Republic of the Philippines

North Eastern Mindanao State University

Formerly Surigao del Sur State University
Rosario, Tandag City, Surigao del Sur 8300
Telefax No. 086-214-4221
Website: www.sdssu.edu.ph
______________________________________________________________________________

NORTH EASTERN MINDANAO STATE UNIVERSITY

COLLEGE OF BUSINESS MANAGEMENT

Department of Business Management and Governance

Main Campus, Tandag City, Surigao del Sur

A Written Report on Public Finance (eFM 1)

Topic: Revenue Generation

Submitted by:
DEGUITO, Wilriza
DELA HELBA, Joseph
DIAZ, Jay
HUERTA, Ericka Mae

Submitted to:

Mr. John Mark Acquiatan

3FMA Tue-Fri 9:00-10:30am

Intended Learning Outcomes:

 Republic of the Philippines
North Eastern Mindanao State University
Formerly Surigao del Sur State University
Rosario, Tandag City, Surigao del Sur 8300
Telefax No. 086-214-4221
Website: www.sdssu.edu.ph
______________________________________________________________________________

 To understand the principles of taxation in the Philippines.

 To understand the types of taxes in the Philippines (e.g., income tax, value-added tax,
excise tax).
 To understand the taxation laws and regulations.
 To understand the relationship between taxation and economic development.
 To understand the challenges of taxation and tax reforms in the Philippines

What is TAX?

- It is a mandatory financial charge or levy imposed on individuals or organizations by a

government.
- Governments collect taxes to raise revenue for public spending.

Taxation System in the Philippines

The taxation system in the Philippines is governed by the Bureau of Internal

Revenue (BIR) and the Bureau of Customs (BOC).

- It follows a self-assessment system where taxpayers are responsible for determining

their tax liabilities and filing tax returns.
- Taxes collected are used to fund government programs and services, such as
infrastructure development, education, healthcare, and social services.

Some taxes are vary depending on government:

 Republic of the Philippines
North Eastern Mindanao State University
Formerly Surigao del Sur State University
Rosario, Tandag City, Surigao del Sur 8300
Telefax No. 086-214-4221
Website: www.sdssu.edu.ph
______________________________________________________________________________

The Philippines also operates a mixed tax system, featuring both direct taxes and indirect
taxes. This report delves into the various aspects of this system, exploring its components,
regulations, and impact on the economy.
 Republic of the Philippines
North Eastern Mindanao State University
Formerly Surigao del Sur State University
Rosario, Tandag City, Surigao del Sur 8300
Telefax No. 086-214-4221
Website: www.sdssu.edu.ph
______________________________________________________________________________

Types of Taxes:

National Taxes

 Direct Taxes: These taxes are levied directly on individuals or corporations based on
their income, wealth, or specific transactions.
Examples include: Income Tax: Progressive tax applied to individual and corporate
income (e.g., salaries, profits). Rates range from 5% to 35% for individuals, with a
30% flat rate for corporations.
 Indirect Taxes: These taxes are embedded in the price of goods and services,
ultimately borne by the consumer.
Examples include: Value Added Tax (VAT): Applied to the sale of goods, services,
and imports. Standard 12% tax levied on the sale of most goods and services. Some
essential items and services are exempt.
 Excise Tax: Imposed on specific goods like cigarettes, alcohol, and petroleum
products. Rates vary depending on the products.
 Franchise Tax: These taxes levied on corporations granted the privilege to operate a
business in the Philippines.
 Documentary Stamp Tax: These taxes levied on various documents, transactions,
and instruments such as contracts, loans and insurance policies. The tax rate depends
on the documents value.
 Withholdings Taxes: These taxes withheld by payors (employers, banks, etc.) on
certain income payments and remitted to BIR includes income tax withheld on
salaries and final withholding tax on winnings.

