Tax Reforms


Research group IBON said that Pres. Rodrigo Duterte’s State of the Nation (SONA) statement that “we achieved the first step towards more equitable taxes” is incorrect because the poorest majority of Filipinos will be paying more taxes than the rich. The Department of Finance is covering this up, the group also said.

According to IBON executive director Sonny Africa, under the tax ‘reform’ package recently passed by the House of Representatives (HOR) and now with the Senate, the poorest 60% of Filipinos will pay more out of their already very low incomes than the highest income 40% of Filipinos.

“The poorest 60% will pay Php32.9 billion in additional taxes next year which is 1.6% of their combined family income of some Php2.0 trillion,” he said. “The highest income 40% on the other hand will pay just Php14.7 billion which is only 0.4% of their total family income of some Php4.1 trillion.”

“In effect, the highest income 40% who have twice as much income as the poorest 60% of Filipinos will be paying less than half as much in additional taxes. Measured as a share of their total income, the poorest 60% will pay four times as much as the highest income 40% including the richest Filipinos,” said Africa.

Taking all the components of the tax package into consideration, Africa said, the highest income 40% will gain Php140.1 billion from lower personal income, estate and donor taxes. He said that this off-sets much of the additional Php154.8 billion they will pay in additional VAT, petroleum and automobile taxes.

On the other hand, Africa said that the poorest 60% do not gain anything from lower personal income taxes – being exempted from paying this already. They will however pay an additional Php32.9 billion in additional VAT and petroleum taxes. This does not even include further inflationary effects and the impact of the onerous tax on sweetened beverages.

Africa added that these estimates exclude the Php2,400 cash transfer for the poorest half of families that the DOF is hyping. He said that the DOF is only using the cash transfer to cover up for the gross inequity of the tax reform package. “After 2018, the cash transfer will be discontinued but the tax burden on the poor will remain,” he clarified. “The tax burden on the poor will become even worse as even higher petroleum excise taxes start to be applied,” Africa warned.

The tax impact is estimated by IBON for 2018 from scant data available from the DOF. Family income estimates are from the government’s latest Family Income and Expenditure Survey (FIES) from 2015.

​During the SONA, ​Pres. Duterte was also ​quoted saying “The poor and vulnerable are at the heart of my tax reform.” Africa commented: “The president was correct but for the wrong reasons — they are at the ‘heart’ because they are paying more taxes than the rich.”

Photo from

By Sonny Africa

IBON FEATURES — The Tax Reform for Acceleration and Inclusion Act (TRAIN), the first part of the Duterte administration’s Comprehensive Tax Reform Program (CTRP), has hurdled the House of Representatives (HOR) and is up for deliberations at the Senate. The Department of Finance (DOF) targets approval of TRAIN, or House Bill No. 5636, soon after sessions resume in late July.

The DOF’s tax reform proposals include: higher consumption taxes from removing VAT exemptions (though retaining those for senior citizens and persons with disabilities) and new excise taxes on petroleum products, sugar-sweetened beverages, and automobiles; and lower income and wealth taxes from reduced personal income tax rates (PIT, indexed to inflation) and a lower flat 6% rate for estate and donor’s taxes.

Pres. Rodrigo Duterte certified TRAIN as urgent and his main economic managers – the finance, budget and economic planning secretaries – have been aggressively pushing it since last year. The bill is also supported by a wide range of other high-income earners spanning the 246 HOR lawmakers voting in favour of it, former finance secretaries and heads of the National  Economic and Development Authority (NEDA), economists, business tycoons, big business groups, foreign chambers of commerce in the country, financial institutions like Deutsche Bank and Nomura, and others.

The government and the wealthy private sector constantly invoke national development and the welfare of the poor to justify their position. Yet the conspicuous lack of similar clamor on the part of the country’s poor majority is not surprising – the DOF’s TRAIN is grossly anti-poor, brazenly pro-rich, and should be derailed.

These are the DOF’s five (5) biggest tax reform lies:

1) “We will lessen the overall tax burden of the poor” and “increase the take-home pay of most individuals thereby putting more money in people’s pockets” where “99% of taxpayers will pay less taxes” – The truth: the tax reform will make the poor poorer.

