Chapter 4.9 Taxation Under the American & During the Commonwealth Period

Summary

This report explores the evolution of taxation in the Philippines during the American administration and the Commonwealth period, highlighting key developments and challenges. The American administration initially adopted and adjusted the Spanish tax system, leading to significant changes, such as the introduction of the Internal Revenue Law of 1904 and the suspension of certain taxes. During the Commonwealth period, reforms aimed at equity were implemented, including the abolition of the sedula tax and the introduction of a resident tax. Despite these advancements, the tax structure remained skewed, underscoring the importance of a fair tax system for national progress.

Takeaways

• 💰 Taxation is a mandatory payment collected by the government from individuals and businesses based on income or property, funding public services.
• 🇺🇸 During the American administration in the Philippines, the existing Spanish tax system was adopted with adjustments from 1898 to 1903.
• 🏞️ The tax system aimed to create a self-sufficient economy by minimizing government revenue needs while addressing land tax collection issues.
• 🚫 Tax evasion, the illegal avoidance of tax payments, was prevalent and led to penalties and fines for individuals and businesses.
• 📜 The Internal Revenue Law of 1904 introduced ten major sources of revenue, including taxes on alcohol, banks, and insurance companies.
• 💼 The taxation system expanded with new taxes, such as sales tax and industrial tax, affecting the business community.
• 📊 Significant changes to the taxation system occurred during the Commonwealth period (1935-1946), aiming for a more equitable tax structure.
• ⚖️ The 1939 National Internal Revenue Code unified the tax system, introducing progressive tax rates and new taxes on estates and gifts.
• 📉 Despite improvements, the tax structure still favored the upper class and landed elite, highlighting inequalities in the system.
• 🕊️ World War II disrupted economic activity, with the Japanese military administration continuing the existing tax system but facing challenges in tax collection.

Q & A

What are taxes and why are they important?

Taxes are compulsory payments collected by the government from individuals and businesses based on income or property. They are essential for funding public services such as schools, parks, hospitals, and salaries for government employees.

How did the American administration approach taxation in the Philippines during the Commonwealth period?

The American administration aimed to create a self-sustaining economy with minimal revenue needs, adopting and adjusting the existing Spanish tax system. They focused on creating a surplus in the budget while implementing various taxes to ensure revenue.

What major changes occurred in the taxation system from 1898 to 1903?

Initially, the Americans adopted the Spanish tax system but made adjustments. The military government suspended several contracts, including those related to opium, and replaced the annual rental tax with a land tax that applied to both rural and urban properties.

What were the main sources of revenue identified in the internal revenue law of 1904?

The main sources of revenue included licensed taxes on alcoholic beverages and tobacco, excise taxes, taxes on banks, document stamp taxes, sedula taxes, insurance taxes, mining concessions, and occupational licenses.

What were the key features of the tax system introduced during the Commonwealth period?

During the Commonwealth period, significant changes included increased tax rates on net income, the abolition of the sedula tax, the introduction of a resident tax, and the creation of the national Internal Revenue Code, which unified and modernized the tax system.

How did the tax rates change for individuals and corporations during the Commonwealth period?

Tax rates for individuals and corporations increased, with higher corporate income taxes, the introduction of taxes on estates and gifts, and a turnover tax replacing the old sales tax with a 10% tax on luxury goods.

What impact did World War II have on taxation in the Philippines?

World War II halted economic activity in the Philippines, and the Japanese military administration took over, maintaining the existing tax system while introducing challenges in tax collection due to wartime conditions and reliance on military notes.

What was the significance of a fair tax system as discussed in the report?

A fair tax system is vital as it reduces the financial burden on the poor and promotes equitable growth. It ensures that all citizens benefit from national progress, fostering real economic growth driven by fairness.

What were the tax collection challenges faced during the Japanese occupation?

During the Japanese occupation, tax collection became increasingly difficult due to war conditions. The Japanese government resorted to issuing military notes and relied on income from national sweepstakes to fund governmental expenses.

What legislative changes were introduced in 1946 regarding taxation?

On July 4, 1946, new measures and legislation were implemented to make the taxation system appear more equitable, addressing the imbalances created in the previous systems.