In Package 1 of now President Duterte’s Comprehensive Tax Reform Program, there are five major additional taxes or tax increases—the personal income tax (PIT), petroleum excise tax, the vehicle excise tax, the road users tax, and the broadening of the 12 percent value added tax (VAT).
Either the new taxes will make life miserable for you or help alleviate your current living conditions. Albay Congressman Joey Salceda says his Tax Reform for Acceleration and Inclusion will transfer wealth to the poor at the greatest volume in our history, so that poverty will decline from 21 percent today to 14 percent in 2022 when Duterte leaves office.
Starting 2018, exempted from income tax are those earning P250,000 or less a year, or P20,833 a month. They used to pay P77,500 income tax a year. In practice, workers making P20,000 a month are slapped a 20 percent effective personal income tax rate, because of the withholding tax system. The tax is zero starting 2018.
Those earning from P250,000 to P400,000 will pay 20 percent of P150,000 or P30,000, down from P80,000 today.
The tax bill creates four new income brackets:
• P400,000 to P800,000 (which will be taxed P30,000 plus P100,000 or 25 percent of the excess over P400,000;
• P800,000 to P2 million (P130,000 plus 30 percent of the excess over P800,000);
• P2 million to P5 million (P490,000 tax plus 32 percent of the excess over P2 million); and
• over P5 million (P1.3 million tax plus 35 percent of above P5 million). Previously, these people paid P125,000 tax plus 32 percent of the excess over P500,000.
In effect, the poor and low middle class (those earning P250,000 or less a year) will benefit. They will pay zero tax. They are 83 percent of taxpayers.
The very rich (those earning P2 million or more) will benefit, too. Also reckoned as very rich are top government officials, those with the rank of cabinet undersecretary (who makes P1.722 million a year) up to the President (who makes P3.468 million a year). They will benefit, too by paying less taxes and getting higher take home pay. They will get an additional take home pay of P78,000 to P83,000 per year, the same additional take-home pay of an executive in a large Makati company under the proposed tax reform.
Contrary to the public perception, our top government officials are not underpaid.
Just ask the top Customs people who, according to Senator Panfilo Lacson, rake in P270 million daily in bribe money or P27 billion a year. Did you know the budget for state colleges and universities (SUCs)? P34 billion. Eighty pesos of every P100 of SUC tuition could be funded—just with the bribe money given Customs. How is that for egalitarianism?
Maybe, if that bribe money were used to give Customs people a higher education (though many SUCs cannot be said to offer higher education), there would be fewer stupid Customs people who speak bad English. How could you explain P6.5 billion worth of illegal drugs being allowed to pass through the Customs Super Green Lane, without requiring an x-ray and a single signature to release? As Senator Richard Gordon has told Customs Commissioner Nicanor Faeldon “either you are incompetent or you are corrupt!”. In either case, the government and the people were the loser.
Thirty years ago, I attempted to work on the release of a 20-foot container with the personal effects of my father-in-law who was coming home for good and therefore, his goods were not taxable. Despite the endorsement of the Customs commissioner then, I had to secure 45 signatures going into the Customs labyrinth and another 45 signatures going out. Every table had an open drawer where you could drop “gifts.” I was required to pay a minimum bribe at every stop, and indeed, all stops up to the Quezon City Welcome Rotunda.
Because of the seemingly lower personal income tax rates under the House-approved Bill No. 5636 (the TRAIN), the government stands to lose P141.4 billion in income tax revenues in 2018, P155.5 billion in 2019, P172.1 billion in 2020, and P227 billion in 2021.
How does the government intend to recoup the huge losses in personal income tax revenues?
On autos (and nearly everyone wants to buy a car to beat MMDA’s crazy car coding scheme), the excise tax will increase from 22 percent to as high as 90 percent. Your Land Cruiser will cost P1 million more, with taxes; your Vios, will cost P33,000 more.
On oil products like, the excise tax will rise from zero at present to P3 per liter in 2018, P5 in 2019, and P6 in 2020. On gasoline, the excise tax will more than double, from P4.35 per liter today, to P9 by 2019.
The VAT exemptions of certain products will be lifted—such as power transmission (which means higher electricity prices), low cost and socialized housing (which means higher home prices), lease of residential units (which means higher rentals), and Boy Scouts and Girl Scouts (will this mean we have fewer young scouts who are honest and brave?).
Since many columnists like me are senior citizens (including the Finance secretary), the VAT exemptions on their food and medicines will remain.
Remember the notorious road user’s tax? It will be doubled and collected from you when you register your car.