help the poor tenants as well as consumers.

Commonwealth Act. No. 461, 1937 – Specified reasons for the dismissal of
tenants and only with the approval of the Tenancy Division of the
Department of Justice.

Rural Program Administration, created March 2, 1939 – Provided the

purchase and lease of haciendas and their sale and lease to the tenants.
Commonwealth Act No. 441 enacted on June 3, 1939 – Created the National
Settlement Administration with a capital stock of P20,000,000.

Japanese Occupation

The Second World War II started in Europe in 1939 and in the Pacific in 1941.

Hukbalahap controlled whole areas of Central Luzon; landlords who

supported the Japanese lost their lands to peasants while those who
supported the Huks earned fixed rentals in favor of the tenants.

Unfortunately, the end of war also signaled the end of gains acquired by the
peasants.

Upon the arrival of the Japanese in the Philippines in 1942, peasants and
workers organizations grew strength. Many peasants took up arms and
identified themselves with the anti-Japanese group, the HUKBALAHAP (Hukbo
ng Bayan Laban sa Hapon).

Lesson 25

Philippine Republic

After the establishment of the Philippine Independence in 1946, the

problems of land tenure remained. These became worst in certain areas.
Thus the Congress of the Philippines revised the tenancy law.

President Manuel A. Roxas (1946-1948) enacted the following laws:

Republic Act No. 34 -- Established the 70-30 sharing arrangements and

regulating share-tenancy contracts.

Republic Act No. 55 -- Provided for a more effective safeguard against

arbitrary ejectment of tenants.

Elpidio R. Quirino (1948-1953) enacted the following law:

Executive Order No. 355 issued on October 23, 1950 -- Replaced the National
Land Settlement Administration with Land Settlement Development
Corporation (LASEDECO) which takes over the responsibilities of the
Agricultural Machinery Equipment Corporation and the Rice and Corn
Production Administration.

Ramon Magsaysay (1953-1957) enacted the following laws:

Republic Act No. 1160 of 1954 -- Abolished the LASEDECO and established
the National Resettlement and Rehabilitation Administration (NARRA) to
resettle dissidents and landless farmers. It was particularly aimed at rebel
returnees providing home lots and farmlands in Palawan and Mindanao.

Republic Act No. 1199 (Agricultural Tenancy Act of 1954) -- governed the
relationship between landowners and tenant farmers by organizing share-
tenancy and leasehold system. The law provided the security of tenure of
tenants. It also created the Court of Agrarian Relations.
Republic Act No. 1400 (Land Reform Act of 1955) -- Created the Land Tenure
Administration (LTA) which was responsible for the acquisition and
distribution of large tenanted rice and corn lands over 200 hectares for
individuals and 600 hectares for corporations.

Republic Act No. 821 (Creation of Agricultural Credit Cooperative Financing

Administration) -- Provided small farmers and share tenants loans with low
interest rates of six to eight percent.

President Carlos P. Garcia (1957-1961)

Continued the program of President Ramon Magsaysay. No new legislation

passed.

President Diosdado P. Macapagal (1961-1965) enacted the following law:

Republic Act No. 3844 of August 8, 1963 (Agricultural Land Reform

Code) -- Abolished share tenancy, institutionalized leasehold, set retention
limit at 75 hectares, invested rights of preemption and redemption for tenant
farmers, provided for an administrative machinery for implementation,
institutionalized a judicial system of agrarian cases, incorporated extension,
marketing and supervised credit system of services of farmer beneficiaries.

The RA was hailed as one that would emancipate Filipino farmers from the
bondage of tenancy.

Lesson 26

President Ferdinand E. Marcos (1965-1986)

Proclamation No. 1081 on September 21, 1972 ushered the Period of the
New Society. Five days after the proclamation of Martial Law, the entire
country was proclaimed a land reform area and simultaneously the Agrarian
Reform Program was decreed.

President Marcos enacted the following laws:

Republic Act No. 6389, (Code of Agrarian Reform) and RA No. 6390 of
1971 -- Created the Department of Agrarian Reform and the Agrarian Reform
Special Account Fund. It strengthen the position of farmers and expanded
the scope of agrarian reform.

Presidential Decree No. 2, September 26, 1972 -- Declared the country under
land reform program. It enjoined all agencies and offices of the government
to extend full cooperation and assistance to the DAR. It also activated the
Agrarian Reform Coordinating Council.

Presidential Decree No. 27, October 21, 1972 -- Restricted land reform scope
to tenanted rice and corn lands and set the retention limit at 7 hectares.

