Survey Analysis of the Taxation Problems and Issues of the National Government

PM 231 – Public Fiscal Administration

Submitted to:

Jocelyn C. Cuaresma

Submitted by:

Aldwin P. Catada
Rodel Cuyco
Introduction

Taxation is the sovereign power of the government to impose obligation levies to

citizens, property or property rights (Cuaresma; p.71). It is an essential function to raise
enough revenue for capital formation, to allocate income, to correct inequity, and to protect
the vulnerable economy from the instabilities of the world economy. To establish a state of
development that promotes the welfare of the general public is the main objective of taxation.
(Cuaresma; p.80). The government, however, lacks the willingness to improve on certain tax
procedures which resulted in inefficiency of national tax administration, but certain issues
can be fixed by raising collection efficiency, improving tax administration, and enforce
taxation. (Celestino, et al; p.19).

As the country continues to face the biggest challenge on how it can increase its tax
collections, it is necessary to examine the factors that hinder it towards achieving this goal.
Thus, this survey analysis is being presented.

Issues

Below are some survey data result from various sources that may be helpful in
crafting policies toward increasing tax collection:

1. The Philippines has the highest income tax rates in the Southeast Asia Region.

Based on the following graph presented by ASEANUP.com, the Philippines has one
of the highest income tax rates in the ASEAN Region. Its corporate income tax stands at 30%
which is very high as compared to its major ASEAN counterparts and this discourages
foreign investors (www.rappler.com). Should the Philippines adheres to a low-income tax
rate, it can invite more foreign direct investments which would in turn spell significant
increase in the country’s tax collections.

2. Too many goods and services are not being taxed.

According the Department of Finance, our tax revenues in the Philippines is below
par as compared with our neighboring countries in the ASEAN Region. According to
economist/columnist JC Punongbayan this can be attributed to a number of tax exemptions in
the country for several products and services. Hence, the country registers low revenue
collection. One important strategy to increase revenues is to expand the tax base
(www.rappler.com)..

3. Too many are evading paying taxes.

Based on the DOF data below, compensation earners contributes hugely more income
taxes than self-employed/professional. From 2010 to 2013, compensation earners earned 60%
of total incomes in the country but paid as much as 80% of all taxes (www.rappler.com)..
This is because income taxes of compensation earners like government employees’ are
automatically deducted from their salaries unlike self-employed/professionals who can hide
or under-declare their income. Taxing more people as possible is one way to expand tax base
(www.rappler.com).
RECOMMENDATIONS

It can be summarized that the main issues in tax generation in the Philippines is on
how it can expand its tax base, curb tax evasion and improve tax efficiency. To address these,
the following are being proposed:

1. Improve and reform our current taxation system because taxation system must be
based on the taxpayer’s ability to pay. Lowering the tax rate and increasing the tax
bracket ceiling will lower the tax collection at first but it will increase by the next year
or the following year because the tax base will expand. (lawaspect.com/philippine-
taxation-system/)
2. If at least 48 million Filipinos in the working class pay taxes, it will help increase tax
collections and revenues notwithstanding income level (https://business.inquirer.net).
3. Amend the unfavorable provisions of the Code which causes limitations on national
revenue generation effort and establish productive tax bases (Celestino 1998).
4. Exploit and utilize fully the potential of other traditional sources and not just rely on
real property tax and business tax.
5. Maximize the revenue generation efforts such as imposing maximum allowable tax
rates and considering administrative and judicial remedies to tax delinquencies.
6. Tax system should be modernized and digitalized. Acquiring more tax experts,
lawyers and data analytics specialists will also greatly help improve the tax system
(https://business.inquirer.net).
7. Bureau of Custom’s system should be realigned and automated to stop smuggling,
which is considerably the biggest tax leakage in VAT and excise tax collection. This
will help the new administration increase their tax collection and revenues without
imposing new taxes (https://business.inquirer.net).
8. The BIR should audit and check all the Statement of Campaign Contributions and
Expenditures of individual candidates, political parties and party list groups,
regardless if they won or not. This process would increase tax collections and revenue
since they will be required to withhold 5 percent from all income and pay donor’s tax
and/or income tax for campaign donations (https://business.inquirer.net).
9. The new administration should support the BIR to withstand tax delinquents and file
tax evasion cases directly at courts without going to the bureaucratic process and
grant the BIR power of access to bank accounts for fraudulent cases so they can
apprehend big-time tax evaders, including tax-evading and corrupt politicians. Lifting
of bank secrecy will greatly improve tax collections and revenue from the Tax
Amnesty Act, which collected only P8.8 billion for 2019-2020
(https://business.inquirer.net).
10. BIR should cooperate with the Department of Foreign Affairs to monitor the
increasing number of foreigners or resident aliens who are either employed or doing
business here using local influences and Filipino companions
(https://business.inquirer.net).
11. Provision of incentives to performing revenue officers must be considered
(https://business.inquirer.net).
References

Abrea, Raymond. The tax challenges and opportunities for the next administration. Philippine
Daily Inquirer. June 27, 2022 accessed at https://business.inquirer.net/351449/the-tax-
challenges-and-opportunities-for-the-next-administration#ixzz7khHn7L89

Celestino, Malvar, Zipagan, Sr. (1998). Handbook of Local Fiscal Administration in the
Philippines. Introduction to Local Fiscal Administration.
Cuaresma, Jocelyn C. Public Fiscal Administration. University of the Philippines Open
University. 1996

LawAspect.com. Philippine Taxation System – Tax Law Essays. Nov. 24, 2020. Accessed at
lawaspect.com/philippine-taxation-system/

Punongbayan, JC. The problem with our tax system and how it affects us. Rappler. Jan 21,
2017 Accessed at https://www.rappler.com/voices/thought-leaders/159027-philippine-
tax-system-problems-effects-
filipinos/?fbclid=IwAR1yJ7FfmKqLYxSsupF5EV2s9cpsgKmF82QLUyrRrlQnHtIX
WUAm7-qsmTc