CHAPTER I

INTRODUCTION

According to the 2012 International Monetary Fund statistics, the economy of the
Philippines is one of the emerging markets and is now the 40 largest in the world. The
Philippine governments main source of revenue are taxes. One of the kinds of taxes is
income tax, which is a government tax imposed on individuals or taxpayers that varies
with the income or profits of the taxpayer. Income tax in the Philippines is a progressive
tax. The tax one pay is based on how much he earns. People with higher incomes pay
more than people with lower incomes. The Bureau of Internal Revenue is committed to
collect taxes for further development of our country.

The underground economy is the market that involves the exchange of goods and
services that are hidden from official view 1. Examples of such activities range from the
street vendors to online jobs. Activities of the underground economy is becoming more
rampant. Aside from the common reason of the people that belong to this market, which
is lack of education for decent employment, the activities of the underground economy
also depends on the capacity of the Philippine government to enforce laws and collect
taxes.

STATEMENT OF THE PROBLEM

Filipino citizens may never fully understand their part into the path through an
abundant economy, but they will understand it once they know their part and how could
they contribute into the betterment of the country.

Many fear the play of paying taxes because they have doubts of giving what they
have worked hard for.

The study sought to answer the following questions:

1
Christopher Tale, Encyclopedia of Chicago (2005) [database on-line];
available from http://www.encyclopedia.chicagohistory.org/

1
 Does the underground economy have the potential to be the foundation of our
country's economy?

Is the underground economy capable of paying income tax if imposed by the

government?

Will the underground economy be willing to pay income taxes?

If they imposed a law regarding this matter, how could the government locate
each individual from the underground economy?

How would the government collect each taxes?

Is the underground economy going to cooperate and not be biased?

If the underground economy will pay taxes, what will be the benefits?

SIGNIFICANCE OF THE STUDY

This study is done primarily to fully understand the underground economy as

potential taxpayers. Most of the underground economy may be Marginal Income Earners
(MIE) but, there are a lot of sections of the underground economy that when subjected to
taxation, will be a great contributor and eventually the foundation of our society. This
study is significant to the researchers as it expands their knowledge about the
underground economy including their economic statuses. Also, in the future, when
policies regarding the taxation of the underground economy are implemented, those who
have been interviewed already have an idea on the amount of tax they are entitled to pay.

OBJECTIVES OF THE STUDY

The study seeks to:

know and analyze the capacity of the people involved in the underground
economy on whether they should be taxed or not

2
 collate programs/policies of the Bureau of Internal Revenue (BIR) regarding
underground economy, and if none, explain why the BIR has not yet imposed a
policy regarding the taxation of the underground economy
defend whether the underground economy is capable or not in paying taxes
explain that the tax one pay is based on how much he earns, therefore providing
an idea that underground economy cannot be considered incapable of paying
taxes
present the economic and potential benefits of the underground economy when
properly supported and enriched by the government

RESEARCH AND METHODOLOGY

research about underground economy and its economic situation

conduct a survey to our chosen barangay which is Barangay San Roque, Antipolo
City
collect the data from the surveys answered by the respondents
summarize, tally, analyze, and conclude from the gathered data

SCOPE AND LIMITATIONS

This study focuses on the underground economy as potential taxpayers. We will

weigh their responsibilities, willingness, and capabilities to pay taxes as a citizen of this
country. Using the updated table for tax dues and exemptions, we will calculate the gross
taxable income of single/ and head of the family, married/ with one (1) to (5) children or
dependent. We will interview 100 respondents who belong to the underground economy
including street vendors, peddlers, sari-sari store owners, stamp makers, and tricycle
drivers that are only within Barangay San Roque.

DEFINITION OF TERMS

International Monetary Fund (IMF) The IMF works to nurture global

growth and economic stability. It works with

3
 developing nations to help them achieve
macroeconomic stability and reduce poverty2.

Income tax Income tax is a tax paid on the

money that a person or business receives as
income3.

Underground Economy The underground economy is also

called the shadow economy or the black
market. It involves the exchange of goods and
services that are hidden from the official view.
There are vast sectors under the underground
economy that ranges from the street vendors
and peddlers, tricycle drivers, tutors, online
sellers, and even drug dealers.

Bureau of Internal Revenue (BIR) The BIR is responsible for the

assessment and collection of all internal
revenue taxes fees, and charge and
enforcement of all forfeitures penalties, and
fine connected therewith4.

