GE 8 ETHICS

Module 2,
Lesson 3
Taxation and
Globalization

Submitted by:
Group 3
WHAT IS TAX?

Ø Onus is a Latin term for “burden”. Tax is a free imposed upon

individual, properties, transactions and business entities to
support the necessary expense and services of government
Ø It is defined as an enforced proportional contribution from
person and property levied by the state by virtue of its
sovereignty for the support of government and for all public
needs.
WHAT IS TAXATION?

Ø Taxation is a means for a state, through laws and

legislations, to obtain income to finance public
expenditures. Through taxation, the government is able
to provide public education, health services, and
infrastructures that benefit the people.
Ø Taxation in an obligation, so that it requires taxpayers to
contribute a certain proportion of their income or
wealth. Taxation in this case is a burden.
DIFFERENCE BETWEEN TAX
AND TAXATION
Ø Tax is not the same as taxation. A tax is a free whereas
taxation is a process.
Ø The term "taxation" applies to all types of involuntary
levies, from income to capital gains to estate taxes.
Though taxation can be a noun or verb, it is usually
referred to as an act; the resulting revenue is usually
called "taxes."
Primary Characteristics of
Tax

Ø It is obligatory or a forced contribution to the government.

Ø It usually monetary in form.
Ø It is proportionate in character.
Ø It is imposed on person and properties.
Ø It is levied by the state that has jurisdiction over the person or
property. Ø It is levied by the legislative body of the state.
Ø It is levied for public purpose.
 Classification of Taxes

1. According to object
– a. Personal tax – tax on like community tax (residence tax)
– b. Property Tax – tax on properties. Example is the real property tax
– c. Consumption Tax – tax on goods and services that people consume. Ex.
Value added tax (VAT) and excise tax
2. According to who bears the burden
– a. direct tax – example income tax, community tax, estate tax
– b. indirect tax- paid directly, such as goods and services
Example- value added tax (VAT), excise tax and customs duties
3. According to the determination of amount of tax to be paid
a. Specific tax – imposed on goods based on quality or standards of measurement
b. Ad valorem tax – imposed on goods based on their value or price. Ex. Real estate tax,
personal tax property
4. According to purpose
a. National tax- imposed by the national government such as national revenue tax,
customs duty and those imposed
by special laws
b. Local tax – imposed by the municipality, city or barangay as tax such as
professional tax and community tax.
5. According to tax system
a. proportional tax – fixed percentage of the taxable object based on market price.
Ex. VAT
b. Progressive tax – tax rate increases as the price of the goods or tax increases.
Ex. Income tax, estate tax, donor’s tax
Kinds of National Taxes

– 1. Income tax
– 2. Estate tax
– 3. Donor’s tax
– 4. Value added tax
– 5. Percentage tax – hotels, carriers, franchises, finance and insurance companies, amusements
and winnings
– 6. Excise tax on certain goods
– 7. Documentary stamp
– 8. Tariffs and custom duties
– 9. Travel tax
– 10. Private motor vehicle tax
– 11. Energy tax
Definition of Terms

Ø Income Taxation – refers to the wealth that flow in to

the taxpayers other than as mere return on capital.
Ø Taxable income refers to the gross income less
deduction of personal and additional exemptions.
Ø Passive Income are those income from interest on
banks, deposits, dividends, prizes and winnings.
Ø Gross Income are those-
1. compensation for services – fees, salaries, wages, commissions, etc.
2. conduct of trade or business or the exercise of a profession.
3. gains derived from dealings in property
4. interests
5. rents
6. royalties
7. dividends
8. prizes and winnings
9. pensions
10. partner’s share from the net income of the general partnerships
Ø Net Income- is gross income less allowance deductions.
Ø Excluded from gross income are:
1. life insurance
2. gifts, requests
3. compensation for inquiries, pensions, gratuities such as tips, amount received
by the insured as returns of
premium.
Purpose of Income tax

– 1. to provide revenues for the government

– 2. to offset regressive sales and consumption taxes
– 3. to mitigate the evils arising from the inequities in the
distribution of income and wealth which are considered deterrents
to social progress
Classification of Taxpayers

1. Individuals
– 1. citizens- resident and non-resident
– 2. Aliens – resident and non-resident (those engaged in trade or business in the
Philippines and those who are
– not engaged in trade and business.
2. Corporations
– 1. domestic or those incorporated under Philippine laws
– 2. foreign or those incorporated under the Philippine laws
3. General Partnership
– 1. General professional partnership – partners are liable for income tax based on their
respective shares in the profits of the partnership
– 2. General co-partnership – the purpose is to engage in business.
Who are required to file income tax
return?

