Why we need #betterbuwis

(part 2)

In part 1 of this column we discussed the constraints in collection which is the main source of our problems with our taxes, and discussed issues encountered in by small businesses to pay taxes. Moreover, we also know that our tax rates are too high especially for the middle class, hampering their growth.

We mainly are able to collect from regressive or transaction based taxes such as the Value added Tax. (VAT) and employees through witholding taxes. What has happened is that employees bear the brunt of contributing taxes, rather than the richer segments of society who ideally need to bear more.

To achieve a change in our tax system, the Comprehensive Tax Reform progran (CTRP) incorporated in new tax proposals in House Bills 4744 and 4888 aim to decrease poverty and expanding infrastructure spending while pushing inclusive growth through lower personal income taxes (down to an average of 25% from the current 32) for 3 out of 4 Filipinos and decreasing and simplifying taxes for small businesses and lowering estate and donors taxes.

To offset the lowering of these taxes, new revenue measures include increasing fuel excise taxes, slapping taxes on new luxury vehicles and removing VAT exemptions such as those on exports. VAT exemltions for seniors snd persons with disabilities will be mantained.

More than this, we really need to plug leakages such as non payment by professionals and businesses of their rightful taxes.

A concern is the increase in online businesses and ride sharing schemes that do not issue receipts. It is not clear, for example, whether the popular ride scheme Uber pays VAT, or whether its driver owners are registered taxpayers subject to either percentage taxes or VAT. That is something worth checking.

We definitely need a new system that captures the right taxes from the right people, and collects them promptly without adding unecessary administartive burdens.

Our development effort demands it. Lowering poverty is no joke. This is a tall order, and a lofty task worth pursuing if indeed we want to be a middle inccome economy with poverty rates near Indonesia’s current 12% (we are now at 22%). For refernece, Malaysia is at the 1.7% poverty level.

Thus, how we collect and spend taxes will determine how mature our economy is and able to facilitate the kind of modernization and industrialization thst fosters the kind of growth that replicates itself without any additional government support. Experts say that this can be achieved once our GDP starts hitting 9-10%.

For now, monitor the DOF website snd facebook pages like facebook/econofchange and #betterbuwis.

For reactions: facebook.com/johntriapage

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