Local Taxes

 Property Tax: These taxes are including on real property such as lands, buildings or
establishments. Rates are set by Local Government Units (LGUs).
 Republic of the Philippines
North Eastern Mindanao State University
Formerly Surigao del Sur State University
Rosario, Tandag City, Surigao del Sur 8300
Telefax No. 086-214-4221
Website: www.sdssu.edu.ph
______________________________________________________________________________

 Business Tax: These taxes imposed on businesses operating within an LGUs

jurisdiction and the rates/categories vary depending on the LGUs.
 Community Tax (Cedula): These taxes are minor tax imposed on all Filipino
residents aged 18-60 yrs. old.

Other noteworthy taxes

 Donor’s Tax: These taxes are on the transferring of property by donations.

 Estate Tax: These taxes are on the transferring of property upon death.
 Capital Gains Tax: These taxes are on the profit earned from the sale of capital
assets like Stocks or Real Estate.

Taxation Laws and Regulations

The primary legislation governing taxation in the Philippines is the National Internal
Revenue Code (NIRC) of 1997, as amended by various Republic Acts like the Tax Reform
 Republic of the Philippines
North Eastern Mindanao State University
Formerly Surigao del Sur State University
Rosario, Tandag City, Surigao del Sur 8300
Telefax No. 086-214-4221
Website: www.sdssu.edu.ph
______________________________________________________________________________

for Acceleration and Inclusion (TRAIN) Law and the Corporate Recovery and Tax
Incentives for Enterprises Act (CREATE Act). Additionally, the Bureau of Internal
Revenue (BIR) issues Revenue Regulations and Rulings to interpret and implement the
NIRC.

I. National Internal Revenue Code (NIRC)

 This comprehensive code serves as the foundation of the Philippine tax system,
outlining different types of taxes, tax rates, exemptions, and procedures.
 It's crucial for taxpayers to understand the relevant sections of the NIRC based on
their specific tax obligations.

II. Tax Reform for Acceleration and Inclusion (TRAIN) Law

 Officially known as Republic Act No. 10963
 It was the first package of the Comprehensive Tax Reform Program implemented in
the Philippines and signed into law by President Rodrigo Duterte on December 19,
2017.
 It aimed to achieve multiple goals simultaneously, balancing the need for revenue
generation with tax relief for individuals and businesses, promoting economic growth,
and addressing structural issues in the tax system.

III. Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Act)
 Officially known as Republic Act No. 11534, is the second package of the
Comprehensive Tax Reform Program in the Philippines.
 It seeks to balance supporting business recovery with promoting a more efficient and
sustainable tax incentive system. It remains to be seen how effectively it achieves
these goals, with ongoing evaluations and discussions about its impact.
IV. Bureau of Internal Revenue (BIR)
 Is a vital agency in the Philippines responsible for collecting taxes and ensuring
compliance with tax laws. It operates under the Department of Finance and plays a
 Republic of the Philippines
North Eastern Mindanao State University
Formerly Surigao del Sur State University
Rosario, Tandag City, Surigao del Sur 8300
Telefax No. 086-214-4221
Website: www.sdssu.edu.ph
______________________________________________________________________________

crucial role in generating revenue for the government, which funds various public
services and infrastructure projects.
 To assess and collect internal revenue taxes due to the government of the Philippines,
to enforce tax laws and regulations, to provide taxpayer services and to promote
voluntary tax compliance.

Taxation and Economic Development

Taxes play a multifaceted role in economic development, impacting various aspects

and creating a complex relationship.

Impacts on Economic Development

 Government Revenue: Taxation is the primary source of government revenue. This

revenue funds critical investments in:

o Infrastructure: Building roads, bridges, and other public infrastructure

facilitates the movement of goods and people, boosting economic activity.

o Education and healthcare: Investments in these sectors improve the skills

and health of the workforce, leading to higher productivity and economic
growth.

o Public safety and security: A stable and secure environment attracts

businesses and investments, fostering economic development.

 Income Redistribution: Progressive tax systems can redistribute income from

wealthier individuals to poorer ones, reducing inequality and potentially stimulating
broader economic growth by increasing aggregate demand.
 Republic of the Philippines
North Eastern Mindanao State University
Formerly Surigao del Sur State University
Rosario, Tandag City, Surigao del Sur 8300
Telefax No. 086-214-4221
Website: www.sdssu.edu.ph
______________________________________________________________________________

 Market Corrections: Some taxes, like environmental taxes, can address market
failures by reflecting the true cost of externalities (e.g., pollution) and encouraging
more efficient resource allocation.

