There are several bills now in Congress that seek to reduce the country’s personal income tax rate, which currently ranges from 5 percent for those earning P10,000 a year to 32 percent for employees earning P500,000 and above annually.
Sen. Juan Edgardo Angara has a bill that seeks to lower individual income taxes to 25 percent. Three bills in the House of Representatives, filed by Rep. Rodrigo Abellanosa of Cebu, Rep. Angelina Tan of Quezon and Rep. Magtanggol Guinigundo of Valenzuela City want to lower income taxes to 15 percent.
Senators Ralph Recto and Bam Aquino also filed bills proposing to adjust income tax rates to “reflect new realities.”
I am very much in favor of these measures although they would have a tough time getting passed into law in this administration.
Workers are already overburdened by taxes in this country. Angara notes in his bill that the Philippines has the third highest individual income tax rate in the Association of Southeast Asian Nations (Asean), after Thailand (37 percent and Vietnam (35 percent).
Even businesses are overburdened by taxes. A study by the Asian Development Bank found that the Philippines has one of the highest tax rates in Asia. The corporate income tax rate of 35 percent in the country is next only to Japan’s 40 percent, and higher than New Zealand’s 33 percent, China’s 33 percent, Thailand’s 30 percent, Australia’s 30 percent, Vietnam’s 28 percent, Malaysia’s 27 percent and Singapore’s 18 percent.
Value added tax here at 12 percent is also higher than Malaysia’s 10 percent, Singapore’s 7 percent, Thailand’s 7 percent, Australia’s 10 percent and Japan’s 5 percent.
The VAT works like a payroll tax as well because it causes prices to increase, reducing the worker’s ability to purchase goods and services. Worker’s wages decline because their purchasing power declines.
We would not complain if we are getting our taxes’ worth but every day we experience absurdities that illustrate the contrary, like flooded, traffic-choked streets, poor public services, criminality and corruption from the lowest to the highest ranks in government.
For instance, from 2002 to 2011, the government lost more than P1.33 trillion in revenue due to smuggling, according to the Federation of Philippine Industries. The government can’t show more tangible results against smuggling and other forms of corruption so they tax fixed income workers and employers, who really have no choice but to pay for the excesses, inefficiencies and corruptions of their government.
Look, we are not Sweden where taxes are high but the citizens don’t complain because they get their money’s worth. PNoy and Kim Henares should wake up and smell the stench. We are a Third World country where majority of workers can barely eke out a living with their incomes.
The Swedes pay a lot but even then, local taxes in Sweden range only from 28 percent to 34 percent. And no one is cursing the Skatteverket, the Swedish Tax Agency, like most Filipinos do the Bureau of Internal Revenue here.
The Swedes accept the high taxes with few complaints because in return they get good public services, a universal safety net that takes care of them when they are old and no longer working, a fair and well-functioning society and an efficient government.
Again, what do our workers get in return from the taxes they pay government? Can the middle and upper income workers who pay the 32 percent income tax, for instance, send their kids to public schools and go to public hospitals, assured that they would get the best services? Can the government assure their safety in their homes and out? Can the government be relied upon to take care of them if they lose their jobs or once they are old and can no longer work, considering that it cannot even get children and mendicants off the streets?
All levels of government are incredibly inefficient. The horrendous state of traffic is a simple example of how much inefficiency there is in government. And then there is the sickening corruption, which even PNoy’s tuwid na daan has failed to curb.
The cost of living here is also high. Even a family in the higher income brackets, let’s say those who earn 30,000 pesos and above have a hard time making ends meet. The cost of utilities alone, including electricity which is among the highest in the world, eats up most of their household budgets.
Reducing income taxes would help immensely. It would put more money in the pockets of workers to help them cope with the high cost of living. This money would be spent on goods and services anyway thereby boosting the economy. More money for workers to spend means increased demand for goods and services, which results in more jobs for more people to spend more money, which results in more people paying taxes and the government making more money.