The Philippine banking system posted an almost 14 percent year-on-year growth in 2016, a whooping P154.2 billion, from the P135.3 billion in 2015. The system has been on a steady, sustained march to profitability. DU30 took extreme care in naming the new BSP governor to shield the system from wayward, irresponsible monetary policies.
But the banking system’s sustained profitability is nowhere near the profit level of the publicly-listed real estate giants, where a P20 billion profit and a 20 percent rise in net income year-on-year looks very ordinary.
What about the investment companies with boxy malls as their crown jewels? We are talking about the wealthiest people in the country, the wealthiest of the wealthy. We are talking about PH corporations that made it to the list of the world’s biggest public companies.
Given these awesome wealth and profitability level, what is the government’s plan for these giant corporations on the taxation side? Will the revenue policy impose the “soak the rich” approach of FDR, or Franklin Delano Roosevelt? Since corporations are flush with cash and the revenue burden is shouldered mainly by the wage earners, would it not be wise policy to re-engineer the tax code to soak the rich and spare the struggling?
No. Not in this country that worships the rich. And where even policy-making is guided by rich worship.
The tax reform package recently passed by the House of Representatives or HOR (doesn’t the phonetics fit?) that has been passed on to the Senate for final approval has this as the centerpiece: cut the corporate tax, which is only 30 percent, on the flimsy ground that it is high relative to the ASEAN counterparts.
No, the proposed cut on the personal income tax of the wage earners is not – has never been – the centerpiece of the DU30 government’s proposed tax reform. I will go to that later.
Why are there no pragmatic and moral reasons to cut the corporate tax?
With sky-high profits on a sustained basis, PH corporations have been spared for so long from the curse of poor corporate profitability. That does not exist. A corporate tax cut would merely fatten the coffers of the very rich. The awesome profits are not really spread around to empower labor via profit sharing and wage increases. In fact, some of these giant corporations are the prime backers of the “endo” policy.
The profits are used to pay off shareholders, which is where the bulk of the corporate net income goes. Trickle-down, as Pope Francis said, is bollocks. The profitable, cash-awash corporations pay dividends and do share buybacks.
Don’t they use the awesome profits for fresh investments? Very little. The bulk goes to pay off the already high-income shareholders.
For their new investments, these giant corporations do not even pay the 30 percent corporate tax. They pay less. Or, they can scam the system by getting tax holidays from the Board of Investments (BOI).
For the giant corporations, there is always a fresh tax loophole to be exploited.
The 32 percent tax on wage earners earning P500,000 a year and up is the most exploitative aspect of the country’s tax system. For years, this has been unchanged, as if P500,000 were a fixed totem pole of personal richness. In truth, the P300,000 or so a year that is left after a wage earner with a P500,000 income has paid his taxes is barely adequate for a family of six. A 25 percent tax rate for wage earners at this particular tax bracket would only offer a minor relief.
Still, the revenue and finance people have not reined in their giddiness to peg – and sell – the supposed tax reform package on the proposed cut on the tax rate of ordinary wage earners.
But the tons of flesh the tax proposal would gouge off the wage earners – which would come through the fuel tax – is sold as a minor story. The various chambers of commerce, prime beneficiaries of the tax reform proposal, have been cheerleading the supposed reform measures.
The truth is the imposition of a fuel tax to make up for the cut in the personal income tax would hit hard on the economic classes from middle class down. Some congressional leaders have an unadorned description of the tax reform package – anti poor. A total of 24 million adult Filipinos would be hard hit by the HOR-assed excise tax on fuel. Transport fares would go up, cost of basic commodities would go up, inflation would set in. Whatever small cut that would be made on the personal income tax would be drowned by the huge burden that would be inevitable with a excise tax on fuel.
The rigidity of the tax structure on the ordinary wage earners and the pliability of the corporate tax code (new investments can even get tax holidays and tax discounts) show that even the so-called comprehensive tax reform measures hew to the general policy of rich worship. The struggling economic classes are the ones always bludgeoned by the loftiest of “ tax reform measure.”
Tax policies are mostly run along the general concept of “soak the poor, spare the wealthy.”
These will be the sorry facts after the work of congress on the “ tax reform” is over and done with. Corporate tax cuts in an environment of record-high corporate profits. Levies on fuel at a time the struggling economic classes need all the ayuda they can get from government.