UNIVERSITY OF NORTHERN PHILIPPINES

OPEN UNIVERSITY

PUBLIC FISCAL ADMINISTRATION

DL PA 231

Submitted by:

Anthony M Bandagosa
09178751125
SELF TEST #1
ANSWERS

1. My own City/Municipality (Muntinlupa City), the contribution of

decentralized Local Fiscal Administration provides funds to improved
the delivery of basic services to the community, especially to the less
previllaged sectors of the community, few examples of the projects of
the LGU were; Batang Munti Foundation, which grants schorlarship
and give allowances to the student of the city and Care Card provides
free medical assistance to the constituents of Muntinlupa City.

2. Nepotism/Political Dynasty and corruptions were all the factors that

contraints LGUs to maximize the use taxing powers. For so many
years as I observed Nepotism/Political Dynasty causes massive
corruption, wherein a long stayed in power (LCE) develops
familiarization (Kumpadre system) to business owners/sectors
whereas the same uses their relationships as Kumpadre to evade tax
or corrupted other government officials in favor of their business
interest or illegal activities. A better solution to this problem is a
frequent monitoring of the National Government of the tax collection as
well as the projects of the LGUs and to end corruptions must abolished
or end the Nepotism/Political Dynasty in every sectors of the
government.

3. Muntinlupa City have a fast moving econony, the rise of the business
hub in barangay Alabang; high rise buildings; BPOs; and Malls which
generates jobs and revenues to the city funds for the funding of various
projects that benifits the constituents, I may say that the city can stand
on its own without the support coming from the National Government.
(see table below).
 No. of Registered Businesses: 13,255

Total No. of Malls: 8

Total No. of Hotels: 8

Gross Sales of Existing Businesses: Php 173 Billion

Total Capitalization of New Business: Php 16.9 Billion

City Income: Php 3,806,355,330

Internal Revenue Allotment: Php 736, 832,771

Business Tax Collection 2015: Php 1,179,468,000

Real Property Tax Collection 2015: Php 1,034,000,000

4. As i interviewed one Tax Payer businessman in the name of Rey

Avaristo in his opinion regarding the payment of taxes as he said in the
interview, he was satisfied regarding to the amount of tax he was
paying for, he reasoned out that the LGU thru the tax allotment services
coming from the LGU reached the constituents thru projects and as
reflected to the Peace and Order situation in the city.

5. Since Barangay Tunasan is located near the Laguna De Bay, the LGU
could be use the lake as a leisure park/ resort and be utilize for water
sports events such as kayaking, dragon boat racing and others, as
such revenue can be gnerate thru this facilities.
SELF TEST #2
ANSWERS

1. Distinguish the primary objective of the following:

a. Taxation

Objectives of Taxation:
The primary purpose of taxation is to raise revenue to meet huge public
expenditure. Most governmental activities must be financed by taxation.
But it is not the only goal. In other words, taxation policy has some non-
revenue objectives.

Truly speaking, in the modern world, taxation is used as an instrument

of economic policy. It affects the total volume of production,
consumption, investment, choice of industrial location and techniques,
balance of payments, distribution of income, etc.

Objective # 1. Economic Development:

One of the important objectives of taxation is economic development.
Economic development of any country is largely conditioned by the
growth of capital formation. It is said that capital formation is the kingpin
of economic development. But LDCs usually suffer from the shortage
of capital.

To overcome the scarcity of capital, governments of these countries

mobilize resources so that a rapid capital accumulation takes place. To
step up both public and private investment, government taps tax
revenues. Through proper tax planning, the ratio of savings to national
income can be raised. By raising the existing rate of taxes or by
imposing new taxes, the process of capital formation can be made
smooth. One of the important elements of economic development is the
raising of savings- income ratio which can be effectively raised through
taxation policy.
However, proper care has to be taken, regarding investment. If financial
resources or investments are channelized in the unproductive sectors
of the economy the economic development may be jeopardized, even
if savings and investment rates are increased. Thus, the tax policy has
to be employed in such a way that investment occurs in the productive
sectors of the economy, including the infrastructural sectors.

Objective # 2. Full Employment:

Second objective is the full employment. Since the level of employment
depends on effective demand, a country desirous of achieving the goal
of full employment must cut down the rate of taxes. Consequently,
disposable income will rise and, hence, demand for goods and services
will rise. Increased demand will stimulate investment leading to a rise in
income and employment through the multiplier mechanism.

Objective # 3. Price Stability:

Thirdly, taxation can be used to ensure price stability—a short run
objective of taxation. Taxes are regarded as an effective means of
controlling inflation. By raising the rate of direct taxes, private spending
can be controlled. Naturally, the pressure on the commodity market is
reduced.

But indirect taxes imposed on commodities fuel inflationary tendencies.

High commodity prices, on the one hand, discourage consumption and,
on the other hand, encourage saving. Opposite effect will occur when
taxes are lowered down during deflation.

Objective # 4. Control of Cyclical Fluctuations:

Fourthly, control of cyclical fluctuations—periods of boom and
depression—is considered to be another objective of taxation. During
depression, taxes are lowered down while during boom taxes are
increased so that cyclical fluctuations are tamed.
Objective # 5. Reduction of BOP Difficulties:
Fifthly, taxes like custom duties are also used to control imports of
certain goods with the objective of reducing the intensity of balance of
payments difficulties and encouraging domestic production of import
substitutes.

Objective # 6. Non-Revenue Objective:

Finally, another extra-revenue or non-revenue objective of taxation
is the reduction of inequalities in income and wealth. This can be done
by taxing the rich at higher rate than the poor or by introducing a system
of progressive taxation.

b. Collection of charges – The collection of pecuniary liablity

fixed by law for the regulation or inspection of business or activity, and
based essentially from the LGUs’ exercice of local police powers. Unlike
taxes a fee should put revenue as a secondary objective. The principal
objective is to regulate and maintain public order.

c. Imposition of fees – Charges are the so-called services fee,

user charges, and direct charges which serve as payment for certain
services and or consumption, or use of goods and servies created and
or sold by LGUs, charges are normally the cost of admission, toll, or
rental. Full cost recovery should be the norm in the implementation of
charges to maintain the facilities at the least.

2. The top three sources of revenue of my city/municipality were;

from the business sectors wherein.

3. How can a fith or sixth income class municipalities increase

the tax revenue collections considering the limited tax based in
these areas?

4. Is the central grant allotment system synonymous to IRA?

Considering “subsitutive” effect or the complete reliance of
some LGUs to their IRA thereby dampering thier enthusiasm to
 raise their own revenues, what should be done to overcome
this undesirable effect?

5. Are you in favor in horizontal criteria being used in determining

the IRA share of specific LGUs? Why or Why not? Aside from
population, land area and equal sharing, can you prpose some
other criteria for a more equitable sharing of the IRA?

6. Basing the illustrative example from the module, compute for

the IRA of your municipality.

7. If you were the chief local executive how will you address the
following issues:

 In places where polictical conflicts between the Local

Chief Executive (executive branch) and the sangunian
(legislative branch) exists, the passage of an
appropriation ordinance or budget is normally delayed.
 The budget process is hampered by non-submission of
supporting documents by concerned offices or officers
on time.
 Failure to implement or complete projects as
programmed.
 Lack of awareness by LGUs of available non-traditional
sources of revenues.
 Low capacity of LGUs for development planning.