The net impact of the change in income taxes, expansion of VAT coverage, new oil excise taxes, and inflationary effect is that the poorest 60% of Filipino households, or 13.7 million households with some 60 million Filipinos, will have less money in their pockets after the tax reform.

The government will in effect take away Php737 annually from the pockets of the poorest 2.3 million families with an average monthly household income of just Php5,214 in 2018 (first and lowest income decile), Php980 from the next poorest 2.3 million families with monthly income of Php8,315 (second income decile), Php1,163 from the next poorest 2.3 million families with monthly income of Php10,691 (third income decile), Php1,374 from the next poorest 2.3 million families with monthly income of Php13,015 (fourth income decile), Php1,687 from the next poorest 2.3 million families with monthly income of Php15,746 (fifth income decile), and Php2,088 from the next poorest 2.3 million families with monthly income of Php19,269 (sixth income decile).

The poorest 60 million Filipinos will pay more taxes under the proposed tax package with higher prices on food, drinks, LPG, transport fares, electricity, housing and other basic goods and services they consume. It will in effect take away Php737 from every rice farmer, Php980 from every farm worker, Php1,163 from every construction worker, Php1,374 from every private school teacher, Php1,687 from every bookkeeper, and Php2,088 from every machine tool operator. The figures from a DOF table supposedly computing the change in annual take-home pay in 2018 are however likely even underestimated. For instance, the DOF has also estimated that the oil excise tax alone will increase a fisherman’s fuel expenses by Php1,089 and of a farmer’s by Php1,210 with the VAT and inflationary impact even coming on top of these.

The income tax exemption for minimum wage earners, personal and additional exemptions, and health insurance premium payments are also proposed to be lifted. While minimum wage earners will still not pay taxes for now – because income tax starts to be paid upon reaching an annual income of Php250,000 a year – it is possible that they will be subject to income taxes in the future if the minimum wage reaches the first taxable income tax bracket.

2) “After the tax-transfer reform, the poor benefits the most” and “the tax system will be fairer and more equitable” – The truth: the tax reform will make the rich richer.

The net impact of the change in income taxes, expansion of VAT coverage, new oil excise taxes, and inflationary effect is that the highest-earning 40% of Filipino households, or 9.1 million households with some 40 million Filipinos, will have more money in their pockets after the tax reform. This includes among the richest households in the country.

The 2.3 million families with an average monthly household income of Php24,355 (seventh income decile) will gain an additional Php4,187 annually, the next 2.3 million families with monthly income of Php32,295 (eighth income decile) will gain an additional Php8,012, the next 2.3 million families with monthly income of Php47,131 (ninth income decile) will gain an additional Php16,954, and the richest 2.3 million families with monthly income of Php111,380 (tenth and highest income decile) will gain an additional Php43,540. They have net gains because their increased take home pay from lower personal income taxes more than offsets losses from additional VAT, oil taxes, and inflation. The net gains also remain even if higher taxes on automobiles and especially on high-end luxury cars, which is sensible, are factored in.

Middle class households in the seventh to ninth income deciles certainly deserve relief from changing decades-old tax brackets. These include Filipino families whose only moderate incomes are doubly-eroded by inflation and by excessively high taxes. It can even be argued that the minimum figure for tax exemptions can be raised to those earning up to around Php33,000 monthly.

However it does not make sense for supposed tax reforms to give a corporate executive already earning Php280,309 monthly (or Php3.4 million yearly) an additional Php91,027 or a company’s chief executive officer already earning Php598,132 monthly (or Php7.2 million yearly) an additional Php130,267. Yet the DOF’s TRAIN does just that while, to recall, taking hundreds of pesos away from the poorest Filipinos who already have so little as it is. The poorest are made to pay more out of much smaller incomes to begin with and this is not by any reasonable interpretation a “fairer and more equitable” tax system.

The DOF cites the supposedly higher income tax rate of 35% applied to the highest income bracket, compared to the current 32%, as proof of the progressivity of their proposals. This is a half-truth though because using the complete formula which includes a minimum lump sum and applying the tax rate only on the excess of income over Php5 million means that many of the country’s rich will actually end up paying less than under the current tax system.

