2. What You Need To Know
This lesson is focused primarily on the different economic issues
that a Filipino entrepreneur is facing especially in this time of
pandemic.
As we go through this lesson, you are expected to:
1. Identify the different economic issues of Filipino entrepreneurs.
2. Analyze the effects of contemporary economic issues affecting
the Filipino entrepreneurs.
3. Design a plan matrix on how to address the economic issues
affecting the Filipino entrepreneurs.
4. I. INVESTMENT
In Economics, investment is an economic activity that
forgoes consumption today with an eye to increasing
output in the future. In finance terms, investment is
denoting a purchase of a security such as stocks or bonds.
➤Classification of investment:
1. Long term
2. Short term
5. Long Term Investments
- are investments that a firm is willing to
hold for a long period of more than a year
or 30 years at most. Being in a long term
investment, investors are willing to accept
the risk in the pursuit of higher rewards.
6. Example:
1. Stocks – these are paper investment, which means
it’s not like a property to manage. Investing in stocks
is investing in the economy.
➤Categories of stocks:
a. Growth stocks – often pay no dividends at all,
primarily reinvest profits in growth.
b. High dividend stocks – have the prospect of
capital appreciation.
7. 2. Bonds – are interest bearing certificates
with terms greater than 10, 20 or 30 years.
Not only provide interest income but also
capital appreciation.
Note: mutual funds and exchange traded
funds are function as portfolios of large
number of different stocks and bonds.
8. 3. Real Estate – an alternative to stocks and as
the best long term investment.
➤Two ways to make money investing in rental
real estate:
a. Rental income
b. Capital appreciation
4. Tax Sheltered Retirement Plans – aren’t
actual investments but get important tax benefits.
9. 5. Annuities – are solid investments and more of an
investment contract.
➤5 Best Philippine Stocks for Long Term Investment:
1. Ayala Corp
2. Ayala Land Inc.
3. Banco de Oro
4. Bank of the Philippine Islands
5. Jollibee Foods Corp.
10. Short Term Investments
- are highly liquid, and by liquid would
mean easy to turn asset into cash. Tend
to be lower risk, meaning sacrificing a
potentially higher return for the safety of
having money.
11. Examples:
1. Savings Account – are highly liquid, you can
add money to the account and it is insured under
the PDIC or Philippine Deposit Insurance
Corporation.
2. Corporate Bond Funds – typically considered
safe and pay interest. However, it is not insured
by the government so it can lose money.
12. 3. Government Bond Funds – just like corporate bonds
except that it is issued by the government. It is not
insured under PDIC but it promises to repay money.
4. Money Market Accounts – another kind of bank
deposit and usually pay a higher interest rate than
savings account. It is protected by PDIC. It is highly
liquid.
5. Certificates of Deposit – it is referred as the time
deposit.
13. II. TAXATION
● The Philippine tax law system was
based on the 1987 Philippine
Constitution and sets its limitations on
the exercise of the power to tax in the
following articles:
14. a. Article 6, sections 28-29
1. Requirement of uniformity and equity in taxation
(Article VI, section 28, Legislative Department).
2. Prohibition against taxation of religious, charitable and
educational entities (Religious and charitable institutions
exempt from property taxes) (Article VI, section 28,
Legislative Department).
3. Prohibition against taxation appropriation for religious
purposes(Article VI, section 28, Legislative Department).
15. b. Article 16, section 4
Prohibition against taxation of non-stock , non-
profit educational institutions and proprietary
educational institutions (exempt from property
and income taxes as well as customs duties
except income derived from business activity not
related to its educational purpose.
16. - The latest revision of the tax law is the
National Internal Revenue Code of
1997.
- Taxes are the lifeblood of government.
These are used to finance the basic
services such as health care and education
as well as infrastructure.
17. - In 2017 Doing Business Report of World Bank, the
Philippines ranked 99th out of 190 economies in terms of
filing of taxes. It takes 185.6 hours or 28 times each year to
file taxes.
➤Main objectives of taxes:
1. Revenue raising to provide public good
2. Redistribution of income and wealth
3. Economic regulator to promote social and economic
welfare
4. Harmonization among other states
18. Classification of Taxes:
1. By tax base – is a convenient classification for economic analysis,
for example, in examining who exactly bears the burden of a tax
known as incidence of taxation
2. Indirect/direct – a direct tax is one levied directly on the person
who is intended to pay the tax whereas the indirect tax is borne by a
person other than the one from whom the tax is collected.
3. Unit/ad valorem – a unit or specific tax is levied on the volume
of what is being taxed whereas an ad valorem tax is levied on the
value of the tax base.
19. 4. Distribution of the tax burden – the way in which burden of tax
is distributed among the taxpaying community.
a. Progressive taxes take an increasing portion as the value of the tax
base rises and depends on the marginal rate of tax.
b. Proportional taxes take a constant portion of the value of the tax
base and depends on the marginal and average rates of tax being
equal.
c. Regressive taxes take a declining portion as the value of the tax
base rises and depends on the average rate of tax being greater than
the marginal rate of tax.
