What I Need to Know

Entrepreneurship is vital in our economy as it creates wealth and so improves the

standards of living not only for the entrepreneurs, but for other people as well. With
entrepreneurs’ innovation, new and improved products enable new markets to
develop. Higher earnings can help boost national income and tax revenue. However,
like any endeavor entrepreneurs faced with challenges. There are some economic
issues that affect their growth and development.

Expected Learning Outcome/s:

1. Cite economic issues faced by entrepreneurs.
2. Explain how the economic issues affect Filipino entrepreneurs.

What I Know

TRUE OR FALSE: Write the word TRUE if the given statement is correct, otherwise
write FALSE
___________ 1. Investment is an amount of money derived merely from savings.
___________ 2. Job and skill mismatch is one of the labor issues in the Philippines
___________ 3. Minimum wage policy tend to reduce employment in small scale
firms.
___________ 4. Non-vat business pays 3% tax based on sales.
___________ 5. Alcohol, tobacco, petroleum products, automobiles, mineral
products are charged with excise tax.
___________ 6. Rate of interest is the sole determinant of investment.
___________ 7. One reason of educated unemployment is the graduate’s reservation
wages and can afford to wait for better opportunities.
___________ 8. The tax liability for a corporation is determined by its residency
status and is based on the net income it obtains while carrying out
its business activity.
___________ 9. Tax imposed to a non-vat business is also called percentage tax.
___________ 10. A 12% tax based on gross sales is imposed by government to a vat
business.
 Lesson
Economic Issues Affecting
6 Filipino Entrepreneurs

What’s In

Different contemporary economic issues affecting Filipino entrepreneurs will

be discussed in this lesson. It aims to critically analyze how these issues affect the
entrepreneurs.

What’s New

A contemporary issue refers to an issue that is currently affecting people and

that is unresolved.

The fundamental economic problem faced by society and business owners is

how to allocate scarce resources to produce various goods and services within the
economy.

Filipino entrepreneurs are currently faced with different economic problems

and issues that affect their business operations.

What’s Is It

Contemporary Economic Issues Affecting Entrepreneurs:

1. Capital/Investment and the Rate of Interest

Chen, J. (2020) defined "investment" as any mechanism used for generating future
income. She explained that investing is putting money to work to start or expand a
project - or to purchase an asset or interest - where those funds are then put to work,
which goal is to earn an income and increase its value over time.

Abrugar, V. (2014) stated that for starting entrepreneurs who are not yet earning an
operating income, getting financial aid from the government or obtaining a loan from
banks seems to be difficult. Applying for a bank loan requires too much paperwork,
while interest rates are also too high. To get a loan, an entrepreneur must have a
collateral or show some years of operating income.

Pettinger, T. (2019) added that with higher interest rates, it is more expensive to
borrow money from a bank. Interest rate is the amount a lender charges for the use
of assets expressed as a percentage of the principal. The interest rate is typically noted
on an annual basis known as the annual percentage rate (APR) Higher rates increase
the cost of borrowing and require investment to have a higher rate of return to be
profitable. This tends to discourage investment because of higher opportunity cost.
Interest rates are one important determinant of investment. However, it is not the only
factor, other factors include investor confidence, economic growth, the willingness of
banks to lend, and state of technology.

2. Labor

Labor refers to an economic group comprising those who do manual labor or work
for wages.

Unemployment, job and skill mismatch and educated unemployed are one of the labor
issues in the Philippines. Even with the high unemployment rate, there are actually
jobs that are not filled because there are no applicants who have the right
qualifications. From this job mismatch problem also arises the educated unemployed.
In 2010, the unemployment rate among the college educated is about 11%. Some have
difficulty in finding an appropriate job for the degree they have. Others, have higher
reservation wages and can afford to wait for better opportunities.

With the declining earnings, people are looking for additional hours of work
(underemployed), or going abroad (overseas employment) or choose to be self-
employed. This also shows how they are not content with the quality of employment.
In 2009, it was reported that 1.423 million Filipinos were deployed overseas.