Marginal Income Earner (MIE) MIE refers to those individual whose

gross sales and receipts does not exceed
P100, 000.

CHAPTER II

REVIEW OF RELATED LITERATURE AND WORK

2
International Monetary Fund [database on-line]; available from
http://www.imf.org/
3
Merriam-Webster (2014) [database on-line]; available from
http://www.merriam-webster.com/
4
Wikipedia (2014) [database on-line]; available from http://en.wikipedia.org/

4
Revenue goals already lower due to untaxed underground economy5

MANILA, Philippines - The Philippines revised revenue targets this year may
already be lower by more than a third as a result of foregone revenues from the
underground economy, a finance official said.

Uncollected taxes from small neighborhood stores, roadside eateries, and

ambulant vendors comprise 35 percent of the countrys uncollected taxes, Department of
Finance (DOF) Undersecretary Gil S. Beltran said.

The amount may even be higher if it includes foregone revenues from tax cheats,
he said, adding that this excludes losses posted by the Bureau of Customs (BOC) from
smuggling.

This may mean that the Bureau of Internal Revenues collection goal of P798.5
billion this year may already be short" by 35 percent, he said.

The government may cut its revenue goals for the third time this year after it
slashed targets by P52 billion from its previous P850.5 billion target.

From January to May this year, BIR collections reached P315.2 billion, 6.1
percent lower than P335.7 billion during the same period last year.

During the first five months this year, the government reported a deficit of P123.2
billion, more than six times the shortfall it posted from January to May last year.

The governments intends to collect P388.4 billion for the first six months this
year.

Uncollected taxes from the underground economy significantly cut revenue

collections because the sector comprises 40 percent of the economy, Beltran said.

The amount of revenues lost due to tax evasion is linked to the size of the
underground economy, he added.

5
GMA News Online (2009) [database on-line]; available from
http://www.gmanetwork.com/

5
 But the size of the tax evasion is largely due to how much of the economy is
underground," he said.

You cannot really collect 100 percent taxes in an economy where 35 to 40

percent are underground. It is impossible. No country even from the West collects 100
percent taxes," Beltran said.

Singapore, which reportedly has the most efficient tax collection system, could
only manage a 97 percent tax collection efficiency.

Despite these drawbacks, the BIR has implemented a few measures to lessen the
impact of tax evasion.

Besides implementing tax audits, the agency has also begun cross matching its
data with those of local government units, Beltran said.

Various programs such as Run After Tax Evaders (RATE), Run After the
Smugglers (RATS), and Oplan Kandado are also being implemented to further enhance
revenues.

Oplan Kandado, which closes down establishments that fail to pay correct taxes,
have already reached P60 million in penalties since its launching in January, Beltran
said.

Meanwhile, the Bureau of Customs have been meeting up to 95 percent of its

revenue targets despite falling imports.

In the first five months, the agency was able to collect P20 billion more than
what was expected from it," he said.

But in June, the Customs bureau posted a P25.9 billion shortfall, a deficit that is
not alarming," Beltran said.

Given with the level of imports, their collection should have dropped but they
were able to ease the drop to a single digit level," he said.

6
 Manila is looking at a wider budget deficit of P250 billion or 3.2 percent of GDP
instead of the revised P199.2 billion or 2.5 percent of GDP due to the deepening impact
of the global crisis.

BIR Targets Marginal Income Earners6

Once again, the BIR (Bureau of Internal Revenue) intensifies its campaign on
their tax collection, this time targeting Marginal Income Earners (MIEs) like sari-sari
storeowners, farmers, fishermen, and others.
In their latest memorandum circular, the BIR reminded concerned individuals that
while MIEs have been enjoying certain privileges under the law, they must still comply
with several tax and tax-related requirements such as to pay the income tax. But BIR
clarifies that MIEs are exempted from the value-added tax and from the business tax.
Sixty percent of the national governments revenues come from the revenue collection of
the BIR. Last year, BIR failed to hit its target of P1.253 trillion. Furthermore, the
government loses about P450 billion a year due to tax evasion. The issuance of the
circular was part of the BIRs tax campaign, under which it aims to plug leakages from
tax evasion and to boost state coffers.
Since she assumed to power in mid of 2010, BIR Commissioner Kim S. Jacinto-
Henares has stepped-up her campaign in the Run-After-Tax Evaders (RATE) program.
BIR has already filed more than 200 cases before the Department of Justices (DOJ).
Some of the cases have already reached the Court of Tax Appeals and the Supreme Court
has decided others. Henares has been very zealous in running after tax evaders including
professionals like doctors and lawyers, celebrities, local and foreign companies, big
business owners, and last year even our Peoples Champ Manny Pacquiao. Henares
spares no one, however, many people are surprised by this new circular targeting the
MIEs.
In 2011, Senator Ralph Recto asked BIR for fair treatment and extreme caution
from their Oplan Kandado in disciplining establishments since some of them could be
micro, small, and medium enterprises (MSMEs). Recto said while the BIRs zealousness
6
Monsi A. Serrano, Kabayan Weekly (2014) [database on-line]; available from
http://www.kabayanweekly.com/

