Tax reform – Manila Standard


Every time the government talks of tax reform, it usually means collecting more taxes from Filipinos. I have never seen a tax reform law that will in the end collect less taxes from the already overburdened Filipino taxpayers.

This is true with House Bill No. 5636 or TRAIN—Tax Reform for Acceleration and Inclusion—that was recently passed by the House of Representatives. We are already one of the highest, if not the highest taxed, citizenry in this part of the world. It is only perhaps the Scandinavian countries that tax their people higher than our government does us. But at least in those countries, they take care of their citizens from cradle to grave. This is perhaps one of the reasons why the Nordic countries always rank at the top of the happiest people index in this planet.

Not so here. We still have to take care of our own education and health care. We have to save for our retirement because any benefits we will receive will likely not be enough. We also have the highest electricity rates, pay more to take public transport and pay a lot more to buy vehicles that we can use because of the unreliability of our public transportation system.

In the Southeast Asian region, we have one of the most expensive vehicles next to Singapore. To give an example, the top-of-the-line Toyota four-wheel drive Fortuner would cost us roughly the equivalent of the X3 BMW SUV in the United States. If bought here, this same vehicle would cost twice than the price in the US.

Like everyone else, I would like to see the day when Congress can pass a law that will mandate a more efficient way of collecting taxes to increase government revenues because there is so much wastage, principally as a result of corruption.

Yes, the House of Representatives have been very quick to point out that in this new tax reform bill, income taxes for those earning P250,000 or less will be abolished. That is the carrot. The kicker, however, is that the new law if passed as crafted by the House, will collect a lot when one buys a liter of kerosene, gasoline, diesel and vehicles. For all intents and purposes, this will make it harder for citizens to buy their first dream cars.

These new taxes are in addition to the 12-percent value-added tax already being collected by the government every time we buy anything, from medicine, clothing and food. Effectively, these bring the VAT to about 20 percent.

I heard a high government official explaining in a live TV interview that the abolition of income taxes of certain income brackets will expand the middle class. He did not explain, however, who those belonging to this so-called middle class would be. I take it that those are the people earning P250,000 a year or less.

The problem is that we do not really have credible official figures on how many middle-class families there are in this country. I have long thought that our middle class disappeared long time ago and that we now only have two groups: The rich who are becoming richer and the poor who are becoming poorer. There is nothing in between.

This new tax reform bill will only make it harder for people transitioning to middle-class status to achieve their cherished goal of getting out of poverty. House Bill No. 5636 will only make the rating agencies happy.

Right now, there seems to be little protest coming from the general public. But the people are not stupid. They will eventually realize the huge bite the new taxes will take from their incomes and hopefully vent their frustrations on their representatives come election time. It is really difficult to fathom that just when people are beginning to earn more, and be able to buy other things aside from basic necessities, the government steps in.

Let us look at motorization. For the first time in our history, people are really beginning to buy more cars. But what does the government do? Instead of making it easier for people to buy vehicles, the government is making it more difficult to do so. It is the complete opposite of what they should be doing.

At the turn of the 20th century, when the United States was starting to transition from horses to vehicles, cars were very expensive. Motor vehicles were the toys of the rich until 1903 when Henry Ford introduced the affordable Model T.

With this model, the price of the car went down, making it affordable to ordinary people. By 1927, 15 million of this model were produced. The rest is history. Motorization hastened the industrialization of the United States and became the biggest car market in the world for the whole of the 20th century until overtaken recently by China.

Maybe our finance people do not realize that every time someone buys a car, this individual helps to create a job and other related industries. With cars, people can in fact improve traffic because they can live far from city centers thereby decongesting crowded cities. The government must really rethink this practice of bleeding the Filipino white with unreasonable taxation.

We should learn from the Chinese. Be happy with a small return of investment so long as the income is continuous rather than aim for bigger return but very irregular. And this is perhaps the reason why of all our billionaires on the Forbes list, almost all of them are Chinese-Filipinos.

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