Introduction
(Marcelo S.G.) With such a huge contribution to
According to the Tax Code of the Philippines the
Bureau of Internal Revenue (BIR) shall be under
the supervision and control of the Department of
Finance and its powers and duties shall
comprehend the assessment and collection of all
national internal revenue taxes, fees, and
charges, and the enforcement of all forfeitures,
penalties, and fines connected therewith,
including the execution of judgments in all cases
decided in its favor by the Court of Tax Appeals
and the ordinary courts. The Bureau shall give
effect to and administer the supervision and
police powers conferred to it by this code or
other laws (Section 2 of the National Internal
Revenue Code of 1997).Registration Compliance
of a business with the BIR is necessary to make
the business legal and to avoid the risk of being
tax evader. All taxpayers who are engaged in
business are required by law to complete the
whole registration process as required by law in
the compliance with the provisions of the
National Internal Revenue Code of 1997, as
amended (hereinafter referred to as the Tax
Code), particularly mandate that business
activities must be registered with the BIR. Tax
Compliance, is a degree to which a taxpayer
complies (or fails to comply) with the tax rules
of his country, for example by declaring income,
filing a return, and paying the tax due in a timely
manner.
The primary role of the BIR is to collect and
administer taxes. Taxation is an inherent power
by which the sovereign state imposes financial
burden upon persons and property as a means of
raising revenues in order to defray the necessary
expenses of the government (Tax Digest by
Cresencio Co Untian, 2002). It is the imposition
of financial charges or other levies, upon a
taxpayer (an individual or legal entity) by a state
such that failure to pay is punishable by law.
Taxation is a mode by which government makes
exactions for revenue in order to support their
existence and carry out their legitimate
objectives (Tax Law and Jurisprudence by
Justice Vitug, 2000).
The fiscal policy of the government is based on
the rule that receipts or revenue should be equal
to annual government expenditures. The
significant portion of the required receipts is
raised from taxation. (Valencia &Roxas, 2017,
p.12) Being the leading tax-collecting agency of
the government, the BIR contributes to over 75%
Page | 1
of total national government tax revenue.
national revenue, the functions and regulations
of the BIR undoubtedly become of utmost
importance.
According to Mr. Reynaldo Guerrero Jr. the
District Administrative Officer of the Bureau of
Internal Revenue Office in Baguio City, the
requirements of the BIR for opening and
operating a business are the following: Business
Permit from the City Hall, Department of Trade
and Industry (DTI) Certificate of Trade Name,
Registration for Self-Employed and Mixed
Income Individuals, Estates/Trusts (Form 1901),
Payment of Annual Registration Fee of Php 500
for Every Separate or Distinct Establishments or
Place of Business on or before the 31st of January
(Form 0605), Certificate of BIR Registration
(Form 2303), File for Receipt (Form 1906),
Registration and Maintenance of Books of
Accounts, Monthly Percentage Tax, Quarterly
Income Tax, and Annual Income Tax. With all
these requirements, registration and continuing
compliance would seem tedious but nevertheless
necessary.
A wider definition of tax compliance, defined in
1978 by Song and Yarbrough suggested that due
to the remarkable aspect of the operation of the
tax system in the United States and that it is
largely based on self-assessment and voluntary
compliance, tax compliance should be defined as
taxpayers ability and willingness to comply with
tax laws which are determined by ethics, legal
environment and other situational factors at a
particular time and place.
In order for the agency to effectively perform its
duties, it must regularly set regulations and
restrictions that evolve with the times. The
bureau regularly releases regulations,
memorandums circulars, and rulings to clarify or
change certain areas of the law. This study is
conducted with the belief that it is of paramount
importance that the level of awareness and
compliance of our taxpayers be monitored and
evaluated.
This study focuses on the Registration and Tax
requirements given by the Bureau of Internal
Revenue (BIR), and the other variables that
might affect the taxpayers compliance to the
said requirements, covering the businesses in
Bakakeng Norte and Sur, Baguio City.
Bakakeng, a 15-minute drive from the central
business district, was known to be a peaceful and
quiet barangay surrounded by pine trees. With
the establishment of the SLU Maryheights
Campus, the once quiet and peaceful barangay
became a little city within Baguio City. Before
SLU Maryheights Campus was erected, the
businesses in the vicinity carry out its day-to-day
operations with the residents of the barangay as
their patrons. When the campus started its
operations, the businesses in Bakakeng started to
cater to the needs of an increased population
caused by the arrival of thousands of students.
This gave rise to an immense economic
development and business opportunities within
the vicinity. (Ochoco, Olid, Orias, Orteza,
&Pambid, 2010, p. 2)In Bakakeng Norte and Sur
alone, a total of 318 businesses are registered in
the City Hall. (Baguio City Hall).Based on 2014
figures provided by the Philippine Statistics
Authority (PSA), there are 946,988
establishments in the Philippines. Of these,
99.6% (942,925) are micro, small, and medium
enterprises (MSMEs) and the remaining 0.4%
