MODULE 5

• Investment - refers to an asset or item that is purchased with the hope that it will generate income or appreciate in the future (Chen, 2021)
• Investment - It also refers to the capital expenditure on physical assets such as plants, machinery, and equipment (Viray Jr. & Avila-Bato, 2018).
• Expected return on the investment – Entrepreneurs and capital owners need the return on their investment, covering risk, and earning a reward.
• Business confidence – This considerably influences the investment decisions of entrepreneurs. Being uncertain of the future can postpone such decisions until confidence returns
• General future expectations – Investment appraisals and eventual business decision-making are influenced by expectations such as an economic downturn
• Corporation tax – A business pays tax on its profit. Thus, a reduction in tax increases its profit (after tax payment). This reduction is an incentive to invest.
• Level of savings – Corporate and household savings offer a flow of funds into the financial sector, which are available for investment.
• Changes in household income – Small changes in household income can trigger changes in investments. In the long run, such expectations should be sustained. In the short run, businesses buy larger quantities of capital goods than they need due to increasing consumption and demand.
• Level of economic activity – There is an increase in the production level when the gross domestic product (GDP) is high, boosting demand for capital and encouraging higher investments (Viray Jr. & Avila-Bato, 2018)
• Technological change – The demand for capital increases to keep up with developments or technological changes.
• Public policy – The demand for capital can significantly be affected by public policies granting incentives to firms (e.g., tax holidays and investment tax credits)
• Interest rates – Interest rates are the cost of using or borrowing money. These rates have a crucial role in increasing capital stock, thus affecting investments.
• Loanable funds – These are the amount of money given by a lender to a borrower.
• Return on capital – Interest is the return earned by the capital as the input in the production process.
• Fixed-income investments (FIIs) – For investors that are risk averse, these are generally safe investment options, providing fixed periodic sources of income over a certain period, such as government securities (treasury bonds, treasury bills and notes, and corporate bonds) and special deposit accounts offered by the Banko Sentral ng Pilipinas (BSP). All these guarantees have a lower risk of losses.
• Variable-income investments (VIIs) – There is no full guarantee for returns strongly influenced by the financial markets' behavior and economic situations.
• Rent - refers to the payment for using land and other natural or economic resources in fixed supply
• Economic rent - is the positive difference between the actual payment made to the owner for an economic resource for its exclusivity or scarcity and the owner's expected payment level (Dinio & Villasis, 2017).
• Taxation - is the act of levying a tax so that the sovereign, through its law-making body, can raise income to cover the necessary expenses of the government.
• Tax - is a levy imposed by the government on income, wealth, and capital gains of people or businesses to fund government spending.
• Direct taxes - are taxes levied by the government on income and wealth from households and businesses to raise government revenue and act as a fiscal policy instrument
• Indirect taxes - are taxes levied by the government on products and services to raise revenue and to act as an instrument of fiscal policy
• Value-added tax - is a business tax imposed and collected from the seller in the course of trade or business on every sale of properties (real or personal), lease of goods or properties (real or personal), or vendors of services (Agoncillo, n.d.).
• Excise tax -is a tax on the production, sale, or consumption of a commodity in a country.
• proportional tax - is a tax imposed so that the tax rate is fixed, with no change as the taxable base amount increases or decrease
• regressive tax - is a tax imposed in such a manner that the tax rate decreases as the amount subject to taxation increases
• progressive tax - is a tax in which the tax rate increases as the taxable base amount increases
• Value-added tax (VAT) – There is a collected 12% VAT for almost all kinds of product sales, services, and leases, remitted to the Bureau of Internal Revenue (BIR) quarterly or monthly, and are reflected in sales invoices and receipts of the business.
• Salary and wage taxes – Withholding taxes on compensation refers to the tax withheld from income payments to individuals arising from an employer-employee relationship (Bureau of Internal Revenue, n.d.). The business owner withholds and remits employees' income, withholding taxes, SSS premiums, and contributions to Pag-IBIG and PhilHealth to government agencies.
• Amusement taxes – Movie houses, basketball games, carnivals, amusement businesses, and even concerts of singers and actors are subject to such taxes by the local and national governments. The tax rate is incorporated into the admission prices.
• Excise taxes – Businesses such as manufacturers of alcohol, tobacco, and petroleum products, importers of automobiles or jewelry, and those involved in mining must pay such taxes
• Import taxes – Businesses pay customs duties for importing products as part of their raw materials and certain industrial machinery and equipment. Customs levy a value-added tax (VAT) of 12% for imported goods, and import tariffs range from 0% to 65% depending on the goods, but no tariff or tax levied for goodsorth less than Php 10,000 (Dunseith, 2017).
• Individual income taxes – If your business is a sole proprietorship or a partnership, your income as the proprietor or partner is considered 'personal income
• Corporate income taxes – A corporation is considered a separate tax-paying entity, paying its income taxes
• Real property tax – It is a tax levied by the local government on properties (e.g., land, building, improvements on the land or building, and machinery). Itshould be paid by property owners (Lamudi, 2019). There are quarterly payments if the business owns land or real estate. Expect penalties for late payments
• Estate and Inheritance taxes – Estate tax is a tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death and on certain transfers which are made by law as equivalent to testamentary disposition (Agoncillo, n.d.).