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Group blasts inflationary effect of tax reform law

With ordinary Filipinos slowly starting to feel the effects of the recently passed tax reform law, the Freedom from Debt Coalition (FDC) criticized the Tax Reform for Acceleration and Inclusion or TRAIN Act as “fundamentally anti-poor” and pushed instead for more taxes on the wealthy. “We know that consumption taxes are inherently regressive and will hurt the poor the most.

What makes TRAIN worse is that it benefits the wealthy while unduly burdening the poor with its specific provisions picking the pockets of the poor and further filling the purses of the wealthy in our country,” Dr. Eduard Tadem, FDC President said.

“While boasting of bringing tax relief for those earning PhP 250,000 and below per year, equivalent to P20,833 per month, it does nothing for those already exempt from paying personal income tax such as minimum wage earners, who numbered 1,186,000 in 2016, and those in the informal sector, estimated at 15.6 million by the latest Labor Survey equivalent to 38% of the total working population,” Tadem noted.

FDC argues that ordinary Filipinos will be the subject of higher prices for commodities and services due to the imposition of excise taxes on petroleum products, and the removal of value added tax (VAT) exemptions that is expected to reverberate through the supply chains to be borne ultimately by consumers.

“While those classified by the National Household Targeting Systems will receive a paltry PhP 200 monthly subsidy in view of the price increases that will be brought about by the TRAIN Act, minimum wage earners and workers in the informal sector, including unpaid family labor, will bear the economic brunt of the decreased purchasing power of their stagnant disposable income. Even with the expanded subsidy program, it will be impossible to cover everybody,” Tadem said.

“The imposition of the flat six percent (6%) estate and donor’s tax highlights the bias of these tax reforms towards the rich. Many countries, and even the Philippines in the past, impose a progressive scheme on estate taxes with increasing percentages as the value of estates increase, on the premise that large estates of the wealthy should pay more,” Tadem added.

According to FDC, the government should impose wealth taxes to correct historic economic injustice, and address present inequality. FDC warned of the detriments of the TRAIN Law earlier when the TRAIN proponents outrightly neglected addressing the tax loopholes as it railroaded its passage promising simpler, fairer and more efficient in the tax reforms with raising more resources for investment in infrastructure and services.

In correcting the tax system’s inequity, reforms should actually lessen the overall burden of the poor while providing more for public services that are accessed by majority of the poor.

“This can begin through the reduction of consumption taxes on non-luxury goods, which can be considered inherently regressive, and the imposition of progressive taxation not only on income but also on wealth such as estates and donations,” Tadem said.

Consequently, “We oppose the 70-30 formula under TRAIN wherein seventy percent of the revenue earned will be earmarked for infrastructure or the so-called ‘Build, Build, Build’ program and only the remaining thirty percent will go to social services such as education, health and housing.

We propose that, in general and specific to the TRAIN Act, government funds for social services and protection should be increased to effectively address poverty and social inequality,” Tadem said.

Maximizing economic and social benefits from tax for the people means providing more of the collected revenues for public and social services. Rather than putting the biggest share to infrastructure, more should go to ensuring provisions for (accessible, affordable, efficient and quality) social services. Immediate impacts of the TRAIN Law, as inflation sets in, should not be looked over, and become lip-service but rather social protection measures be actualized immediately.

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