CHAPTER 1: INTRODUCTION 1

A. Background of the Study

The Value-Added tax is an indirect tax levied on goods and services as they
transfer from one production process to the other. The most common form to impose
VAT is the “credit-invoice VAT” which operates like sales tax (Mitchell, 2005). Since
it is a sales tax and an indirect tax, the tax liability of producers can be passed on to
consumers at a specific rate which is now 12%. This is measured by the price paid
for the goods purchased multiplied by the uniform rate.

As cited by Newhouse and Zakrahova (2007, p. 3), government revenue was

estimated to increase by about 1.3 percentage points of GDP on 2006 because the
VAT rate was increased from 10% to 12% on February 2006. As a result, prices of
goods and services increased, including electricity and petroleum products.

The Value-Added Tax will not interfere with how consumers will distribute
their purchases among goods for the choice between untaxed consumption such as
leisure and taxed consumption (Schenk & Oldman, 2007). Since they exclude only
products and services which are too difficult to purchase, consumers tend not to
spend on those things and focus more on something important such as basic
necessities. Unfortunately, these necessities impose increasing prices and, at the
same time, untaxed good are worth more which gives the former much attention
over the latter.

In the eyes of the lawmakers and the government, the said tax is a source of
wealth and creates a good opportunity for a state to progress. However, behind its
attractive attributes is an additional burden to consumers which are often ignored.

Historically, a VAT has been considered as a possible way to raise

government revenue and to meet their public expenditures. In spite of the
opportunities it offers, not all people are proponents of the said tax. Some favors
VAT while some do not. Others support its implementation because they believe that
CHAPTER 1: INTRODUCTION 2

it could further develop a nation and promote long-term economic growth. On the
contrary, others oppose VAT for a number of reasons. One of which is that it is
thought to be regressive since people with lower income consume a higher
proportion of their income than those at the top of the income distribution (Hammond
& Raboy,1995). Hence, the tax burden of those with lower income increases.

Since consumption goods are affected by VAT, most people limit their
consumption on untaxed goods which include leisure. Other people do not include in
their budgets the consumption of the things they want because their monthly income
is allocated for basic necessities which include foods and other expenses such as
transportation and daily allowance. What has been the effect of Value-Added Tax on
Household Leisure Consumption Pattern of breadwinners?

In line with the growing issues against VAT, this study was conducted to find
out the relation of VAT on household leisure consumption of people particularly on
breadwinners who usually belong on the income bracket of not more than Forty
Thousand Pesos. Also, the researchers aim to determine how VAT distorts
consumer’s spending decisions. In addition, the research was carried on to be
informed on their reactions on VAT whereas the prices of basic commodities are
continuously increasing.
CHAPTER 1: INTRODUCTION 3

B. Statement of the Problem

The researchers seek to determine how VAT affects the household leisure
consumption of the breadwinners who are currently residing in Metro Manila whose
income bracket does not exceed Forty Thousand Pesos. Additional expenditures
such as the VAT are burdensome for them considering that usually, the salary they
receive is just enough for their daily needs. This fact led the researchers to find the
answers to the following questions:

1. How many of the respondents favor the implementation of Value-Added

Tax on consumption goods?
2. How many of the respondents think that the implementation of VAT affects
their household leisure consumption?
3. How many of the respondents are still capable of acquiring commodities
other than basic needs?
4. Do breadwinners spend large amount of money in acquiring leisure?
5. What is the frequency of their consumption of leisure?
CHAPTER 1: INTRODUCTION 4

C. Significance of the Study

The researchers hope that the findings of this study will help readers to be
aware on how the Value-Added Tax affects, more or less, the consumption patterns
of consumers on hard-to-reach goods and services. It was also conducted in the
light of helping households to share their sentiments regarding the effect of VAT on
their consumption of leisure.
CHAPTER 1: INTRODUCTION 5