President Corazon C. Aquino (1986-1992)

The Constitution ratified by the Filipino people during the administration of

President Corazon C. Aquino provides under Section 21 under Article II that
“The State shall promote comprehensive rural development and agrarian
reform.”
On June 10, 1988, former President Corazon C. Aquino signed into law
Republic Act No. 6657 or otherwise known as the Comprehensive Agrarian
Reform Law (CARL). The law became effective on June 15, 1988.

Subsequently, four Presidential issuances were released in July 1987 after 48

nationwide consultations before the actual law was enacted.

President Corazon C. Aquino enacted the following laws:

Executive Order No. 228, July 16, 1987 – Declared full ownership to qualified
farmer-beneficiaries covered by PD 27. It also determined the value
remaining unvalued rice and corn lands subject of PD 27 and provided for
the manner of payment by the FBs and mode of compensation to
landowners.

Executive Order No. 229, July 22, 1987 – Provided mechanism for the
implementation of the Comprehensive Agrarian Reform Program (CARP).

Proclamation No. 131, July 22, 1987 – Instituted the CARP as a major
program of the government. It provided for a special fund known as the
Agrarian Reform Fund (ARF), with an initial amount of Php50 billion to cover
the estimated cost of the program from 1987-1992.

Executive Order No. 129-A, July 26, 1987 – streamlined and expanded the
power and operations of the DAR.

Republic Act No. 6657, June 10, 1988 (Comprehensive Agrarian Reform Law)
– An act which became effective June 15, 1988 and instituted a
comprehensive agrarian reform program to promote social justice and
industrialization providing the mechanism for its implementation and for
other purposes. This law is still the one being implemented at present.

Executive Order No. 405, June 14, 1990 – Vested in the Land Bank of the
Philippines the responsibility to determine land valuation and compensation
for all lands covered by CARP.

Executive Order No. 407, June 14, 1990 – Accelerated the acquisition and
distribution of agricultural lands, pasture lands, fishponds, agro-forestry
lands and other lands of the public domain suitable for agriculture.

President Fidel V. Ramos (1992-1998)

When President Fidel V. Ramos formally took over in 1992, his administration
came face to face with publics who have lost confidence in the agrarian
reform program. His administration committed to the vision “Fairer, faster
and more meaningful implementation of the Agrarian Reform Program.

President Fidel V. Ramos enacted the following laws:

Republic Act No. 7881, 1995 – Amended certain provisions of RA 6657 and
exempted fishponds and prawns from the coverage of CARP.

Republic Act No. 7905, 1995 – Strengthened the implementation of the

CARP.
Executive Order No. 363, 1997 – Limits the type of lands that may be
converted by setting conditions under which limits the type of lands that
may be converted by setting conditions under which specific categories of
agricultural land are either absolutely non-negotiable for conversion or highly
restricted for conversion.

Republic Act No. 8435, 1997 (Agriculture and Fisheries Modernization Act
AFMA) – Plugged the legal loopholes in land use conversion.

Republic Act 8532, 1998 (Agrarian Reform Fund Bill) – Provided an additional
Php50 billion for CARP and extended its implementation for another 10
years.

Lesson 27

President Joseph E. Estrada (1998-2000)

“ERAP PARA SA MAHIRAP’. This was the battle cry that endeared President
Joseph Estrada and made him very popular during the 1998 presidential
election.

President Joseph E. Estrada initiated the enactment of the following law:

Executive Order N0. 151, September 1999 (Farmer’s Trust Fund) – Allowed
the voluntary consolidation of small farm operation into medium and large
scale integrated enterprise that can access long-term capital.

During his administration, President Estrada launched the Magkabalikat Para

sa Kaunlarang Agraryo or MAGKASAKA. The DAR forged into joint ventures
with private investors into agrarian sector to make FBs competitive.

However, the Estrada Administration was short lived. The masses who put
him into office demanded for his ouster.

President Gloria Macapacal-Arroyo (2000-2010)

The agrarian reform program under the Arroyo administration is anchored on

the vision “To make the countryside economically viable for the Filipino
family by building partnership and promoting social equity and new
economic opportunities towards lasting peace and sustainable rural
development.”

Land Tenure Improvement - DAR will remain vigorous in implementing land

acquisition and distribution component of CARP. The DAR will improve land
tenure system through land distribution and leasehold.

Provision of Support Services - CARP not only involves the distribution of

lands but also included package of support services which includes: credit
assistance, extension services, irrigation facilities, roads and bridges,
marketing facilities and training and technical support programs.

Infrastructure Projects - DAR will transform the agrarian reform communities

(ARCs), an area focused and integrated delivery of support services, into
rural economic zones that will help in the creation of job opportunities in the
countryside.
KALAHI ARZone - The KALAHI Agrarian Reform (KAR) Zones were also
launched. These zones consists of one or more municipalities with
concentration of ARC population to achieve greater agro-productivity.

