Final Paper PDF

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 1
Chapter 1
THE PROBLEM AND ITS SETTING
Introduction
Variety store or ―sari-sari ―store has been a big part of the Filipino culture. Variety
stores are small establishments that offer varieties of inexpensive and popularly-priced
goods, offered in small-packed sales or in ―tingi‖. Variety stores are highly in demand in the
Philippines because of the enormous number of minimum-wage earners who plan their
budget daily. These consumers are highly dependent to variety stores, making this business
one of the fast-growing retail platforms in Philippines.
In a variety store, price is the center of competition. Price is the exchange value of
goods and services. The lower the price a variety store offers, the more customers it gets.
One of the factors that can affect price is inflation. When there is inflation, the purchasing
power of peso has decreased; put simply there is a general increase in prices of products.
And in economics, the higher the price, the lower the demand.
As the Tax Reform for Acceleration and Inclusion (TRAIN) Law took effect on January
1, 2018, the effects on the prices of sugar-sweetened products, cigarettes, liquors, etc., did
not came as unnoticeable. TRAIN Law is to create a more just, simple and more effective
system of tax collection, as per the constitution, where the rich will have a bigger
contribution, and the poor will benefit more from the government‘s programs and services.
(What is TRAIN? Department of Finance). Although TRAIN Law reforms and changes in
collection efficient, affects the tax revenue of the government and helps increase the take
home pay of Filipino citizens, we still cannot ignore the fact that increasing the excise tax
which cause inflation, affects the market and economy in a changing manner.
Since variety store is a part of the Philippine culture and Filipino‘s daily life, and the
price being directly cause effect on the management strategy of the variety store owners,
this study was undertaken to determine the effects of TRAIN Law to the business planning
and operation of the owners of variety stores in the City of Mandaluyong.
Though there are government researches going on about the overall impact of TRAIN
Law to the economy, the researchers want to explore the specific effects that it has on the
lifeblood of retailing industry and provide findings about the effectiveness of TRAIN Law and
its vital role in the growth and development of ‗sari-sari‘ store business.
Theoretical Framework
Variety stores have been a huge part of the Philippine economy and even outside the
country. Several theories are given to have a wider knowledge of how they operate and how
they play their role in the economy.
In this study, theories are categorized into four, namely – (1) the Cyclical Theories, (2)
the Evolutionary Theories, (3) the Conflictual Theory and (4) the Environmental Theory.
Under the cyclical theories, two sub-theories were mentioned, the Wheel of Retailing and
the Accordion Theory. The wheel of retailing tells us that variety or retail stores undergo a
cycle of three phases. First is the entry phase, followed by the trading-up phase, and lastly,
the vulnerable phase. The entry phase tells us that retailing undergoes an initial stage
wherein they have low price, low service and limited product offerings. Next, the trading-up
phase where the entity improves their offerings, provide better service and then put their
prices a little higher. And in the last phase which is the vulnerable phase, the entity will now
have conservatism and have a declining return on investment (ROI) and should now expect
increased competition. On the other hand, accordion theory tells us about the evolution of
retail institutions from general, broad-based outlets with wide assortments, to narrow-based
institutions carrying specialized assortments, and back to general, broad-based
assortments. The cyclical theories provide us knowledge as to how variety stores maintain
their operations while undergoing certain phases which is likely to involve repetition for it
was said that it is a cycle.
The evolutionary theories discuss three processes involving retailing. These are the
dialectic process, natural selection and retail life cycle. In the dialectic process, retailers
mutually adapt in the face of competition from ―opposites‖. When challenged by a competitor
with a differential advantage, the established retailer will adopt strategies and tactics in the
direction of that advantage, making the innovator less attractive. Put simply, combining a
thesis and an antithesis together, and creating a synthesis which would then be used as a
thesis that will also later be combined with another antithesis and the process would go on,
repeatedly. In the natural selection, retailing institutions that can most effectively adapt to
environmental changes are the ones most likely to prosper or survive. When there is an
environmental need for a certain kind of retailing institution, it will evolve. When there is a
need to cease the existence of the institution, it will tend to disappear. Lastly, the retail life
cycle which states that retail organizations pass through identifiable stages of innovation,
development, maturity and decline. Under innovation, there is differentiated services,
product and format, few competitors, rapid growth and moderate profit. In the development
stage, there is increase in sales, arrival of competitors, the organization tries to attain
leadership, there is a need of higher investment and there will be cost pressure. The
institution will now undergo maturity which involves increased competition, decrease in
growth rate and a possible repositioning or adjustment in strategy, format and merchandise
mix. Lastly, the decline stage wherein there is a loss of competitive edge, negative rate of
growth, profitability decline and costs will run higher. The evolutionary theories tell us that
retailing institutions are subject to evolution or on the bad side, a possible disappearance in
the economy. This can give us proper information regarding how variety stores hold their
existence in the industry and how they improve under advantages and disadvantages that
arise from incoming competitions.
The third theory, which is the conflictual theory, is very much related to one process
under evolutionary theories, the dialectic process. Where the combination of a thesis and an
antithesis to form a synthesis is involved. According to the conflictual theory, retailing
evolves through blending of two opposites to create a new format. One good example is a
supermarket which is a product of the combination of individual retailers and a department
store. The last theory, environmental theory, states that retailing is under a certain
environment where three factors are continuously affecting it, these are the customers, the
competitors and the changing technology. These two last theories mentioned help us know
that variety stores do not raise easily, rather changes as to how factors under its
environment affect it. Also, they can later face evolution.
Conceptual Framework
The Conceptual Framework illustrates the flow of the study undertaken. It shows the
data gathered which is considered as input, how the data is processed, and the output.
Input is concerned with two main topics. The first topic is the Profile of the
Respondents, of which three data was gathered. These are the years of operation, average
daily sales, and the initial capital of the variety store. The second was the aspects of the
effects of TRAIN Law to the selected variety stores which is composed of four aspects
Figure 1. Research Paradigm
namely, sales management, profit management, cost management, and financial
management.
The data gathered is then processed through the assessment of the effects of TRAIN
Law to the selected variety store, and is presented, analyzed, and interpreted through the
survey questionnaire.
The output contains the processed data that provided useful information about the
effects of TRAIN Law to the selected variety stores in Mandaluyong City.
Statement of the Problem
This study aims to determine the effects of TRAIN Law to selected variety stores in
Mandaluyong City.
Specifically, it seeks to answer the following sub-problems:
1. What is the profile of the stores in terms of the following variables:
1.1 Years of Operation
1.2 Average Daily Sales
1.3 Initial Capital
2. What are the effects of TRAIN Law to the selected variety stores in Mandaluyong City
as assessed by the respondents in terms of the following aspects:
2.1 Sales Management
2.2 Cost Management
2.3 Profit Management
2.4 Financial Management
3. Is there a significant difference in the respondents‘ assessment on the effects of
TRAIN Law in selected variety stores in Mandaluyong City when they are grouped according
to store profile?
Hypothesis
There is no significant difference in the respondents‘ assessment on the effects of
TRAIN Law in selected variety stores in Mandaluyong City when they are grouped according
to store profile.
Scope and Limitations of the Study
This study focused on the negative effects of TRAIN Law in variety stores in
Mandaluyong City.
This study is limited to the data gathered from the respondents who owns and/or
manages variety stores in Mandaluyong City. The researchers analyzed the data gathered
based on sales, cost, profit and financial management of the stores. The lists of chosen
variety stores were provided by the Business Permit and Licensing Office of Mandaluyong
City. And all the literature and studies included in the review shall have been published or
written at least ten (10) years before the conduct of the current study.
Significance of the Study
This study will be beneficial to the following:
Businessmen.This study would help them know whether to invest in a big business
or in small/medium businesses in the time of the existence of the TRAIN Law. This will also
let them know the advantages and disadvantages of the law.
Students.The result of this study can give knowledge to the students especially to
those who are pursuing accountancy and entrepreneurship. This will help them know some
differences in the taxation laws of the Philippines.

Government.This study would help the authorities and to know their respective
contributions in the industry. By identifying the specific problems, they could be able to
locate their weaknesses and some loopholes of the existing policies that are inapplicable to
these modern times.
Knowing these, they can update the obsolete regulations and enact better ones that
would meet the needs of the citizens.
Future Researchers.This study may serve as a guide and reference for future
researchers in gathering data related to TRAIN Law.
Variety Stores’ Owners.As the subject of this study, this will give them knowledge on
the advantages and disadvantages of the reformation of Philippines‘ tax policy to their
business.
Definition of Terms
To further understand the study, the following terms were operationally and
theoretically defined.
Cost Management. This refers to the amount of money to pay for the goods or
resources acquired by the business. It is the planning and controlling of the budget of the
business.
Excise Tax. This refers the indirect tax on the sale of a good or service such as fuel,
tobacco and alcohol. Indirect means the tax is not directly paid by an individual consumer —
instead, the Internal Revenue Service (IRS) levies the tax on the producer or merchant, who
passes it onto the consumer by including it in the product's price. (Investopedia)

Financial Management. Operationally, this refers to how individuals, business
owners, manage its money, purchasing goods or investing to other things. And it refers to
the processes to do in acquiring needed funds.
Implementation. This refers to an act of execution or making policies planned take
into effect. The process of making something active or effective; implementation of a new
policy or law. (Merriam-Webster Dictionary)
Inflation. This refers to the change in percentage rate of prices at which there‘s an
increase in general prices of some goods and services and it requires more money to spend
to buy such goods and services.
Profit Management. This refers to the primary goal of a business, it is to earn profit
or income, revenue less expenses. Income or profit is generated from the activities of the
business.
Sales Management. This refers to the operating revenues earned by the business by
selling their products or services. It is the practical application of Sales Techniques.
(Accounting Tools)
Tax Reform for Acceleration and Inclusion (TRAIN). In this study, this refers to the
new tax reform program where the government expanded the value-added tax (VAT) base,
and they increase the excise tax on petroleum products and sweetened beverages. And
because of that it resulted in an increase in the price on some commodities and on ―sin‖
products.
Variety Store. This refers to the small retail store that offers wide range of common
goods, usually the low-priced goods.