1. every resident citizen

2. every non-resident citizen and resident aliens
3. every non-resident alien engage in business
Principles of Taxation

The 18th century economist and philosopher Adam Smith attempted to

systematize the rules that should govern a rational system of taxation. In The Wealth of
Nations (Book V chapter 2) he set down four general canons:
Ø The subject of every state ought to contribute towards the support of the
government, as nearly as possible, in proportion to their respective abilities; that is,
in proportion to the revenue which they respectively enjoy under the protection of
the state…
Ø The tax which each individual is bound to pay ought to be certain, and not arbitrary.
The time of payment, the manner of payment, the “quantity to be paid, ought all to
be clear and plain to the contributor, and to every person…
Ø Every tax ought to be levied at the time, or in the manner, in which it is most likely
to be convenient for the contributor to pay it…
Ø Every tax ought to be so contrived as both to take out and keep out of the pockets of
the people as little as possible over and above what it brings into the public treasury
of the state…
The Burden of Taxation

A. Taxation is the primary method by which the government finance “themselves”.

Essentially all taxes transfer resources from the private to public sector, where
government decision makers (both elected and unelected) will choose how the resources will
be allocated between services and redistribution. Essentially all taxes shift resources to the
government by threatening current resource holders(property owners, labor, international
trading firms, etc.) with punishments of various sorts if they do not give their resources to the
government’s tax collectors. a. In this sense, all taxes are coercive at the point of collection. b.
This contrasts with the government bonds and ordinary fees for services, because such
transactions are voluntary fees for services, because such transactions are voluntary at the
point of collection. Bond buyers and public service purchasers expect to be better off after the
purchase, whereas tax payers normally feel worse off after paying the tax (although better off
than had they not paid and been placed in jail). (On the other hand in so far as taxes are used
to fund desired public services, taxation as a method of government finance can be regarded
as voluntary. In such cases, voters prefer to “tax themselves” to pay for desired government
services, rather than go without those services.)
B. The burden of taxation can be measured in two ways:
First, it can be calculated as cash payment- in much the same way
that payments for ordinary goods are calculated. This is the most widely used
measure by macro-economists, accountants, and newspaper reporters. It is
also used in many international comparisons of income tax and VAT tax rates.
However, it turns out that the burden of a tax is not always mainly borne by
the person who “writes the check” to pay it.

Second, it can be calculated by determining the losses imposed on

taxpayers as a consequence of the tax- that is to say he opportunity cost of
the tax. That is to say, the burden of an excise or income tax can be measured
as the reduction of consumer surplus and profits induced by the tax. This
differs a bit from the money paid to the government, because the existence
of a tax often reduces the extent of market transactions. That is to say, most
taxes have a deadweight loss, which can be measured as the extent to which
“social surplus” is reduced by the existence of a particular tax.
 Benefits of Paying Right Taxes

