UNIVERSITY OF SAN JOSE – RECOLETOS

Magallanes St. , Cebu City

Prelim Output for Taxation 1

Submitted to:

Dr. Cedric Val Naranjo, CPA

Submitted by:

Lauron, Katrina Fe Y.

Robles, Elsa T.
 I. Introduction

Taxation is the process by which the sovereign, through its lawmaking body raises
revenues used to defray expenses of government. It is the means of the government in
increasing its revenue under the authority of the law, purposely used to promote welfare and
protection of its citizenry. It is a collection of a share of individual and organizational income by a
government under the authority of the law. The tax system refers to the methods or schemes of
imposing, assessing, and collecting taxes. It includes all the tax laws and regulations, the
means of their enforcement, and the government offices, bureaus and withholding agents which
are part of the machineries of the government in tax collection. According to Adam Smith, in
order to have a good tax system, the three principles should be present, and these are: fiscal
adequacy, theoretical justice and administrative feasibility.

Fiscal Adequacy requires that the sources of government funds must be sufficient to
cover government costs. Taxation as a part of the country’s sources of revenue, citizens of our
country should be aware on the importance of it. As the nation’s lifeblood, taxation is very
significant in making the government perform its function to serve its people. The budget of the
country comes from taxes paid by its citizens, so the government must not incur deficit.
Payment of tax is a necessity and the government, thru Bureau of Internal Revenue and Bureau
of Customs, shall do its part on the collection of taxes. Hence, taxes should increase in
response to increase in government spending.

Equity or theoretical justice means that it is only appropriate for the government to base
the tax that is being collected to the declared salary of the payer. With this principle, tax payers
will have reasonable taxes and will give a fair share of what they have earned to the
government. This is the so-called “ability to pay principle”. This also points out that the exercise
of taxation should not be oppressive, unjust, or confiscatory.

Administrative Feasibility means that tax laws should be capable of convenient, just and
effective administration. The government should make it easy for the taxpayers to comply by
avoiding administrative bottlenecks and reducing compliance costs. This principle is very
important in the collection of taxes and its implementation. Tax imposition in the Philippines
involves three stages, first is the levy. It is the legislative act or the tax law that determines the
amount of tax or certain percentage shall be imposed on the person, property or acts subjected
thereto. After the levy, assessment follows; this action involves computation of the sum due,
giving notice to the taxpayer and making simultaneous demand upon the payer for the tax or its
deficiency. And lastly the collection; thru proper government agencies, taxes are collected. This
stage embraces the different remedies for enforcement of the payment of taxes including
prosecution on tax violators. The government assigns two bureaus in the administration of tax
collection; these are Bureau of Internal Revenue and Bureau of Customs.

II. Assessment

The taxation system in the Philippines has been a hot issue that causes rage and fury
among Filipinos. Apparently, this is a national issue that needs an immediate action from the
government as it affects the entire nation. It is a tormenting thought that if what is known to be
the “lifeblood of the government” will be the very one thing that sucks “life” out of its people.

It is said that Fiscal Adequacy requires that the sources of government’s funds must be
sufficient to cover government costs. Now, the question to our government is “are we generating
enough revenue for our country?” and “where do these revenues go?” Considering the amount
of debt we owe to the international banks, Philippines is not generating enough income to pay
for its expenses in running the country. The revenue is not sufficient to pay for its debt and this
is a bad sign that the fiscal budget is not enough or should we say that the budget no longer
goes to where it is appropriated. This misappropriation includes corruption of public funds, over-
priced projects, under the table deals and the likes that contribute to the country’s continuous
poverty. Also, according to former Finance Secretary Cesar Antonio Purisima, “We are in a
position where 90 percent of our revenue is used for debt service. So, for every peso of revenue
that we currently raise, 90 goes to debt service.” That is the interest plus amortization of our
debt. So clearly, this is not a sustainable situation.