20. • Levied means impose
• Marginal means extra or additional or
increment
Marginal Rate of Tax = Change in tax paid
Change in income
Average Rate of Tax = Total tax paid
Total income
21. In the Philippines, the government adopted the
progressive taxation scheme in the collection of
income tax in order to allocate the burden of tax
fairly between members of the community.
Under the progressive taxation, the rate of tax
would increase as the level of income increased.
This implies that the system should be used to
correct income inequalities.
22. ➤The following are the arguments in favor of progressive
taxation:
a. Vertical equity – tax rates should be progressive in
order to promote equality of sacrifice like the loss of a one
peso of a rich person is less a burden compared to the loss
of a one peso to a poor person.
b. Redistribution of income – socially aware
governments seeking reduce poverty and promote social
welfare can use progressive taxation to achieve a greater
degree of redistribution.
23. c. Benefit theory – may be justified on the grounds that
wealthier individuals receive more benefit from public
services such as defense and law and order as they have
more to lose than poorer individuals with few possessions.
d. Achieve equity in the tax system as a whole – can
compensate for regressive taxes in the tax system so that
the total burden of taxation from all taxes is proportional.
24. ➤The following are arguments against a progressive taxation:
a. Simplicity – it is argued that steeply progressive rates of income
tax make it more complicated increasing the incentive to avoid and
evade the tax.
b. Political objection – the fact that a government is voted in by the
majority of the electorate but the highest progressive rates of tax
would only apply to a minority may be politically unacceptable, as
in effect the majority would be allowed to determine rates of tax
that would fall exclusively on the minority.
25. c. Economic efficiency – highly progressive
rates of income tax are likely to reduce savings
and the creation of capital making society as a
whole worse off.
26. Ambisyon Natin 2040 paved the way of passing
the major laws. The Tax Reform for Acceleration
and Inclusion or the well-known TRAIN bill, tax
amnesty legislation and Republic Act No. 11032
of 2018 which aims to fast track measures of
cutting red tape and make the process of setting
up and maintaining a business easier and
efficient.
27. The Tax Reform for Attracting Better and High-
Quality Opportunities or the TRABAHO bill is
the second component of the tax reform
package which is to make corporate tax rates in
the Philippines competitive with those of its
regional neighbors and to enhance fiscal
incentives regime.
28. 1. TRAIN bill was implemented in January 2018 to
increase government earnings to fund higher public
expenditure which are better infrastructure, health,
education, jobs and social protection.
A simplified income tax system was also developed
for small businesses introducing the possibility of
being taxed at a flat rate of their gross sales on
receipts provided that this does not exceed an annual
threshold of 3 million.
29. 2. TRABAHO bill proposes an income tax
holiday incentive be granted for a period not
exceeding three years and other incentives for
businesses.
3. Green Jobs Act of 2016 referring to
employment that contributes to the preservation
and restoration of the environment.
30. 4. Tax Amnesty Act of 2018 or RA
11213 with taxpayers benefitting from
two types of tax amnesties:
a. Estate Tax Amnesty
b. Tax Amnesty on Delinquencies
31. Ease of Doing Business Act
Republic Act No. 11032 of 2018 or otherwise
known as the Ease of Doing Business and Efficient
Government Service Delivery Act provides for an
adoption of simplified requirements and procedures
that will reduce bureaucratic requirements and
expedite both business and non-business related
transactions with the government.
32. ➤The law provides a zero contact policy wherein
government employees are prohibited from having any
contact of any type with any transacting applicant except on
the following cases:
a. During preliminary assessment of the request
b. While evaluating the sufficiency of submitted
requirements
• The present administration took the initiative so that
entrepreneurs can do business at ease.
33. III. WAGE
Wage is the price of labor and is usually in
monetary compensation paid by an employer to
an employee in exchange of a work done. What
drives the higher supply of labor is the wage
even if there is low demand for it. Higher wage
means higher supply of labor.
34. Wage rate in the Philippines is at 13, 487.30 pesos
since 2018 compared to the 12, 646 pesos in 2017.
For small businesses to acquire and convince
individuals to offer their skills, expertise and time is
to make compensation be competitive in the labor
market. Attractive benefits and other perks entice a
skilled individual to be part of your growing
business.
35. ➤The minimum wage law is determined by the
regional wage boards every year. The
determination is based on the following factors:
1. Needs of workers and their families
2. Capacity to pay
3. Comparable wages and incomes
4. Requirements of economic and social
development.
36. IV. RENT
In the Philippines, a law intended to protect
millions of Filipino renters across the country
which took effect in 2009, the Rent Control Act of
2009. In 2018, the Philippine Statistics Office
recorded least 1.5 million renters and 97% of
these renters are renting with rates costing 10, 000
pesos per month.
