TAX 101

The government collects taxes to provide basic services such as education, health, infrastructure, and other social services for all. These taxes are used to pay for our doctors, teachers, soldiers, and other government personnel and officials. These are also used to build schools, hospitals, roads, and various infrastructure for connectivity, and industrial and agricultural facilities.

Prioritizing these investments would give the people an opportunity to contribute in economic progress and nation-building.

What are taxes?


Taxes are mandatory contributions of everyone to raise revenue for nation-building. The revenue is used to pay for our doctors, teachers, soldiers, and other government personnel and officials, as well as for building schools, hospitals, roads, and other infrastructure. It is our duty to pay our taxes.


Why does the government collect taxes?


The government collect taxes to provide basic services such as education, health, infrastructure, and other social services for all.


Who pays taxes?


We all pay taxes, either directly or indirectly. We pay taxes according to our income and/or level of consumption.

Income tax is based on the ability-to-pay principle wherein people with higher income should pay more.

Consumption tax is based on the amount of goods and services utilized such that the more you consume, the higher the tax you pay.

Filipinos residing in the Philippines are taxed based on income earned here and abroad. In the case of Filipinos living abroad, they are only taxed based on their income earned in the Philippines. Similarly, resident aliens and non-resident aliens in the Philippines are taxed based on their income earned in the country.



The following are the number of taxpayers by income bracket:



Data from the Bureau of Internal Revenue. Tax payers include both compensation income earners, and self-employed and professionals. Income/sales and tax due distribution based on Department of Finance estimates.


Where do my taxes go?


Taxes are used to fund social services and investment in infrastructure and human capital development. Part of our taxes get directly transferred to the poorest through targeted transfers (e.g. 4Ps, pension to qualified senior citizens, allowance for PWDs, and PhilHealth).


What are the different kinds of taxes?


Taxes can either be direct or indirect.

Direct taxes are those that are paid from your income and properties. Examples include personal and corporate income taxes, property and capital taxes.

Indirect taxes are collected based on consumption. Examples include excise taxes, VAT, percentage tax, and documentary stamp tax (DST).


What are the tax rates for the different kinds of taxes?


Value-Added Tax is a type of indirect tax imposed on goods and services. It is typically passed on to the buyer as part of the selling price. Both imported and domestic goods and services are covered by VAT, but there are many exemptions.

12%

0%

EXEMPTED

For non-exempt domestic and imported goods and services For exports and export-related
transactions
For selected goods and services (list of exemptions can be found in Section 109 of the Tax Code)



Income tax is a direct tax paid by an individual or organization imposed on:

Compensation Income

Business Income

Passive Income

Salaries, wages, taxable bonuses, fringe benefits, and other allowances Practice of profession, trades, gains from sale of assets, and other income not covered by compensation Tax on deposits, royalties, and dividends


Excise tax is an indirect tax on selected goods that have negative externalities and are non-essentials. Excise tax can be either specific or ad valorem.

Specific is based on weight, volume capacity, or any other physical unit of measurement.

Ad valorem (literally meaning "according to value") is based on selling price or other specified value This is a measure to discourage too much consumption of scarce resources and limit the bad effects of some products.

These are the commodities subject to excise taxes: Sin products (alcohol and tobacco), petroleum, miscellaneous articles (automobiles, jewelry, perfume, and toilet waters, yachts, and other vessels intended for pleasure or sports), and mineral products.