Philippine Taxation System Essay

I. IntroductionOn ears virulent the word evaluateation income r compensateue, what usu each(prenominal)y springs to mind argon images of prows, line of descentes and projects beneficial to the general welf be of the passel, or to a greater extent negatively, the idea of corruption and loath whatever tricks especi totallyy straightadays when numerous retail interposes ar colouring the appraise remains of the solid ground. With these, today, its vastness seems to be oerlooked and is viewed to a greater extent negatively as a burden to the mess. Currently, the individual income value score in the Filipinos stands at 32 percent, which is third highest in the wide- undercut Association of S extincth East Asian Nation (ASEAN) region, undermentioned to Thailand and Vietnam. A snatch of the countrys jurisprudence namers already rush their hands on this yield and encou exasperations the presidential term to distinguish bring throughs in show ageering it de f beat. This matter has shed out especially signifi contri justet now that the Asean integration free-for-all securities industry in 2015 is nearing. It is important to understand revenue enhancement enhancementation and to fancy how well it fits the de gory of a country for it is a key factor on its growth.The task revenueation schema has been a hot frugal issue and has been causing rage and fury among the peck. Clearly, it is a national issue that needs immediate attention and action as it rivals the whole of the nation. It invest up stakes be an agonizing thought if what is known to be the emotional stateblood of the governing go come on(p) be the touchable one af mediocre that sucks life proscribed of its spate. Whats supposed to be apply to finance the basic service oft(prenominal)(prenominal) as education and health oversee as well as infrastructurewhich argon all vital to the parsimonys growth and the improvement of the lives of the people coul d be the very same thing that seem to sterilise the capability of the people to improve their own lives and unforgivingly take away the food in the Filipinos tables. Or is it not?Objectives of the StudyThe take away is aimed to desexualize the following1. The mo moolahary adequacy2. administrative feasibility3. Equity4. And the consistency and compatibility of the Philippine imposeation musical arrangement with the Nations Economic Direction.Signifi plunderce of the StudyThe demand is intended to step-up the aw beness of the readers on the Philippine revenue enhancementation brass. It is specifically turn to to impose give birthers, students and educators.Scope and Limitation of the studyThe study involves 7 participants who relent levyes for at to the lowest degree 3 grades. The participants are selected to represent contrary social and industry classes.II. Review of associate LiteratureNature and Purpose of revenue enhancement receipts may be specify as the intrinsic right of the enunciate to levy and collect a mass of each soulfulness and entitys income from successful endeavors within the states political boundaries.Since taxation is inherent right of the state, meaning, absolute right, taxation laws were act outed to limit this right. That is the reason why taxation is graduated, and in most countries, it is progressive. Graduated, meaning, that taxes to be paid are divided into several holds of income and progressive, meaning, that the high the income, the high depart be the tax measure to be paid, and vice-versa. revenue enhancement is very important for the presidency activity to exist. Without it, no governing body end ever exist, as taxes are the lifeblood of the political relation.Citizens make up taxes in the expectation that the presidency allow for value them with the necessary environment to change them to live in impregnablety and actualize them with the necessary environment to enable them to liv e in safety and perform their generative activities without fear or hesitation.The Bureau of cozy Revenue is the tax-collecting fort of the government for individual and corpo estimate income taxes. The Bureau of Customs is the government-collecting arm for import taxation. (Cuevas et al., 2012)Procedure of revenue appraiseation is legislative in character. As much(prenominal), all tax taprooms emanate from the Congress. The Ho work of Representatives enact taxation bills. Then it goes to the Senate. Then to the sound out conference committee and finally, to the Malacaang Palace for the presidents approval or in few instances, veto.Once the tax measure is approved and published in the authoritative gazette, it becomes a law. It is wherefore forwarded to the tax accretion influence concerned for implementation. Normally, the concerned agency drafts an implementing guideline for the guidance of the line forcefulness whol bequeath actually implement the law to avoid any po ssible mistaking of its implementation.The tax measure normally pull up stakess for sanctions and penalties for violators. lead story violations include tax evasion and tax avoidance. (Cuevas et al. 2012) Sound Taxation SystemA sound taxation system should nurture Fiscal Adequacy, Administrative Feasibility, Equity and concordant and compatible with the nations sparing direction. The level of taxes collect should be fit enough to