Polytechnic University of the Philippines

(Open University)
Quezon Branch
Lopez, Quezon
HAROLD R. BERANA Dr. Rufo N. Bueza
Master in Public Administration

PUBLIC FISCAL

Module 1 Public Fiscal Administration Fundamental Concepts

Exercises/Written Assignment #1

1. What do you understand of Public Finance. How does it differ with Public

Fiscal Administration?

Public Finance is the government revenues and expenditures. It is the role of the

government in the economy. It is a management of a country’s revenue, expenditures,

and debt load through various government and quasi-government institutions. The main

components of public finance include activities related to collecting revenue, making

expenditures to support society, and implementing a financing strategy.

When we say Public Fiscal Administration means by which a government

adjusts its spending levels and tax rates to monitor and influence a nation's economy. It

is the sister strategy to monetary policy through which a central bank influences a

nation's money supply. While Public Finance refers to policies related to the regulation,

supervision, and oversight of the financial and payment systems, including markets and

institutions, with the view to promoting financial stability, market efficiency, and client-

asset and consumer protection. Finance policy is mainly concerned with the

management of interest rates and the total supply of money in circulation. While, fiscal

policies are to target the total level of spending plus the total composition of spending.
2. Why is the study of Public Fiscal Administration important? Show examples.

It is important to study the Public Fiscal Administration because we will to how

the managing incoming and outgoing monetary transactions and budgets for

governments, educational institutions, nonprofit organizations, and other public service

entities. It also refers to systems, processes, resources, and the policy, environment,

government, the inter-governmental and inter-local fiscal relations, affecting among

others.

One good example is how the government of the Philippines manages the

monetary fund annually. How they allocate the budget in the most effective way and

what to prioritize in planning the budget.

3. Why is Public Finance considered both a science and an art?

Public finance is considered both science and an art. Science because doing

public finance follows various systematic procedures enable them to finalize the national

budget in a year. It uses scientific methods, it must be objective and measured. The

facts are orderly arranged. It will become an art if these scientific methods are used,

learned and applied. Even when using common sense is applied in decision making to

be practical in allocation.

4. In what major areas of Public Fiscal Administration do reforms be given

emphasis?

Public Fiscal Administration must give focus to the budgeting and expenditures

because budget planning and preparation system is essential, not just to derive
expenditure projections but to be able to advise policymakers on the feasibility and

desirability of specific budget proposals, from a macroeconomic or microeconomic

perspective. It is much easier to control government expenditures at the "upstream"

point of budget preparation than later during the execution of the budget. Budget

planning and preparation are (or should be) at the heart of good public expenditure

management. If the current administration didn’t know how to allocate budget and

expenditures, there is no efficient delivery of public services.

5. Among the major areas of Public Fiscal Administration (Philippine scene),

which is the weakest area? Strongest area? What can be done?

I think the weakest area of Pubic Fiscal Administration in the Philippines is the

accounting and auditing because we have too many public servants who are not doing

their proper job and perform some corruption in auditing the budget and expenditures.

The strongest in my opinion is the public borrowings and debt management, because

we as Filipinos can easily transact to the other country to make a deal and borrow some

funds that needed annually. They have trust on us that we can easily payback the

money that we borrowed.

 Polytechnic University of the Philippines
(Open University)
Quezon Branch
Lopez, Quezon
HAROLD R. BERANA Dr. Rufo N. Bueza
Master in Public Administration
PUBLIC FISCAL

Module 2 Public Fiscal Administration: History, Issues and Concerns

Exercises/Written Assignment #2

1. Give a summary of the development of public finance in general. How does it

differ with that in the Philippine context?

The history of public finance is a story about change over time, a tale punctuated

by wars, social movements, and revolutions. Yet much of the existing scholarly literature

neglects the broader context that has given meaning to fiscal policies. The new

historical fiscal sociology is an emerging interdisciplinary field that investigates the

relationship between public finance and society. In doing so, it restores the importance

of historical and social context to the study of taxation, public debt, and state spending.

