For those who have encountered a political post in a couple of social media channels, you have most likely seen the comments of angry citizens asking if the poster have any contributions in this country so far, which is then frequently rebutted with “I pay my taxes!” remark. It might appear a little absurd, but frankly, there is indeed truth in such rebuttal. These days, nearly everything is taxable in the Philippines that even buying a few candies have certain taxes implemented on it, too.
Well, all of us have heard about taxes and we all have paid for it (yes, even though sometimes we do not have any idea that we are already doing so) but at the end of the day, the vast majority of us are still not sure what a tax really is, how it works, and what it is for.
What are Tax and Taxation?
To define it in a way that most of us can understand, basically, tax is the charge implemented by our government upon us, its citizens, through our properties and activities to be able to support the administration’s projects and public services. Tax is a price we pay for acquiring investments, homes, lands, and the likes as well as for earning and spending money. Even though taxes are more like a mandatory than an involuntary contribution, it is one of the ways that we can provide to our country’s progress and development. Needless to say, taxes are of utmost importance in every country in the world.
Taxation, on the other hand, is the very act or practice of collecting taxes. It happens when the government or a taxing authority obtains the right amount of money from its citizens based on their earnings and properties as a payment for public services. That’s why proper implementation of taxation in Manila, Philippines is vital to our country’s and the Filipinos’ growth.
Different Taxes Implemented in the Philippines
Taxation in Manila, Philippines can be categorized into two: national and local taxes. National taxes are the ones paid to our government via the Bureau of Internal Revenue or BIR while local taxes and fees are imposed by our local government units in each province or city, municipality, and barangay.
These are the taxes under the National category:
- Capital Gains Tax. Inflicted on the gains from a sale, exchange, or other settlement of capital assets located in the country such as properties, stocks, pieces of jewelry, and other items of high value.
- Documentary Stamp Tax. Taxes on documents, legal papers, loan agreements, and the likes that are often used as evidence of acceptance, assignment, sale or transfer of an obligation, rights, or property such as deeds of sale, bank promissory notes, and the likes.
- Donor’s Tax. Implied on a donation or gift for the free transfer of property between people who are both still living at the time of transfer. Example: relief goods sent for donation.
- Estate Tax. This tax is obligated to be paid before an estate is transferred to the rightful heir of a departed person.
- Excise tax. Tax on goods produced for sale which is consequently sold within the country. This is an indirect tax which means the manufacturer is supposed to recover it by adding the amount to the selling price. Sin tax is an example of such.
- Income tax. Inflicted on every compensation and income acquired from practice of a profession, conduct of trade-in business, and/or from properties.
- Percentage tax. A tax for a business that is not covered by Value Added Tax.
- Value Added Tax (VAT). Another kind of indirect tax that is transferred on to the consumer’s end. It is the most common type of tax since all final sales are essentially always charged with this tax.
- Withholding tax. It is the tax subtracted from the wages of employees and is the company’s obligation to remit to the government.
Meanwhile, under the Local Taxes category:
- Basic Real Property Tax. Based on the term itself, it is the kind of tax imposed on real properties may it be agricultural, commercial, industrial, residential, timberland, and mineral.
- Franchise Tax. Imposed on business franchises.
- Business of Printing and Publication Tax. Collected from all printing and/or publication of printed materials such as books, cards, pamphlets, posters, or tarpaulins businesses.
- Professional Tax. This is what is being taxed from doctors, lawyers, engineers, and other professionals that demand a government examination or possession of a license to practice their professions.
- Amusement Tax. The tax (which is usually included in the ticket price) being imposed on all forms of entertainments such as movies, concerts, and plays.
- Yearly Tax for Transport Trucks and Vans. This tax amounts to Php500.00 and is collected from trucks and vans that transport goods from one place to another.
- Barangay Tax. Obligatory on sari-sari stores whose annual gross sales is not more than Php50,000 and collected on the first day of January of every year.
Other local taxes include Barangay Clearance and Community Tax or Cedula. Import and export taxes charged by the Bureau of Customs can also be considered as national taxes, however, these would not be discussed further here in this article.
The money being raised from taxation supports our government and allows it to fund different projects and services for its citizens. Tax and taxation is the price we pay for being a citizen and our government decides how much is too much or too little for a tax. Since taxes are very important, it is vital for every citizen to pay them correctly, however, there are times that things get complicated and that paying the right amount can get confusing. The consequences of not paying the right amount or not paying your taxes at all could be very grave so if you have questions about taxes and taxations, do not hesitate to contact Yap, Kung, Ching & Associates law office for they can assist you with your questions and requests to avoid legal cases due to taxation.
You may also want to read “Why Every Entrepreneur Must Learn Labor Law Before Starting Their Own Business” in connection with the taxation matters discussed in this article if you’re planning to start your own business in this country.