Tax Reforms

From Peace History
While President Duterte likes to claim that his administration adheres to an independent foreign policy, it appears that his major programs such as the packages of tax reforms and the planned Charter change (Cha-cha) are actually pushed by US and other foreign interests.

IBON noted that the tax reforms and Cha-cha are among the key policy reforms long lobbied for by US business groups with active support from American aid agencies. It cited the US’s Partnership for Growth (PFG) initiative, an aid program participated in and coordinated by the US Agency for International Development (USAID), State Department, Millennium Challenge Corp. (MCC) and other US agencies as well as the World Bank, International Monetary Fund (IMF) and various UN bodies.

Part of the PFG implementation is The Arangkada Philippines Project (TAPP) of the USAID and the American Chamber of Commerce (AmCham) through the Joint Foreign Chamber of Commerce (JFCC). Under the TAPP, the JFCC has produced Legislation Policy Briefs that identified broad recommendations for Congress and the Executive.

Among hundreds of specific policy proposals of the JFCC are comprehensive tax reforms that will raise excise tax on petroleum products, impose sin taxes (alcohol, cigarettes, and tobacco products), as well as broaden the base of the value-added tax (VAT), while reducing the corporate income tax. It also pushed for the lifting of constitutional restrictions on foreign investments through Charter change (Cha-cha).

IBON noted that the US remains a major player in the Philippine economy. In the past decade (2006 to 2016), American businesses have invested US$4.12 billion or 10.3% of the total foreign direct investment (FDI) that flowed into the domestic economy, the second biggest among all foreign investors. The US is also the second largest market for products from the Philippines, accounting for US$89.22 billion or 15.6% of the country’s total exports in the past 10 years.

Both the pro-business tax reforms of the Duterte administration and Cha-cha for greater economic liberalization will further benefit US corporations. This includes lower corporate income tax that will be offset by heavier indirect taxes at the expense of the public, and the opening up of additional sectors of the economy for US investments and profits, said IBON.

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These reiterations are in reaction to the article “Assessing TRAIN” by Mr. Filomeno Sta. Ana of the Action for Economic Reforms (AER), which appeared on the January 8, 2018 issue of Business World.

IBON has repeatedly presented its evidence-based analysis of the TRAIN (basing on the Department of Finance data no less) and consistently deepened our explanations to the public. Our 40 years of institutionalisation has equipped us with analysis sets to provide a popular understanding of socio-economic issues.

The Duterte administration claims that the Tax Reform for Acceleration and Inclusion (TRAIN) Law will benefit the poor in terms of lower personal income tax, unconditional cash transfers, and new infrastructure. It also describes the new tax law to be inclusive and even progressive. IBON belies these false claims. Under TRAIN, the poor stand to lose while the rich will gain.

