SS - Lesson 3

• the philippines is a predominantly market capitalist company
• according to the national statistical coordination board, the national government, local government, and government-owned or controlled cooperations, including government monetary institutions, are the components of the philippine public sector
• externality refers to the effect of an economic activity to people who are not directly involved in the said activity
• taxes are portions of incomes that individuals and businesses pay to the government
• the bureau of internal revenue (BIR) and the bureau of customs (BOC) are the two tax collecting agencies of the government
• The BIR assesses and collects all national internal revenue taxes, fees, and charges
• The BOC collects all taxes, fees. and charges in connection with international trade
• nontax revenues consist of incomes of the bureau of treasury, government fees and charges, privatisation, and others (such as foreign grants/loans)
• two main classifications of taxes: shoulders the tax burden and based on percentage of tax levied on the income
• under shoulders the tax burden are direct and indirect taxes
• direct taxes are taxes shouldered and paid by the taxpayers themselves
• indirect taxes are taxes passed on by the taxpayers to other persons such as consumers
• examples of direct taxes: personal income taxes, business income taxes, property taxes, and estate and gift taxes
• personal income taxes are taxes levied on incomes of individuals
• business income taxes are taxes levied on incomes of corporations and taxable partnerships
• property taxes are taxes levied on real properties, such as lands, houses and buildings
• estate and gift taxes are taxes on transfer on wealth
• estate tax is tax on wealth such as a piece of land. transferred to another person after the death of the donor. Aka inheritance tax
• gift tax is a tax on transfer of wealth before the death of the donor
• examples of indirect tax: value-added tax, excise tax, and duties
• value added tax is the tax levied on purchase or consumption of selected products
• excise tax is a tax levied on particular products such as liquors and cigarettes
• duties are taxes on purchase or consumption of imported goods
• when tax rate increases as income increases, the tax is considered as progressive
• when taxpayers, regardless of income, pay the same percentage of tax, the tax is said to be proportional
• when tax is inversely proportional to the size of income, the tax is considered tax regressive
• national budget is allowed into two main dimension: by sector and by expense class
• budget by class covers the following areas: defense, debt burden, economic services, general public service, and social service
• debt burden allotment is earmarked for the payment of governments financial obligations
• the bulk of defense budget goes to the armed force of the philippines
• economic services cover expenditures for agriculture and agrarian reform, natural resources and environment, etc..
• general public service include general administration, public order and safety, subsidy to local government units, and other general public services
• social services include expenditures for education, culture, manpower development, health, social security, welfare and employment, etc..
• natural government budget by expense class consists of: personnel services, capital outlays, allotments to LGUs, maintenance and other operating expenses, debt burden, support to government owned and controlled corporations (GOCCs) and tax expenditures
• personnel services covers salaries and wages, overtime pay, contractual services, government service insurance system (GSIS) life retirement and other services
• maintenance and other operating expenses include travel expenses; communication expenses; repairs and maintenance of government facilities; transportation and delivery expenses; etc..
• capital outlays cover land and land improvements
• debt burden including net lending covers payment for the government loans, loan outlays etc..
• tax expenditures cover estimated revenue losses from special exclusions, exemptions, deduction and credits in the tax law
• government budgeting cycle has four phases: preparation, legislation, execution, and accountability