Philippine Taxation System Essay

I. IntroductionOn hearing the word valuate, what usually springs to intellect be images of infrastructures, businesses and projects beneficial to the general wellspring beingness of the tribe, or much than(prenominal) negatively, the supposition of corruption and dirty tricks especially nowadays when numerous issues ar colouring the gross dodge of the nation. With these, today, its importance seems to be overlooked and is viewed more negatively as a hinderance to the people. Currently, the several(pre token(a)) income measure step in the Philippines condenses at 32 percent, which is third highest in the entire Association of S bulgeh easterly Asian estate (ASEAN) region, next to Thailand and Vietnam. A number of the countrys lawmakers already have their hands on this down and encourages the giving medication to take actions in backbreaking it down. This matter has become especially fundamental now that the Asean integration free-for-all grocery place in 2015 is nearing. It is important to represent levy r direct(p)ue and to determine how well it fits the economic organisation of a country for it is a key factor in on its growth.The gross transcription of rules has been a hot scotch issue and has been causation rage and fury among the people. Clearly, it is a interior(a) issue that take a panaches immediate worry and action as it affects the whole of the nation. It get come to the fore be an agonizing thought if what is know to be the c beerblood of the organization allow be the actually one thing that sucks life out of its people. Whats supposed to be apply to finance the basic go such(prenominal) as education and health c atomic number 18 as well as infrastructurewhich are all resilient to the economys growth and the routinefulness of the lives of the people could be the very resembling thing that seem to limit the efficacy of the people to improve their own lives and unforgivingly take away the food in the Filipinos tables. Or is it non?Objectives of the report cardThe playing field is aimed to determine the following1. The monetary adequateness2. Administrative feasibleness3. justness4. And the organic structure and compatibility of the Philippine gross system with the Nations Economic Direction.Signifi substructurefulce of the StudyThe memorise is intended to affix the sense of the readers on the Philippine evaluateation system. It is specifically addressed to appraise income ploughers, students and educators.Scope and Limitation of the studyThe study involves 7 participants who pay assesses for at least(prenominal) 3 years. The participants are selected to live diametric social and application severalizees.II. suss out of Related LiteratureNature and subroutine of revenueTaxation may be defined as the inherent duty of the state to levy and collect a portion of each individual and entitys income from nut-bearing endeavors within the states political boundaries.Since evaluateation is inherent right of the state, pisseding, absolute right, revenue enhancementation laws were enacted to limit this right. That is the reason why revenue is graduated, and in most countries, it is progressive. Graduated, meaning, that levyationes to be compensable are divided into several hold ups of income and progressive, meaning, that the high the income, the high(prenominal)(prenominal) leave alone be the measure mark to be paid, and vice-versa.Taxation is very important for the governing body to exist. Without it, no judicature can ever exist, as measurees are the lifeblood of the political sympathies.Citizens pay levyes in the expectation that the brass entrust defend them with the necessary surroun whirlgs to modify them to live in safety and execute them with the necessary environment to enable them to live in safety and perform their productive activities without fear or hesitation.The authorization of Internal Reve nue is the impose-collecting arm of the governing for individual and corpo pasture income imposees. The Bureau of usance is the judicature-collecting arm for import taskation. (Cuevas et al., 2012)Procedure of TaxationTaxation is legislative in character. As such, all tax measures emanate from the Congress. The support of Representatives enact revenue enhancement bills. consequently it goes to the Senate. Then to the joint conference committee and finally, to the Malacaang castling for the Pre inclinents approval or in few instances, veto.Once the tax measure is approved and published in the official gazette, it becomes a law. It is then forwarded to the tax array agency have-to doe with for instrumentation. Normally, the concerned agency drafts an implementing guide grapevine for the guidance of the line personnel whol get out actually implement the law to ward off whatever viable misinterpretation of its implementation.The tax measure usually provides for sanctio ns and penalties for violators. Principal violations include tax outflow and tax rid ofance. (Cuevas et al. 2012) Sound Taxation frameA sound taxation system should have fiscal Adequacy, Administrative Feasibility, fairness and consistent and compatible with the nations economic direction. The level of taxes tranquil should be sufficient enough to fund authorities operations and projects. A tax sight that is less(prenominal) than sufficient depart take in fiscal dearth that can tend ostentatiousness. Taxation laws should be easy to understand that the existing personnel and an some other(prenominal) 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 range, and those with low income should either be exempted from taxes or pay negligible amounts of taxes. The establishments tax collection efforts should b e collateral of the economys short- and long-term plans. (Cuevas et al., 2012)EquityRecently, the common officials have been confronted with allegations of corruptions and in economic democrat schemes. To fix a few, the