EVEN though we heard the statement, listened several times to the recording of it made by our reporter, and read the words in print in our own and several other newspapers, we are still having a hard time believing any government official anywhere, let alone the president of a nation of 100 million people, could say something as abysmally stupid as what President BS Aquino 3rd offered in explanation for rejecting any consideration of the new tax proposals supported by a majority of the Legislature and the public.
What is being proposed, to describe it in as simply as possible, is to reduce the personal income tax rate by adjusting the tax brackets, lowering the highest percentage (which now stands at 32 percent), raising the lowest bracket from five percent to nine percent, and raising the tax-exempt level of income from its virtually-irrelevant current level of P10,000 per year to a more reasonable P180,000 per year. To compensate for an assumed reduction in revenues from income taxes, the Value-Added Tax (VAT) could either be raised from its current 12 percent to 14 or 15 percent, expanded to cover goods and services that are currently VAT-exempt, or some combination of both.
As to the matter of reducing income taxes, Aquino said, “The question is, if we reduce income taxes, our revenue will also go down and our deficit will grow. Will the increase in deficit become a negative factor when credit rating agencies rate us?” To the suggestion that VAT could be increased in some way, he responded, “Taxes like the VAT affects everybody regardless of economic status or level in society. That’s not what the Constitution is saying that we should adopt a policy of progressive taxation.”
As our own and others’ analysis has repeatedly explained, a change to a gross-income tax scheme simplifies tax collection; as the Bureau of Internal Revenue under Aquino has demonstrated its inability to efficiently collect taxes under the current convoluted scheme, this proposal is an obvious solution to the real problem – which is not, as Aquino and his BIR chief Kim Henares believe, a matter of not enough taxes being levied, but a matter of properly collecting the taxes due.
And while it is technically accurate to describe VAT as a regressive tax (i.e., one whose functional percentage is inversely proportional to income), it is more fair than an income tax – provided lower-income taxpayers are protected by making basic necessities exempt from VAT – because it is an optional tax. Taxpayers have the choice to be taxed or not, depending on their spending, and as higher-income taxpayers tend to spend more, the regressive nature of VAT is largely canceled out.
Furthermore, a president who has refused to consider reductions in VAT several times during his tenure has no personality to hold forth on its “regressive” nature.
President Aquino, you have mocked the country long enough by referring to us as “your bosses,” and then promptly ignoring or dismissing every demand or suggestion for better governance and improved economic circumstances “your bosses” have ever made. We want the tax system updated, period. If you cannot do the job “your bosses” demand, then stop wasting our time and step aside for someone who will.