MONKAYO COLLEGE OF ARTS, SCIENCES, AND TECHNOLOGY

L.S. Sarmiento , Sr. St., Poblacion, Monkayo, Davao de Oro

ACADEMIC PAPER ON THE IMPORTANCE OF TAXATION

PRESENTED TO Mr. RHYAN MIKE R. BACARO
SUBJECT INSTRUCTOR

A Course Requirement for the Subject SSE 112: MACROECONOMICS

JUAN B. DELA CRUZ

Student
 “Tax is the fuel of government, but leakages of this tank made it dysfunctional or
inefficient.” According to Toledo (2021), the existence of government is a necessity; that
government cannot continue without means to pay its expenses; and that for these means it
has a right to compel its citizens and property within its limits to contribute. He further added
that taxes are the lifeblood of government and should be collected without necessary
hindrance. To support the idea that tax is the fuel of government, Tan (2019) emphasizes
that tax helps the government fund their projects for economic development. However, it has
been a concern of some Filipinos that sometimes we perceived taxation as inefficient or
unfair, Atian (2020) argued that while tax avoidance allows profits to be artificially and legally
shifted to low tax or no tax jurisdictions, tax planning that is so aggressive is also generally
used to take advantage of the imperfections of the law and make use of them to exploit tax
benefits to generate higher profits. Atian (2020) further came out with the concept of
Aggressive Tax Planning Scheme, it is committed through tax planning structures which can
be done via shifting interest payments and royalty payments to jurisdiction granting lower
taxes, and strategic transfer pricing.

The purpose of taxation is to raise revenues from all possible sources to support
government expenditures and services and to promote the general well-being of its citizens
(Manapat, et.al. 2010). It is a mandate by the Local Government Code of the Philippines
Book III Section 129 which states that, each local government unit shall exercise its power to
create its own sources of revenue and to levy taxes, fees, and charges subject to the
provision herein, consistent with the basic policy of local autonomy. Such taxes, fees, and
charges shall accrue exclusively to the local government units. Manapat, et.al. (2010) further
stated that there are different government institutions that administer and enforce the
different policies and concerns about taxes. He also added that these institutions function
based on the legal foundations and provisions upon which taxation rests. Legal basis such
as: the Constitution; Statutes, laws passed by Congress, or Presidential Decrees; Bureau of
Internal Revenue rules and regulation; Judicial decisions on tax cases by the Supreme
Court; Provincial, city, and municipal ordinances; Observance of international agreements;
and Administrative ruling and opinions.

As to the matter of the type of taxes, Borracho (2020) enumerated the two general
types of taxes, these are National Taxes and Local Taxes. Taxes paid to the Bureau of
Internal Revenue (BIR) are automatically credited as national taxes which goes to the
national treasury, these include the Income Tax, Value-added tax, Documentary Stamp Tax,
and Also Estate Tax. On the other hand, those paid to the local government units in the
treasurer’s office are local taxes, such as Real Property Tax; Transfer Tax, and Professional
Tax.
 In the same article of Borracho (2020) she also put an emphasis on how the Tax
Reform for Acceleration and Inclusion Act (RA 10963) contributed to an increase in national
revenue. The aim of this law is to make the tax system of the Philippines simpler, fairer, as
well as more efficient. Moreover, it was a way of raising government revenues to fund the
projects of the administration. Finance Secretary Carlos Dominguez III said even non-wage
earners who will not get tax breaks under the TRAIN LAW, they still benefit greatly from it in
the form of better infrastructure, more jobs and expanded access to education, health and
other social services that will be partly funded by this reform package (TAXREFORM:
DEPARTMENT OF FINANCE). Abrea (2018) listed the salient features of TRAIN Law, this
includes, Lowering of Personal Income Tax, Offsetting Measures through the imposition of
Excise Taxes, Social Mitigating Measures, and Tax Administrative Reforms.

As I scrutinized the TRAIN Law published in the Official Gazette, I wanted to point
out the salient features of this law for our deeper understanding. This act is officially cited as
Republic Act No. 10936, an initial package of the Comprehensive Tax Reform Program
(CTRP) signed into law by President Rodrigo Duterte on December 19, 2017. This package
introduced changes in personal income tax (PIT, estate tax, Donor’s tax, value added tax
(VAT), documentary stamp tax (DST) and the excise tax on tobacco products, petroleum
products. Mineral products, automobiles, sweetened beverages, and cosmetic procedures.
This law aims to decrease the income tax, and exempt the minimum wage earner in tax
responsibility. An increase in VAT led to an increase in prices of goods. The prominent
features of the tax reform is the lower personal income tax, individual taxpayers with taxable
income not exceeding P250, 000 annually are subject to exception from income tax. There is
also Php12 per liter excise tax for sweeten beverages like soft drinks and non-softdrinks but
contains sugar. 6% of the net value of the property of the estate tax, when it comes to
Donor’s tax, 30% should be levied if the benefactor is not related to the distributor and 10% if
relative. Under also with this tax reform is the additional excise tax on automobiles, there
must be 4% to be levied if the price of automobiles is below Php600, 000 and 30% if the
price is above Php600, 000 but below 1 million. The Government also would levy a tax on
cosmetic surgery, 5% should be imposed for cosmetic surgeon tax.

After reading some articles or related literatures, I concluded that our taxation is
progressive in nature and a pro-poor system. Revenues collected under this reform funded
to the social services and the infrastructural development of the government that opened job
opportunities.
References

Abrea, M. (2018). TRAIN Law: How was it implemented? Inquirer.net. Retrieved on July 4,
2021 from https://business.inquirer.net/261521/train-law-how-was-it-implemented

Atian, LM. (2020). Who Said that the World is Unfair? Retrieved on July 4, 2021 from
https://home.kpmg/ph/en/home/insights/2020/01/who-said-that-the-world-is-
unfair.html

Borracho, M. (2020). General Concept and Principle of Taxation. LexClassroom. Retrieved

on July 4, 2021 from https://lexclassrooms.com/principles-of-taxation/

Department of Finance. Retrieved on July 4, 2021 from

https://taxreform.dof.gov.ph/news_and_updates/non-taxpayers-to-also-benefit-from-
train/

Local Government Code of the Philippines. Retrieved on July 4, 2021 from

https://www.dilg.gov.ph/PDF_File/reports_resources/dilg-reports-resources-
2016120_271dafdd99.pdf

Official Gazette of the Republic of the Philippines. Retrieved on July 4, 2021 from
https://www.officialgazette.gov.ph/2017/12/27/republic-act-no-10963/

Manapat, C. et.al. (2010). Economics, Taxation, and Agrarian Reform. C & E Publishing ,
Inc. page 119-137.

Tan, E. (2019). Why Freelancers and Solopreneurs Need to Pay Income Tax in the
Philippines. Retrieved on July 4, 2021 from https://www.taxumo.com/blog/income-
tax-philippines/

Toledo, M. (2021). The Lifeblood of Government. Philstar Global. Retrieved on July 4, 2021
from https://www.philstar.com/other-sections/newsmakers/2021/03/09/2082867/
lifeblood-government