PDAF scam, DAP scam, political grandstanding to puzzle down 2016 election potential rivals, the supposed overpricing of Makati City parking dance orchestra and the 700 one thousand million Iloilo convention center. These facts combined with unforgiving tax collection campaign has resulted to negative sentiments more or less the equit capacity of taxation in the country. The tax being impose by the presidency is as well as frequently. They even want to tax us my sari-sari store. The mere 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. state by a sari-sari store owner in Del Pilar, Castillejos. My take home pay is cut into half because of the deduct ions and tax imposed to us. My gross salary, to be honest is not enough, then they exit deduct us (tax and contributions) and you will start out out from the media that our taxes were subvert by a syndicate in the government said by a college instructor in Gordon College.People serve to IncentivesAn incentive is something that induces a person to act, such as the prospect of a penalization or a reward. Because rational people make decisions by comparing be and benefits, they respond to incentives. Incentives are crucial to analyzing how market work. For example, when the price of an orchard apple tree rises, people settle to eat fewer apples. At the same, time, apple orchards decide to hire more workers and harvest-home 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 forget about incentives Many policies miscellanea the bes or benefits that people fount and, therefore, alter their behaviour. A tax on gasoline, for instance, encourages people to drive smaller, more burn down high-octane cars. (Mankiw, 2013)Fiscal drawFiscal pass happens when the governments cyberspace fiscal position ( using up minus taxation) fails to cover the net savings desires of the underground economy, besides called the non unrestricted economys pass gap (earnings minus spending and undercover investment). The resulting lack of aggregate need leads to deflationary pressure, or drag, on the economy, essentially collect to lack of state spending or to excess taxation. One cause of fiscal drag may be bracket creep, where progressive taxation attachs automatically as taxpayers move into higher tax brackets receivable to inflation. This tends to mode grade inflation, and can be characterized as an automatic stabilizer to the economy. Fiscal drag can too be a result of a hawkish stance towards government finances. (ww w.wikipedia.org)Bracket creep describes the process by which inflation pushes nominal wages and salaries into higher tax brackets. Many progressive tax systems are not change for inflation. As wages and salaries rise in nominal price under the influence of inflation they become more highly taxed, even though in real terms the foster of the wages and salaries has not change magnitude at all. The net effect is that in real terms taxes rise unless the tax rates or brackets are modify to compensate. (www.wikipedia.org)Supply-Side Effects of Fiscal PolicyThe changes in tax rates, particularly marginal tax rates, affect aggregate supply by their impact on the relative attractor of productive activity in proportion to leisure and tax avoidance. Supply side tax cuts are a long-term growth-oriented strategy that will eventually increase both SRAS and LRAS.Keynesian ModelKeynesian economics was developed by the British economist John Maynard Keynes during the 1930s in an attempt to un derstand the Great Depression. Keynes advocated increase government expenditures and lower taxes to stimulate demand and pull the global economy out of tGrohe Depression. Subsequently, the term Keynesian economics was utilize to refer to the concept that optimal economic performance could be achieved and economic slumps prevented by influencing aggregate demand by means of activist stabilization and economic intervention policies by the government. Keynesian economics is considered to be a demand-side theory that focuses on changes in the economy over the short run. (www.inves overtakeedia.com)herd-out ModelCrowding out is a kind of expansionary fiscal policy, reduces investment spending. The increased acceptation crowds out private investing. Originally, crowd out was relate to an increase in interest rates from the borrowing, but that was broadened to multiple channels that business leader leave total output shrimpy 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 reducing in tax revenues leads to a deficit that is financed by increased borrowing, then the borrowing can increase interest rates, leadership to a reduction in private investment. There is some controversy in modern macroeconomics on the subject, as different schools of economic thought differ on how households and financial markets would react to more government borrowing under various circumstances. (Tyson, 2012)The Benefits doctrineThe benefits rule states that people should pay taxes establish on the benefits they receive from government services. This doctrine tries to make mankind goods similar to private goods. It seems fair that a person who ofttimes goes to the moving-picture shows pays more in total for movie tickets than a person who rarely goes. Similarly, a person who gets great benefit from a public good should pay more for it than a person who gets little benefit. The benefits belief can also be utilize to argue that smashed citizens should pay higher taxes than poorer ones simply because the wealthy benefit more from public services. For example, the benefits of patrol force protection from theft.Citizens with oft to protect benefit more from police than do those with less to protect. Therefore, according to benefits principle, the wealthy should contribute 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, matter defense, and the court 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 king-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 t he claim that all citizens should make and equal open 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 tang nilang kuhanan ng tax. Yung simpleng pambayad nga lang ng business licence ang hirap na eh. Gusto ata nila paratrooper sa kanila magtrabaho. C it is the life blood of the government D The specie extorted from productive people to overgorge the govt bank accounts. F Kaltas sa sahod. 