Applied Economics

LESSON 9
CONTEMPORARY
ISSUES FACING THE
FILIPINO
ENTREPRENEUR
INVESTMENT
AND INTEREST
RATES
Investment is the purchase of
goods that are not consumed today
but are used in the future to create
wealth or appreciate and sold at
higher price.
Gross Investment includes both
types of investment spending, but
net investment only measure new
assets rather than replacement
assets.
Interest rate is the amount of
interest due per period, as a
proportion of the amount lent,
The main
01
determinants of
investment are :
1.The expected
Return on the
Investment
This means that businesses,
entrepreneurs, and capital
owners will require to return on
their investment in order to
cover this risk, and earn a
reward.
2. Business
Confidence
Changes in business
confidence can have a
considerable influence on
investment decisions.
3. Changes in
National Income
Changes in national income
create accelerator effect.
The accelerator Effect

Small changes in household
income and spending can
trigger much larger changes in
investment.
4. Interest Rates
Investment is inversely related
to interest rates, which are
cost of barrowing and the
reward to lending.
5. General
Expectations
Because investment is high
risk activity, general
expectation about the future
will influence a firm’s
investment appraisal and
eventual decision-making.
6. Corporation tax
Firms pay corporation tax on
their profits, so the reduction
in tax increases the profits
they retain after tax is paid,
and this acts as an incentive to
invest.
7. The level of
savings
Household and corporate
savings provides a flow of
funds into the financial sector,
which means that funds are
available for investment.
02
Three
challenges
for the
Filipino
Entrepreneur
1. Government licensing and
permits
Entrepreneurs
complain on how
difficult to apply or
renew with certain
local government
units.
2. Prohibitive rental rates and
other clauses in malls
There is no doubt
that doing a
business in
shopping mall has
advantages.
3. there are many who have no
jobs
Unemployment is
high in the country.
Current problems of Filipino
Entrepreneurs
1. Inadequate 3. Marketing
access to advice
technology, 4. Logistical
problems in
setting up and
2. Financing maintaining
capital their
competitivenes
s in their
community.
04
Taxes in the
Philippines
The Philippines currently has
the second highest personal
and highest corporate income
tax system among its ASEAN-6
peers.
Types of
Business
Taxes
1. Value Added Tax (VAT)
A 12% VAT must be

collected for almost all
kinds of product sales,
services, and leases.
2.Salary and Wage Taxes
business owner responsible

to the welfare of your
employees, you must
withhold and remit to the
proper government
agencies employee income
withholding taxes, SSS
premium, Pag-Ibig, and
Medicare.
3. Amusement Taxes
Cockpits, movie houses,

cabarets, night and day
clubs, boxing tournament,
basketball games, horse
racing and other
amusement businesses are
subject to amusement taxes
by the local national
government.
4. Excise Taxes
If your business that
involves the manufacturer
of alcohol, tobacco, and
petroleum products;
importing of automobile or
jewelry, and mining, you
need to pay special excise
taxes.
5. Import Taxes
When your business

involves importation of
goods as part of your raw
material, you have to pay
custom duties.
6. Individual Income Taxes
Your income from sole

proprietorship business is
considered personal income
and must included in your
individual tax return (ITR).
7. Corporate Income Taxes
If your business is
structured as a corporation,
the corporation pays its own
income taxes as if it is a
separate tax-paying entity.
8. Real Estate Taxes
If your business own real

estate or land, you must
pay for real estate taxes on
the quarterly basis.
9. Estate or Inheritance Taxes
When you passed away,

your heirs pay inheritance
taxes on the money and
property that you leave to
them.
05
Effects of High
Taxes on Business
Effects of High Taxes on Business
1. Inadequate incomes
The total outcome of all the effects is
large tax burden.
2. Low wages
Multiple government levy so many
taxes on business that “taxes” is the
highest budget items on the ledger
sheets of most businesses.
3. High Prices
Businesses have to raise prices to
get money to pay these taxes.
4. Substandard Products
These taxes take away money
otherwise used to improve quality.
5. Product Unavailability
and Continuation
Because of high taxes cost
businesses more, they can’t provide
as many products as they used to be
able to.
6. Poverty and High Crime
Because people can’t afford to live
on their incomes, the poverty rates
goes up.
THANK
S!
CREDITS:
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LESSON 9

The accelerator Effect

A 12% VAT must be

business owner responsible

Cockpits, movie houses,

When your business

Your income from sole

If your business own real

When you passed away,

Please keep this slide for the attribution

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