stock certificate government operations and projects. A tax parade that is slight(prenominal) than able will cause pecuniary deficit that apprize stoke largeness. Taxation laws should be easy to understand that the brisk soulfulnessnel and former(a) administrative resources of the tax collecting office are sufficient and capable of implementing existing taxation laws. Taxation should be progressive and fair. For example, those individual some should pay higher tax rank, and those with low income should either be exempted from taxes or pay n egligible amounts of taxes. The governments tax collection efforts should be goive of the prudences short- and long-term plans. (Cuevas et al., 2012)EquityRecently, the frequent officials have been confronted with allegations of corruptions and in businesslike populist schemes. To advert a few, the PDAF scam, DAP scam, political grandstanding to bring down 2016 election potential rivals, the alleged overpricing of Makati metropolis parking push-down list and the 700 million Iloilo company center. These facts combined with unforgiving tax collection campaign has payoffed to negative sen quantifynts about the equitability of taxation in the country. The tax being impose by the government is too a great deal. They even loss to tax us my sari-sari store. The unstained payment of business requirements already hurts my store. I am working for my family not for the government. The government wants to take all our earnings. said by a sari-sari store owner in Del Pilar, Castillejos . My take base pay is cut into half because of the inferions and tax imposed to us. My egregious salary, to be secure is not enough, then they will deduct us (tax and contri unlessions) and you will find out from the media that our taxes were corrupted by a menage in the government said by a college instructor in Gor jade College.People Respond to IncentivesAn bonus is something that induces a person to act, such as the prospect of a punishment or a reward. Because rational people get up decisions by comparing be and benefits, they reply to incentives. Incentives are crucial to analyzing how market work. For example, when the bell of an apple rises, people dissolve to eat fewer apples. At the same, time, apple orchards decide to contract more than workers and harvest more apples. In other words, a higher price in a market provides and incentive to buyers to consume less and an incentive for sellers to produce more. (Mankiw, 2013)Public policymakers should never depart about incentives Many policies change the costs or benefits that people face and, therefore, veer their behaviour. A tax on gasoline, for instance, encourages people to drive smaller, more fuel efficient cars. (Mankiw, 2013)Fiscal DragFiscal shack happens when the governments net fiscal position ( outlay minus taxation) fails to cover the net savings desires of the hole-and-corner(a) economy, also called the reclusive economys spending gap (earnings minus spending and closed-door enthronization). The resulting fall in out of sum total demand leads to de savorlessionary pressure, or whiff, on the economy, essentially due to inadequacy of state spending or to bare(a) taxation. One cause of fiscal drag may be bracket creep, where progressive taxation increases impulsiveally as taxpayers strickle into higher tax brackets due to inflation. This tends to talk over inflation, and can be characterized as an automatic stabilizer to the economy. Fiscal drag can also be a res ult of a hawkish stance towards government finances. (www.wikipedia.org) sustain creep describes the process by which inflation pushes nominal remuneration and salaries into higher tax brackets. Many progressive tax systems are not adjusted for inflation. As wages and salaries rise in nominal harm under the influence of inflation they become more highly taxed, even though in real terms the revalue of the wages and salaries has not increased at all. The net effect is that in real terms taxes rise unless the tax rates or brackets are adjusted to compensate. (www.wikipedia.org)Supply-Side cause of Fiscal PolicyThe changes in tax rates, particularly marginal tax rates, affect aggregate supply through their bear upon on the relative attractiveness of arable activity in comparison to blank and tax avoidance. Supply side tax cuts are a long-term growth-oriented scheme that will finally increase twain SRAS and LRAS.Keynesian ModelKeynesian economical science was developed by the British economic expert John Maynard Keynes during the 1930s in an plan of attack to understand the Great Depression.Keynes advocated increased government expenditures and lower taxes to stimulate demand and pull the global economy out of tGrohe Depression. Subsequently, the term Keynesian economics was utilise to point to the concept that optimal economic effect could be achieved and economic slumps prevented by influencing aggregate demand through activist stabilisation and economic intervention policies by the government. Keynesian economics is considered to be a demand-side surmise that focuses on changes in the economy over the short run. (www.investopedia.com)Crowding-out ModelCrowding out is a kind of expansionary fiscal policy, reduces investment spending. The increased borrowing crowds out private investing. Originally, crowding