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Thesis Larz Luza
Thesis Larz Luza
Thesis Larz Luza
This thesis entitled “THE EFFECTIVENESS OF TAXATION IN SMALL SCALE BUSINESS IN PULILAN
MARKET” prepared and submitted by Anna Mariela A. Cruz, Jallene D. Espino, Rudy S. Maestre, Chaser
Jane R, Mutas, and Juliena E. Ramirez in partial fulfillment of the requirements for the degree of
BACHELOR OF SCIENCE IN ENTREPRENEURSHIP has been examined and recommended for oral
examination.
Evaluation Committee
Mercedita C. Mag-isa
Adviser
APPROVAL
Approved by the Panel on Oral Examination on March 2018 with the grade of _____.
Approved in partial fulfillment of the requirements for the degree of Bachelor of Science in
Entrepreneurship
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 1
The thesis entitled “THE EFFECTIVENESS OF TAX IN SMALL SCALE BUSINESS IN PULILAN
MARKET” prepared and submitted by Anna Mariela A. Cruz, Jallene D. Espino, Rudy S. Maestre,
Chaser Jane R. Mutas, and Juliena E. Ramirez in partial fulfillment of the requirements for the degree
oral examination.
Evaluation Committee
Mercedita C. Mag-isa
Adviser
APPROVAL
Approved by the Panel on Oral Examination on March 2019 with the grade of ____.
Approved in partial fulfillment of the requirements for the degree of Bachelor of Science in
Entrepreneurship
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 2
CERTIFICATION OF ORIGINALITY
This is to certify that the research work presented in this thesis entitled “THE EFFECTIVENESS OF
TAXATION IN SMALL SCALE BUSINESS IN PULILAN MARKET” for the course ENMA 4073 Thesis
Writing at the Polytechnic University of the Philippines embodies the result of original and scholarly
work carried out by the undersigned. This thesis does not contain words or ideas taken from published
sources or written books that have been accepted as basis for the award of a degree from any higher
education institution, except where proper referencing and acknowledgement were made.
ESPINO, JALLENE D.
RAMIREZ, JULIENA E.
MAESTRE, RUDY S.
Researchers
March 2019
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 3
ACKNOWLEDGEMENTS
This study could not have been conducted and completed without the genuine
To Prof. Mercedita Mag-isa , our thesis adviser, who has been unselfishly exerting
effort in sending email to the researchers whenever they have queries about the
thesis writing, for giving assistance and guidance in completing the research and to
persevere more.
To our college dean, Ma. Elena Maño for guiding us through the process of making
To Maestre Family, for allowing and letting the group to stay in their house while
To our friends, who helped and provide us more information to improve this research
To our family, for the continuous support, understanding, and giving us an inspiration
Most of all, to our Almighty God, the source of knowledge and wisdom, and whose
guidance, good health and bountiful graces have enabled the researchers overcome
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 4
the challenges and endure the hardships and trials we encountered during their
studies.
ABSTRACT
Year: 2018
TABLE OF CONTENTS
CERTIFICATION…………………………………………………………………………. ii
ACKNOWLDEGEMENTS ………………………………………………………………. iv
ABSTRACT ………………………………………………………………………………. v
Introduction……………………………………………………………………….
Statement of the Problem ………………………………………………………
Theoretical Framework …………………………………………………………
Conceptual Framework ………………………………………………………..
Scope and Limitation of the Study …………………………………………...
Significance of the Study ………………………………………………………
Foreign Literature………………………………………………………………..
Local Literature……………………………………………………………………
Foreign Studies ………………………………………………………………….
Local studies ……………………………………………………………………..
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 6
Summary ……………………………………………………………………
Findings …………………………………………………………………….
Conclusion ………………………………………………………………….
Recommendations ………………………………………………………...
BIBLIOGRAPHY …………………………………………………………………….
APPENDICES ………………………………………………………………………..
Chapter 1
This chapter present the introduction, background of the study, conceptual framework,
statement of the problem, hypothesis, significance of the study and its scope and
limitation.
Each year business runs into tax problem that can easily be avoided. It is
important for business owners to understand every tax law that affects their
enterprises. Failure to do can result in the organization being levied penalties and
Introduction
country by their government. In almost all countries tax revenue is the major source
of financial for public. Taxation has not always been the chief source of revenue for
government. The two primary objectives of every business are profitability and
solvency.
