Chapter 9 :

Consumer,
Government
and Taxation
Presented by :
MOJARES, Jasper Kyle Marco D.
REGLOS, Marie Nhelle K.
GORDO, Jenevieve B.
 Learning Objectives

At the end of this chapter, the learners will be able to :

1. Explain what socio-economic impact study is ;

2. Enumerate the benefits of socio-economic impact study ;
3. Identify and explain the various socio-economic factors affecting
business and industry such as the consumer, government policies,
and tax revenues ;
4. Evaluate the role of the government in the economy ; and
5. Understand the socio economic impact of business in consumer
income and government.
 Socio-economic Impact Study

• Socio-economic impact study is done by a business entity or a

company to measures its impact in the economies, environments,
and communities in which they operate. Just how an organization
impact the environment and society is closely monitored by
stakeholders who find it important to comment publicly when a
business goes wrong. The upside of an impact study is that when
done right, other business and the society benefit by focusing
on an area of the organization such as reducing risks,
enhancing brand, and creating new business opportunities.
 Socio-economic Impact Study

• Against this background, measuring socio-economic impact can

help business, government, and civil society design more
effective collaborations by providing insight into the value of
partnerships. A better understanding of industry needs can
highlight the socio-economic impacts of companies in a given
sector, geography, or environment. This, in turn can help
prospective partners understand the companies' highest
potential impacts where they come from, how they unfold, and
what can be done together and at what scale to mitigate or
leverage them.
 Socio-economic Impact Study

• The practice of measuring the socio-economic impact

of a business is still in the early stages, but if
integrated into business performance management and
used as a tool for effective collaboration, it holds
great promise as an enabler to address the global
challenges facing both business and society
(Guardians 2017).
 Benefits of Measuring Socio-Economic Impacts

According to Guardian ( 2017 ), there are a variety of reasons,

ranging from reducing cost and risk to creating and capturing new
opportunities, which underpin a company’s decision to measure its
socio-economic impacts. Among them are :

1. Obtaining or maintaining a permit to operate a business

2. Improving the business-enabling environment
3. Strengthening value chains
4. Fueling products and services innovations
Socio-economic Factors
Affecting Business and
Industry
Socio-Economic Factors Affecting
Business and Industry
 The Consumers
A consumer is an individual who buys products or services for
personal use. In economics, it is the consumer who makes things
happen. Consumers are the engine that drives the economy. Consumers,
either directly or indirectly, determine everything that the economy
will produce. Directly, consumers decide how many of each of the
final goods and services will be produced by voting with their money.
By purchasing one good and not another, consumers send signals to
manufacturers and other suppliers about what need and what need not
be produced. Through these direct statements, consumers indirectly
determine the capital goods and intermediate goods (supplies and
inputs) that must be produced to meet the demand for final goods and
services. Thus, everything that is produced in the economy is done so
because consumers want it.
 Assumption about Consumer
Behavior

You have to be careful when you

make assumptions. If people assume
too much or too early, they blind
themselves to the possibilities
that the world may be different
from what they think.
 Four Basic Assumptions about Consumers

1. Consumers are rational

2. Consumers desire many goods

3. Consumers have to pay for goods

4. Consumers have limited income

 The Government

Clayton ( 1995 ) explains that the economic system of one country

is highly complex. It is based primarily on free enterprise and
capitalism, but it also includes elements of command and
traditional economies.

The following are the roles of the government in its economy :

1. As protector
2. As provider and consumer
3. As regulator
4. As promoter of national goals
 Socio-economic Impact of Business in Consumer Income

Income is the amount of money individuals earn from their daily

economics activities, be it employment, business, or investment. The
availability of disposable income influences spending habits.
Customers are likely to purchase expensive or luxurious item whenever
there is an increase in their disposable income.
However, when income in scarce, customers ten to
restrict their spending to essential items. Income
fluctuations occur as a result of changes in the rates
of economic growth. When the economy is doing well,
employees earn pay hikes, businesses post record
sales, financial market thrive, and mutual funds
grow. The opposite happens during periods of
economic decline. During the global economic
crisis, for example, businesses recorded reduced
sales after credit facilities became scare and
many people lost jobs ( Cole, 2017 )
 Taxation and Revenues

Tax is defined as a pecuniary burden laid upon

individuals or property owners to support the
government. It is a payment exacted by legislative
authority. Taxes are also imposed by many
administrative divisions and may be paid in money or
as its labor equivalent.
 Brief History of Taxation

• Taxes are as old as governments. The general levels of taxes have

changed through the years, depending on the role of the government. In
modern times, many governments, especially in advanced industrial countries,
have rapidly expanded their roles and taken new responsibilities. As a
result, their need for tax revenue increased. Through the years, people have
frequently protested against tax increases. In these situations, taxpayers
have favored keeping services at current level or reducing them. Voters have
defeated many proposal for tax increases by the government.