7
in running after tax delinquent is commendable, the BIR should be circumspect in
deciding which erring store should be shut down or not. He further express his
observation by saying, In the latest batch that was shut down by the BIR, most of them
could qualify under the MSMEs sector, which is the subject of protection by our existing
laws.
As of this writing, the commitment of Recto to file a bill that would strengthen
two existing laws for MSME or MIEs which are Republic Acts (RAs) 9178 and 9501,
that provide some incentives to MSMEs like minimum wage exemption, access to cheap
loans and formal trainings. That bill that hes going to file will further strengthen the two
laws by granting more incentives to MSMEs such as income tax holidays, exemption
from BIR and value-added tax (VAT) registrations and tax breaks for every two new
workers hired.
Under existing laws governing the operations of MSMEs, a micro-business
enterprise should have a total asset of up to P3 million; a small enterprise, P3.1 million to
P15 million; and, the medium enterprise should have assets worth between P15.1 million
to P100 million.
Meanwhile, Fisherfolk group Pamalakaya condemned the plan of the BIR to tax
small fishermen and other marginal income earners. Pamalakaya further said that the BIR
wants small fishermen to pay taxes more than the 12 percent Expanded Value Added Tax
which they pay for every liter of gasoline or diesel they buy for their motorized boats and
for the 12 percent EVAT they pay for every kilo of rice they buy to feed their family.
Pamalakaya vice chairperson Salvador France said, Each fisherman in this
country can no longer feed his family three times a day due to the rising cost of
production coupled with 12 percent EVAT and high prices of basic commodities due to
the same regressive tax scheme put on commodities. He further explained by saying,
Every small fisherman pays the government a total of P72 in EVAT, and now the
government wants to tax the remaining P50 for state income. This is horrible, shocking
and revolting to the highest order.
Rick Fulgencio, Chairman of Stop Corruption Philippines said, We dont have
any issue on the tax being levied by the government to every Juan and Juana. But the
problem here is that it seems that there is selective application on taxation. I still have yet

8
to see rich and famous person to be jailed for tax evasion. Come to think of it, if all the
taxes being collected are utilized properly, every working person would be gladly give his
or her share. But the problem here is we have PDAF or DAP scandal which the
government needs to resolve. If there is no scandal such as this and then there is a law
that protect our MSME or MIEs, why run after the small fries. BIR should catch the big
fishes and solve the corruption in their agency by not being selective in their target.

BIR taps telcos to ferret out untaxed home-based call centers7

MANILA - The Bureau of Internal Revenue will enlist the help of telecom
companies in cracking down on untaxed home-based call centers.

Commissioner Kim Jacinto-Henares said the bureau will ask telcos for a list of
residential customers who maintain high bandwidth connections.

The list would enable the agency to determine whether there are home-based call
centers among them and whether they are BIR-registered.

Call center operations require high bandwidth allocations, standby connections as

well as 24/7 technical support services to ensure optimum quality and smooth operation
in dealing with clients abroad.

"We will coordinate with telecom companies to be able to go after these home-
based call centers which may not be paying the right taxes," Jacinto-Henares said.

She said the bureau will seek the help of Internet service providers in ascertaining
the status of these businesses insofar as tax compliance is concerned.

"Of course all call centers would need high bandwidth Internet connection to be
able to operate. We will use whatever method that is legally available," she added.

Andrew Rojo, a manager at one of the country's top business process outsourcing
companies, said setting up of call centers at home is one of the industry's major
challenges.