D. Scope and Limitation

This study dealt with the effects of Value-Added Tax on employees with a net
income bracket of not over Forty Thousand Pesos, particularly the breadwinners of
the family residing in the Metro Manila area on their Household Leisure
Consumption. This was not made to deliver a comprehensive analysis about VAT,
nor was it meant to scrutinize its implementation. However, as additional information,
the researchers asked the respondents whether they are proponents or opponents
of the said VAT. This was conducted just to determine the household leisure
consumption patterns of the participants to fit with the salaries they receive. The type
of leisure considered by the researchers was the passive leisure activities. The
researchers limited themselves to the feedback of the respondents and some
relevant sources. This research examines the relationship which exists between
Value Added Tax and Household Leisure Consumption and how it affects the leisure
consumption pattern of the said respondents.
CHAPTER 1: INTRODUCTION 6

E. Definition of Terms

Breadwinner They are the one whose earnings are the primary sources of
support for one’s dependents (“Breadwinner,” 2004, p. 109).

Credit-Invoice VAT It is typically administered by taking the total value of

sales of all businesses (Mitchell, 2005).

Capitalism It is an economic system in which the means of production and

distribution are privately or corporately owned and development is
proportionate to the accumulation and reinvestment of profits gained in a free
market (“Capitalism,” 2004, p. 132).

Consumerism According to De Souza (n.d.), Consumerism arises when the

person becomes, in his own mind or in the view of others, primarily an object
that consumes solely for himself, rather than a subject who uses material
goods in order to give himself to others.

Indirect tax As what Schenk and Oldman (2007) noted, Indirect tax is a tax
levied upon commodities before they reach the consumers who ultimately
pay[s] the taxes as part of the market price of the commodity.

Levy It deals with the provisions of law which determines the person or property to
be taxed, the sum or sums to be raised, the rate thereof, and the time and
manner of levying, receiving and collecting the taxes (Ampongan, 2008).

Market forces These are the economic factors that affect the price and
availability of a commodity or product in a free market (Martin, n.d).
CHAPTER 1: INTRODUCTION 7

Passive Leisure It refers to activities in which a person does not exert any
significant physical or mental energy, such as going to the cinema, watching
television, or gambling on slot machines (“Passive Leisure,” n.d.).

Private sector It is a part of the economy which is both run for private profit and
which is not controlled by the state (Johnson, n.d.).

Progressive rate It is a rate which increases as the tax base or bracket increases
(Ampongan, 2008).

Public sector It refers to a part of economic and administrative life that deals
with the delivery of goods and services by and for the government, whether
national, regional or local/municipal (Murphy, 2007).

Regressive rate Is is a rate of which decreases as the tax base increases

(Ampongan, 2008).

Value-added tax It is a tax on consumption levied on the sale of goods and

services and on the imports of goods into the Philippines (“Value-Added Tax,”
2008).
CHAPTER 2: REVIEW OF RELATED LITERATURE 8

The purpose of this study is to present information regarding the Household

Leisure Consumption of consumers specifically, breadwinners whose incomes are
not over Forty Thousand Pesos under the burden of Value-Added Tax on. This
chapter presents the review of related research of the relationship of VAT imposed
on goods and services and household leisure consumption. The literature about the
nature and effects of VAT, distributional implications of the VAT reform, regressivity
versus progressivity of VAT, its economics and politics, the nature of leisure and
consumerism are discussed.

Nature and Effects of Value-Added Tax

Meaning of Value-Added Tax

Schenk & Oldman (2007, p. 1) defined the Value-Added Tax as “intended to
tax personal consumption comprehensively, neutrally, and efficiently”. It has been
the most common tax reform in the world and is widely used in both developed and
developing countries.

