READINGS IN PHILIPPINE HISTORY

Chapter 4: SOCIAL, POLITICAL,

ECONOMIC, AND CULTURAL ISSUES IN
PHILIPPINE HISTORY

Group 6 (Reporter 6)
Jhea C. Demeterio
Rose Ann M. Montillen
Jelyn B. Zafra
Greizen Mae M. Aratea
Mario O. Abejar Jr.
Dannah Jane C. Conejos
I. JHEA C. DEMETERIO

Evolution of the Philippine Constitution

1897: Constitution of Biak-na-Bato

1899: Malolos Constitution

II. ROSE ANN M. MONTILLEN

1935: The Commonwealth Constitution

1937: Constitutional Authoritarianism

1987: Constitution After Martial Law

III. JELYN B. ZAFRA

Attempts to Amend or Change the 1987 Constitution

Federalism

Policies on Agrarian Reform

IV. GREIZEN MAE M. ARATEA

Landownership in the Philippines under Spain

Landownership in the Philippines under the Americans

Post-War Interventions towards Agrarian Reform

V. MARIO O. ABEJAR JR.

Agrarian Reform Effort under Marcos

Post-1986 Agrarian Reform

CARPER and the Future of Agrarian Reform in the

Philippines

VI. DANNAH JANE C. CONEJOS

Evolution of Philippine Taxation

Taxation in Spanish Philippines

Taxation under the Americans

Taxation during the Commonwealth Period

Fiscal Policy from 1946 to Present

I. [ DEMETERIO, JHEA C.]

Evolution of the Philippine Constitution

CONSTITUTIONS

-as a set of fundamental principles or established precedents according to

which a state or other organization is governed.

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.

1897: Constitution of BIAK-NA-BATO

The Constitution of Biak-na-Bato was the provisional 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 Artacho and Félix
Ferrer in Spanish, and later on, translated into Tagalog.

ORGANS OF THE GOVERNMENT UNDER THE CONSTITUTION

1. 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. 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.
3. 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 an 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 24th 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 went to exile in Hong Kong. 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 revolutionary forces retreated to the control of
Aguinaldo, and the 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.

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 eight 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 Calderon, 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 Sangguniang-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
Constitutional Program of the Philippine Republic of 1898; the provisional
constitution of Mariano Ponce in 1898 that followed the Spanish
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 these ends, have voted,
decreed, and sanctioned the following political constitution.

II. [ MONTILLEN, ROSE ANN M.]

1935: THE COMMONWEALTH CONSTITUTION

It is worth mentioning that after the Treaty of Paris, the Philippines was
subject to the 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 be 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 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.

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.
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 the 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 originally provided for an 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 Congress composed of Senate and a half

House of Representatives, the creation of an independent electoral
commission, and limited the term of office of the president and vice
president to four years, with one bicameral as well as re-election.

It was amended in 1940 to have a Congress composed of Senate and a half

House of Representatives, the creation of an independent electoral
commission, and limited the term of office of the president and vice
president to four years, with one bicameral as well as re-election.

While the dominant influence in the constitution was American, it also bears
traces of the Malolos Constitution, the German, Spanish, and 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 U.S. President Franklin B. Roosevelt
on 25 March 1935. Elections 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. Afterward, upon liberation, the
Philippines was declared an independent republic.

1937: 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 voluntarily exiled.

With Marcos as dictator, the direction of the convention turned, with

accounts that the president himself dictated some provisions of the
constitution, manipulating the document to be able to hold on to power for
as long as he could. On 29 November 1972, the convention approved its
proposed constitution.

The President, on 17 January 1973, issued an proclamation announcing that

the proposed constitution had been ratified by an overwhelming vote of the
members of the highly irregular Citizen Assemblies were held from 10-15
January 1973, where 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 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 to also become the Prime
Minister and continue to exercise legislative powers until Martial Law was
lifted and authorized the President to legislate on his own on an emergency
basis. An overwhelming majority would ratify further amendments
succeedingly.

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 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 1986, the Executive Committee was abolished and the position
of the vice president was restored.