7
Katrina Mennen A. Valdez, InterAksyon (2012) [database on-line]; available
from http://www.interaksyon.com/

9
 "Illegitimate call centers are multiplying unbelievably. They are able to get clients
abroad since the services they offer are way cheaper as against those who are holding
themselves out in public as call centers," Rojo said.

"They also get to recruit employees for two reasons: the hiring process is more
relaxed and that most of the time, employees get to take home their entire pay without
any withholding from their employers," he added.

The Philippines is the world's leader in the English voice BPO business with a 39
percent market share.

Of the $11 billion generated in 2011 by the country's IT-BPO industry, P7.4
billion came from the voice segment.

BIR wants online sellers to pay taxes8

MANILA, Philippines - The Bureau of Internal Revenue (BIR) said it will start
collecting taxes from individuals and businesses selling products online as part of its
aggressive efforts to meet collection goal and boost government revenues.
The BIR issued a new memorandum which reiterates online sellers obligation to
pay taxes.
Citing the National Internal Revenue Code, Internal Revenue commissioner Kim
Henares said failure of online sellers to register with the BIR would result in the
imposition of appropriate penalties.
Henares said the law requires the issuance of receipts by online sellers for every
sale of goods and properties or exchange of service. The receipt must bear the full
amount of the sale to the buyer.
Under the rules, online sellers must secure the required Authority to Print (ATP)
invoices and register books of accounts for use in business either manually or
electronically.

8
Zinnia B. Dela Pea, The Philippine Star (2003) [database on-line]; available
from http://www.philstar.com/

10
 The receipt, the BIR said, must be prepared at least in duplicate, the original to be
given to the buyer and the duplicate to be retained by the seller as part of the latters
accounting records.
Online sellers are also required to file and pay applicable tax returns on or before
the due dates as well as submit a summary list of sales/purchases including the payees.

Henares said the existing tax laws and revenue issuances on the tax treatment of
purchases (local or international) of goods (tangible or not) shall apply to all transactions
wherein consumers directly buy goods or services from a seller and an intermediary or
third party over the Internet. Therefore, those using online social networks such as
Facebook must register as a taxpayer.
Among the popular online buy and sell websites include sulit.com.ph,
ayosdito.ph, alibaba.com, and tsikot.com, etc.
Also covered by the rules are those that use the Internet to deliver marketing
messages to attract potential buyers and those that conduct online auctions (such as
ebay.ph).
Aside from issuing official receipts, online merchants or retailers are mandated to
issue acknowledgement receipt to the credit card company or payment gateways for the
amount received. They must also pay the commission of credit card company net of 10
percent expanded withholding tax.
Payment gateways which refer to banks, credit card companies, financial
institutions, and bill paying services are similarly required to issue validated bank deposit
slips in the name of the merchant or intermediary and remit the amount to the merchant
less Expanded Withholding Tax (EWT) of one half of one percent.
Freight forwarders and online website administrators are likewise required to
issue the BIR registered OR for the service fees paid by the merchant or advertisers.
According to the BIR, the merchant/retailer is obliged to pay the online
advertising entity for the advertising fee, net of two percent EWT.

11
Sari-sari stores, Carinderia, and other Marginal Income Earners Must Register
with BIR9

The Bureau of Internal Revenue recently issued Memorandum Circular No. 7-

2014, clarifying the issues relating to the registration and tax compliance requirements of
Marginal Income Earners (MIE). The circular provides that an MIE refers to an
individual not deriving compensation as an employee under an employer-employee
relationship but who is self-employed and deriving gross sales or receipts not exceeding
P100, 000 in any 12-month period. Moreover, the activities of such MIE should be
principally for subsistence or livelihood. The term includes, but not limited to,
agricultural growers/producers (farmers/fishermen) selling directly or indirectly to
ultimate consumers, small sari-sari stores, small carinderias or turo-turos,
drivers/operators of a single unit tricycle, and such, but shall not include licensed
professionals, consultants, artists, sales agents, brokers and others similarly situated,
including all others whose income have been subjected to withholding tax.

MIEs are required to register with the Bureau using BIR Form 1901, register their
Books of Accounts (e.g. two-column journal or other simplified books for daily expenses
and revenues), and issue registered principal receipts/sales invoices as prescribed under
RMO 12-2013.

