FLORINDO G.

GUZMAN, JR
0918 550 7665
DLPA 231
Public Fiscal Administration

Self Test I
Answer

1. Considering your own municipality or province, make an assessment regarding the

contribution of decentralized local fiscal administration. Has this strategy improved the
delivery of basic services (e.g. Health and Nutrition) to the concerned constituents? If so, in
what ways?
1. The contribution of decentralized local fiscal administration has greatly affected the service
for health and nutrition in the Municipality of Tumauini, Province of Isabela.
2. Yes, The additional budget allocated for health and nutrition for the past few year has
played a very vital part in the distribution of these basic but significant services to the
constituents of Tumauini, Isabela.
3. Because of the increase in the allocation, the Local Health Unit has improved its was able to
provide a more efficient community health program, carried out by full-time, specially
qualified staff. New building was constructed and facilities are modernized more complete
comparing before.
4. The Local Nutrition council which is composed of local representatives from the NGAs and
NGOs has also rendered a vital role in the effective and efficient implementation of Nutrition
programs in the Municipality specially the inaccessible barangays.
5. Because of the decentralization, the Local Nutrition Council was able to capacitate the
members of the Nutrition management thru building series of seminars and training on
basic course on Nutrition Program Management. Because of this, the management was able
to deliver a nutrition and related services such as counselling on breastfeeding,
organization of breastfeeding support groups, conduct of nutrition education activities,
vitamin A and iron supplementation to preschool children and pregnant women,
distribution of seeds, seedlings, fingerlings and small animals to families with underweight
children and supplementary feeding. Malnutrition problem has sufficiently reduced. These
programs was achieved because of the additional budget allotted to the Local Nutrition
Council.

4. Try to interview a taxpayer. What is his/her opinion regarding the payment of taxes? If
you were the Local Chief Executive, what are the implication of his/her Opinion in your
administration?
Answer:
Ms. Maureen Brotamante, a taxpayer from City of Bacoor, Province of Cavite said, though she
is earning just enough for the family, she is still happy and contented since she knows that the
taxes that was deducted to her salary is used betterment of the City. She also added that she
was once a barangay secretary before and that she is aware of the prjojects/programs of the
city to enhance the living of its constituents. She said that she is happy because in a small way,
she was able to contribute and help develop the city/country as a tax payer.

If I were the Local Chief Executive, I would be very glad and thankful that a taxpayer have a
positive understanding with regards to tax. With this information coming from a taxpayer, the
administration will be more delighted and happy and strive hard to provide a better service and
deliver a series of program for the people.

5. Give one sensible and workable program/project or any activity possible source of
revenue in your own barangay. How could this become operational and sustainable?
Present details.

One program/project that a barangay should conduct is an Enhanced livelihood/learning

programs to unemployed residents and out of school youths of the barangay. The program can
be dressmaking, welding or iron works, automotive, food processing, etc. Its goal is to
strengthen the capabilities of its labor force by education. The implementation of the program
is expected to enhance the economic well-being of the identified beneficiaries, hence contribute
to the attainment of the barangays goal of inclusive growth and poverty reduction.

The barangay can also make use of the vacant lot (barangay property) where it can be made to a
recreational area such as Covered basketball Court, Children’s Playground Equipment, Playing
field, multi purpose hall, or a pavillion where business can be established and admission fee or
creation of structure/building where offices and other businesses can rent/lease.

1) Decentralized local fiscal distribution does not only increase the autonomy of our
province but also secures the allocation of funds for necessary projects and programs that
our local government unit consistently eyes for. Due to the liberty given to our local
government unit, funds are not controlled by the national government hence, projects are
 not that hard to push through as long as it is in line with the national goals of the
government. This certainly improves the basic services in provinces just like ours
because local government units have the freedom what to focus on. In our case, majority of the
funds have been allotted for health, nutrition, and sanitation interventions that
includes the distribution of medicines and necessary kits across our locale, hence,
making it an efficient move towards the development of our local government unit.