(4,063) are large enterprises. Of the total number
of MSMEs, 90.3% (851,756) are micro
enterprises, 9.3% (87,283) are small enterprises,
and 0.4% (3,886) is medium enterprises.
Needless to say, majority of the businesses
registered in Bakakeng Norte and Sur are micro,
small, and medium enterprises.
Tax knowledge is an essential element in a
voluntary compliance tax system, particularly in
determining an accurate tax liability (Saad et al.;
2003Palil,2005). More recent studies undertaken
in Malaysia (Loo, 2006; Loo et al., 2008;2009)
also suggested tax knowledge to be the most
empirically established by several other studies
(for example, Kasipillai&Jabbar, 2003; Kicher et
al., 2006, which documented that possessing tax
knowledge would lead to higher compliance
rates. On a similar note, the absence of tax
knowledge may lead to noncompliance behavior
among taxpayers, either intentionally or
unintentionally.
These findings suggest that in self-assessment
systems, tax audits can play an important role
and their central role is to increase voluntary
compliance. Audit rates and the thoroughness of
the audits could encourage taxpayers to be more
prudent in completing their tax returns, report all
income and claim the correct deductions to
ascertain their tax liability. (Palil, M.R., 2010)
Psychology theories on the other hand posit that
taxpayers are influenced to comply with their tax
Page | 2
obligations by psychological factors. They focus
on the taxpayers morals and ethics. The theories
suggest that a taxpayer may comply even when
the probability of detection is low. As opposed to
the economic theories that emphasize increased
audits and penalties as solutions to compliance
issues, psychology theories lay emphasis on
changing individual attitudes towards tax
systems. (Atawodi, O.W. &Ojeka, S.A., 2012)
Various opinions exist about the best ways to
improve tax compliance. Given the chance, a lot
of businesses will not pay taxes unless there is a
motivation to do so. Some believe that the best
way is to increase incentives (Feld & Frey, 2007)
others believe the best way is to increase
penalties.
There is the assertion that younger businesses
bear higher tax compliance costs when compared
with older businesses. This is largely occasioned
by high start-up costs and learning curve effects.
Tran-Nam and Glover (2002); Rametse and Pope
(2002); Hansford, Helseldine and Howorth
(2003) and Eichfelder and Schorn (2008) studied
start-up cost of tax compliance. While Tran-Nam
and Glover (2002) and Rametse and Pope (2002)
found empirical relationships between tax
compliance costs and start-up costs, Hansford et
al. (2003) and Eichfelder and Schorn (2008)
found no empirical evidence between business
age and tax compliance costs
There is a general belief that a relationship exist
between the size of a business and its level of tax
compliance costs. It might be true that smaller
businesses have relatively higher tax compliance
costs when compared with big businesses. Hence
bigger SMEs seem to benefit from economies of
scale. Several studies conclude that the relation
between company size and the ratio of
compliance costs/turnover is negatively
correlated. It can be inferred that the bigger the
business, the lower the compliance costs (Pope,
2001; Hanefah et al., 2002; Pope, 2002; Slemrod
and Venkatesh, 2002; Lignier, 2006; Charron et
al., 2008).
In a number of countries, studies have been
undertaken to examine the impact of industries
on business tax compliance costs (Blumenthal
and Slemrod, 1996; Chan et al, 1999; Slemrod
and Venkatesh, 2002). In general, tax compliance
costs researches show that there exists a wide
variation in tax compliance costs by industry
type. From all these studies there were no
univocal conclusions that regarding the effect of
industry on tax compliance cost. In Hong Kong
differences were found, but only by using the
absolute compliance costs. No significant
differences could be discovered when using the
compliance costs relatively to sales (Chan et al.,
1999). The only existing research that showed
significant differences between industries is that
conducted by Blumenthal and Slemrod (1996).
They find that firms in the retail or wholesale
industry have significantly lower tax compliance
costs and that firms in the primary industry have
significantly higher than average tax compliance
costs.
This study also considers the taxpayers income
as one of the factors that affects tax compliance.
In the study entitled, Third-Party Income
Reporting and Income Tax Compliance
(Deskins&McKnee, 2006) it was concluded that
tax compliance rates decline with higher income,
lower audit rates, and higher tax
rates.Considering the impact of income on
declared income, higher income leads to
higher compliance in both specifications of
the compliance equation. This result suggests
that declared income is a normal good, with an
income elasticity (0.651 to 0.726) that is
significantly less than one (n18). This result is
also similar to other empirical work (Witte and
Woodbury, 1985; Dubin, Graetz, and Wilde,
1990), in which the income elasticity of reported
income is significant and positive.
Higher tax rates lead to significantly
lower compliance, which is consistent with the
notion that the payoff to successful evasion is
greater when the tax rate is larger. Note that most
theoretical models of tax compliance conclude
that compliance actually increases with greater
tax rates, since a higher tax rate lowers income
and, with decreasing absolute risk aversion, the
lower income increases the individual's
willingness to take risks according to
estimating the determinants of taxpayer complia
nce with experimental data (Jackson B.R