Chapter 2
REVIEW OF LITERATURE AND STUDIES
The literature and studies cited in this chapter tackle the different concept,
understanding, and ideas, generalization or conclusions and different development related
to study of the effects of the change in fiscal policy to the business operation and
management of a Variety Store. Those that were also included in this chapter helps in
familiarizing information that are relevant and like the present study.
Sales Management
Hunkar Ozyasar (2018) said on his article “How does Fiscal Policy Affect Company?”
tight fiscal policy calls for less spending and more taxes, both of which hit the bottom line of
the small business. This will require small business, such as retail businesses to increase
price of the goods. Thus, the net result is less demand for goods and services, and lower
sales. If the government also raises taxes, the effect on small business can be devastating.
Deciding how cost should be managed, selling price should also be well set because
when it comes to the business market, prices are everything. Prices are responsible for the
decisions that producers and consumers make. In favor of what is stated,‖ Pricing is a
critical source of influence over shopper purchase behavior, and the pricing decisions you
make directly affect category sales, inventory positions, and category profitability‖ (Nicholls,
2017). This shows that a change in price of the goods being offered also creates a change
in the sales, inventory and profitability aspects of a business.

In addition to that, prices should be set carefully because many consumers use price
to ascertain the value inherent in products and services they purchase. Price is a factor
affecting sales as well as income. Putting a high mark-up on some products to increase
income, affects the level of sales. This might give a high income per product, but the number
of sale might decrease since customers think that the price set is not reasonable based on
the quality of the product being offered.
Setting the right price and managing cost effectively is not enough to sustain the
profitability of a Merchandising Company. Understanding consumer behavior is also
important for any organization before launching a product. If the organization failed to
analyze how a customer will respond to a product, the company will face losses. (Solomon,
2009). Choosing the variety of products to offer to customers is important. Having
understood about this reduces the risk of having large number of unsold products. Knowing
what to sell is an advantage because this somehow shows that customers are willing to buy
even at a high price. But it should also be kept in mind that as a variety of products are sold,
there also is a variety of customers, with different purchasing capacity and different taste
knowing the needs of every customer improves the level of sales, inventory, and income.
Price inflation is occurring at the same time as consumers adjust their spending to
reflect their new financial realities. Before, consumer could back up their spending by using
credit or their savings, considering that the price of the products does not go far from the
standard or usual range. But that is not applicable now. Overall, it has a double impact on
demand: each money buys less than it once did at a time when consumers are spending
less anyway, meaning retail volumes are now falling regularly into negative territory. If a
retailing business is trying to increase price when the disposable income is not that
squeezed, the scenario could have been different. (Dickinson, 2018)

Additionally, higher excise tax on fuel products due to the newly implemented Tax
Reform Law would increase the prices of prime commodities alleviated by DTI. According to
DTI Secretary Ramon Lopez, ―there should be minimal effect if at all no change on
suggested retail prices of goods and consumers should not worry that prices of commodities
will increase. And based on the estimates of DTI the effect of the higher imposed excise tax
on petroleum products to the total production costs is only 4%. And he says that the costs of
manufacturers are increased only by a little. And he warned the groceries that they do not
have the right to increase the price of the goods that they are selling because it is stated in
the law that they should price their goods within the suggested retail price (SRP) and that it
could be lower but not higher. It‘s because they believe that there‘s still old stocks of the
goods before the new tax reform took effect and he encourage strongly that consumers
should report those groceries and supermarkets who increased the prices of their products
unusually.
Filipinos can have a chance at being entrepreneurs who in turn which will make way
for more infrastructures and jobs. Small businesses with total annual sale of less than P3
million will benefit from the TRAIN Law because it is VAT exempted just like what Maramara
(2018) concluded.
Implementation of Tax Reform Acceleration and Inclusion (TRAIN) Law was
considered as a blessing for some Filipinos as the take home pays and company bonuses
as increased depending on salary tax bracket (Smaeunabs,2018). This is true for Filipinos
earning not more than 250,000 annually. Although the small and medium enterprises are
benefiting from this, it may also have a negative effect since many consumers are having a
tough time coping with the rising inflation of goods brought by the said law. This is the
reason why several sectors believe that this new implemented law is beneficial for medium
to high earners.
Now having said that it is important to know which variety of product should be offered
to generate income, it is also essential to assign a price that will not just cover costs, but
also increase profit. Price set for goods affects the volume of sales, not only because of the
price itself, but the customers might tend to use the price set as the basis of the quality of
the goods or products being sold. Setting it too high might drive the customers away to the
competitors selling the same product but for a lower price. This agrees with what Espinocilla
(2011) quoted in the study she conducted, that pricing a premium item too low, for example,
and customers will not believe the quality is good enough. Conversely, putting too high a
selling price on value lines and customers will purchase competitors‘ lower- priced items.
It is possible that an increase in retail price has a positive effect on the retail trade as
long as the consumers do not realize that retail price significantly increased in relation to
their disposable income. But also take into account that negative relationship between net
wages and nominal retail trade can be caused by alternative investment possibilities such as
savings, investment, etc., that can be an allocation of consumers disposable income, and
could possibly affect retail spending, i.e. retail trade. (Benazić, 2014)
In the study The Effect of Tax Payment on the Performance of SMEs: The Case of
Selected SMEs in Ga West Municipal Assembly (Tee, Boadi & Opoku, 2016), it has been
found that changes in tax rates leads to higher production, distribution and selling cost of
products which lead to higher prices which leads to the change in the consumer‘s buying
behavior. It will cause a retarded growth of SMEs. Consumption rate and sales volume
decrease inversely relative to the increase in price reducing the profitability of the business.
More so, tax payment is among the outflows of cash from the business which reduce the
purchasing power of an enterprise. This is due to the fact that a large amount of cash
collected is used to pay taxes rather than to expand the business.
In the study Consumer Response to Cigarette Excise Tax Changes
(Lesley,Muehlegger 2010), the find out that the increase in excise tax in cigarettes affects
stores closer to lower-tax jurisdiction more as there is a greater reduction in sales. In their
study, they also inform that the public policy implication of tax increase with non-fiscal
motives as the consumer avoidance undermines the policy objectives. Consumer avoidance
directly undermines policy objectives. We find that consumer behavior in anticipation and
following a tax increase vary by the intensity of consumption (heavy vs. light smokers),
proximity to the border, and by demographics (such as age and race).
There is a genuine dilemma in determining how to price the products—to lower prices
and promote, thus gaining volume, albeit at lower profitability—OR to raise prices and sell
less volume, but at a higher profit margin. The former yields increases in apparent revenue,
if enough additional units are sold. The same with raising the price, it generates more profit
on the sales revenue, again if enough units are sold and of course, if unit sales do not
decline too much due to increased prices. (Mariotti, 2011)
Cost Management
To other country, particularly in Singapore, SMEs are price takers in the product
markets and they are also price-takers in the input markets. When there is substantial
increase in cost, SMEs would likely be in trouble as they cannot pass the increased in cost
to some products and services to their buyers. (Chew, 2008)
This agrees with the idea of Kulkarni (2013) that perhaps, the most vexing problem
facing retailers is the challenge of getting the right merchandise in the right quantities to the
right stores at the time the customers want it. Maintaining the right number of goods and
knowing which goods or products to have, plays a significant role in the store‘s profitability.
Having excess merchandise might increase operating cost due storage or warehouse rents
while having insufficient merchandise decreases sale because the merchandise is not
available by the time the customers are willing to buy it.
Everybody knows that rising inflation means an increase in the cost of living. But not
everyone realizes that the effect on small- and medium-sized enterprises (SMEs) can be
much more severe (Gaw, 2017). For an average consumer, this only means that the price of
food, utilities and clothing has gone up while for SMEs, this means higher bills and a
diminished buying power. Although government provides a percentage of annual budgets
for the SMEs, some small businesses still must personally absorb these hikes which results
to the owners, aside from having less room to invest for the growth of the business,
becoming open to non –traditional financing options. This clearly indicates that aside from
the taxation system, inflation has a profound impact on SMEs too and the government
should think of ways to help not just the small businesses but the economy as well.
The administration of President Rodrigo Duterte started 2018 by implementing
TRAIN, which reduces personal income taxes of individuals, but many did not expect is a
higher monthly household bill that would offset the gains they would receive. Though TRAIN
reduced the imposed personal income tax, there is still a burden because of the increase on
some goods and services needed by individuals. Payroll managers have started adjusting
their systems to reflect the new withholding tax rates. Supermarkets, oil retailers,
convenience stores, and even sidewalk vendors have begun updating their price lists. In the
beginning of the 3rd quarter of 2018, the motorist needed to prepare themselves for higher
fuel prices and higher fuel prices will also have a trickle-down effect on public transport
service providers, which have started seeking fare hikes.
Furthermore, there are other provisions stated in the TRAIN Law, but one thing is
certain: everyone will be affected, the SMEs included. SMEs will have to shell out increased
budget on their transportation since gas and petroleum prices will have significant increases.
With the expected increase in the various services and logistics, small entrepreneurs will
have to innovate ways on how to expand their businesses without having to add on higher
expenses to their customers. There will be so many changes on how SMEs will have to deal
with businesses. They should find creative instances to make their small endeavors more
palatable to their respective customers to stay afloat to today‘s business scenario.
Compliance cost of taxation and transfer pricing are some of the obstacles that SMEs
are facing. A study conducted in Europe (Solilova et al., 2017) shows that compliance cost
is increasing through strict and difficult transfer pricing rules. This type of costs is regressive
with respect to the size of firm, the SMEs gets the disadvantage that it cannot use the
benefits resulting from tax planning and application of tax planning instruments, for example
is transfer pricing which helps to reduce tax risks and overall tax liability. Once a strict
compliance of transfer pricing is required it will need tax consultancy that increases
compliance cost of taxation therefore adding to the costs and burden of SMEs. Small
businesses compared to large enterprises will mostly face the burden of disproportionately
high tax compliance, so the taxation and other obligations should be carefully designed.
A research conducted regarding the Higher Retail Prices of Sugar-Sweetened
Beverages 3 Months after Implementation of an Excise Tax in Berkeley (2016), California
suggests that the demand for sugar-sweetened beverages is elastic thus; the distributors or
retailers may reduce the effects of the excise tax on the sugar-sweetened beverages by
either absorbing the costs or distributing costs across untaxed products and lower their profit
margin just to sustain sales or known as ―strategic pricing‖.
Corpuz (2017) mentioned that ―Operating a retail asset management is complicated
and not just about building space and leasing because it relied on the retail mix, attracting
the right customers, and good consumer marketing and ensuring that the asset was well
maintained and customer- centric. ―Store owners should obtain knowledge on what their
customers really need so that the management will know which products they should
continue to sell even if its cost increases largely. This will help the Store owners to have a
well manage inventory. It may also increase their sales even if there is a price increase
because, customers are still willing to buy those certain products because it is essential to
them or it has no substitute product.
According to Roy (2018), one thing is certain, everyone will be affected, the SMEs
included. SMEs will have to shell out increased budget on their transportation since gas and
petroleum prices will have significant increases. With the expected increase in the numerous
services and logistics, small entrepreneurs will have to innovate ways on how to expand
their businesses without having to add on higher expenses to their customers. There will be
so many changes on how SMEs will have to deal with businesses. They should find creative
instances to make their small endeavors more palatable to their respective customers to
stay afloat to today‘s business scenario.
Rebecca Burn-Callander said on her article ‗How does Inflation affects the
business?‟(2015) the slowing of the demand will cause a decrease in supply, thus, for the
emerging economies as a result of the increase in price, will help reduce the pressure on the
commodity price and the cost of physical inputs will fall back, which will help to control the
effect of inflation to the cost of SMEs.