Income and Consumption Base for Tax

The said authors cited above added that “consumption-based taxes imposed
on transactions (like the VAT) cannot be tailored to individual circumstances”. One
complaint about the said VAT is its regressivity. A response from this argument
came from economist John Kenneth Galbraith (1984) “the obvious solution is by
making private goods more expensive, public goods are made more abundant.
Motion pictures, electronic entertainment, and cigarettes are made more costly so
that schools can be more handsomely supported. We pay more for soap, detergents
and vacuum cleaners in order that we may have cleaner cities and lesser occasion
to use them. We have more expensive cars and gasoline so that we may have more
agreeable highways and streets on which to drive them. Food being relatively cheap,
we tax it in order to have better medical services and better health in which to enjoy
it”.
CHAPTER 2: REVIEW OF RELATED LITERATURE 9

Effects of VAT
Mitchell (2005) cited in his research paper several adverse effects of VAT.
First, it will expand the cost of government since countries with VATs have heavier
tax burden compared to those without VATs. Second, it will increase income tax
rates. Mitchell further explained that “in the real world, the VAT has been used as an
excuse to increase income taxes as a way to maintain “distributional neutrality.”
Third, it will slow economic growth and destroy jobs for two reasons—it reduces
incentives to be more productive and it diminishes economic efficiency since it
allows transfer of resources from private to public sector of the economy.

Distributional Implications of the VAT Reform

As stated by Newhouse & Zakharova (2007), Value Added Tax is designed to

raise revenue of the government for its expenditures. It is distributed in a
proportionate burden, meaning, authorities tax sales in accordance with the
transactions incurred. In practice, many countries, because of political pressures to
use the tax system to correct social inequities and because of their inability to tax
certain sector, use exemptions and multiple rates that consume the neutrality of the
VAT. Such complications make the VAT more complex and expensive to administer
and increase the opportunities for evasion. According to the study made by said
authors (2007, p. 6), VAT reform had a moderate adverse effect on poor
households, and was progressive in its overall distributional impact. VAT is
computed by subtracting inputs from outputs but it is not actually a requirement that
the trader will subtract these two instead, traders tax every sale and purchase and
nets out the difference in tax liabilities for each trader. In this way, a trader charges a
proportional tax rate on all sales.
CHAPTER 2: REVIEW OF RELATED LITERATURE 10

Regressivity versus Progressivity of VAT

The VAT is a sales tax applied to the sales of goods and services at all
stages of the production and distribution chain. By using a credit invoice method,
vendors are able to claim tax credits to gain the tax they paid on their business. As a
result, the tax is in effect applied only to the value added of each vendor. The only
tax that does not get credited or refunded is the tax imposed on the final
consumption purchased by individuals and governments. Hence, the tax is
theoretically equivalent to the retail sales tax on final consumption (Jenkins et.al,
2006).

The proposition that the VAT is regressive is based on the observation

that the VAT is a tax on consumption, and the poor tend to consume a larger
proportion of their incomes than do the higher income groups.

For this reason, the VAT must be regressive because the poor has paid
more tax as a percentage of their income. For this result to come about, four
conditions must hold: first, the savings of the higher income groups today will not be
consumed by these people on taxable goods and services in the future; second, all
goods subject to VAT are taxed equally; third, the poor spend the same proportion of
their total expenditures on taxable consumption goods as do higher income families;
and a 100% of the consumption taxes are passed through to final consumers
(Jenkins et.al, 2006).

The counter arguments as the follows: First, most of the savings undertaken
today will be used to pay for consumption in the future when the people either retire
or suffer a temporary loss of income. These future expenditures will be subject to the
VAT; hence, it is not correct to say that current savings avoids the VAT (Jenkins
et.al, 2006).
CHAPTER 2: REVIEW OF RELATED LITERATURE 11

Second, in developing countries and also in some developed ones, the VAT
is actually levied on only about 50% to 70% of the total value of goods and services
consumed. Some goods and services are taxed at almost full rates while other items
avoid taxation at the retail level. Some obvious examples are expenditures on
health, education and social services. As a consequence, the purchase prices of
these items will have a lower proportion of VAT content than goods and services
which are subject to VAT at all stages of their production and distribution chains
(Jenkins et.al, 2006).

Third, the poor tend to purchase a larger proportion of goods and services
from the informal retail sector where the goods are either not taxed at all, or are
more lightly taxed. In such countries, the higher income households purchase goods
and services in retail outlets that are likely to fully comply with the tax rules. As a
result, the share of consumption subject to VAT for higher income households tends
to be greater than that for the poor (Jenkins et.al, 2006).

