finals economics ii

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The Agrarian Reform Program of the PhilippinesChapter 7

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Land Reform

• is a process of redistributing land from the landlords to tenant-farmers in order that they will be given a chance to own a piece of land to improve their plight

• It abolishes unfair land tenancy programs and changes in the land tenure systems

• Is just a part of agrarian reform

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Agrarian Reform

• It is concerned with the total development of the farmer’s economic, social and political transformation

• It covers:Distribution of land to cultivators

Security of tenure and fair system of rental payments

Improved methods of cultivation through the improvement of rural institutions serving farmers such as:• Adequate farming• Cooperative marketing• Agricultural investment

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History of Agrarian ReformPre-Spanish Period American Period

Spanish Period Present Republic

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Pre-Spanish Period

• Social Classes:T h e N o b l e s – could own their own land

and were free from tribute payment

T h e S e r f s – entitled to cultivate certain lands, but were required to pay an annual fee of one-half of the yield of their crops to the Datu; they remained with the land as a result of this regular payment

T h e S l a v e s – served the Datu or the Nobles and were owned by them; they could be sold or traded

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Spanish Period

Encomienda System

- the system of giving lands to people

- resulted in the exploitation of the inhabitants

The encomienderos were replaced by the “cacique class”

Kasama system or share tenancy

Gen. Emilio Aguinaldo confiscated the friar lands and gave it to landless peasants

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American Period

• US negotiated the purchase of 23 Friar Estates during the early years of the century.

• The land was subdivided and offered for sale to the Filipinos residing on it

• SAKDALISTA movement was initiated in 1930 by Benigno Ramos

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Present Republic

• Pres. Manuel Roxas - RA No. 34 of 1946, providing for a 70-30 crops sharing arrangements

• Pres. Ramon Magsaysay - RA No. 1199 which allowed for the division of crops

• Pres. Diosdado Macapagal – RA No.3844 (Agricultural Land Reform Code)

• Pres. Ferdinand Marcos – PD No.2 declaring entire Philippines as land reform areaPD No. 27 ‘”emancipating the tenant- farmers

from the bondage of the soil”

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Objections in the Implementation of Agrarian Reform

• Fragmentation of farm-holdings• Small farms become less

productive• Ineffective government programs• Agrarian reform failed in the past

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Pertinent Laws on Agrarian Reform

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Importance of Land Reform

Land reform will:• Diffuse tension existing between tenant-

farmers and landlords• Give farmers a dignified existence in our

society• Bring social justice• Increase the efficiency and productivity

of the farmers• Help solve unemployment• Increase food production• Enhance the living conditions of the

poor farmers

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Aspects of Agrarian Reform

• Economic aspect

AR will help improve agricultural productivity to accelerate general economic development

• Socio-cultural aspect

AR brings about socio-cultural transformation on the life of the farmers

• Religious aspect

When God created earth, He gives it all to His children, hence, all people must enjoy the fruit of having a piece of land to till

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Aspects of Agrarian Reform

• Moral aspect

It is the moral obligation of the government to bring about peace and prosperity to our country

• Legal aspect

The Constitution serves as the basis in the formulation of laws

• Political aspect

AR is ultimately the product of deliberate political decisions, hence, AR must be the highest priority of gov’t programs

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Components of Agrarian Reform

• Land Distribution

Considered as the very foundation of agrarian reform

• Support ServicesIrrigation facilities

Infrastructure development

Price support and guarantee for all agricultural produce

Financial assistance

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The Comprehensive Agrarian Reform Program (CARP)

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On June 10, 1988, President Corazon C. Aquino signed into law RA No. 6657,

otherwise known as the

Comprehensive Agrarian Reform Law of 1988

The program provides the farmers and farm workers the opportunity to improve the quality of their lives and

at the same time enhance the dignity of the farmers.