The DOF also gives the example of the country’s top two income taxpayers whose take home pay falls in 2018 upon the tax reform to reinforce the impression that the new tax system is progressive. This is however an exaggeration and is oblivious to how the country’s super-rich use various legal and illegal strategies to avoid paying taxes including tax havens, off-shore accounts, shell companies and trust funds, smuggling and others.

The tax reform program really does nothing to address, and actually worsens, the continuing accumulation of massive wealth in the hands of a few. The country’s richest for instance also gain additional benefit from the lowering of estate and donor’s taxes to a flat rate of 6%, with the DOF estimating that they will pay at least Php3.1 billion less per year starting 2018.

3) “We are committed to uplift the poor and the vulnerable through a progressive social protection using targeted cash transfers and public transport subsidies” – The truth: TRAIN’s taxes are permanent but its social protection is only temporary and, worse, still just an undefined afterthought.

The only reason the DOF can argue that the poor benefit is because TRAIN supposedly has a social protection component. Early proposals included a targeted cash transfer of Php300 per month to the poorest 50% or some 10 million households in the country to mitigate rising prices and a Pantawid Pasada scheme of cash cards for public utility vehicles to offset the impact of the increase in oil excise taxes especially on diesel.

The TRAIN bill passed by the HOR however remains extremely vague on these supposed social protection measures. Out of the 59-page bill, there is only a third (1/3) of a page on them with just cursory mention of a “social benefits program” and “granting fuel vouchers to qualified transport franchise holders”.

The only clarity given is that the measures will last for just three years. This means that even assuming that they are implemented, the measures are only temporary and the majority poor of the country will be struggling with the onerous tax burden of TRAIN long after the social protection measures have ended. This gives credence to the notion that they are only being implemented to divert from the gross regressiveness of the new tax package. Such a smokescreen also comes at a price and the administrative cost of the scheme will run into at least hundreds of millions of pesos and perhaps even into the billions.

4) “If no or diluted tax reform, the outcome will be poverty, malnutrition and traffic” and “the poor will likely remain poor” – The truth: the DOF is blackmailing the poor because it is afraid to tax the rich.

The threat of poverty, malnutrition and indeed the traffic oddly mentioned in the same breath is directed at the country’s poor farmers, workers, informal sector, low-paid employees and others who already suffer these the worst. It is certainly true that the government needs resources for the many different things needed to ensure social and economic development for the majority. Schools, hospitals and homes have to be built, roads, bridges, water systems and power plants have to be constructed, factories and farms have to be developed, and the economy has to be strengthened.

The DOF is however disingenuous in putting the burden of providing these resources on the majority of Filipinos who have such low incomes and barely any assets to begin with, rather than on the few elite families and corporations who not only have such high incomes but have also amassed huge wealth from the economy over decades. Poorer families earning just a few thousand pesos a month with barely any savings and scant assets cannot be treated the same way as the richest families earning hundreds of thousands (or even millions) of pesos a month with hundreds of millions (or even billions) in savings and assets.

The extreme concentration of wealth in a few in the country is an opportunity for real tax reforms that do not just raise revenues for development but also reduce inequality. Today, some 16 million Filipino families (70% of all families) earn at most around Php21,600 a month; the poorest half (50%) try to live off less than Php15,200 a month and the poorest fifth (20%) on an average of less than around Php9,500 a month. These poor and low income families should be taxed as lightly as possible while being given as much publicly-provided social and economic services as they need.

On the other hand, the richest 156,000 or 0.7% of families had a cumulative income of Php356.9 billion in 2012 with an average annual income of Php2.3 million – taxing just an additional 20% of this income can raise Php71 billion. The next richest 170,000 or 0.8% of families had a cumulative income of Php198.4 billion with an average annual income of Php1.3 million – taxing just an additional 10% of this income can raise Php20 billion. So raising income taxes on just the richest 1.5% of Filipino families can already raise some Php91 billion.

