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# Instruments of Fiscal Policy in the Philippines This document discusses the instruments of fiscal policy in the Philippines. It covers two main aspects: taxation and government spending. ## Taxation (Pagbubuwis) **Direct Tax:** Collected directly from the income of individuals or businesses (...

# Instruments of Fiscal Policy in the Philippines This document discusses the instruments of fiscal policy in the Philippines. It covers two main aspects: taxation and government spending. ## Taxation (Pagbubuwis) **Direct Tax:** Collected directly from the income of individuals or businesses (e.g., income tax, corporate tax). **Indirect Tax:** Collected through the prices of products and services (e.g., Value-Added Tax (VAT), excise tax). * **Examples**: * Income tax deducted from employee salaries * VAT (12%) on goods purchased ## Government Spending (Paggasta ng Pamahalaan) Funds are allocated to public services such as education, healthcare, infrastructure and security. This is important for stimulating the economy and creating jobs. * **Examples**: * Increased budget for education and free tuition * Expansion of healthcare services like the Universal Health Care Program ## Impact of Fiscal Policy on the National Economy **Gross Domestic Product (GDP)**: Effectively using fiscal policy can increase GDP by boosting government spending and consumer spending. **Unemployment**: Expansionary fiscal policies (increased government spending) can create more jobs through new government projects. **Inflation and Price Levels**: Contractionary fiscal policy (reducing government spending) aims to control high inflation by decreasing the supply of money circulating in the economy. **Government Debt**: Excessive government spending that surpasses revenue can lead to a budget deficit, increasing national debt. **Key terms**: * **Direktang buwis**: Direct tax * **Di-direktang buwis**: Indirect tax * **Pagbubuwis**: Taxation * **Paggasta ng Pamahalaan**: Government Spending * **GDP**: Gross Domestic Product