&McKee M. 1991). However, the result here is
similar to that of Clotfelter (1983), who finds
that unreported income increases with higher
marginal tax rates. The tax rate elasticity equal
roughly -.5, a result similar to Clotfelter (1983).
Page | 3
Tax compliance theories can be broadly
classified into two: economics based theories and
psychology based theories. Economic based
theories, also known as deterrence theory, place
emphasis on incentives. The theory suggests that
taxpayers are influenced by economic motives
such as profit maximization and probability of
detection. Therefore according to the theory, in
order to improve compliance, audits and
penalties for non-compliance should be
increased. (Atawodi, O.W. &Ojeka, S.A.,
2012)Some studies claimed that audits have a
positive impact on tax evasion (Jackson and
Jaouen, 1989; Shanmugam, 2003; Dubin, 2004).
The researchers believe that tax evasion,
taxpayer non-compliance, and corruption to be
rampant what with constant news reports on
these matters. By determining the level of
compliance of businesses in Bakakeng Norte and
Sur, the researchers hope to help with the better
implementation of regulations and further
improvement of taxation and directive
compliance in the area. Moreover, the study was
conducted in order to raise the awareness and in
turn the obedience of the said entities to current
and future requirements in order to avoid
imminent violations and penalties.
Statement of the Problem
The researchers wanted to determine the degree
of compliance of the different business entities in
Bakakeng Norte and Sur, Baguio City in
accordance with the specific BIR requirements.
Specifically, it seeks to answer the following
questions:
1. What is the profile of the business
entities in BakakengNorte and Sur in
Terms of:
a. Years of Operation
b. Average Quarterly Income
c. Type of business industry
d. Type of Registration (Vat
or Non-Vat)
e. Other Variables That
Affects Compliance
2. What is the level of compliance and the
degree of understanding in filing and
paying of Business Taxes by the
respondents on the Following:
a.) Registration Requirements
b.) Taxation Requirements
 3. Is there a significant relationship in the
level of compliance when the
respondents are grouped according to
their profile?
4. What are the problems encountered in
the compliance to registration and
taxation requirements?
Hypotheses
1. Business owners make sure that they
comply with the registration and
taxation requirements of BIR up to the
extent of the required payments.
2. The taxpayers in Bakakeng Norte and
Sur, Baguio City always understand the
requirements and computations
provided by BIR.
3. Compliance to BIR requirements vary
to a great extent. It significantly varies
to the moderation variables of: years of
operation; amount of capitalization;
quarterly income and type of industry.
4. The taxpayers do not encounter any
problems in the process of complying in
registration and taxation requirement of
the BIR.
The hypotheses listed above were used to prove
whether or not the respondents are compliant to
BIR requirements.
Method
Research Design and Methodology
The study is designed to determine the degree of
compliance of the different business entities in
Bakakeng, Baguio City in accordance with the
specific BIR requirements. As such, in gathering
useful data, questionnaires were given to the
business owners in BakakengNorte and Sur,
Baguio City.
This study uses the descriptive design to gather
data regarding the compliance of business
entities in BakakengNorte and Sur. Descriptive
design is a statistical study to identify patterns or
trends in a situation, but not causal linkages
among its different elements. This study also
aims to provide description about the relation of
the given variables in the questionnaire to the
compliance to BIR requirements.
Page | 4
Population and Locale of Study
The population of the study was the registered
business entities in Bakakeng Norte and Sur,
Baguio City. The said entities were chosen for
they were covered by the issue regarding BIR
requirement compliance. Considering the time
frame of the study and the scale of the area,
accessibility of the respondent was essential,
therefore, accidental non-random sampling was
applied to limit the number of respondents from
318 businesses to 177 respondents with the 5%
level of significance.
N
n=
1+ N e 2
Data Gathering Tool
Questionnaire was used as the main data-
gathering tool for the study which was floated to
the respondents to obtain necessary information
for the study.
The questionnaire contain questions that help the
researchers in gathering data that determines the
degree of understanding and level of compliance
of the subjected business entities in Bakakeng
Norte and Sur, Baguio City.
The instrument was divided into five parts. The
first section determines the registered trade
name, years of operation, average quarterly
income, amount of capitalization, and type of
industry the business engages in. The second part
of the instrument covers the degree of
compliance of the requirements for registration.
The instruments third section addresses business
taxation requirement compliance. The third part
will determine the degree of understanding of the
business owners of the registration and taxation
requirements along with the computation of their
taxes.
The fourth and final section of the instrument
inquires about the other variables that affect
compliance. The respondents were instructed to
put a check mark on their respective answers to
the particular question. The researchers are
involved in carrying out the distribution and
collection of the questionnaire.