While the DOF often mentions “shared responsibility,” its tax reforms are conspicuously silent on taxing the super-rich’s massive wealth. For instance, there are reportedly at least 690 “ultra high net worth” Filipinos with at least Php1.4 billion in assets each. This includes the country’s 50 richest oligarchs who have a combined net worth of US$79.5 billion or Php3.8 trillion at current exchange rates and 14 of whom recently landed on Forbes’ World Billionaires list.

The DOF is correct in pointing out “dire consequences [on] the lives of the poor and vulnerable” from “[losing] classrooms, teachers, rural health units, barangay health stations, provincial hospitals, paved roads, bridges and irrigated land”. For the sake of argument it can also be granted that greater infrastructure spending will increase economic activity and output at least in the short-term. It should however not look to the poor for the resources to finance these but to the rich, especially the super-rich, who have already benefited so much from the economy, from its infrastructure, and indeed from the labors of the poor themselves.

5) “Tax Reform for Acceleration and Inclusion” – The truth: TRAIN deforms the tax system to become even more anti-poor and pro-rich.

To “reform” is to make something better but, for all the reasons mentioned above, the DOF is not reforming the tax system. The tax proposals are even exclusionary in disproportionately burdening the poor while relieving the rich. To call the proposals “Tax Reform for Acceleration and Inclusion” is then the biggest lie of them all.

The Duterte administration’s tax reform program starkly reflects the country’s class divide and is neoliberalism in full play. The upper classes and foreign capital are clamoring to pay lower taxes and to have their infrastructure and other services paid for by the poor. The government is unfortunately complicit and doing all it can to deliver these benefits for a wealthy minority at the expense of the poor majority.

Ruling elites should however be worried. The resulting further build-up of wealth in the hands of a few from reducing the incomes of the many will only increase social conflict and tensions, intensify class contradictions, and create the conditions for a great upheaval. The real reforms will come after this.

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Research institution IBON said that government should be willing to forge a genuinely progressive tax system instead of adopting one that remains pro-rich. The group said this upon recent Congressional approval of the first part of the Department of Finance’s (DOF) Comprehensive Tax Reform Package (CTRP).  Forging a truly progressive tax package is an important pending topic under fiscal and montary policies in the currently suspended  peace negotiations between the Philippine government (GRP) and the National Democratic Front of the Philippines (NDFP), added IBON.

IBON said that as hyped, House Bill (HB) 5636 or the Tax Reform Acceleration and Inclusion Act (TRAIN) instructs the lowering of personal income tax. In particular, those earning no more than Php250,000 annually will pay less income tax starting January 2018. The bill requires an 8% tax on gross sales or receipts of the self-employed and professionals within the Value Added Tax (VAT) threshold of Php3 million. Those above this threshold meanwhile will be taxed a lower 30% of corporate income. Those receiving Php100,000 will be exempted from the 13th month pay. Lower estate and donor taxes of 6% will also be charged. Lottery and sweepstakes winnings from the Philippine Charity Sweepstakes Office (PCSO) will be taxed 20 percent.

Aside from excise tax on automobiles, HB 5636 imposes a Php10-per-liter excise tax on then VAT-exempted non-alcoholic sweetened beverages in liquid, powder or concentrate forms, said the group. The bill also imposes a substantial Php3-per-liter excise tax on diesel and liquefied petroleum gas and higher duties on gasoline and kerosene.

Tax revenues will mainly fund the Duterte administration’s trillions-worth of infrastructure spending. But the above will translate to lesser taxes on the rich, said IBON, which noted no less than the DOF explaining that the VAT base will be expanded to make up for the projected revenue loss. While government will be collecting around Php170 billion less from the richest, consumers will be paying more than Php340 billion for previously VAT-exempt items, according to IBON’s initial estimates.

These additional taxes on socially-sensitive goods such as oil products and drinks will bear heavily on the country’s majority low- or no- income households, reiterated IBON. The group said that the design of the package is far from inclusive nor progressive as the additional VAT does not spare the poor, unemployed and underemployed who have insufficient means to live decently.

