One of the best qualities of President Duterte as a leader is his compassion and his sincere and warm heart for the poor.
But his economic managers have steamrolled, through a cooperative Congress, a P3.35-trillion budget passed in record time by the Legislature. The budget bill is accompanied by a so-called tax reform package to raise funds for Duterte’s unprecedented spending spree. Many of the tax proposals will —to use the President’s favorite word—screw most Filipinos and will generally favor the rich.
The tax reforms come in five packages with a combined tax yield of P368 billion.
The first involves lowering the personal income tax rate to 25 percent from 32 percent; increasing the value added tax rate and its coverage, imposing an excise tax of P10 per liter on oil products and an excise tax equivalent to P10 per liter of sugary products – candies, cakes, juices, soft drinks and anything that has sugar in it. The VAT expansion will raise P163 billion, the excise tax on oil a stupendous P178 billion, and the sugar tax P18 billion. Package 1 will raise P200.7 billion, the biggest among the five packages or 54.5 percent of the P368 billion tax target.
The second package will reduce the corporate income tax rate to 25 percent from 30 percent; replace the five percent gross income tax rate with a 15-percent corporate income tax; and reduce, phase out or remove tax incentives enjoyed by industries in industrial zones. The government stands to lose, not earn, P1 billion from this pro-business package.
The third package lowers property taxes (like documentary stamp tax, transfer tax, and registration fees) and the estate and donor’s tax to just six percent, from 20 percent. But valuation of property on which the tax is based will increase and mandate property valuation every three years. This package will raise P40 billion or 10.8 percent of the P368-billion potential tax gain.
The fourth package will harmonize tax rates on financial and other assets. The tax on interest income on peso deposits, investments, and other fixed income will be cut to 10 percent, from 20 percent. In the stock market, the transfer tax will rise to 1 percent, from half percent. The government will lose money, P1 billion, in this package.
The fifth package contains even more taxes—a luxury tax on automobiles and jewelry, tax on mining, tax on alcohol and tobacco, fatty foods, lottery and casino bets and winnings, and a carbon tax. Package 5 taxes will raise P129.4 billion, the second biggest haul.
Package 1 and package 5 are the biggest money makers in the P368 billion tax reform package. They contain most of the anti-poor taxes—the P10 tax per liter of diesel, the tax on sugar products, the tax on alcohol and tobacco (contrary to the popular belief, the poor drink and smoke more than the rich), the tax on junk food (like McDo and Jollibee meals, the bread and meat of the poor).
Lowering the inheritance tax to six percent means government will lose P1 billion.
The government will raise P163 billion from increasing the VAT to 16 percent, from 12 percent, which today, is already the highest in Asia, outside of China’s 17 percent. The standard Asean VAT is 10 percent, except for Thailand which has 7 percent.
VAT is applied to the consumption of everyone, rich or poor. Since most Filipinos are poor, it is an anti-poor tax.
The government will earn, additionally, P178 billion from the P10 per liter tax on diesel.
Now, who uses diesel which will be slapped a P10 per liter tax? Jeepney drivers, fishermen, and farmers using diesel-run irrigation pumps, and most drivers of motorcycles.
On the other hand, many of the taxes will make millionaires happy, like the 70-percent reduction in estate tax to six percent, the reduction in tax on interest from bank deposits,
In effect, the poor and ordinary Filipinos will bankroll the President’s spending spree. Note that the above figures are yearly tax hauls. Over the next years, Duterte will spend P25 trillion—more than the total spent by all previous presidents before him.
Early on in his presidency, Duterte has relegated to his economic managers the management of the government’s finances and the economy. Perhaps, he should use the laser-sharp and deadly focus he has on illegal drugs to refining many of his managers’ tax proposals.
If Duterte does it, then I would believe change would have indeed come to this country.
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