Concept Paper Approval Sheet

Impact of Tax Reform for Acceleration and Inclusions Law to the Financial Growth of
Small and Medium Enterprises in Lipa City

Proponents:
Landicho, Lalaine L.
Montillano, Gerald C.
Panganiban, Nicole C.

Evaluator 1 Teacher in charge

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Approved Disapproved

Evaluator 2 DONVITO B. VALLE

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Approved Disapproved

Evaluator 3 EDGAR ALLAN G. CASTRO, PhD

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Approved Disapproved

Title of the Proposed Study: Impact of Tax Reform for Acceleration and Inclusions Law to the
Financial Growth of Small Medium Enterprises in Lipa City

Area of Study: Taxation

Background of the Study:

Taxation plays a vital role in the economic development of a country, including the Philippines.
Its primary purpose is to raise revenue that will be used for a country’s projects and expenditures. The
country’s tax policies and systems are greatly related with the business ventures in the country, including
the small and medium enterprises (Jepkogei, 2014). Favourable ad progressive tax laws will result to a
successful business and improvement in its financial aspects. Businesses, including Small and Medium
Enterprises (SMEs), contribute to economic growth through ways such as raising revenue and providing
jobs. Therefore, there is a relationship between tax policies and businesses.

The Philippine tax system introduced a new tax policy which amended some of the provisions of
the old National Internal Revenue Code (NIRC) and provided additional tax on goods such as sweetened
beverage, petroleum products and beauty products. The Tax Reform for Acceleration and Inclusions Law,
also known as TRAIN Law, aims to fund education programs, provide more and improved healthcare
services to the country and will fund the infrastructure projects. As a result, not only individual consumers
are affected but also businesses, including SMEs.

SMEs will have to shell out increased budget on their transportation since gas and petroleum
prices will increase. 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 increase expenses of
their customers. There will be many changes on how SMEs will have to deal with businesses. They
should find creative instances to make their small endeavours more palatable to their respective
customers to stay afloat to today’s business scenario. (Roy, 2018) For purposes of this study, the
emphasis is on the impact of TRAIN Law to the financial growth of SMEs in Lipa City.

Statement of the Problem:

The research entitled “Impact of Tax Reform for Acceleration and Inclusions to the Financial Growth of
Small and Medium Enterprises in Lipa City” seeks to address the following queries:
1. What are effects of changing tax policy and tax rates to the business operations and financial
growth of Small and Medium Enterprises in Lipa City?
2. How do changes in tax policy affect the turnover of SMEs in Lipa City?
3. What types of taxes affect the financial growth of SMEs in Lipa City?

Objectives of the Study:

The study aims to describe the impact of new tax policy in the financial growth of SMEs. The researchers
want to focus on the following objectives:
1. To know the effects of changing tax policy and tax rates to the business operations and financial
growth of Small and Medium Enterprises in Lipa City.
2. To analyze how the changes in tax policy affect the turnover of SMEs in Lipa City.
3. To determine the types of taxes that affects the financial growth of SMEs in Lipa City.

Hypotheses:

H0: The Tax Reform for Acceleration and Inclusions Law has no significant impact on the financial growth
of Small and Medium Enterprises in Lipa City.

H1: The Tax Reform for Acceleration and Inclusions Law has no significant impact on the turnover of
Small and Medium Enterprises in Lipa City.

H2: The different types of taxes have no significant effect on the financial growth of Small and medium
Enterprises in Lipa City.
Literature Review:

Taxation plays an important role in the growth of a country. Once it has been changed,
accounting and business sectors are also affected. They have to adapt to the new rates and rules in the
tax policy. Also, the financial aspects of a company, as a result of higher tax rates and higher prices, can
also be affected.
A similar study entitled “Study of Tax System Impact on the Growth of SMEs” by Mungaya,
Mbwambo, Tripati, discusses the impact of new tax policies on the economic growth of SMEs. According
to this book, high tax rates and tax complicity discourage the growth of SMEs. So as the tax rates
become higher, SMEs are at greater risk because not only the prices are affected but also its financial
aspect. It is also cited in the book that if the tax structure is not adequately designed to the specific
environmental conditions, it may create a greater burden to the taxpaying organizations.
Another study entitled “The Impact of taxation on Small Business” by E. Gordon Keith is also
related to the topic. In this study, it is discussed that high federal taxes can affect the size and strength of
the small business population in several ways: First, it can reduce the number of business births by
discouraging those who might otherwise form new businesses; Second, it can slow down rate at which
small businesses are able to grow by making it more difficult for them to finance a rapid expansion; Third,
it can weaken the desire and ability of small concerns to survive as independent enterprises by making
the gains from a sale or merger look more attractive than the income to be derived from continued
operation. Also, according to this study, high taxes in business income are said to destroy the incentive
for growth and efficiency.

Framework:

Conceptual Framework

A study entitled “IMPACT OF TAXATION ON THE GROWTH OF SMALL MICRO

ENTREPRISES CASE STUDY OF SELECTED SMES IN ITEN TOWN” by Talam Cynthia Jepkogei
(2014) provides an operating framework related to the study. This framework can give an overview of the
study’s scope and limitations:

Proposed Research Design, Methods and Procedures

The study will use a descriptive research design to ensure the researchers have no influence on
the results. To provide quantitative data, questionnaires will be used as the primary data source to be
given out to SMEs. Questionnaires help support the study by providing the researchers with first-hand
information about the SMEs.
Bibliography
Jepkogei, T.C. (2014, February). Impact Of Taxation On The Growth Of Small Micro Enterprises
Keith, E.G. (N.d.). The Impact of Taxation on Small Business
Mungaya, M., Mwambo, A.H., Tripathi, S.K. (N.d.). Study of Tax System Impact on the Growth of Small
and Medium Enterprises (SMEs): With Reference to Shinyanga Municipality, Tanzania
Roy (2018, January 23) SMEs and the TRAIN Law: finding creative ways to stay in the biz