The Economics of VAT

Economics of VAT
The case for consumption taxation cited by Hammond & Raboy (1995, p. 21)
includes how the economists favored increased consumption taxation as a way to
address its inefficiencies and distortions. The bias toward consumption is causing
consumption-based taxes to be reconsidered as away to promote economic growth
and boost savings and investment. The basic theory is that making consumption
more expensive will induce people to save more, increasing the domestic resources
available for investment and enhancing prospects for strong economic growth.
CHAPTER 2: REVIEW OF RELATED LITERATURE 12

Nature of Leisure

According to the American Heritage Dictionary (2004), Leisure is freedom

from time-consuming duties or activities. Earlier writers made a prediction how mass
media could destroy the public. On the contrary, Marxist writers drew attention to
how the mass media and other leisure industries were formed and run not only for
profit but also to produce compliant workers and consumers. For example, they
argued that people who became accustomed to being passively entertained would
be equally submissive at work and politically (Roberts, 2006). As indicated by
Roberts (2006, p.183), it is argued that consumer capitalism blurs the distinction
between human needs and artificially created wants, thereby locking people into a
work-and-spend regime, creating ever-expanding markets for profit-seeking
businesses that sell consumer goods and services, which spread superficial
contentment or, when people remain unhappy, persuade them that this must be their
own fault. The use of leisure are said to be controlled by the interests of commerce
rather by our own needs. The growing supply of goods and services has lengthened
people’s chances to live the way they want to and enlarge their freedom.

Consumption
Producers create goods for later consumption. People can only consume if
they also work. Some types of consumption deplete the value of the product easily
while some deplete more slowly like the purchase of a car or a house. Normally,
people expect that the value they earn, like salary they receive, is of greater value of
the effort they exerted. They go to work in order to spend what they have been paid
for in their free time (Roberts, 2006, p. 184).
CHAPTER 2: REVIEW OF RELATED LITERATURE 13

Consumerism

Leisure and consumption

There have been claims that consuming now dominates people’s leisure. It is
true that nowadays most of us celebrate our holidays and other celebrations out and
that when we spend leisure time at home, we typically use goods such as
televisions, sound system, furniture, and the like. But does this mean that our leisure
is dominated by consumption? The expenditure of many households is consumed by
essentials. Roberts (2006, p. 203) further explained that “they are adrift from the
strata whose members are able to spend the winter months planning their summer
holidays, spend the preceding months spending towards the Christmas celebrations,
who scan the color supplements in search of purchasing suggestions and who can
afford to go lifestyle shopping on occasional Sundays.” Leisure is broader than
consumption (Mullett, 1988) conceptually and in terms of the reality of people’s
everyday lives. The public sector has played and still plays a major, not a residual,
role in leisure provision and, although it is now subject to greater commercial
pressures than in the past, its sustenance still depends primarily on political will, not
market forces.
CHAPTER 3. METHODOLOGY 14

As part of the research process, the researchers first consulted the central
library situated in the University of Santo Tomas and the internet for data which are
necessary to support this paper.

Before making the survey, the researchers brainstormed on the possible

questions that should be included on the survey forms and reflected on its relevance
on how the questions would help them in conducting the research. The main aim of
the survey forms is to be the principal source of information in order to support the
study.

The quantitative data were gathered by sending out one hundred survey
forms to the respondents. The said forms were distributed by the researchers
individually between January 28, 2009 and February 06 of the same year. Only
eighty-seven survey forms were retrieved but only seventy are qualified
respondents. The said survey was the basis for answering the problems stated in
Chapter 1.

After collecting and studying the survey, the responses were then tallied and
interpreted through graphs. In addition, the declarative form was used in order to
support both quantitative and qualitative responses.

The respondents chosen by the researchers for this research are the
breadwinners residing in Manila within the income bracket of not more than Forty
Thousand Pesos monthly. The researchers specifically chose the said amount,
which is already after tax, because if divided by thirty-one days, they have
approximately One Thousand Three Hundred Pesos daily allowance which is
positive in terms of financial capacity. The researchers believe that the said amount
of money could still enable them to purchase things that they need and want.