Scholars in this field pose broad historical and comparative questions about the origins

and development of fiscal policies. They also ask about the consequences of these

policies for political, social, and cultural life. Taxation is a central institution in modern

society. Instead of asking how a particular tax law or policy affects prices and quantities

in a particular market.

In the Philippine scenario, development of Public finance started with the barter

system of commodities during Pre-Spanish Period. The datus have just collected the tax
from the people. In the Spanish era, all male Filipinos, from 16 6o 60 years of age,

rendered forced labor called “polo” for 40 days a year. They worked in building and

repairing roads, bridges and churches, etc.; cutting timber in the forests, and working in

artillery foundries and shipyards. The tributes and the taxes, plus encomienda system

(local version of feudal estate) became the sources of Spanish resources and at the

same time of abuses and even state corruption. When the American period came, the

country experienced military government, civil government, and the Commonwealth.

Many of the Spanish legal and business practices were initially adopted until replaced

with those of American influence. During the first Philippine Republic, the government

was financed from two principal sources of revenue: taxes and license fees, and military

contributions, or war taxes. Special payment for taxes was allowed in the form of rice,

edibles, etc. for the sustenance of the army . In the Civil Commission era, the local

governments were provided with their own sources of income from the real property tax.

A system of inspection and examination of banks, an accounting and audit system, an

internal revenue system and a tariff system under the Tariff Act of 1905 of Congress

were created. The powers and duties of the Secretary of Finance and Justice included

administrative and legislative matters. The Japanese printed Japanese paper money

popularly known as “Mickey Mouse” money which flooded the Islands resulting in

inflation with everything sold at an exorbitant price in the Japanese Occupation regime.

Today, a decision to increase taxes increases revenue of government to implement

social amelioration program creates a charge on revenue earned while at the same time

distributes and disperses social benefits.

2. Analyze the development of public finance in relation to the process of

development among nations.

 The development of Public finance among nations has been in a fast-faced

situation. Various strategies to manage the government funds had been utilized as the

economic changes. Many changes on the way a nation manage their budget has been

occurred. The main concern is how appropriate public finance policies can improve the

quality of government. From simple ways to complex to manage the expenditures has

been established over the decades. Through the years, many developing countries

would benefit from an increase in the responsibility of state and local governments for

certain public functions.

3. How can we strengthen accountability of government in spending public

money?

We can strengthen accountability of government in spending money by means of

maximizing the use of budgeting and proper allocation of budget. Prudent budget

policies, reduced costs of raising revenue, efficient and effective public spending,

strengthened decentralization in government, and public finance policies consistent with

poverty alleviation these are the five broad directions which public finance policies

should strive to pursue. Progress simultaneously on all fronts will be difficult to attain in

most countries. Nonetheless, neglect of any one area can easily lead to problems in the

others. A comprehensive approach to public finance reform is therefore essential to

produce consistent policy advice and to implement sustainable reform.

 Polytechnic University of the Philippines
(Open University)
Quezon Branch
Lopez, Quezon
HAROLD R. BERANA Dr. Rufo N. Bueza
Master in Public Administration
PUBLIC FISCAL

Module 3 The Functions of Government and the Roles of Fiscal Policy

Exercises/Written Assignment #3

1. Get hold of a recent newspaper. Classify each of the headlines that illustrate

the economic functions of government.

In the issues that our country is facing

off. It shows the ups and down of our

economy. It aimed at ending decades

of separatist violence. The impact the

attack would have on a decades-long

push for peace that culminated last

week in voters approving expanded

Muslim self-rule in the south. This has

a large impact on our economy,

because of many damages, the rate of

loss of impastructure were millions of

worth. Many were affected by this

incident. The church attack came

despite President Rodrigo Duterte

putting the southern Philippines under martial rule after pro-IS militants seized the

southern city of Marawi in May 2017.

Government officials have argued that martial rule, which gives authorities extra

powers, has been effective in taming the perpetually restive region.

2. In a mixed market economy like that of the Philippines, both markets and

government decisions play important roles. What roles should the government

play in the economy? Take a personal stand on the role of government in the

economy. Which position makes the most sense? Why?