Small businesses include both self-employed sole traders, who are taxed as
individuals, and small incorporated firms, which are taxed as companies. Many
economic activities could be carried out either by an employee working for a company
example, the owner-manager has considerable discretion over the way in which he
derives taxable income from the firm. If the tax treatments of income in the form of
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 8
wages and income in the form of distributed profits are substantially different, the tax
system is likely to have a significant impact on the ways in which small business
This may also favor more economic activity being undertaken by small firms
and less activity being undertaken by employees of larger firms, who cannot reduce
their tax liabilities so easily. Avoiding these kinds of inequities and distortions will
again require appropriate alignment of personal and corporate tax rates. Smaller firms
higher costs of tax compliance, relative to their size, and the scale of this
disadvantage will tend to increase with the complexity of the tax system.
This chapter addresses a focused set of structural issues concerning the way in
which small, owner-managed businesses are taxed. This may sound limited, but in
fact these issues are highly complex and pervade the design of the entire tax system.
They affect the interaction between taxation of income from labor and that of income
from capital.
its administration and compliance: the higher the tax rate is, or the greater the efforts
to fulfill taxation requirements are, as well as to check how those requirements are
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 9
met, the lower the initiatives are for SMEs to perform well. Therefore, maintaining the
tricky balance between tax rates, compliance costs, tax administrating and economic
The need for this objective is because much is expected from individuals from
material production, high per capital income, and the production of industrial raw
materials.
It is generally agreed by many that the way out of the problem of economic
is faced with three (3) major business decisions to make every day as far as finance is
concerned. Investment, financing and dividend decisions are the major decisions firms
have to tackle every day in order to survive. These decisions are greatly influenced by
handled with care as the financial position of every business organization will definitely
be effected based on how tax matters are managed. The ability of an organization to
effectively and efficiently employ various techniques to avoid and reduce tax burden is
therefore important for financial managers and accountants to apply efficient legal tax
liabilities are efficiently managed, more revenue generated by the organization will be
invested in other areas of the business to speed up growth and expand the business.
Conceptual Framework
studies.
The Conceptual Framework was use in research to outline the problem and the
promotion need of our content. The researcher uses the Theoretical Framework of the
1. Profile of the
respondents to
describe in terms
of: The researcher The effectiveness
distribute a of tax in small
Sex
questionnaires to scale businesses in
Age the chosen Pulilan Bulacan
respondents;
2. Factors that
affect tax in small
scale businesses.
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 11
Hypothesis
The focus of our research is to address the factors that contribute to the
effectiveness of tax in small scale business in Pulilan Bulacan. It will help owners to
3. How these factors affects the Effectiveness of Tax in Small Scale Businesses
Without taxes, governments would be unable to meet the demands of their societies.
Taxes are crucial because government collect this money and use it to finance social
projects.
• Health
• Education
Education could be one of the most deserving recipients of tax money. Governments
• Governance
governance would have far reaching ramifications on the entire country with a heavy
toll on its economic growth. Good governance ensures that the money collected is
utilized in a manner that benefits citizens of the country. This money also goes to pay
public servants, police officers, and members of parliaments, the postal system, and
others. Indeed, with a proper and functioning form of government, there will be no
This study will be a significant endeavor in giving ideas on how to manage tax
properly. The researchers as future business owners it serves as their guide on how
we can handle our own taxes in near future. It would enable the government to do
reforms to the tax rates in supporting small business. The study will also useful to
other manufacturing companies having taxation difficulties. The study when carried
out will also be of great benefit to student researchers who have interest in
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 13
researching more into taxation. It will act like a guide to student researchers who may
find the recommendation and findings of the study when completed useful.
This research study is focused on the factors that can help to get real picture
how taxation can affect small business. Decisions of an organization, the researcher
will make use financial statement in Pulilan, Bulacan. This study was conducted to the
selected area of small enterprises in Pulilan. To know the factors that contribute to the
The study of Small Business in of great importance to economic growth. It will links
small business with economic growth. That is the theoretical framework lining.
The study tried to highlight the role of small business for natural development, beside
it, the study will try to provide some basic knowledge of the small business owner the
Definition of terms
Aggregation – Term used to denote the adding together of the tax payer’s income
from all sources in order to determine the applicable tax rate for income tax purposes.