  1. TRAIN will not benefit the poor majority of Filipinos with lower personal income tax. According to the government, 6.8 million low- and middle-income families will be completely exempted because they are earning less than the Php250,000 personal income tax threshold. But this figure includes millions of minimum wage earners or otherwise those in informal work with low and erratic incomes already exempted by law. The 6.8 million families certainly deserve income tax cuts to cope with rising costs of living. But of the country’s total 22.7 million families, the personal income tax cuts for most of the reported 7.5 million personal income tax payers still leaves as much as 15.2 million families without any income tax gains from this measure. Yet, at the very start of 2018, these families have already had to deal with more expensive goods, such as food and drinks, and cooking expenses. Jeepney and bus fares, electricity and other utility fees are bound to increase due to new taxes on oil products including liquid petroleum gas (LPG), kerosene, diesel, and gasoline. Other price hikes abound when the imposition of value-added tax (VAT) on previously exempted services and goods takes effect. Note that the value-added tax slapped on petroleum products per Republic Act 9337 of 2005 drove up inflation from 6.0% in 2004 to 7.6% in 2005.
  2. TRAIN is pro-rich. Government slams TRAIN critics who say that the tax program is anti-poor. Yet it is the country’s richest who are among the biggest gainers from TRAIN’s income tax reforms. The richest 1% of families with incomes of over Php1.5 million or more a year will have an average of Php100,000 to over Php300,000 additional take-home pay annually especially when income taxes are lowered further in 2023. This is on top of how the rich will pay billions of pesos less in estate and donor taxes. Also, the richest 10% already earning an average of Php104,170 monthly according to Department of Finance data, will have Php90,793 more every year. Meanwhile, every chief executive officer (CEO) already earning Php494,471 monthly will have Php88,568 more in their pockets every year.
  3. TRAIN-provided cash transfers are temporary. That TRAIN will provide P200 per month in unconditional cash transfers to the poorest 10 million Filipino households from 2018 to 2020 is an indirect admission by government that the TRAIN’s taxes do put an additional burden on the poor. The relief ends after the third year while the greater TRAIN tax burdens are permanent.
  4. Infrastructure spending is biased away from poor regions, and biased away from the kind of infrastructure projects that the poor directly need or will directly use. There is a general trend of higher infrastructure spending in regions of low poverty incidence, and low infrastructure spending in regions of high poverty incidence. This is observed when comparing the value and regional distribution of the government’s flagship infrastucture projects and poverty incidence by region. For instance, the NCR has the lowest official poverty incidence of 3.9% but takes up the largest chunk of flagship projects at Php343 billion, while the Autonomous Region of Muslim Mindanao (ARMM) with the highest official poverty incidence of 53.7% accounts for among the least flagship projects at just Php5.4 billion. Also, instead of irrigation, milling factories, and post-harvest facilities; public schools; public hospitals; and mass housing, which millions of poor Filipinos need  for their livelihoods and welfare, the Duterte administration’s flagship projects are mostly big-ticket transportation infrastructure eyed by oligarchs and their foreign counterparts for business, such as roads, bridges, fly-overs, railways, seaports, and airports.
  5. TRAIN remains regressive. The Duterte administration claims that TRAIN is progressive, but this should mean that the people are taxed according to their capacity to pay. On the contrary, the poor stand to bear the greater burden under TRAIN. According to official data, only the richest 20% Filipinos earn the family living wage (FLW or the amount needed by a family of 5 to live decently ) or more (Php30,000 per month on the average for 5 persons). Meanwhile, the poorest 80% earn way below the family living wage, but they are being made to pay the same additional taxes as the richest, while the latter will even be relieved of certain tax obligations. While the middle class deserve lower personal income taxes, it is unjust that those earning millions monthly should be taxed less.

Government can undertake concrete measures towards genuinely progressive taxation by raising direct taxes on the richest such as personal income tax and corporate income tax, while reducing indirect taxes such as VAT and other taxes on consumer products. IBON also proposes steps, which, while temporary, may ease the burden on the poorest: (1) Maintain exemptions on products where the poorest are directly affected; (2) Tax the rich more, specifically, raise taxes on those belonging to the highest income bracket; and (3) Allocate specific budget items for essential social services.

 

(sgd)

Sonny Africa

IBON Executive Director

 

 

 

IBON 2018 0114 TRAIN vs poor

IBON 2018 0114 TRAIN vs poor

The rich and other higher income groups will have larger take home pay than previously estimated under the new tax law, while the poor will still bear the brunt of paying higher taxes. The highest earning 40% or about 9.1 million households will have even more money in their pockets under the recently passed Tax Reform For Acceleration and Inclusion (TRAIN) Law compared to the original DOF proposal.

Using July 2017 data from the Department of Finance (DOF) on the first year impact of TRAIN, IBON previously estimated that the richest 10% earning an average of Php115,428 monthly will have an additional Php33,795 annually.  But IBON’s computations based on the latest December 2017 DOF data shows that the richest 10%, now estimated by the DOF to be earning an average of Php104,170 monthly, will have an additional Php90,793 annually.

