It has already been lamented that the Philippines has the highest power and internet costs in Southeast Asia, it also has the highest personal income tax rates in the region. These have hampered further competitiveness and disallowed reinvestment of incomes in other pursuits such as small businesses that could have driven more employment.
The last elections have therefore pushed these issues in the limelight, especially since many voters feel this pinch in their pockets, given that majority of our taxes come from fixed income earners like them.
With about twenty to thirty percent of monthly salaries going to taxes, employees feel this crunch, all the more made painful knowing how these significant amounts sadly translate to the poor infrastructure they have to drive and ride on, inadequate public hospitals, and ill equipped and poor quality public education. In the more advanced countries they or their relatives have visited and worked in, these essential public services need not break the bank, being affordable or even free.
Had the quality and cost of these necessary public services been improved, then the lower and middle classes need not spend on costly private service providers and pay expensive tolls on highways and spend for private education and hospitalization. It is these last two items that force Pinoys to work abroad.
The high cost of these things, plus the pain of seeing them go to government makes living in the Philippines difficult and frustrating for many.
Thus, to achieve two goals, which is lower taxes for the middle class and better public services, and money to pump prime the economy requires that sufficient revenue be generated over the nect five years. Towards this, government’s economic managers have begun pushing in Congress The proposed comprehensive tax reform program.
Called the Tax Reform for Acceleration and Inclusion Act aims to generate a net gain of P174 billion, equivalent to 1 percent of the GDP in 2018. This initial proposal is to lower personal income tax (PIT) rates to make these at par with those in the region, expanding the Value Added Tax (VAT) base by limiting exemptions to necessities such as raw food, education and health care, while increasing excise taxes on oil and automobiles.
If approved in full will allow the government to“improve 44,000 kilometers of national and local roads; build 6,700 health centers and hire nearly 10,000 doctors, nurses and midwives; and attain 100 percent health insurance coverage, along with building 80,000 more classrooms and hiring 157,000 teachers over the next five years,” according to Finance Secretary Carlos Dominguez III.
Likewise important is the governments goal of lowering the poverty rate from the present 21% to 15% by the end of the Duterte government’s term. Dominguez said that this would achieved by implementing these initiatives, because raising productivity and improving competitiveness will, in turn, create more and better jobs—and thereby lift the economic status of the country’s impoverished sectors.
Truly, investments that drive growth in employment do not come without spending for the right infrastructure that has eluded us for decades. Perhaps its time we truly push these things.
We are all therefore encouraged to monitor progress of this important legislative proposals, ot only to see of we have paid less taxes, but whether we have better infrastructure, services, and less poor by 2022.
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