Amortization – Process of writing off the cost of an intangible asset over its useful
life.
more persons, called arbitrators, who are chosen by the parties and who normally do
Chapter 2
Presented in the chapter are foreign and local literatures and studies that
would be of great help in the pursuit of this undertaking. This helped the researchers
Foreign Literature
According to Oliver Wendell Holmes (2017), tax is what business owners paid
for a civilized society. Governments need sustainable funding for social programs and
achieve a common goal of a prosperous, functional and orderly society. And they
that often receive large amounts of external assistance to help meet their needs.
Taxation not only pays for public goods and services; it is a key ingredient of the
social contract between citizens and the economy and thus key to building an effective
government. How taxes are raised and spent shapes the legitimacy of governments
All governments need revenue, but the challenge is to carefully choose not only
the level of tax rates but also the tax base. Governments also need to design a tax
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 16
compliance system that will not discourage taxpayers from participating. Recent firm
surveys in 147 economies show that companies consider tax rates to be among the
top 5 constraints to their business, and tax administration to be among the top 11.
Firms in economies that rank better on the ease of paying taxes tend to perceive both
responsible for collecting as well as for remitting taxes (Christensen et al., 2001). They
are, hence, important players in a country’s tax system. Though the evidence is not
unequivocal (e.g. Hanlon et al., 2007; Rice, 1992) most research suggests that small
business owner-managers are more likely to cheat than other groups of taxpayers
(e.g. Joulfaian and Rider, 1998; Kirchler et al., 2006; Schuetze, 2002). Even the
estimates that only half of corporate non-compliance is detected (Webley, 2004), and
that tax audits are generally a costly matter. Increasing voluntary compliance among
is likely to be an important topic for small business owners, the actual experience of
paying taxes and small businesses’ tax behaviors have received surprisingly little
attention in the small business literature. For example, when searching the
International Journal of Entrepreneurial Behaviour and Research for the term “tax,”
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 17
there are 53 hits but only two articles deal directly with tax behavior (Rothengatter,
2005; Williams, 2005). Many other hits constitute predominantly qualitative research
paper reviews the empirical literature on the impact of company taxes on the
studies by computing the tax rate elasticity under a uniform definition. The median
value of the tax in the foreign literature is around 3.3 (i.e. A 1%-point).
Local Literature
individuals. If you are registered as an individual taxpayer, you are either employed (or
(other than marginal income earners or those earning less than Php 100,000 annual
regulatory board or body. These exclude those who are earning purely from
certified public accountants, architects, engineers, and the like. Although freelancers
may not have professional licenses under a regulatory body, as in the case of
bloggers, web developers, graphic designers, writers and other people who provide
Revenue said owners of small “sari-sari” (variety) stores, farmers, fishermen, single-
unit tricycle operators and other marginal income earners (MIEs) are still liable to pay
tax.
In one of its latest circulars, the BIR reminded concerned individuals that while
MIEs have been enjoying certain privileges under the law, they must still comply with
Under Revenue Memorandum Circular No. 7-2014, the tax authority states that MIEs
are liable to pay the income tax, but are exempted from the value-added tax and from
issue receipts. MIEs are defined in the circular as individuals who are self-employed
and earning not more than P100, 000 in any given 12-month period. Their incomes
are considered mainly for subsistence. Besides the ones mentioned above, MIEs may
They exclude licensed professionals, sales agents, brokers, artists and other
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 19
professionals whose incomes are subject to withholding tax. The issuance of the
circular was part of the BIR’s tax campaign, under which it aims to plug leakages from
In a complementary circular, No. 8-2014, the tax authority said individuals who have
claimed to have exemptions from certain taxes should secure certification from the
BIR for such exemptions. Without certification of exemption, the BIR said, concerned
“The tax exemption certificate or ruling must explicitly recognize the grant of
exemption, as well as the corresponding exemption from withholding tax,” the BIR
“Failure of the taxpayer to present the said tax exemption certificate shall subject him
to the payment of appropriate withholding taxes due on the transaction,” the BIR
added.
The tax authority added that enterprises tasked to withhold certain taxes on
purchases by their clients ought to do so unless certification has been presented. The
BIR said those failing to withhold taxes as prescribed by the Tax Code would be
meted penalties.
The BIR, which accounts for at least 60 percent of the national government’s
collection although it was seen to have fallen short of its target of P1.253 trillion.
According to rough estimates, the government loses about P450 billion a year due to
tax evasion.
