Duterte and taxes
WHEN Candidate Duterte promised lower taxes, many from the middle class and the poor felt vindicated. But it turns out that President Duterte actually didn’t make that promise to them.
Progressive think-tank IBON points out the fundamental injustice in President Duterte’s so-called tax reform law called TRAIN: “[It] does not make sense for supposed tax reforms to give a corporate executive already earning Php303,059 monthly (or Php3.7 million yearly) an additional Php1,212. Nor does it make sense to only tax a company’s chief executive officer earning Php706,017 monthly (or Php8.5 million yearly) just an additional Php20,694; this is probably just what would be spent on a weekend family dinner. Yet the DOF’s TRAIN does just this while, to recall, taking hundreds of pesos away from the poorest Filipinos who already have so little as it is. The poorest are made to pay more out of much smaller incomes to begin with and this is not by any reasonable interpretation a ‘fairer and more equitable’ tax system.
According to IBON, “DOF cites the supposedly higher income tax rate of 35% applied to the highest income bracket, compared to the current 32%, as proof of the progressivity of their proposals. This is a half-truth though because using the complete formula which includes a minimum lump sum and applying the tax rate only on the excess of income over Php5 million means that many of the country’s rich will actually end up paying less than under the current tax system.”
“The DOF also gives the example of the country’s top two income taxpayers whose take home pay falls in 2018 upon the tax reform to reinforce the impression that the new tax system is progressive. This is however an exaggeration and is oblivious to how the country’s super-rich use various legal and illegal strategies to avoid paying taxes including tax havens, offshore accounts, shell companies and trust funds, smuggling and others,” the think-tank explains.
Taxes could and should be a way to redistribute wealth, by making the wealthiest contribute more, while giving comfort to the struggling middle class, and helping emancipate the poor.
The defenders of TRAIN cannot just zero-in on the cuts on the personal income tax rate given to the middle class. That is long overdue: Overdue by two decades.
What should define TRAIN is that it also gives the wealthiest Filipinos something that they don’t need and deserve: tax cuts for their ballooning wealth.
IBON gets it. Duterte’s mortal sin is that “TRAIN will make the rich richer – The net impact of the change in income taxes, expansion of VAT coverage, new oil excise taxes, and inflationary effect is that the highest-earning 40% of Filipino households, or 9.1 million households with some 40 million Filipinos, will have more money in their pockets after the tax reform. This includes among the richest households in the country.”
“[The wealthiest] have net gains because their increased take home pay from lower personal income taxes more than offsets losses from additional VAT, oil taxes, auto taxes, the sweets tax, and inflation. The net gains remain even if higher taxes on automobiles and especially on high-end luxury cars, which is sensible, are factored in,” IBON explains.
In many countries, people always give plenty of attention to tax reform not only for the benefits they stand to get or should get. They are wary over what the oligarchs manage to sneak in in terms of tax cuts and tax breaks — things that are unjust because they don’t deserve it and they get it at everyone else’s expense.
Another way of looking at it is that TRAIN’s tax cuts for the oligarchs mean loss of revenues on the part of government. It means government will have to recover those lost revenues from the middle class and the poor. The higher, expanded and new taxes like fuel excise taxes, sugar-sweetened beverages tax and VAT — which all of us, especially the poor, would now have to shoulder — would pay for the tax cuts Duterte lavishes on the oligarchy.
We must argue that the tax cuts for the middle class could have been higher, and some new taxes could have been forgone if the Duterte administration and Congress decided to stick it to the fat, greedy, selfish oligarchy. If Duterte matched his anti-oligarchy promises with action, the wealthiest should be made to pay more, the middle class even less, and the poor shielded from inflationary indirect taxes.
While the richest get richer under TRAIN, economist Sonny Africa says “15.2 million Filipino families not getting any increases in take-home pay will have to deal with more expensive food and drinks, cooking expenses, jeepney and bus fares, electricity and other goods and services next year. Higher taxes will be imposed on sugar sweetened drinks; oil products including liquid petroleum gas (LPG), kerosene, diesel, and gasoline among others; and coal.”
With TRAIN, Duterte is not Scrooge. He is more like the Robin Hood of the oligarchs. He grabs from the poor and the middle class what he gives to the wealthiest. In so doing, Duterte hardens and perpetuates income inequality — and by this single measure, he defines who he is truly loyal to and who he deceives with words like “change” and “reform”. He’s no different from all past presidents.
(Christmas wishes: May the holidays bless us, our families and the nation with what is needed to expose and challenge fake reforms like TRAIN. May the Child born in a manger make us see the shepherds who represented us at his birth, and also the murderous King who sought his and other infants’ heads. May the Star guide us on the way forward.)