Four indicators that Duterte’s tax program is anti-poor

December 1, 2017

by IBON Foundation

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.###