Income Tax Reform: Good or Bad?

After years of discussions, both houses of Congress are finally hell-bent on passing the income tax reform bill; a proposal seeking to bring income taxes down. The Philippine Daily Inquirer reports that both Senate President Franklin Drilon and House Speaker Feliciano Belmonte are looking to talk to President Benigno Aquino III and seek his endorsement.

ELECTION FEVER

Their action is really expected, with the general elections just on the horizon. Politicians will try to attract the votes of the masses by championing populist causes and advocacies. According to the proponents, if the bill eventually becomes a law, this will strengthen the purchasing power of the working Filipino by increasing disposable incomes of each individual. Good news for income tax paying individuals like myself! Even the informally employed and minimum-wage earners -people who do not pay anything to this end- are pushing for the passage of the legislation. A measure that has this kind of popular support would definitely have the backing of any true-blooded professional baby-kisser. Any act showing opposition to it can result in nothing less than a debacle in May 2016.

BEYOND FACE VALUE

We do not live in an ideal world where people live happily without governments. The social theories presented by Thomas More and Henry David Thoreau have no place in this shallow, commercially driven existence. In the real world, government needs to collect taxes in order to pay for the "basic" social services (medical, housing, welfare, etc.), national needs (peace and order, disaster response, national security, etc.) and infrastructure. The national budget is determined based on the projected annual tax collection. Modifications to the tax law -like this new bill- can and will disrupt the cash flow and ultimately affect government programs. Therefore, government will need to find other sources in order to compensate for the losses. In other words, new taxes will be introduced, or existing taxes will be increased.

This early, the Bureau of Internal Revenue and representatives in the Lower House are already discussing where to get the needed funds. The BIR is proposing an increase in the Value-Added Tax (VAT) from 12% to 14%. VAT, for the information of the uninitiated, covers almost everything that is peddled in the market; be it products or services. Congress is also poised to raise taxes on non-alcoholic beverages by as much as PhP 10.00 per liter by January 2017. The extra fee on the drinks is on top of the 12% (or 14%) VAT already levied on the products. Proposed products to be covered include:

• soft drinks
• soda fruit drinks
• sports drinks
• sweetened tea
• coffee drinks
• energy drinks
• all non-alcoholic, ready-to-drink beverages

Sin taxes on tobacco and alcohol will most definitely go up after tariff on more benign luxuries are increased. Who's to say what the incoming government will think of next? Tax on extra-rice? How about drinking water? Breast milk?

EGALITE, FINALLY!

So, what does this all mean? For one thing, the idea of increasing disposable income by lowering income tax is just an illusion. Prices of commodities will go up and thereby negate the value of a higher take-home pay. Informally employed Filipinos, like PUV drivers, street vendors, the daily-wage and minimum-wage earners, will be hit the heaviest. The masses who complain about the price of basic commodities will need to pay more in order to survive. The ironic thing is, they're the most vocal supporters of this bill. Two years or so from now, this commie-backed mob will be back in the streets clamoring for its repeal. Remember: Populist agenda look good on the surface. In the end, when the lies and deception of the likes of Teddy Casino and Neri Colmenares are unraveled, they bite back.

It is about time people who never or do not pay income tax contribute more into the national coffers. We will be proportionally charged the same amount of money by the taxman.