CHAPTER 11
government
TWO (2) POLICIES INACHIEVING
BASICMACROECONOMIC GOALS
1. FISCAL POLICY
Use of government spending
and taxes to influence the
nations spending, employment
and price level
Manipulation of the national
government; budget to attain
price stability, relatively full
employment, and a satisfactory
rate of economic growth
In order to attain goals, it must
manipulate public spending and
taxes
Instrument of demand
management which seeks to
influence the level of economic
2. MONETARY POLICY
activity in an economy through
the control of taxation and
government spending
o DISCRETIONARY FISCAL
POLICY
Deliberate use of change
in government spending
or taxes to alter
aggregate demand and
stabilize the economy
TWO (2) BASIC TYPES
EXPANSIONARY FISCAL
POLICY
Increase in
government
spending,
decreases taxes or
increase
government
spending and taxes
equally
CONTRACTIONARY
FISCAL POLICY
decrease in
spending, increase
taxes, or decrease
government
spending and taxes
equally
FISCAL AUTHORITY
DEPARTMENTOFFINANCE
JOHN MAYNARD KEYNES first
advocated the use of budget
deficits as the means of
counteracting the mass
unemployment brought about
the Great Depression in the
United States
Fiscal policy was used as the
main means of fine-tuning the
economy to achieve full
employment
Macroeconomic policy which
involves the regulation of the
money supply, credit ad
interest rates in order to control
the level of spending in the
economy
BSP
o To influence the general
price level and the level of
liquidity in the economy
o Its primary objective is to
promote low and stable
inflation conducive to a
balanced and sustainable
economic growth
TWO (2) BASIC TYPES
EXPANSIONARY MONETARY
POLICY
Increase the level of
liquidity/money supply in
the economy and which
could also result in a
 relatively higher inflation
path for the economy
Usually undertaken in
order to counteract a
slowdown in the economy
CONTRACTIONARY
MONETARY POLICY
Decrease the level of
liquidity/money supply in
the economy and which
could also result a
relatively lower inflation
path for the economy
Usually employed to
limit the tendency of the
economy to overheat
because of increase in
aggregate spending
MONEY SUPPLY amount of
money in circulation in the
economy
o M1 = currency in circulation
and peso demand deposits
o M2 = broad money; M1 +
peso savings and time
deposits
o M3 = broad money liabilities;
M2 + peso deposits
substitutes
o M4 = M3 + transferable and
other deposits in foreign
currency
FIVE (5) MONETARY POLICY
INSTRUMENTS
1. Raising(reducing) the BSPs
policy interest rates
2. Increasing(decreasing) the
reserve requirement
3. Encouraging (discouraging)
deposits in the special
deposit account (SDA)
facility by banks and trust
entities of BSP-supervised
financial institutions
4. Increasing(decreasing) its
rediscount rate on loans
extended to banking
institutions on a short-term
basis against eligible
collaterals of banks
barrowers
5. Outright sales(purchases) of
the BSPs holdings of
government securities
CHAPTER 12
TAXATION inherent power of the
state to demand enforced
contributions from the people for
public purposes
TAX is a levy imposed by
government on the income, wealth
and capital gains of person sort
businesses on spending on goods and
services and on properties
FOUR (4) PURPOSES
1. To raise revenue for government
to cover its own expenditure on
the provision of social services
2. As an instrument of fiscal policy
in regulating the level of total
spending in the economy so as
to stabilize the economy
3. To alter the distribution of
income and wealth
4. To control the volume of imports
into the country
TWO (2) TYPES OF TAXES
o DIRECT TAXES taxes levied
by government on the
income and wealth received
by households and
businesses
o INDIVIDUAL INCOME
TAXES taxes on
particular persons
o CORPORATE INCOME TAX
taxes on businesses
 o INDIRECT TAXES taxes
levied by government on
goods and services in order
to raise revenue and as an
instrument of fiscal policy
PROGRESSIVE TAXES
o Taxes that place a greater
burden on those best able to
pay and little or no burden
on the poor
o Best example individual
income tax
PROPORTIONAL TAXES
o Taxes that place on equal
burden on the rich , the
middle class and the poor
REGRESSIVE TAXES
o Taxes that fall heavily on the
poor than on the rich
BASIC PRINCIPLE OF TAXATION (ADAM
SMITHS CANONS OF TAXATION)
1. ADEQUACY, taxes should be just
enough to generate revenue
required for provision of essential
public services
2. BROAD BASING, taxes should be
spread over as wide as possible to
all sectors of the population or
economy so as to minimize the
individual tax burden
3. COMPATIBILITY, taxes should be
coordinated to ensure tax
neutrality and overall objectives if
governance
4. CONVENIENCE, taxes should be
enforced in a manner that facilities
voluntary compliance to the
maximum extent possible
5. EARMARKING, tax revenue from a
specific source should be dedicated
to a specific purpose only when
there is a direct cost and benefit
link between the tax source and
the expenditure.
