Title Page And Other Parts

A RESEARCH ON THE HOUSEHOLD PASSIVE LEISURE CONSUMPTION PATTERN OF BREADWINNERS WITHIN METRO MANILA UNDER THE BURDEN OF VALUE ADDED TAX

Presented to

Ms. Ma. Ailil B. Alvarez Alfredo M. Velayo – College of Accountancy University of Santo Tomas

In Partial Fulfillment of the requirements for English 108 (Technical Writing)

Prepared by Carlos, Marco Roberto T. Cruzada, Kristine L. Maminta, Juan Marlo B. Monfort, Kareen M. Palo, Keren B. Palomillo, Kris Marielle H. Valdez, Enica May G. Feb/March __, 2009

Acknowledgement The researchers gratefully acknowledge the following faculty members for imparting their knowledge and for the advises they have given: Ms. Ma. Ailil B. Alvarez, for her advises since we started up to the time we finalizes our research; Ms. Ginavee Dapula, for her comments and suggestions in constructing our research topic and thesis statement that serve as the primary guide all through out this topic. The researchers would also like to thank their parents, professors, and classmates who served as their inspiration through the whole process of the research and their friends for helping them in handing out survey forms to those who they know. The researchers also appreciate all those seventy respondents who were cooperative during our survey, as well as the library personnel of University of Santo Tomas Central Library and to Mr. and Mrs. Palomillo (Bureau of Internal Revenue employees) who guided us in the process of collecting our related literature. This research is given back to the Greatest Researcher, Greatest Adviser and the Greatest Panelist.

We, the researchers, gratefully dedicate this study to our professors, friends, family and to GOD Almighty

MR.T.C K.L.C JM.B.M K.M.M K.B.P KM.H.P EM.G.V

ABSTRACT

This research studies how the Value Added Tax in the Philippines affects the Household Leisure Consumption pattern of breadwinners in Metro Manila. This was made to deliver information and awareness to readers. As basis for data and information, this study involved survey forms as the primary means of data collection. Seventy respondents participated in the said study. Respondents considered by the researchers were breadwinners in Metro Manila area who are monthly income earners of not more than Forty Thousand Pesos. Responses were presented and analyzed. The type of leisure discussed by the researchers was the passive leisure activities. Findings of the study include the following: a) VAT imposed on commodities implies higher prices hence it alters the consumption pattern of households b) With VAT, consumers particularly the breadwinners tend to limit their spending on leisure products/activities whether such is taxable or not prioritizing basic necessities. The generated responses from the participants conform to the expected outcome of the researchers. The following data are collected: As for the profile of the respondents, majority of the respondents are within eighteen to twenty-eight years old (47%), there are more male respondents (64%) than female (36%). Majority are single (57%) followed by those who are married (43%). They are currently employed (66%) earning Ten Thousand to Thirty Thousand Pesos (68%) and usually support one to five family members (52%). A greater part of the respondents are College Graduates. The answers to the questions stated in Chapter 1 were gathered from the responses of the participants. The response for problem 1, which is how many of the respondents favor the implementation of Value-Added Tax on consumption goods, respondents who oppose (67%) VAT outnumbered those who are undecided (17%)

and who responded positively (16%). Their main reason of being against VAT is that it resulted to expensive goods and commodities while those who support VAT believe that the said tax would support the expenses of the government for new projects which would be enjoyed by the citizens. The response for Problem 2, which is how many of the respondents think that the implementation of VAT affects their household leisure consumption, is majority of the respondents believe that the said tax affects household leisure consumption. It lessens or limits their financial capacity of acquiring leisure products while some of them no longer spend on it at all. The response for Problem 3, which is, how many of the respondents are still capable of acquiring commodities other than basic needs, is that from the monthly income received by the respondents, majority are still capable of spending on leisure (54%). A very close amount responded that they are no longer capable of spending on leisure. Such products and activities they usually buy and perform are going to the mall, watching movies, vices, new home appliances, and books for entertainment. The response for Problem 4, which is how many of the participants spend large amount of money in acquiring leisure, is that most of the respondents do not consume large amount of money for leisure consumption (59%). Most of them spent 1,500Php to 2,000 for leisure goods and services. The response for Problem 5, which is what the frequency of their consumption of leisure is, is that majority of the respondents said that they never engaged in attending opera, ballet, or dance performances in the past three months. The least number of respondents said that they frequently engaged in playing adult games, buying books for pleasure, and visiting art galleries and museums. These activities were part of the leisure activities cited by the researchers. The breadwinners believe that leisure consumption is limited because they prioritize consumption of basic necessities and buying leisure only after satisfying their basic needs. They also consider the after-purchase cost of leisure such us additional utility bills and maintenance cost. People are not blinded by the fact that prices of goods and services are not stable and continuously increasing. The added burden of VAT makes it harder for households to spend not only on leisure but also the basic necessities. Of course,

