The existing tax system in the Philippines, already biased toward the rich, is up for reform. However, the Duterte administration’s proposed tax reform package (House Bill No. 5636, also referred to as the Tax Reform Acceleration and Inclusion Act or TRAIN), recently adopted by the House of Representatives, further burdens the poor and low-income earners.
Genuine tax reform means reversing the pro-rich bias in the taxation system. It must be a mechanism that redistributes wealth from the rich to the rest of the population. Income inequality is increasing, with the richest families earning nine times more than poor families. Genuine tax reform should be a mechanism for reducing the gap in income inequality.
But the Duterte administration’s tax reform does the opposite. According to estimates by some legislators, it reduces the income of the bottom 60 percent of the households. The monthly take-home pay of poor households will shrink by P1,189 and those of middle-class workers by P13,652.
According to the bill, workers earning P250,000 a year or approximately P20,000 per month won’t have to pay taxes. Yes, but this looks like a con scheme. More of our income will go to paying the value added tax (VAT): The VAT will be expanded and it will be imposed on some exempted goods and services. According to some estimates, the government will be collecting around P170 billion less from the richest families, while the rest of us will be paying more than P340 billion for previously VAT-exempt items.
We will pay more for oil and petroleum products as the excise tax on these commodities will be increased (P3-P6 excise tax per liter of fuel).
The overall package would result in a net gain of P133.8 billion for the government. This tax revenue will mainly fund the Duterte administration’s trillions worth of infrastructure spending; but note the lucrative contracts for these projects under the program will be awarded to the corporate rich.
It’s a win-win for the rich and their corporations, while the rest of us are being conned into paying the lucrative infrastructure contracts to be awarded to the corporate rich, which will include foreign-owned firms.
In view of this, Partido Lakas ng Masa calls for genuine tax reform to redistribute wealth and reduce the income inequality between the rich and the rest of the Filipino populace. It means scrapping VAT; implementing a steeply graduated and progressive tax system where the wealthy pay their share; introducing a wealth tax for the super rich; exacting bigger tax from environment polluters; ending the billions of pesos in public subsidies to private corporations, banks and energy companies; doubling the tax free threshold to P500,000 a year; increasing the minimum wage and the social wage, among others.
REI MELENCIO, Partido Lakas ng Masa, partidolakasngmasa@gmail.com