6. EFFICIENCY, tax collection efforts
of government should not cost an
inordinately high percentage of tax
revenues
7. EQUITY, taxes should legally
burden all individuals and entities
in similar economic circumstances
8. NEUTRALITY, taxes should not favor
any one group or sector over
another, and should not be
designed to interfere with or
influence individual decision
making
9. PREDICTABILITY, tax collection of
taxes should reinforce their
inevitability and regularity
10.RESTRICTED EXEMPTIONS, tax
exemptions must only be for
specific purposes and for a limited
period
11.SIMPLICITY, tax assessment and
determination should be easy to
understand by an average tax
payer
THREE (3) APPROACHES TO TAXATION
1. Ability to pay principle
taxation should be levied
according to an individuals
ability to pay
basis for progressive taxation
16th century
Jean Jacques Rosseau(Swiss
philosopher), Jean Baptiste
Say (French political
economist), John Stuart
Mill(English economist)
2. Benefit approach
Taxation should be levied
broadly in relation to the
benefits that people receive in
public services
17th century
 Thomas Hobbes and John
Locke (English philosopher),
Hugo Grotius(British Jurist)
3. Tax incident approach
Major duty of a tax system is to
analyze the effect of a particular
tax on the distribution of tax
welfare
Tax welfare - ultimate payers of
tax
Proposed by Physiocrats
CHAPTER 13
AGRARIAN REFORM
aims to lessen the disparity
between the landlord and the
landless
defined as the rectification of the
whole system of agriculture
government redistributes the
agricultural lands among the
farmers of the country
relation between production and
distribution of land among the
farmers
processing of raw materials
LAND REFORM
full range of measures that may or
should be taken to improve or
remedy the defect in the relations
among men with respect to the
rights in the use of land
set of integrated measures
designed to eliminate obstacles to
economic and social development
arising out of defects in the
agrarian structure
(9)MEASURES OF AGRARIAN REFORM
1. Public health provisions
2. Family planning
3. Education and training of farmers
4. Reorganization of land reform
agencies
5. Application of labor laws to
agricultural workers
6. Construction of infrastructure
facilities
7. Organization of various types of
voluntary associations
8. Provide employment opportunities
for underemployed or surplus rural
labor
9. Other services which are
community development in nature
HISTORY
PRE-SPANISH PERIOD
o social classes existed
o rice is the medium of
exchange
SPANISH PERIOD
o Royal Land Grants /
encomienda system
THE FIRST PHILIPPINE REPUBLIC
o E. Aguinaldo declared his
intention to confiscate large
estates, especially the so-
called Friar lands
AMERICAN PERIOD
o Philippine Bill 1902 sets the
ceilings on the hectarage of
private individuals and
corporations : 16 hectares
for private individuals and
1,024 hectares for
corporations
o Land Registration Act of
1902 comprehensive
registration of land titles
under the Torrens system
o Public Land Act of 1903
homestead system
o Rice Share Tenacy Act of
1933 & Sugar Cane Tenacy
Contracts Act regulated the
relationships between
landowners and tenants of
rice and sugar cane lands
COMMONWEALTH PERIOD
o M. Quezon espoused the
social justice program to
 arrest the increasing social
unrest in Central Luzon
o 1935 Philippine Constitution
promotion of social justice
to ensure the well-being and
economic security
o Commonwealth Act no. 178
certain controls in the
landlord-tenant relationships
o National Rice and Corn
Corporation price of rice
and corn thereby helping the
poor tenants as well as
consumers
o Commonwealth Act No. 461,
1937 reasons for the
dismissal of tenants
o Rural Program
Administration (March 2,
1939) purchase and lease
of haciendas and their sale
and lease to the tenants
o Commonwealth Act No. 441
(June 3, 1939) National
Settlement Administration
with a capital stock of P20
000 000
JAPANESE PERIOD
o World War II
o Hukbo ng Bayan Laban sa
Hapon (HUKBALAHAP)
controlled the whole areas of
Central Luzon
THE PHILIPPINE REPUBLIC
o Philippine Independence
1946 problems of tenure
remained
o MANUEL ROXAS
Rice Share Tenancy Act of
1946 (RA 34) 70-40
sharing establishment
and regulating share-
tenancy contracts
RA 55 more effective
safeguard against
arbitrary ejectment of
tenants
o ELPIDIO QUIRINO
EXECUTIVE ORDER NO.
355 (OCT. 23. 1950 )
replaced the National
Land Settlement
Administration with Land
Settlement Development
Corporation(LASEDECO)
o RAMON MAGSAYSAY
RA 1160 & 1954
abolished LASEDECO and
established National
Resettlement and
Rehabilitation
Administration (NARRA)
RA 1199 relationship
between landowners and
tend farmers by
organizing share-tenancy
and leasehold system
RA 1400 (LAND REFORM
ACT OF 1955) Land
Tenure
Administration(LTA) which
was responsible for the
acquisition and
distribution of large
tenanted rice and corn
lands over 200 hectares
for individuals and 600
for corporations
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