Breadwinners usually carry the financial burden of the family. Most of the
time, the monthly salary they receive is allocated on important expenditures such as
CHAPTER 3. METHODOLOGY 15

foods, school allowance, payment for utility bills, and the like. They usually no longer
spend on products which they want--products that are not a necessity but more of a
form of pleasure and entertainment.

For convenience purposes, the researchers distributed the said forms to

those who they are personally related. They also favored some of their friends and
families to hand out the said forms to those who they know as well. The survey
forms were distributed and let the respondents answer with utmost honesty and
within reasonable time to familiarize them with the content of the survey.

Each participant was asked whether they are still capable of acquiring
household leisure commodities amidst the implementation of the Value Added Tax.
They were asked on how they perceive the implementation of VAT--either they are
proponents or opponents and if they think its implementation affects their household
leisure consumption. They were also asked about the frequency of the said
consumption and the possible reasons why their answers turn out the way they
answered it. Also, the examples of such leisure which they acquire were also asked.
A sample survey form is contained in the Appendix for a complete reference of the
questions.

Aside from the responses of the respondents, books, the internet, and other
relevant source materials have been used by the researchers to gather information.

Responses to the survey forms were expressed quantitatively in frequency

and percentage. In analyzing the data, the formula used was:
CHAPTER 3. METHODOLOGY 16

Where: p = percentage
f = frequency
n = sample size
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 17

Data were expressed using graphs for us to see easily the distribution of the
respondent’s according to their preferred answers, which then leads to a faster
drawing of conclusion for each table. Having a great number of respondents and
choices, graph is the simplest and accurate manner of presenting and observing the
results.

The following tables show the frequency and percentage pertaining to the
respondents’ profile.

Figure 1

As shown in the graph, majority of the respondents are within eighteen to

twenty-eight years old (47%). These are followed by respondents within twenty-nine
to thirty-nine years old (30%). Lastly, the least number of respondents fall on the age
bracket of 40 above (23%).

This indicates that there are many young individuals who, despite their age,
are already breadwinners.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 18

Figure 1.1

The researchers also want to know the distribution of the respondents in

terms of gender. The above graph shows that there are more male breadwinners
(64%) than female (36%).

Figure 1.2

The graph shows that majority of the respondents are single (57%) followed
by those who are married (43%). There are many single breadwinners than those
who are married because after graduating, or in most cases some discontinue their
studies, they prioritize looking for jobs in order to provide financial support to their
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 19

family right away. They do not usually search or settle with a partner since they want
to help and do not want to add an extra burden. Those who are married, on the other
hand, are supporting their own family.

Figure 1.3

The above figure shows that bulk of the respondents have one to five family
members (52%). Next in order are those who have six to ten family members (45%)
and eleven above (3%), respectively. Only sixty-three respondents answered the
question.

The Household Leisure Consumption Decision of breadwinners also depend

on the number of family members they are supporting because the more the number
of supported family members, the more they limit their passive leisure consumption.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 20

Figure 1.4

Most of the respondents currently are employed (66%). These are followed by
small business owners (20%), by working student (11%), and other occupation (3%)
such as taxi driver.

There are a significant number of employed breadwinners because having

your own business would require capital which would be financially burdensome for
the family especially when there is only one who is earning income.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 21

Figure 1.5

A greater part of the seventy respondents are College Graduates followed by

College Undergraduates, High School Graduates and High School Undergraduates.
Others are currently College Students.

Figure 1.6

Majority of the respondents are distributed at 46 % within the income bracket

of Ten Thousand and One Pesos to Twenty Thousand Pesos. Next in order fall on
One Thousand to Ten Thousand Pesos (31%) and Twenty Thousand and One
Pesos to Forty Thousand Pesos (23%).
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 22

The analysis and interpretation of data are presented in this chapter in

accordance with the problems posed in Chapter 1.

The first problem is:

How many of the respondents favor the implementation of Value-Added
Tax on consumption goods?

