LibraryWorks No. 07 - Introduction to Taxation Part 02

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LibraryWorks No. 07 - Introduction to Taxation Part 02

Post  Dune on Sat Feb 23, 2008 8:59 pm

8. What are the different obsolete forms of taxation? Discuss each.

Obsolete forms of taxation include:

Scutage - paid in lieu of military service; strictly speaking a commutation of a non-tax obligation rather than a tax as such, but functioning as a tax in practice

Ta lage - a tax on feudal dependents.

Tithe - a tax-like payment (one tenth of one's earnings or agricultural produce), paid to the Church (and thus too specific to be a tax in strict technical terms). The modern practice of tithing is normally voluntary, although the Church has imposed it forcefully at times.

Aids - During feudal times Aids was a type of tax or due paid by a vassal to his lord.

Danegeld - medieval land tax originally raised to pay off raiding Danes and later used to fund military expenditures.

Carucage - tax which replaced the danegeld in England.

Tax Farming - the principle of assigning the responsibility for tax revenue collection to private citizens or groups.

9. Trace the History of Taxation.


Taxation History in Philippines:
During the 17th and 18th centuries, the Contador de' Resultas served as the Chief Royal Accountant whose functions were similar to the Commissioner of Internal Revenue. He was the Chief Arbitrator whose decisions on financial matters were final except when revoked by the Council of Indies. During these times, taxes that were collected from the inhabitants varied from tribute or head tax of one gold maiz annually; tax on value of jewelries and gold trinkets; indirect taxes on tobacco, wine, cockpits, burlas and powder. From 1521 to 1821, the Spanish treasury had to subsidize the Philippines in the amount of P 250,000.00 per annum due to the poor financial condition of the country, which can be primarily attributed to the poor revenue collection system.

American Era
In the early American regime from the period 1898 to 1901, the country was ruled by American military governors. In 1902, the first civil government was established under William H. Taft. However, it was only during the term of second civil governor Luke E. Wright that the Bureau of Internal Revenue (BIR) was created through the passage of Reorganization Act No. 1189 dated July 2, 1904. On August 1, 1904, the BIR was formally organized and made operational under the Secretary of Finance, Henry Ide (author of the Internal Revenue Law of 1904), with John S. Hord as the first Collector (Commissioner). The first organization started with 69 employees, which consisted of a Collector, Vice-Collector, one Chief Clerk, one Law Clerk, one Records Clerk and three (3) Division Chiefs.

Following the tenure of John S. Hord were three (3) more American collectors, namely: Ellis Cromwell (1909-1912), William T. Holting (1912-1214) and James J. Rafferty (1914-1918). They were all appointed by the Governor-General with the approval of the Philippine Commission and the US President.

During the term of Collector Holting, the Bureau had its first reorganization on January 1, 1913 with the creation of eight (Cool divisions, namely: 1) Accounting, 2) Cash, 3) Clerical, 4) Inspection, 5) Law, 6) Real Estate, 7) License and Cool Records. Collections by the Real Estate and License Divisions were confined to revenue accruing to the City of Manila.

In line with the Filipinization policy of then US President McKinley, Filipino Collectors were appointed. The first three (3) BIR Collectors were: Wenceslao Trinidad (1981-1922); Juan Posadas, Jr. (1922-1934) and Alfredo Yatao (1934-1938).

On May 1921, by virtue of Act No. 299, the Real Estate, License and Cash Divisions were abolished and their functions were transferred to the City of Manila. As a result of this transfer, the Bureau was left with five (5) divisions, namely: 1) Administrative, 2) Law, 3) Accounting, 4) Income Tax and 5) Inspection. Thereafter, the Bureau established the following: 1) the Examiner's Division, formerly the Income Tax Examiner's Section which was later merged with the Income Tax Division and 2) the Secret Service Section, which handled the detection and surveillance activities but was later abolished on January 1, 1951. Except for minor changes and the creation of the Miscellaneous Tax Division in 1939, the Bureau's organization remained the same from 1921 to 1941.

In 1937, the Secretary of Finance promulgated Regulation No. 95, reorganizing the Provincial Inspection Districts and maintaining in each province an Internal Revenue Office supervised by a Provincial Agent.

Japanese Era
At the outbreak of World War II, under the Japanese regime (1942-1945), the Bureau was combined with the Customs Office and was headed by a Director of Customs and Internal Revenue.

Post War Era
On July 4, 1946, when the Philippines gained its independence from the United States, the Bureau was eventually re-established separately. This led to a reorganization on October 1, 1947, by virtue of Executive Order No. 94, wherein the following were undertaken: 1) the Accounting Unit and the Revenue Accounts and Statistical Division were merged into one; 2) all records in the Records Section under the Administrative Division were consolidated; and 3) all legal work were centralized in the Law Division.

Revenue Regulations No. V-2 dated October 23, 1947 divided the country into 31 inspection units, each of which was under a Provincial Revenue Agent (except in certain special units which were headed by a City Revenue Agent or supervisors for distilleries and tobacco factories).

The second major reorganization of the Bureau took place on January 1, 1951 through the passage of Executive Order No. 392. Three (3) new departments were created, namely: 1) Legal, 2) Assessment and 3) Collection. On the latter part of January of the same year, Memorandum Order No. V-188 created the Withholding Tax Unit, which was placed under the Income Tax Division of the Assessment Department. Simultaneously, the implementation of the withholding tax system was adopted by virtue of Republic Act (RA) 690. This method of collecting income tax upon receipt of the income resulted to the collection of approximately 25% of the total income tax collected during the said period.

The third major reorganization of the Bureau took effect on March 1, 1954 through Revenue Memorandum Order (RMO) No. 41. This led to the creation of the following offices: 1) Specific Tax Division, 2) Litigation Section, 3) Processing Section and the 4) Office of the City Revenue Examiner. By September 1, 1954, a Training Unit was created through RMO No. V-4-47.

As an initial step towards decentralization, the Bureau created its first 2 Regional Offices in Cebu and in Davao on July 20, 1955 per RMO No. V-536. Each Regional Office was headed by a Regional Director, assisted by Chiefs of five (5) Branches, namely: 1) Tax Audit, 2) Collection, 3) Investigation, 4) Legal and 5) Administrative. The creation of the Regional Offices marked the division of the Philippine islands into three (3) revenue regions.

The Bureau's organizational set-up expanded beginning 1956 in line with the regionalization scheme of the government. Consequently, the Bureau's Regional Offices increased to (Cool eight and later into ten (10) in 1957. The Accounting Machine Branch was also created in each Regional Office.

In January 1957, the position title of the head of the Bureau was changed from Collector to Commissioner. The last Collector and the first Commissioner of the BIR was Jose Aranas.

A significant step undertaken by the Bureau in 1958 was the establishment of the Tax Census Division and the corresponding Tax Census Unit for each Regional Office. This was done to consolidate all statements of assets, incomes and liabilities of all individual and resident corporations in the Philippines into a National Tax Census.

To strictly enforce the payment of taxes and to further discourage tax evasion, RA No. 233 or the Rewards Law was passed on June 19, 1959 whereby informers were rewarded the 25% equivalent of the revenue collected from the tax evader.

In 1964, the Philippines was re-divided anew into 15 regions and 72 inspection districts. The Tobacco Inspection Board and Accountable Forms Committee were also created directly under the Office of the Commissioner.
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