House Bill No. 5636, or TRAIN (Tax Reform for Acceleration and Inclusion), is essentially antipoor. Or prorich. Its net effect is to decrease the purchasing power of the bottom 60 percent of the population and increase that of the top 40 percent (especially the very rich). And the so-called “transfer” measures that are supposed to alleviate this (or compensate the poor) are only for a four-year period, plus the fact that it is not clear how those “transfers” are to be effected. That is the gist of my last column.
This column is addressed not only to the Reader but also to the Senate, which has the power to correct things. Of course, there is still the “Third Chamber” that has the ultimate power—the bicameral committee of the House and Senate.
The most obvious Senate correction needed is to ensure that transfers to the poor do not end after four years, and also to ensure that the petroleum excise taxes from which these transfers will come continue to increase in order to meet growing population needs—which means indexing them (why not make them ad valorem instead of specific?).
Second, how are these transfers to be effected? If the Department of Social Welfare and Development is put in charge, its other important activities—like the 4Ps and disaster relief—may suffer. Either that, or the transfers program, which involves 80 percent of the population, will not even get off the ground.
Third, the Senate could think of other measures, and not necessarily limit itself to the tax measures in HB 5636. For example, why not consider a negative income tax, which the Bureau of Internal Revenue could administer? A negative income tax, Reader, means that people earning less than a certain amount would receive supplemental pay from the government, instead of paying taxes (or not paying, if income is less than P250,000 a year).
Don’t laugh, Reader, or Senators. This idea is at least better than HB 5636’s current mishmash of social benefit cards, discounted fares on public utility vehicles, or discounts on medicines or subsidies on food and housing. Essentially just the negative income tax (i.e., a cash transfer) would suffice, allowing beneficiaries to choose what to spend it on. That would save on the humongous cost of administering multiple programs envisioned by HB 5636. There’s an added benefit: The BIR would see its roll of taxpayers (and negative income tax recipients) expand, so that in better times, they’d have a data base of potential income tax payers.
Fourth, economist Cielo Magno (UP School of Economics) recently pointed out in an interview that the tax reform measures for the mining industry were not included in TRAIN. She is correct. Rep. Miro Quimbo (another congressman whose salary is well deserved), with the help of the Mining Industry Consultative Council, introduced HB 5637 in the last Congress, which would precisely correct the present anomalous situation where the government’s share, as owner of the minerals, was practically zilch.
Nothing came out of that bill. It conveniently disappeared from the radar screen of both Congress and the Department of Finance. Cielo estimated that the additional revenues could safely be estimated at P20 billion. And no way could this measure be called antipoor.
Another tax measure which could have been included in TRAIN, but was not, is the reform of our sin taxes. Dr. Antonio Dans (UP College of Medicine) has been tracking the impact of the Sin Tax Reform law of 2012 , and has shown it to be eminently propoor. His data show a marked decline in smoking, and a marked increase in Filipinos who have never smoked. The decline in smoking was most marked in price-sensitive populations—the poor, rural dwellers, and the very young. An increase in sin taxes will not only result in a decrease in smokers by 1 million by 2021 but will also shift household expenditures from tobacco to more healthful products. Moreover, the reforms would bring in estimated incremental revenues of about P100 billion.
With all that, TRAIN shifts from antipoor to very propoor. Let’s see if the Senate can face down the cigarette and mining lobbies.
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