Profit Management
There is consensus among policy makers, economists, and business experts that
small and medium enterprises (SMEs) are drivers of economic growth. A healthy SME
sector contributes prominently to the economy through creating more employment
opportunities, generating higher production volumes, increasing exports and introducing
innovation and entrepreneurship skills. The dynamic role of SMEs in developing countries
insures them as engines through which the growth objectives of developing countries can be
achieved. Small businesses are a vital part of the American economy, bringing in more than
50 percent of the U.S. gross domestic product and creating about half of all private-sector
employment. However, they are forced to deal with a complicated tax code that has many
laws that can negatively impact their productivity. (Hanks, 2008)
Based on the TRAIN Law (R.A 10963), small medium enterprise owner and the self-
employed have the liberty to choose the way they pay their taxes. They can pay yearly an
8% tax or through a graduated income tax rate.
The BIR said the process has been easier under the TRAIN Law that‘s why they are
expecting more tax payments and that everyone might feel burdened because of the tax
reform but notes that many will benefit in the long run. There are good feedbacks to the said
tax reform that the government implements just like Maricar Cruz, a laundry shop owner who
said that she is happy to the revised tax policy and vows to pay her taxes on time. (Jocson,
2018)
This supports the fact that self-employed individual and professionals and MSMEs are
noted as the winners under TRAIN. They are bound to enjoy ―more disposable income‖
because of reduced income tax and new tax exemptions. 98% of the businesses in the
country are MSME‘s. Under TRAIN, the value added tax (VAT) threshold was raised to P3M
from P1.9M. Thus, MSMEs that gross below P3M annually will no longer required charging
VAT to their customers.
In the Philippines, Small and Medium Enterprises (SMEs) are defined as any
enterprise with 10 to 199 employees and/or assets valued from P3 million to P100 million.
SMEs and micro enterprises combined make up 99.6% of establishments in the country
(Natividad, 2016). Most of SMEs here in the Philippines are composed of variety stores,
along with other low to medium-earning entities. Small and medium enterprises play a big
part in maintaining a healthy market or economy. However, due to difficulties encountered
within their enterprise together with other external factors, their performance falls below what
is expected.
SMEs also play a significant role in the political economy, helping to promote and
strengthen reforms. Economically, they have an inherent interest in promoting policies that
favor a level playing field, while politically; a thriving SME sector empowers and grows a
strong middle class, which can then serve as a constituency seeking democratic reform and
sound economic governance (Why Small Business Matter?, n.d).
Micro, small and medium enterprises (MSME) are the biggest winners in the
government's tax reform program, according to new research by several firms. Experts said
the most important change was the raising of the tax threshold from ₱1.5 million to ₱3
million. MSMEs with gross sales below the threshold can opt to pay a flat tax of just 8%
instead of paying the regular income tax. This change makes the tax system "simpler and
more favorable" to entrepreneurs, a report by Chinabank Securities read. The change is
even more significant for those earning between P1.5 million and ₱3 million a year — the
newly tax-exempt. Their disposable incomes are expected to jump by 27-28.2%. Even
though consumer prices are expected to go up because of higher taxes on fuel and coal,
Chinabank Securities said inflation will still be outpaced by the rise in entrepreneurs' income.
For those earning up to ₱1.5 million annually, inflation will not erode their income gains until
2021. For those earning between ₱1.5 million and ₱3 million, they have until 2025, the bank
said (Jiao, 2018).
The simplified tax procedures should also benefit MSMEs that often don't have the
time or money to hire accountants to go over their books (Abrea, 2018). The deadline for
taxpayers to pay the second installment of their tax liabilities was extended from July 15 all
the way to October 15 as a result of the law‘s implementation. Abrea also said that it may be
the ultimate objective of Tax Reform for Acceleration and Inclusion (TRAIN) Law to simplify
rules to encourage the compliance of small businesses here in the Philippines. In addition,
Abrea also had a thought that the government should not be running after the few taxes of
these small entities but rather be helping or encouraging them to be able to comply to
become part of the country‘s formal economy.
Semikolenova (2011) have mentioned in her study that the development of small and
medium enterprises is heavily influenced by the level of taxation, its administration and
compliance. SMEs in highly developed-countries play an important part of their market
economies. Some of the essential functions of SMEs in the economy are mentioned in her
study such as its social- productive and social economic environment advantages that helps
the economy to overcome inflation, a fall in production, growing unemployment and fast
unexpected changes of economic environment. And since SMEs play a significant role in
the economy, the main goal of every tax policy should be maintaining tricky balance
between tax compliance costs, tax administrating and economic development to help the
owners and economy as well. Although taxation system is the most principal factor that
promotes development and growth of SMEs, creating a policy with it can be the crucial one.
According to a new OECD study, governments have a range of policy levers –
including tax policies that can support the growth and development of SMEs. Tax Policies
can influence the creation and growth of SMEs in a way that the applied tax rules to all
businesses may disproportionately affect SMEs particularly those small businesses first year
of operations. Furthermore, carefully designed taxation rules on SME income might provide
incentive to incorporate and is a vital role to ensure that country tax systems support SME
success. (Does Tax Affect SME creation and growth, 2009)
The purchasing power of an enterprise drops immediately after the payment of taxes
(Tee et al.,2016) this is since large amount of cash collected is used to pay taxes rather than
expand the business. It has been found in a study that increase in changes in tax rates lead
to higher production, distribution and selling costs that lead to higher prices that results in a
change in buying behavior of the customers. Hence, a drop-in consumption rate and
decrease in sales volume reduces the profitability which leads to retarded growth of SMEs.
Simplifying of tax regulations governing SMEs that would make it easier for them it complies,
since most SMEs are involved in non-compliance on tax, will help prevent the non-
compliance from happening. Tax administrators should also carry out their duties more
efficiently to combat multiple taxes that burdens SMEs the most. Owners of this size of firms
should be educated on issues such as the taxes they are required to pay, the incentives and
exemptions they are eligible to help lighten the burden of taxation to small businesses.
In the study of Anna Mozdzierz ‖The Impact of Changes in Indirect Tax Rates on
Inflation in Selected EU Countries” (2017), she concluded that In the modern economy, the
impact of the government to the price is limited. This impact, however, is possible through
the use of administered prices and changes in indirect taxes. The experience from the last
crisis shows that changes in indirect taxes in some countries shaped, to a large extent, the
growth rate of prices. She also mentioned that the structure of the tax system with a high
proportion of indirect taxes equips fiscal authorities with tools to influence the prices. Thus,
the reconstruction of tax system should have an even distribution of the direct and indirect
tax to reduce the inflationary pressure.
According to a study conducted by Macalipay (2016), Having the right amount of cash
is important for every Small and Medium Enterprises because the study proved that having
more cash on hand will impair profitability, and having less cash will lead to business and
operation interruptions. A good financial management is needed to determine when and
where to investment cash to generate more profit.
For an organization to be successful there is a need to develop and nurture managers
and leaders throughout the organization. Organizations often evolve and innovate based on
the suggestions and input of individuals who are several levels below CEO. Managers are
expected to set the vision and agenda of the organization as well as oversee strategic
execution. For them, there are three skills that managers must develop. They are technical,
interpersonal and conceptual skills (Gulati, Mayo & Nohria, 2014).
In a report by the Bureau of Internal Revenue (BIR) to Finance Secretary Carlos G.
Dominguez III at a recent executive committee meeting of the DOF, VAT collections mostly
from its regional offices fell, but collections from the percentage tax and income tax
increased from January to June this year. Finance officials said that the figures indicate that
that many SMEs have reaped benefits from raising the VAT threshold from P1.9 million to
P3 million under the TRAIN Law. The finance chief explained that increases in the
percentage- and income-tax collections indicate that SMEs and self-employed individuals
that have not exceeded the VAT threshold are now opting to pay either the 8-percent
income tax on gross sales or receipts and other non-operating income or the percentage tax
and the graduated income-tax rates under the tax-reform measure. This is what Rea Cu
(2018) reported in Business Mirror, a business newspaper in the Philippines, based on facts
gathered from the reports of BIR regarding how the implementation of Tax Reform for
Acceleration and Inclusion Law affects small and medium-sized enterprises.
According to Schmidt (2018), taxes lower overall gains because operationg income
and capital gains are taxed. Taxes reduce overall cost and expense impacts. Tax savings
from depreciation improve the bottom line because depreciation expenses do not contribute
to cash flow and lower reported income, therefor tax liability is also lowered.
Financial Management
Though this law is beneficial for some, not every Filipino is pleased to have this
implemented, especially those who are earning a minimum wage, self-employed individuals,
and small unregistered enterprises. As a whole, these folks are considered as informal
economy since they are neither taxed nor monitored in the country‘s overall economy
