An antipoor tax package
I stand foursquare for tax reform. The reasons are plenty: the country’s low revenue/GDP ratio, tax loopholes, inequities in the tax system, and the fact that tax administration needs improvement, tax measures must be rationalized, and the tax system could stand simplification. These may result in undesirable outcomes for the economy, such as undertaxation and overborrowing, overconsumption and underinvestment, investment in the wrong areas (real estate and properties), and public squalor amid private affluence.
BUT: I have problems with this administration’s comprehensive tax reform program (CTRP), which is touted as a “simpler, fairer, and more efficient tax system, characterized by low rates and a broad taxpayer base that promotes investment, job creation and poverty reduction,” and designed “with the stated intention of benefiting the poor the most and being a game changer for the economy and society.”
How can anyone be against that? Because, on closer inspection, the hype kind of disintegrates.
ITEM: Rep. Joey Salceda, who gave me a hard copy of his exhaustive presentations of the “TARA sa TRAIN” (TsT)—the first package of the CTRP (five or six packages, with contents and timing which get fuzzier as we progress)—had a summary slide showing the benefits of the TsT (from 2017-22): “Almost P1.1 trillion (almost half) are savings to middle class… P58 billion are income transfers to the low income class.”
Joey is the vice chair of the House committees that studied the package, and a proponent. I will not question his figures which came from the Department of Finance. So the question is: How can a 95-5 split of the direct benefits of the TsT in any way represent a “the poor will benefit the most” situation, between the “middle” and “low” income groups? Ask any child: If candies are split 19 and 1 between two children, is that fair? Is it most beneficial to the child who gets one candy? Duh!
It gets worse: That P58 billion worth of transfers to the poor (P14.5 billion a year) is only a temporary benefit. It will stop after four years. On the other hand, the benefits to the nonpoor are perpetual. How much more antipoor can a tax package get? In fact, the package itself has a negative impact on the poor in the long run.
ITEM: The TsT, passed recently by the House, includes two minor (in revenue impact) tax measures: one that will reduce and restructure the donor’s tax on net donations for gifts exceeding P100,000, and another that will reduce and restructure the estate tax based on the net value of the estate. Note the words “estate” and “donors.” Its impact (per the DOF) will reduce government revenues by P3.1 billion a year.
Who will benefit from that tax reduction? Unabashedly, the children of the rich—the ones wealthy enough to try cheating the government by donating their wealth to their spouses or children while they are still alive, and those wealthy enough to leave an estate. Will this benefit the poor? In fact, it will tend to perpetuate the gross inequalities in wealth. The measures were slipped quietly into the TsT.
ITEM: Here is the original composition of the tax measures over time: TsT—personal income tax reduction, wealth tax deduction (estate and donor’s tax), VAT exemptions streamlining (we have the largest number of exemptions in Asean), and automobile excises; Package 2 for next year—“Health Tax Package,” which includes the Sin Tax Reform bill, and the Sugar Sweetened Beverage (SSB) excise; Packages 3, 4, 5 in the next two or three years—corporate income tax/incentives, property tax, capital income (gains) tax, and other taxes (carbon tax, “fatty” food tax, lottery and casino tax, mining tax).
So how did the SSB, scheduled for Package 2, get into Package 1? The story is that the strong auto lobby managed to reduce its proposed excise taxes. Thus the need for a replacement in the TsT.
Why not the already studied and propoor sin tax and mining tax? The answer: The cigarette, alcohol and mining lobbies were equally strong, with champions in the House and the Cabinet.
The last question: Who lobbied for the poor?