Data Gathering Procedures
The method used for the collection of data is
through the distribution of questionnaires to the
respondents who were willing and available to
answer. The difficulties were encountered in
convincing the respondents due to the sensitivity
of the topic. The broadness of the area was also
one factor for the complexity of handing out the
questionnaires. The researchers also found it
difficult to look for the owner of the business.
Treatment of the Data
observing the sample results given that the
null hypothesis is true. P-value is the outcome of
the test that will be compared to the level of
significance to determine whether to accept the
null hypothesis or not. A P-value greater than the
level of significance would mean the null
hypothesis would be accepted and vice versa.
The researchers subjected the results into
statistics. The provided questionnaire are not
answerable by any quantities but to be able to
use statistical tools, the researchers let numbers
to represent the degree of compliance and
understandability namely; 1-never, 2-rarely, 3-
sometimes, 4-often, 5-always.

The researchers, to be enabled to address the Presentation, Analysis and

problems in the statement of the problem, used Interpretation of Data
Hypothesis Testing and One Way ANOVA.
Hypothesis testing is the operation of deciding Business Profile
whether or not a data set obtained for random
sample supports or fails to support a particular The following charts shows the percentages of
hypothesis. This treatment of data would be used the respondents who belong to the range given:
to answer how business owners comply with the
registration and taxation requirements of BIR
and how do taxpayers understand the
Years of Operation
requirements and computation provided by the
BIR. 1-3 4-6 7-9
10-12 13-15 25-27
Analysis of Variance (ANOVA) is used to test
hypothesis about three or more population means
rather than population variances. The purpose of
such is to establish the variations between groups 11% 2% 1%
and within groups. This treatment of data would 9%
47%
be used to answer how business entities comply
with BIR requirements according to the
31%
moderating variables of: years of operation;
amount of capitalization; quarterly income; and
type of industry.

