Taxation Through Time: Exploring the History of Taxation in the Philippines

Honey Faye P. Luranza

A199

April 07, 2024

INTRODUCTION

Taxation is a fundamental aspect of society, plating a crucial role in

government revenue generation and the provision of essential public services. The
concept of taxation encompasses the imposition of compulsory levies on individuals
or entities by governments to fund various expenditures, Taxes are levied in nearly
every country worldwide, primarily to raise revenue for government operations,
although they serve additional purposes as well.

BODY

The pre-colonial Philippines societies, including the barangay system, were

characterized by a unique taxation system. In the pre-colonial Philippines, ancient
Filipinos paid taxes called “buwis” or “handug” to their rulers known as “datus” in
exchange for protection. These taxes were primarily levied on the commoners,
known as the Timawa class, who were expected to pay taxes as part of their
obligations to the communities. The barangay system, which existed prior to
Spanish colonialism, was the dominant sociopolitical unit in the Philippines during
the 14th to 16th centuries. Barangays were complex sociopolitical units that could
range from small, well-organized independent villages to large cosmopolitan polities.
The term “barangay” originally referred to both a house on land and a boat on water,
containing families, friends, and dependents.

During the Spanish colonial period in the Philippines, various taxation

policies were implemented, including the encomienda system and the tribute
system. The encomienda system was a grant of native labor and tribute given to
Spanish conquistadors and settlers. This system led to abuse and distrust,
gradually phasing out as control over Native American tribute and labor reverted to
the crown. Tribute varied by region and era, mainly consisting of goods that
Spaniards could profit from or sell. The tribute include products like maize, silk,
honey, pearls, gold, and cattle. The impact of Spanish taxation on the indigenous
population and the economy was significant. Native Americans were required to
fulfill various duties, including attending services, sending children to catechism
classes, paying religious fees and taxes, and meeting labor and tribute quotas. These
obligations often led to confrontations and discontent, with petitions against corrupt
priests and officials. The taxation and labor systems imposed by the Spanish
affected the daily lives of Native Americans, shaping a complex combination of
compliance, rebellion, affluence, and poverty.

The American colonial period introduced significant changer and reforms in

taxation, including the establishment of modern tax systems such as the income
tax. The Spanish colonial legacy in America, such as described in the article
“Representation without taxation, taxation without consent: the legacy of Spanish
colonialism in America,” highlights a taxation system that consisted of a vaguely
defined or head tax, partly a property tax, and partly an income tax. However,
indigenous villages often rejected these taxes to maintain ownership over their
resources. During the American colonial period, taxes came in various forms and
were used differently. The struggle for US independence began largely due to a
dispute over taxes levied on colonists by the British government. The Stamp Act of
1765, which required newspapers, permits, commercial contracts, playing cards,
and various other types of legal documents to have a tax stamp, sparked protests
from colonists who argued that they should not be taxed because they lacked
representation in parliament. The Boston Tea Party in 1773 was another significant
event during the American colonial period, where colonists boarded ships carrying
chests of tea when they arrived from Britain and threw the shipments into Boston
Harbor to protest the Tea Act of 1773, which they saw as an attempt to help British
merchants at the expense of colonial tea smugglers and direct importers. After the
American Revolution, the newly established government was cautious about
taxation, and direct taxation was prohibited by the Constitution. Government
revenues were collected through tariffs and duties on liquor, tobacco, sugar, and
legal documents. However, the need for revenue to fund wars and other government
expenses led to the introduction of new taxes, such as income taxes during the Civil
War and the Revenue Act of 1861, which imposed a 3% tax on incomes over $800.
These taxes created the modern progressive tax system with allowances for
deductions.

After gaining independence from colonial rule, the Philippines underwent

significant changes in taxation policies. One notable policy was the Tax Reform of
1884, which markedly modified the system of taxation in the Philippines. This
reform eliminated the old tax system and introduced new taxes, including the cedula
and the industria, which evolved into roughly graduated taxes on personal and
business income. The Spanish colonial regime never introduced a land tax, despite
proposals for such a tax. The most plausible hypothesis is the influence of strong
pressure groups upon government policy, such as the friars owning large estates
and the native landowning class being the main pillar of the colonial regime. During
the American colonial period, the tax system evolved further, and the Philippines
adopted modern tax systems such as the income tax. The American colonial period
introduced significant changes and reforms in taxation, including the establishment
of modern tax systems such as the income tax. After independence, the Philippines
continued to evolve its taxation policies to meet the needs of its growing economy.
The Duterte administration, for example, is planning to undertake tax reform,
building on past tax reforms from the Marcos regime to the Aquino administration.
The reform aims to address issues such as mismanagement of currency reserves
and irregularities in foreign exchange operations. Understanding the magnitude of
tax evasion is also crucial for evaluating the success or failure of enforcement
mechanisms.

CONCLUSION

Taxation plays a crucial role in nation-building and economic development

efforts. Through the collection of taxes, governments can generate revenue to fund
essential public services, infrastructure projects, social welfare programs, and
national defense. Taxation not only provides the financial resources needed for
government operations but also serves as a tool for redistributing wealth, promoting
social equity, and fostering economic growth. In the context of nation-building,
taxation helps establish the legitimacy and authority of the state by creating a social
contract between the government and its citizens. By contributing taxes, individuals
and businesses participate in the collective effort to build and sustain a functioning
society. This shared financial responsibility fosters a sense of citizenship, promotes
social cohesion, and strengthens the bond between the government and its people.
Economically, taxation plays a pivotal role in funding public investments that are
essential for long-term growth and development. Infrastructure projects, education,
healthcare, and other public services financed through taxation contribute to
human capital development, enhance productivity, attract investments, and create a
conducive environment for business activities. Moreover, progressive tax systems
can help reduce income inequality, stimulate consumer spending, and support
economic stability. Effective tax policies can also incentivize desirable behaviors,
such as investment in research and development, environmental conservation, and
social responsibility. By implementing tax incentives, exemptions, and credits,
governments can steer economic activities towards strategic priorities, such as
innovation, sustainability, and inclusive growth.

REFERENCES

https://en.wikipedia.org/wiki/Precolonial_barangay

https://www.themasterspsychservice.com/post/the-classes-of-the-precolonial-
philippines

https://www.thoughtco.com/spains-american-colonies-encomienda-system-
2136545

https://www.asj.upd.edu.ph/mediabox/archive/ASJ-21-1983/wolters.pdf

https://www.accuratetax.com/blog/history-taxes-america/

https://www.investopedia.com/articles/tax/10/concise-history-tax-changes.asp

https://www.scribd.com/document/289579370/History-of-Taxation-in-the-
Philippines