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Principles

The welfare of the landless farmers and farm workers will receive the highest consideration to promote social justice

By means of appropriate incentives, the State shall encourage the formation and maintenance of economically sized family farms to be constituted by individual beneficiaries and small land owners

The State shall be guided by the principles that land has a social function and landownership has a social responsibility

The State may lease underdeveloped lands

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Salient Features of CARP (RA No.6657)

1. CARP covers all public and private agricultural lands

2. Ownership of agricultural lands is based on a family size farm which is not more than three (3) hectares. Landowner can retain five (5) hectares. Three (3) hectares may be awarded to each child of the landowner if he is not less than 15 years old

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3. Qualified beneficiaries in the ff. order of priority are the agricultural lessees and share tenants, regular farm workers, seasonal farm workers, actual tillers or occupants of public lands, collectives or cooperatives of the aforementioned beneficiaries, and other directly working on the land

4. The distribution of the lands covered by CARP shall be implemented within 10 years effective immediately upon signing of the law by Pres. Corazon C. Aquino on June 10, 1988.

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5. Exemptions and exclusions include lands for wildlife, forest reserves, reforestation, fish sanctuaries and breeding grounds, watersheds and mangroves, national defense, school sites and campuses…

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Payments to landowners:

Above 50 hectares 25% cash and 75% gov’t bonds

above 24 and up to 50 hectares

30% cash and 70% gov’t bonds

24 hectares and below 35% cash and 65% gov’t bonds

Payments are made in 10 years at 10% interest per annum



7. Beneficiaries pay Land Bank of the Philippines in 30 annual amortization at six per cent (6%) interest per annum.

8. Valuation of lands is determined by PARC (Presidential Agrarian Reform Council), headed by the President of the Philippines.

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TAXATIONChapter 8

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Taxation

• Is the supreme power of a sovereign state to impose burdens or charges upon persons, property or property rights for public purpose

• It is the power vested upon the legislature for the purpose of raising revenues to finance government expenditures and for the general welfare and protection of its citizen

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Tax

Compulsory contributions to support the State

Considered as “lifeblood” of a government that without which, a government may not be able to perform and expenditures are financed by tax revenues

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Basis of Taxation

Found in the reciprocal duties of protection and support between

the state and those that are subject to its authority.

In return of their contribution, taxpayer enjoys services and

protection from the government.

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Importance of Taxation

Raise revenue

Protect locally produced goods against competition from import by imposing higher custom duties

Protect new industries by granting tax exemptions

Regulate property

Distribute equally the wealth of the nation

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Essential Characteristics of Taxation

It is…• An enforced contribution• Generally payable in money• Proportionate in character• Levied on persons, property or

property rights• Levied by the state, which has the

jurisdiction over the person or property

• Levied by the legislative branch o the state

• Levied for public purposes

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Basic Principles of a Sound Tax System

Fiscal adequacy(the source of revenue should be sufficient to address the demands of public expenditures)

Equality or theoretical justice(the tax burden should be proportionate to the taxpayer’s ability to pay)

Administrative feasibility(the tax should be capable of convenience, just and effective administration)

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Classification of Taxes

National TaxesThese are taxes imposed by the national

government under the National Internal Revenue Code and other laws particularly the Tariff and Custom Code

Local TaxesThese are taxes imposed by the local

government to meet particular needs under the Local Government Code, such as real property tax and the community tax

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Forms of Taxes

Direct TaxesForm of tax paid directly by the individual or corporations directly to the government

Indirect TaxesTaxes imposed on a particular article or transaction which are paid by others than those from whom the tax collector receives payment

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Direct Taxes

Income Tax Derived from the individuals, corporate, estates and trusts income

Inheritance Tax Paid on property passed on from a deceased person to those who are to inherit it

Estate Tax Tax on the right of the deceased person to transmit his estates to his lawful heirs at the time of death

Donor’s Tax Tax levied on donation or gift and is imposed on the gratuitous transfer of property between two or more persons who are living at the time of the transfer