families would have to prioritize their consumption of their needs before spending on their wants. But with the additional money they have to spend because of VAT, households tend to limit their leisure consumption further. Some of them no longer spend on it at all especially when they are supporting more than two family members. From that findings, the researchers concluded that like what Schenk & Oldman (2007, p 34) stated, the VAT will not interfere with patterns of consumption (that is, how consumers decide to divide their purchases among available choices), except for the choice between untaxed consumption and untaxed consumption. Still, Value-Added Tax alters the Leisure Consumption Decision of Households. Although the purpose of implementing Value-Added tax is to generate additional revenues to fund Government projects such as infrastructure, educational, medical, housing, and other programs, the said tax is undeniably an additional financial burden to middle class families whenever they want to enjoy even a little amount of luxury in life.

TABLE OF CONTENTS

Title

i

Acknowledgement

ii

Dedication

iii

Abstract

iv

Table of Contents

vii

List of Figures

ix

List of Table

xii

Chapter 1

Chapter 2

INTRODUCTION A. Background of the Study

1

B. Statement of the Problem

3

C. Significance of the Study

4

D. Scope and Limitation

5

E. Definition of Terms

6

REVIEW OF RELATED LITERATURE Nature and Effects of Value-Added Tax

8

Distributional Implications of the VAT Reform

9

Regressivity versus Progressivity of VAT

10

The Economics of VAT

11

Nature of Leisure

12

Consumerism

13

Chapter 3

RESEARCH METHODOLOGY

14

Chapter 4

PRESENTATION AND ANALYSIS OF DATA

17

Chapter 5

SUMMARY, CONCLUSION, AND RECOMMENDATION A. Summary and Conclusion

39

B. Recommendation

41

APPENDIX A

xiii

APPENDIX B

xvii

APPENDIX C

xviii

BIBLIOGRAPHY

xix

LIST OF FIGURES Pages Figure 1

Distribution of Respondents according to Age

17

1.1

Distribution of Respondents according to Gender

18

1.2

Distribution of Respondents according to Civil Status

18

1.3

Distribution of Respondents according to Number Family Members

19

1.4

Distribution of Respondents according to Occupation

20

1.5

Distribution of Respondents according to Educational Attainment

21

1.6

Distribution of Respondents according to Monthly Income Bracket 21

2

Distribution of Respondents according to their View concerning the implementation of Value Added Tax

22

2.1

Distribution of the possible reasons why respondents favor VAT

23

2.2

Distribution of the possible reasons why they oppose VAT

24

3

Distribution of Respondents according to their View concerning the Equitability of Value Added Tax among Filipino Families

25

3.1

Distribution of the possible reasons why they think VAT is just

26

3.2

Distribution of the possible reasons why they think VAT is

not just

27

3.2.1 Distribution of Respondents according to their View whether the Implementation of VAT can resolve the Economic Crisis of the Philippines

Appendix B

3.2.2 Distribution of Respondents according to their View on what grounds they think the Government base VAT 4

Appendix C

Distribution of Respondents according to their View concerning the Effect of VAT their Household Leisure Consumption

5

28

Distribution of Respondents according to their View concerning the Effects of Household Leisure Consumption under the Tax Burden of VAT

6

29

Distribution of Respondents according to the Availability of Allowance in Spending on Leisure

30

7

Types of Leisure Products they acquire

31

8

Distribution of Respondents according to the Degree of their Leisure Consumption

9

32

Distribution of Respondents whether they spend large amount of money in Acquiring Products for Household Leisure Consumption

33

9.1

Amount of money spent for leisure

34

10

Distribution of Respondents according to their View on why

11

Household Leisure is Limited

37

Post-purchase of Leisure

38

LIST OF TABLE Page Table 1

Percentage Distribution of Respondents on the Frequency with which they Engage in the following Activities in the past three months

