THE intransigent refusal of President Benigno Aquino III to lower unreasonably high income tax rates raises a crucial question for the administration candidate for the presidency in 2016.
The question that demands a clear-cut answer today from Liberal Party bet Manuel Roxas II is simple: Does he agree with the President?
How Roxas answers this question will have a major impact on the lives of millions of working men and women who toil every day only to see the state take away a third of their earnings while offering them very little in return by way of social services.
A direct and truthful answer to this question must be part of the equation for voters who go to the polls next year to elect a new president.
The question is even more germane, given that Roxas is running on a platform of continuity. He must now answer honestly: does this continuity extend to our high taxes? If so, why should low- and middle-income earners even consider voting for him?
For there is no doubt that our income taxes are both excessive and unjust.
Even Mr. Aquino’s own Cabinet secretary for socio-economic planning, Secretary Arsenio Balisacan, admitted that the country’s tax system is regressive, and that middle- and low-income groups bear the brunt of the cost of government.
Testifying before a Senate budget hearing with more candor than the President, Balisacan said the country’s tax system may appear progressive on paper but it is actually regressive.
“It is the low-income groups paying higher taxes proportional to their income,” Balisacan said.
Last year, the Tax Management Association of the Philippines noted that Filipino workers pay the highest income tax in the entire Association of Southeast Asian Nations.
A Filipino employee earning a little over P500,000 a year is taxed 32 percent, while his Thai counterpart is only taxed 10 percent, the TMAP said.
A worker earning an equivalent of P500,000 annually in Singapore pays only 2 percent. In Vietnam, the rate is 20 percent; in Malaysia, 11 percent; in Cambodia, 20 percent; and in Laos, 12 percent.
In Brunei, workers earning the equivalent of P500,000 do not have to pay any income tax at all.
This data was made available to Congress to press for lower and more equitable income tax rates, now the subject of two bills.
Yet neither the bill by Marikina Rep. Miro Quimbo nor the one by Senator Ralph Recto has swayed the President, who is convinced that lowering the tax rates will 1) the loss of government revenue, estimated at P29 billion for the first year; and 2) lower the country’s credit rating among international rating agencies.
Last week, 18 major business groups urged the President to reconsider his position, saying that reducing personal and corporate income tax rates would make the Philippine workforce and corporations more competitive with their Asean neighbors; broaden the tax base by encouraging tax compliance; and increase disposable income for domestic purchase of goods and services that, in turn, would increase the government tax take on consumption taxes.
The statement was supported by TMAP, most major international chambers of commerce, the Management Association of the Philippines, the Philippine Chamber of Commerce and Industry, the Financial Executives Institute of the Philippines and the Makati Business Club.
In a rare display of agreement, major labor groups have also supported the call to lower income tax rates.
Amid the almost unanimous support against the President’s stand, Roxas, as the ruling party’s standard bearer, has a unique opportunity to show the electorate that he is his own man, with more reason and compassion than his political sponsor.
There can be no fence sitting or prevarication on this gut issue and we must ask candidate Roxas at every opportunity where he stands on the need to lower our patently unreasonable income tax rates. We must also demand to know if he intends, as Mr. Aquino’s financial advisers now propose, to raise consumption taxes as a way to offset the lowering of income tax rates—an approach that most certainly would hurt low- and middle-income families.
These are the burning questions that candidate Roxas must address. The voters demand and deserve a straight answer.