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Direct Taxes

Capital Gains Tax Tax imposed on income from sale of capital assets, which includes stocks, bonds, real estate, and partnership

Property Tax Tax levied on the assess value of land and permanently attached improvements owned by individuals or corporations

Documentary Stamp Tax Tax imposed on documents, instruments, loan agreements and papers evidencing acceptance, assignment, sale or transfer of an obligation

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Indirect Taxes

Value-added TaxTax imposed by the government at each stage in the production of a good or service

Sales TaxTax levied on the sale of goods and services

Percentage TaxBusiness tax imposed on persons or entities who sell or lease goods, properties or services in the course of trade or business whose gross annual sales or receipts do not exceed P550,000 and are not VAT registered

Excise TaxTax on manufacture, sale or use of goods or services levied by local , state or national governments

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Some Fees, Charges and Burdens Collected by the Bureau of Customs

Harbor FeeAmount which the owner, agent, operator or master of a vessel has to pay for each entrance into or departure from a port of entry in the Philippines

Wharfage dueAmount assesses against the cargo of a vessel engaged in foreign trade, based on the quantity, weight or measure received and/or discharged by such vessel

Berthing chargeAmount assessed against a vessel for mooring or berthing at pier at any port of the Philippines

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Some Fees, Charges and Burdens Collected by the Bureau of Customs

Storage charge

Amount assessed on articles for storage in customs premises, cargo shed and warehouses of the government

Arrastre charge

Amount which the owner, consignee or agent of article or baggage has to pay for the handling, receiving and custody of the imported or exported article or baggage of passengers

Tonnage due

Amount paid by the owner, agent or operator of a vessel engaged in foreign trade coming to the Philippines from foreign port or vv based on the net tonnage of the vessel or weight of the articles discharged or laden 3

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Limitations On The Power Of Taxation

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Classification of Limitation

• Constitutional Limitation

– those expressly found in the constitution or implied from its provisions

• Inherent Limitation

– those which restrict the power although they are not embodied in the constitution

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Constitutional Limitations

• Due process of law• Equal protection of the laws• Rule of uniformity and equity in taxation• Prohibition for imprisonment for non-

payment of a poll tax• Non-impairment of the obligation of

contracts• Non-infringement of religious freedom• No appropriation for religious purposes• Exemption from taxation of religious

institutions, charitable institutions, non-profit and non-stock educational institutions and non-profit cemeteries

• Concurrence by a majority of all the members of Congress for the passage of a law granting exemption

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Requirement for due process of law

“No person shall be deprived of life, liberty or property without

due process of law”

• There must be appropriate notice to the taxpayer and the tax imposed is for public purpose

Due process of law - done (1) under the authority of a law that is valid, or of the Constitution itself, and (2) after compliance with fair and reasonable methods of procedure prescribed by law

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Requirement of Equal protection of the laws

• The equality it guarantees is “legal equality” or as it is

usually put, the equality of all persons before the law, which

does not treat the persons differently because of who he

is or what he is or what he possesses.

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Requirement of uniformity and equity in taxation

• The rule of taxation shall be uniform and equitable

• A tax is uniform when it operates with the same force and effect and in every place

where the subject of it is found

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Prohibition against imprisonment for non-payment of Poll tax

• Poll tax – cedula tax or residence certificate tax

• The constitution does not prohibit cedula tax but it prohibits imprisonment for non-payment of the cedula or residence tax

• A poll tax maybe understood as a tax, the payment of which is made a requirement for the exercise of the right of suffrage

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Prohibition against impairment of obligation of contracts

“No law impairing obligation of contracts shall be passed.”

Impairment of obligation of contracts - “when a right is taken or when a person is deprived of the means for enforcing such right”

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Prohibition against infringement of religious freedom

“No law shall be made respecting an establishment of religion, or

prohibiting the free exercise thereof.”

• The free exercise and enjoyment of religious profession and worship, without discrimination shall forever be allowed.