35

CHAPTER I INTRODUCTION

CHAPTER II REVIEW OF RELATED LITERATURE

CHAPTER III METHODOLOGY

CHAPTER IV PRESENTATION AND ANALYSIS OF DATA

CHAPTER V SUMMARY, CONCLUSION, AND RECOMMENDATION

APPENDICES

APPENDIX A SAMPLE SURVEY FORM Pontifical and Royal UNIVERSITY OF SANTO TOMAS España, Manila Alfredo M. Velayo - College of Accountancy “A RESEARCH ON THE HOUSEHOLD LEISURE CONSUMPTION PATTERN OF BREADWINNERS WITHIN METRO MANILA UNDER THE BURDEN OF VALUEADDED TAX” This survey aims to identify the effects of VAT to the Household Leisure Consumption of breadwinners in Manila. The results shall help resolve the issues brought by this action. Respondent’s Profile: Name (Optional): Age: [ ] (18-28) [ ] (29-39) [ ] (40 above) Gender: [ ] Male [ ] Female Civil Status: [ ] Single [ ] Married [ ] Widow/er No. of family members: Educational Attainment: [ ] Professional [ ] College Graduate [ ] College Undergraduate

Occupation: [ ] In Business [ ] Employed [ ] Working Student [ ] Professional Student [ ] Others Pls. Specify Income Bracket: [ ] P 1,000 – P 10,000 [ ] P 10,000 – P 20,000 [ ] P 20,000 – P 30, 000 [ ] P 30,000 – P 40,000 [ ] Others ____________

[ ] High school Graduate [ ] High school Undergraduate [ ] Others, Pls. Specify Direction: Kindly put a check on the space provided for your answer. 1. How often do you usually buy things for leisure? [ ] Always [ ] Sometimes [ ] Never [ ] Others, Pls. Specify 2. Does your monthly income gives you allowance for commodities other than basic needs? [ ] Yes [ ] No

If Yes, what kind of Household – Leisure products do you usually acquire? [ ] Shopping [ ] Buying Appliances [ ]DVD’s [ ] Gadgets [ ] Vices (Cigarettes/ Alcohol) [] Foods [ ] Books [ ] Others 3. Do you spend large amount of money in acquiring products for Household – Leisure consumption? [ ] Yes [ ] No If Yes, on which price brackets does this product falls? [ ] P 500 – P 1000 [ ] P 1000 – P 1500 [ ] P 1500 – P 2000 [ ] P 2000 above 4. Are you in favor of the tax laws imposing 12% VAT on commodities? [ ] Yes [ ] No [ ] Undecided If Yes, why? [ ] Increase in government funds for new projects [ ] Support the citizens [ ] Payment of debt [ ] Others: ______________________________ If No, why? [ ] Expensive Goods [ ] Government Corruption [ ] Additional Burden [ ] Very High Rate [ ] Others: ______________________________ 5. Among Filipino families, do you think VAT is just? [ ] Yes [ ] No [ ] Undecided If Yes, why? [ ] All are paying If No, why? [ ] Additional burden [ ] Too high expenses

[ ] Used properly

[ ] Improving economy

[ ] Affects basic needs [ ] Corruption

[ ] Affects low income earners more 6. Do you think the implementation of VAT will help resolve the economic crisis of the Philippines? [ ] Yes [ ] No 7. On what grounds do you think the government base VAT? [ ] To defray necessary expenses of the government. [ ] To promote general welfare and protection of the citizens. [ ] Personal gains/benefits. [ ] Others, Pls. Specify 8. Does the implementation of VAT affects your consumption in Household – Leisure commodities? [ ] Yes [ ] No If Yes, in what way? 9. What effects on the consumption of Household – Leisure do you encounter under the tax burden of VAT? (you may have more than one answer) [ ] Less buying of commodities for leisure. [ ] Buying more commodities for leisure. [ ] Less buying of basic necessities. [ ] Buying more of basic necessities. [ ] Buying such products only after satisfying basic needs. [ ] Not buying at all. [ ] Others, Pls. Specify 10. Please check the frequency in which you engaged in the following activities in the

past 3 months. Check only one answer for each possible leisure activity.