• According to Rehnquist ( 1992 ), the first known system of taxation was in

Ancient Egypt around 3000 BC – 2800 BC in the first dynasty of the Old
Kingdom. The earliest and most widespread form of taxation was the corvée and
tithe.
 Brief History of Taxation
Records from the time show that pharaoh would conduct a
biennial tour of the kingdom, collecting tithes from the
people. Other record show that taxes are granary receipts
that are on limestone flakes and papyrus. Early taxation is
also described in the Bible. In Genesis ( chapter 47, verse
24 – The New International Version ), it states that “But
when the crop comes in, give a fifth of it to Pharaoh. The
other four-fifths you may keep as seed for the fields and as
food for yourselves and your households and your children.”
Joseph was telling the people of Egypt how to divide their
crop, providing a portion to the Pharaoh. A share ( 20% ) of
the crop was for the tax.
 Brief History of Taxation
• In times of war, the people of Athens imposed a tax referred to as
eisphora.
• The Greek were one of the few societies who were able to rescind
the tax once the emergency was over.
• Athenians imposed a monthly poll tax on foreigners, people who did
not have both an Athenian mother and father.
• The earliest taxes in Rome were customs duties on imports and
portoria for exports. Augustus Caesar was considered by many to be
the most brilliant tax strategist of the Roman Empire.
• The tax was five (5) percent of all inheritances except gift to
children and spouses.
• The English and Dutch borrowed the inheritance tax of Augustus
Caesar in developing their own inheritance taxes.
 Brief History of Taxation

• During the time of Julius Caesar, a one (1) percent sales

tax was imposed.
• During the time of Augustus Caesar, the sales tax was four
(4) percent for slaves and one (1) percent for everything
else.
 Taxation in the Philippines

The basic source of Philippine tax law is National

Internal Revenue Law, which codifies all tax
provisions, the latest of which is embodied in
Republic Act No. 8424. It amended previous
national internal revenue codes, which was
approved on December 11, 1997. There are, however,
special laws that separately provide special tax
treatment in certain situations.
 National Taxation

• The 1987 Philippine Constitution sets limitation on

the exercise of the power to tax. The rule of
taxation shall be uniform and equitable. The Congress
shall evolve a progressive system of taxation. All
money collected on any tax levied for a special
purposes shall be treated as a special fund and paid
out for such purposes only. If the purposes for which
a special fund was created has been fulfilled or
abandoned, the balance, if any, shall be transferred
to the general funds of the Government.
 National Taxation
• The Congress may, by law, authorize the president to
fix within specified limits, and subject to such
limitations and restrictions as it may impose, tariff
rates, import and export quotas, tonnage and wharfage
dues, and other duties or imposts within the
framework of the national development program of the
government. The president shall have the power to
veto any particular item or items in an
appropriation, revenue or tariff bill, but the veto
shall not affect the item or items to which he does
not object.
 National Taxation

• The Supreme Court shall have the power to review,

revise, reverse, modify, or affirm on appeal or
certiorari , as the law or the Rules of Court may
provide, final judgements and orders of lower courts
in all cases involving the legality of any tax,
impost, assessment, or toll, or any penalty imposed
in the relation thereto.
 Tax Exemptions

Tax exemptions are limited to those granted by law. The

Constitution expressly grant tax exemption on certain entities /
institutions such as :

1. Charitable institutions, churches, parsonages, or convents

appurtenant thereto, mosques, and nonprofit cemeteries and
all lands, buildings, and improvement actually, directly, and
exclusively used for religious, charitable, or educational
purposes ; and

2. Non-stock non-profit educational institutions used actually,

directly, and exclusively for educational purposes.
 Local Taxations
The Constitutions provides for local government taxations.
Parenthetically, the Local Government Code provides that all local
government units are granted general tax powers, as well as other
revenue-raising powers like the imposition of service fees and
charges, in addition to those specifically granted to each of the
local government units. But no such taxes, fees, and charges shall
be imposed without a public hearing having been held prior to the
enactment of the ordinance. The levy must not be unjust excessive,
oppressive, confiscatory, or contrary to a declared national
economic policy. Further, there are common limitations to the
grant of the power to tax to the local government, such that taxes
like income tax, documentary stamp tax, etc., cannot be imposed by
the local Government. ( Bureau of Internal Revenue 2017 )
 Local Taxations

The Bureau of Internal Revenue

( BIR )is one of the agencies in
the Philippines responsible for
tax revenues.
 Socio-economic Impact of Business in
Government and Taxations

The government has given great importance to preventing all

alleviating poverty by implementing certain fiscal measures. Such
measures include applying progressive income tax rates and
increasing public spending on various social and community
services. For low income households, their income alone cannot
truly reflect their poverty situation as the expenditure pattern
and living standard of low income households are affected
additionally by the amount of public services and welfare support
they are receiving. Thus, analyses of the income of low income
households should also take into account the impact of
government’s taxation policy and social transfers and other
benefits.
 Socio-economic Impact of Business in
Government and Taxations

Government, households at the upper segment of the income

distribution pay more in taxes than they receive in
benefits and the reserve for households at the lower
segment of income distribution. Taxes and benefits
therefore tend to have the effect of narrowing household
income disparity. ( Labor and Welfare Bureau 2017 )
 Thank you for listening 
Do you have any questions?