THE IMPACT OF TAXES REGULATIONS ON THE GROWTH OF SMALL

BUSINESS

A Research Paper

Presented to the Faculty of the

Senior High School Department

AMA COMPUTER COLLEGE

Santa Cruz, Campus

In Partial Fulfilment

of the Requirements for Practical Research of

HUMANITIES AND SOCIAL SCIENCES

DE LEON, JILLIAN LOUISE V.

HITOSIS, KURT LESTER J.
HUGO, BRIANNE C.
RAMOS, RAYANNA TRICIA D.
TIPON, AZMIER A.

JANUARY 2024
 Republic of the Philippines
AMA COMPUTER COLLEGE
Santa Cruz, Laguna

APPROVAL SHEET

This study entitled “THE IMPACT OF TAXES REGULATIONS ON THE

GROWTH OF SMALL” presented and submitted by DE LEON, JILLIAN LOUISE V.
HITOSIS, KURT LESTER J. HUGO, BRIANNE C. RAMOS, RAYANNA TRICIA D.
TIPON, AZMIER A. in partial fulfillment of the requirements for the Practical Research of
Humanities and Social Sciences is hereby recommended for approval and acceptance.

PANEL OF EXAMINERS

Approved and accepted by the Committee on Oral Examination with a grade of

______________.

EUNICE L. IBO

Chairman

Accepted in Partial Fulfillment of the Requirements for Practical Research of

Humanities and Social Sciences, at AMA Computer College, Santa Cruz Campus, Santa
Cruz, Laguna.

__________________ MARY JANE N. FOLLOSO

Date School Dean

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 DEDICATION

This study is lovingly dedicated to my family and friends, as well as Hugo, Brianne C.

and Ramos, Rayanna Tricia D., and those who have been a continuous source of inspiration

and support throughout the process of making and conducting this study.

To those who willingly showed and provided their physical, mental, intellectual,

moral, spiritual, and financial support to complete and humbly submit this study. To my

current and former teachers, to the faculty, and staff of AMA.

Lastly, to our God Almighty who showered us with His blessings in our everyday

lives, especially for the strength, courage, patience, guidance, wisdom, and time in the

realization of this work.

J.L.V.D.

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 DEDICATION

This is gratefully dedicated to my family, friends, teachers, and to the future

researchers, to the hardworking small business owner and above all, to our ALMIGHTY

GOD.

K.L.J.H.

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 DEDICATION

I sincerely dedicated this research to my family who supported me morally,

emotionally, spiritually, and financially as well as my friends who gave me courage,

inspiration, and intellectual support.

To my group mates, Rayanna and Jillian for cooperating well and helping each other

to successfully finish this study.

Especially to God Almighty, for giving me wisdom, and knowledge, and for being the

source of my strength throughout this study.

B.C.H.

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 DEDICATION

This study is dedicated to those who gave me their support, inspiration, love, hope,

concern, and knowledge to make the completion of this study possible. To my family for

being present and available to me, spending their time with me and listening to my concerns,

and offering continuous guidance and support.

To my friends, who have helped and supported me and are continually supporting me

from start to finish.

Most importantly to God Almighty, who showered us with His blessing in our

everyday lives.

R.T.D.R.

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 DEDICATION

I dedicated my thesis to my family and friend for their endless love, support and

encouragement throughout my pursuit for education I hope this achievement will fulfill the

dream they envisioned for me.

A.A.T.

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 ACKNOWLEDGEMENT

The researchers would like to express their deepest gratitude and appreciation to the

following individuals who helped and supported them in the completion of this research

study:

First and foremost, the researchers would like to acknowledge and thank the Almighty

God for the graces and blessings that He continually and wholeheartedly gives us, as well as

for the strength, knowledge, and most especially wisdom to create and conduct this study,

alongside the unconditional love and protection His researchers fully receive.

Mrs. Eunice ibo-calo, the researchers’ teacher in practical research and classroom

adviser, for her support, encouragement, suggestions, and much-needed opinion and guidance

to finish this study. As well as her inspiring words of encouragement, mental, emotional, and

intellectual support, as well as for the correction of technicalities of their study, and

knowledge, and wisdom that played a big part in the completion of this study.