Leisure Activity Playing adult games (ex. Casino) Buying books for pleasure Going on a family outing Going out for the evening for drinks and entertainment (ex Mall, Bars) Going to the movies Visiting art galleries and museums Collecting or Making something Attending opera, valet, or dance performances Buying new appliances Watching Television/Using the computer

Frequently Occasionally

Seldom

Never

O O O O

O O O O

O O O O

O O O O

Not Sure O O O O

O O O O

O O O O

O O O O

O O O O

O O O O

O O

O O

O O

O O

O O

(If your answers range from seldom to not sure, proceed to No. 11) 11. What do you think are the reasons why your household leisure consumption is limited? [ ] Basic necessities first (consumption goods, education, etc.) [ ] Not included in the budget/No Financial Capacity [ ] You don’t naturally spend on it [ ] I don’t know Post-purchase: [ ] Additional utility bills for consumption of such leisure [ ] High maintenance cost [ ] I might not help but spend on it

APPENDIX B

Figure 3.2.1

The above figure shows that majority of the respondents believe that VAT will not resolve the economic crisis of the Philippines.

APPENDIX C Figure 3.2.2

Distribution of Respondents according to their View on what grounds they think Government base VAT 40 30

y c n u q re F

20 10 0 Choice 1

Choice 2

Choice 3

Others

Choices

The above chart shows that choice 3, which is personal gains/benefits, got the most number of respondents (49%). Next in order are choice 1 (31%), which is to defray the necessary expenses of the government, and choice 2 (18%), which is to promote general welfare and protection of the citizens, respectively. 2% cited other reasons.

BIBLIOGRAPHY Ampongan, O. (2008). Income Taxation: with tax principles & remedies (7th ed.) (2004). Breadwinner. The American Heritage® Dictionary of the English Language, Fourth Edition. Houghton Mifflin Company. (2004). Capitalism. The American Heritage® Dictionary of the English Language, Fourth Edition. Houghton Mifflin Company. De Souza, R., (n. d.). John Paul II and the Problem of Consumerism. Retrieved December 18, 2008, from Action Institute for the study of religion and liberty website: http://www.acton.org/publications/randl/rl_article_321.php Galbraith, J. (1984). The Affluent Society 238 (4th ed.). Houghton Mifflin Co. Hammond & Raboy (1995). Enterprise Economics IV: The Case For and Against Value-Added Taxation [Electronic Version]. Retrieved December 10, 2008, from DLC: Democratic Leadership Council Home website: http://www.ndol.org/ndol_ci.cfm?kaid=125&subid=163&contentid=2027 Jenkins, G., Jenkins, H., & Kuo, C. (2006). Is the Value-Added Tax Naturally Progressive? [Electronic Version]. Retrieved December 10, 2008, from SSRN: Social Science Research Network website: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=897677 Johnson, P. (n.d.). Retrieved December 18, 2008, from A Glossary of Political Economy Terms website: http://www.auburn.edu/~johnspm/gloss/private_sector Martin, G. (n.d.). Retrieved December 18, 2008, from The Phrase Finder website: http://www.phrases.org.uk/meanings/market-forces.html

Mitchell, D. (2005). Beware the Value-Added Tax [Electronic Version]. Retrieved December 10, 2008, from The Heritage Foundation: Leadership for America, 1852 website: http://www.heritage.org/research/taxes/bg1852.cfm Mullet, S. (1988). Leisure and consumption: incompatible concepts. Routledge Press, part of the Taylor & Francis Group. Murphy, W. (2007). Efficiency and Effectiveness in the Public Sector. Retrieved December 18, 2008, from Conferenz website: http://www.conferenz.co.nz/efficiencyand-effectiveness-in-the-public-sector-2.html Newhouse, D. & Zakharova, D. (2007). Distributional Implications of the VAT Reform in the Philippines [Electronic Version] Retrieved December 10, 2008, from SSRN: Social Science Research Network website: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1007902 Passive Leisure. Retrieved December 20, 2008, from Absolute Astronomy website: http://www.absoluteastronomy.com/topics/Leisure Roberts, K. (2006). Leisure in Contemporary Society (Rev. ed.). Wallingford, CABI Publishing. Schenk, A., & Oldman, A. (2007). Value-Added Tax: a comparative approach. Cambridge, New York: Cambridge University Press. Value-Added Tax. Retrieved December 12, 2008, from Bureau of Internal Revenue website: http://www.bir.gov.ph/taxinfo/tax_vat.htm