The situation In the 1980s had been very turbulent. As Marcos amassed
power, discontent has also been burgeoning. The tide turned swiftly when in
August 1983, Benigno Aquino, Jr., opposition leader and regarded as the
most credible alternative to President Marcos, was assassinated while under
military escort immediately after his return from exile in the United States.

There was widespread suspicion that the orders to assassinate Aquino came
from the 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 and

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.

1897: The constitution after the 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.

In March 1986, President Aquino proclaimed a transitional constitution to last

for a year while a constitutional commission drafted a permanent
constitution. This transitional constitution, called the Freedom Constitution.

In 1986, a constitutional convention was created, composed of 48 members

appointed by President Aquino from varied backgrounds and representations.
The convention drew up a permanent constitution largely restoring the set
up abolished by Marcos in 1972, but with the new ways to keep the president
in check, a reaction to the experience of Marcos’ rule. The new constitution
was officially adopted on February 2, 1987.

The legislative power resides in a congress divided into two houses:

1. The senate and the house of representatives.

2. The 24 senator are elected at large by popular vote, and can serve no
more than two consecutive six years terms.

There are 234 legislative districts in the philippines that elect their
representatives to serve three-year terms. The 1987 constitution created a
party-list system to provide spaces for the participation of under community
sectors or groups. Party list representatives may fill up not more than 20
percent of the seats in the house. The Philippine court system is vested with
the power of the judiciary, and is composed of a supreme court and lower
courts as and created by law. The supreme court is a 15-members court
appointed by the president.

The constitution also established three independent constitutional

commissions, namely, the civil service commission, a central agency in
charge of government personnel.
CHANGING THE CONSTITUTION is a perennial issue that crops up, and terms
such as “cha-cha” and “con-con” are regularly thrown around. Article XVII of
the 1987 constitution provides of three ways by which the constitution can
be changed.

Congress (house of representatives and the senate) may convene as a

constituent assembly (or Con-As) to propose amendments to the
constitution. In a (Con-Con), delegates will propose amendments 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 method is called the “People’s Initiative” or (PI). In this method,
amendments to the constitution may be prosed by the people upon a
petition of at least 12% of the total number of registered voter.

The 1987 constitution directs the congress to enact a law to implement the
provisions of the PI [People’s Initiative]. Which has not yet materialized.

III. [ ZAFRA, JELYN B.]

ATTEMPTS TO AMEND OR CHANGE THE 1987 CONSTITUTION

METHODS OF AMENDMENT

1. Constituent Assembly
2. Constitutional Assembly
3. People’s Initiative
4. All require ratification by majority vote in a referendum

Ramos Administration (1995-1997)

1995: Jose Almonte drafted constitution ----- failed after media exposure

1997: PIRMAN attempted People’s Initiative ----- Supreme Court Blocked (no
enabling law)

ESTRADA ADMINISTRATION

•Study commission on charter change

•FOCUS: economic & judiciary provisions

•Did not succeed

ARROYO ADMINISTRATION

•Endorsed Constituent Assembly

•Faced Controversy (possible term extension)

•Failed Attempt

AQUINO ADMINISTRATION

•Little interest in charter change

•Proposal for economic amendments

•Did not prosper

DUTERTE ADMINISTRATION

•Advocated for Federalism

•AIM: Decentralize power & tribute resources

•PLAN: Autonomous regions sharing power with national government

PROS OF FEDERALISM

•Regions can create solutions based on local needs

•Control over finances (less dependence on Manila)

•Fund local projects directly

•Promotes specialization

•Possible solution to Mindanao conflict (Bangsamoro Region)

