Accelerating exclusion

IN THE first week of 2018, the Duterte Tax Reform Program is rampaging already through consumers’ purses and budgets. If there are still any political stragglers within the Duterte administration who still believe that he embodies progressive economic ideals, then the marauding tax reform law or TRAIN that is now being implemented should leave anyone without any doubt about the obvious neoliberal direction of his administration.

The Tax Reform Law for Acceleration and Inclusion by the Duterte administration signed into law by Duterte last December 19, 2017 is a neoliberal technocrat’s wet dream. One can say that government functions can be divided into two broad categories – collecting and spending money.

The new tax measures clearly resolves the issue of securing government revenues by devising of the most efficient ways to collect money from the people by taxing the core of every Filipino’s consumption practices regardless of social standing.

It veers away from the over reliance on income taxation of the past and casts a wider net that makes tax payers out of the country’s every man, woman, and child through their consumption practices of basic economic goods such as sugar and oil.

It is a shrewd move that on the one hand dangles additional funds to the formally employed workers in the country who before bore the brunt of filling government coffers with their income tax. They are now given substantive deductions from the income tax taken away from their salaries and now they will have more take home pay.

However, the salaried ones and every Filipino including those who have no formal sources of income as well as the country’s oligarchs, politicians, and millionaires will now have to equally share in the costs of running government.

And if you look at these sectors in terms of number, who among these comprise the greatest number who will eventually assume the economic burden of government costs? Only 7.5 million Filipino families, according to Ibon Foundation’s Sonny Africa, are set to benefit from the reduction of income tax leaving 15.2 million Filipino families who will suffer the ensuing higher prices with the expanded VAT on oil and sugar goods.

In other words, the tax reform has widened the sources of revenue beyond income tax by taxing the goods that every one especially the poor who are more numerous consume.

The increase in taxes in diesel and gasoline for instance will have a domino effect in other consumer goods since all goods before they reach the consumer will have to be transported.

The two to four peso increases in both oil products are already drawing out petitions from transport groups for an increase in minimum fare for the riding public pegged at twelve pesos.

What is even more worrisome is the inflationary effect of additional income from those who now have additional buying power. The formal income earners might appreciate the increase in their take home pay at first but in terms of real value, they might actually see their incomes decreasing with the prices of goods going up.

The obvious winner in all of these is, of course, government who will benefit from the shift from income tax to taxing basic economic goods. It also will enjoy more efficient means of tax collection by simplifying the revenue stream from the expanded value added tax base.

Other winners here include middle and upper class income earners who will have additional income in the few thousands to hundreds of thousands with the reduction in income tax planned over the next few years. In other words, those that do not need additional income already are actually given more under the tax reform regime of Duterte.

This propertied class is also set to gain a whole lot more with reductions in estate and donor taxes under the same tax scheme. In the meantime, proponents of the tax law fete the progressive dimensions of the tax law because it supposedly promotes public health by weaning away the public from the consumption of sugary goods as if the inflationary effect of the same tax law will now give them access to healthier organic goods.