The government in the Philippines should correct market failures, or

situations in which private markets cannot maximize the value that they could create for

society. This includes providing public goods, internalizing externalities, consequences

of economic activities on unrelated third parties, and enforcing competition. That being

said, many societies have accepted a broader involvement of government in a capitalist

economy.

Perhaps most important the government guides the overall pace of

economic activity, attempting to maintain steady growth, high levels of employment, and

price stability. By adjusting spending and tax rates or managing the money supply and

controlling the use of credit. It can slow down or speed up the economy's rate of growth

and, in the process, affect the level of prices and employment.

In my opinion, the president should take full responsibility in the economic growth

in the Philippines. Being the leader of a country, you must take into account all the

happenings in his legislation. He must be concerned on how series of reforms has been
pursued to enhance the entrepreneurial environment. He must seek many investors to

increase the economic growth in the Philippines.

3. Based on the World Bank classification of economies, what is the classification

of the Philippines? What are the characteristics of the Philippine economy to be

classified as such?

According on the World Bank, the Philippine economy grew by 6.9 percent year-

on-year in the first half of 2016, making it the strongest performer among major East

Asian developing economies including China, Indonesia, Thailand, Malaysia and

Vietnam.

The Philippines is one of the most dynamic economies in the East Asia and the

Pacific region. With increasing urbanization, a growing middle-income class, and a large

and young population, the Philippines’ economic dynamism is rooted in strong

consumer demand supported by vibrant labor market and robust remittances. Business

activities are buoyant with notable performance in the services sector including the

business process outsourcing, real estate, and finance and insurance industries.

Sound economic fundamentals and a globally recognized competitive workforce

reinforce the growth momentum. Having sustained an average annual growth of 6.4

percent between 2010-2017 from an average of 4.5 percent between 2000-2009, the

country is poised to make the leap from a lower-middle income country with a gross

national income per capita of US$3,660 in 2017 to an upper-middle income country (per

capita income range of US$3,896 – 12,055) in the medium term.

The Philippines remains a strong growth performer in the East Asia region. While

the Philippine economic growth moderated to 6.3 percent year-on-year in the first half of
2018 from 6.6 percent in the same period last year, the Philippines was among the top

three growth performers in the region. Private consumption growth marginally declined

amidst rising inflation, but remained robust given a stable job market and the steady

remittance inflows. Investment spending supported growth, fueled by increased

investments in durable equipment and buoyant activity in the construction sector. In

addition, public consumption growth accelerated, as the government continued to ramp

up public spending. Net exports, however, was weaker driven by softening global trade,

and robust import growth.

In recent years, the Philippine economy has made progress in delivering

inclusive growth, evidenced by the declining poverty rates and a falling Gini coefficient.

Poverty declined from 26.6 percent in 2006 to 21.6 percent in 2015 while Gini coefficient

declined from 42.9 to 40.1 over the same period. Unemployment has reached historic

low rates but underemployment remains high, near its 18-20 percent decade-long

average. Although a large share of Filipino workers transitioned out of agriculture, most

of them end up in low-end service jobs. Thus, while employment increased between

2006 and 2015, average wages remained stagnant. Measures to generate good jobs

and better wages therefore are essential to achieve shared prosperity.

 Polytechnic University of the Philippines
(Open University)
Quezon Branch
Lopez, Quezon
HAROLD R. BERANA Dr. Rufo N. Bueza
Master in Public Administration
PUBLIC FISCAL

Module 4 Legal Framework of Public Fiscal Administration in the Philippines

Exercises/Written Assignment #4

1. There are other government agencies and instrumentalities involved in public

fiscal administration. Can you name them?

Department of Finance (DOF) is the executive department of the Philippine

government responsible for the formulation, institutionalization and administration of

fiscal policies, management of the financial resources of the government, supervision of

the revenue operations of all local government units, the review, approval and

management of all public sector debt, and the rationalization, privatization and public

accountability of corporations and assets owned, controlled or acquired by the

government.

Department of Budget and Management (DBM) is an executive body under

the Office of the President of the Philippines. It is responsible for the sound and efficient

use of government resources for national development and also as an instrument for

the meeting of national socio-economic and political development goals.