Manila plans to tax starving fishermen10

MANILA, Philippines The Philippine government is set to impose more taxes

on marginalized sectors, including but not limited to subsistence fishermen who could
hardly feed their families three times a day due to small income.
A national federation of small fishermen in the country had assailed the plan of
Bureau of Internal Revenue to tax small fishermen other marginal income earners.
Dismissing the plan as heartless, bizarre, brutal and extremely cruel, the
fisherfolk alliance Pambansang Lakas ng Kilusang Mamamalakaya ng Pilipinas
9
Atty. Fred Pamaos, AttyAtWork (2014) [database on-line]; available from
http://attyatwork.com/
10
Gerry Albert Corpuz and Gloria Madonna Velarde, Pamalakaya-Pilipinas
(2014) [database on-line]; available from http://pamalakayaweb.wordpress.com/

12
(Pamalakaya) said that despite the poorest sector in the country is found along the
countrys coastal areas, the tax agency still wants subsistence fishermen to pay taxes
more than the 12-percent Expanded Value Added Tax (E-VAT) they pay for every liter of
gasoline or diesel for their motorized boats.
A fisherman also shoulders the 12- percent EVAT they pay for every kilo of rice
they buy to feed their family.
Every fisherman in this country can no longer feed his family three times a day
due to rising cost of production coupled with 12 percent EVAT and high prices of basic
commodities due to the same regressive tax scheme levied on necessities. And here is the
Aquino administration courtesy of the ever cruel BIR Commissioner Kim Henares
working on to tax our poor fisherfolks P 50 daily income. If that is not Satanic, then what
is it? An act sent from heaven above? said Pamalakaya vice chairperson Salvador France
in a press statement.
The Pamalakaya official said a small fisherman used to pay daily taxes in the
form of expanded value added tax. He said for an average of 5 liters of gasoline or diesel
they used for fishing, they pay the national government some P60 pesos in taxes.
France said aside from EVAT on petroleum products, a fisherman consumes three
kilos of rice for his family and that constitutes P12 per day in total taxes paid to the
government in the form of the controversial EVAT.
Every day a small fisherman pays the government a total of P72 in EVAT, and
now the government wants to tax the remaining P50 for state income. This is horrible,
terrifying and revolting to the highest order, added France.
Pamalakaya said the government is inviting a major political upheaval from the
affected sectors if President Benigno Simeon Aquino will still insist in taxing the poor.
The proposed BIR measure to tax the starving public is an open invitation to war.
If Mr. Aquino and the tax dictator Henares want war, we will give them war, said
Pamalakaya.
The group meanwhile, urged the Senate and the House of Representatives to
legislate a law that would stop Malacaang from pursuing this Hitler like move to burden
the poor public with more regressive tax measures.

13
 The lawmakers are legally and morally obliged to stop this tax madness from the
tax madmen of the Aquino syndicate in Malacaang, the group added.
The BIR said aside from small fishermen and farmers, owners of small sari-sari
(variety) stores, single-unit tricycle operators and other marginal income earners (MIEs)
will be required to pay taxes.
Under Revenue Memorandum Circular No. 7-2014, the BIR argues that MIEs are
liable to pay the income tax, but are exempted from the value-added tax and from the
business tax.
The MIEs are defined in the circular as individuals who are self-employed and
earning not more than P100, 000 in any given 12-month period. Their incomes are
considered mainly for subsistence.
The tax authority said the MIEs may also include owners of small carinderia or
turo-turo, and other micro-entrepreneurs. They exclude licensed professionals, sales
agents, brokers, artists and other professionals whose incomes are subject to withholding
tax.
The issuance of the circular was part of the BIRs tax campaign, under which it
aims to plug leakages from tax evasion and to boost state coffers. In a complementary
circular, No. 8-2014, the tax authority said individuals who have claimed to have
exemptions from certain taxes should secure certification from the BIR for such
exemptions.
The BIR, which accounts for at least 60 percent of the national governments
revenues, is tasked to collect P1.46 trillion in taxes this year. In 2013, it was expected to
have posted at least a 10-percent year-on-year growth in collection although it was seen
to have fallen short of its target of P1.253 trillion.
According to rough estimates, the government loses about P450 billion a year due
to tax evasion.