Paying the right amount of tax has been one of the serious topics concerning most income earners in
Philippines.Many, if not all, wants to as much as possible reduce the amount of tax they will have to pay to the BIR.
As such, they engage to all kinds of ways to reduce their taxes obligations, such as tax amnesties, tax avoidance and
even tax evasion.
1. No/ Minimal BIR Audit
Oftentimes, the reason you or your business receives letter of notice from the BIR, is caused by the following:
Ø Failure to file and pay tax return, or the BIT is questioning the amount of tax paid, or both.
By filing and paying the right amount of tax, it will minimize the instances that BIR will audit your accounting
records. The BIR does benchmarking based on industries, and if the taxpayers tax payments fall below the said
benchmark, there is a high probability that the BIR will audit the said taxpayer to validate the deficiency. On the
other hand, the BIR do not audit taxpayers who pay taxes above the said benchmark. If you want to eliminate BIR
audit, start paying the right amount of taxes.
2. Peace of Mind
Being audited by BIR may cause high amount of stress especially to taxpayers who intentionally or illegally
decreases their tax payment. Sometimes, it can affect even your personal life which gives you sleepless nights and
anxieties.
3. Truthful Income Tax Return
Some taxpayer, who do not file the correct amount of tax encounters problems when they
need to generate an Income Tax Return for purpose of VISA and Loan applications. As such,
they resort to preparing inaccurate income tax returns in order to produce said requirements.
The risk on producing an inaccurate tax return is high because if the agency verifies it to BIR, it
will cause big trouble.
4. Good Credit Rating
Paying the right amount of tax provides good credit rating to financial institutions and
agency. The higher the income and tax you declare, the higher the credit rating. You can use
your good credit rating when getting a loan for additional funds for expansion of your business
or for future purposes.
5. Good Investor Value
In order for your business to grow, at some point you need people or institutions with
money that are willing to invest in your company. These investors will look into your financial
and tax records to support their investment decisions.
6. Social Responsibility and Contribution to the Country
Paying the right tax is a social responsibility to the country. The taxes we pay will go to the
government funds that will be used in developing and improving the government facilities and
life of Filipinos, inside and outside the country.
The tax reform Law of 2018 or as Tax
Reform Acceleration and Inclusion
(TRAIN)
The Tax Reform for Acceleration and Inclusion
(TRAIN) is the first package comprehensive tax reform
program (CTRP) envisioned by President Duterte’s
administration, which seeks to correct a number of
deficiencies in the tax system to make it simpler, fairer, and
more efficient.
What is TRAIN?

– The goal of the first package of the Comprehensive Tax Reform Program (CTRP) or TRAIN
is to create more Just, simple, and more effective system of tax collection, as per the
Constitution, where the rich will have bigger contributions and the poor will benefit
more from government programs and services.
– Lowering the personal income tax (PIT)
– Simplifying the estate and donor’s tax
– Expanding the value-added tax (vat) base
– Increasing the excise tax of petroleum products
– Increasing the excise tax of automobiles
– Introducing the increase in the tax of sugar-sweetened beverages. January 1, 2018 –
start of the implementation of train
 The Vision of the TRAIN

The tax reform aims to achieve the following:

By 2020
– Poverty rate reduced from 26% to 17% (or some 10 million Filipinos uplifted from
poverty)
– Law abiding country
– Peace within the country and with out neighbors
– Achieve high middle-income status, where per capita gross national income (GNI)
increases from USD3,000 to USD4,100 by 2022 in today’s money.
By 2040

- Extreme poverty eradicated.

- Inclusive economic and political institutions where everyone has
equal opportunities.
- Achieve high income status, where capita GNI increases from
USD3,000 to USD 12,000 by 2040 in today’s money
Achieving the Vision

For us to be able to achieve the vision TRAIN, we need to lead

the investment growth of 7 to 10 percent. Over the long-term all
these investments require additional funds or around 1 trillion pesos
per year in 2016 prices, on top of the current 1.7 trillion pesos. Over
the medium term, the government will need to raise some 366
billion per year between 2016 to 2022 (or 2.2 trillion pesos in total)
Ways to Raise Investments

– Sustainable borrowings
– Budget reforms
– Tax and Custom Administration Reforms
– Tax Policy Reform
Complementary Economic
Reforms

– Secure Property Rights

– Enhance Competition
– Improve Food Security
– Simplify Regulations
 Group 3
BALONTONG, MARVEN CEASAR
DELA CRUZ, CASSANDRA
TORRECAMADA, JETTRY A.
LANTICSE CESAR B. CEREBO,
HAROLD D. PAJES, JOHN
CYRIK L. ESPIGA. EURIE B.
CATALAN, ALEXIS BRYAN V.
MALATE, JOEBEN E. CARTAGENA,
JHANCEL B. PANOGA, JASON S.