•More equal development across country

CONS OF FEDERALISM

•Could weaken national unity

•Some regions not ready to govern themselves

•Risk of uneven development

• Jurisdiction overlaps between national & regional governments

ARRMM exists but conflict in Mindanao continues

•Very costly & time consuming to implement

CURRENT SITUATION

•Philippines remains a Unitary Government

•Powers & Resources Concentrated in national government

Agrarian reform: definition & importance

•Agrarian reform = rectification of the agricultural system

•Important because nearly half of Filipinos depend on agriculture

•Focus: land distribution, class relations, and social structures

Agrarian Reform – Goals

•Improve productivity of agriculture

•Reduce poverty in rural areas

•Promote social justice and fairness

Agrarian Reform – Issues

•Rooted in colonial land systems

•Unequal land ownership persists

•Many farmers still lack access to land

IV. [ARATEA, GREIZEN MAE]

LAND OWNERSHIP IN THE PHILIPPINES UNDER THE SPAIN

When Spain colonized the Philippines, land was owned by the Spanish Crown
and Filipinos were only assigned to cultivate it while paying tributes in crops.
The Law of the Indies granted lands to religious orders, Spanish soldiers, and
encomenderos, who controlled the encomienda system. This system was
abusive—Filipinos were forced to sell produce at low prices, surrender goods,
and render unpaid services.

In the 19th century, the hacienda system replaced encomiendas as Spain

integrated the Philippines into the world economy. A land registration law in
the 1860s allowed friars and elites to register vast estates, displacing many
Filipino peasants. Religious orders became the biggest and most exploitative
landowners, often raising rents arbitrarily.

The loss of communal landownership caused widespread agrarian revolts. A

major motivation of the Philippine Revolution was the Filipinos’ desire to own
land. Although the revolutionary government declared friar lands as state
property, this was cut short by the arrival of American colonial rule.

LAND OWNERSHIP IN THE PHILIPPINES UNDER THE AMERICANS

The Americans recognized landlessness as a major cause of unrest and
passed laws to expand land ownership. The Philippine Bill of 1902 set land
limits (16 hectares for individuals, 1,024 for corporations) but also allowed
Americans to own land. Act No. 496 introduced the Torrens system for land
registration, and the 1903 Homestead Program let tenants acquire up to 16
hectares, though limited mostly to Northern Luzon and Mindanao.

Despite these policies, landownership worsened. Friar lands were sold to

wealthy Americans and Filipinos instead of peasants, and poor farmers
lacked support to keep their land, forcing many back into tenancy. This led to
uprisings such as the Colorum and the Sakdal Uprising (1935), which
demanded land reform, lower taxes, and immediate independence from the
U.S., but was quickly crushed.

During the Commonwealth period, President Quezon pushed a social justice

program—buying haciendas for resale to tenants, creating NARIC to aid
farmers in disputes, and forming the Court of Industrial Relations. The NLSA
continued homestead programs. However, limited funds, persistent
uprisings, and eventually World War II halted these reforms.

POST WAR INTERVENTION TOWARDS AGRARIAN REFORM

After World War II, agrarian reform aimed to address old problems. Under
President Roxas, RA 34 established a 70-30 sharing arrangement between
tenant and landlord and reduced loan interest to 6%. Attempts to redistribute
hacienda lands failed due to lack of support for small farmers.

President Quirino created the Land Settlement Development Corporation

(LASEDECO), later replaced by NARRA under President Magsaysay, to
resettle peasants and landless farmers. Magsaysay also pushed for genuine
land reform, leading to RA 1199 (Agricultural Tenancy Act), which protected
tenants’ rights, fixed rentals, and created the Court of Agricultural Relations.
Support agencies such as the Agricultural Tenancy Commission, ACCFA, and
the Agricultural and Industrial Bank were also established. NARRA further
resettled landless farmers and sought to reintegrate Huk rebels.

Despite these efforts, reforms struggled due to lack of funds, weak support
services, and opposition from landed elites. A major stride in land reform
arrived during the term of President Diosdado Macapagal through the
Agricultural Land Reform Code (Republic Act No. 3844).
PRIMARY SOURCE: DECLARATION OF THE POLICY UNDER R.A. NO.
3844 OF AGRICULTURAL LAND REFORM CODE 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, divert
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 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; and
(6)To make the small farmers more independent, self-reliant and
responsible citizens, and a source of genuine strength in our
democratic society.

The Code abolished share tenancy, aiming to convert tenant-farmers into

lessees and later owner-cultivators. It promoted farmer independence,
equity, productivity, and land distribution. Though comprehensive and
effective in pilot areas, it lacked funding from Congress, limiting nationwide
implementation.