Figure 2

The above figure shows that respondents who oppose VAT outnumbered
those who are undecided and who responded positively.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 23

Figure 2.1

When asked why the participants favor the implementation of VAT, eleven
respondents reasoned out that the government will have increased revenues that
would pave the way for new projects, eight respondents said that the said tax will
help the government to support its expenses for the citizens and seven respondents
believe that it could help pay the debt of the Philippines from other countries.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 24

Figure 2.2

When asked why the participants do not favor its implementation, forty-seven
said that its imposition resulted to expensive goods, forty-three respondents said
that it is a way of government corruption, thirty-five respondents believe that it is very
burdensome, thirty-one respondents said that it is very high, and two cited other
reasons.

In line with the researchers’ expectations, majority of the respondents oppose

the implementation of the VAT. They believe that it does not help economic growth
and development of the country but rather give way to government corruption and
rapid price hike of commodities. Considering that our respondents are all
breadwinners, they are sensitive with regards to their consumption of goods. Only
16% of the respondents are in favor to the VAT. Many of them justify that it greatly
contributes to the government funds in raising projects. Although there are issues on
economics and politics, according to them, the development program of our
government are still ongoing.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 25

Figure 3

The participants were also asked whether they think VAT is just or not. From
their responses, majority reckon that it is not. This is followed by those who are
undecided and who answered Yes.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 26

Figure 3.1

When asked why the participants think that VAT is just, seven respondents
believe that the said tax is just because all are paying. Five respondents believe that
they could see where their money is being used, and four respondents think that
they actually feel that VAT helps the economy improve.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 27

Figure 3.2

When asked why the participants think that VAT is not just, fifty-two
respondents said it is a burden. Fifty respondents said it affects basic needs and
forty-eight responded that it leads to too high expenses. Forty-three said it is a form
of government corruption. Thirty-seven said it affects more the low-income earners.
Thirty-five said it is a very high rate, and four cited other reasons.

Majority of the respondents believe that VAT will not resolve the economic
crisis of the Philippines (Appendix B) and that the government based it on the
personal gains and benefits of government officials (Appendix C).

Figure 3 shows that most of our respondents viewed that VAT is unjust as it
results to an increase in the prices of goods and affects their basic needs
consumption. Some believed that the tax rate imposed on every commodity is too
high that it leads to personal gains/ benefits to some government officials. Only 12%
agreed that VAT is just for all are obliged to pay. Others see the fruit of their
contribution as it adds to the improvement of the economy.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 28

The second problem is:

How many of the respondents think that the implementation of VAT
affects their household leisure consumption?

Figure 4

The graph shows that majority of the respondents believe that the
implementation of the Value-Added Tax affects their household leisure consumption.
It lessens or limits their financial capacity of acquiring leisure products.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 29

Figure 5

The effects of VAT on household leisure consumption of the respondents are

presented above. The above figure shows that majority of the respondents buy
lesser amount of leisure commodities which is choice 1 (34%). This is followed by
buying leisure products only after satisfying basic needs (26%). Next in order are not
buying leisure products at all (15%), buying more of basic necessities (12%), less
buying of basic necessities (12%), and buying more leisure commodities (1%),
respectively.

As breadwinners, our respondents budget their consumption in a way that

they prioritize basic needs over others. Since their salary income is sufficient enough
for everyday expenses, they tend to limit their spending particularly on their leisure
consumption. Before engaging in leisure activities or purchasing luxury products
they make sure that their basic necessities are satisfied.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 30

The third problem is:

How many of the respondents are still capable of acquiring
commodities other than basic needs?

Figure 6

From the monthly income received by the respondents, majority are still
capable of spending on leisure. A very close amount responded that they are no
longer capable of spending on leisure.

Filipinos, by culture, are the type of people who wants to enjoy their life.
Because of this, breadwinners tend to sacrifice some of the basic needs or save
some money for leisure.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 31

Figure 7

The respondents who answered Yes were further asked to check the different
kinds of leisure products listed in the survey forms which they consume. Shopping
has the most number of responses specifically thirty-eight out of thirty-eight
respondents. This is followed by the purchase of foods of the same number of
respondents, gadgets of thirty-one respondents, DVDs of twenty-nine respondents,
vices of twenty-four respondents, books of nineteen respondents, appliances of
twelve respondents and other products of seven respondents.

