Any discussion about the economics of taxation is always quite touchy and sensitive primarily because it affects practically everyone – rich and poor alike. The repercussions of high taxes and additional taxes, however, almost always affect the ordinary wage-earner. As in any case, the government plays a potential role in the nation’s economy.

Taxation and government intervention are felt all the more at this time when Filipinos troop to the nearest office of the Bureau of Internal Revenue to beat the April 15 deadline set for citizens to pay their annual income taxes.

It certainly cannot be denied that in order for government to be able to do anything at all – and if we may add, to function well and effectively – it must first raise revenues. And, the primary vehicle that the government uses to finance itself is taxation.

The most important thing to remember about taxes is that ultimately they are paid by people, or by households. Taxes may be imposed on transactions, institutions, property, meals, and all kinds of other things, but in the final analysis they are paid by individuals or households.

Developing countries like the Philippines rarely have sophisticated income tax schemes like that of highly industrialized countries like the United States. As a result, the primary means of raising revenues in many developing countries is through commodity taxes. This is what we see happening in the Philippines where, as a consequence, the prices of prime commodities periodically go up because of the increase in taxes imposed by government on such goods.

As earlier mentioned, practically everything is taxed – from essential goods and items, to services, to entertainment (movies), to the so-called “sin taxes” (cigarettes and liquor) – and it is us, the people, who bear the brunt of paying these taxes.

Since time immemorial, there has been much disagreement over what constitutes a fair tax system. One theory contends that people should bear tax burdens in proportion to the benefits that they receive from government expenditures. This is called the benefits-received principle. Another contends that people should bear tax burdens in line with their ability to pay. This is called the ability-to-pay principle which has dominated U.S. tax policy.

Be that as it may, the ultimate burden of a tax must be borne by those initially responsible for paying them. Since people and households are the ones who bear this burden, it can be distributed equitably.

Taxes are generally beneficial because it is a way for government to improve its services to the people. Simply put, all citizens should be conscious of paying their taxes honestly and promptly, and not change their behavior and do something to avoid paying taxes.

So long as these kinds of taxes are used for their specific purpose, then people will be encouraged to help the government raise revenues through taxes. If people can see where their taxes go, whether these are used for the betterment of people’s lives as well as for the efficient delivery of services, then people will not begrudge the government of revenues through taxes.

Such, however, is not what the Filipinos have experienced with our government for a long time now insofar as tax collection is concerned. The recent spate of protest actions and the increasing incidence of expose’s of tax evasion or of people’s money being spent illegally or dishonestly leave a bad taste, especially for the ordinary wage-earner who can hardly make both ends meet.

It is high time that government looks into how best taxes may be utilized for the purpose that they serve. Heavy penalties should likewise be imposed to those who do not pay their taxes honestly. It is rather lopsided if the so-called big fry goes scot-free, while the small fry suffers the consequences of the former’s actions and made the scapegoat. This causes discontentment and unrest, bringing about chaos in national affairs and in the economy.