CHAPTER III

14
OBJECTIVES AND STRATEGIES

In order to accomplish this thesis within the limited time given, we used the different
strategies stated below:

1. Researching Before we conduct our thesis, we agreed to research first about the
underground economy in order to have a forehand knowledge to be able to go
through this thesis. It helped us in creating our own objectives and fully
understand the significance of our study.
2. Surveying We cannot resolve the problem if not for surveying 100 respondents
from the underground economy. We were given only three (3) days to conduct our
survey and each day, our target respondents are 33. We roamed the streets along
the Immaculate Concepcion Parish and the streets going to Loreland Farm Resort
and Bosay Resort. We chose this places because there are three (3) other groups
conducting a survey at the same time and a lot of the people in the underground
economy along certain areas of Barangay San Roque do not like to be surveyed
more than once. We tried different styles of approaching our chosen respondent.
We used the words good morning/ afternoon po and excuse me po.
3. Tallying We did the tally quickly but certainly. A group member reads the
survey while the group leader organizes the data through charts. The other group
member makes sure we do not miss an information.
4. Preparing the PowerPoint presentation for our defense After going through
the process, we prepared our PowerPoint presentation that we will be presenting
on our defense. We made sure that all of the informations we stated in our
presentation were made clear.

CHAPTER IV

15
FINDINGS

SURVEY FORM

Good day!

We are fourth year students from WILL School of Antipolo, Inc. Our group is
conducting a survey in partial fulfilment of our project in Araling Panlipunan. Your
answers will be a huge contribution for our thesis. Kindly put a check mark ( ) inside the

box () and fill in the blanks.

Name: _____________________________________________________ Age:______

Livelihood: _________________ How many years in this kind of livelihood:_________

Civil Status:

Single Single and head of the family

Married with how many children ____ Age:_____

Daily income:

70 pesos below Amount:__________

70-100 pesos 100-200 pesos 200-300 pesos 300-400 pesos

400-500 pesos 500 pesos above Amount:___________

Is your daily income enough for your daily expenses? Yes No

Do you think you are capable of paying taxes based on your income? Oo Hindi
In your opinion, does the underground economy need to be taxed? Why?

16
________________________________________________________________________
________________________________________________________________________

If you answered no to the question above, do you think its fair?

________________________________________________________________________
________________________________________________________________________

Thank you very much!

SURVEY FORM (Filipino)

Magandang araw po!

Kami po ay mga mag-aaral sa ika-apat na taon ng WILL School of Antipolo, Inc.

Ang amin pong grupo ay nagsasagawa ng isang pagsisiyasat bilang bahagi ng aming
proyekto sa Araling Panlipunan. Ang inyong mga sagot ay napakahalaga sa amin
sapagkat malaki ang maitutulong nito sa aming pagsasaliksik. Maaari lamang po na

lagayan ng tsek () ang kahon () at punan ang mga patlang.

Pangalan: __________________________________________________ Edad:______

Trabaho: ________________________________ Ilang taon ng nagtatrabaho:_________

Civil Status:

Single Single and head of the family

17
 Married with how many children ____ Age:_____

Kita kada araw:

Mas mababa sa 70 pesos Amount:__________

70-100 pesos 100-200 pesos 200-300 pesos 300-400 pesos

400-500 pesos Mas mataas sa 500 pesos Amount:___________

Sapat ba ang kinikita mo kada araw? Oo Hindi

Sa tingin mo, kaya mo bang magbayad ng buwis base sa iyong kita? Oo Hindi
Sa iyong palagay, dapat bang patawan ng buwis kayong mga nasa underground
economy? Bakit?

________________________________________________________________________
________________________________________________________________________

Patas nga ba kung patawan ang underground economy ng buwis?

________________________________________________________________________
________________________________________________________________________

Maraming Salamat po!

18
 Using the table below, we calculated the equitable amount of tax of every
individual to be paid for one whole year.

If taxable income is: Tax due is:

Not over P10, 000 5%

Over P10, 000 but not over P30, 000 P500 + 10% of the excess over P10, 000

Over P30, 000 but not over P70, 000 P2, 500 + 15% of the excess over P30, 000

Over P70, 000 but not over P140, 000 P8, 500 + 20% of the excess over P70, 000

Over P140, 000 but not over P250, 000 P22, 500 + 25% of the excess over P140, 000

Over P250, 000 but not over P500, 000 P50, 000 + 30% of the excess over P250, 000

Over P500, 000 P125, 000 + 32% of the excess over P500, 00

With the following exemptions:

Single/ and head of the family P50, 000

For each married individual P50, 000

Every child or dependent not more than 21 P25, 000

years old and not exceeding 4 in number

19
 Karampatang buwis na babayaran para sa isang buong taon kung sakali (Equitable
amount of tax to be paid annually):

a. Single/Single at head of the family/Married

Kita kada araw Buwis kada taon

(Daily Income) (Tax to be paid every year)
Mas mababa sa P70 Walang buwis na babayaran
P70 P100 Walang buwis na babayaran
P100 P200 Hanggang P1, 700
P200 P300 P1, 700 P6, 700
P300 P400 P6, 700 P13, 000
P400 P500 P13, 000 P20, 500
P500 pataas P20, 500 pataas

b. Married with 1 child

Kita kada araw Buwis kada taon

(Daily Income) (Tax to be paid every year)
Mas mababa sa P70 Walang buwis na babayaran
P70 P100 Walang buwis na babayaran
P100 P200 Walang buwis na babayaran
P200 P300 Hanggang P2, 950
P300 P400 P2, 950 P8, 350
P400 P500 P8, 350 P15, 500
P500 pataas P15, 500 pataas

c. Married with 2 children

Kita kada araw Buwis kada taon

(Daily Income) (Tax to be paid every year)
Mas mababa sa P70 Walang buwis na babayaran
P70 P100 Walang buwis na babayaran
P100 P200 Walang buwis na babayaran
P200 P300 Hanggang P400
P300 P400 P400 P4, 600
P400 P500 P4, 600 P10, 500
P500 pataas P10, 500 pataas

d. Married with 3 children

20
 Kita kada araw Buwis kada taon
(Daily Income) (Tax to be paid every year)
Mas mababa sa P70 Walang buwis na babayaran
P70 P100 Walang buwis na babayaran
P100 P200 Walang buwis na babayaran
P200 P300 Walang buwis na babayaran
P300 P400 Hanggang P1, 400
P400 P500 P1, 400 P6, 250
P500 pataas P2, 500 pataas

e. Married with 4 children

Kita kada araw Buwis kada taon

(Daily Income) (Tax to be paid every year)
Mas mababa sa P70 Walang buwis na babayaran
P70 P100 Walang buwis na babayaran
P100 P200 Walang buwis na babayaran
P200 P300 Walang buwis na babayaran
P300 P400 Hanggang P500
P400 P500 P500 P2, 500
P500 pataas P2, 500 pataas

f. Married with 5 children

Kita kada araw Buwis kada taon

(Daily Income) (Tax to be paid every year)
Mas mababa sa P70 Walang buwis na babayaran
P70 P100 Walang buwis na babayaran
P100 P200 Walang buwis na babayaran
P200 P300 Walang buwis na babayaran
P300 P400 Walang buwis na babayaran
P400 P500 Hanggang P250
P500 pataas P250 pataas

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SURVEY FINDINGS

22
23
24
 After we have tallied the surveys we have conducted from 100 respondents and
concluded the results, we found out that most people from the underground economy
think that they cannot afford to pay taxes if ever they get involve into taxation. Their
primary reason is that the products they are selling already has Value Added Tax or VAT
when they bought them. Furthermore, they earn just enough income to support their
needs. This reason is common to our respondents who have a lot of members in their
family and if theyre the sole workers of their family. However, a large number of our
respondents told that they earn an amount of 500 pesos and up.

We found out that most people from the underground economy are willing to get
taxed if ever the government will mandate them to do so. Our respondents believed that
since it is mandated, it will leave them no choice but to cooperate instead of questioning
the government.

ANALYSIS

As our studies go further, we learned that most people from the underground
economy could not even satisfy their needs. We found out that most of the underground
economy are willing to pay taxes if ever it will be imposed in order to contribute to the

25
development of our country but, the problem still lies on their capability. Based on our
findings, the underground economy could have been a huge contributor to the
Philippines revenue if paying taxes will not be a burden to their economic life. However,
if the government imposed a law regarding the taxation considering all kinds of the
underground economy, they will not do anything about it rather pay because it is
mandatory. We quote, Doble-kayod na lang.

CONCLUSION

We therefore conclude that:

The underground economy must be taxed, but, with consideration and exemption
to those Marginal Income Earners or MIE.

