TERM PAPER ON INCOME AND

BUSINESS TAXATION

TERM PAPER

CAVITE STATE UNIVERSITY

Cavite City Campus

Business Management Program

DEPARTMENT OF MANAGEMENT

MONICA TRINA T. NOBLE

BMGT 25, BM2A
 TERM PAPER ON INCOME AND
BUSINESS TAXATION

A Term Paper
Submitted to the Faculty of
The Department of Management
Cavite State University
Cavite City Campus

In partial fulfillment
Of the requirements for the subject
BMGT 25: Income and Business Taxation

MONICA TRINA T. NOBLE

BMGT 25, BM2A
 BIOGRAPHICAL DATA

The author’s name is Monica Trina T. Noble was born on the 26th day of July

1996, at San Antonio, Cavite City. She is the youngest among the three children of

Carolina T. Noble and Manolo T. Noble. She has two brothers namely Mon Carlo and

Mon Nico T. Noble.

She took her primary education at Ladislao Diwa elementary school, Caridad

Cavite City from 2007 to 2008. She graduated her secondary education at Cavite National

High School at Chief E. Martin St. Caridad Cavite City. After the completion of her

secondary education, she also took a vocational course Computer Technician in the year

of 2012 at Cavite City Technical and Vocational School in Dra. Salamanca, Cavite City.

She is now taking up Business Management major in Marketing at Cavite State

University Cavite City Campus.

 TERM PAPER ON INCOME AND
BUSINESS TAXATION

Monica Trina T. Noble

A term paper submitted to the faculty of the Department of Management, Cavite

State University-Cavite City Campus, Cavite City in partial fulfillment of the
requirements for the subject BMGT 25- Income and Business Taxation. Prepared
under the supervision of Dr. Victoriano N. Rodil

INTRODUCTION

This study is focused on the new implemented law which is the Tax Reform

for Acceleration and Inclusion (Train) Law or Republic Act No 10963 took effect on

January 1, 2018. This study aims to explain the coverage, effects and its impact on the

government and every citizen. It will answer the questions who are exempted in paying

taxes? What are the Impact of it to the people? What are the benefits that will receive by

the one who are paying taxes? And what are the changes that the society will encounter

after implementing this said law.

Many of us are curious about this new implemented Law because we do not

know if it will results in good or in bad situation, People will think that this Law will

benefits more on the one who are paying taxes, and you would rather ask if it would

benefit the entire citizen? In principle, people pay taxes in accordance to the income they

make. Therefore, those who earn more will pay higher taxes proportionate to their

income.
 The author tends to have a wide explanation about the law, for those citizens

who are not aware about this new implemented law. This study may be able to explain

the effects, changes, results and benefits in paying taxes, and how it will affect the

government and the people. This study will be beneficial for the current tax payers,

fellow researches and ordinary citizen.

Objectives of the Term Paper

The objectives of the author in conducting this study is to have a further

knowledge about the new implemented law on paying tax, and for the reader to be

updated on the changes that might happened after the implementation of the said law. To

be able know whether it will be result in good or bad situation to the citizen of the

society. Most especially what are the benefits of the one who are not exempted in paying

taxes?

Significance of the Term Paper

The purpose of conducting this study is to inform the readers about the

importance of paying taxes this study will state the difference on the computation of taxes

after implementing the (Train) law. Also the advantage and disadvantages of the Train

Law in the society, and as well as gaining more knowledge and understanding to the

author. The benefit of this study to the reader is for them to become aware about what are

the happenings in their society because being a citizen of a country you need to be aware

of what is happening in your environment most specially in the society that you belong. It

is important to be knowledgeable about taxes because whatever changes happens about

taxes it will have a big impact in the society and as well as its citizen.
 TAX PAYER’S PROFILE

Dovie Nina Bautista Hernandez is an individual taxpayer working as a crew at

Golden Arches Development Corporation. She is single and doesn’t have any dependent

children. She was working at McDonald’s for almost six years. This is the computation of

her tax withheld from January 1 to December 31 in the year of 2017.

AMOUNT

13th Month Pay and Other Benefits 8,501

De Minimis Benefits 0.00

SSS, GSIS, PHIC & Pag-ibig 6,908.50

Contributions, & Union dues (Employee
share only)
Total Non-Taxable/Exempt 15,410
Compensation Income
A.NON TAXABLE/ EXEMPT COMPENSATION INCOME

B.TAXABLE COMPENSATION INCOME REGULAR

AMOUNT

Basic Salary 113,673.91

Overtime Pay 0.00

Total Taxable Compensation Income 113,673.91

C. SUMMARY

Gross compensation income from

Present employer(Non-Taxable plus 129,084.37
Taxable)
Less: Total Non-Taxable/Exempt 15,410.46

Taxable Compensation Income from 113,673.91

present employer (Total Taxable)

Add: Taxable Compensation Income 0.00

from previous employer

Gross Taxable Compensation Income 113,673.91

Less: Total Exemptions 75,000

Less: Premium Paid on Health (hospital 0.00

Insurance)
Net Taxable Compensation Income P38, 673.91

Tax due 3,801.09

In the summary Ms. Hernandez Total Compensation Income is P129, 084.37, if

we deduct the Non-Taxable Income of P15, 410.46 (129,810.37 – 15,410.46) it will come

up to the Gross Taxable Income of P113, 673.91. We less the Total exemption of

P75,000 (113,673.91-75000) it will be equal to P38, 673.91 Net taxable Compensation