census. Part of this sector includes small vendors, farmers, fishermen, PUJ and pedicab
drivers, and contractual construction workers. Among others, these earners are having a
tough time coping with the rising inflation of goods brought by the said law. (Smaeunabs,
2018)
Cabuenas (2018) specified the top three social media sentiments read by research
analytics group about TRAIN Law - it is more of a burden to Filipino people, anti-poor and
that it dismayed our society. Since social media is one of the greatest way of sharing ideas
and information at this time, this may be a good critique to the said law.
According to Jiao (2018) Micro, small and medium enterprises (MSME) are the
biggest winners in the government's tax reform program, according to new research by
several firms. TRAIN Law is said to be a way of simplifying procedures which will benefit and
encourage variety stores, that don‘t have enough time and money to hire accountants to go
over their books, to comply for them to be part of the formal economy.
Furthermore, ―MSME's are the real backbone of our economy. People do not realize
that your businesses have greater direct impact on Filipinos' lives than do big players,‖ said
Senator Edgardo J. Angara. According to DTI, almost a 100% of the national economy is
fueled by micro, small and medium enterprises (MSMEs) but many thinks that these types of
business have invaluable contribution in the Philippine economy. During the launch of ―Asia
SME Finance Monitor‖, the ADB Senior Adviser, Noritaka Akamatsu, have said that SMEs
make up an average of 96% of all registered firms and employ 42% of economic output. In
line with this, many countries are working to create efficient finance for SMEs that will enable
them to contribute to growth of GDP. One of the ways for the government to improve their
financing they should consider alternative financing methods to provide growth capital to
SMEs such as providing more equity financing and actively support the development of
venture capital industry in the country.
Suspending the Tax Reform for Acceleration and Inclusion (TRAIN) law would have a
―minimal impact‖ on mitigating inflation, said the government‘s economic managers.
―Suspending TRAIN and adopting other band-aid solutions will only have a minimal and
short-term impact on inflation and will stifle our growth, further delaying our nation‘s progress
toward becoming an upper-middle-income country by 2019, such that around six million
Filipinos would be lifted out of poverty by 2022,‖ the Duterte administration‘s economic
managers said.
According to them, the TRAIN only reformed the previously unfair and harsh tax
regime since it helped increase the take home pay of almost 99 percentage of tax payers
because it lowered the personal income taxes.
The Tax Reform for Acceleration and Inclusion Act (TRAIN) has increased the
incomes or spending power of Filipino consumers to more than make up for the moderate
rise in inflation that happens in fast-growing economies, according to the Department of
Finance (DOF). Despite the temporary spike in inflation, this new implemented law results to
rise in domestic demand or consumption. According to Alvarez, this temporary strike in
inflation will eventually go down and stabilize as the supply eases and production costs drop
brought by the ―Build, Build, Build‖ program of that the government had managed to
implement. This contradicts the concerns of some small businesses that the implementation
of the law will decrease the demand of the consumers due to increase inflation.
One missing piece in the development of an effective tax system which promotes
investment is the effective treatment of SME. The main problem facing SME taxation is non-
compliance and the search for a simple tax regime. Although SMEs have helped the
economy in so many ways, most small businesses see that taxation system is not fair for
them because they pay the same amount as large enterprise. We can see this as the main
reason why there are a lot of SMEs involve in non-compliance in tax. Panorica and Al Saedi
(2015) suggest that the Government should simplify or make a new system that suits the
SMEs that would remove the comparison with larger enterprises.
The state should remember that they are reshaping the sales tax system for the
reason of generating a stable source of revenue to fun government services. Handpicking
the goods that should be tax or not tax will create a more complex and erode tax base thus,
unintended consequences caused by complex tax codes will become more challenging to
avoid. (Loughead, 2018)
Not all small business stories pertain to success. Many small businesses‘ failure
within the first three years is the result of inadequate financial management experience or
business skills. It is the major reason for failure, and it is also the most frustrating one to
detect. Because of insufficient financial management skills, many small business owners
spend more money than is necessary to operate the business and hardly track their
spending. Even if the entrepreneur has excellent skills in certain fields, the success of the
business will depend on variety of important skills such as managing the cash flow, keeping
a systematic account and record of transactions, maintaining a strategic planning and
marketing system and an information system capable of giving information to make right
decision (Henderson, 2009).
According to the study of Philippine Institute for the Development Studies “SMEs
access to Finance: Philippines” (Aldaba,2011), close to 67% of respondents said that
financing the expansion of their business to internal funds alone is not sufficient so they
would need to make a loan request for their business expansion. Aside from borrowing
money for their expansion this study also shows that the dependence of SMEs on internal
sources of financing continues not only during their startup phase but also to finance the
current operation of the business.
Synthesis of the Reviewed Literature and Studies
Many policymakers, economist and business experts agree that micro, small and
medium enterprises (MSMEs) are fundamental part of the economy. They play a big part in
the overall GDP of the country and also on the employment sector. But this sector suffers
more on inflation and is forced to deal with complicated tax code which has a positive or
negative effect to their business operations.
In this study, researchers conducted by other firms in the Philippines highly believe
that the biggest winners in the implementation of TRAIN Law are the MSMEs. The rising of
the tax threshold from P1.5 Million to P 3 Million, MSMEs can opt to pay a tax rate of 8%.
This may be true to the manufacturing industry and service industry but not on the
merchandising industry, especially to the commodity retailing industry, in which, variety
stores belong. Price is expected to go up because of higher tax on fuel and coal. In business
world, price is responsible for the decision that producer, distributor and consumer make.
Variety Stores are very particular to prices because they are buyer first before they become
distributor. Change in price of the goods being offered also creates a change in the sales,
inventory, profitability and financial aspect of the business. When there is an increase in
cost, variety stores have a hard time passing the increase to the consumer as they are
subjected to suggested retail price or SRP.
Rising inflation may affect variety stores differently. As the consumer is concern,
inflation only means an increase in price of the commodities. But for a retailing industry, this
will mean a higher bill and a diminishing buying power. As the price goes up, consumer‘s
behavior also changes. In this case, adjusting the price and managing the cost may not be
enough to sustain the profitability. Price inflation rises at the same time as consumer adjust
to their new financial realities. As the price increase, the disposable income of the consumer
decreases. This causes a double impact on the variety stores as they absorb all the impact
of the increase in price caused by the change in fiscal policy.
The purchasing power of the variety store drops immediately after the increase in
price as the large amount of cash collected is used to increase the capital to sustain the
level of inventory rather than to expand the business. Some of the products that is being
sold in the variety store are not affected by the increase in excise tax as they are inelastic
relative to price increase. But some products such as ―sin‖ products are elastic, causing the
demand for this product to fall. They could undershift the effect of tax by either absorbing the
cost added or by distributing the tax effect to the products that is not affected by the tax and
lowering their profit margin. This is supported by study about Higher Retail Prices of Sugar-
Sweetened Beverages 3 Months after Implementation of an Excise Tax in Berkeley,
California”.
Inadequate financial management causes small business failure. The implementation
of TRAIN Law burdened the small businesses more, including variety store as 67% percent
of the business needed to borrow money not just to expand but also to finance current
operation of the business. This law also requires these small businesses to increase their
budget for transportation, additional cost, which the business will have to resort for ways on
how to sustain the business without having to add on higher expenses to the customers.
Chapter 3
METHODOLOGY
This chapter describes the research methodology used in this study specifically, it
focuses on the techniques and procedures of gathering the data, the population and
sampling techniques, the description of the respondents, the instruments to be used and the
statistical tools and techniques necessary for analysis of data.
Method of Research
The descriptive method of research specifically the normative survey was employed
in this study. This was used because of its advantages in educational work as a fact-finding
operation with adequate interpretation. The descriptive method involves the description,
recording, analysis and interpretation of the prevailing conditions and the present nature of a
certain group. It will include the following processes: induction, analysis, classification,
enumeration, measurement and assessment of the data. Survey refers to the gathering of
data regarding current conditions. Normative is used to ascertain the normal or typical
condition. The survey will try to ascertain the common negative effects of TRAIN Law to
variety stores in Mandaluyong City.
Best (1983) defines descriptive research as a method that describes and interprets
what it is. It is concerned with conditions that prevail beliefs, point of views, or attitude that
are held, processes that are going on, effect that are put, or trends that are going on. This
type is most fitting to the present study.