2)The unfortunate reality why the dream lives of some citizens are still not achieved even up
to this day is simply because of the taxing and revenue collection of local government units that
is limited. Local Government Units are restricted to impose taxes, fees, and charges, only
when and what the law may allow. Despite the huge numbers of import and export of
products to and from local government units, taxes, fees, and other c ha n g e r s a s
w e l l a s i m p os i t i o n s u p o n g o o d s c a r r i e d i nt o o r o u t o f t h e t e r r i t o r i a l
jurisdictions of local government units, in the guise of charges for wharf age. Moreover,
there may be flourishment of establishments within the jurisdiction of the
l o c a l government unit yet, majority of it are agencies and instrumentalities of the
National Government which is exempted from such. In order to address this, there
must be proper and sufficient legal provisions that will further substantiate the
legalities of imposing taxes on such as well as laws that will allow justifiable increase.

3)Residing in a relatively small barangay compared to that of the big ones in cities and
other municipalities, apparent stability could be noted from our current situation. It is in the
sense that local officials are still able to push through for projects and programs for
constituents, while at the same time looking into the development of establishments
within our vicinity. The main source of our barangay includes that charges imposed in
legal documents released by LGUs, including clearances, business
p e r m i t s , certifications, etc. as well as the annual renewal of these establishments that is
deemed necessary according to existing laws. Although it is not that much, this
stabilizes the influx of funds in our barangay. With such powers granted to local
government units because of decentralized powers, it could be further noted that the
decentralization of finances granted to barangays give them the liberty to independently
choose where their funds will be allocated without the need of depending on the
national government.

Self Test 2
1. Dustinguish the primary objective of the following:
a) Taxation
b) Collection of charges
c) Imposition of fees

A. 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 refers to collection levies imposed by national government agencies

(NGAs) and government-owned or controlled corporations (GOCCs) on the direct recipients
of public goods and services they render in the exercise of their mandated regulatory and
service delivery functions. They are also known as user charges. Common examples of fees
collected by NGAs are permits, licenses, registration/accreditation fees, clearance and
certification fees, as well as fees collected for specific services such as medical and
laboratory examinations.

C. Imposition of fees
It is the act of placing a fee, tax or charges on the recipient of public goods and services they
render in the exercise of their mandated regulatory and service delivery functions.

The primary purpose of imposing fees is cost recovery. Hence, the rate of fees and charges
must be reasonable and should at least be able to recoup and wages the operating expenses
incurred in rendering the service, Also, a balance should be struck between recovering the
costs of services rendered and the socioeconomic impact of the fees and charges.

In determining the rates, the following should be considered:

1. The direct cost of rendering the service based on current appropriation, which shall
include the cost of supplies and materials, salries, and wages of personnel directly
involved in the service and the proportionate share in the overhead expenses, including
the depreciation cost of equipments used.
2. Inflation from the time rates were last revised.
3. Rates shall, as much as possible be =uniform for similar or comparable services and
functions offered by other government entries and shall approximate the cost of
comparable services offered by private entities, based on local and /or international
standards, as may be appropriate.

While the primary purpose of imposing fees is cost recovery, it would also ensure
improvement on the quality of service delivery b treating the fees to be collected as the
share to the cost of providing such service from the people benefitting from the service
rendered.

2. In your Municipality, What are the top three of revenues? Can you cite as
many constraints as possible in the revenue collection performance of your
LGU? What Collection enhancement measures could you suggest to improve
the revenue generation of your own LGU.

Answer:

2.A) Income Tax, Selling public goods and services, fines, contributions,
* Local government revenue comes from property, sales, and other taxes;
charges and fees;
 *Individual income tax, Corporate income tax, Social Insurance (Payroll)
Taxes
*Income Tax Collection, fees and lecense,
*Individual Income Taxes (50%),Payroll Taxes (36%), corporate income
taxes (7%)
2.B) Constraints to enhancement of revenue mobilization and spending
quality include the existence of a large informal sector; inadequate information on
property ownership; perceived corruption; inefficient use of public resources;
political interference; volatile election cycles; abuse of tax incentives; uneven
transfer pricing; illicit financial flows; and untaxed online businesses, coupled
with poor administrative capacity and tax policy design.