Income. Now we need to figure out how much is the tax due.
We can refer to this formula from BIR:

Over But not Over Amount Rate of Excess Over

not over 10,000 5%

10,000 30,000 500 + 10% 10,000

30,000 70,000 2,500 + 15% 30,000

70,000 140,000 8,500 + 20% 70,000

140,000 250,000 22,500 + 30% 140,000

250,000 500,000 50,000 + 30% 250,000

500,000 over 125,000 + 32% 500,000

The Net Taxable Compensation Income is P38, 673.81, first we need to look at

the table to know the amount rate so in this case our Net Taxable Compensation Income

is over P30, 000 but not over P70, 000, the amount rate for the tax is P2, 500 + 15% of

the excess over P30, 000. So we compute it as (38,673.81 – 30,000 x 15% + 2,500), at the

end of the year 2017 Ms. Hernandez total tax due is P 3,801.09.
 The purpose of paying the right amount of tax is a social responsibility of every

citizen in the country, as we all know that taxes that we are paying will go to the

government funds that will use in developing and improving the government facilities,

and life of Filipino’s inside and outside of the country. Come to think of it if the

government reduces the amount of tax obligations, the government has lesser funds to

build roads, school, infrastructure, lower wages that may lead to poor government

services. In this scenario the cycle of poverty in the Philippines will continue.

The benefits derived from paying the right amount of taxes are first, it will

provide as a good credit rating to financial institutions and agencies. You can use your

good credit rating when getting a loan for the additional funds for the expansion of your

business or other purposes. Second, in corporations or business paying the right amount

of taxes will result in good investor’s value, because in order to grow your business you

need people or institutions with money that are willing to invest in your company these

investors will look into your financial and tax records to support their financial decisions.

So the corporation needs to maintain a truthful and accurate accounting tax record so it

will boost confidence of the investors, and also it will create an impression that the

company is trustworthy to invest with.

 The Comprehensive Tax Reform Package of the Department of Finance which is

the TRAIN LAW is part of the President’s Duterte administration. It aims to provide

relief to 90% of the tax paying workers in the Philippines by reducing their monthly

income taxes. The TRAIN law is banking on the economic growth that will be generated

by the infrastructures to be built and whose funds will be drawn from the tax revenues, as

well as from foreign development assistance whose release is premised on the approval

of the TRAIN law. It is also hoped that the so-called “Build Build Build” initiative will

generate demand for construction-related work.

Who are exempted in paying taxes? They are the citizens who are earning low

income and middle income in the country, which are the majority of the population.

According to the Department of Finance, 83% of working class Filipino’s belongs to the

P0.00 to P250, 000 income bracket. This means that majority of people will be tax free

because of the TRAIN Law which is implemented this year 2018.

What are the impacts of the new implemented law in the society and how it will

affects the citizen’s financial status? As said from the start that this new implemented law

reduces the income tax burden of the earning Filipinos, recalibrating the brackets with the

intention of increasing the disposable income after taxes. This will not only drive growth,

but also generate government revenues where the taxes are now shifted to the

consumption of goods and services. While the law targets specific goods, such as

sweetened beverages and vehicles, it also has increased the taxes for fuel. We know that

the latter would lead to increases not only in transportation costs, but will have an effect

in the prices of practically all commodities. The idea is that whatever is lost in tax

revenues from personal income is compensated by the taxes on the purchase of goods and
services. However, increase in taxes on the commodities will have an effect that will cut

across income classes. And for the poor, this would even be costlier, since their pre-

TRAIN levels of earnings, if any, are not taxed anyway, and hence any change in the tax

rates would not have an effect in their disposable incomes. Thus, any increase in prices of

transportation fares and commodities will certainly hit the poorer classes of society

harder.

So the government creates a subsidy component to the TRAIN Law, which is

going to be implemented by the Department of Social Welfare and Development

(DSWD) through the unconditional cash transfer (UCT) program. Under UCT,

households which qualify will be given a monthly cash grant of P200 in 2018, and P300

in 2019 and 2020. It is estimated that about 10 million Filipino households and

individuals who belong to the poorest sector of the country will benefit from this

program.
 INSIGHTS

After reading different kinds of article about the train law I have realized

that this new implemented law have potential benefits and also have negative impacts on

the citizen in the society. The potential benefit of the Train Law, it has opposite measures

to affect the wealthiest businesses and individuals to generate income that will be used in

the government’s aggressive infrastructure projects and in improving basic services such

as housing, education and social protection. Because when the government collects more

taxes, it will go to different investments and different government’s project. But the

Negative impacts or Disadvantages of TRAIN law is the increase of prices of products

and other services due to reduced taxes, it may affect the consumer for buying products

because of higher prices for fuel and gas, electricity, vehicle, and other products and

services. Though income taxes will greatly decrease for almost all employees, they would

need to spend more money on their basic necessity which on the other hand the one that

are . TRAIN law would be big blow to the country’s poorest, arguing the poor families

will have a worst impact of higher prices on basic goods and services. In the end, the

poor will not benefit from this. It will still be the rich who will gain from this law.
 REFERENCES

http://aer.ph/significance-of-the-comprehensive-tax-reform-program-aka-train/

http://mpm.ph/benefits-of-paying-the-right-taxes/

https://www.imoney.ph/articles/duterte-new-income-tax-rates-philippines

http://www.manilatimes.net/train-law-poor/377248/

https://www.bir.gov.ph/index.php/train.html