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. ###