Population, Sample Size, and Sampling Technique
To determine the appropriate sample size without resorting to your subjective
decision, you may use the Slovin‘s formula.
Slovin‘s Formula:
n=
2
1+Ne
Whereas:
n = sample size of population
e = margin of error
N = total no. of population
n= 180
2
1 + 180 (.05)
n = 124
Using the proportional allocation to select an appropriate sample size n = 124, how
large a sample must be taken for each stratum the researchers used stratified random
sampling as their sampling technique.
In this type of planning the population is first divided into subject based on
homogeneity called strata. The strata are internally homogenous as possible and at the
same time each stratum is different from one another as much as possible. Then, samples
are selected proportionally from each stratum which can be done through simple/systematic
random sampling. This type has an advantage in some cases to reflect more accurately the
characteristics of the population.

Table 1
Frequency Distribution of the Respondents According to the Store’s Location
Barangay in Number of
Total Population %
Mandaluyong City Respondents
ADDITION HILLS 28 25 20.16
BARANGKA DRIVE 7 6 4.84
BARANGKA IBABA 2 2 1.61
BARANGKA ILAYA 5 4 3.23
BARANGKA ITAAS 3 3 2.42
DAANG BAKAL 2 0 0
HAGDAN BATO ITAAS 4 2 1.61
HAGDAN BATO LIBIS 6 2 1.61
HARAPIN ANG BUKAS 1 1 0.81
HIGHWAY HILLS 12 7 5.65
HULO 14 14 11.29
MABINI J. RIZAL 12 6 4.84
MALAMIG 9 4 3.23
MAUWAY 13 7 5.65
NAMAYAN 6 2 1.61
NEW ZANIGA 4 3 2.42
OLD ZANIGA 7 4 3.23
PAGASA 17 10 8.06
PLAINVIEW 13 12 9.68
PLEASANT HILLS 1 0 0
POBLACION 4 2 1.61
SAN JOSE 8 6 4.84
VERGARA 2 2 1.61
TOTAL 180 124 100
Description of Respondents
The respondents of this study were divided according to their barangays. It consists
of 124 variety stores, which is 75% of the total population of 180 registered variety stores
with store name in Mandaluyong City.
They, specifically the owners of the stores have been asked to answer the
questionnaire to determine their common problems pertaining to TRAIN Law effects.

Research Instrument
The researcher designs a self-administered questionnaire for the data gathering
process to get quantitative data. The primary aim of the questionnaire is to determine the
Effects of TRAIN Law to the Selected Variety Stores in Mandaluyong City. In a Likert-type
Scale, respondents are asked whether they agree or disagree with a statement. Each option
is given a score, which can be used to analyze results.
The questionnaire was divided into two parts: part one includes questions regarding
the basic information of the store which consist of the Years of Operation, Average Daily
Sales, and Initial Capital; while part two includes questions regarding the effects of TRAIN
Law to the store which fall under Sales Management, Cost Management, Profit
Management and Financial Management. The second part is a Unipolar Likert Scale.
Unipolar scales are more contoured, allowing users to instead focus on the absence or
presence of a single item. The scale measures the ordinal data, but most of the times
unipolar scales generate more accurate answers. In this study, unipolar satisfaction scale
that will be use is:
Table 2
Likert Scale
Descriptive Rating Weights Range
Strongly Agree 5 4.21 – 5.00
Agree 4 3.41 – 4.20
Neutral 3 2.61 – 3.40
Disagree 2 1.81 – 2.60
Strongly Disagree 1 1.00 – 1.80

Data-Gathering Procedure
The gathering of data was preceded by getting permission from authorities
concerned regarding the administration of the instrument, Business Permit and Licensing
Office of Mandaluyong City hall. Then, after permission and approval had been obtained,
owners of variety stores were approached, and their cooperation was solicited.
The administration of the instrument caused for the observation of the following
steps:
1.) Owners/Caretakers were approached during their vacant time.
2.) The purpose of the instrument was explained, and care was so taken as to make
the owners understand that they would not be identified as individuals.
3.) Directions were explained for the owners to respond correctly.
4.) No time limit was imposed, when an owner indicated that he had finished
answering the items, the researchers immediately collected the answer sheet.
5.) The data gathered from the subjects were then checked, classified, and
tabulated. Findings were further analyzed and presented in the tables and figures for letter
visualization and for more convenient and perceive comparison of results.
Statistical Treatment of Data
The data collected were organized and classified based on the research method
and the problems formulated. The data were coded complied, tabulated, and subjected to
statistical treatment to ensure the validity and reliability of the conclusions. The following
statistical tools were used to facilitate the presentation and interpretation of the results of the
study.
1. Frequency Percentage/Formula for Percentage compares two or more
magnitudes to determine their relationship. Percentage was used to indicate which items in
a group were favored most and which items were favored least by the respondents. It was
also used to show comparison of the number of a group against the total population. The
formula used in the application of this technique was:
P= 100 %
whereas:
P = percentage
f = frequency
n = total number of respondents
2. Weighted Mean was used to determine the average response of the respondents
on specific items in the questionnaire.
∑f x whereas:
X=
N
x = mean
f = ith frequency
x = ith class mark
N = total no. of observations
3. Ranking Method is a relationship between set off items such that, for any two items,
the first is ―ranked lower than‖, or ―ranked equal to‖ the second. It refers also to the data,
information in which numerical or ordinal values are replaced by their ranks when data are
sorted. whereas:
R= Rank
R1+R2 R1= the rank of one variable as arranged in
R= chronological order
2 R2 = the rank of other variable
4. Likert Scaling Technique
The obtained mean is evaluated by the researchers according to the following:
Table 3
Likert Scale
Descriptive Rating Weights Range
Strongly Agree 5 4.21 – 5.00
Agree 4 3.41 – 4.20
Neutral 3 2.61 – 3.40
Disagree 2 1.81 – 2.60
Strongly Disagree 1 1.00 – 1.80
5. Analysis of Variance (ANOVA)
Whereas:
s is the standard deviation.
yi is the ith observation.
n is the number of observations.
is the mean of the n observations.

Chapter 4
PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA
This chapter presents the results of analysis of the data gathered. The first to be
presented is the frequency distribution of the respondents‘ store profile. Second, the mean
distribution of the respondents‘ dominant aspects. And lastly, the relationship of the store
profile factors and aspects.
1. Profile of the Stores
1.1. Years of Operation
Table 4
Frequency and Percent Distribution of Respondents by Years of Operation
Years of Operation Frequency Percent

Below 1 year 13 10.5
1 to 3 years 39 31.5
More than 3 years 70 56.5
No Answer 2 1.6
Total 124 100.0
The table 4 illustrates the frequency and percent distribution of respondents by their
years of operation. The table above is composed of three ranges of how long respondents
have been operating, it shows that 13 respondents or 10.5% of the population has been
operating for less than a year; 39 respondents or 31.5% of the population has been
operating for 1 to 3 years; 70 respondents or 56.5% of the population has been operating for
more than 3 years; and 2 respondents or 1.6% of the population did not answer.
1.2. Average Daily Sales
Table 5
Frequency and Percent Distribution of Respondents by Average Daily Sales

Average Daily Sales Frequency Percent
P5,000 and below 73 58.9
P5,001 – P10,000 20 16.1
P10,001 – P15,000 17 13.7
P15,001 – P20,000 7 5.6
P20,001 and above 2 1.6
No Answer 5 4.0
Total 124 100.0
The table 5 shows the frequency and percent distribution of respondents according to
their average daily sales. The table above presents the selected variety stores‘ average
daily sales, 73 respondents or 58.9% of the population has an average daily sales of P5,000
and below; 20 respondents or 16.1% of the population has an average daily sales of P5,001
– P10,000; 17 respondents or 13.7% has an average daily sales of P10,001 – P15,000; 7
respondents or 5.6% of the population has an average daily sales of P15,001-P20,000; 2
respondents or 1.6% of the population has an average daily sales of P20,001 and above;
and 5 respondents or 4% of the population did not answer.
1.3 Initial Capital
Table 6
Frequency and Percent Distribution of Respondents by Initial Capital
Initial Capital Frequency Percent