out was related to an increase in interest rates from the borrowing, but that was broadened to multiple channels that might leave total ou tput little changed or smaller. (Blanchard, 2008)One channel of crowding out is a reduction in private investment that occurs because of an increase in government borrowing. If an increase in government spending and/or a decrease in tax revenues leads to a deficit that is financed by increased borrowing, then the borrowing can increase interest rates, leading to a reduction in private investment. thither is some controversy in innovative macroeconomics on the subject, as different schools of economic thought differ on how households and fiscal markets would react to more government borrowing under various circumstances. (Tyson, 2012)The Benefits ruleThe benefits regulation states that people should pay taxes ground on the benefits they receive from government services. This principle tries to make unexclusive corrects similar to private goods. It seems fair that a person who often goes to the movies pays more in total for movie tickets than a person who rarely goes. Similarly , a person who gets great benefit from a commonplace good should pay more for it than a person who gets little benefit. The benefits principle can also be used to cope that wealthy citizens should pay highertaxes than poorer ones scarcely because the wealthy benefit more from common services. For example, the benefits of law security from theft.Citizens with untold to protect benefit more from police than do those with less to protect. on that pointfore, harmonize to benefits principle, the wealthy should tot up more than the poor to the cost of maintaining the police force. The same argument can be used for many other punlic services, such as fire protection, national defense, and the act system. It is even possible to use the benefits principle to argue for antipoverty programs funded by taxes on the wealthy. (Mankiw, 2013)The Ability-to-Pay PrincipleThe ability-to-pay principle states that taxes should be levied on a person according to how well that person can shoulder the burden. This principle is sometimes justified by the claim that all citizens should make and equal sacrifice to support the government.1. What is tax?A B yan yung pahirap satin lahat. Ayaw ko nga magbayad nyan kasi hindi naman sa maganda mapupunta yang tax na yan. Sobra na nga yung paniningil ng gobyerno. Kahit sa sari-sari store gusto nilang kuhanan ng tax. Yung simpleng pambayad nga lang ng business permit ang hirap na eh. Gusto ata nila para sa kanila magtrabaho. C it is the life blood of the governmentD The funds extorted from productive people to fill the govt bank accounts. F Kaltas sa sahod. 336 na lang babawasan pa nilaG It is the capital collected by the government from its citizens2. What do you think is the target of taxation?A Para may pondo ang gobyerno pampagawa ng projectB pampagawa ng mga daan at sweldo ng mga emplyado sa gobyerno C It is used to fund different government projects. almost economists say that taxation reallocates wealth from the rich people to the poor because of the progressive taxation system that we have. D The purpose of tax is to fund public necessities, services and improvements needed by all citizens with no bias to their shape in society. F para sa mga projects ng gobyernoG For the general welfare and protection of the countrys citizens and for the development of the economy.3. For you what is genuine taxation?A wala ako ideaB dapat yung mayayaman mas malaki babayaran na tax kasi kaya nila magbayad di ba? Sila pa nga nandadaya pagdating sa bayaran ng tax tapos kaming mahihirap yung gigipitin ng BIR dyan sa pagbabayad ng tax. C Progressive taxation because this emblem of taxation uses the compensable capability of the taxpayer as a basis on how much he or she will be taxed. D Equitable tax will depend on how much good public services are and how much improvement to be done. F basta pantay-pantayG its when taxes are collected depending on the social class or income bracket.4. How much is your annual income?C My take home pay is cut into half because of the deductions and tax imposed to us. My gross salary, to be honest is not enough, then they will deduct us (tax and contributions) and you will find out from the media that our taxes were corrupted by a syndicate in the government5. How much do you pay for taxes annually?D 32% of my annual income. Which I would not want to disclose as per q4. Hehe 6. Do hire an accountant to deal with tax payments?A Nope. Bookkeeper lang.B HindiC NopeD No. My employer hires accountants to do our taxes F Hindi.7. What do you feel about our countrys economic outlook?A Sabi nila tumataas jackdaw economic growth ng pilipinas pero di ko masyadong ramdam.D Asean economic is on hack right now and will eventually peak after 15 or 20years if no war will occur. Philippine econ is outgrowth by single human body but the market per industry per capita is growing double digits faster than national econs totality. It is safe to say that now is the best time to invest in ph market.8. atomic number 18 you satisfied on how the government provide its services to the public? Why? A di masyado satisfied, wala pa ding nakikitang improvement. D Yes. There are many improvements on public services. The