V. [ ABEJAR, MARIO O.]

AGRARIAN REFORM EFFORTS UNDER MARCOS

Agrarian reform has been a long-standing issue in the Philippines, with

multiple administrations attempting to address land inequality and improve
the lives of farmers. Here are some key agrarian reform efforts under the
Marcos administrations

Operation Land Transfer: This program was implemented to distribute land to

tenant farmers under Presidential Decree No. 27. The program targeted rice
and corn lands owned by landlords who owned more than 7 hectares of land.

AGGRARIAN REFORM FUND

Established in 1973, this fund was used to finance the acquisition and
distribution of land to tenant farmers. The fund was also used to provide
support services to agrarian reform beneficiaries, such as credit, training,
and extension services.
POST 1986 AGRARIAN REFORM

After the 1986 People Power Revolution, the Philippine government

implemented several agrarian reform programs to address land inequality
and improve the lives of farmers. Here are some key agrarian reform efforts
in the post-1986 period:

COMPREHENSIVE AGRARIAN REFORM LAW (CARL)

Enacted in 1988, CARL aimed to distribute land to landless farmers and

farmworkers, provide support services, and promote rural development. It
covered all agricultural lands, including private and public lands, and set a
10-year deadline for land distribution.

AGRARIAN REFORM FUNDS

Established in 1988, the fund was used to finance the acquisition and
distribution of land as well as to provide support services to agrarian reform
beneficiaries.

REFORM PROGRAMS EXTENSIONS WITH REFORMS (CARPER)

CARPER was enacted in 2009 to extend and reform the Philippines’ agrarian
reform program, aiming to address historical land inequality by redistributing
agricultural land to landless farmers and farmworkers. It extended the
deadline for land distribution from 2009 to 2014, allocated $\text{P}150$
billion for land acquisition and support services, removed the controversial
Stock Distribution Option (SDO) to ensure physical land transfer,
strengthened compulsory land acquisition to bypass resistant landowners,
and mandated support services like credit, training, and infrastructure to
help beneficiaries make their farms productive.

VI. [ CONEJOS, DANNAH JANE C.]

EVOLUTION OF PHILIPPINE TAXATION

TAXATION IN SPANISH PHILIPPINE

The arrival of the Spaniards altered the subsistence system because they
imposed the payment of tributos (tributes) from the Filipinos, similar to what
had been practiced in all colonies in America. The difficulty faced by the
Spaniards in revenue collection through the tributes was dispersed nature of
the settlements, which they solved by introducing the system of reduccion
by creating pueblos, where Filipinos were gathered and awarded pieces of
land to till. Exempted from payments of tributos were the principales:
alcaldes, gobernadores, cabezas de barangay, soldiers, member of the civil
guard, government officials, and vagrants.

Toward the end of the sixteenth 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 the merchandise from Asia and sent to New Spain
(Mexico), and back. 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 a stop and was replaced by a poll
tax collected through a certificate of identification called the cedula personal.
Unlike the tribute, the payment of cedulas is by person, not by family. The
Chinese in the Philippines were also made to pay their discriminatory cedula
which was bigger that what the Filipino said.

Two direct taxes were added in 1878 and imposed on urban incomes.

(1) URBANA is a tax on the annual rental value of urban real estate.

(2) INDUSTRIA is a tax on salaries, dividends, and profits.

Indirect taxes such as customs duties were imposed on exports and imports
to further raise revenue, especially during the nineteenth century when
economic growth increased exponentially.

The colonial government also gained income from monopolies, such as the
sale of stamped paper, the manufacture and sale of liquor, cockpits, and
opium, but the biggest of the state monopoly was tobacco, which began in
1781 and halted in 1882. This monopoly made it possible for the colony to
create a surplus of income that made 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. 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 by the
second half of the nineteenth century.