3. Minimum Wage

A wage is monetary compensation or remuneration paid by an employer to

an employee in exchange for work done. Payment may be calculated as a fixed amount
for each task completed (a task wage or piece rate), or at an hourly or daily rate, or
based on an easily measured quantity of work done.

Based on the findings of the study conducted, Lanzona, L.Jr. (2014) explained that,
the minimum wage policy reduces employment in small-scale firms. Because of
greater marginal cost it would be difficult for small-scale firm to grow and become a
larger-scale firm. Thus, it causes them to reduce their production workers.

4. Taxes

Taxes are imposed and collected pursuant to the National Internal Revenue
Code, the Tariff and Customs Code, and several special laws. There are four main
types of national internal revenue taxes: income, indirect (value-added and percentage
taxes), excise and documentary stamp taxes, all of which are administered by the
Bureau of Internal Revenue (BIR). At the local level, governments have some autonomy
to impose taxes on business and ownership of real property.
  Corporate Income Tax - In the Philippines, all companies – domestic or
foreign – are liable to pay corporate income tax (CIT). The tax liability for a
corporation is determined by its residency status and is based on the net
income it obtains while carrying out its business activity, normally during one
business year.

Starting in 2020, corporate income tax will be reduced from 30 percent to 20

percent in annual increments of 1 percentage point over a 10-year period through
the Corporate Income Tax and Incentives Rationalization Act (CITIRA) initiative in
September 2019

A minimum corporate income tax (MCIT) of 2 percent is imposed on the

gross income of both domestic and resident foreign corporations, on an annual
basis. It is imposed from the beginning of the fourth taxable year immediately
following the commencement of the business operations of the corporation. The
MCIT is imposed when the standard 20 percent CIT is lower than the 2 percent
MCIT on the company’s gross income. Any excess of the MCIT over the normal tax
may be carried forward and credited against the normal tax for the three
immediately succeeding taxable years.

 Sales Tax - Sales tax is a tax imposed on the gross sales or gross receipts of
an entity. The tax rate ranges from 3% to 12% depending on the tax type, such
as VAT or NON-VAT.

When a business entity is VAT registered, it is subject to 12% sales tax on

its gross sales or receipts. Such sales tax is referred to as VAT or Output Tax. On
the other hand, if a business entity is NON-VAT, it is subject to 3% sales tax on its
gross sales or receipts. Such sales tax is referred to as Percentage Tax.

 Excise Taxes - Excise taxes are imposed on the following: alcohol, tobacco,
petroleum products, automobiles, mineral products, and non-essential goods
such as jewellery and precious stones, perfumes, yachts and other sport
vessels.

 Documentary Stamp Tax - A documentary stamp tax (DST) is required for

certain documents, transactions or instruments specified in the tax code when
the obligation or right arises from Philippine sources or when the property is
situated in the Philippines.

5. Rental and mandatory requirements

Many businesses around the world are currently struggling to cover their
overheads, and most economic activity is being generated from people’s homes. This
renders rent — for offices, entertainment/hospitality, non-food retail, and industrial
spaces. Rent is the grand of possession and enjoyment of property or machinery and
etc. in turn for the payment of rent from the tenant or lessee.
 What’s More

Identify the following statements. Write your answers on the blank.

________________ 1. A tax imposed on the gross sales or gross receipts of an entity.
________________ 2. A tax that is required for certain documents, transactions or
instruments specified in the tax code.
________________ 3. It refers to any mechanism used for generating future income.
________________ 4. It refers to an issue that is currently affecting people and that is
unresolved.
_________________ 5. A tax paid by all companies – domestic or foreign.
_________________ 6. This is the amount a lender charges for the use of assets
expressed as a percentage of the principal.
_________________ 7. This refers to an economic group comprising those who do
manual labor or work for wages.
_________________ 8. This is imposed and collected pursuant to the National
Internal Revenue Code, the Tariff and Customs Code, and several special laws.
_________________ 9. It refers to the grand of possession and enjoyment of property or
machinery and etc. in turn for the payment of rent from the tenant or lessee.
_________________10. This is a monetary compensation or remuneration paid by
an employer to an employee in exchange for work done