This includes how a chief executive officer (CEO) among the top 0.1% of families already earning Php494,471 monthly will take home an extra Php88,568 annually. This is a reversal of the previous estimate that a CEO among the top 0.1% earning Php706,017 would lose Php20,694, said the group. Middle income and lower-middle families meanwhile take home an additional Php7,880 to Php24,343 under TRAIN.

Meanwhile, the poorest 60% of Filipino households or 13.7 million households will continue to have less money under the new tax law, though figures based on the more recent data are slightly lower than previously estimated. Under TRAIN in 2018, every rice farmer (first and lowest income decile) will lose Php646 annually; every farm worker (second income decile) will lose Php937; every construction worker (third income decile) will lose Php1,141; every private school teacher (fourth income decile) will lose Php1,363; every bookkeeper (fifth income decile) will lose Php1,591; and Php1,887 will be taken from every machine tool operator (sixth income decile).

​Contrary to government claims, majority of Filipinos will not benefit from income tax exemptions from TRAIN. About 15.2 million families who already do not pay income tax because they are minimum wage earners or informal sector workers with erratic incomes will not have any income tax gains. Yet while not getting increased take home pay, they will have to endure price hikes as a direct or indirect effect of higher consumption taxes. (From “Even more money​ for the rich under TRAIN law–IBON”, 12 January 2018 IBON Media Release)

Illustration by Jose Erwin Mallare

The rich and other higher income groups will have larger take home pay than previously estimated under the new tax law, while the poor will still bear the brunt of paying higher taxes, said research group IBON. IBON said that the highest earning 40% or about 9.1 million households will have even more money in their pockets under the recently passed Tax Reform For Acceleration and Inclusion (TRAIN) Law compared to the original Department of Finance (DOF) proposal.

Using July 2017 data from the DOF on the first year impact of TRAIN, IBON previously estimated that the richest 10% earning an average of Php115,428 monthly will have an additional Php33,795 annually.  But IBON’s computations based on the latest December 2017 DOF data shows that the richest 10%, now estimated by the DOF to be earning an average of Php104,170 monthly, will have an additional Php90,793 annually.

This includes how a chief executive officer (CEO) among the top 0.1% of families already earning Php494,471 monthly will take home an extra Php88,568 annually. This is a reversal of the previous estimate that a CEO among the top 0.1% earning Php706,017 would lose Php20,694, said the group. Middle income and lower-middle families meanwhile take home an additional Php7,880 to Php24,343 under TRAIN.

Meanwhile, IBON said that the poorest 60% of Filipino households or 13.7 million households will continue to have less money under the new tax law, though figures based on the more recent data are slightly lower than previously estimated. Under TRAIN in 2018, every rice farmer (first and lowest income decile) will lose Php646 annually; every farm worker (second income decile) will lose Php937; every construction worker (third income decile) will lose Php1,141; every private school teacher (fourth income decile) will lose Php1,363; every bookkeeper (fifth income decile) will lose Php1,591; and Php1,887 will be taken from every machine tool operator (sixth income decile).

IBON said that contrary to government claims, majority of Filipinos will not benefit from income tax exemptions from TRAIN. About 15.2 million families who already do not pay income tax because they are minimum wage earners or informal sector workers with erratic incomes will not have any income tax gains. Yet while not getting increased take home pay, they will have to endure price hikes as a direct or indirect effect of higher consumption taxes.

The proposed cash transfers to supposedly minimize the tax impact on poor households are an admission by the DOF that the poor will be burdened with higher spending. Yet these are only temporary and will only be given during the first three years while oil excise taxes continue to increase. The poor will no longer receive the temporary cash transfers after 2020 yet have the permanent burden of higher prices on their basic goods and services.