PRIMARY SOURCE : Mariano Herbosa Writes to Rizal about Taxes

(Calamba, 29 August 1886)

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 only
one-half of the story and even Damas cannor 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
if it has no water, must pay a tax of 50 cavanes of palay (unhusked rice) and
land with six 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 the irrigated tenant has six cavanes of seed, with six cavanes of
seed, if they see that the harvest is good, they increase 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, if a stone wall is added, 50 pesos must be paid, the lowest being 20
pesos. But a nipa or cogon house pays only one 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 four
years, but the tax is increased every year. For these reasons, for 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 expelled, which our ancestors
had feared so much. The result is bargaining, like they do in buying fish. It is
advisable to allow 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 a receipt every time we pay. Anyway, it is valueless, 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 the land tax and 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 town,
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 bows wear and since “lupo” 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 townhall they were paid only 25 cents a
cavan and a half, and it seems that the locusts are not increasing. 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

From 1898 to 1903, the Americans followed the Spanish system of taxation
with some 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 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 cédula, (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 cédula went through changes in the new law as the rate was fixed per
adult male, which resulted in a great decline in revenues. In 1907, some
provinces were authorized to double the fee for the cédula to support the
construction and maintenance of roads. The industria tax was levied on the
business 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-Simmons 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-General Francis Burton Harrison urged that tax receipts be
increased to make up for the loss. Minor changes were made in 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.

TAXATION DURING THE COMMONWEALTH PERIOD

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, the cédula tax was abolished, which 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 National 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 a single tax at a 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.

As World War II 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 II
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
government were derived from the sales of the National Sweepstakes and
sale of government bonds.

FISCAL POLICY FROM 1946 TO PRESENT

The economic situation was so problematic that by 1949, there was a severe
lack of funding in many aspects of governance, such as the military and
education sectors. No efforts 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
Quirino through the implementation of import and exchange controls that led
to import substitution development. This policy allowed for the expansion of
a viable manufacturing sector that reduced economic dependence on
imports. New tax measures were also passed, which included higher
corporate tax rates that increased government revenues—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

promised 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 on them who belonged to
the highest classes of society. The period of the post-war republic also saw a
rise in corruption. From 1959 to 1969, Congress did not pass any tax
legislation despite important changes in the economy and the vested
Interests of Filipino businessmen in Congress would manifest in many
instances, which is the reduction of taxes on import, 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 revenue.

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 of 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.

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 the 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 lessor’s 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
P5,200,000;
(4)Adoption of the tax credit method of calculating tax by subtracting tax
on inputs from tax on gross sales;
(5)Consumption of the sale of basic commodities such as agriculture and
marine food products in their original state, price-regulated petroleum
products, and fertilizers; and
(6)Additional 20% tax on non-essential articles such as jewelry, perfumes,
toilet waters, yachts, and other vessels for pleasure and sports.

The VAT law was signed in 1986 and put to effect in 1988. Along with 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; and 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 Program, 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 levels, lowering the highest tax
rates, and simplifying procedure; and (4) rationalize the grant of tax
incentives, which was estimated to be worth P51.7 billion pesos in 1994.

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

1. Removed the VAT exemptions for all co-operatives (agricultural,

electric, credit, or multipurpose, and others) provided that the share
capital of each member does not exceed P15,000 pesos.
2. Expanded the coverage of the term “simple processes” by including
broiling and roasting, effectively increasing the tax base for food
products.
3. Expanded the coverage of the term “original state” by including
molasses.
4. Removed from the VAT-ex list the following:
— Importation of coal
— 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)
— House and lot and other residential dwellings valued at P1 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 P8,000, subject to adjustment using the CPI
— Sale, importation, printing, or publication of books and any
newspaper

The succeeding term of President Joseph Estrada in 1998 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, she undertook increased government spending without adjusting
tax collections. This resulted in larger 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 III succeeded President Arroyo in 2010. The
administration ventured into the adjustment of excise tax on liquor and
cigarettes or the Sin Tax Reform, motivation for which was primarily fiscal,
public health, and social order-related considerations. Republic Act 10351
was passed, and government revenues from alcohol and tobacco excise
taxes increased. Collections rose and stood at 3.4%, and ended up 4.1% of
the Gross Domestic Product and the improvement in tax collection resulted in
the Philippines receiving a credit rating upgrade (to investment grade
status). The Sin Tax Reform was an example of how a tax reform could
impact social services as it allowed for the increase of the Department of
Health budget (triple in 2015) and free health insurance premiums for the
poor people enrolled in PhilHealth increased (from P5.2 million in 2012 to
P15.4 million 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 on
income taxes were outdated as they were drafted two decades ago. The
proposed tax reform also seeks to limit VAT exemptions and increase excise
tax on petroleum products and automobiles.