What I Have Learned

1. Filipino entrepreneur are faced with different economic issues and problem
that affects their operation.
2. investing is putting money to work to start or expand a project - or to purchase
an asset or interest - where those funds are then put to work, which goal is to
earn an income and increase its value over time. With higher interest rates, it
is more expensive to borrow money from a bank.
3. Unemployment, job and skill mismatch and educated unemployed are one of
the labor issues in the Philippines.
4. Because of greater marginal cost it would be difficult for small-scale firm to
grow and become a larger-scale firm. Thus, it causes them to reduce their
production workers.
5. Taxes are imposed and collected pursuant to the National Internal Revenue
Code, the Tariff and Customs Code, and several special laws.
6. Many businesses around the world are currently struggling to cover their
overheads, and most economic activity is being generated from people’s homes.
 What I Can Do

News clip. Cut or print out a news article discussing economic issues affecting
entrepreneurs now-a-days. Place it in a bond paper. Answer the following
questions:

1. What economic issue affects the Filipino entrepreneur on your selected news
article?
2. How this economic issue affects the Filipino entrepreneurs?
3. What are your reactions towards the issue?
4. If you are a political or economic leader, how will you resolve the issue?

Assessment

Multiple Choice. Choose the letter of the best answer. Write the chosen letter on a
separate sheet of paper.

1. Mary Ann is paying 3% tax based on her gross sales. Mary Ann is paying ________.
A. Excise Tax B. Value Added Tax C. Percentage Tax
2. The government grants additional cost of living allowance to workers. What
possible economic issue affects the small scale production business of Mang Joe?
A. Labor B. Wage C. Investment
3. Interest rate on borrowing is high. How this situation may affect the inclination of
Mr. Martinez to borrow money for his micro business enterprise?
A. Mr. Martinez might increase his borrowing to increase his fund.
B. Mr. Martinez might have a second thought of borrowing due to its cost.
C. Mr. Martinez might borrow but lower his price in order to boost greater sales.
4. Which of the following taxes is being paid by all types of business?
A. Corporate Income Tax B. Excise Tax C. Sales Tax
5. Which of the following is charged of excise tax?
A. Agriculture products B. Live Stock Products C. Petroleum Products
6. Which of the following is a labor issue?
A. Underemployment B. Employment C. Labor Supply
7. The following determines the tax liability of a corporation EXCEPT one.
A. Residency status B. net income it obtains C. number of stockholders
8. What is the reason of educated unemployed?
A. Difficulty in finding an appropriate job for the degree they have.
B. Simply they do not want to apply for a job.
C. Have lower reservation wages
9. What could be the result of sending our professionals and skilled workers abroad?
A. Oversupply of professionals and skilled workers in local job market.
B. Undersupply of professionals and skilled workers in local job market.
C. No supply of professionals and skilled workers in local job market.
10. If the cost of investment is high, entrepreneurs may tend to ________________.
A. Offer the product at lower price.
B. Offer the product at higher price.
C. Neither A nor B.
 Additional Activities

Instruction:

1. Construct a “hugot line” showing how contemporary economic issue

affects Filipino entrepreneurs during this Covid 19 Pandemic.

2. Identify the economic issue that you have cited.

3. Explain how the economic issue affects the Filipino Entrepreneurs.

Answer Key

10.Wage
9. Rent
8. Tax
10.C 7. Labor 10.TRUE
9. B 6. Interest Rate 9. TRUE
8. A Income Tax 8. TRUE
7. C 5. Corporate 7. TRUE
6. A Issues 6. FALSE
5. C 4. Contemporary 5. TRUE
4. C 3. Investment 4. TRUE
3. B Tax 3. TRUE
2. B 2. Documentary 2. TRUE
1. C 1. Sales Tax 1. FALSE

Assessment What's More What I Know