IBON said that the TRAIN Law only confirms the Duterte administration’s tendency  towards anti-poor and pro-rich policies. ###

Photo by Ariel Opera for NDBC News

Petroleum excise taxes proven to be very inflationary in the past

The administration persistently downplays certain increases in the prices of goods and services, research group IBON’s Executive Director Sonny Africa said. This is dishonest and insensitive to the burden that the Tax Reform for Acceleration and Inclusion (TRAIN) imposes on the poor to avoid higher taxes on the rich, said Africa. He maintained that the Duterte administration’s TRAIN law which took effect at the start of the year will increase prices, and possibly even dampen economic growth.

The Department of Trade and Industry (DTI), Department of Finance (DOF), Bangko Sentral ng Pilipinas (BSP), and National Economic and Development Authority (NEDA) have all understated the impact of TRAIN on the prices of goods and services, noted IBON. The DTI said that the effect on prices of prime commodities would be very small or minimal. The DOF insists that inflation will remain manageable in 2018. For the same period the BSP forecasts that inflation will just be at 3.4 percent. NEDA meanwhile has declared that inflation will be stable despite TRAIN.

The orchestrated statements are meant to diffuse justified criticism of the anti-poor and pro-rich tax reform, Africa said. “The additional petroleum product excise taxes for instance cannot but have a domino effect on the prices of basic commodities and other goods and services”, he said. He added that TRAIN proponents correctly point out how petroleum excise taxes were last raised over two decades ago. “They should also highlight how this was very inflationary,” said Africa.

The Republic Act (RA) 8184 of 1996 increased taxes on gasoline by Php1.83-2.83 per liter, diesel by Php1.18, and kerosene by Php0.10, among other oil products. “This was certainly a factor in driving inflation up from 8.0% in 1995 to 9.1% in 1996.”, said Africa. Similarly, RA 9337 of 2005 expanded the coverage of the value-added tax (VAT) to include petroleum products. Despite excise taxes on diesel and kerosene being taken away, inflation rose from 6.0% in 2004 to 7.6% in 2005.

The higher oil taxes also likely contributed to dampening economic growth as one major factor among many factors underlying economic growth rates, according to Africa. Growth in gross domestic product (GDP) slowed from 5.8% in 1996 to 5.2% in 1997, combining with the Asian financial crisis in the latter part of the year. Growth also moderated from 6.7% in 2004 to 4.8% in 2005 and 5.2% in 2006.

Africa pointed out that oil excise tax increases under TRAIN are however much higher than before. From current levels, the tax on gasoline will increase by Php2.65 per liter in 2018, Php4.65 in 2019, and Php5.65 in 2020; the tax on diesel by Php2.50, Php4.50, and Php6; and on kerosene by Php3, Php4, and Php5. “There is even a new tax on LPG of Php1 per kilogram in 2018, Php2 in 2019, and Php3 in 2020. Administration economic managers are then being dishonest in being dismissive about the inflationary impact of TRAIN,” he said.

“They are also being insensitive,” said Africa. “The administration’s economic managers and other TRAIN proponents should stop harping on the windfall from personal income tax cuts of, at most, six to seven million taxpayers. It’s about time for them to become more transparent and upfront about the negative impact of TRAIN on the poorest 15 million Filipino families. These are tens of millions of Filipinos who do not get any personal income tax cuts but will pay higher prices for the goods and services they consume from already very low incomes,” he stressed.

Africa also said that government’s harping on the cash transfers for the country’s poorest families is an indirect admission that the TRAIN’s taxes do put an additional burden on them. “But these transfers are only temporary for the first three years while even higher taxes are imposed.” According to Africa, the relief ends after the third year but the greater TRAIN tax burdens are permanent. ###

From ylbnoel.wordpress.com

Admin’s avid push for market-driven measures will run over the poor majority

The new year seems to usher in more difficulties for Filipinos in accessing basic goods, public utilities, and services amid government’s exclusionary policies, research group IBON said. The market-driven policies that have been prioritized by the Duterte government such as the Tax Reform for Acceleration and Inclusion (TRAIN), Build, Build, Build, amendments to the Public Services Act, and easing restrictions on foreign ownership and participation will hugely benefit only oligarchs, foreign investors and their allies in the bureaucracy, said the group.

