Focus on taxing the rich
A trial balloon was set off last week to see what the public reaction will be if they removed the VAT exemption of senior citizens. My reaction is simple: you guys have to be kidding!
I realize that we need new fund sources to replace loss of tax revenues from some of the tax reform measures the Duterte administration plans to put in place. But they have to look at taxing the rich who have more capacity to pay than to reduce what little benefits the masa is already enjoying now.
Okay… I may concede that there should be a limit to VAT exemption for meals taken in high end restaurants. But the VAT exemption for prescription drugs, other medicines and health care services required by senior citizens must not be diluted or removed.
The reasons for senior citizen VAT exemption are obvious. Senior citizens have sharply diminished earning power and those prescription medicines and health care services are matters of life and death.
There might even be more sense in increasing the taxes levied on gasoline and diesel. The low prices of these products these days make that affordable. Higher pump prices will also make us think twice before taking the car out and worsening our traffic gridlock situation.
Actually, we have long determined that the impact of higher fuel product prices on prime commodities is not that large. The problem is wrong perception.
Merchants use higher fuel prices as an excuse for an outrageous increase in the prices of consumer goods. The DTI should just be vigilant in monitoring and sanctioning erring manufacturers, traders and grocers.
And let us not forget, it is a good idea to tax soft drinks and other junk snacks for health reasons as well as to raise tax revenues. I am afraid the DOF is backtracking on this proposal, likely because of strong lobby by the soft drink companies.
Then too, let us think of measures that will increase tax collection but only affect the rich. I am sure plugging some legal tax avoidance practices will do the trick. It will make the rich more honest about the taxes they ought to be paying and also help realize the administration’s claimed objective of making the tax system more equitable.
Maybe we can focus on all those private holding companies of taipans and other rich folks who have inherited a lot of wealth. I am told dividends received by any corporation from another corporation are not taxable and they are excluded from taxable income when computing the income tax.
Most of the rich make most of their income via dividends paid by their companies. Only dividends paid to a real person pay a 10 percent tax. If dividends are paid to a corporation, like a private holding company, there is no tax.
The thing is… rich folks use the shell personal holding company to pay for most of their personal needs … from expensive cars to vacations abroad to even the salaries of their army of household helpers. I am also told that the BIR examiner has discretion to challenge or accept the claim. This is where corruption, big time corruption at the BIR happens.
The objective should be to remove that discretion completely. When the taipan needs cash for personal expenses, the money must be turned over to him personally from the holding company less the normal tax on dividends.
More on tax reform… a reader posted this comment on the online version of Philstar.com: As we can see, there are many common sense approaches to tax reform. But there are too many vested interests among tax experts that influence policy.
With a President who can credibly claim no ties with the long entrenched ruling economic elite, we have this golden opportunity to do a real reform of our tax system. But this can only happen if President Digong gets personally involved in the process.
I trust Sonny Dominguez to want to do the right things but he too is under pressure from his own class interests. We need Digong to set the policy clearly and see the reforms through.
The fact that some of his bureaucrats are thinking of taking away the VAT exemption of senior citizens rather than seek ways of increasing the tax payments of the rich shows we have a problem only Digong can set straight.
I am sure the manicured set of Makati and the oligarchs will do all they can to keep the current system. Digong must give this tax reform initiative the deadly importance of his anti drug drive.
The window for tax reform is short. If we fail to do this in the first year of Digong, the forces of the elite and the oligarchs will prevail and things will remain as oppressive and unfair as always.
The tax system had been imposed top down for so long. It is time for long suffering taxpayers to speak out and be heard. We have to be given hope that indeed, change is coming too in the way we are assessed our taxes.
Remember that unless the new measures are able to extract more tax payments from the rich than they are paying now, it is not tax reform at all.
eirons1043 • Sir Boo as a retired accountant there is only one kind of taxation that is simple and direct and that is TAX ONLY THE GROSS INCOME/ RECEIPTS AND FORGET THE exemptions and EXPENSES. The only job of BIR is to determine the fairness of the reported gross income and nothing else.
The Income Tax Form will fit in a single 1/2 page vertical bond paper. Example - Monthly employee gross income of P50 thousand taxed at one percent of the gross is P500 hundred tapos na. Example- Corporation with gross monthly receipt of P50 million taxed at 10 percent = P5 million monthly tax tapos na wala ng gagawin pa. Very simple di po ba?
But as I have told you Sir Boo I have been waiting for the past 50 years for this but zero result. My guess eh mawawalan ng trabaho ang mga Tax Consultant, Tax professors, tax accountant at tax lawyers pati na yong mga judge/justices na kumikita dyan.
Finally the reality is VAT is also an income tax coz Income Tax is tax before receiving the Income while VAT is a tax after receiving the income when you buy something/anything. So there you are tax before receiving and tax again after receiving. Ika nga ni Digong p.......... buhay ito.