IBON underscored that government should craft a tax package that collects from its constituents depending on the latter’s capacity to pay. The richest, as the biggest beneficiaries of the country’s economy, resources and labor, should be taxed the most while the poor should be taxed the least if at all. The government can do so through higher import tariffs, investment and corporate taxes especially on foreign firms, and by raising income, estate and inheritance taxes on the wealthy.

Tax reform is one part of overall development policy. It is crucial that government pursue national industrialization and other meaningful social and economic reforms for the country to achieve genuine development, IBON said.  The peace negotiations are an opportunity to push for a progressive tax reform as part of the Comprehensive Agreement on Social and Economic Reforms (CASER).

The two panels generally commonly believe in orienting fiscal policy to expand social welfare, social infrastructure and state investment in priority productive sectors, social services, public services and economic services, noted IBON. Resuming the peace negotiations is an available and possible step to devising progressive tax system.  It can be a start in the reduction of inequality, in the equitable distribution of the nation’s wealth, and in preventing the undue accumulation and concentration of economic power in the hands of a few, the group said.###


As the Tax Reform for Acceleration and Inclusion Act (TRAIN) which contains the first part of the Department of Finance’s (DOF) proposed Tax Reform Package advances in Congress, research group IBON reiterated that this legislative proposal remains biased for the rich and burdens the poor.

With the majority approval of the House of Representatives committee on ways and means, the tax reform proposal will now move to the committee on appropriations for review before transmittal to the House plenary for second reading and debates.

The proposed tax law essentially seeks to raise an additional Php400 billion by 2019 to fund increases in infrastructure spending for the administration’s so-called ‘golden age in infrastructure’. The proposal purportedly intends to lower personal income taxes while expanding the coverage of value-added tax (VAT) and imposing additional taxes on oil and sweetened beverages.

IBON however reiterated that with this proposal, wealthy families will be paying less income taxes and other taxes, while the poor majority will face higher taxes on goods and services.

The group had earlier pointed out that the package includes a reduction of income, property-related taxes and capital income taxes to the benefit of the wealthiest.

The group also initially estimated that in the DOF’s Tax Reform Package the richest will be paying around Php178.3 billion less in reduced personal and corporate income taxes, estate and donor taxes, and capital income taxes. Consumers, meanwhile, will be paying about Php341.6 billion more for the VAT to be charged on previously exempt items and higher excise taxes on petroleum products. Additional taxes will also be paid by consumers for every sugary beverage they buy. The Tax Reform for Acceleration and Inclusion bill is a key component of the DOF’s overall tax reform package.

These contradict the DOF’s claim that its tax reform is progressive and pro-poor, according to IBON. The group repeated that the package remains regressive and elitist as it offsets lower taxes paid by the wealthiest Filipinos by putting additional tax burden on the poor majority of consumers amid their already very low incomes and insecure livelihoods.


Pres. Rodrigo Duterte recalled the government’s peace negotiators from negotiations with the National Democratic Front of the Philippines (NDFP) until being given “compelling reason” to resume talks. Research group IBON, however, points out that the most compelling reason for having peace talks are the economic and political reforms on the agenda that can address the roots of armed conflict. Ending the peace talks with the NDFP also ends talks on important social and economic reforms which makes the prospects for their implementation and achieving benefits for the people dimmer.

IBON noted that ceasefires are at most only momentary respites from fighting. The government and the NDFP reaching agreements on genuine reforms, on the other hand, are among the clearest steps towards peace based on social justice. The government and NDFP each prepared their proposed draft for a comprehensive agreement on social and economic reforms (CASER) and exchanged these in mid-January 2017. IBON reviewed these and compared their respective proposals for key reforms.

Photo from International Institute for Environment and Development

While the unorthodox Pres. Rodrigo Duterte gained popular support due to its pro-poor pronouncements and promise of change, research group IBON said that the neoliberal economic agenda prevails as  Duterte’s economic managers and other dominant groups push big business-biased/free market-oriented policies over people-centered reforms.

Nevertheless, IBON also said that the ongoing peace negotiations between the Philippine government and the National Democratic Front of the Philippines (NDFP), of which social and economic reforms and political and constitutional reforms are the next substantive agenda, remain an opportunity to push steps that can benefit the Filipino majority.