Null hypothesis represents a theory that has been

put forward, either because it is believed to be
true or because it is used as a basis for argument,
where this assertion is held as true until there is
sufficient statistical evidence to conclude
otherwise. Alternative hypothesis is an assertion
of all situations not covered by the null
hypothesis.

A t-test is a statistical test used to determine

whether two population means are different
when the variances are unknown. The level of
statistical significance is often expressed as the
so-called p-value. Depending on the statistical
test chosen, it will calculate a probability of

Page | 5
Years of Operation

The sample size of 177 respondents will be Average Quarterly Income

dominated by entities with age of 1 to 3 years
with 47%. 30% will be occupied by businesses
operating 4 to 6 years, 11% by businesses
operating 10 to 12 years, 9% by businesses
operating 7 to 9 year, 2% by businesses
operating 13 to 15 years, 1% by businesses
operating 25 to 27 years.
Grouping the respondents by their average
quarterly income, 84% of the sample size will be
businesses that earnPhp 600.00 to Php
63,024.00. 10% from businesses earning Php.
63,025.00 to Php 125,449.00, both 2% to
businesses earning Php 125,450.00 to
Php187,874.00 andPhp 187,875.00 to Php
250,299.00, and both 1% to businesses earning
Php 437,575.00 to Php 500,000.00 and Php
312,725.00 to Php 375,149.00.

Types of Industry
Average Quarterly Income SARI SARI STORE OTHERS

600- 63,024 63,025- 125,449

125,450- 187,874 187,875- 250,299
250,300- 312,724 312,725- 375,149 COMPUTER SHOP BOARDING HOUSE
25%
437,575- 500,000

46%
LAUNDRY 5%
HARDWARE
2%2%1% 1% 1% 6%
10% 6%
7% 3%2%
FOOD INDUSTRY RETAIL

84%

Page | 6

Type of Industry
The respondents, when grouped according to the
type of industry will be dominated by the
retailers with 46% of the total sample size
followed by sari-sari stores with 25 %, food
industry with 7%, computer shop together with
boarding houses with both 6%, 2% for the
Laundry industry, 3% for the hardware industry,
and the 5% allocated on other businesses such as
publishing, printing, photocopy industry, beauty
salons, manufacturing and farming, and bills
payment.
Type of Registration
1% VAT
Non-VAT
99%
Type of Registration
Out of 177 respondents, 99% are businesses or
establishments that are non-VAT registered.
Other Variables
Audit of Books
As to the whether the respondent allows their
book to be audited, it appears that 6.79% of the
respondents always let their books to be audited,
0.56% oftenallow their books to be audited,
2.82% sometimes let their books to be audited,
2.26% rarely allows their books to be audited
and the percentage of the respondents who allow
their books to be audited is 87.57%.
Hiring of Bookkeeper
Page | 7
As to the whether the respondent hires an auditor
to audit their books, it appears that 2.81% of the
respondents always let an auditor to audit their
books, 0% often let an auditor to audit their
book, 3.94% sometimes hires an auditor to audit
their books, 2.25% rarely hires an auditor to
audit their book and the percentage of the
respondents who never hires an auditor to audit
their book is 91%.
Receipt Issuance
According to the tallied data gathered by the
researchers 17.51% of the respondents always
issue receipt to their customers, 2.26% often
issue receipts, 14.69% sometimes issue receipt to
their customers, 9.04% rarely issue receipt and
the percentage of the respondents who never
issue receipts to their customers are 56.50%
Awareness to Penalties
The percentage of the number of respondents
who are always aware to the penalties imposed
by the BIR is 64.41%, 6.78% are often aware of
the penalties imposed by the BIR, 7.91% are
sometimes aware of the penalties imposed by the
BIR, 1.13% are rarely aware of the penalties, and
the percentage of the number of the respondents
who are never aware of the penalties imposed by
the BIR is 19.77%`
Proper dissemination of information during BIR
Seminars
There are 18.08% of the respondents always
agree that information were properly
disseminated during their seminars, 8.47% often
find that information were properly disseminated
during BIR seminars, 16.38% sometimes agree
that information were properly
disseminatedduring BIR seminars, 9.04% rarely
agree that information were properly
disseminated and 48.03% never agree that
information were properly disseminated during
BIR seminars.
Hypothesis Testing for Single Mean
The succeeding discussions present the data,
their analysis and interpretation.
Table 1 shows the data for the registration
requirements of the Bureau of Internal Revenue
(BIR).

