Tax ‘reform’ program burdens poor more than the rich–IBON

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.”/www.ibon.org

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