“The Researchers”

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 ABSTACT

The study aimed to determine the impacts of tax regulations on the growthofsmall

businesses in terms of property tax, income tax, finance, and profit. It sought toanswer the

following questions: (1) What is the level of tax regulations in termsofproperty tax and

income tax? (2) What is the level of the growth of small businessesin terms of finance and

profit? (3) Is there any significant effect of taxes regulationson the growth of small business?

The descriptive method was used in the study to determine if thetaxregulations have

positive impacts on the growth of small businesses. Aquestionnairewas conducted through a

survey to ascertain the level of tax regulations in termsofincome tax and property tax, as well

as the growth of small businesses in termsoffinance and profit.

The result of the impact of property tax, income tax, finance, and profit onthegrowth

of small businesses was assessed by fifty (50) chosen small business ownerswho were

situated within the vicinity of the municipality of Santa Cruz, Laguna. Inaccordance with the

research survey’s overall result in terms of property tax, incometax, finance, and profit, it

does provide evidence that the majority of small businessowners who were surveyed agreed

to the tax regulations positive impacts.

Tax policies have positive impacts on small business growth in developingcountries.

The study analyzed data from 1,200 small businesses in Nigeria andfoundthat higher tax rates

were associated with higher levels of business growth. Theauthors suggest that this could be

due to the fact that higher taxes indicate a stableandpredictable business environment, which

can attract more investment and promoteeconomic growth. Additionally, the study found that

small businesses in industrieswith lower tax rates tended to have lower levels of growth

compared to thoseinindustries with higher tax rates. These findings suggest that tax policies
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can play a significant role in promoting small business growth in developing countries

(Adeleke, A., Adeleke, O., 2021).

Based on the analysis of the data, it has been found that there is a significant effect of

tax regulations on the growth of small businesses. The study examined the correlation

between tax regulations and key growth indicators of small businesses.

Therefore, the hypothesis stating “There is no significant effect of the impact of tax

regulations on the growth of small businesses in terms of income tax, property tax,

networking, and profit” was rejected.

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 TABLE OF CONTENTS

PRELIMINARY PAGES

Title Page............................................................................................…..i
Approval Sheet...................................................................................…..ii
Dedication..........................................................................................…..iii
Acknowledgement..............................................................................…..viii
Abstract..............................................................................................…..ix
List of Contents..................................................................................…..x
List of Table.......................................................................................…..xii
List of Figure......................................................................................…..xiii

Chapter

1 THE PROBLEM AND ITS BACKGROUND

Introduction........................................................................................….1
Background........................................................................................….2
Theoretical Framework......................................................................….3
Statement of the Problem...................................................................….4
Research Hypothesis..........................................................................….5
Significance of the Study...................................................................….5
Scope and Limitation.........................................................................….6
Definition of Terms............................................................................….6

2 REVIEW OF RELATED LITERATURE AND STUDIES

Related Literature...............................................................................….8
Related Studies...................................................................................…11

3 RESEARCH METHODOLOGY

Research Design.................................................................................…17
Research Instrument...........................................................................…17
Research Respondents........................................................................…18
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 Sampling Technique...........................................................................…19
Statistical Treatment...........................................................................…20

4 PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

Level of Tax Regulations in terms of Income Tax.............................…21

Level of Tax Regulations in terms of Property Tax...........................…22
Level of Tax Regulations in terms of Network Marketing................…23
Level of Tax Regulations in terms of Profit.......................................…24
Significant Effect of Tax Regulations on the Growth of Small Businesses …
25

5 SUMMARY, FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

Summary............................................................................................…27
Findings..............................................................................................…27
Conclusion..........................................................................................…28
Recommendations..............................................................................…29

BIBLIOGRAPHY

Website...............................................................................................…30

APPENDICES

A. Letter to the Barangay Captain......................................................…34

B. Letter to the Principal....................................................................…35
C. Questionnaire.................................................................................…36
D. Data Matrix...................................................................................…41

CURRICULUM VITAE..........................................................................................…50

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 LIST OF TABLE

Table Pages

1 Likert Scale..........................................................................................................…18
2 Level of Taxes Regulations in terms of Income Tax...........................................…21
3 Level of Taxes Regulations in terms of Property Tax.........................................…22
4 Level of Taxes Regulations in terms of Network Marketing..............................…23
5 Level of Growth of Small Business in terms of Profit........................................…24
6 Significant Effect of Tax Regulations on the Growth of Small Businesses........…25

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 LIST OF FIGURE

Figure Pages

1 Research Paradigm..............................................................................................…4

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 CHAPTER 1

THE PROBLEM AND ITS BACKGROUND

This chapter discusses the introduction, background, theoretical framework,

statement of the problem, research hypothesis, significance of the study, scope and

limitations, and definition of terms that would provide an overview of the study.