IBON said that the newly-enacted first package of TRAIN relieves the rich by lowering personal income, estate, and donor taxes. The second package, which Congress is set to tackle soon, will propose to lower corporate income taxes as well. But the poorest 10 million Filipino families whose incomes fall way below the family living wage of Php1,039 per day will soon bear the brunt of TRAIN-triggered higher prices of food and goods,and service fees, said the group. It noted that TRAIN’s measly Php200 monthly social protection is slated only for 2018 and will be insufficient to cushion the impact of added taxes on oil and sweetened beverages, electricity, and shipping.

In terms of government’s infrastructure program that will be funded by foreign and private sector loans, public-private partnerships (PPPs), and unsolicited proposals, IBON added, contracts stipulate that the State will ensure interest and risk guarantee payments to the lenders and corporations for largely transportation infrastructure. But on the other hand, the public will be obliged by the ‘user pays principle’ with the likes of higher toll fees and more expensive fares.

IBON also said that proposed amendments to the Public Service Act will open up services such as transportation and telecommunications to foreign ownership. This will purportedly lower the prices of these services due to competition. Based on experience, however, monopolies or only a few companies instead prevailed and dictated the prices due to the absence of strong and genuine government regulation that upholds public interest. Proposed amendments will also allow ‘public utilities’ such as water and power service providers to treat corporate income tax as an expense. According to IBON, this will mean higher rates as consumers will be made to shoulder the companies’ tax obligations.

Relatedly, said IBON, more foreign corporations may be enticed to do business in the Philippines upon the modification of the foreign investment negative list (FINL) even before foreign restrictions could be removed through a more cumbersome Charter change. The FINL is a mechanism to limit foreign ownership in and protect Philippine industries, stressed IBON. However, the Duterte administration’s proposed modification will allow foreigners to further enroach on local professions, construction, retail trade, businesses, media, and education. Once government steps aside from its duty to provide goods and services, people’s access and capacity to afford these will be left at the mercy of corporations.

The Duterte government’s prioritization of the above-mentioned measures shows its determination in completely opening up the Philippine economy to big business and foreign corporate plunder at the cost of people’s welfare and national sovereignty, IBON said. This year onward, these State-facilitated neoliberal policies will further attack the people’s lives and livelihood,  and undermine the public’s rightful control and access of the country’s  resources. These social and economic woes will most likely increasingly face public scrutiny and opposition for now and the years to come, said IBON.

A typhoon survivor decorates a Christmas tree amid the rubble of destroyed houses in Tacloban, Philippines, Dec. 17. Typhoon Haiyan reduced almost everything in its path to rubble when it swept ashore in the central Philippines Nov. 8, killing more than 6,000 people, and displacing more than 4 million. (CNS photo/Erik De Castro, Reuters) (Dec 17, 2013)

Research group IBON said that contrary to its claims, the Duterte administration affirmed its apathy towards the low-income majority of Filipinos upon its signing of the Tax Reform for Acceleration and Inclusion (TRAIN). By signing the tax program into law, government has proven its determination to collect funds for its purportedly pro-poor centerpiece programs but at the expense of millions of poor Filipinos who will have to cope with TRAIN-triggered price hikes, said the group.

President Duterte, upon inking TRAIN, said that it would be his administration’s best Christmas gift to the Filipino people. Following deliberations on proposed amendments to the Department of Finance’s (DOF) original package, Congress ratified last week a final version of the first package of the government’s Comprehensive Tax Reform Program (CTRP).

According to IBON, government has in fact grossly exaggerated how lower income taxes will benefit Filipinos, and downplayed how the country’s poorest will be burdened by higher prices on basic goods and services without getting any tax exemptions. The overwhelming majority of Filipinos in fact do not get any income tax benefits from TRAIN, the group said.