Claire Jiao of CNN Philippines (2018) stated that Micro, small and medium
enterprises (MSME) are the biggest winners in the government's tax reform program,
according to new research by several firms. Experts said the most important change
was the raising of the tax threshold from 1.5 million to 3 million. MSMEs with gross
sales below the threshold can opt to pay a flat tax of just 8% instead of paying the
This change makes the tax system "simpler and more favorable" to entrepreneurs, a
According to its simulation, entrepreneurs earning up to P1.5 million annually will see
The change is even more significant for those earning between P1.5 million and P3
million a year — the newly tax-exempt. Their disposable incomes are expected to
jump by 27-28.2%.
Even though consumer prices are expected to go up because of higher taxes on fuel
and coal, Chinabank Securities said inflation will still be outpaced by the rise in
entrepreneurs' income.
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 21
For those earning up to P1.5 million annually, inflation will not erode their income
gains until 2021. For those earning between P1.5 million and P3 million, they have
Tax consultancy Abrea Consulting Group, meanwhile, said that even if MSMEs
don't avail of the 8% flat tax, they will still benefit from the overall lowering of income
tax rates.
Under the Tax Reform for Acceleration and Inclusion (TRAIN) law, all income
P250, 000 and below will be exempt from tax. Tax rates were also lowered for most
In a sample case, Abrea Consulting Group showed that a typical sari-sari store
(mom and pop shop) making P500, 000 in gross sales a year would have to pay
P52,500 in taxes under the old rules. With the new rules, the store's tax bill will go
down to P25, 000 using the lower income tax or P20, 000 using the flat tax.
"They'll be saving at least half of what they're paying right now," Abrea Consulting
Group President Mon Abrea said in an interview on Monday. "So that's really good tax
relief for our small businesses." Many factors affect entrepreneurship creating the so
certain profession, local and global market opportunities, access to funding and
finance, the role of universities and of education and training as catalysts, the function
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 22
of mentors, advisors and support systems, the attitude, skill and human capital of the
workforce.
Foreign Studies
small business owners with employed taxpayers and found that they did not differ in
subjective probability of being caught for tax evasion; preference for aggressive tax
planning; cooperation with and resistance against tax authorities; attitudes towards
equity issues; personal norms of tax honesty; tax morale; and the level of admitted tax
evasion. In line with these findings, a scenario study showed no significant differences
in terms of hypothetical tax compliance between fiscal officers, business lawyers, and
stronger imbalance between their own tax burden and state refunds; they feel a
slightly higher subjective tax burden; and they feel they benefit much less from
governmental benefits than other groups of taxpayers (Kirchlerand Berger, 1998). Not
surprisingly, small business owners were also shown to holdless favorable fairness
Adams et al., 1996) fairness. Other studies add to that picture by showing that small
business owners hold different mental representations of taxes than employed people.
For the self-employed, the stimulus word “tax” tends to elicit thoughts of tax
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 23
complexity and the limitations that taxes impose on a business. For the employed,
“taxes” are often associated with a necessary burden and considerations of justice
programs, their commitment to values associated with security for the community and
nation was even higher (Ahmed and Braithwaite, 2005).Importantly, experiences with
and competence in tax matters differed significantly between small business owners
and all other groups of taxpayers (Ahmed and Braithwaite, 2005): small business
signaling that this group is particularly likely to be audited due to its unique exposure
to the tax system. As a consequence, small business owners may attest more power
to tax authorities and report that they lack competence and autonomy in dealing with
Another related study was conducted by Sandford and Hasseldine (1992) is the
context. Prior to their study, the Consultative Committee on Tax Simplification (The
Waugh Committee) had proposed different ways in which the tax laws could be
simplified (Tax Simplification Consultative Committee, 1990). This led to the funding
for the study of Sandford and Hasseldine (1992) from the Inland Revenue Department
(IRD). The purpose for their study was to evaluate the compliance costs of the tax
follow-up studies in the future. The authors used two separate mail surveys to collect
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 24
their data on the costs of compliance. One of the surveys collected data on the costs
related to the employers, such as pay-as-you-earn (PAYE), fringe benefit tax (FBT)
and other withholding taxes on employees’ income. The other related to goods and
approximately $1,882 million, which was made up from 46.5 million hours of time
spent and costs of over $600 million paid for external advisers fees as well as other
various costs. Theaverage compliance cost associated with the smallest sized
business group (turnover less than $30,000) was equivalent to 13.4 per cent of the
This compared to the equivalent of 0.03 per cent of turnover (or $59,404) for
the largest business group (turnover more than $50 million). Sandford and Hasseldine
(1992) found evidence to suggest that compliance costs of business taxation are
regressive, both individually to each tax and collectively for all taxes.