Since p value is greaterthan the critical value, at

5% level of significance, the taxation
requirements are always complied to by the
business entities in BakakengNorte and Sur,
Baguio City. There are 68.74% of the
respondents always comply, 5.46% often
comply, 2.45% sometimes comply, 23.35% never
comply with the taxation requirements. No
respondent answers rarely.

Table 3 shows the results regarding the

understanding of the respondents in the
registration and taxation requirements, the
computation of percentage and income tax, and
the difference thereof.

Supported by the test that was conducted by the

researchers, it is evident that the business entities
in Bakakeng Norte and Sur, Baguio City always
comply with the registration requirements. There
are 64.07% of the respondents always comply,
1.47% often comply, 1.36% sometimes comply,
0.79% rarely comply, 32.32% never comply with
the registration requirements of the BIR.

Table 2 shows the results of the test to determine

whether business entities in Bakakeng Norte and
Sur, Baguio City always comply or do not
always comply with the taxation requirements
base on the taxation code of the Philippines.

Page | 8
Base on the above results, it shows that the between the business entities separated by their
business entities in Bakakeng Norte and Sur, years of operation.
BaguioCityalwaysunderstand the taxation and
other requirements necessary in conducting Table 5: ANOVA Single Factor
business since computed p value is greater than
the 5% level of significance.
There are 37.29% of the respondents always
comply, 15.71% often comply, 14.69%
sometimes comply, 5.31% rarely comply,
27.01% never comply with the registration
requirements of the BIR.

One Way ANOVA

The succeeding discussions present the data,

their analysis and interpretation.

At 5% level of significance, given that the

After computing for the ANOVA Single Factor
of each variable, the researchers determine the
rejected null hypotheses and performed Post Hoc
Analysis to find out exactly where those
differences are. It allows the researches to make
multiple pair wise comparisons and determine
which pairs are significantly different and which
are not.
computed F, 1.19845, is less than the critical
value, it is to conclude that the business entities
in Bakakeng Norte and Sur, Baguio City,
grouped by their years of operation, are
complying with the taxation requirements.
Table 6: ANOVA Singe Factor

For the given set of variables:

Null Hypothesis: All means are equal.
Alternative Hypothesis: At least two means are
not equal.

YEARS OF OPERATION

Table 4: ANOVA Single Factor

According to the test result, F = 0.18899 with a

critical value of 0.05, the F critical = 2.26698.
Therefore, at 5% level of significance, null
hypothesis is acceptable. There is no difference
between the degrees of understanding of owners
of business entities when grouped according to
years of operation.

According to the test result F = 1.22011 with a AVERAGE QUARTERLY INCOME

critical value of 0.05, the F critical = 2.26698.
Therefore, since the F statistic is lesser than the Table 7: ANOVA Single Factor
critical value, null hypothesis is accepted. At 5%
level of significance, there is insufficient
evidence that there is a difference between the
means. Furthermore, the test explains that there
is no difference in registration compliance

Page | 9
At 5% level of significance, there is sufficient
evidence that business entities in Bakakeng
Norte and Sur, Baguio City have different
degrees of registration compliance when grouped
by Average Quarterly Income.
The test resulted to a computed F = 1.410535
which is less than the critical value which would
entail the acceptance of the null hypothesis at 5%
level of significance thereby enabling the
researchers to conclude that business entities in
Bakakeng Norte and Sur, Baguio City are
complying to the taxation requirements when
grouped by their average quarterly income.