“TRAIN is a scourge, not a gift, to the people,” IBON executive director Sonny Africa said. “Though Filipino families certainly deserve income tax cuts to cope with rising costs of living, it is misleading to claim ‘6.8 million’ benefiting from TRAIN because this figure includes millions of minimum wage earners already exempted by law,” said Africa. He added that if anything, the DOF, House and Senate have even proposed to remove this minimum wage exemption.

Africa also said that 15.2 million Filipino families not getting any increases in take-home pay will have to deal with more expensive food and drinks, cooking expenses, jeepney and bus fares, electricity and other goods and services next year. Higher taxes will be imposed on sugar sweetened drinks; oil products including liquid petroleum gas (LPG), kerosene, diesel, and gasoline among others; and coal. Broadening the VAT base will only worsen the burden on poor Filipinos, Africa said.

Africa also noted that the biggest chunks of flagship infrastructure projects for which the administration claims to have earmarked most of the collection from TRAIN are concentrated in already economically-active regions such as the Metro Manila, Southern Tagalog and Central Luzon. That the poorest regions like the Autonomous Region of Muslim Mindanao (ARMM) and Caraga Administrative Region (CAR) are getting only small portions of the Build Build Build projects indicates that the Duterte administration marginalizes poor Filipinos, said Africa. The projected cost of Build Build Build is at Php8-9 trillion over five years with projects to involve China and Japan, as well as known oligarchs such as the Ayalas, Cojuangco and the Pangilinan group.

Photo from GMA
On the day that Pres Duterte signs the tax reform package, IBON underscores how TRAIN will entail price hikes on various goods and services beyond Christmas.
Photo from GMA
Photo from GMA
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From Manila Survival Guide

By Sonny Africa

The Duterte administration’s Tax Reform for Acceleration and Inclusion (TRAIN) bill reportedly due for ratification by Congress this week burdens the poor with higher consumption taxes so that the rich can have higher take-home pay. The Department of Finance (DOF) used income tax gains for a few middle-class families as a smokescreen for even greater tax gains by the richest Filipinos and, worse, higher consumption taxes for the majority of poor Filipinos.

The bicameral conference committee on TRAIN on Monday reconciled the Senate and House versions. Proponents have grossly exaggerated how millions are supposedly exempted from paying income tax. They have also downplayed how tens of millions of the country’s poorest will be burdened by higher prices on basic goods and services without getting any income tax exemptions.

The overwhelming majority of Filipinos do not get any income tax benefits from TRAIN. Most of the country’s total 22.7 million families do not pay income tax because they are just minimum wage earners or otherwise in informal work with low and erratic incomes. Even if TRAIN reduces income taxes paid by most of the reported 7.5 million personal income taxpayers, this still leaves as much as 15.2 million families without any income tax gains.

A reported 6.8 million low- and middle-income families will be completely exempted because they are earning less than the Php250,000 threshold for income tax to start to be paid. These families certainly deserve income tax cuts to cope with rising costs of living. But it is misleading to claim “6.8 million” benefiting from TRAIN because this figure includes millions of minimum wage earners already exempted by law. If anything, the DOF, House and Senate have even proposed to remove this minimum wage exemption.

The country’s rich are meanwhile among the biggest gainers from TRAIN’s income tax reforms. Low income and middle class families earning up to some Php60,000 a month will have a few thousand up to around Php80,000 additional take-home pay annually. The richest 1% of families with incomes of Php1.5 million or more a year will have an average of Php100,000 to over Php300,000 additional take-home pay annually especially when income taxes are lowered further in 2023. This is on top of how the rich will pay billions of pesos less in estate and donor taxes.

On the other hand, the poorest 15.2 million Filipino families not getting any increases in take-home pay will have to deal with more expensive food and drinks, cooking expenses, jeepney and bus fares, electricity and other goods and services next year. Prices will increase because of the direct and indirect effect of higher taxes on: sugar-sweetened drinks; oil products including liquid petroleum gas (LPG), kerosene, diesel, and gasoline among others; and coal. The burden on poor Filipinos can only get worse once it becomes clear what value-added tax (VAT) exemptions will be removed.

