Proposed tax plan inconsistent with pro-poor thrust—IBON

The research group IBON has said the Department of Finance’s (DOF) proposed tax plan essentially remains elitist and is inconsistent with President Duterte’s pro-poor stance. Following the President’s lead, the government should be brave enough to tax the richest businesses and families instead of burdening the poor with new taxes, IBON said. 

The DOF last week submitted to Congress the first set of its proposed tax-reform program. The plan includes the reduction of personal income tax and the expansion of the tax base by loosening VAT exemptions. Also among the proposals is adjusting the excise tax on petroleum and automobile products.

According to IBON, the poor will suffer higher prices of goods and services, including transport fares, the new VAT, oil tax and sweets tax.

The DOF’s argument that the new higher taxes are progressive is unsound, said the group. The DOF does not seem to realize that a peso for the poor is worth so much more to them than even hundreds or thousands of pesos for the rich, said IBON.

The additional tax burden that is being put on the poor majority of consumers is unjust amid their already very low incomes and insecure livelihoods to begin with. The administration’s economic managers should not be so reluctant to tax the biggest corporations and wealthiest families and businessmen to raise revenue for social and economic services, IBON said.

It added that the tax-reform program relieves the rich and burdens the poor. The group said that this will worsen inequality in the country and should be replaced by a tax program that taxes the rich instead and is backed with the required political will.

The DOF proposed tax-reform program seeks to raise an additional P600 billion by 2019. IBON noted that it will do this by raising taxes on the country’s poor majority and reducing taxes paid by the rich and big corporations.

According to the group, the rich will benefit from lower income taxes, property-related taxes, and capital income taxes:

The top personal income-tax rate will go down from 32 percent to eventually just 25 percent. Around 6.7 million deserving wage and salary earners also stand to benefit from the DOF’s plan to update 19-year-old tax brackets. These will result in P139 billion less revenues for the government in just the first year of implementation; and

The corporate income tax will go down from 30 percent to 25 percent. Corporations will pay P34.8 billion less in income taxes.

It added that the tax rate on property-related transactions of the wealthy will be cut. The estate tax of 20 percent will go down to 6 percent of the value of property being transferred. Donor taxes and transaction taxes on land will also be cut. The rich will pay P3.5 billion less in estate and donor taxes.

The tax on interest income earned on peso deposits and investments will also go down from 20 percent to 10 percent. The rich will pay P1.0 billion less in capital income taxes.

IBON observed that the DOF plans to offset lower taxes paid by the wealthiest Filipinos by increasing taxes on the poor majority.

IBON said that the administration’s economic managers are using Mr. Duterte’s current popularity to push an unpopular pro-rich neoliberal tax agenda. But the people need vastly improved public and economic services. This should be financed by those who have already accumulated so much and not by those who have so little as it is, said the group.