P10,000 and below 35 28.2
P10,001 – P20,000 25 20.2
P20,001 – P30,000 13 10.5
P30,001 – P40,000 10 8.1
P40,001 and above 36 29.0
No Answer 5 4.0
Total 124 100.0
The table 6 exhibits the frequency and percent distribution of respondents by their
initial capital. It is composed of five different capital ranges. The respondents who had an
initial capital of P10, 000 and below are 35 or 28.2%; P10, 001 – P20, 000 with 25 or 20.2%,
P20,001 – P30,000 with 13 or 10.5%; P30,001 – P40,000 with 10 or 8.1%; P40,001 and
above with 36 or 29%; and 5 or 4% did not answer.
2. Respondents’ Assessment on the Effect of TRAIN Law
2.1. Sales Management
Table 7
Respondents’ Assessments on the Effect of TRAIN Law in Terms of Sales
Management
Verbal
Sales Management Mean Rank
Interpretation
I increased the sales price of the products i sell.(tinaasan ko
4.30 1 Strongly agree
ang presyo ng mga produkto na aking tinitinda.)
There is a decreased in sales for alcoholic beverages.(may
2.73 7 Neutral
pagbaba ng benta sa alak)
There is a decreased in sales for sugar. (may pagbaba ng
3.24 4 Neutral
benta sa asukal.)
There is a decreased in sales for juice and softdrinks. (may
3.42 2 Agree
pagbaba ng benta sa juice at softdrinks.)
There is a decreased in sales for cigarettes. (may pagbaba ng
2.76 6 Neutral
benta sa sigarilyo.)
There is no change in the number of my customer. (walang
2.97 5 Neutral
pagbabago sa dami ng aking mamimili.)
There is an increase in the number of my competitors. (may
3.40 3 Neutral
pagtaas sa bilang ng aking mga kakompetensya.)
I had an opportunity to sell new products for substitution.
(nagkaroon ako ng opportunity na magbenta ng mga bagong 2.55 8 Neutral
pamalit na produkto)
Grand mean 3.17 Neutral
The table 7 shows the respondents‘ assessments on the effect of TRAIN Law in terms
of sale management. As shown in the data above, most of the respondents strongly agreed
that they need to increase their selling price on most products they sell with a mean of 4.30
and because of this, they agreed that there is a decreased in their sales of juice and
softdrinks with a mean of 3.42, while there is no changes in their sales for alcoholic
beverages with a mean of 2.73. Having a mean of 2.55, respondents neither agree nor
disagree in the statement that they had an opportunity to sell new products for substitution.
This revealed that there is no change in the respondents‘ opportunity to sell new
products for substitution .To increase their sales, the advice is to cope up with what their
customer needs, and knowing that offering new products will have no effect to their sales, it
is best for them to continue selling those products that the customer has patronized even
before the implementation of TRAIN Law.
2.2. Cost Management
Table 8
Respondents’ Assessments on the Effect of TRAIN Law in Terms of Cost
Management
Verbal
Cost Management Mean Rank
Interpretation
I lowered the number of my inventory. (Binabaan ko ang bilang
3.47 1 Agree
ng aking imbentaryo.)
I sometimes run out of stock for Alcoholic beverages.(Kung
3.07 6 Neutral
minsan ay nawalan ako ng stock para sa alak.)
I sometimes run out of stock for Sugar. (Kung minsan ay
3.23 4.5 Neutral
nawalan ako ng stock para sa asukal.)
I sometimes run out of stock for Juice/Softdrinks. (Kung
3.41 2 Agree
minsan ay nawalan ako ng stock para sa Juice/Softdrinks.)
I sometimes run out of stock for Cigarettes. (Kung minsan ay
2.80 8 Neutral
nawalan ako ng stock para sa Sigarilyo.)
Sometimes I run out of money to pay for the products I buy.
(Minsan nauubusan ako ng pera pambayad sa mga produkto 2.89 7 Neutral
na aking binibili.)
I changed my supplier for my products to save up. (Nagbago
3.23 4.5 Neutral
ako n inagkukunan ng paninda upang makatipid.)
I eliminated some brands in these products to maximize my
investment (alcoholic beverages, cigarettes, juice etc.).
(Nagtanggal ako ng ilang brands sa mga ganitong produkto 3.33 3 Neutral
upang ma-maximize ang aking puhunan (alak, sigarilyo, juice
atbp.))
Grand Mean 3.18 Neutral
The table 8 reveals the corresponding weighted mean distribution and frequency of
respondents‘‘ assessments on the effect of TRAIN Law in terms of cost management.
According to them they needed to lower the number of their inventory with a mean of 3.47
which caused them to agree that sometimes runout of stock for juices and softdrinks with a
mean of 3.41. Despite of increasing prices in the market, they did not runout of money to
pay for the products they buy which resulted to a mean of 2.89 and having a mean of 2.80, it
also shows that there is no effect in their number of stocks for cigarettes.
As depicted in the above table, the owners need to lower their inventory just to reduce
their cost but they should be aware that even though there is a need to lower the number of
inventory they should maintain an inventory of their products according to the market‘s
demand. They should have regular inventory counts to guide them on deciding how much to
buy to avoid excess stock on some products.
2.3. Profit Management
Table 9
Respondents’ Assessments on the Effect of TRAIN Law in Terms of Profit
Management
Verbal
Profit Management Mean Rank
Interpretation
After the TRAIN LAW, my income is unstable.(Hindi na stable
3.87 2 Agree
ang aking kita mula ng naipatupad ang TRAIN Law.)
I cannot add a slightly higher markup on sales price because of
the increase in product price. (Hindi na ako makapagdagdag ng
4.14 1 Agree
mas mataaas na patong sa presyo ng paninda dahil sa pagtaas
ng presyo nito.)
There are times when my profit is just enough to cover my
expenses. (May pagkakataon na sapat na lamang ang aking 3.82 3 Agree
kita upang masakop ang mga ginastos.)
I have to reduce the number of my workers (Kinailangan kong
2.36 5 Disagree
magbawas ng tindero/tindera)
There are times when my revenue is just enough to cover my
expenses. (Nagkakaroon ng pagkakataon na sapat na lamang 3.49 4 Agree
ang aking benta upang masakop ang ginastos.)
Grand Mean 3.54 Agree
Table 9 presents the respondents‘ assessments on the effect of TRAIN Law in terms
of profit management. Because of the sudden increase in prices of products in the market
they agreed that they cannot add a higher markup on their sales price with a mean of 4.14
which made their income unstable with a mean of 3.87. Also there are times that their
revenue is just enough to cover their expenses because of the unexpected changes in their
operation due to different factors such as changes in fiscal policy, additional competitors in
their areas and additional unforseen expenses relating to their operations with a mean 3.49.
There is no need for them to reduce the number of their workers since variety stores are
usually managed by the owners themselves, this resulted to a mean of 2.36.
This provided that there are times when the respondents earn revenues that are only
enough to cover their expenses. To combat this, they should have knowledge about every
expenses they incur so that they can eliminate and avoid some expenses which are not
relevant to their business. The store should review all the possible expenses that bears a
significant part in the business management. Also, the owners should be mindful regarding
the separation of the store or the business money from the personal money. The store
should come up with a expense control wherein it will only be limited to the extent of the
capacity of the business to generate profit. Another action to be made is to slowly cut cost in
their operation, which gives rise to the fact that the respondents disagreed of employing
workers. We encourage respondents not to hire workers not because they don‘t have
capacity to pay one, but because they need to generate more income. Moreover, it will be
irrelevant for the store to hire other personnel because the Variety Store is small enough to
be convenient not only for the costumer but also for the store owners. The lesser person
involve in managing the store, the better the management will be because the store will be
the only focus of the owner.