burden of taxation on SMEs (Colmar Brunton, 2005). This study found that the
average amount of time a business spent per year on internal tax activities was
approximately 76.7 hours, with the most time spent complying with GST, then followed
by income tax requirements. The average combined compliance cost (internal and
external) on SMEs was $4,024.10 The compliance cost for the smallest businesses
explored in thier study (turnover of up to $19,999), was 21 per cent of the firm’s total
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 25
Colmar Brunton’s findings show that the compliance costs were regressive; this
is not only consistent with Sandford and Hasseldine (1992), but also shows that the
regressivity had not been reduced over the 10 year period, and in fact showed an
increase. The follow-up study, Inland Revenue (2010), found that average combined
compliance costs had risen in nominal terms to $5,557.11 When compared to the
2004 study (Colmar Brunton, 2005), compliance costs actually decreased by 1.3 per
cent (adjusted for inflation), primarily as a result in the reduction in the total amount of
time spent on tax compliance activities. This finding was unexpected due to the
additional hours needed to comply with KiwiSaver, 12 and additional student loan
No definitive answer could explain this decrease, but Inland Revenue’s researchers
hypothesis that: differences in the SME demographic characteristics, the impact of the
collectively) could have had an effect on the result. While there has been an overall
Gupta and Sawyer (2015) conducted the most recent investigation into the
larger international project including Australia (Lignier & Evans, 2012) , South Africa
(Smulders, Stiglingh, Franzsen, & Fletcher, 2012), the UK (Hansford & Hasseldine,
2012), Ireland, Canada and the US. While the parameters of the study were kept in
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 26
line with the larger international comparisons, limited comparisons can still be made
with the earlier New Zealand studies (Colmar Brunton, 2005; Inland Revenue, 2010).
Gupta and Sawyer’s study finds that the average total amount of hours spent on tax
compliance activities was 479.17 per year, with GST contributing to more than half of
the total time spent. This contributed to an average combined cost of compliance of
$31,096. This figure was comparatively larger when compared against prior studies
(Sandford & Hasseldine, 1992; Colmar Brunton, 2005; Inland Revenue, 2010). The
authors were unable to explain such a difference in the result. Furthermore, Gupta
and Sawyer (2015) reaffirm that compliance costs continue to be regressive based on
business size.
Local Studies
firms pay only 2% income tax. More than a third of the country's largest corporations
are paying only two percent in income tax every year despite high profits, a practice
Revenue's (BIR) Large Taxpayers Service (LTS) paid only the minimum corporate
income tax (MICT) of two percent, according to the National Tax Research Center
(NTRC).
This resulted into P3.3 billion taxes collected from them in 2014, the study titled
"Revenue Performance of the BIR Large Taxpayers Service: 2006-2015" said. Among
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 27
others, LTS includes those with annual gross sales of P1 million and net worth of at
"A number of (large taxpayers) despite being classified as such reported net losses
caused by their declared (cost of sales) that almost eat up their entire net
"With a very low tax base (i.e. gross income), the computed tax is likewise low," it
added.
Under the National Internal Revenue Code, the two-percent MICT is paid by
corporations which have zero or negative taxable income beginning from their fourth
year of operations.
"It was meant to ensure that corporations contribute to the government since it was
said that they are benefiting despite operating at a loss," said Lina Figueroa, tax
"There was an observation back before the 1997 tax reform that corporations who
have been at a loss still continue to operate anyway," she said in a phone interview.
Of the 518 LTS members, NTRC said 452 incurred zero or negative taxable income in
This was computed after all deductions were made, which the study showed 87.5
Of that figure, 80 declared 100 percent of their net income as cost-of-sales, leaving
none for tax base, while 510 others deducted 80 to 99 percent "leaving very minimal
gross income.”
Most deductions came from salaries and allowances, cornering 19 percent, followed
by advertising and promotions (10.5 percent), interest (7.3 percent) and rental costs
(6.5 percent).