2.C) Policy implications on revenue performance are (1) the National Treasury
and Local Government Unit should focus on property taxes and capital gains taxes
to expand the tax base; (2) development partners are needed to direct technical
assistance to the informal sector, to aid with transfer pricing, to monitor illicit
financial flows, and to properly tax online businesses; (3) greater use of
technology is needed to increase efficiency; (4) intervention by the Geospatial
Information System is needed to link data on land and property ownership with
tax information in the existing database; (5) a pay-for-results model needs to be
deployed; (6) need to reduce tax expenditures; and policy reforms to be initiated
in the agricultural sector. The policy implications on expenditure are (1) the need
for efficient utilization of tax revenues; (2) the need for implementation of digital
technologies; (3) the need to revisit an integrated financial management
information system (IFMIS) configuration; (4) the need to adhere to long-term
planning; and (5) adoption of the GFS 2014 reporting standard. Overall, an
independent entity needs to be established that will set budget ceilings, monitor
budget implementation, and carry out audits.

3. How can the fifth or sixth income class municipalities increase the tax
revenue collections considering the limited tax base in these areas?

Answer:

The fifth or sixth income class municipalities can increase their tax revenue by
inviting investors to invest in the municipality. For the LGU to entice the business
industry, they need to build roads connecting near municipalities for easy access
and delivery of merchandise, improve the line of communications (telephone lines
and internet connection) for clear transmission of information, implementation of
digital technology is needed to increase efficiency.

One desirable preference is for the LGU to focus on the improvement of tax policy.
The LGU needs to assess the design and structure of excise taxes. They need to
 evaluate the current tax revenue forecasting models and upgrade tax revenue
models integrated with national income accounts and the input-output tables.

Strengthened criminal prosecution of tax evasion is one of the key aspect to increase
municipal revenue. Segmenting taxpayers according to attributes such as size,
sector, and past behavior can help tax authorities quickly perform a risk analysis
identifying discrepancies between an individual taxpayer’s behavior or payments.
To automate parts of the process, the administration develop a specific audit tools,
which simplifies procedures and improves the overall quality and consistency of
audits. They can introduce electronic channels such as Internet portals, mobile-
payment options, and ATMs. By using these channels for simple taxpayer
transactions (such as declarations and payments), a tax administration can increase
the level of voluntary payments while conveying a strong sense of its public
purpose. Such approaches reduce the length of queues at tax offices while also
removing a barrier to compliance.

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

“Substitutive” effect or the complete reliance of some LGus to their IRA thereb
dampening their enthusiasm to raise their own revenues, what should be done to
overcome this undesirable effect.

DL PA 231PUBLIC
FISCAL ADMINISTRATION
Part 1
1.Based on my own assessment regarding to the contribution of decentralized local f iscal
administration in our city. This strategy has improved when it comes to the deliveryof basic services
to the concerned constituents like health social welfare agriculture andenvironment by granting
the local government a wide range of fiscal powers and fiscala d m i n i s t r a t i o n t o e x e r c i s e
i n t h e c o u r s e o f p e r f o r m i n g t h e i r d e v o l v e d t a s k a n d responsibilities including the
power to create its own sources of revenues and to levytaxes.Through this system of
decentralization, it helps to provide adequate fundneeded for the service without much
delay and constraints because such taxes, feesand charges accrue exclusively within the
local government itself and entitled to anequitable share automatically released to them.
2. In my own opinion, most of the constraints that the LGU’s encountering until now are on taxes.
Most of the business owners intentionally not to declared their real business tolessen their taxes.
They used small type of business to hide their big and profitable one.They also failed to provide
official receipt to declare small gross annually. In community tax, most of the tax payer did not
declare their real profession to availtheir smaller fee.
See more
In extraction of sand, gravel and other quarry resources, a lot of extractors did not secure
permit to quarry to exempt on tax to have much profit. Those were the common constraints that I
observed in Local Government Units. In my own view, to minimize those constraints, the LGU’s
must be strict enough toprevent it from occurring repeatedly. If needed and just, give the ample
punishment forthem to realize their wrong practices and should not be tolerated.
3. The decentralization of national Government is needed because it is an
importantprocess in the democratic development of our country. As a result of this process
wehave separation of functions between central and local government, this increase
theefficiency and the transparency in government. It creates an efficient and
reliableadministration intensifies and improves local government better insures the rights of
thelocal population to have a voice in government and better protect minorities.