Certain sectors of the underground economy are not capable of paying tax. E.g.
peddlers and street vendors

Most of the underground economy are willing to pay taxes but they are incapable

RECOMMENDATIONS

To the government, we recommend that those in the underground economy whose

annual income exceeds P100, 000 following the BIRs memorandum, must be taxed. This
will be done because we saw that those who earn more than what they need are willing to
pay taxes because then again, the tax one pays is based on how much he earns therefore
providing them an idea that they are capable. We presented those people the table of
equitable tax to pay annually. They know to themselves too, that paying taxes are their
responsibility as a citizen, of this country.

26
BIBLIOGRAPHY

http://www.encyclopedia.chicagohistory.org/pages/1280.html

http://www.gmanetwork.com/news/story/167007/economy/revenue-goals-already-lower-
due-to-untaxed-underground-economy

http://www.interaksyon.com/business/45526/bir-taps-telcos-to-ferret-out-untaxed-home-
based-call-centers

http://www.philstar.com/business/2013/08/24/1126961/bir-wants-online-sellers-pay-taxes

http://attyatwork.com/sari-sari-stores-carinderia-and-other-marginal-income-earners-
must-register-with-bir/

http://pamalakayaweb.wordpress.com/2014/02/16/manila-plans-to-tax-starving-
fishermen/#more-782

http://www.kabayanweekly.com/2014/02/24/bir-targets-marginal-income-earners/

http://www.imf.org/external/about/overview.htm

http://www.merriam-webster.com/dictionary/income%20tax

http://en.wikipedia.org/wiki/Bureau_of_Internal_Revenue_(Philippines)

GLOSSARY

Bureau of Customs

27
Bureau of Internal Revenue (BIR) The BIR is responsible for the
assessment and collection of all internal
revenue taxes fees, and charge and
enforcement of all forfeitures penalties, and
fine connected therewith11.
DAP
dependent A dependent means a legitimate,
illegitimate, or legally adopted child that is
dependent upon or and living with the
taxpayer and must not be more than twenty-
one (21) years old.
Expanded Value-added Tax
Expanded Withholding Tax (EWT)
Income tax Income tax is a tax paid on the
money that a person or business receives as
income12.
International Monetary Fund (IMF) The IMF works to nurture global
growth and economic stability. It works with
developing nations to help them achieve
macroeconomic stability and reduce poverty13.
marcoeconomic
Marginal Income Earner (MIE) MIE refers to those individual whose
gross sales and receipts does not exceed
P100, 000.
Micro, Small, and Medium Enterprises (MSME)
Oplan Kandado
Priority Development Assistance Fund (PDAF)
revenue
Run After Tax Evaders (RATE)
Run After the Smugglers (RATS)
tax exemption
Underground Economy The underground economy is also
called the shadow economy or the black

11
Wikipedia (2014) [database on-line]; available from http://en.wikipedia.org/
12
Merriam-Webster (2014) [database on-line]; available from
http://www.merriam-webster.com/
13
International Monetary Fund [database on-line]; available from
http://www.imf.org/

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 market. It involves the exchange of goods and
services that are hidden from the official view.
There are vast sectors under the underground
economy that ranges from the street vendors
and peddlers, tricycle drivers, tutors, online
sellers, and even drug dealers.
Value-added Tax

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 APPENDICES

STUDENT PROFILE

Name: Denyle S. Barlaan

Gender: Male
Birthdate: November 12, 1997
Birthplace: Cabangan, Zambales
Address: Blk. 7 Lot 94, Venice St., Phase 1 Maia Alta, Brgy. Dalig, Antipolo City
Motto: God has a reason for everything that happens.

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Economic Dream: To have equality, no corruption and no poverty

Name: Gladinessah V. Bonget

Gender: Female
Birthdate: May 25, 1996
Birthplace: Pasig City
Address: Blk. 9 Lot 24, Orchids St., Antipolo Hills, Brgy. San Luis, Antipolo City
Motto:
Economic Dream: Everyone must have a shelter. Communism!

Name: Ivy Nicole G. Soriano

Gender: Female
Birthdate: January 7, 1998
Birthplace: Antipolo City
Address: 3 Abner St., Gloria Heights Subdivision, Brgy. Dalig,
Antipolo City
Motto: In dreams begin responsibilities
Economic Dream: Wealth must be equally distributed. The world must not allow the rich
to be richer by making the poor poorer.

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