The Philippines is not the easiest country to pay taxes in, according to a study
Out of 189 economies reviewed in the report called “Paying Taxes 2015” for ease of
In the country, it takes 193 hours for a business to comply with 36 required payments,
according to the PwC study. On average, a Philippine employer pays 42.5 percent in
taxes and contributions, 6 percent above the average tax rate in the Asia Pacific
region.
Sen. Francis Escudero, citing the study, said the Philippines has one of the most
tedious processes for paying taxes in the world and holds the highest income tax rate
in Asia.
“Where else will you find a country that taxes its people severely and then makes it
Escudero further pointed out that the Philippines is three ranks above Sierra Leone
“In fact, it’s even easier to pay taxes in Iraq, Iran and Afghanistan. What does that say
The PwC study is completed annually and is included in the World Bank Group’s
“Doing Business” project. It attains its findings by assessing the length of time it takes
mid-sized companies to prepare, file, and pay its taxes; the number of taxes a
business must pay; the method of payment; and the total tax liability as a percentage
On Monday, Oct. 19, the Malacanang said it would continue working to simplify the tax
paying process.
The government, through the Bureau of Internal Revenue, is taking measures to make
Simplifying taxes in the Philippines is key to sustaining the stability and growth it has
attained in the last five years, said Steve Forbes, chair and editor-in-chief of Forbes
Neighboring Asian nations ranked significantly higher than the Philippines, including
Hong Kong and Singapore, which ranked fourth and fifth with three and five tax
payments, respectively.
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 30
“How can we encourage investors to come and put their money here when a third of
The senator urged Filipinos to make tax reforms an election issue so more leaders
would back legislative efforts to amend the Tax Reform of 1997, according to
InterAksyon.
“Everyone is now singing the same tune, even those who were hesitant to support us
in the past. And that’s fine. The important thing is to let this campaign for tax reforms
sustain economic growth,” he said. United Arab Emirates and Qatar tied for the top
spot on the list, requiring four payments that could be completed in 12 hours and 41
hours, respectively.
Bolivia ranked last among the 189 countries, with its tax procedure requiring 42
CHAPTER 3
Research Methodology
This chapter contains the measure of the research used, the population, the
To utilize the study, the descriptive research method was used. The
respondents of the study were the owners of small business enterprises in Pulilan
Market, who were the taxpayers. The researchers used the survey questionnaire to
gather data.
Research Method
This method enables the researchers to interpret the theoretical meaning of the
findings and hypothesis development for further studies. Specifically the researchers
difficulties in answering the questions required for the researchers to have information
For the researchers to be able to find out the factors affecting owners they
used a questionnaire survey and look for the majority answers that will be converted
to percentage. The result was analyzed by the researchers to see the relationship of
both variables. The researchers make a questionnaire about the factors affecting
owners in taxation, the method used by the researchers is both quantitative and
The result of the students respond will be accurately computed and getting the
percentage of each.
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 33
small business with innovation and creativity were test Questionnaire were
owner. The entrepreneur and business owner were sampled alone altogether for the
Respondent 4 3 7
Respondent 8 12 20
Respondent 1 2 3
Respondent 10 10 20
TOTAL 23 27 50
This table shows the respondents in our study. There were 25 males and 25
Research Design
The research design that the researchers used was descriptive design. We used
This study focus on the effectiveness of tax in small scale businesses in Pulilan
Bulacan.
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 35
Chapter 4
This Chapter presents, analyzes and interprets the data gathered out of the
instruments used in the study presented according to specific problem. This is the
each of problem.
This chapter will draw upon the main themes and present the findings which
arose out of the interview process and subsequent data analysis. First and foremost, a
Table 1
Male 23 46%
Female 27 54%
Total 50 100
Table 1 reveals that out of 50 respondents, 23 or 46% are male and 27 or 54% are
female. It may imply that there are more female who are owning a small business in
Pulilan than male. As we can see most of the female respondents are engaged in
Table 2
18 – 25 years old 2 4%
56 – 65 years old 2 4%
66 and above - -
Total 50 100
Table 2 shows that out of 50 respondents, 36 to 45 years old with the total of
who own a small business that pays taxes followed by 26 to 35 years old with
respondents, and lastly both 18 to 25 years old and 56 to 65 years old with 2 or
4% of the respondents with the lowest number of small business owners. This
ages 36 to 45 years old has the large contribution in paying taxes among the
respondents.
Table 3
“Types of Business”.