Agrarian Justice - To help clear the backlog of agrarian cases, DAR will hire
more paralegal officers to support undermanned adjudicatory boards and
introduce quota system to compel adjudicators to work faster on agrarian
reform cases. DAR will respect the rights of both farmers and landowners.

President Benigno Aquino III (2010-2016)

President Benigno Aquino III vowed during his 2012 State of the Nation
Address that he would complete before the end of his term the
Comprehensive Agrarian Reform Program (CARP), the centerpiece program
of the administration of his mother, President Corazon Aquino.

The younger Aquino distributed their family-owned Hacienda Luisita in

Tarlac. Apart from the said farm lots, he also promised to complete the
distribution of privately-owned lands of productive agricultural estates in the
country that have escaped the coverage of the program.

Under his administration, the Agrarian Reform Community Connectivity and

Economic Support Services (ARCCESS) project was created to contribute to
the overall goal of rural poverty reduction especially in agrarian reform
areas.

Agrarian Production Credit Program (APCP) provided credit support for crop
production to newly organized and existing agrarian reform beneficiaries’
organizations (ARBOs) and farmers’ organizations not qualified to avail
themselves of loans under the regular credit windows of banks.

The legal case monitoring system (LCMS), a web-based legal system for
recording and monitoring various kinds of agrarian cases at the provincial,
regional and central offices of the DAR to ensure faster resolution and close
monitoring of agrarian-related cases, was also launched.

Aside from these initiatives, Aquino also enacted Executive Order No. 26,
Series of 2011, to mandate the Department of Agriculture-Department of
Environment and Natural Resources-Department of Agrarian Reform
Convergence Initiative to develop a National Greening Program in
cooperation with other government agencies.

Lesson 28

President Rodrigo Roa Duterte (2016 – present)

Under his leadership, the President wants to pursue an “aggressive” land

reform program that would help alleviate the life of poor Filipino farmers by
prioritizing the provision of support services alongside land distribution.

The President directed the DAR to launch the 2nd phase of agrarian reform
where landless farmers would be awarded with undistributed lands under the
Comprehensive Agrarian Reform Program (CARP).
Duterte plans to place almost all public lands, including military reserves,
under agrarian reform.

The President also placed 400 hectares of agricultural lands in Boracay under
CARP.

Under his administration the DAR created an anti-corruption task force to

investigate and handle reports on alleged anomalous activities by officials
and employees of the department.

The Department also pursues an “Oplan Zero Backlog” in the resolution of

cases in relation to agrarian justice delivery of the agrarian reform program
to fast-track the implementation of CARP.

The Comprehensive Agrarian Reform Program

The CARL set in motion the implementation of the Comprehensive Agrarian

Reform Program (CARP) in June 1988 with an initial allocation of p50 000
million[12] for the Agrarian Reform Fund (ARF). The CARP covered all public
and private agricultural lands regardless of the crops planted. It also included
public domain lands that were suitable for agriculture. It sought to
redistribute land not only to farmers and farm workers but also to other
landless poor. Guided by the principle of social justice, it recognized the right
of landowners to just compensation and provided a retention limit of 5 ha. It
also recognized the rights of indigenous cultural communities to their
ancestral land.

The CARP extended the amortization period from 20 years (as under
President Marcos' Decree No. 27) to 30 years. On lands not covered by land
distribution (those within the retention limit), the CARP sought to improve
tenure arrangements through leasehold. The law mandated the Department
of Agrarian Reform (DAR) to lead the implementation of the CARP.

The CARP also provided a comprehensive package of support services. These

included: land surveys and titling; credit; basic rural infrastructure (farm-to-
market roads, communal irrigation systems, and post-harvest facilities);
basic social services (potable water supply, education and health care);
extension (including marketing and management assistance); and capability
building (training and organizational development of farmers).

The CARP was given ten years to distribute a total target of some 8 million
ha. However, by June 1998 it had distributed only 4.6 million ha (58 percent
of target) to some 2.8 million agrarian reform beneficiaries (ARBs), leaving a
backlog of some 3.4 million ha. President Ramos signed Republic Act No.
8532 on 11 February 1998, extending the CARP until 2008, with an additional
allocation of p50 000[13] million for the ARF.

For more information about Agrarian Reform, visit this link:

[Link]

[Link]

RA 6657 (The Comprehensive Agrarian Reform Law)

[Link]
Agricultural Land Reform Code

[Link]

Reading about Philippine Agrarian Reform

[Link]

Reference

Manapat, Carlos L.,Pedrosa, Fernando T. Economics, Taxation and Agrarian

Reform. C & E Publishing. 2018