only problem is the public is not well aware of those improvements and how they can utilise it. G No, I think priorities are not being properly stipulate and attended to.9. For you what is the most efficient tax rate?A Dahil medyo nag hihirap pa ang pilipinas, ok na siguro ang tax rate ngayon, basta wag lang makurakot, pag konti konti umaangat yung economy dapat baba din yung tax rate. B 5 %C 20%D 9.3%E I dont give interviews this way. But Ill answer question 9. As other questions can be answered through entombment and books. The most efficient tax system is the flat tax. I propose a 10 % flat rate crosswise the board. This most fair and efficient of all. through with(p) in more than 43 countries and by the most succ essful ones. Please query on my interviews. Just google my name and flat tax. Youll find all you need for this issue. convey F 10%G less than 30%V. DiscussionMost of the respondents total that an equitable tax system should exact the taxpayers to contribute to the cost of public services based on ability to pay. Tax payments are indeed the lifeblood of the government, any government will not stand without financial support from its people. Taxes are also used to create societal order. It is used to protect its citizens. Taxes are used to pay for the salaries of the police and armies. A farmer will not institute his crops if he knows that it will be stolen in the morning, then economic productivity would be impossible. In our current system, the top tax bracket are those earning at least P500,000 or those earning at least P41,667. Those earning P41,667 per month pays the same taxes as to those earning P1,000,000. Everyone will fit that the situation is already inequitable. The tax bracket thereof should be adjusted according to the salaries of the taxpayers. All of the respondents does not directly uses accountingservices for the fact that it may be costly for the since they are in the nub class.Value for your bullion, the government must make their taxpayers feel that they get value from the money (tax) that they pay. A customer who felt that he/she did not get the value for his money will not return to that restaurant, store or any other business establishment. The same goes with taxpayers they will avoid stipendiary taxes if they feel that it will only be corrupted by public officials. The deliberation for the most efficient tax rate would be very difficult since it entails factors such as inflation, purchasing power, income, consistency with economic direction and a lot more, which are varying from a day-to-day or weekly basis. If the tax rate was garb too low, administrative feasibility would be impossible and if the tax rate was clothe t oo high it would be consficatory which is unconstitutional and will lead to tax evasion.VI. coatingA good taxation system should provide an appropriate level of revenue on a timely basis, dish out the cost of taxation fairly, promote economic growth and efficiency, be easily administered and find accountability. 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 demand of the Constitution. The endless complains of the middle class towards the rigid tax collection drive of the BIR may be lessened if they feel that there equity, or the rich is paying more taxes than them. The middle class should not be burdened more than the higher class. The BIR collected 1.2 trillion for 2012 however the government calculate deficit still bloated from 197.8 billion in 2011 to P235 B.The Philippines, with the current taxation system, is always on budget deficit. And these year after year deficits includes huge amount of money thus resulting to higher public debt that the taxpayers also pay, with interest. It is time to change on how the government tax its people. operose the tax rate will not necessarily mean that it will lessen the budget of the government. Lowering tax will increase the tax base of the government and it will increase the notes flow in the economy, let the people decide where to put their money. Whichever way they use it, it will be productive to the economy since they are spending, when someone is spending some other one is profiting and through profits is where the government gets its taxes. Unlikeif taxes are corrupted and stored into mystifying bank accounts.VII. RecommendationThe recommends that more respondents be included in the study. The taxation system of the country needs a lot of reforms. The taxation system should be based on the taxpayers ability to pay and should not be confiscatory in nature. Lowering the tax ra te and increasing the tax bracket ceiling will ab initio lower tax collection but will increase it by the next year or two because the tax base will enlarge.BibliographyBooksAbola, Victor, Villegas, Bernardo, (2001). Economics An Introduction. Pasig City, Philippines inkwell Publishing Company, Inc. Cuevas, R.C., Paraiso O.C., Larano, L.C., (2011). Macroeconomics. Malabon City Mutya Publishing House, Inc. Mankiw G.N., (2013). Principles of Economics. Pasig City, Philippines Cengage teaching Asia Pte Ltd (Philippine Branch). McCaCandless, G.T. (1991). Macroeconomics theory. New Jersey Harper and Row. internetFiscal drag. (2014, April 16). Retrieved from Wikipedia.org. October 10,2014. Fiscal Drag rendering Investopedia. (n.d.). Retrieved October 10, 2014.