IBON conducted its 2016 yearend analysis of economic and political trends during the Duterte administration’s first six months In its briefing paper, the group noted the following as among the glaring socioeconomic challenges that persist:

  • Contracting agriculture.The fastest growing sectors wereconstruction and real estate followed by trade and manufacturing,but agriculture contracted.  The share of agriculture in the economy has shrunk to 8.5%. The production sectors consisting of agriculture, manufacturing, construction and mining slightly declined to 38.5%, the smallest recorded shares in the country’s history.
  • Worsening inequality.The net worth of the 40 richest Filipinos grew by almost 14% between 2015 and 2016 and the profits of Philippine Stock Exchange (PSE) by over 18%; real minimum wage in the National Capital Region (NCR), a proxy for workers’ wages, fell by almost 3% in the same period.
  • Deteriorating jobs. Two out of three employed (63%) or 24.4 million Filipinos are non-regular, agency- hired, informal sector, or unpaid family workers, meaning low-paying and insecure work with poor or no benefits. One of three (34.5%) rank and file workers are non-regular workers. Initial IBON re-estimates of labor force survey figures are over four million unemployed Filipinos and an unemployment rate of over 9%. Underemployed number 7.5 million with an 18.3% rate in 2016. Taken together there are 11.5 million who are without work or are still seeking more work
  • Widening wage gap.  Daily NCR minimum wage remains at Php481. According to IBON estimates, this is barely half of the family living wage (Php1,119 as of 2016) or the amount needed by a family of six for their basic needs. The wage gap again widened from 55% (2015) to 57% (2016).
  • Prevalent poverty. Government reported a lower population poverty incidence of 21.6%, counting 21.9 million poor Filipinos for 2015, or 1.8 million less compared to 2012 figures. However, this employs a very low poverty threshold of just Php60 per person per day based on a conservative food threshold and an outdated estimation of non-food expenses, thus reflecting the situation only of Filipinos in extreme poverty. IBON estimates some 66 million poor Filipinos struggling to survive on around or even less than Php125 per day. IBON’s latest national opinion survey meanwhile showed seven of 10 Filipinos rating themselves ‘poor’.
  • Elusive right to education. . The additional Php8.3 billion allocated is short of being able to give free tuition to all 1.7 million students enrolled at all levels in State Universities and Colleges (SUCs), and does not cover other considerable expenses for registration and other pertinent fees. IBON estimates that an additional Php4.4 billion is needed to provide free tuition for all SUC students. The group also said that since the added budget depended on the discretion of lawmakers and the availability of funds, it may not last beyond 2017. The Commission on Higher Education (CHED) has even announced that not all SUC students will be covered.
  • Shallow ‘universal’ health coverage.  While an additional Php3 billion was reportedly allocated to the Phililppine Health Insurance Corporation (PhilHealth) to ensure coverage for all Filipinos, the support value of PhilHealth remains at 50% while the balance of 50% is still paid out of pocket. Also, the poor and sick remain burdened with hospital expenses as 40% of the number of claims paid to indigent/ sponsored program beneficiaries still needed co-payments. Moreover, the  no balance billing policy for indigents is only applicable to increasingly underfunded government hospitals.
  •  People-centered reforms opposed. While additional support for national irrigation has been approved, the Duterte government’s economic directors are opposed to a moratorium on land use conversions, which further institutionalize land grabbing to the detriment of farmers. The economic managers have also been opposed to granting the Php2,000 pension to the elderly, arguing, among others, that it is anti-poor. Earlier, the Duterte administration clarified that by ending contractualization it meant prohibiting the practice of terminating workers before they assume regular status, thereby still allowing all other forms of contractualization where workers are denied the benefits naturally accorded to regulars.
  • Rich relieved, poor burdened further with tax reform package. The administration plans to fund its infrastructure expansion through a consistently regressive tax plan, which will relieve the richest and big corporations. But the poor will be further burdened through additional taxes on a wider range of goods such as fuel products, and  increased value-added tax (VAT).
  •  Unaddressed roots of “war on drugs”. While there have been 2,166 deaths of ‘drug personalities’ during police operations aside from at least 4,049 more victims of drug-relatedextrajdicial or vigilante-style killings, the socioeconomic roots of the drug problem remain largely unaddressed.