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Prohibition against appropriation for religious purpose

“No public money or property shall be appropriated, applied, paid, or employed, directly or indirectly, for the use, benefit or support of any

sect, church, denomination, sectarian, institution, or system of

religious, or of any priest, preacher, minister, or other religious teacher…

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Prohibition against taxation of religious institutions, charitable institutions, non-profit and non-stock educational institutions and non-profit cemeteries

• …charitable institutions, mosques, and non-profit cemeteries are required that for the exemption of “lands, buildings, and improvements” they should not only be ‘exclusively’ but also ‘actually’ and ‘directly’ used for religious, charitable or educational purposes.

• There must be a proof therefore of the actual and direct use of lands, buildings, and improvements for religious or charitable (or educational) purposes to be exempt of taxation

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Requirement of concurrence by a majority of all the members of Congress for the passage of a law granting exemption

“No law granting any tax exemption shall be passed

without the concurrence of a majority of all the members of

the congress”

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Inherent Limitations

Requirement that levy must be for a public purpose

Non-delegation of the legislative power to tax

Exemption from taxation of government entities

International comity

Territorial jurisdiction

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Requirement that levy must be for a public purpose

The power to tax exists for general welfare. Hence implicit

in the power is the limitation that it should be exercised only

for a public purpose.

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Prohibition against delegation of the taxing power

• The power to impose tax is purely legislative. Congress cannot delegate the power to others

• Doctrine of separation of powers:

Each branch must exercise its powers without intruding into the exercise of the powers of the

other branches, for they are independent and coordinate

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Prohibition against taxation of government entities

• Government agencies and instrumentalities are generally exempted from taxation, unless otherwise provided by law.

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Limitation on International comity

• The property of foreign state or government may not be taxed by another. Foreign Diplomats/ Ambassadors are also exempted from taxation, this principle is based on the sovereign equality among states under international law that foreign government may not be sued without its consent so that it is useless to assess the tax, since anyway it cannot be collected

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Limitation on Territorial jurisdiction

• A state may not tax property lying outside the borders or right or privilege in another state. The reason is that tax laws do not always operate beyond a country’s jurisdictional limits.

• In movable property taxation, the rule is: “Mobilia Sequntur Personan” meaning “movables follow the law person”

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Income Taxation

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Income - It means all the wealth which

flows into the taxpayer other than mere return of capital

Income tax

- a tax levied directly on personal income in one taxable period

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Classifications of Income

• Gross income

All income derived from whatever source

• Ordinary income

Includes any gain from any sale or exchange of property which is not a capital asset or property

• Taxable income

Pertinent items of gross income less the deductions and/or personal and additional exemptions

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Classifications of Income

• Passive income

Income such as interest on bank deposits, dividends, royalties, prizes and other winnings

• Net income

Gross income minus allowable deductions

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Taxpayer

• Any person subject to tax imposed by the National Internal Revenue Code

• Classification of TaxpayersIndividual taxpayer

Corporate taxpayer

General Professional Partnership

Estates and Trusts

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Basic Personal Exemption (BPE)

• A mandatory deduction allowed to individual citizens in the Philippines regardless of the status at the amount of P50,000.00. This applies to all individual citizen taxpayers engaged in trade or business, practice of professions, and employees earning compensation income

• Deducted from gross income

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Basic Personal Exemption (BPE)

• Single / Legally Separated /Judicially annulled…………P50,000.00

• Head of the Family……………...P50,000.00

• Married…………….P50,000.00

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Additional Personal Exemptions (APE)

• A mandatory deduction of P25,000.00 for each qualified dependent child up to maximum of four (4) qualified dependent children in the Philippines or maximum amount of P100,000.00

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Head of the Family

• An unmarried or legally separated man or woman with one or both parents, or with one or more brothers/sisters, or with one or more legitimate, recognized natural or legally adopted children living with and dependent upon him for their chief support

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Dependent

• A legitimate, legitimated, illegitimate, or legally adopted child of the taxpayer