Table 9: ANOVA Single Factor

Post Hoc Analysis

When grouped by Average Quarterly Income,

there is sufficient evidence at 5% level of
significance that owners of business entities in
Bakakeng Norte and Sur, Baguio City have
different degrees of understanding of the
The pair on the table located at the first column requirements.
represents the different range on the average
quarterly income where; 1 is 600-63,024, 2 is
63,025-125,449, 3 is 125,450-187,874, 4 is
187,975-250,299, 5 is 250,300-312,724, 6 is
312,725-375,149 and 7 is 437,575-500,000.
Since the null hypothesis was rejected, therefore,
post hoc analysis was done. As seen in the table
above, there is no significant difference among
the pairs for compliance.

Table 8: ANOVA Single Factor

Page | 10

The pair on the table located at the first column
represents the different range on the average
quarterly income where; 1 is 600-63,024, 2 is
63,025-125,449, 3 is 125,450-187,874, 4 is
187,975-250,299, 5 is 250,300-312,724, 6 is
312,725-375,149 and 7 is 437,575-500,000.
Since the null hypothesis was rejected, therefore,
post hoc analysis was done. As seen in the table
above, there is no significant difference among
the pairs for compliance.
AMOUNT OF CAPITALIZATION
Table 10: ANOVA Single Factor
Given these results, the researchers can conclude
that there is no difference on degree of
compliance on registration requirements of
business entities in Bakakeng Norte and Sur,
Page | 11
Baguio City when grouped by their amount of
capitalization.
According to the test result F = 1.564818 with a
critical value of 0.05, the F critical = 2.152264.
Therefore, since the F statistic is lesser than the
critical value, null hypothesis is accepted. At 5%
level of significance, there is insufficient
evidence that there is a difference between the
means.
Table 11: ANOVA Single Factor
The null hypothesis is accepted at 5% level of
significance given that F = 0.816274 is less than
F critical = 2.152264. Therefore the researchers
are able to conclude that business entities in
Bakakeng Norte and Sur, Baguio City, grouped
by their amount of capitalization, are complying
with the taxation requirements with no
significant difference.
Table 12: ANOVA Single Factor
The test resulted to F = 0.777034 with a critical
value of 0.05 being lower than the F critical =
2.152264 which results to the null hypothesis
accepted.Therefore, at 5% level of significance,
the business entities in Bakakeng Norte and Sur,
Baguio City, when grouped by their amount of
capitalization, have the same degree of
understanding of the requirements.
TYPE OF INDUSTRY
Table 13: ANOVA Single Factor
There is sufficient evidence at a 5% level of
significance that there is a difference in
registration compliance between the business
entities when grouped by their type of industry
given that F statistic is greater than the critical
value rendering the rejection of the null
hypothesis.
Post Hoc Analysis
Page | 12
The pair on the table located at the first column
represents the different range on the average
quarterly income where; 1 is sari-sari, 2 is others,
3 is computer shop, 4 is boarding house, 5 is
laundry, 6 is hardware, 7 is food industry and 8 is
retail.
Since the null hypothesis was rejected, therefore,
post hoc analysis was done. As seen in the table
above, there is no significant difference among
the pairs for compliance.
Table 14: ANOVA Single Factor
At 5% level of significance, given that the
computed F, 1.237819246, is less than the
critical value, it is to conclude that the business
entities in Bakakeng Norte and Sur, Baguio City,
grouped by their type of industry, have no
difference in the compliance on taxation
requirements.
Table 15: ANOVA Single Factor
When grouped by Type of Industry, there is
sufficient evidence at 5% level of significance
that owners of business entities in Bakakeng
Norte and Sur, Baguio City have different
degrees of understanding of the requirements.

