The tax reform proposal of the Department of Finance (DOF) will only ease the rich of taxes but load the poor with more of them. It can even result to the worsening of inequality in the country. This was how the IBON Foundation, a cause-oriented research group, assessed the DOF tax plans it intends to submit to Congress this month.
“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,” IBON revealed in an email message to GMA News Online.
In a gist, IBON said the rich will gain from lower income and capital income taxes, as well as property-related taxes.
“The top personal income tax rate will go down from 32 percent to eventually just 25 percent … This will result in P139.0 billion less revenues for the government in just the first year of implementation,” IBON further disclosed.
Last July, President Rodrigo Duterte announced how his administration would pursue tax reforms, opting for simpler, fair and more efficient taxation to lower rates from 32 to 25 percent—a taxation that remained the same since 1997.
The present administration also aims to lower taxes on transactions relating to properties like donor, estate and transaction taxes.
“IBON observed that the DOF plans to offset lower taxes paid by the wealthiest Filipinos by increasing taxes on the poor majority. The poor will suffer higher prices from value-added tax (VAT) being charged on previously exempt items, higher excise taxes on petroleum products, and a new sweets tax,” the research foundation claimed.
Moreover, Duterte’s administration plans to impose 12-percent VAT on basic needs like raw food, health and education.
“Consumers will pay P163.4 billion more for the same goods and services,” IBON explained.
“There will be higher excise taxes of P6-10 per liter or kilogram on diesel, LPG (liquefied petroleum gas), kerosene and the entire range of oil product prices. Consumers will pay P178.2 billion more when they buy oil products or pay for correspondingly more expensive goods, services, and transport fares,” IBON added.
The president announced that a comprehensive tax reform plan is high on the 10-point proposal of the business community.
The DOF tax reform plan is also considering an increase in government revenues through the imposition of taxes on “fatty foods” as well as luxury goods and casino winnings. However, the plan also includes preparing a selected subsidy plan to protect poor consumers from the excise tax reforms.
“We are currently developing a targeted subsidy plan, similar to that of Indonesia, where the most vulnerable (especially [pertaining] to the increase in transportation costs) will be protected in a manner like that of the 4Ps (Pantawid ng Pamilyang Pilipino Program),” Finance Secretary Carlos Dominguez III explained in another statement on Monday, September 5.
“Tax reform is needed to achieve the larger goals of the administration and to make sure that everybody feels the country’s growth,” Dominguez added.