Shopping and having lunch/dinner in restaurants are usually done during

weekends. Breadwinners find leisure time during weekends to recharge themselves
after a hard week of work. The researchers think that it is for this reason that
shopping and buying food have the highest percentages of the type of leisure
products they acquire.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 32

Figure 8

In general, most respondents answered sometimes. Next in order said that

they always consume things for leisure. These are followed by those who seldom or
rarely consume it and those who do not consume it at all.

Implementing VAT leads the breadwinners to tighten their belt to live within
their means. For this reason, most of them have to spend have to spend on leisure
products not on a regular basis (sometimes). Perhaps those who can afford to
always consume such products are those who do not have student/s studying in
schools, especially, in a private one.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 33

The fourth problem is:

Do breadwinners spend large amount of money in acquiring leisure?

Figure 9

Most of the respondents do not consume large amount of money for leisure
consumption.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 34

Figure 9.1

Those who answered Yes were further asked for the amount of money they
spend for such consumption, 31% spend One Hundred to One Thousand Five
Hundred Pesos, 45% spend between One Thousand Five Hundred to Twenty
Thousand Pesos, and 24% spend more than Twenty Thousand Pesos.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 35

The fifth problem is:

What is the frequency of their consumption of leisure?

Table 1
Percentage Distribution of Respondents on the Frequency with which they Engage
in the following Activities in the past 3 months
Frequently Occasionally Seldom Never Not Sure Total
Situation 1 1.43% 20% 20% 55.71% 2.86% 100%
Situation 2 1.43% 15.71% 38.57% 31.43% 0% 100%
Situation 3 4.29% 38.57% 34.29% 22.83% 0% 100%
Situation 4 17.14% 38.57% 35.71% 8.57% 0% 100%
Situation 5 10% 34.29% 31.43% 38.57% 0% 100%
Situation 6 1.43% 8.57% 30% 50% 7.14% 100%
Situation 7 8.57% 12.86% 25.71% 42.86% 4.29% 100%
Situation 8 0% 7.14% 15.71% 77.15% 0% 100%
Situation 9 7.14% 28.57% 34.29% 27.14 4.29% 100%
Situation 10 50% 21.43% 20% 5.71% 0% 100%
As for situation 1, which is playing adult games such as Casino, most
respondents never spend on such activity while the least number of respondents
engaged in the said activity frequently for the past three months.

As for situation 2, which is buying books for pleasure, most respondents

seldom spend on it while the least number of respondents engaged in the said
activity frequently.

As for situation 3, which is going on a family outing, most respondents

occasionally spend on it while the least number of respondents engaged in the said
activity frequently.

As for situation 4, which going out for the evening for drinks and
entertainment such as bars and mall, most respondents occasionally spend on it
while the least number of respondents never engaged in the said activity.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 36

As for situation 5, which is going to the movies, most respondents never

spend on it while the least number of respondents engaged in the said activity
frequently.

As for situation 6, which is visiting art galleries and museums, most

respondents never spend on it while the least number of respondents engaged in
the said activity frequently.

As for situation 7, which is collecting or making something, most respondents

never spend on it while the least number of respondents are unsure on the
frequency on which they engaged in the said activity.

As for situation 8, which is attending opera, ballet, or dance performances,

most respondents never spend on it while the least number of respondents seldom
engaged in the said activity.

As for situation 9, which is buying new appliances, most respondents seldom

spend on it while the least number of respondents are unsure on the frequency on
which they engaged in the said activity.

As for situation 10, which is watching television/using the computer for fun,
most respondents spend on it frequently while the least number of respondents
never engaged in the said activity.

To sum the result from the above table, majority of the respondents said that
they never engaged in attending opera, ballet, or dance performances in the past
three months. The least number of respondents said that they frequently engaged in
playing adult games, buying books for pleasure, and visiting art galleries and
museums.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 37

Average income earners have to adjust their activities depending on priorities.

