Taxed to death

The only thing that is certain is death and taxes, so goes a popular saying, and we know it would not sound exaggerated if we say that for many working stiffs like us, we feel that we are being taxed to death. And it’s not a sentiment that is without basis, because studies from international and local audit and financial firms say the Philippines has one of the highest tax rates in Southeast Asia—up to 32 percent for those earning P500,000 a year.

Since 1997, individual income tax brackets have remained unchanged, but the prices of food and other goods and services have skyrocketed, and despite the corresponding miniscule salary increases given to employees and wage earners, the purchasing power of the peso has also greatly diminished. Common sense should tell us that the tax brackets almost two decades ago are now very unrealistic, but then again, this is an administration that is in dire need of common sense as even its standard bearer wants to create a Department of Common Sense.

Despite the overwhelming clamor from his bosses, President BS Aquino adamantly refuses to even consider the proposal to lower or remove taxes on low and middle income earners. The president’s Finance secretary and Internal Revenue chief both chorused that the suggestion by some politicians to lower the tax bracket for salaried workers is simplistic and populist, as it would hinder the momentum of development in the Philippines. This development and economic growth that they love crowing about, unfortunately, has yet to be felt by many Filipinos who admitted in a recent survey by the Social Weather Stations that they have experienced hunger in the last three months. If the Philippines is really moving towards the road of prosperity, with billions spent on the government’s pet Conditional Cast Transfer program, why is the number of hungry Filipinos going up?

In defending their patron’s resolve not to heed the clamor of his bosses, Purisima and Henares point to low compliance rates and bank secrecy laws as reasons why tax evasion still happens. Of course, there is also rampant smuggling that also deprives the government of billions in tax revenues. There are groups however who argue that the revenue that will be lost should the government lower the current tax bracket can be compensated if concerned government agencies do their job, and well, of going after tax cheats and smugglers. It doesn’t help either that people are resentful at the thought that the taxes from their hard-earned, meager wages do not go where they are supposed to go and most likely ends up in some politician’s pocket (as largesse) or gets diverted to fund a certain candidate’s campaign.

In his blog post titled “Why tax issues should decide the 2016 election outcome” (https://jpfenix.wordpress.com/2015/10/06/why-tax-issues-should-decide-the-2016-election-outcome/), strategic communications expert and former media editor JP Fenix puts this issue of taxation into context, and why the taxman over the centuries has become an object of hate.

“What makes taxation and taxmen such objects of hate to this day is not the concept of collecting a share of personal wealth for the common good, which is what taxes are supposed to be. We need taxes to be able to fund roads, bridges, government services and similar expenses which the state requires to exist and its citizens to commonly use.

“What we all hate most is when taxes are not used for the purpose they were intended for. In Christ’s time the taxes were collected from the Jewish nation by the Roman conquerors that spent it for the lifestyle of the Emperor back in Rome and the local Roman governor who ruled over them.

“These days, in this democracy called the Republic of the Philippines, our tax contributions pay for our government and governance, and it pisses us to no end when we hear that our hard earned money goes to funding fraud, waste and abuse…

“The burden on providing the tax money for the Philippine government falls squarely on the shoulders of the middle class whose third of their income is slashed off automatically through the withholding tax system. Thus, whether they file their income tax forms or not (an additional burden on their time, energy and resources), they’ve already paid their taxes.

To the rich—that one percent of society which owns about 40 percent of capital resources in the country—the 30 percent or more income tax payment doesn’t matter. They have the money to hire the best tax lawyers and accountants to keep their payments down. Even after payment they can still afford their luxurious homes and vehicles; send their children abroad to study and; pay for private security, hospitalization and emergency services when needed. And their accountants and lawyers can find a way to deduct those from their tax payables,” Fenix writes.

(Truth be told, we can’t even figure out how to fill out the online BIR tax forms, or even remotely understand how the VAT works.)

“All these, taken together, makes for a crucial election issue for 2016,” he continues, underscoring the disconnect that people see between what they pay and where their money goes. What’s funny is that President BS refuses to lower tax rates because it will undermine his supposedly reformist agenda and hinder his socio-economic development and anti-poverty programs—yet it underspent P623 billion from its budget. So why collect taxes if you don’t spend the money on where they are supposed to be spent?

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