thirteen classes and ranging in cost from 37.50 pesos to 50 cents (there were three additional classes, two "gratis" and one "privileged") were reduced to one class and issued to all alike at the uniform rate of 1 peseta, the amount fixed being the estimated cost of issue. These suppressed sources of internal-revenue taxation produced in normal periods of Spanish rule more than 7,500,000 pesos annually, or nearly one-half of the total receipts from every source, including the customs. The cédula tax alone produced annually about 5,200,000 pesos. The remaining three sources of revenue, to wit, the industrial, urbana, and stamp taxes, producing in times of peace a little over 2,000,000 pesos annually, have been enforced by the military government within territory under firm military occupation, but in the modified form hereinafter indicated.

INDUSTRIAL TAX.

This tax is in its nature an income tax, and reaches all incomes derived from industrial, commercial, or professional pursuits. As to salaries, compensations, and allowances paid directors, managers, superintendents, and higher officials, it exacts 5 per cent, but 24 per cent is taken from the lower salaries of subordinate employees, and absolute exemption is granted as to all salaries less than 600 pesos per annum. It also comprises the taxes on profits of individuals and corporations engaged in any established business, approximating, as administered, 5 per cent of the net income of such business. There are seven different tariffs prescribed under which industries are classified, and in each tariff there are four ratings based upon populations of towns. The character of the business and its location ascertained, its classification and rating are easily determined. The table of exemptions comprises sixty-two different classes of "industrials" who are exempted from the payment of this tax, the general tendency being to favor the poorer classes, whose compensations are small, also agriculture and mining.

In the internal revenue, the same as in customs duties, the efforts of the government to increase the revenue of the country seem to have been limited mainly to the imposition of surtaxes. The industrial tax carried three of these, one of which, however, was operative in the city of Manila only. Their effect was to raise the industrial tariffs about 27.05 per cent. This first surtax of 10 per cent was collected for the benefit of municipalities; the second, collected only in the city of Manila, was a war tax not imposed until 1896; and the third, a surtax of 5 per cent, was levied for the purpose of paying the costs of collection.

These surtaxes rendered difficult the determination of the amount of tax to which any person or business was subject and furnished complications in administration. This and other considerations led to their abolition, which was effected by General Orders, 53, office of the United States military governor, April 17, 1900.

A further reduction of the industrial tax resulted from the suspension by the military governor of those provisions which required the Government contractors, subcontractors, and lessees to pay one-half of 1 per cent of the total amount of their contracts as a tax. This suspension was based upon the consideration that the tax was merely an expense and not a source of revenue, as the contractor invariably added one-half of 1 per cent to his contract and the Government collected one-half, therefore gaining nothing and being put to the expense of collection.

URBANA TAX.

The second of the taxes enumerated above, the urbana tax, or what is more commonly known as the direct tax on house property, is, like the industrial tax, in its nature an income tax, falling upon incomes derived from buildings and amounting to 5 per cent of 75 per cent of the annual rent therefrom, 25 per cent being allowed for repairs, insurance, and maintenance of property. However, all buildings of a value of less than 266 pesos were exempt from this tax, and in this way the poor were again favored, as there was no other tax applicable to those buildings, and the value of the ordinary native house outside of the larger cities was less than the amount of the exemption.

This tax, like the "industrial," was burdened by surtaxes to the amount of 10 per cent for municipal purposes and 5 per cent for collection, both of which, amounting to an increase over the tariff rates of about 15 per cent, were suspended in April, 1900, by the military governor.

STAMP TAX.

The stamp tax, continued by the military government, is similar in character to that enforced in the United States, and it is always employed where transfer of funds or of property is made, and the rate in such cases is fixed by the amount of consideration involved. In its application to the judiciary, this tax has the effect of throwing, to a very great degree, the expense of maintaining the courts upon the persons who use them, and here again the poorer classes are favored, they being allowed what in practice amounts to an exemption from this tax when they prosecute or defend as poor persons.

CÉDULAS-CERTIFICATES OF REGISTRATION.