2.4. Financial Management
Table 10
Respondents’ Assessments on the Effect of TRAIN Law in Terms of Financial
Management
Verbal
Financial Management Mean Rank
Interpretation
I had to add investment to keep my inventory.
(Kinailangan kong magdagdag ng puhunan para 2.95 4 Neutral
mapanatili ang aking imbentaryo.)
I had to borrow money from someone (e.g. bank, friend,
institution) in order to maintain my inventory.
(Kinailangan kong umutang sa ibang tao (halimbawa: sa 2.42 5 Disagree
bangko, kaibigan, institusyon) upang mapanatili ang
aking imbentaryo))
I recovered my investment slower than before. (Mas
mabagal kong nababawi ang aking puhunan kumpara 3.82 2 Agree
noon.)
I am now unable to save up from my profit, which could
have help the growth of my store.(Hindi na ako
3.44 3 Agree
nakapagtatabi mula sa aking kita na maaari sanang
makatulong sa pagpapalago ng aking tindahan.)
After implementing TRAIN Law, I would say that it still a
good idea to invest in small businesses like variety
stores. (Matapos na maipatupad ang TRAIN Law, 3.93 1 Agree
masasabi kong maganda parin maginvest sa mga maliliit
na negosyo tulad ng variety store.)
Grand Mean 3.31 Neutral
This table 10 exhibits the respondents‘ assessment on the effects of TRAIN Law in
terms of their financial management. With a mean of 3.93, the respondents agreed that it is
still a good idea to invest in small businesses like variety stores even though their
investments are recovered slower than before with a mean of 3.82. There is no need for
them to add investment just to keep their inventory proven with a mean of 2.95. With a mean
of 2.42, they disagreed to the fact that there is a need to borrow money from someone to
maintain their inventory.
The result showed that the respondents disagreed to the idea of borrowing money
from their relatives, friends or banks because there is no need for them to have additional
investment to maintain their inventory. For them to continue this practice, the action they
have to take is to know and maintain the right level of inventory and to invest cash on
products that will surely generate profit in a short period of time.
2.5 The Respondents’ Assessments on the Efffect of TRAIN Law
Table 11
Respondents’ Assessments on the Effect of TRAIN Law
Aspects Grand Mean Rank Verbal Interpretation

Sales Management 3.17 4 Neutral
Cost Management 3.18 3 Neutral
Profit Management 3.54 1 Agree
Financial Management 3.31 2 Neutral
Table 11 shows that the respondents agreed that TRAIN Law only affects the aspect
on Profit Management. All other aspects have neutral effect from TRAIN Law.
3. Significant difference in the respondents’ assessment on the effects of TRAIN
Law in selected variety stores in Mandaluyong City
3.1. Years of Operation
Table 12
Significant Difference of Respondents’ Assessments on the Effect of TRAIN Law by
Years of Operation
Aspects F-value p-value Decision Remarks

Sales Management .315 .731 Accept Ho Not Significant
Cost Management .290 .748 Accept Ho Not Significant
Profit Management .056 .946 Accept Ho Not Significant
Financial Management .821 .442 Accept Ho Not Significant
Table 12 shows that the null hypothesis is accepted in all aspects since the computed
p-value is greater than the significance level which is .05. Hence, there is no significant
difference. This implies that their years of operation doesn‘t pertain problems regarding on
the effects of the implementation of TRAIN Law in selected variety stores in Mandaluyong
City in all aspects do not differ.
3.2. Average Daily Sales
Table 13
Average Daily Sales
Sales Management 1.618 .175 Accept Ho Not Significant
Cost Management 1.283 .281 Accept Ho Not Significant
Profit Management 2.739 .032 Reject Ho Significant
Financial Management 2.807 .029 Reject Ho Significant
Table 13 shows that the null hypothesis is accepted in the first two aspects since the
p-value computed is greater than the significance level of .05. Hence, there is no significant
difference. This implies that their average daily sales doesn‘t pertain problems regarding on
City in Sales Management and Cost Management do not differ.
The null hypothesis is rejected in the last two aspects since the p-value is less than
the .05 significance level. Hence, there is significant difference. This implies that their
average daily sales pertain problems regarding on the effects of the implementation of
TRAIN Law in selected variety stores in Mandaluyong City in Profit Management and
Financial Management differ.
According to Agarwal(n.d.), the most important part of cash flow management for
retail business is to avoid extensive cash shortages due to increased gap between cash
inflows and outflows. The ability of a retail store to cover the expenses and suppliers' bills
can be determine with its capacity to maintain the optimum balance between the cash
inflows, money received through selling merchandise and cash outflows, money paid for
store expenses.
According to Mariotti(2011), retailers faced a genuine dilemma to generate more profit
on the sales revenue- to lower the prices and gain more volume thus giving lower
profitability or to raise prices and sell less volume but a higher profit margin. Therefore the
sales revenue is based on the strategy of the retailer as to the profit margin they want to
have.
3.3. Initial Capital
Table 14
Initial Capital

Sales Management 1.206 .312 Accept Ho Not Significant
Cost Management .499 .736 Accept Ho Not Significant
Profit Management .879 .479 Accept Ho Not Significant
Financial Management .704 .591 Accept Ho Not Significant
Table 14 shows that the null hypothesis is accepted since the p-value exceeds the
significance level of .05. Hence, there is no significant difference. This implies that their
average daily sales doesn‘t pertain problems regarding on the effects of the implementation
of TRAIN Law in selected variety stores in Mandaluyong City in all aspects do not differ.
Chapter 5
SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
This chapter presents the extent of the study with all of the data and information
gathered and illustrated. It includes the summary of findings, conclusion and
recommendations for improvement.
Summary of Findings
Based on the data gathered, the researchers found out that the respondents is
composed of three ranges of how long they have been operating, it shows that 13
respondents or 10.5% of the population has been operating for less than a year; 39
respondents or 31.5% of the population has been operating for 1 to 3 years; 70 respondents
or 56.5% of the population has been operating for more than 3 years; and 2 respondents or
1.6% of the population did not answer.
73 respondents or 58.9% of the population has an average daily sales of P5,000 and
below; 20 respondents or 16.1% of the population has an average daily sales of P5,001 –
P10,000; 17 respondents or 13.7% has an average daily sales of P10,001 – P15,000; 7
respondents or 5.6% of the population has an average daily sales of P15,001-P20,000; 2
respondents or 1.6% of the population has an average daily sales of P20,001 and above;
and 5 respondents or 4% of the population did not answer.
The Initial Capital is composed of five different capital ranges. The respondents who
had an initial capital of P10,000 and below are 35 or 28.2%; P10,001 – P20,000 with 25 or
20.2%, P20,001 – P30,000 with 13 or 10.5%; P30,001 – P40,000 with 10 or 8.1%; P40,001
and above with 36 or 29%; and 5 or 4% did not answer.
From the findings, it is shown that most of the respondents strongly agreed that they
need to increase their selling price on most products they sell with a mean of 4.30 and
because of this, they agreed that there is a decreased in their sales of juice and softdrinks
with a mean of 3.42, while there is no changes in their sales for alcoholic beverages with a
mean of 2.73. Having a mean of 2.55, respondents neither agree nor disgaree in the
statement that they had an opportunity to sell new products for substitution.
This revealed that there is no change in the respondents‘ opportunity to sell new
products for substitution .To increase their sales, the advice is to cope up with what their
customer needs, and knowing that offering new products will have no effect to their sales, it
is best for them to continue selling those products that the customer has patronized even
before the implementation of TRAIN Law.
The study reveals the corresponding weighted mean distribution and frequency of
respondents‘‘ assessments on the effect of TRAIN Law in terms of cost management.
According to them they needed to lower the number of their inventory with a mean of 3.47
which caused them to agree that sometimes runout of stock for juices and softdrinks with a
mean of 3.41. Despite of increasing prices in the market, they did not runout of money to
pay for the products they buy which resulted to a mean of 2.89 and having a mean of 2.80, it
also shows that there is no effect in their number of stocks for cigarettes.
As depicted in the above table, the owners need to lower their inventory just to reduce
their cost but they should be aware that even though there is a need to lower the number of
inventory they should maintain an inventory of their products according to the market‘s
demand. They should have regular inventory counts to guide them on deciding how much to
buy to avoid excess stock on some products.
The study presents the respondents‘ assessments on the effect of TRAIN Law in
terms of profit management. Because of the sudden increase in prices of products in the
market they agreed that they cannot add a higher markup on their sales price with a mean
of 4.14 which made their income unstable with a mean of 3.87. Also there are times that
their revenue is just enough to cover their expenses because of the unexpected changes in
their operation due to different factors such as changes in fiscal policy, additional
competitors in their areas and additional unforeseen expenses relating to their operations
with a mean 3.49. There is no need for them to reduce the number of their workers since
variety stores are usually managed by the owners themselves, this resulted to a mean of
2.36.
With a mean of 3.93, the respondents agreed that it is still a good idea to invest in
small businesses like variety stores even though their investments are recovered slower
than before with a mean of 3.82. There is no need for them to add investment just to keep
their inventory proven with a mean of 2.95. With a mean of 2.42, they disagreed to the fact
that there is a need to borrow money from someone to maintain their inventory.
The respondents agreed that TRAIN Law only affects the aspect on Profit
Management. All other aspects has neutral effect from TRAIN Law.
In the Significant Difference of Respondents‘ Assessments on the Effect of TRAIN
Law by Years of Operation, null hypothesis is accepted in all aspects since the computed p-
value is greater than the significance level which is .05. Hence, there is no significant
difference. This implies that their years of operation doesn‘t pertain problems regarding on
City in all aspects do not differ.
The Significant Difference of Respondents‘ Assessments on the Effect of TRAIN Law
by Average Daily Sales shows that the null hypothesis is accepted in the first two aspects
since the p-value computed is greater than the significance level of .05. Hence, there is no
significant difference. This implies that their average daily sales doesn‘t pertain problems
regarding on the effects of the implementation of TRAIN Law in selected variety stores in
Mandaluyong City in Sales Management and Cost Management do not differ.
The null hypothesis is rejected in the last two aspects since the p-value is less than
the .05 significance level. Hence, there is significant difference. This implies that their
average daily sales pertain problems regarding on the effects of the implementation of
TRAIN Law in selected variety stores in Mandaluyong City in Profit Management and
Financial Management differ.
According to Agarwal(n.d.), the most important part of cash flow management for
retail business is to avoid extensive cash shortages due to increased gap between cash
inflows and outflows. The ability of a retail store to cover the expenses and suppliers' bills
can be determine with its capacity to maintain the optimum balance between the cash
inflows, money received through selling merchandise and cash outflows, money paid for
store expenses.
The Significant Difference of Respondents‘ Assessments on the Effect of TRAIN Law
by Initial Capital shows that the null hypothesis is accepted since the p-value exceeds the
significance level of .05. Hence, there is no significant difference. This implies that their
average daily sales doesn‘t pertain problems regarding on the effects of the implementation
of TRAIN Law in selected variety stores in Mandaluyong City in all aspects do not differ.
Conclusion
This study concludes that most the respondents had an initial capital of ₱ 40,001.00
and above. Majority of the respondents are operating for more than three years and, and
around a half of them has an average daily sales of ₱ 5,000.00 and below.
Based on the findings, it was concluded that the respondents strongly agrees to the
fact that they had to increase the sales price of the products they sell when it comes to sales
management. On the other hand, it was proven that the respondents agreed that they are
having difficulties in pricing their products, which they cannot add slightly higher mark up on
sales price because of the increase in the product price. As a part of cost management,
most of the respondents confirmed and agreed that they had to lower the number of their
inventory, stating that when it comes to buying products for them to sell, they are only
spending within the profit they had from operations and not adding more from borrowings or
from their own pockets. Despite of the problems faced due to the implementation of the
TRAIN Law, the respondents still believes and agrees that it is still a good idea to invest in
small businesses like a variety store.
The researchers therefore conclude that the stores years of operation, average daily
sales, and initial capital are not affected by TRAIN Law on the aspect of sales management
and cost management but profit management and financial management.
With this result of the study, it shows that these effects may result to better
understanding of TRAIN Law on the aspects of sales management, cost management, profit
management, and financial management which can be of big help on the variety of stores in
the country since they are part of our business culture, making it as one of the fast-growing
retail platforms in Philippines. And that, TRAIN Law really reforms and changes in collection
efficient, affects the tax revenue of the government and helps increase the take home pay of
Filipino citizens, though we still cannot ignore the fact that increasing the excise tax which
cause inflation, affects the market and economy in a changing manner.
Recommendation
Based from the findings and conclusions formulated in this research study, the
following recommendation are hereby proposed:
1. Sales Management
The researchers recommend that variety store owners should increase the sales price
of the products they sell to cope up with the changes brought by the TRAIN Law.
There is a low probability that consumers will decrease for they always have needs
and wants, therefore the fear of a decrease in buyers should not be a hindrance for
variety stores to increase their selling price to maintain or improve their sales.
2. Cost Management
Owners of the variety stores should be aware that maintaining a great number of
inventories can cause adverse effects. Stocking excess amount of merchandise
usually leads to overstocking which increases their inventory costs. To reduce these
costs, the researchers recommend that variety stores should lower the number of
their inventory. In this way, the likeliness of the inventory to be stock and be unsold
will decrease. Variety stores should get rid of excess unnecessary merchandise and
maintain an inventory according to the market‘s demand. The researchers also
suggest that the entities should have regular inventory counts to guide them on
deciding how much to buy. This will help them determine which products sell often
and what stays in their inventory for a relatively-long period of time.