336 na lang babawasan pa nila G It is the money equanimous by the government from its citizens2. What do you pretend is the purpose of taxation?A check bit 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. Some economists say that taxation reallocates wealth from the rich to the poor because of the p rogressive taxation system that we have. D The purpose of tax is to fund public necessities, services and improvements inevitable by all citizens with no warp to their status in society. F para sa mga projects ng gobyernoG For the general eudaemonia and protection of the countrys citizens and for the learning of the economy.3. For you what is equitable 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 type of taxation uses the nonrecreational capability of the taxpayer as a basis on how more than 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 have about our countrys economic outlook?A Sabi nila tumataas daw economic growth ng pilipinas pero di ko masyadong ramdam.D Asean economic is on hype right now and will eventually peak later 15 or 20years if no war will occur. Philippine econ is growing by champion digit but the market per industry per capita is growing double digits faster than issue econs totality. It is safe to say that now is the beat out time to invest in ph market.8. Are you satisfied on how the government provide its services to the public? wherefore? A di masyado satisfied, wala pa ding nakikitang improvement. D Yes. There are many improvements on public services. The but problem is the public is not well aware of those improvements and how they can utilize it. G No, I ideate priorities are not being justly set and attended to.9. For you what is the most efficient tax rate?A Dahil medyo hussy 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. entirely Ill answer question 9. As other questions can be answered through interment and books. The most efficient tax system is the flat tax. I protrude a 10 % flat rate across the board. This most fair and efficient of all. Done in more than 43 countries and by the most successful ones. amuse research on my interviews. Just google my name and flat tax. Youll find all you need for this issue. Thanks F 10%G less than 30%V. Discussion to the highest degree of the respondents agree that an equitable tax system should ask 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 funding 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 plant his crops if he knows that it will be stolen in the morning, then economic productiveness 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 agree that the situation is already inequitable. The tax bracket thus should be adjusted accord ing to the salaries of the taxpayers. All of the respondents does not at once uses accounting services for the fact that it may be costly for the since they are in the middle class.Value for your money, the government must(prenominal) make their taxpayers feel that they get nurture from the money (tax) that they pay. A customer who matte that he/she did not get the value for his money will not recidivate to that restaurant, store or any other business establishment. The same goes with taxpayers they will avoid paying taxes if they feel that it will only be corrupted by public officials. The computation for the most efficient tax rate would be very touchy since it entails factors such as inflation, purchasing power, income, unanimity with economic direction and a lot more, which are varying from a daily or weekly basis. If the tax rate was set too low, administrative feasibility would be impossible and if the tax rate was set too high it would be consficatory which is unc onstitutional and will lead to tax evasion.VI. ConclusionA good taxation system should provide an appropriate level of revenue on a punctual basis, distribute the cost of taxation fairly, leaven economic growth and efficiency, be slowly administered and ensure accountability. People will avoid paying taxes if they feel that the taxes imposed are confiscatory in nature and this in looseness reduces the tax base. The inequity of the tax system negates the command of the Constitution. The endless complains of the middle class towards the strict 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 budget deficit still bloated from 197.8 trillion in 2011 to P235 B.The Philippines, with the current taxation system, is evermore on budget deficit. And these year after year deficits inclu des 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. hard 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 cash flow in the economy, allow 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 another one is profiting and through gain is where the government gets its taxes. Unlike if taxes are corrupted and stored into secret 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 rate and change magnitude the tax bracke t ceiling will initially lower tax collection but will increase it by the next year or devil because the tax base will enlarge.BibliographyBooksAbola, Victor, Villegas, Bernardo, (2001). political economy An Introduction. Pasig City, Philippines Inkwell publish 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 Learning Asia Pte Ltd (Philippine Branch). McCaCandless, G.T. (1991). Macroeconomics theory. New Jersey harpist and Row.InternetFiscal drag. (2014, April 16). Retrieved from Wikipedia.org. October 10,2014. Fiscal Drag Definition Investopedia. (n.d.). Retrieved October 10, 2014.