“THINGS as certain as Death and Taxes, can be more firmly believ’d,” stated Daniel Defoe in 1726 in his book entitled The Political History of the Devil . Defoe, a Presbyterian, believed that the devil was a participant in the history, fates and fortunes of the world and its leaders, especially the Catholic Church in Europe and its launch of the Crusades.
It seems that the whole concept of taxation has been a contentious topic from the beginning of time, and taxmen (or tax collectors) have been reviled for their practice. Matthew, one of Jesus Christ’s 12 apostles and later among the four Gospel authors was a tax collector: “And as Jesus passed on from there, He saw a man, called Matthew, sitting in the tax office; and He said to him, ‘Follow Me!’ And he rose, and followed Him. Matthew 9:9)”
Christ, of course, was making a point: his ministry was one of openness, acceptance and forgiveness that even the most repulsive of fellows has a place by His side.
What makes taxation and taxmen such objects of hate to this day is not the concept of collecting a share of personal wealth for the common good, which is what taxes are supposed to be. We need taxes to be able to fund roads, bridges, government services and similar expenses which the state requires to exist and its citizens to commonly use.
What we all hate most is when taxes are not used for the purpose they were intended for. In Christ’s time the taxes were collected from the Jewish nation by the Roman conquerors that spent it for the lifestyle of the Emperor back in Rome and the local Roman governor who ruled over them.
These days, in this democracy called the Republic of the Philippines, our tax contributions pay for our government and governance, and it pisses us to no end when we hear that our hard earned money goes to funding fraud, waste and abuse.
This is why, despite having to pay almost 50 percent in income taxes Filipinos who have been able to migrate to Canada or Australia are still the subject of envy. They see their tax payments going directly to benefits and services like quality education, healthcare, transportation, telecommunications … all the basic necessities to live decently. All the more is this situation amplified in places like Singapore where the income tax rate is placed in the area of 10 percent. Low payment, still high quality of government service.
In the Philippines the tax rate is placed at about 30 percent of income, with another 12 percent in Value Added Tax (VAT). Yet the litany of complaints in government service is ever growing: poor personal security due to lack of police manpower, skills and equipment, inadequate transport infrastructure, corruption from the petty levels to the big time top levels, lack of health facilities, lavish lifestyles of those in government service, inadequate emergency response….
The burden on providing the tax money for the Philippine government falls squarely on the shoulders of the middle class whose third of their income is slashed off automatically through the withholding tax system. Thus, whether they file their income tax forms or not (an additional burden on their time, energy and resources), they’ve already paid their taxes.
To the rich – that one percent of society which owns about 40 percent of capital resources in the country – the 30 percent or more income tax payment doesn’t matter. They have the money to hire the best tax lawyers and accountants to keep their payments down. Even after payment they can still afford their luxurious homes and vehicles; send their children abroad to study and; pay for private security, hospitalization and emergency services when needed. And their accountants and lawyers can find a way to deduct those from their tax payables.
The poor, though massive in numbers compared to the middle class, don’t pay income taxes to start with. But their existence is part of the tax burden being an expense to society as a whole. Think of the billions in the Conditional Cash Transfer program of the Department of Social Welfare and Development (DSWD). This is not to disparage it, but it is a fact that this cash given to the poorest sector is funded by the middle class’ tax money.
Even the VAT, which some say the poor don’t escape from paying because they purchase goods and services with it, has the tax automatically tagged on the purchase price. But consider this: VAT is an “input-output tax.” Those who dutifully report VAT payments monthly like small businesses and companies know that they pay the amount of the VAT they charge to clients net of the VAT they in turn paid for the inputs they used for that service. For example the 12 percent VAT I paid for the bond paper I bought in the bookstore can be deducted from the 12 percent VAT on top of what I charged a client for the press release I wrote and printed it on. Ergo if I paid P11.20 for the bond paper the VAT I paid there was P1.12, and I charged my client P112 for the press release service the VAT for that which my client gave me is P12. With the bookstore receipt on hand I remit to the Bureau of Internal Revenue (BIR) P12 – 1.12 = P10.88.
My point? Who in the middle class does this? Again, the rich’s lawyers and accountants find ways to minimize their damage while the poor purchase very little compared to the middle class who again gets automatically hit with 12 percent and don’t have the means and wherewithal to go through the whole input/ output exercise.
And all this, taken together, makes for a crucial election issue for 2016. The current administration of President Benigno Aquino III has stated clearly that it does not want and will not have any tax cut as it will jeopardize its reform, socio economic development and anti-poverty programs under its Daang Matuwid governance. All this is, of course, contained in the trillion peso budget presented and eventually passed by Congress.
And, it can be safely said, that in its continuation of the Daang Matuwid governance Liberal Party standard bearers Mar Roxas and Leni Robredo will continue this resistance to reforming the tax rates.
But Senator Chiz Escudero, Vice Presidential candidate Senator Grace Poe’s presidential bid, clearly points out that with a P623 Billion under spending in the PNoy government’s budget one can that it can obviously take the P30 billion hit if the tax rates are cut. Indeed, why collect the taxes if you don’t spend it?
Of course, it’s a totally different matter if you do declare the savings then spend it on a totally different, off-budget matter. And that was what the Disbursement Acceleration Program (DAP) was all about – budget savings converted to fund other expenditures – which was declared unconstitutional by the Supreme Court.
This brings us back to why taxes and taxmen are so reviled. We see a disconnect between what we pay and where it goes.
Poe’s clear and direct 20 point agenda for her presidential campaign addresses this disconnect by defining priorities where tax spending will go. Her VP running mate Escudero’s positive tax cut attitude further closes the gap between the people’s tax burden and benefits.
The LP’s Roxas-Robredo tandem will carry the current PNoy government’s program – tax rates, budgeting and spending – although Leni has openly stated that tax reforms must be undertaken to shift the burden to the rich. The statement is pretty broad that Philippine Star columnist Boo Chanco sees it as a campaign promise that will go the way of the Freedom of Information (FOI) act promise of PNoy during his own 2010 campaign. Thus we can assume we will have more of the same Daang Matuwid with this team, whatever it is we have now.
The candidacy of Vice President Jejomar Binay and Senator Gregorio Honasan is saddled with a very graphic example of taxes going to the wrong places – if the revelations about the Binay public funds shenanigans are to be believed. It’s like the middle class acting as the orphan Oliver with an empty food bowl, sheepishly asking the caretaker: “Please sir, I want some more.”
So, will the tax issue make a difference in the 2016 elections? Or will it be, like death, just be a part of life, to be reviled but accepted as something to live with? The vote will spell the difference.