Those who have no or less dependents can afford higher frequency of leisure
activities than to those who have heavy burden.

Figure 10

The respondents whose answers range from seldom to never were further
asked about their view on why their household leisure consumption is limited. Table
16 shows that choice one, which is basic necessities first, was answered by the
majority of the respondents. This is followed by choice two, which is not included in
the budget or has no financial capacity, choice three and four, respectively. Some
respondents left the question unanswered.
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA 38

Figure 11

The above table show that majority of the respondents believe that the
post-purchase reason why their leisure consumption is limited is that it demands
additional utility bills for consumption of such leisure (47%). Next is that it demands
high maintenance cost (38%). Lastly, few respondents said that if they spend on
leisure, they might not help but spend on it continuously (15%). Some respondents
left the question unanswered.
CHAPTER 5: SUMMARY, CONCLUSION, AND RECOMMENDATION 39

A. Summary and Conclusion

Credit Invoice VAT is one form of imposing Value Added Tax on producers of
goods and providers of services. Hence, it is treated as a sales tax. Since VAT is an
indirect tax, the burden can be passed on to consumers by paying an additional
amount for the cost of the goods and services they purchased based on 12% rate.
From 10%, the rate has risen to 12% which imply additional burden to consumers.
Goods and services become expensive but people can’t help but to spend on it
especially when it is a necessity. In relation to that, people limit their consumption on
what they want which include leisure products. Such products include going to the
mall, watching a movie, buy new appliances and many more.

From the figures shown on Chapter 4, the researchers therefore conclude

that there is a relationship that exists between Value Added Tax and the Household
Leisure Consumption not only among breadwinners but also to other individuals.
Majority of the breadwinners who participated in this research reckon that the Value
Added Tax imposed on consumption goods affect their household leisure
consumption pattern. Wants are not necessities but no one is deprived of spending
on it. They also include in their consumption decision the post-purchase leisure
consumption. Majority of them considers additional cost on utilities if they spend on
it. Example of which is that if they buy a DVD player, they would have to buy DVD
movies and would also increase their electricity bill. Another example is buying a
new car. Petroleum products are not exempted from VAT too. Therefore, it would
demand additional cost for gasoline and also for maintenance.

The added burden of VAT makes it harder for households to spend not only
on leisure but also the basic necessities. Of course, families would have to prioritize
their consumption of their needs before spending on their wants. But with the
additional money they have to spend because of VAT, households tend to limit their
leisure consumption further. Some of them no longer spend on it at all especially
when they are supporting more than two family members. From those findings, the
CHAPTER 5: SUMMARY, CONCLUSION, AND RECOMMENDATION 40

researchers concluded still, Value-Added Tax alters the Leisure Consumption

Decision of Households. Although the purpose of implementing Value-Added tax is
to generate additional revenues to fund Government projects such as infrastructure,
educational, medical, housing, and other programs, the said tax is undeniably an
additional financial burden to middle class families whenever they want to enjoy
even a little amount of luxury in life.

Although majority of the breadwinners believe that their consumption of

leisure is limited due to VAT, most of them are still capable of spending on passive
leisure products/activities from time to time such as shopping and watching TV.
While they spend on it most of the time, most of them do not spend large amount for
such products/activities. The researchers conclude that other factors, not just the
burden imposed by Value-Added Tax, affect the consumption pattern of
breadwinners on passive leisure products/activities. Such factors include the
monthly income they are earning and the number of family members they are
supporting. They are more likely to limit their leisure consumption if they do not have
sufficient income to support their families and that if they are supporting quite a large
number of family members especially if the said members are still studying.
CHAPTER 5: SUMMARY, CONCLUSION, AND RECOMMENDATION 41

B. Recommendation

The researchers recommend that middle class families and those individuals
who receive low income should (1) limit their consumption on leisure products due to
value added tax which are imposed to all products that we are consuming; (2) be
sure to satisfy basic necessities first than any others products which are not really
important.