Get Real By: Solita Collas-Monsod
The Senate version of the much-vaunted TRAIN (Tax Reform for
Acceleration and Inclusion), Senate Bill No. 1592, was passed this week.
Let me tell you, Reader, and I am joined by highly respected colleagues
in this view, that it leaves much to be desired.
We need this tax reform program because the administration’s platform
is based on a “Build, Build, Build” program to improve the country’s
infrastructure—not only physical (roads, bridges, etc.) but also human
(i.e., to improve the people’s education, skills, training) and even
natural. President Duterte wants to accelerate our pace of development.
The problem lies in the fact that with the current tax structure, the
government cannot finance it. We have a structure that is old, creaky
and full of loopholes. For example, our excise taxes on fuel haven’t
been changed in 20 years. In 1998, fuel excises constituted around 50
percent of fuel prices—the same as other countries. Now they constitute
maybe 10 percent.
For loopholes, how about our value-added taxes (VAT)? Sure, we have
about the highest VAT rate in the region, but there are so many
exemptions. Sen. Panfilo Lacson pointed this out when he said that the
Philippines’ exemptions were more than those of Thailand, Malaysia,
Vietnam and Indonesia put together (PH=143, T+I+M+V=111).
So, to raise the funds to finance our Philippine Development Plan and
to make up for the needed reductions in personal income tax, we need to
streamline and update our tax structure. That’s what the Department of
Finance set out to do. Finance Secretary Sonny Dominguez was reported to
have said that his proposed increase in the fuel excises would bring in
P177 billion, and that removing the VAT exemptions would bring in P166
billion.
Hence the tax reform—to pay for the physical infrastructure and human
capital development (P40 billion for free college tuition). And there’s
universal healthcare, estimated at around P50 billion, etc. And then we
have to make sure that the poor are not further marginalized.
So what happened? Well, for one, all the foregoing—the country’s
needs—took a back seat to the individual needs of our senators. Someone
monitoring the discussions told me that this was the first time (in
three Congresses) that the senators were so open about what they wanted
for themselves.
They even had pet names for themselves, like “Papa Bear” (Gordon, I
am told), “Mama Bear” (Villar supposedly), and “Ice Queen” (allegedly
Legarda). And if their individual needs or interests clashed with the
needs of tax reform, guess who won?
Example: Sen. Sonny Angara’s interests led him to include ecozones
(not just direct exporters) among those with VAT zero rating, thus
adding to, rather than reducing, the exemptions. And anything that would
affect real estate was given wide berth, to accommodate Mama Bear.
When the senators realized that their pet insertions had reduced the
expected revenues of the tax reform, they scrambled to add more
revenue-raising provisions. And so you had a doubling of the documentary
stamps tax, a doubling of the minerals excise tax, a tax on coal 10 to
30 times its present rate. Is that good? No. No one bothered to check
what the overall impact would be. As a colleague described it: all
whimsical or arbitrary, all without the benefit of complete staff work.
The senators did arrange for the cash transfers to the poor for three
years: The additional revenues from TRAIN would be divided into 60
percent for physical infrastructure, 27 percent for human infrastructure
(including the cash transfers), and 13 percent for the Armed Forces.
However, if the poor are to get the P50.4 billion envisaged (P3,600 a
year x 14 million families—yes, the Senate considers the poor to
comprise 70 percent of our families), revenues from the Senate’s TRAIN
should be at least P187 billion. The latest estimated revenues are about
P120 billion.
Yet, in spite of the need to raise revenues, sin taxes (with complete
supporting studies) were not even considered. Senators Manny Pacquiao
and JV Ejercito presumably were convinced not to pursue this, because
anyway, it will be included in TRAIN II “early” next year. Anybody want
to bet on that? Elections are coming, and taxes and elections do not mix
well.
source: Inquirer