The pair on the table located at the first column
represents the different range on the average
quarterly income where; 1 is sari-sari, 2 is others,
3 is computer shop, 4 is boarding house, 5 is
laundry, 6 is hardware, 7 is food industry and 8 is
retail.
Since the null hypothesis was rejected, therefore,
post hoc analysis was done. As seen in the table
above, only pair 1-8 has a significant difference
among the pairs for compliance.
Problems Encountered by the Respondents
Based on the feedback of the respondents where
they are allowed to input as many problems they
have encountered, 63 out of 177 or 35.59% said
that they havent encountered problems affecting
their compliance on processing all registration
and taxation requirements. 59 respondents or
33.33% of the sample size says that the slow
processing is a reason that affects their
compliance to registration and taxation
requirements while 31 respondents or 17.51%
said that the long queue is the problem affecting
their compliance. The image of regulating
agencies being corrupt is believed by 36
respondents or 20.34% affecting their perception
in complying with registration and taxation
requirements while 49 respondents or 27.66%
said that the problem they encountered on
complying with these requirements is the under
the table transactions and collecting of other
fees, aside from the prescribed fees, that were
done by fraudulent employees.
Page | 13
Other respondents, a total of 8 taxpayers which
is 4.52% of the sample size claim that they dont
have enough knowledge regarding the tax
requirements because of the lack of information
given by the BIR officials. According to these
respondents its hard for them to understand the
given requirements because they have little
knowledge of complying with such. The
remaining respondents which represents 1.2% of
the feedback given said that the problem they
encounter is the inconvenience banks accredited
by the BIR and that BIR is imposing low
regulation and low non-compliance penalty.
Conclusion
Based on the findings, the following are the
conclusions of this research study:
1. The profile of the business entities in
Bakakeng Norte and Sur is dominated by:
a. Business operating 1 to 3 years when
respondents are grouped according to
their years of operation.
b. Business earning P600.00
P63,024.00 quarterly when respondents
are grouped according to the average
quarterly when respondents are grouped
according to the average quarterly
income.
c. Retailers when respondents are
grouped according to the type of
industry.
d. Non-vat registered businesses when
grouped by type of registration.
e. Business entities that do not have
their book audited, do not hire
accountants or bookkeepers, do not
issue receipts are aware of penalties that
may be faced, and entities that do not
believe that information was properly
disseminated during BIR seminars.
2. Business entities always comply with the
registration and taxation requirements and that
they always understand the rationale behind the
filing and paying of business taxes.
3. There is no significant relationship in the level
of compliance when the respondents are grouped
according to their profile.
4. The most common problems encountered in
the compliance of registration and taxation
requirements are slow processing of ITRs which
results to a longer time queuing for
accommodation and changed perception of
business owners to the reputation of BIR due to
serious corruption issues, and offering other
fraudulent services
Recommendation
The researchers recommend that the Bureau of
Internal Revenue (BIR) should come up with a
proper dissemination like seminars to educate
more the taxpayers regarding their tax
responsibilities to avoid penalties due to their
lack of knowledge and understanding.
The researchers also recommend finding ways to
establish better trust and confidence between the
researchers and respondents to enable the
researchers to acquire more honest feedbacks.
Asking for evidences of the respondents'
compliance to the requirements can also be done
to ensure that the results will be more accurate. A
longer time period is also recommended on
conducting this study.
References
1. Publications
Peter, O. (2012). An Analysis of Factors
Affecting Tax Compliance in the Real Estate
Sector in Kenya: A Case Study of Real Estate
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Palil, M. (2007).Tax Knowledge and Tax
Compliance Determinants in Self Assessment
System in Malaysia.PhDThesis.University of
Birmingham.Retrieved 2010, from University of
Birmingham Research Archive
National Internal Revenue Code of 1997
Valencia, E., &Roxas, G. (2016-2017) Income
Taxation Seventh Edition
Marcelo, S.G. Dec 2011
Page | 14
Tax Digest by Cresencio Co Untian, 2002
Tax Law and Jurisprudence by Justice Vitug,
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Factors that Affect Tax Compliance Among
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Tax Knowledge and Tax Compliance
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Abrugar, V. (2011). What Taxes Should I Pay in
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3. Interview
Permits and Licensing Division, Baguio City
Hall
Page | 15
Reynaldo Guerrero Jr., District Administrative
Officer, Bureau of Internal Revenue, Baguio City
Author Biography
JORICK B. GAMBOA, MANUEL MA.
MASON G. YAO III, MEDIATRIX F.
LOSANEZ, ROCHEL JOY A. GAUIRAN
AND APRIL GRACE O. VILLACENTINO
are fourth year Accountancy and Management
Accounting students of the School of
Accountancy and Business Management, Saint
Louis University Baguio City Philippines.
JOSEPHINE ACOP, CPA, MSBA is their
Accounting 403 (Thesis) instructor.