Partnership 5 10%
Corporation - -
Total 50 100%
Partnership with 5or 10% respondents have a partners in managing their small
business.
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 39
Table 4
Education”
Elementary 15 30%
Secondary 28 56%
College 7 14%
Master or Higher - -
Total 50 100%
educational level. The chart above represents the highest percentage which is
Table 5
Yes - -
No 50 100%
Total 50 100%
Table 5 shows that out of 50 respondents who own and manage small business, 50 or
Finance Sector.
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 41
Table 6
Is Tax Avoidance a
Frequency Percent
Large issue?
Yes 16 32%
No 34 68%
Total 50 100%
Table 6 presents the frequency and percent distribution of respondents in terms of tax
avoidance being a large issue, among the 50 respondents, 34 or 68% of them thinks
that tax avoidance is not large issue while the 16 or 32% of the respondents think it is.
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 42
Table 7
Agree 35 70%
Disagree 15 30%
Total 50 100%
Table 7 presents that among 50 respondents, 29 or 58% agreed that companies have
an active duty financially in supporting the country they reside in while the 21
Table 8
Agree 32 64%
Disagree 18 36%
Total 50 100%
64% of the respondents agreed that if they were given a chance as a taxpayers
they would consider the relocating of tax purposes while the 18 or 36 % of the
respondents disagreed.
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 44
Table 9
indirect taxes?
Yes 13 26%
No 37 74%
Total 50 100%
the knowledge of respondents between the differences of direct and indirect taxes. 37
or 74% of the respondents answered “No” which means they do not know the
differences between direct and indirect taxes while the 13 or 26% of the respondents
Table 10
Status
Single 12 24
Married 38 76
Total 50 100
Table 10 shows that out of 50 respondents, 38 or 76% of the respondents are married
and 12 or 24% of the respondents are single. It may imply that people who are
married have a higher number of people who own and manage small business than
Chapter 5
This chapter of the stated in concise from the findings based on the analysis
and interpretation of the data gathered out of the research instruments used and
is presented and such solutions to the problem were passed on the form of
recommendations.
SUMMARY
This study aims to determine the factors of the effectiveness of Tax in Small
Scale Business in Pulilan Market. The profile of respondents in terms of age shows
that out of 50 respondents 36 to 45 years old with 28 or 56% of the respondents are
Pulilan Market, followed by 26 to 35 years old with 11 or 22% of the respondents, and
2 or 4% of the respondents. This implies that most small business owners in Pulilan
Market are ageing 36 to 45 years old. The profile in terms of sex shows that there are
more female in the field of business than man. Among 50 respondents, 45 of them are
sole proprietors and the remaining 5 are in partnership business. The survey shows
the level of education of the most respondents is secondary or high school level with
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 47
small business owners do not have an experience in Finance Sector. During the time
of distinguishing questionnaire, they were asked if tax avoidance is a large issue and
respondents are avoiding paying their taxes. Respondents were also asked if they
think that companies have an active duty in supporting financially the country and 70%
of the respondents agreed that companies have a bigger role in terms of financial
support, through paying taxes, to the economy of the country. In the survey that
respondents agreed that if they were given a chance as a taxpayers they would
disagreed. In terms of the knowledge of regarding to direct and indirect taxes only 13
out of 50 respondents know the difference between the two. Out of 50 respondents,
38 or 76% of the respondents are married and 12 or 24% of the respondents are
single. It may imply that people who are married have a higher number of people who
own and manage small business than people who are single. The highest number of
business owners in Pulilan Market is ranging 36 to 45 years old and most of them are
sole proprietor that does not have an experience in Finance Sector. Out of 50
respondents, 34 think that tax avoidance is not a large issue but this also implies that
they know the effectiveness of tax because when they were asked if they were given a
Findings
Majority of the respondents were 36 to 45 years old and mostly were female 27
or 54% while male are 23 or 46% owning and managing a small scale business in
Pulilan Market. Out of 50 respondents 45 or 90% of them are single proprietor and 38
Conclusion:
small scale business owners in Pulilan Market. On the profile of respondents, among
the owners of small business most are in the age ranging 36 to 45 years old. These
respondents are one of the 16 people who think that tax avoidance is a large issue.
secondary level and do not have an experience in any finance sector. Also during the
time of distinguishing the questionnaire, 74% of the respondents lack the knowledge
about taxation. This could be the reason why businessman in Pulilan Market thinks
Recommendations:
taxes
2. Non-taxpayers lack the knowledge of what is the purpose of taxes and how it
4. The study shows that 68% of the respondents in Pulilan Market thinks that Tax
Avoidance is not a large issue. Conducting a seminar to educate may help the
respondents.