Introduction

Small businesses are crucial to the functioning of the contemporary market

economy. The establishment of small businesses should help to promote population

welfare, address the issue of employment, and preservation of a healthy level of

competition and useful innovation. However, a small firm cannot survive without the

state's active support, so the government should create several initiatives to help small

businesses encourage the growth of small enterprises, including by developing tax

policies. Small businesses may struggle with the costs associated with complying with

complex tax codes and regulatory requirements. (DolgihI, et.al,2020)

Tax-related challenges are among the top concerns for small businesses. Four of the

top ten issues that small business owners report as being the most difficult are tax

related. Federal taxes on corporate revenue came in third place on the tax severity list,

with 20% of respondents citing it as a serious concern. State taxes on corporate

revenue came in seventh, property taxes came in fourth, and tax complexity came in

eighth in terms of problem relevance. Taxes reduce profits, and profits are the primary

source of financing for small businesses. Financing owners use to increase wages, for

capital investment, and expansion opportunities. And for small business owners, profit

levels are not always consistent or predictable year to year. Owners rely on strong

profits to often support times of profit declines, which many owners continue to

experience in the pandemic. Almost one-third (32%) of small businesses report

revenues still below 75% of pre-pandemic levels. (Dunkelberg William,2021).

Tax reductions deprive public investments that support the growth of small enterprises

of funding. Tax cutbacks lessen support for public transportation, secure

neighborhoods, and other pillars of a robust economy that aid small firms in

expanding because states are required to balance their budgets. (Greenstein Robert,

2019).

Background of the Study

Small and medium-sized businesses (SMEs) are very important to the

Philippine economy because they account for a sizable part of employment and

economic activity. Microbusinesses, small businesses, and medium-sized companies

all fall under this category. They frequently work in a variety of industries, including

agriculture, retail, manufacturing, and services. Small and medium-sized enterprises

(SMEs) play a significant role in the Philippine economy by providing a significant

portion of employment and economic activity. This category includes

microbusinesses, small businesses, and medium-sized enterprises. They frequently

operate in a range of sectors, such as manufacturing, retail, agriculture, and services.

(Rao L.N 2021)

The tax system in the Philippines includes various taxes such as income tax,

value-added tax (VAT), excise taxes, documentary stamp tax, and local business taxes,

among others. Tax rates, tax incentives, and compliance requirements can vary based

on the size, sector, and location of the business. Tax revenue is critical for funding

public services, but it also has a direct impact on the profitability and growth

prospects of small businesses. (Lim M. 2023)

High tax rates can put a heavy financial burden on small firms, making it more

difficult for them to invest in growth, hire additional staff, or innovate. Small

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enterprises frequently lack resources, and high taxes might reduce their profitability. It

can be costly and time-consuming to comply with legal and tax regulations. To make

sure they comply with rules, small firms may need to devote a sizeable percentage of

their budget to accounting, legal counsel, and administrative tasks. (E Borchers, J

Deskins, 2016)

. Small firms may experience increased operating expenses because of having

to set aside money for shady transactions to operate in the tax and regulatory

environment. Bribing or paying kickbacks to authorities is a common practice in

corruption to get special treatment or get around regulations. Environments that are

obscure often foster corruption. Small businesses may find it difficult to comprehend

and follow the rules when tax and regulatory systems are opaque because of

corruption, creating legal and financial hazards. (M Belitski et.al, 2016)

Cutting state personal income taxes not only won’t promote small business

growth and job creation, but it is also likely over time to threaten the success of

entrepreneurs by taking resources away from critical services like education. Until

recently, most proposals to cut state taxes in the name of boosting economic growth

and job creation focused on cutting business taxes like the state corporate tax. But in

the past several years a growing number of elected officials and business

organizations have called for cuts in state personal income taxes. They contend that

because owners of most small businesses take advantage of provisions that allow

them to pay personal income taxes on their profits rather than corporate taxes a

personal income tax cut is required for small business to get the economic benefits of

tax reduction. ( Michael Mazerove, 2013).