3. Profit Management
a) The owners of the store should have discretion that revenue includes both the
cost of and the profit from selling the products. They should be mindful as to
separating the cost of the product and reinvesting it to the business. Being
responsible in spending in spending the cash on hand will not only lead to the
profitability of the business but also decrease the likeliness of loss or bankruptcy.
b) Review expense and their reason of occurrence. There might be some cost
that could be eliminated. Cite some management strategies that will allow your
business to work efficiently even with cutting some expense.
c) Distribute cost increase to the untaxed product. ―Sin‖ products absorb the
additional excise tax. But on the research conducted, it was proven that the demand
on these products did not change even though there is a significant increase in price.
To take advantage on this, minimize the price of the taxed products by distributing
parts of the increase to the untaxed products, but of course, on minimal amounts.
These distributed cost increase, when summed up together, will give you more
efficient product pricing. Lower price on the "sin" products will give you higher
demand, thus, increasing the relative profit. The originally untaxed products' demand
will remain the same or if there's a change, will be insignificant because of the fact
that the price increase is long assumed and will be unnoticeable.
4. Financial Management
a) Review inventory management. Take note of the products that is more liquid
and those that are not. Have a proper schedule of replenishing these products, taking
into account those that are highly in demand. Do not let the products to overlap each
other‘s schedule of replenishment. By that, they‘ll have an efficient financial
management and would not have to add additional investment to keep inventory.
b) Have discipline on not using the store inventory for personal or/and family use.
There are the common habits of the store owners. Keep in mind that these products
are the future money of the business. Decreasing them will also mean a decrease in
revenue, thus, decrease in profit.
5. To the Businessmen,
a) Invest in a microenterprise, especially to a variety store because TRAIN Law
will not take effects on the sales, cost, and financial management of this kind of
business.
b) Consider the customer‘s behavior relative to the increase in price. Significant
change in customer‘s behavior will affect the overall profitability of the business.
c) Consider engaging in a retailing business. Retailing business, especially the
variety store, allows the businessmen to partially relieved to the effects of the TRAIN
Law by passing the increase in cost due to the inflation in the market.
6. To the Students,
a) For them to understand the new tax law we researchers recommend to further
study the TRAIN Law. Be mindful to the effects of the change in fiscal policy. The
study has proven that the change in fiscal policy had greatly affected the inflation rate
upon the implementation of TRAIN Law.
b) We recommend them to further study the business management of the
microenterprises. Learn the management behavior of the business owners under this
nature of business. The implementation of TRAIN Law had caused a disadvantage to

the profit management of the variety store, but taking into account that it has a neutral
effect to the sales, cost and financial management of the variety store.
7. To the Government,
a) Formulate guidelines on the effects of TRAIN Law on variety stores to
achieved better understanding of the law.
b) Conduct seminar regarding risk management in relation to the future effects of
TRAIN Law and the continuing increase of inflation rate.
c) Propose programs for store owners who are experiencing problems within
their stores in the future effect of the TRAIN Law.
8. To the Future Researchers,
a) Conduct studies regarding the extent of the said law and how it is improving.
Study about which aspect or factors implicate the sales, cost, profit and financial
management of the businesses in our country.
b) Formulate follow-up studies which primary concern are the aspects other than
sales, cost, profit and financial management.
9. To the Variety Store Owners,
The owner should follow the recommendations for the Sales, Cost, Profit and
Financial Management. This would help them improve their business management in
different aspects. The researchers focus on the areas that the variety stores garnered
inefficient practices.
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POLYTECHNIC UNIVERSITY OF THE PHILIPPINES 1

THE PROBLEM AND ITS SETTING

one of the fast-growing retail platforms in Philippines.

and operation of the owners of variety stores in the City of Mandaluyong.

they play their role in the economy.

institutions carrying specialized assortments, and back to general, broad-based

was said that it is a cycle.

development, maturity and decline. Under innovation, there is differentiated services,

arise from incoming competitions.

antithesis to form a synthesis is involved. According to the conflictual theory, retailing

supermarket which is a product of the combination of individual retailers and a department

environment affect it. Also, they can later face evolution.

Figure 1. Research Paradigm

namely, sales management, profit management, cost management, and financial

effects of TRAIN Law to the selected variety stores in Mandaluyong City.

Statement of the Problem

Specifically, it seeks to answer the following sub-problems:

1. What is the profile of the stores in terms of the following variables:

1.1 Years of Operation

1.2 Average Daily Sales

1.3 Initial Capital

as assessed by the respondents in terms of the following aspects:

2.1 Sales Management

2.2 Cost Management

2.3 Profit Management

2.4 Financial Management

3. Is there a significant difference in the respondents‘ assessment on the effects of

There is no significant difference in the respondents‘ assessment on the effects of

Scope and Limitations of the Study

Significance of the Study

This study will be beneficial to the following:

let them know the advantages and disadvantages of the law.

differences in the taxation laws of the Philippines.

these modern times.

would meet the needs of the citizens.

researchers in gathering data related to TRAIN Law.

passes it onto the consumer by including it in the product's price. (Investopedia)

Financial Management. Operationally, this refers to how individuals, business

the processes to do in acquiring needed funds.

Implementation. This refers to an act of execution or making policies planned take

policy or law. (Merriam-Webster Dictionary)

to buy such goods and services.

selling their products or services. It is the practical application of Sales Techniques.

goods, usually the low-priced goods.

REVIEW OF LITERATURE AND STUDIES

understanding, and ideas, generalization or conclusions and different development related

in the sales, inventory and profitability aspects of a business.

the quality of the product being offered.

profitability of a Merchandising Company. Understanding consumer behavior is also

2009). Choosing the variety of products to offer to customers is important. Having

squeezed, the scenario could have been different. (Dickinson, 2018)

Implementation of Tax Reform Acceleration and Inclusion (TRAIN) Law was

collected is used to pay taxes rather than to expand the business.

In the study Consumer Response to Cigarette Excise Tax Changes

proximity to the border, and by demographics (such as age and race).

decline too much due to increased prices. (Mariotti, 2011)

to some products and services to their buyers. (Chew, 2008)

available by the time the customers are willing to buy it.

diminished buying power. Although government provides a percentage of annual budgets

The administration of President Rodrigo Duterte started 2018 by implementing

service providers, which have started seeking fare hikes.

palatable to their respective customers to stay afloat to today‘s business scenario.