This research will determine the effectiveness of tax incentives in tax collection of Baguio City. Its effectiveness will be assessed through the use of a cost-benefit analysis, which will weigh the level of costs and benefits against the possibility of a profit for the community. To the extent that increased tax revenues reveal the political and economic activity of the population, it also constitutes an engine of development and growth. While most of the city's revenue comes from commercial establishments, economic enterprises and real estate, according to the city treasurer, it is fascinating to see how the city manages to meet its tax collection goal and continues to increase its registered operating permits. Incentives may take the form of tax incentives for individuals or businesses, which may include deductions, benefits, etc., which will likely influence the trend of tax collection over a given period. Instruments that contribute to economic growth and development have been one of the agendas of nations around the world; its uses become more evident in resolving the situation of developing countries after the colonization period. The exercise of state sovereignty through tax collection has been one of the main sources of physical funds to achieve the quest for growth and development of the state in order to generate better welfare for its population. Ahmad and Stein (1991) would argue that questions regarding the principles of tax theory on how effectively the government would finance its activities remain debatable. But the question that must first be asked is how the State could earn maximum revenue so that funds are correctly distributed in public expenditure. The theory on optimal taxation would suffice...... middle of document ...... community objective focused on improving living conditions. The incentives granted should not result in a loss of income; otherwise it won't make sense. The problem regarding the complex tax system of our country can be analyzed and modified given that according to the 1987 constitution, “The rule of taxation shall be uniform and equitable. Congress will have to develop a progressive system of taxation. (Article VI, section 28, paragraph 1). The system should consider all possible situations and factors for more collective taxation; this will be reflected in the concepts of good governance and division of labor in the bureaucracy. mess%E2%80%99http://documents.worldbank.org/curated/en/2013/06/17886462/promoting-growth-caribbean-tax-incentives-theory-practice