Theoretical Framework

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 According to Imelda T. Angeles (2021), Taxpayer compliance behavior and

how it affects organizational procedures. According to their compliance behavior, it

identifies taxpayers, adding to the body of knowledge on tax classifications and how

they affect compliance and non-compliance. Taxpayers' categorization indicates

management techniques that might influence stakeholder interactions. Taxation may

raise expenses and obligations for owners, but management can function with

confidence because of conformity with the law. The complexity of tax law can also

give management a chance to do business with assurance and morality. Payment of

taxes reflects a tax ethic, and adherence to tax laws demonstrates good business

governance and moral behavior. This in turn draws partners and investors, building a

good rapport with the government. In essence, the economy gains from taxpayers'

active compliance with tax obligations, affecting its sustainability and growth.

Taxation is essential to a nation's economic development, but collection in

emerging economies is getting harder. Using mixed-method findings, a study

categorized taxpayers and their contributions to tax collection. According to the

findings, the government should make tax payer distinctions in order to catch tax

evasion and determine the reasons for collecting differences. The report also advises

researchers to replicate and carry out a country-based study on taxpayer

characteristics to confirm the results while taking into account cultural and tax system

variations. This will assist in determining the reasons behind inequalities in tax

collection and enhance tax collection in emerging economies.

Conceptual Framework

Independent Dependent

Taxes regulations in terms Growth of small busines in

of: terms of:

 Income tax  Network Marketing

 Property tax  Profit
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 Frame 1 Frame 2

Figure 1: Research Paradigm

Frame 1 consist of Independent Variable which limited to taxes regulations.

Frame 2 consist of Dependent Variable which were limited to growth of small

business in terms of finance and profit.

Statement of the Problem

1. What is the level of taxes regulations in terms of:

1.1 Income tax;

1.2 Property tax?

2. What is the level of the growth of small business in terms of:

2.1 Finance;

2.2 Profit?

3. Is there any significant effect of taxes regulations on the growth of small business?

Research Hypothesis

There is no significance effect of the impact of taxes regulations on the growth

of small businesses.

Significance of the Study

The study was conducted to assess the impact of tax regulations in small

businesses. This study is beneficial to the following:

Proprietors: This study is significant and crucial for small business owners to obtain

information and be aware of the impact of tax regulations while running their

businesses.

Students: Students may be able to use this research study as a source of information

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and a guide for undertaking similar studies.

Researchers: Researchers will be able to broaden their knowledge of the subject and

impart it to other researchers. The first step in influencing others as a researcher is

gathering data. It is the purpose of researchers to inform the public, proprietors, and

future proprietors regarding the possible impacts of tax regulations on small

businesses.

AMA College: This research study will help in the advancement of the school’s

research and development. This study will be added as additional data needed for

current and future school growth by being kept and stored.

Future Researchers: This research study can serve as future assistance and reference

material to gain knowledge and acquire further information regarding their research.

Scope and Limitations

This study aimed to provide information regarding the impact of tax

regulations on the growth of small businesses. The study will be conducted with 50

small business owners that started this year, 2023, through a survey within the vicinity

of Santa Cruz, Laguna. The data collection will be determined in accordance with the

participants responses.

This study is limited to the information about specific organizations, sectors,

and departments that benefit taxpayers, both public and private, and will not cover

other problems that are not necessarily connected to the scope of the study. Each

participant will be given the same questionnaire, and the results will only be

applicable to those that correlate with the impact of tax regulations on small

businesses and will not be used to obtain information regarding the government for

negative purposes.

Definition of Terms

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 To furthermore understand about the contents of this research paper, the

important terms used in the study have been operationally defined. The following

terms are:

Finance: It refers to how small business owners run and manage the money in their

business.

Impact: The effect or outcome of a particular action.

Loan: A sum of money that individuals or small businesses borrow from banks or

other financial institutions.

Non-profit Organization: An organization with the purpose of providing a service to

the community without generating a profit.

Profit: The money left after paying for small business expenses

Resources: The materials and support that small businesses have at hand.

Small Business: A small-scale type of industry that offers goods and services and has

few employees, or sometimes the owner is also the employee.

Tax: The mandatory contribution levied on individuals or corporations by a

government entity.

Tax Regulations: It refers to the policies or rules that taxpayers and small businesses

follow

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