The Duterte administration’s TRAIN runs over the poor to avoid taxing the rich. Hundreds of billions of pesos can be generated if only the government were unafraid to impose higher taxes on the country’s wealthiest families who have accumulated trillions in pesos and can well afford to contribute more to government revenues than they already do. Planned higher taxes on cars and cosmetic surgery are miniscule compared to the wealth they have. If passed into law, TRAIN only confirms the Duterte administration’s anti-poor and pro-rich economic policies. 

AntiPoorTaxProgram

Lawmakers should rethink Duterte tax program

The Senate version of the Tax Reform for Acceleration and Inclusion (TRAIN) bill remains anti-poor despite amendments. Research group IBON said this following senators’ recent approval of their version of the Duterte tax bill on third and final reading. According to the group, the Senate’s efforts to reduce the tax burden on the poor and to increase taxes on the rich do not go far enough to correct the Duterte tax program’s regressiveness and anti-poor character.

A copy of the Senate version is still unavailable. Based on media reports, IBON points out that the upcoming bicameral conference should rethink TRAIN for the following reasons:

1.       The poor are burdened by higher taxes that they can ill afford. Over half of Filipino families survive on less than Php15,000 a month including the one-third who struggle with Php10,000 or much less monthly. The Senate version of TRAIN still burdens the poor majority of Filipinos with higher costs of electricity, transportation, liquefied petroleum gas (LPG), sweetened drinks, food, and other basic goods and services. This is because of: (a) higher taxes on petroleum products including diesel and LPG; (b) sweetened beverages tax; (c) imposing 12% value added tax (VAT) on previously VAT-exempt items such as shipping and energy generation; and (d) a proposed new excise tax on coal.

2.       The richest will enjoy tax cuts. The middle class deserve income tax relief but the richest 1% of Filipinos with monthly incomes of Php150,000 to over Php7,000,000 can afford to pay much higher taxes while still maintaining their luxurious standards of living. The Senate version of TRAIN however still relieves the country’s richest with lower personal income tax, estate and donor taxes. As it is, Pres. Duterte has also already promised oligarchs that corporate income tax, property taxes, and capital income taxes will be reduced with the next packages under TRAIN.

3.       Token social protection. The Duterte tax program acknowledges the additional burden on poor households and tries to cover this up with temporary cash transfers to the poorest 10 million families of Php300 per month. This is however only during the first year of the tax program. The relief from cash transfers will be gone after the first year while their tax burden even continues to increase from the second year onwards.

4.       Grand infrastructure program not for the poor. The government claims that the TRAIN will finance its ‘Build Build Build’ program which mainly benefits the poor. This infrastructure program however does not build the public schools, hospitals, housing, irrigation and factories that the majority of Filipinos and the nation need for development. ‘Build Build Build’ is mainly about flagship transport infrastructure projects concentrated in the country’s highest-income regions National Capital Region, Southern Tagalog and Central Luzon with little for the poorest regions in the rest of Luzon, Visayas and Mindanao.

The Senate’s approval of its version of TRAIN moves the government a step closer to even greater distortion of the country’s tax system to benefit the rich and burden the poor. This will worsen already severe inequity in the country by putting more money in the pockets of the rich and taking away from the majority poor who already have so little as it is.

IBON argues that real tax reform means making the tax system more progressive. This involves reducing consumption taxes on the poor rather than increasing them as currently pushed by the Duterte administration. Moreover, said the group, direct income and wealth taxes on the richest should be increased. For instance, taxing an additional 20% of the income of just the richest 182,000 families who are the wealthiest 0.8% in the country can easily yield an additional Php84 billion.

The group stressed that aside from increasing taxes on the highest income brackets, revenues earned should be specifically allocated to essential social and economic services to benefit millions of Filipinos. This should be on top of meaningful social and economic reforms that prioritize people’s welfare and national development over elite interests, said IBON.###

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