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 50
Bibliography
CNN Philippines (2018) Small businesses are big winners in tax reform [online]
Available from: http://cnnphilippines.com/business/2018/01/08/MSMEs-tax-
reform.html [Accessed: 1st September 2018]
Entrepreneur Philippines (2016) Paying taxes: A guide for the self-e mployed and
professionals [online] Available from: https://www.entrepreneur.com.ph/run-and-
grow/paying-taxes-a-guide-for-the-self-employed-and-professionals-a1537-20160804-
lfrm [Accessed: 1st September 2018]
Inquirer.net (2014) Small stores, farmers, fishers, others should pay taxes—BIR
[online] Available from: http://business.inquirer.net/163908/small-stores-farmers-
fishers-others-should-pay-taxes-bir#ixzz5QdNHbQED [Accessed: 1st September
2018]
The Manila Times (2018)The TRAIN Law and MSMEs [online] Available from:
https://www.manilatimes.net/train-law-msmes/379507/ [Accessed: 1st September
2018]
Prinz Magtulis (2016) Study shows 35% of Philippine firms pay only 2% income tax
[online] Available from: https://www.philstar.com/business/2016/10/05/1630606/study-
shows-35-philippine-firms-pay-only-2-income-tax#KhzeD17ubr0iuaOs.99 [Accessed:
3rd September 2018]
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 51
QUESTIONNAIRE
Questionnaire on the Effectiveness of Tax in Small Scale Business in Pulilan Bulacan
Profession: _______________________________________
5. Would you avoid a company’s products or services due to unethical tax policies ( tax avoidance)
__ Yes __ No
7. Do you think companies have an active duty to financially support the country they reside in?
__ Agree __ Neither agree nor disagree __ Disagree
8. If you were to own a company or do own a company, would you consider relocating for tax purposes?
__ Agree __ Neither agree nor disagree __ Disagree
APPENDIX B: FORMULA
occurrences of values within a particular group or interval and in this way each
Frequency distributions were used for both qualitative and quantitative data.
F=n100/P
Where P = Percentage
100= Constant
2. Percent Distribution
Is just way to present statistical data, it shows how the results are distributed in
P= (f/n) 100
Where f = frequency
CERTIFICATION
By
Jallene D. Espino
OBJECTIVES To be part of your company, apply my knowledge, skills
and attitude, and compete as your asset
EDUCATION
Tertiary Polytechnic University of the
Philippines
2016 – Present Bachelor of Science in
Entrepreneurship
Poblacion, Pulilan, Bulacan
PERSONAL DATA
Birth Date: November 15, 1995
Place of Birth: Pulilan, Bulacan
Age: 21 years old
Civil Status: Single
Religious Affiliation: Roman Catholic
Citizenship: Filipino
Height: 5 ft. and 2 inches
Weight: 49 kilograms
Mother’s Name: Arlyn Espino
Father’s Name: John Ronald Cunanan
I HEREBY CERTIFY that the above information herein are true and
correct to the best of my knowledge and belief.
Jallene D. Espino
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 56
OBJECTIVE
QUALIFICATIONS
PERSONAL DATA
EDUCATIONAL ATTAINMENT
CHARACTER REFERENCES
Signature
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 58
Juliena E. Ramirez
Address : Taal Tramo, Pulilan, Bulacan
Email Address : julienaeramirez@yahoo.com
Contact No. : 09558742733
OBJECTIVE
QUALIFICATIONS
PERSONAL DATA
EDUCATIONAL ATTAINMENT
CHARACTER REFERENCES
Signature
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 60
OBJECTIVE
QUALIFICATIONS
PERSONAL DATA
EDUCATIONAL ATTAINMENT
CHARACTER REFERENCES
Signature
POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 62
Rudy S. Maestre
Address : 424 Angeles Street, Pulilan, Bulacan
Email Address : annamariela99@yahoo.com
Contact No. : 09051637631
OBJECTIVE
QUALIFICATIONS
PERSONAL DATA
EDUCATIONAL ATTAINMENT
CHARACTER REFERENCES
Signature