National Economic and Development Authority (NEDA), is the country’s

premier socioeconomic planning body, highly regarded as the authority in

macroeconomic forecasting and policy analysis and research. It provides high-level

advice to policymakers in Congress and the Executive Branch. Its key responsibilities

include:

a. Coordination of such activities as the formulation of policies, plans and programs

to efficiently set the broad parameters for national and sub-national (area-wide,

regional and local development);

b. Review, evaluation, and monitoring of infrastructure projects identified under the

Comprehensive and Integrated Infrastructure Program (CIIP) consistent with the

government’s thrust of increasing investment spending for the growing demand

on quality infrastructure facilities; and

c. Undertaking of short-term policy reviews to provide critical analyses of

development issues and policy alternatives to decision-makers.

Commission on Audit (COA) is an independent constitutional commission

established by the Constitution of the Philippines. It has the primary function to

examine, audit and settle all accounts and expenditures of the funds and properties of

the Philippine government.

Bangko Sentral ng Pilipinas (BSP) the main functions are:

1. Liquidity management, by formulating and implementing monetary policy

aimed at influencing money supply, consistent with its primary objective to maintain

price stability,

2. Currency issue. The BSP has the exclusive power to issue the national

currency. All notes and coins issued by the BSP are fully guaranteed by the

Government and are considered legal tender for all private and public debts,
 3. Lender of last resort, by extending discounts, loans and advances

to banking institutions for liquidity purposes,

4. Financial supervision, by supervising banks and exercising

regulatory powers over non-bank institutions performing quasi-banking functions,

5. Management of foreign currency reserves, by maintaining sufficient

international reserves to meet any foreseeable net demands for foreign currencies

in order to preserve the international stability and convertibility of the Philippine

peso,

6. Determination of exchange rate policy, by determining the

exchange rate policy of the Philippines. Currently, the BSP adheres to a market-

oriented foreign exchange rate policy, and

7. Being the banker, financial advisor and official depository of the

Government, its political subdivisions and instrumentalities and GOCCs.

2. Cite instances how the government agencies involved in public fiscal

administration interact with one another.

Budget Accountability During the preparation phase, the Executive prepares the

proposed National Budget. This is followed by the legislation phase where the Congress

authorize the General Appropriations Act. In the execution phase, agencies utilize their

approved budgets and during the accountability phase the executive phase, agencies

utilize their approved, the executive monitor and evaluate the use of the budget.

At the beginning of the budget preparation year, the Department of Budget and

Management (DBM) issues the National Budget Call to all agencies (including state

universities and colleges) and a separate Corporate Budget Call to all GOCCs and
GFIs. The budget Call contains budget parameters (including macroeconomic and fiscal

and agency budget ceilings) as set beforehand by the Development Budget

Coordination Committee (DBCC); and policy guidelines and procedures in the

preparation and submission of agency budget proposals. Allotment Release Orders

(SAROs) Items identified as “needing clearance” are those which require the approval

of the DBM or the President, as the case may be (for instance, lump sum funds and

confidential and intelligence funds). For such items, an agency needs to submit a

Special Budget Request to the DBM with supporting documents. Once approved, a

SARO is issued.

3. Name other legal basis on sources of public revenues aside from taxation.

The following points highlight the nine main sources of government revenue. The

sources are:

Source # 1. Tax: A tax is a compulsory levy imposed by a public authority

against which tax payers cannot claim anything. It is not imposed as a penalty for only

legal offence. The essence of a tax, as distinguished from other charges by the

government, is the absence of a direct quid pro quo (i.e., exchange of favor) between

the tax payer and the public authority.

Source # 2. Rates: Rates refer to local taxation, i.e., taxation levied by (or for)

local rather than central government. Normally rates are proportional to the estimated

rentable value of business and domestic properties. Rates are often criticised as being

unrelated to income.
 Source # 3. Fees: Fee is a payment to defray the cost of each recurring service

undertaken by the government, primarily in the public interest.

Source # 4. Licence fee: A licence fee is paid in those instances in which the

government authority is invoked simply to confer a permission or a privilege.

