Economics

• Entrepreneur


  A person who sets up a business or businesses, taking on financial risks in the hope of profit
• How can an entrepreneur increase trade?

  1. Produce a good or service that satisfies unmet demand

  2. Reduce the transaction costs of making trades
• Producing goods/services that satisfy unmet demand

  • Steve Jobs and the development of iPads, iPhones and iPods
• Reducing transaction costs of trades


  • Online buying and selling
• Investment


  An economic activity that forgoes consumption today with an eye to increasing output in the future
• Classification of investment


  • Long term investments
  • Short term investments
• What is long term investments

  • Investments that a firm is willing to hold for a long period of more than a year or 30 years at most
  • Investors are willing to accept the risk in the pursuit of higher rewards
• Example of long term investments

  • Stocks
  • Bonds
  • Real Estate
  • Tax Sheltered Retirement Plans
  • Annuities
• Categories of stocks


  • Growth stocks
  • High dividend stocks
• 10 best Philippine stocks for long term investment


  • Ayala Corp
  • Ayala Land Inc.
  • Aboitiz Power Corp.
  • Banco de Oro
  • Bank of the Philippine Islands
  • DMCI Holdings Inc.
  • First Metro Philippine Equity
  • GT Capital Holdings
  • International Container Terminal Services
  • Jollibee Foods Corp.
• What is short term investments

  • Highly liquid, easy to turn asset into cash
  • Tend to be lower risk, sacrificing potentially higher return for safety
• Example of Short term investments

  • Savings Account
  • Corporate Bond Funds
  • Government Bond Funds
  • Money Market Accounts
  • Certificates of Deposit
• The Philippine tax law system was based on the 1987 Philippine Constitution
• Limitations on the exercise of the power to tax in the Philippine Constitution


  • Requirement of uniformity and equity in taxation
  • Prohibition against taxation of religious, charitable and educational entities
  • Prohibition against taxation appropriation for religious purposes
  • Prohibition against taxation of non-stock, non-profit educational institutions and proprietary educational institutions
• The latest revision of the tax law is the National Internal Revenue Code of 1997
• Taxes


  The lifeblood of government, used to finance basic services and infrastructure
• 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.
• What are 4 Main objectives of taxes

  • Revenue raising to provide public good
  • Redistribution of income and wealth
  • Economic regulator to promote social and economic welfare
  • Harmonization among other states
• 4 Classification of taxes

  • By tax base
  • Indirect/direct
  • Unit/ad valorem
  • Distribution of the tax burden
• Progressive taxes


  Take an increasing portion as the value of the tax base rises and depends on the marginal rate of tax
• 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
• 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
• Marginal Rate of Tax


  Change in tax paid / Change in income
• Average Rate of Tax


  Total tax paid / Total income
• The Philippine 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
• Arguments in favor of progressive taxation


  • Vertical equity
  • Redistribution of income
  • Benefit theory
  • Achieve equity in the tax system as a whole
• Arguments against progressive taxation


  • Simplicity
  • Political objection
  • Economic efficiency
• Ambisyon Natin 2040 paved the way of passing the major laws like the TRAIN bill, tax amnesty legislation and Republic Act No. 11032 of 2018
• TRAIN bill


  Implemented in January 2018 to increase government earnings to fund higher public expenditure and developed a simplified income tax system for small businesses
• TRABAHO bill


  Proposes an income tax holiday incentive be granted for a period not exceeding three years and other incentives for businesses
• Green Jobs Act of 2016 refers to employment that contributes to the preservation and restoration of the environment
• Tax Amnesty Act of 2018 or RA 11213 provides two types of tax amnesties: Estate Tax Amnesty and Tax Amnesty on Delinquencies
• Ease of Doing Business Act (RA 11032 of 2018)


  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
• The present administration took the initiative so that entrepreneurs can do business at ease
• Wage


  The price of labor, usually monetary compensation paid by an employer to an employee in exchange of work done
• Wage rate in the Philippines is at 13,487.30 pesos since 2018 compared to the 12,646 pesos in 2017
• Minimum Wage Law


  Determined by the Regional Wage Boards every year based on the needs of workers and their families, capacity to pay, comparable wages and incomes, and requirements of economic and social development
• Rent Control Act of 2009


  A law intended to protect millions of Filipino renters across the country, with 97% of renters renting at rates costing 10,000 pesos per month
• For entrepreneurs and owning a business in the Philippines, one major concern is the property
• Economic growth refers to an increase in real GDP over time, indicating that more goods and services are being produced.