Basic Principles of a Sound Tax System There are three basic principles of a sound taxation.

These are fiscal adequacy, equality or theoretical justice and administrative feasibility. I. Fiscal Adequacy

Fiscal Adequacy means that the sources of revenue should be sufficient to meet the demands of public expenditure. Taxation as a part of the country s source of revenue, citizens of our country should be aware on the importance of it. As the lifeblood of our nation, taxation is very significant in making the government perform its function to serve its people. The budget of the country comes from taxes paid by its citizens. So payment of tax is a necessity and the government, thru Bureau of Internal Revenue and Bureau of Customs, shall do its part on the collection of taxes. The question to our government is whether we are generating enough revenue for the country and how do they manage the proper distribution of its budget. Considering the amount of debt we owe to the international banks, Philippines is not generating enough income to pay for its expenses in running the country. The revenue is not sufficient to pay for its debt and this is a bad sign that the fiscal budget is not enough or should we say that the budget no longer goes to where it is appropriated. This misappropriation includes corruption of public funds, over priced projects, under the table deals and the likes that contribute to the country s continuous poverty. And if the government properly handle its

funds and still lack the revenue to pay for its project, I guess the government should find a way to raise its fiscal budget to adequately meet the demands for public expenditure. In the Philippines, we think that the percentage of tax passed on its citizen is already a burden. The amount of deduction to the salaries of an employee is considerable large amount of money. So increasing the percentage of tax burden on the citizen is no longer an option in raising the revenue of the government. Also, there are different kinds of tax to where the government can pull out funds for the implementation of its projects. I recommend that the government increase its tax on cigarettes and liquors, specifically those coming outside the country. Since these commodities are not considered a necessity, people who tightens there belt in saving money will no longer consider buying these unnecessary things. And this might as well increase the income on tax of the government. The government can also raised its revenue by increasing its tax on imported goods that are not considered a necessity for its citizens. This will not only increase the government s revenue but will also help the local producers of such products.

II.

Equality or theoretical justice This means that it is only appropriate for the government to base the tax that is being

collected to the declared salary of the payer. With this principle tax payers will have reasonable taxes and will give a fair share of what they have earned to the government. This is the socalled ability to pay principle. The Philippines being a third world country and has a minimum wage salary of 426.00 Php per day, according to the Department of Labor and Employment in the National Capital Region, only shows that not everyone could pay their taxes. With the ability to pay principle this people who earn minimum wages are given tax exemptions to cope up with their daily living cost and those who are earning above this minimum wage are obligatory to pay their monthly taxes. The monthly income is proportional to the tax that is being paid. As the income increases tax also increases. For those whose income after personal and additional exemptions is below 10,000 the tax rate would be 5%, for 10,000but not over 30,000 would be 500 + 10% of the excess over 10,000, for 30,000 but not over 70,000 would be 2,500 + 15% of the excess over 30,000, for 70,000 but not over 140,000 would be 8,500 + 20% of the excess over 70,000, for 140,000 but not over 250,000 would be 22,500 + 25% of the excess over 140,000, for 250,000 but not over 500,000 would be 50,000 + 30% of the excess over 250,000 and for 500,000 and above would be 125,000 + 32% of the excess over 500,000.

III.

Administrative Feasibility

Administrative Feasibility means that tax laws should be capable of convenient, just and effective administration. This principle is very important in the collection of taxes and its implementation. Tax imposition in the Philippines involves three stages, first is the levy. It is the legislative act or the tax law that determines the amount of tax or certain percentage shall be imposed on the person, property or acts subjected thereto. After the levy, assessment follows; this action involves computation of the sum due, giving notice to the taxpayer and making simultaneous demand upon the payer for the tax or its deficiency. And lastly the collection; thru proper government agencies, taxes are collected. This stage embraces the different remedies for enforcement of the payment of taxes including prosecution on tax violators. The government assigns two bureaus in the administration of tax collection; these are Bureau of Internal Revenue and Bureau of Customs. In enforcing the tax law, the administrative body of our government should be very serious and sincere in their job. The revenue of the country lies in their hands. Every cent that they collect should go and use only for public purposes and projects. They should detach any personal interest on the money that they collected. As a recommendation, every officer in the bureau should undergo a thorough process of lifestyle checking and before hiring any office it should be very clear that they are hired as a

public servant not as a master waiting to be served. We believed that the root of all evil is selfishness, and everyone in the government should not contain this undesirable character. Another recommendation on the administration of taxation, officers of the bureau should do a thorough lifestyle check on taxpayer with questionable payment of tax despite his/her riches. And no tax evaders should be given with special treatment and proper dues and fines should be enforced on the violators.

Assessment and Recommendation On Sound Tax System In the Philippines

Submitted to: Prof. Edna Q. Kinilitan

Submitted By: Esquivel, Timothy John Policarpio, Arvin San Gabriel, Melvin