Source # 5. Surplus of the public sector units: The government acts like a

business- person and the public acts like its customers. The government may either sell

goods or render services like train, city bus, electricity, transport, posts and telegraphs,

water supply, etc. The government also earns revenue from the production of

commodities like steel, oil, life-saving drugs, etc.

Source # 6. Fine and penalties: They are the charges imposed on persons as a

punishment for contravention of a law. The main purpose of these is not to raise

revenue from the public but to force them to follow law and order of the country.

Source # 7. Gifts and grants: Gifts are voluntary contribution from private

individuals or non-government donors to the government fund for specific purposes

such as relief fund, defence fund during war or an emergency. However, this source

provides a small portion of government revenue.

Source # 8. Printing of paper money: It is another source of revenue of the

government. It is a method of creating extra resources. This method is normally avoided

because if once this method of financing is started, it becomes difficult to stop it.

Source # 9. Borrowings: Borrowings from the public is another source of

government revenue. It includes loans from the public in the form of deposits, bonds,

etc. and also from the foreign agencies and organizations.

 Polytechnic University of the Philippines
(Open University)
Quezon Branch
Lopez, Quezon
HAROLD R. BERANA Dr. Rufo N. Bueza
Master in Public Administration
PUBLIC FISCAL

Module 5 Budgeting in the Public Sector

Exercises/Written Assignment #5

1. Secure a copy of the Vision, Goals and Objectives plan of your Agency. From

this plan:

VISION

The BJMP envisions itself as a dynamic institution highly regarded for its

sustained humane safekeeping and development of inmates.

MISSION

The Bureau aims to enhance public safety by providing humane safekeeping and

development of inmates in all district, city and municipal jails.

a. Create a Line Item Budget

 b. From the Line Item Budget develop a Program Budget based on the costs of

individual activities.

c. From the Program Budget develop a budget based on PPBS

d. From the PPBS develop a Zero-Base Budget.

2. Why do governments prepare an annual budget?

Annual budgets can apply to either a fiscal or calendar year. These budgets help

their creators to plan for the upcoming year and make the necessary adjustments to

meet their financial goals. Annual budgets help individuals to better manage their

money. For corporations, governments, and other organizations, annual budgets are

critical and often mandated for planning purposes with respect to sources of income and

necessary expenses; assets, liabilities, and equity required to support operations over

the one-year period; and cash flows used for reinvestments, debt management, or

discretionary purposes.

Another prime role of an annual budget, typically broken down into monthly

periods, is the enabling of budget versus "actual" performance comparisons. For

example, if an individual has to dip into a savings reserve at the end of a month to pay a

credit card bill, he or she can look at the annual budget items to find out where an actual

expense exceeded a budgeted expense and make appropriate adjustments.

3. P-Noy has directed the use of zero-based budgeting for FY 2011 instead of the

traditional incremental budgeting method used by previous administrations. What

could be the reason? What are the advantages and disadvantages of zero-based

budgeting?

ZERO-BASED budgeting (ZBB) has always been an attractive technique to US

state-government level planners. It became even more so when Americans felt the

2008-2009 economic meltdown.

At least 15 state legislatures saw bills proposing statewide zero-based budgeting

last year. The most famous proponent of ZBB is President Jimmy Carter. His ZBB

experience as the governor of Georgia was hailed as a success until analysts later saw

it to be exaggerated. When he introduced it to the federal government, the Office of

Management and Budget developed it as budget method by 1978.

But President Ronald Reagan’s administration used only some elements of it as

an alternative form of determining funding options for agencies when their budgets were

reduced. With ZBB, these agencies with less money were forced to prioritize their most

essential tasks and activities.

This is what appears to be the main reason President Benigno Aquino 3rd has

decided to make ZBB his administration’s approach to determining how much should be

allocated to which programs.

In its most basic sense, ZBB is what is forced on households that find

themselves with very little money. They have to begin from scratch. There is no money

for anything but the very basics.

