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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.

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

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Page 1: 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

Page 2: Title page and other parts

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.

Page 3: Title page and other parts

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

Page 4: Title page and other parts

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,

Page 5: Title page and other parts

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

Page 6: Title page and other parts

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.

Page 7: Title page and other parts

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 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

Chapter 2 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

Page 8: Title page and other parts

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

Page 9: Title page and other parts

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

Page 10: Title page and other parts

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 Appendix C

4 Distribution of Respondents according to their View concerning

the Effect of VAT their Household Leisure Consumption 28

5 Distribution of Respondents according to their View concerning

the Effects of Household Leisure Consumption under the Tax

Burden of VAT 29

6 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 32

9 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

Page 11: Title page and other parts

10 Distribution of Respondents according to their View on why

Household Leisure is Limited 37

11 Post-purchase of Leisure 38

Page 12: Title page and other parts

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

Page 13: Title page and other parts

CHAPTER I

INTRODUCTION

Page 14: Title page and other parts

CHAPTER II

REVIEW OF

RELATED LITERATURE

Page 15: Title page and other parts

CHAPTER III

METHODOLOGY

Page 16: Title page and other parts

CHAPTER IV

PRESENTATION AND

ANALYSIS OF DATA

Page 17: Title page and other parts

CHAPTER V

SUMMARY,

CONCLUSION, AND

RECOMMENDATION

Page 18: Title page and other parts

APPENDICES

Page 19: Title page and other parts

APPENDIX A

SAMPLE SURVEY FORM

Pontifical and RoyalUNIVERSITY OF SANTO TOMAS

España, ManilaAlfredo M. Velayo - College of Accountancy

“A RESEARCH ON THE HOUSEHOLD LEISURE CONSUMPTION PATTERN OF BREADWINNERS WITHIN METRO MANILA UNDER THE BURDEN OF VALUE-

ADDED 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): Occupation: [ ] In BusinessAge: [ ] (18-28) [ ] Employed [ ] (29-39) [ ] Working Student [ ] (40 above) [ ] Professional StudentGender: [ ] Male [ ] Female [ ] OthersCivil Status: [ ] Single Pls. Specify [ ] Married

[ ] Widow/er Income Bracket:No. of family members: [ ] P 1,000 – P 10,000Educational Attainment: [ ] P 10,000 – P 20,000[ ] Professional [ ] P 20,000 – P 30, 000[ ] College Graduate [ ] P 30,000 – P 40,000[ ] College Undergraduate [ ] 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 thanbasic needs? [ ] Yes [ ] No

Page 20: Title page and other parts

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 [ ] Used properly [ ] Improving economyIf No, why?[ ] Additional burden [ ] Affects basic needs[ ] Too high expenses [ ] Corruption[ ] Affects low income earners more

Page 21: Title page and other parts

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 Frequently Occasionally Seldom Never Not Sure

Playing adult games (ex. Casino) O O O O OBuying books for pleasure O O O O OGoing on a family outing O O O O OGoing out for the evening for drinks and entertainment (ex Mall, Bars)

O O O O O

Going to the movies O O O O OVisiting art galleries and museums O O O O OCollecting or Making something O O O O OAttending opera, valet, or dance performances

O O O O O

Buying new appliances O O O O OWatching Television/Using the computer

O O O O O

Page 22: Title page and other parts

(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

Page 23: Title page and other parts

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.

Page 24: Title page and other parts

APPENDIX C

Figure 3.2.2

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.

Page 25: Title page and other parts

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

Page 26: Title page and other parts

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/efficiency-

and-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