The Marcos Jr government seems to think it has so much money that it can just keep cutting taxes on the rich. This is while it is going to impose a new tax on digital services that is not only the highest in Southeast Asia but will also burden poor and low-income Filipinos the worst.

Congress is deliberating a bill to cut taxes on stock transactions and on dividends to non-resident aliens. They’re not calling it a “Tax Cut on the Rich Act” though and instead hiding this intent by calling it a “Capital Markets Efficiency Promotion Act,” probably just to throw off people with pseudo-technical language.

The House of Representatives (HOR) passed this in March 2024 while the Senate is still deliberating it. The approved House bill will mean a revenue loss of Php140 billion in over the next four years – which is, correspondingly, Php140 billion more in earnings for capital market players.

On an annual basis, some Php18 billion is lost from lowering the stock transactions tax from 0.6% to 0.1 percent. Another Php12 billion is lost mainly from cutting the dividends tax on foreigners and secondarily from cuts in taxes on sweepstakes winnings, lotto winnings, and documentary stamp tax (DST) on lottery tickets and horse racing bets.

The government justifies these tax cuts and lost revenues as promoting more efficient capital markets and investments. There’s a problem with this and it’s really just a smokescreen to increase investor financial returns without really creating new economic value.

The main effect of these proposals is to reduce government revenues by the amount that earnings of investors are increased. It will also just further incentivize financial speculation over productive investment which really does so little to address the real economic problems of poverty, hunger, joblessness and inequality in the country.

The government, the economic managers and our legislators have to correct their erroneous thinking that all financial flows go to productive investment in the real economy. If financial flows are eased, such as by lowering transaction taxes, the only sure thing is that financial and speculative profits will increase. Decades of financial liberalization has clearly still not led to Filipino industrial development.

If the government really wants to improve capital markets for national and social development, it would achieve so much more by promoting long-term investment in agriculture and Filipino industry, by improving development banking, and by more public investment in critical social sectors.

If it really wanted to. Instead, Congress is apparently just looking to divert public attention away from the measure’s substantial revenue losses with a tweak to include a provision for tax incentives to companies with a “corporate pension plan” that will “create wealth for the working class.”

We should be skeptical about this nonsense that tax incentives for companies to establish corporate pension plans will create wealth for Filipino workers.

Only a very tiny minority of working class Filipinos are in formal establishments and even less in the large firms able to set up such pension plans, perhaps just 5% of the total work force at most. Higher wages from meaningful wage hikes are a much more broad-based way of generating substantial wealth for the working class.

If the government is serious about pension reforms it should strengthen public pension systems to be more universal and with larger benefits giving decent retirement incomes to all workers. There are some 10.6 million to 12 million Filipinos aged 60 years old and above. Around 3.7 million indigent seniors receive a negligible Php1,000 monthly, some 3.3 million SSS pensioners get an average of less than Php5,000, and only 576,000 GSIS pensioners are able to get about Php20,000; there is an overlap between indigent and SSS or GSIS pensioners.

The government should also improve social services, especially health care, to give retirees more security in their old age.

Tax incentives for corporate pension plans will ultimately benefit corporations. They will use these to lower their tax burdens on the specious justification that it is for the workers when it’s not.