According to the group, the new government may appear different from its predecessors but there are very few indications that substantial change is underway. Under the same profit-driven, market-oriented economic policy framework, the country’s resources remain concentrated in the hands of the wealthiest families and corporations. Despite the President’s strong pronouncements, an independent foreign policy has not been forged; the country has not broken free from foreign powers with geopolitical interests in the Philippines whether it be, for instance, the US or China. Traditional politics prevail. Relatedly, the administration repeatedly dangles authoritarian measures, putting at risk assertions of democracy that are gaining ground.

Nevertheless, IBON said that while prospects for change are getting dimmer rather than brighter, it remains to be seen how the peace negotiations could still possibly effect initial people-centered reforms. It is an opportune time to challenge the administration to, beyond paper, step out of its neoliberal economic and undemocratic political tradition in the direction of crafting policies in the interest of the majority of poor and marginalized Filipinos, said the group.





Research group IBON said that the fuel excise tax being pushed by President Duterte’s economic managers will increase taxes on already burdened poor and low income wage earners. The group said that the Duterte administration should redesign the tax system to tax the richest who have the huge ability to pay more and relieve the majority who are struggling on low incomes.

The government plans to impose an excise tax on petroleum products to help generate revenues needed to fund the Duterte administration’s infrastructure projects. Previously tax-free fuel items such as diesel
used by buses and jeepneys, cooking gas, and bunker fuel used to generate electricity will have a tax of P6 per liter. Meanwhile, tax on gasoline will rise from Php4.35 to Php10 per liter. This will be in addition to the 12% value-added tax these products are already subjected to.

IBON said that this fuel excise tax is among proposed reforms under the government’s neoliberal tax package that will add further hardship to already struggling ordinary Filipinos.  Other reforms include the proposed decrease in the list of VAT-exempt items, and excise tax on sugary products.

These additional taxes will increase the prices of basic goods and services, and mostly affect poor and low-income consumers that are already struggling to pay for food and other basic needs. According to the September round of the IBON National Survey, seven out of ten Filipinos considered themselves poor. Also in the past three months, the survey showed that 64% of Filipinos had trouble paying for electricity and 53.3% had trouble buying enough food.

IBON said that the Duterte administration should instead focus its efforts on more efficient and aggressive tax collection on the wealthy and big corporations. Revenues generated should then be prioritized to
fund much-needed public utilities and social services. ###

Research group IBON remarked that the Department of Finance’s (DOF) proposed tax plan essentially remains elitist and is inconsistent with President Duterte’s pro-poor stance. Following the president’s lead, government should be brave enough to tax the richest businesses and families instead of burdening the poor with new taxes.
The DOF on Monday submitted to Congress the first set of its proposed tax reform program. The plan includes reduction of personal income tax and the expansion of the tax base by loosening VAT exemptions. Also among the proposals is adjusting the excise tax on petroleum and automobile products.
According to IBON, the poor will suffer higher prices of goods and services, including transport fares, the new VAT, oil tax and sweets tax.
The DOF’s argument that the new higher taxes are progressive is unsound, said the group. The DOF ​does not seem to realize that a peso for the poor is worth so much more to them than even hundreds or thousands of pesos for the rich, said IBON.
The additional tax burden that is being put on the poor majority of consumers is unjust amid their already very low incomes and insecure livelihoods to begin with. The administration’s economic managers should not be so reluctant to tax the biggest corporations and wealthiest families and businessmen  to raise revenue for social and economic services, IBON said.

from GMA News
from GMA News

Research group IBON said that the World Bank’s recent offer to assist the Department of Finance (DOF) with its tax reform plan, although not surprising, is unwelcome news. The World Bank with twin global financial pillar International Monetary Fund (IMF) has long been at the forefront of designing the Philippines’ regressive tax system, including providing incentives for liberalization. This has primarily benefited the interests of the wealthiest and big corporations at the expense of poor Filipinos, said the group.

