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Publication Detail
TRJ 2011-9: Where Does Your Tax Money Go?, November - December 2011

The paper aims to provide information on how the government allocates and spends tax revenues and analyzes the types of services and economic benefits which taxpayers get out of their tax payments. All year-round, taxpayers remit huge amounts of money into the government coffers as payments for various taxes. Out of these tax proceeds, the government is able to perform its duty of providing public goods and services to the people. Thus, being the major contributors to the resources being used to finance various government expenditures, taxpayers are entitled to know where their tax money goes. Total taxes paid to the government continuously increased from PhP518 billion in 2001 to PhP1.21 trillion in 2010 except for a slight decline in 2009. About 94% of the total taxes, on the average, was paid to the NG and 6% to local governments (LG). Meanwhile, government expenditures more than doubled from PhP844 billion in 2001 to PhP1.73 trillion in 2010. Of the amounts, approximately 85% was spent by the NG and 15% by the LGUs. The NG expenditures went to the following sectors and mandatory obligations, namely: 1) social services; 2) economic services; 3) general public services; 4) defense; 5) net lending; 6) debt services; and 7) allotment to LGUs. On the other hand, the LG expenditures are categorized into: 1) social services; 2) economic services; 3) general public services; 4) debt service; and 5) other purposes. One major mandatory obligation, the debt service, topped the NG expenditure from 2001-2007 sacrificing provisions for social and economic services during the period; its share, however, has been slipping to less than 30% in 2006 to a range of 19% - 23% in 2007-2010. The other mandatory expense is the internal revenue allotment (IRA) to LGUs which shared 16.0%-18.0% of the total NG expenditure over the 10-year period. Provision of social services got a significant share of the total annual NG expenditures ranging from 21% to over 24% from 2001-2010. Among the social services, government spending on education, culture and manpower development received the highest allocation amounting to PhP127 billion in 2001 to PhP242 billion in 2010. The bulk of the budget (85%) of this subsector went to the Department of Education (DepEd). Expenditures on public education over the years helped functional literacy rate to improve from 84.1% in 2003 to 86.4% in 2008 based on the latest available figures. Meanwhile, government spending on health, nutrition and population control increased from PhP82.6 billion in 2001 to PhP57.9 billion in 2010. The Department of Health (DOH) received the highest allocation from the NG budget on health. Through the government’s efforts, infant and maternal mortality rate declined in recent years. Expenditures on social security, social welfare and employment services continuously increased from PhP39.8 billion in 2001 to PhP84.5 billion in 2009 although it significantly dropped to PhP56.1 billion in 2010. Initiatives of the government to provide employment opportunities resulted to a reduction in the unemployment rate from 8% in 2006 to 6.9% in 2010. Expenditures on housing and community development averaged PhP6.7 billion annually from 2001 to 2005; and increased to PhP12.5 billion annually from 2006-2010. Programs on this sub-sector include construction of low-cost housing units, slum upgrading, provision of housing financial assistance, among others. The share of the provision of economic services ranged from 13% to 22% of the total budget during the period under review. Government spending on communication, roads and transportation received the highest allocation among the economic services which ranged from PhP53.8 billion to PhP167.2 billion annually from 2001-2010. Majority of the NG budget for this subsector was shared by the Department of Public Works and Highways (DPWH) and the Department of Transportation and Communication (DOTC). NG expenditures on agriculture, agrarian reform and natural resources ranged from PhP35 billion to PhP48 billion annually in 2001-2006; then ballooned to PhP69 billion to PhP100 billion in 2007-2010. Spending for programs and projects on this sub-sector were shared by the Department of Agriculture (DA), Department of Environment and Natural Resources (DENR), National Food Authority (NFA), among others. These efforts were reflected in the increased agricultural fish, livestock and poultry production resulting in food security and higher income for farmers and fishermen. The expenditure share allocated to the following sub-sectors likewise increased during the period under review, though with a relatively lower share than those allotted for DPWH, DOTC, DA and DENR: 1) water resources development and flood control for the DPWH’s drainage, sewerage and flood control projects; 2) power and energy for the Department of Energy’s (DOE) programs and projects on energy exploration, development, utilization, distribution and conservation; 3) trade and industry services for the programs of the Department of Trade and Industry (DTI) and its attached agencies; and to selected GOCCs in charge of promoting economic zones as an investment destination; and 4) tourism services for development programs that helped increase the number of visitor arrivals in the country. The NG expenditure on defense remained to have a modest share averaging 5% of the total expenditure in 2001-2007 although a reduced share became evident in 2008-2009; but this surged to over 6% in 2010. The resources were spent on the salaries and allowances of uniformed personnel of the Armed Forces of the Philippines (AFP), internal security operations, the AFP Modernization Program, among others. Lastly, general public services, which include expenses for public order, safety and justice and administration and support services, ate up 12%-24% of the total NG expenditures from 2001-2010. This covered expenditures on police force, fire protection, jail management and trial courts. The quality of the services that go back to the citizenry depends largely on how much money is available for allocation to the different expenditure items in the budget; and on how the prevailing system of priorities and expenditures is being implemented by the government. These priorities and expenditures should mirror the general requirements of growth or development. It is for this reason that efforts should be made to expand the tax revenue-raising initiative of the government. With more tax collection, the government would be able to enlarge the scope of its priorities or expenditures. However, tax collection will increase only if the taxpayers are made aware of the implications of their tax payments, which hinges on the visibility of government priorities and expenditures, not only in terms of the amounts spent on them but more so of the benefits arising therefrom. In all, tax collection can be promoted or enhanced through a well-crafted system of priorities or expenditures that involves taxpayers in the formulation of said system and in seeing to it that the said system is made visible in terms of expense or coverage, content or substance, and benefits.

National Tax Research Center
Authors Keywords
NTRC; tax revenue; tax payments;
Download PDF Number of Downloads
Published in 2011 and available in the NTRC Library or Downloaded 118 times since January 02, 2014
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