Under the Spanish administration the cédula tax constituted the most productive item of internal taxation, producing annually, with the Chinese capitation tax, more than 5,000,000 pesos (average for eight-year period ending 1897), and exceeding the average annual customs receipts by more than 800,000 pesos. It was much complained of as burdensome and oppressive and presented difficulties in administration and collection. Like the urbana and industrial taxes, it was in the nature of an income tax. The disposition at first was to abolish this tax absolutely, but Spanish laws continued in force made necessary a cédula in some form, and the military government decided for this reason to issue the document at the uniform price of 20 cents each. These documents are now termed "certificates of registration,' printed in English, and are issued throughout the islands. It is suggested that this tax may have been too indiscriminately rejected and that its revival at a much reduced rate, solely, however, as a municipal tax, should be considered.

The foregoing makes it apparent that the internal taxes collected by the military government in the Philippine Islands are mainly contributed by large corporations and mercantile firms, the amount paid by smaller concerns being relatively insignificant, and the poorer wageearner contributing nothing at all except the 1 peseta for the certifi cate of registration. If we except persons who have arrived in Manila since the American occupation was established, and who are not believed, as a class, to contemplate a permanent residence in the

islands, there is no one complaining of the salary tax, and of the excepted class the total number complaining has not exceeded twenty. Natives of the Philippine Islands who receive income enough to come under the provisions of the industrial tax cheerfully pay their 24 per cent per annum on salaries received.

The foregoing is believed to be a fair statement of the system of internal revenue applied under American rule. That it is a system in all respects adapted to existing conditions, to be retained without amendment, is by no means asserted; but that it is not justly chargeable with the inequalities and oppressive features so frequently claimed by a certain portion of the public press is perfectly clear. That the military government has, to any considerable extent, assumed the rôle of taxgatherer is to be rejected absolutely.

LAND TAX.

There is the authority of the Official Guide of the Philippines for the statement that only about one-ninth part of the territory of the islands has been brought under cultivation, and the more ample development of agricultural interests is the declared purpose of numerous protecting laws. No land tax has been applied in the Philippines, and in many other respects the agricultural interests have been favored. The laws restricting immigration of Chinese were from time to time relaxed as to certain designated agricultural districts, with exemption from taxation for a specified period for such farm laborers as took advantage thereof. The law of agricultural colonies, extended to the Philippines by royal decree of the 4th of September, 1884, provides special franchises in favor of said colonies, the most important among which were exemptions from all contributions on property, improvements, stock (cattle, etc.) established by them, and from all contributions on industries carried on within or upon the property of such colonies for the purpose of making the products of the same ready for market; also an exemption from export duties on their products and from import duties on apparatus, machinery, tools, and materials necessary for agricultural work and construction of buildings. The objections to the introduction of a land tax were not, however, limited to these considerations alone, but were based also upon the lack of comprehensive surveys and other statistical data necessary to the administration of such a tax, the registers of property being notoriously incomplete. These considerations, and the further one that agriculture has perhaps suffered interruption from war conditions more than any other business, explain the lack of initiative thus far looking to the establishment of a system of land taxation.

JUDICIAL DEPARTMENT.

From the date of the reestablishment of the civil courts it was apparent that the laws of criminal procedure should be entirely substituted or radically amended, in order to provide a system which would be divested of those harsh and oppressive features so much in conflict with American standards. But the repeal of existing laws and the correlative substitution of a new and complete code were impracticable, in view of the necessity for reasonable expedition, and of limiting the changes to the smallest necessary number in order that the Philippine bench,

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bar, and court functionaries should not be disqualified from what was deemed an indispensable participation in the administration of justice. General Order No. 58, current series, this office, affecting those more necessary and desirable changes in the laws of criminal procedure, was issued, but the amendments it affected in said laws were really designed as an introduction to and means of preparation for such exhaustive changes as seemed unavoidable at a future date.

The changes made by this order may be briefly summarized as follows:

1. The requirement of a specific complaint or information to agree substantially with a prescribed form, charging but one offense, in lieu of the rambling accusation of the Spanish practice, which frequently alleged and was the basis of prosecution for several distinct offenses.

2. A brief preliminary examination of the complainant and such witnesses as he might produce as a means of determining whether a warrant of arrest should issue in lieu of the former interminable and secret "sumario."

3. The extension of the rights of a speedy and public trial, to defend in person or by counsel, to be advised of the accusation, to testify in his own behalf, to be exempt from testifying against himself, to confront and cross-examine the witnesses against him, to have compulsory attendance of witnesses in his own behalf, and the right of appeal in all cases-this also in lieu of the "sumario," which was conducted in secret by the judge and prosecuting attorney, witnesses being examined without the presence of the accused or his attorney, and the accused even being required to be present without the aid of counsel to testify in the case. At the termination of the "sumario" the accused was either dismissed or the case was placed in "plenario," at which stage the accused was permitted to be represented by counsel and to inspect the depositions taken in the "sumario," with the right of requesting the presence of witnesses for the purpose merely of supplementing the inquisitorial testimony of the secret sumario."