IBON said among the conditions of World Bank structural adjustment loans and IMF stabilization programs since the late-1980s was the imposition of the value-added tax (VAT) and lowering of income taxes including on the rich. For instance, former President Cory Aquino, under the advisement of the IMF-World Bank, swiftly passed Executive Order (EO) 273 which applied a 10% VAT on basic commodities. The VAT was later expanded under succeeding presidents Ramos and Arroyo also with pressure from the IMF-World Bank.

The World Bank’s latest offer to the DOF is part of its long-standing advocacy of taxing the poor while unburdening the country’s wealthiest oligarchs as well as large foreign and local firms, said IBON. It is the tenet of the international financial institutions that taxing the ultra-rich and big corporations is a disincentive to their wealth generation and to economic activity. Instead, the World Bank and IMF promote lowering direct taxes while increasing taxes on goods and services. Lower taxes such as providing tax holidays and incentives to big business and breaking down import taxes serves their economic liberalization policy. Meanwhile, taxing consumption is administratively easy, thus the World Bank pushes for indirect taxes like the VAT to generate revenue foregone from lower taxes on the wealthy oligarchs and big firms, said the group.

According to IBON, the DOF’s proposed tax reform plan already falls in line with the World Bank’s regressive tax schemes and could become worse should the government take up the World Bank’s offer. The group noted that the DOF plans to lower taxes on wealthy oligarchs and foreign and local corporations via lower income and corporate taxes, property-related taxes, and capital income tax. Meanwhile, the foregone revenue from this will be offset by hiking taxes to the poor through higher prices from the expansion of VAT-able items, higher fuel excise taxes and a new sweets tax.

IBON said that Pres. Rodrigo Duterte should be wary of the World Bank’s endorsement and offer of assistance with the proposed tax reform plan that relieves the rich by burdening the poor. Instead, the Duterte administration should focus on more aggressive tax collection of the wealthy and corporations to help fund much-needed social and economic services for ordinary Filipinos, said the group. ###

Economy not going strong

Research group IBON said that the Department of Finance’s (DOF) proposed tax reform program relieves the rich and burdens the poor. The group said that this will worsen inequality in the country and should be replaced by a tax program that taxes the rich instead and is backed with the required political will.

The DOF proposed tax reform program seeks to raise an additional Php600 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

​According to the group, the rich will benefit from lower income taxes, property-related taxes, and capital income taxes:

  1. The top personal income tax rate will go down from 32% to eventually just 25 percent. Around 6.7 million deserving wage and salary earners also stand to benefit from the DOF’s plan to update 19-year-old tax brackets. These will result in Php139.0 billion less revenues for the government in just the first year of implementation.
  2. The corporate income tax will go down from 30% to 25 percent. Corporations will pay Php34.8 billion less in income taxes.
  3. The tax rate on property-related transactions of the wealthy will be cut. The estate tax of 20% will go down to 6% of the value of property being transferred. Donor taxes and transaction taxes on land will also be cut. The rich will pay Php3.5 billion less in estate and donor taxes.
  4. The tax on interest income earned on peso deposits and investments will also go down from 20% to 10 percent. The rich will pay Php1.0 billion less in capital income 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:

  1. The 12% VAT will be charged on the widest range of consumer items in the country’s history with exemptions on just very few necessities like raw food, education and health. Consumers will pay Php163.4 billion more for the same goods and services.
  2. There will be higher excise taxes of Php6-10 per litre or kilogram on diesel, LPG, kerosene and the entire range of oil product prices. Consumers will pay Php178.2 billion more when they buy oil products or pay for correspondingly more expensive goods, services and transport fares.
  3. The sugar excise tax starting at Php5 per kilogram will increase the prices of sugary foods, fruit drinks, sodas, sweetened tea and coffee, sports drinks, and other sweetened products. Consumers will pay Php18.1 billion more for the sugary products they buy

​IBON said that the administration’s economic managers are using Pres. Rodrigo Duterte’s current popularity to push an unpopular pro-rich neoliberal tax agenda. But the people need vastly improved public and economic services. This should be financed by those who have already accumulated so much and not by those who have so little as it is, said the group.

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