• Not more than 21y/o, unless physically or mentally handicapped

• Living with the taxpayer• Dependent upon the taxpayer for chief

support• Not gainfully employed, even if the child

is employed but the taxpayer is still supporting the child at least 51% of its living expenses

File a Certificate of Tax Exemptions or BIR Form No. 2305

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Income Tax Rates

Over But not over

P 10,000 5%

P 10,000 30,000 P 500 + 10% of excess over 10,000

30,000 70,000 P 2,500 + 15% of the excess over 30,000

70,000 140,000 P 8,500 +20% of the excess over 70,000



500,000 P 125,000 +32% of the Excess over 500,000

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Tax Evasion

• It is the use by the taxpayer of illegal or fraudulent means to defeat or lessen the amount of tax

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Tax Avoidance

• It is the use by the taxpayer of legally permissible methods in order to avoid or reduce tax liability

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Tax Exemption

• It is the grant of immunity or freedom from financial charges, burdens or fees extended by the State to the taxpayers.

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Cooperative Programs In The PhilippinesChapter 9

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Cooperative

derived from the Latin word “cooperatus”

Co means “with” and operatus means “to work”

= working together

A group of persons who pool their resources under the procedure and principle of equality and common understanding for their mutual benefits

Based on the saying that:

“in union, there is strength”

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Why Previous Cooperative Failed

Incompetent Management

Inadequate Capital

Lack of knowledge on the concept of cooperative

Inability to meet competition

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• Republic Act 6938 – The Cooperative Code of the Philippines

Fosters the creation and growth of cooperatives as a practical vehicle promoting self-reliance and harnessing people towards the attainment of economic development and social justice

• Republic Act 6939 – The Cooperative Development Authority

Provides for the creation of CDA tasked to implement the programs of cooperatives in the Philippines

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Purposes of the Cooperative Development Program

Facilitate redistribution of income and wealth

It is a means for community development

To systematize the developments of cooperatives

to give more opportunities to the poor

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Objectives of Cooperatives

• To provide goods and services to its members and thus enables them to attain increased income and savings, investments, productivity, and purchasing power and promote among them equitable distribution of net surplus through maximum utilization of economies of scale, cost-sharing and risk sharing without, however, conducting the affairs of the cooperative for charitable purposes.

• It shall provide maximum benefits to its members, teach them efficient ways of doing things in a cooperative manner, propagate cooperative practices and new ideas in business and management and allow the lower income groups to increase their ownership in the wealth of the nation. 7

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Types of Cooperatives

1) Credit Cooperatives(composed of persons who are bounded y common interest in promoting the virtue of thrift among its members by pooling their savings into a common fund)

2) Consumer’s Cooperatives(composed of consumers residing in a particular community who have pooled their resources together to procure and distribute commodities at low prices; serves the need of its members)

3) Producer’s Cooperatives(Composed of skilled workers and craftsmen engaged in small scale industry who have pooled their economic resources)

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Types of Cooperatives

4) Marketing Cooperatives(Engaged in the sale of farm products produced individually by member-farmers in their respective farms)

5) Service Cooperatives(Established by members to provide themselves with certain services which would help ameliorate their life)

6) Multi-purpose Cooperatives(combines two or more of the business activities of these different types of cooperatives)

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Factors Contributing to the Success of Cooperatives

Economic needs

(Man is a social being, his economic problems can best be solved through cooperation)

Sound Business Policies

(Refers to efficiency of operation, careful planning, foresight and fair dealing with customers)

Honest and Competent management

(The persons who are to serve as members of the board of directors should have adequate business experience)

Exemption from Taxes(Cooperatives has a decided edge or advantage over private enterprises)

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“Knowing is not enough; we must apply. Willing is not enough; we must do.”

Johann Wolfgang von Goethe

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finals economics ii

Documents

land system

distribution of land

land reformis

piece of land

land reform areapd

land tenure systems

social system

process of redistributing