4. The privilege of demurring to an insufficient complaint and of pleading a former judgment or jeopardy.

5. The right of joint defendants to be tried separately.

6. The right of a new trial in case of errors of law or newly discovered evidence.

7. Provisions, of a character similar to those above stated, for trials in justices' courts.

8. The making of all persons, including defendants, competent witnesses, instead of the peculiarly harsh rule of the Spanish law excluding the accused and his relatives and employees.

9. The requirement that evidence should be relevant to the fact at issue and should be the best of which the case might be susceptible, thereby changing the illogical and severe practice of the Spanish courts under which hearsay evidence was freely admitted.

10. Providing that all prisoners should be bailable before conviction, except in capital cases where the proof or presumption of guilt was strong. This was a substantial departure from the Spanish law, which permitted bail in the lighter offenses only.

11. Conceding the privilege of the writ of habeas corpus to every person unlawfully restrained of his liberty. The Spanish law apparently has no remedy similar to this writ, the nearest approach being the clearly inadequate and universally abused requirement for a speedy trial of all prisoners.

12. Safeguarding the issuance and execution of search warrants. Speaking in general terms, it may be said that the operation of the law has been satisfactory in securing to defendants in criminal cases the fundamental rights of Anglo-Saxon criminal law. The writ of habeas corpus has been frequently invoked, and under its speedy operation nearly 100 prisoners, the heritages of the Spanish régime, have been liberated from an unwarranted detention.

Owing to the fact that native judges, prosecuting attorneys, and lawyers, without opportunity of preparation, have been called upon to follow a system of procedure radically and widely different from that in which they have been trained, there have been numerous errors and some miscarriages of justice, which, as far as possible, have been corrected on appeal or review by the criminal branch of the supreme court. With this supervision, with the assistance of American attorneys and the usually earnest attention of the courts, the situation is clearing with as great rapidity as, under all circumstances, perhaps, could be expected. While it is true, as suggested, that the majority of the judicial functionaries are studying to comprehend the new system, some have manifested an imperturbable indifference, which, if continued, must result in serious disadvantage to the native legal profession. In the report of the chief justice of the supreme court, herewith, will be found a reference to the general orders of the military governor's office reestablishing the supreme court and the courts of first instance and of the peace in several of the provinces and to the progress made in reviving the notarial service and offices of registrars of property. There is likewise considerable data as to the work accomplished by the reestablished courts and a review of the several orders of a legislative character affecting the judiciary, from which I extract the following pertinent comment on General Order No. 58, above discussed:

Lastly, the measure most worthy to be recorded in the administration of justice was the adoption and publication of the new law of criminal procedure contained in General Order No. 58, of April 23, 1900, which took effect on May 15 following, a law based upon American legal principles.

This law, based upon the accusatory system, has abolished the inquisitorial period so derogatory of the rights of the accused, and which was the foundation of our former criminal procedure. The time formerly taken up by this inquisitorial system without the right of intervention on the part of the accused, which at times would be prolonged for years, dependent upon the difficulty of investigation, has been saved; the long period of preventive imprisonment suffered by many persons during the long summary examination is now avoided, which said examination was carried on only for the purpose of investigating the commission of a crime and whether any person was guilty thereof. The new procedure provides for complete equality between the accuser and the accused, between the prosecution carried on by the Government and the defense of his personal liberty, and security interposed by the defendant, a brief proceeding which becomes and is public from its initiation, fully provides all that is necessary for a complete defense, and is an absolute safeguard of personal security. This undoubtedly is the greatest benefit conferred upon the inhabitants of this country.

The personnel of the supreme court has, from the date of its establishment and until quite recently, included three American judges, one of whom, Associate Justice R. W. Young, formerly major, commanding the Utah Light Artillery, United States Volunteers, was, upon the unanimous recommendation of the court, appointed by you as president of the criminal branch to succeed Judge Raymundo Melliza y Angelo, resigned. The preparation of a reformed code of criminal procedure was largely the work of Judge Young, who was also a