Slippery Slope Framework.

Slippery Slope Framework gives factors that can affect a person’s perception when it comes to
tax compliance. As some people are aware of tax compliance, and comply with it. Some does not know
but complies with it. Some knows but does not comply with it. Some comply due to the law, and some
goes around it. As a result, perceived authority and confidence in the government are key elements in
determining tax compliance; however, whereas power tends to impose compliance, trust tends to inspire
voluntary, according to (Christoph, Larissa, Anca, Jozefm, Alexis, & Erin. 2013) the framework for tax
compliance known as the slippery slope includes several factors and categorizes them into two main
dimensions. The Slippery Slope Framework shows the influence of the government’s power in people’s
perception of tax compliance that can result into voluntary or enforced compliance. While trusting the
government can result into voluntary compliance according to (Benk, Serkan & Bundak. 2012).
Voluntary tax compliance is people’s willingness to comply with the government. On the contrary
enforced tax compliance is achieved when government uses its power.
Slippery Slope Frameworks exhibits citizens’ willingness to comply with the law depending on
their belief in the government’s ability to enforce it according to (Barbara, Edoardo, Ercih, & Alfred.
2013). It also shows the willingness of the people to comply voluntarily. As penalties can be a factor of
people’s knowledge on tax compliance or can have an opposite effect. Trust in authorities and power of
authorities are both relevant and a factor to the study on people’s perception with tax compliance
according to (Erich, Erik, & Ingrid. 2008). Slippery Slope Framework shows that voluntary tax
compliance can be achieved when people’s trust with the government increases. While enforced
compliance can be achieved by putting more power by the government.
According to (Larissa. 2019) that trust and power encourages tax compliance. Trusting the
authorities more can result into more voluntary tax compliance. While authority’s power, the use of
traditional enforcement tools like audits and fines increases more enforced tax compliance. The
framework highlights tax compliance of two type, voluntary and enforced. It can show people’s tax
compliance perception. People can be aware with the tax compliance due to enforced tax compliance.
Enforced tax compliance is about putting up fines and doing audits. People can also be aware with the tax
compliance and complies voluntarily because of the trusting relationship with the authorities that help and
supports them. Voluntary tax compliance by trusting the authorities. (Aloys, Stephan, Erich. 2014)
Trust in authorities Questionnaire rrl:
According to (Benk & Budak. 2011) trust is created when tax authorities treats people with mutual
respect. If trust is created, people will be more willingly to comply voluntarily. Mutual respect and fair
treatments for tax payers can lead into trusting authorities more. Being aware of this may result people
complying voluntary. It can also result into enforced tax compliance. And it can also result into people
avoid tax compliance or not complying at all. If tax payers have low trust with the tax authorities
taxpayers may tend to avoid tax compliance. Taxpayers complying can also be based on individual’s
awareness to obey or to avoid their obligations. (Widuri, R., Jie, M., & Christie, A. 2019)
Reference:
Kogler, C., Batrancea, L., Nichita, A., Pantya, J., Belianin, A., Kirchler, A. (2013). Trust and power as
determinants of tax compliance: Testing the assumptions of the slippery slope framework in Austria,
Hungary, Romania and Russia. Journal of Economic Psychology. Volume 34. pp. 169-180,
(https://www.sciencedirect.com/science/article/pii/S0167487012001109)
Benk, S. & Budak, T. (2012). Power and trust as determinants of voluntary versus enforced tax
compliance: Empirical evidence for the slippery slope framework from Turkey. African journal of
business management.
(https://www.researchgate.net/publication/263199232_Power_and_trust_as_determinants_of_voluntary_
versus_enforced_tax_compliance_Empirical_evidence_for_the_slippery_slope_framework_from_Turkey)

Kastlunger, B., Lozza, E., Kirchler, E., & Schabmann, A., (2013). Powerful authorities and trusting
citizens: The Slippery Slope Framework and tax compliance in Italy. Journal of Economic Psychology.
Volume 34. pp. 36-45. https://www.sciencedirect.com/science/article/pii/S0167487012001444

Kirchler, E., Hoelzl, E., & Wahl, I. (2008). Enforced versus voluntary tax compliance: The “slippery
slope” framework. Journal of Economic Psychology. Volume 29, Issue 2. pp. 210-225.
https://www.sciencedirect.com/science/article/pii/S016748700700044X

Ennya, S. (2019). Trust and power as determinants of tax compliance across 44 nations. Journal of
Economic Psychology. Volume 74.
(https://www.sciencedirect.com/science/article/pii/S0167487019301746)