The Philippines being a third world country and has a minimum wage salary of 500-537 Php
per day, according to the Department of Labor and Employment in the National Capital Region.
With these information, this only shows that some Filipinos have low salary not everyone could
pay their taxes. With the ability to pay principle this people who earn minimum wages are given
tax exemptions to cope up with their daily living cost and those who are earning above this
minimum wage are obligatory to pay their monthly taxes. The monthly income is proportional to
the tax that is being paid. As the income increases, tax also increases.

According to a news article, the Philippine tax system is only "mildly" progressive, and even
borderline "regressive" – in many instances, poor Filipinos effectively pay a larger fraction of
their income in taxes. For example, tax rates on dividends and other forms of capital incomes
(which are earned mostly by the rich) are so low compared to the tax rates of ordinary workers.
Increasing these capital income tax rates will certainly help make the rich pay more in taxes.

Administrative feasibility assures us that the tax system should be as simple as possible,
clear, concise and capable of enforcement and convenient as to time and manner of how taxes
are assessed, collected and complied with. In the Philippines, tax returns are currently filed
manually or electronically using electronic filing and payment system (e-FPS) facility and
electronic BIR forms (e-BIRForms) package under existing BIR issuances. This has been the
manner of filing tax returns for the past three years since the introduction of the e-BIRForms
platform. The good news is that this year’s filing deadline for the annual income tax return
proved to be less complicated as compared to previous years because the current rules were
merely reiterated through the issuance of Revenue Memorandum Circular (RMC) No. 28-2017.
Nonetheless, taxpayers have to deal with a different set of rules as to who are required to file
income tax returns via e-FPS, e-BIRForms, or manually. According to a news article, taxpayers
can now settle their annual dues online and avoid long queues at Bureau of Internal Revenue
offices through Philippine Electronic fund transfer System and Operations Network (PESONet)
Accredited banks and payment channels include the Development Bank of the Philippines, Land
Bank, Bank of the Philippine Islands, Rizal Commercial Banking Corporation (RCBC), Banco de
Oro (BDO), and Gcash. According to Finance Undersecretary Antonette C. Tionko, PESONet
aims to cut red tapes and improve the ease of doing business to better serve the public and
attract more investors.

III. Conclusion:

A good taxation system should provide sufficient revenue, consider the taxpayer’s ability
to pay, and provide convenience in paying taxes.

It is said that tax is the lifeblood of the government but why does it have to be a burden
on the part of the tax payer. What supposed to be used to finance the basic and public
services such as education and health cares – which are necessary in economic
development and in people’s lives – could possibly limit the capabilities of the Filipinos to
improve their own lives.

The government should make their taxpayers feel that they get value from the tax that
they pay. People will avoid paying taxes if they feel that the taxes imposed are confiscatory
 in nature and this in turn reduces the tax base. The inequity of the tax system negates the
command of the Constitution.

Based on the information above, it is said that Philippines is always on budget deficit and
year after year, deficit includes huge amount of money thus resulting to higher public debt
and as a result, taxpayers will suffer to pay more taxes.

Unfortunately, the Philippine tax system is currently deficient in both respects. Not only
do our taxes disproportionately burden the poor and benefit the rich, but they also yield too
little revenue given the distortions they create. Needless to say, both problems need to be
resolved soon.

We think that the government should change the tax system in the Philippines because
the current system, even with those reforms, has not been felt by many.

IV. References:

Books

 Banggawan,R.(2019).Income [Link] City:Real Excellence Publishing

Sites

 [Link]
administration-that-matters-to-all-
taxpayers&id=143827&fbclid=IwAR12kqNtRhjqzOOUz7yp3oPQUovDiiN8W4aahL9DxF
ED7JfIJ3bboKZikM8
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characteristic-of-a-sound-tax-system-was/
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transfer/?fbclid=IwAR3AfeSKnulnuJzJX51WvG8txHRDNV-Ux3a6NHTru_oz4lEbA0IsV1KyCiA
 [Link]
online?fbclid=IwAR2wHmlygTd3eZFINJicRlI5fuPI482SqF8oB6UitrGCQnKvDJYaZJglTY0
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filipinos