Direct taxes are those that cannot be shifted to another but are borne by those liable to pay them. Direct taxes are computed on the basis of the taxpayer's income or personal assets so that those with greater income pay a larger tax. Since direct taxes cannot be shifted to other taxpayers, these do not tend to increase the prices of consumer goods and services and are, in principle, more effective in achieving equality in society. ln practice, however, the effectiveness of direct taxation in achieving equality may not be readily apparent, particularly when non-wage income (business income, professional income, interest income, etc.) is hardly taxed. ln this situation, wage earners pay their taxes, while businessmen and other professionals do not. This is the case in the Philippines, where "otficial statistics show that an increasing share of personal income taxes is accounted for by fixed income earners rather than by professionals and businessmen." (Diokno, 2005) "Greater reliance on direct taxes, especially on individual income taxes, increases the sense of fairness of any tax system." (Diokno, 2005) lndirect taxes are those paid by persons other than the one on whom the tax is legally imposed. Persons liable for indirect taxation may shift or transfer their ta,x burden to others as part of the purchasing price of a commodity or part of compensation for services rendered. Thus all buyers of the same product or service pay exactly the same rate and amount of tax regardless of differences in their incomes. But indirect taxation can increase inequality in society. This is because when those who live in povefty pay the same amount of taxes as the rich, they are actually paying proportionately more taxes than the rich are; the indirect tax is a bigger share of their income, and they have less to spend for their needs than the rich do. lndirect taxes also tend to increase the prices of consumer goods and services. "Neo liberal economists traditionally hold that taxation distorts markets and obstructs their ability to allocate resources efficiently. lt has become evident, however, that markets do not always or naturally allocate resources fairly. The persistent rise in inequality in recent years, both within and between countries, illustrates this and demonstrates the inadequacy of existing tax systems to correct the bias that market-led economic policies have created. lncreasing tax competition to attract foreign direct investments has caused a dramatic change in the structure of tax systems. Many governments have tended to increase indirect taxes ... while reducing progressive income tax rates. As a result, the tax burden on the wealthiest has fallen and in many countries so have tax revenues ..." (lnternational Council on Human Rights Policy, 2010) Philippine taxes programmed for fiscal year 2013 show that the country will continue to rely on both direct and indirect taxation as its main sources of taxation revenues. 2011 Direct Taxes lndirect Taxes from lnternational and Transactions Taxes Trade Total Percent 574,296 583,058 44,712 1,202,066 2012 Percent 2013 Percent 48% 673,771 47o/o 789,178 48% 49o/" 688,049 48o/" 783,O14 47"/" 4% 65,607 5o/o 79,065 5o/o 100% 1,427,427 lOOo/o 1,651,257 1AO/o Source: Table C.1, "Revenue Program, By Source, 201 1-2013," Department of Budget and Management, Budqet of Expenditures and Sources of Financino, FY2013. 61