 That is what ZBB fundamentally is. Under the ZBB regime, when a government

agency has to make its plans at the start of a budget cycle, it must assume that there is

no remaining money for programs from the previous cycle.

Advantages of ZBB:

 Efficient allocation of resources, as it is based on needs and benefits.

 This approach drives managers to find cost-effective ways to improve activities.
 This approach detects inflated budgets.
 It is useful for service departments because criteria are not always easy to

identify.
 It increases staff motivation because it gives them more initiative and

responsibility in the decision-making process.

 This approach increases the communication and coordination within the

organization about certain decisions.

 This approach identifies and eliminates wastage and out-of-date operations.
 This approach identifies opportunities for outsourcing.
 This approach forces cost centers to link their mission to the related

organizational objectives.

Disadvantages of ZBB

• It is time-consuming. If the review and analyses are not exhaustive, the findings

might end up being less than correct. And dishonest inputs might go undetected.

• Since decision-making cannot be made on huge chunks of data and situations,

so-called “decision units” and “decision packages” must be isolated. It is not easy to

arrive at these units and packages.

• Futuristic planning and prevention projects, which are just as important in the

long run as actual productive activities, will usually be set aside or downgraded. For it is

not easy to justify funds for the prevention of possibly bad events that never transpire. In
ZBB the bias is always in favor of production of results. In private companies, ZBB

always tend to be biased against R&D.

• Executives of agencies not trained in ZBB and rigorous analysis (which most

civil servants in the Philippines probably are) will most likely not be very useful in the

beginning. This makes the ZBB process even more time-consuming than it should be.

• More people and stakeholders must be involved in the ZBB process. This

makes it necessary to communicate all facts to all of them correctly. A difficult task when

many are involved in the analysis and decision process.

• In the big government departments, the large number of people and the thick

folders of reports or very long computerized reports will not be easy for members of the

review teams to digest. Making these detailed information materials shorter would result

in loss of data necessary for correct decisions.

• The honesty of every executive must be guaranteed, otherwise the results and

decisions will be wrong.

Polytechnic University of the Philippines

(Open University)
Quezon Branch
Lopez, Quezon
HAROLD R. BERANA Dr. Rufo N. Bueza
Master in Public Administration
PUBLIC FISCAL

Module 6 Revenues and Taxation

Exercises/Written Assignment #6

1. The power to tax is inherent in the State. Why is this so? Does this mean

that such power of the State is limitless? Discuss.

The power of taxation is both inherit and legislative in character because it has

been reserved by the State to for it to exercise. It is inherit because the sustenance of

the government requires contribution for them. The power of taxation originated from

the theory that existence of a government is a necessity. No government, whether

democratic or despotic, can exist without resources to finance the operation.

The power of the state in taxation has a limitation. It has a limitation of public

purpose where it for the support of the government or any recognized object of the

government, or where it will directly promote the welfare of the community in equal

measure. Also, limitation of territorial jurisdiction, it follows that its taxing power does not

extend beyond its territorial limits, but with its limit , it may tax persons, property, income

or business.

2. Define the different kinds of taxes being levied by the Philippine

government.

There are basically two types of taxes that are covered by the tax laws in the

Philippines, namely the national taxes and local taxes.

 National taxes refer to the national internal revenue taxes imposed and

collected by the national government through the Bureau of Internal Revenue (BIR),

such as income tax, Value Added Tax (VAT) or percentage tax, excise tax, estate tax,

capital gains tax, and documentary stamp tax.

Local taxes are the taxes imposed and collected by the local

government units, such as real property tax, local business taxes, professional

tax, amusement tax, and community tax.

3. Taxes are the only source of revenue of the government. True or False?

Discuss.

False, because the are other forms which a country can source a revenue of the

government. The sources are Tax, Rates, Fees, License Fee, Surplus of the public

sector units, Fine and penalties, Gifts and grants, Printing of paper money, Borrowings.

Excise taxes consist of taxes collected for various items, such as airline tickets,

gasoline products, distilled spirits and imported liquor, tobacco, firearms, and other

items.

Other taxes and receipts include Federal Reserve Banks (FRBs) earnings, tax

related fines, penalties and interest, and railroad retirement taxes.