 Investment and Business Activity: A stable and predictable tax system can
encourage investment and business activity leading to job creation and economic
growth. However, high or low complex taxes can deter investment and hinder
economic activity.

Current Developments:

 Tax Incentives Review: The government is currently reviewing its system of tax
incentives, aiming to streamline and rationalize them to ensure they are effective
in attracting investments and promoting targeted economic activities.
 Digital Economy Taxation: The Philippines is exploring ways to tax the digital
economy more effectively, as traditional tax laws may not be well-suited to
capture income generated online.
 Focus on Tax Administration: The Bureau of Internal Revenue (BIR) is
implementing various initiatives to improve tax administration, such as
digitalization and taxpayer education, to increase tax compliance and collection.

Taxation Reforms in the Philippines: Progress and Challenges

 Republic of the Philippines
North Eastern Mindanao State University
Formerly Surigao del Sur State University
Rosario, Tandag City, Surigao del Sur 8300
Telefax No. 086-214-4221
Website: www.sdssu.edu.ph
______________________________________________________________________________

The Philippines has actively pursued tax reforms in recent years, aiming to increase
revenue, improve equity and boost economic growth. While some progress has been made
and several challenges remain.

Recent Reform Initiatives:

 Tax Reform for Acceleration and Inclusion (TRAIN) Law (2018): Reduced
personal income tax for low- and middle-income earners, broadened VAT
coverage, and introduced excise taxes on sugar-sweetened beverages, among other
changes.
 Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Act)
(2021): Lowered corporate income tax from 30% to 25%, with further reductions
planned, and introduced various incentives for businesses.

Progress Made:

 Increased Revenue: Both TRAIN and CREATE resulted in higher tax

collection, providing additional resources for government spending.
 Improved Equity: TRAIN reduced the tax burden on low- and middle-income
earners, making the system more progressive.
 Enhanced Business Environment: CREATE aims to attract investments and
stimulate economic activity through lower corporate taxes and incentives.

Challenges Remaining:

 Limited Revenue Mobilization: The Philippines' tax-to-GDP ratio remains low

compared to regional peers, indicating potential for further revenue generation.
 Informal Sector Taxation: A significant portion of the economy operates
informally, escaping taxation and hindering revenue collection.
 Republic of the Philippines
North Eastern Mindanao State University
Formerly Surigao del Sur State University
Rosario, Tandag City, Surigao del Sur 8300
Telefax No. 086-214-4221
Website: www.sdssu.edu.ph
______________________________________________________________________________

 Tax Exemptions and Incentives: Complex and extensive exemptions and incentives
create loopholes and reduce tax bases, impacting revenue potential.
 Administrative Inefficiency: Inefficient tax administration, including limited
digitalization and data sharing, hampers effective tax collection.

Sources:

Bureau of Internal Revenue (BIR): https://www.bir.gov.ph/

National Tax Research Center (NTRC): https://ntrc.gov.ph/

Department of Finance (DOF): https://www.dof.gov.ph/

Next Generation Tax Reform in the Philippines" by Rosario G. Manasan (UP CIDS):
https://cids.up.edu.ph/wp-content/uploads/2022/03/ppj-16-17-reside-2017.pdf

"A Glimpse of a New Tax Reform: What to Expect from The Ease of Paying
TaxesBill"(KPMGPhilippines): https://kpmg.com/ph/en/home/insights/2023/11/a-

"TRAIN law to further reduce personal income taxes in 2023 onwards" (DOF):
https://www.dof.gov.ph/train-law-to-further-reduce-personal-income-taxes-in-2023-onwards/

PwC Philippines Tax Summaries: https://taxsummaries.pwc.com/philippines

ASEAN Briefing - Guide to Taxation in the Philippines:

https://www.aseanbriefing.com/news/category/tax-accounting/