Prinz, A., Muehlbacher, S., & Kirchler, E. (2014). The slippery slope framework on tax compliance: An
attempt to formalization. Journal of Economic Psychology. Volume 40. pp. 20-34.
(https://www.sciencedirect.com/science/article/pii/S0167487013000536)
Widuri, R., Jie, M., & Christie, A. (2019). Individual Tax Compliance: Trust versus Power. Proceedings
of the International Conference on Tourism, Economics, Accounting, Management, and Social Science
(TEAMS 19). pp. 61-67 https://doi.org/10.2991/teams-19.2019.12

Benk, S. & Budak, T. (2012). Power and trust as determinants of voluntary versus enforced tax
compliance: Empirical evidence for the slippery slope framework from Turkey. African journal of
business management.
(https://www.researchgate.net/publication/263199232_Power_and_trust_as_determinants_of_voluntary_
versus_enforced_tax_compliance_Empirical_evidence_for_the_slippery_slope_framework_from_Turkey)

MSMEs
Philippines is one of many economies that considers MSMEs as their backbone. A total of 99.5% of
businesses establishments here in the Philippines. Department of Trade and Industry (DTI) estimated
35.7% of the total value-added or gross domestic products was contributed by MSMEs. 5.7 million jobs
or 63.2% total employment during 2018 was generated by MSMEs. The description of MSMEs are
employee size of not more than 200 employees and an asset size if below P100 million. (Congressional
Policy and Budget Research Department. 2018). MSMEs in the Philippines is crucial when it comes to
creating employment and entrepreneurship opportunities. (Kagohashi, H. 2022).
MSMEs are determined based on its total assets, provided in Republic Act No. 6977. It refers to any type
of business whether it is a single proprietorship, cooperative, partnership or corporation. Micro, small,
and medium prices vary depending on its total asset value. (P&L Law. 2020). MSMEs helps with the
reduction of poverty by creating jobs and economic growth. MSMEs provides decent jobs and
entrepreneurship for women, youth and groups in a vulnerable situation. MSMEs also had a negative
socioeconomic impact during the pandemic (Covid-19) (United Nations. 2022).
According to (Department of Trade and Industry. 2021) Manufacturing made up the greatest portion of
the MSME sector, providing 35.7% of the total, with a share of 6.87%. Financial intermediation came in
second with a share of 6%, followed by wholesale, retail, and repair trades. In 2020 40% of country’s
Gross Domestic Product was produced by MSMEs, an increase in 2018’s 35.7%. Due to pandemic the
GDP of the country went down to 16.5% for months since the community quarantine was declared.
(United Nations Philippines. 2020). The traditional SMEs, which have carried on providing the goods
and services passed down from previous generations, and the modern SMEs, which cater to present-day
consumer demands and seem to be risk-takers looking for new market opportunities to maximize their
efficiency in the expanding economy. (Investree. 2022). One must also keep in mind the three
characteristics of MSMEs: single, small, and local. MSMEs are companies that are neither corporations
nor conglomerates but yet play a significant role in the Philippine economy. SMEs are frequently single-
proprietorship businesses, and occasionally the owner may be the only employee. It might also be
applicable if only one product or service is produced or offered. Some may think that a MSME “small-
time” business is like a sari-sari store. But it also includes manufacturing, trading, importing-export,
retailing rental and services. MSMEs can be for everyone with an initiative and drive to start a business.
(Project Match. 2022). MSMEs provides jobs and opportunities for people who wants to start up a
business. It also helps poverty in the country, creating jobs and impacting the economy. It plays a vital
role in a developing country’s GDP.
Questionnaire:

Trusting the authorities to implement tax fairness and tax regulations that can be helpful to the people.
Under TRAIN Law or Republic Act No. 10639, BIR creating fairness in tax compliance for MSMEs. As
MSMEs find it less burdensome to declare their income and to pay the proper taxes under this tax reform
law. To set tax fairness to MSMEs and other large businesses, under TRAIN Law more than P250,000
but does not exceed to P3,000,000 are given an option to be taxed at 8% of gross sales/receipts in excess
of P250,000 or new income tax rates under TRAIN Law. (Atty. Aranas, P. 2020). In order to keep
everyone accountable for their obligations the tax authorities implements regulations to avoid tax evasion.
Some business may not comply due to unawareness or total avoidance but is still punishable by law to be
fair for those who do their obligations. As tax evasion is a criminal offense. Tax evaders are subject to
penalties and criminal chargers. In the Philippines, tax evasion penalty is up to P10,000,000 or
imprisonment depending on the severity of the offense. (Zoleta, V. 2022). The fairness of tax and
transparency of law is evident creating laws so that can be fair for the people. For instance the Corporate
Recovery and Tax Incentives for Enterprises (CREATE) Act. Additionally, CREATE offers a significant
and adaptable tax incentive program that is clear, performance-based, time-bound, and targeted.
Stakeholders have all agreed upon these principles throughout hearings and dialogues. The tax incentive
program under CREATE strikes a balance between the interests of all parties involved while upholding
the core values and taking into account the nation's fiscal concerns. MSMEs will have a tax reduction rate
from 30% to 20%. Large corporations also has a reduction of 5% from 30% to 25%. (Tax Reform
Department of Finance. 2021). People trusting the tax authorities if mutual respect is met according to
(Widuri, R., Jie, M., & Christie, A. 2019). Respecting privacy can be a way to gain trust from people. As
BIR only use and disclose personal information in connection with their lawful functions and activities.
BIR follow in accordance with the existing legislations such as Republic Act (RA) No. 10173, or the Data
Privacy Act of 2012, and RA No. 10021, or the Exchange of Information on Tax Matters Act of 2009.
(BUREAU OF INTERAL REVENUE). In order to protect and honor everyone’s private information.
With this people feel safe and trust the tax authorities more, subjecting to voluntary tax compliance.

Tax Reform Department of Finance. (2021). Package 2: Corporate Recovery and Tax Incentives for
Enterprises (CREATE) Act.
https://taxreform.dof.gov.ph/tax-reform-packages/p2-corporate-recovery-and-tax-incentives-for-
enterprises-act/

BUREAU OF INTERNAL REVENUE. PRIVACY NOTICE.

https://www.bir.gov.ph/index.php/privacy-notice.html

Reference:
Congressional Policy and Budget Research Department. (2020) FF2020-19: MSMES IN THE
PHILIPPINES. No. 19. https://cpbrd.congress.gov.ph/2012-06-30-13-06-51/2012-06-30-13-36-50/1195-
ff2020-19-msmes-in-the-philippines
Kagohashi, H. (2022). Re-thinking the MSME support ecosystem to build back better from the pandemic
and natural disasters. https://www.ilo.org/manila/public/sp/WCMS_846708/lang--en/index.htm

P&L Law. (2020). MICRO, SMALL AND MEDIUM ENTERPRISES: WHAT BUSINESSES ARE
CONSIDERED MSMES. https://pnl-law.com/blog/micro-small-and-medium-enterprises-what-businesses-
are-considered-msmes/
United Nations. (2022). Micro-, Small and Medium-sized Enterprises (MSMEs)
https://sdgs.un.org/topics/capacity-development/msmes

Department of Trade and Industry. (2021). 2021 MSME STATISTICS.

https://www.dti.gov.ph/resources/msme-statistics/
United Nations Philippines. (2020). MSME Sector is key to COVID-19 inclusive recovery for PH.
https://philippines.un.org/en/93680-msme-sector-key-covid-19-inclusive-recovery-ph

Investree. (2022). Why are SMEs Important to the Philippines Economy and Why We Should Support
Them. https://articles.investree.ph/posts/why-are-smes-important-to-the-philippine-economy-and-why-
we-should-support-them

Project Match. (2022). The Importance of MSMEs in the Philippines.

https://www.projectmatch.ph/resource-center/post-2180e179-2ab6-41ff-acee-ab17763bbd10

Atty. Aranas, P. (2020) The TRAIN Law and MSMEs.

https://www.lmalaw.org/index.php/blog/item/36-the-train-law-and-msmes

Zoleta, V. (2022). What Happens If I don’t Pay my Taxes? Tax Evasion Penalties Every Tax Payer Must
Know.
https://www.moneymax.ph/personal-finance/articles/tax-evasion-penalties#:~:text=Because%20tax
%20evasion%20is%20a,imprisonment%2C%20depending%20on%20the%20offense.

Tax Reform Department of Finance. (2021). Package 2: Corporate Recovery and Tax Incentives for
Enterprises (CREATE) Act.
https://taxreform.dof.gov.ph/tax-reform-packages/p2-corporate-recovery-and-tax-incentives-for-
enterprises-act/

BUREAU OF INTERNAL REVENUE. PRIVACY NOTICE.

https://www.bir.gov.ph/index.php/privacy-notice.html