Miscellaneous earned revenues consist of earned revenues received from the

public with virtually no associated cost. These revenues include rents and royalties on

the Outer Continental Shelf Lands resulting from the leasing and development of

mineral resources on public lands.

 Generally, funds from dedicated collections are financed by specifically identified

revenues, provided to the government by non-federal sources, often supplemented by

other financing sources, which remain available over time. These specifically identified

revenues and other financing sources are required by statute to be used for designated

activities, benefits or purposes, and must be accounted for separately from the

Government’s general revenue.

Intragovernmental interest represents interest earned from the investment of

surplus dedicated collections, which finance the deficit spending of all other fund’s non-

dedicated operations.

4. Discuss the characteristics of a good tax system.

A good tax system should meet five basic conditions: fairness, adequacy,

simplicity, transparency, and administrative ease.

Although opinions about what makes a good tax system will vary, there is general

consensus that these five basic conditions should be maximized to the greatest extent

possible.

Fairness, or equity, means that everybody should pay a fair share of taxes.

There are two important concepts of equity: horizontal equity and vertical equity.

Horizontal equity means that taxpayers in similar financial condition should pay

similar amounts in taxes.

Vertical equity is just as important, however. Vertical equity means that

taxpayers who are better off should pay at least the same proportion of income in taxes
as those who are less well off. Vertical equity involves classifying taxes as regressive,

proportional, or progressive.

While no system of taxes is perfect, it is important to seek horizontal equity

because taxpayers must believe they are treated equally. It is just as important to seek

vertical equity so government does not become a burden to low-income residents.

Adequacy means that taxes must provide enough revenue to meet the basic

needs of society. A tax system meets the test of adequacy if it provides enough revenue

to meet the demand for public services, if revenue growth each year is enough to fund

the growth in cost of services, and if there is enough economic activity of the type being

taxed so rates can be kept relatively low.

Simplicity means that taxpayers can avoid a maze of taxes, forms and filing

requirements. A simpler tax system helps taxpayers better understand the system and

reduces the costs of compliance.

Transparency means that taxpayers and leaders can easily find information

about the tax system and how tax money is used. With a transparent tax system, we

know who is being taxed, how much they are paying, and what is being done with the

money. We also can find out who (in broad terms) pays the tax and who benefits from

tax exemptions, deductions, and credits.

Administrative ease means that the tax system is not too complicated or costly

for either taxpayers or tax collectors. Rules are well known and fairly simple, forms are

not too complicated, it is easy to comply voluntarily, the state can tell if taxes are paid on

time and correctly, and the state can conduct audits in a fair and efficient manner. The

cost of collecting a tax should be very small in relation to the amount collected.
 5. What government agencies in the Philippines are responsible for

collecting taxes?

The Department of Finance is a government institution that formulates fiscal

policy. Carrying out its basic function of revenue generation to ensure adequate

financing for the needs of the country has led to an expansion of the DOF’s role over

time. Below are the Bureaus, Agencies and Government Corporations under the

supervision of DOF.

BUREAU OF INTERNAL REVENUE (BIR)

 Assessment and collection of all national internal revenue taxes, fees and

charges.
 Enforcement of all forfeitures, penalties, fines and execution of judgments

in all cases decided in its favor by the Court of Tax Appeals and the

ordinary courts
 Administer supervisory and police powers conferred by National Internal

Revenue Code as amended by R.A. 8424 or other laws.

BUREAU OF CUSTOMS (BOC)

 Assess and collect customs revenues from imported goods.

BUREAU OF TREASURY (BTR)

Assess and collect lawful revenues:

 Assist in formulation of policies on borrowing, investment and capital market

development;
 Formulate adequate operational guidelines for fiscal and financial policies;
 Assist in preparation by government agencies concerned of an annual program,

for revenue and expenditure targets, borrowing levels and cash balances of

National Government (NG);

 Maintain books of accounts of the NG cash transactions;
 Manage cash resources of NG, collect advances made, and guarantee and

forward cover fees due NG;

 Control and service NG public debt, both foreign and domestic.