Distributing the tax burden

In general, no tax is ever acceptable to a people.  This is even more so if the government that collects it is perceived to be useless, illegitimate, and corrupt.  A good government is one that is able to show the public that the taxes it demands are collected justly – i.e., according to one’s earnings and assets – and entirely spent for the common good.

Herein lies the biggest problem of the present government.  Most Filipinos believe that taxes in our society are collected more on the basis of expediency rather than on justice.  That the government has been relying more on consumption taxes than on property and income taxes.  That it has zeroed in more on the fixed-income earners with no breathing space than on those with variable incomes, like freelance professionals and businesses.  The public feels that those who bear the brunt of taxation are not the rich who have unlimited ways of hiding their true incomes, but the poor and lower middle classes who have single and easily traceable incomes, like the ordinary government employees.

On top of this, citizens do not see their taxes being spent to improve social services but only to line up the pockets of corrupt bureaucrats and to pay for government debts accumulated by bad leaders.  The public may know little of the superiority of the value-added tax (VAT) over the ordinary sales tax or excise tax.  But they know that whichever form of tax is collected, it will always be passed on to them as final consumers.  Therefore they believe that any increase in the VAT or any expansion in its coverage will always be, in the last analysis, an additional burden that they cannot hope to pass on to anyone but their families.

They want the government to first plug the drain in public funds caused by massive corruption.  They want the government to go after the large tax-evaders, to tax the wealthy instead of the poor by focusing on large incomes and lavish consumption, rather than on meager incomes and basic needs.

In view of this, it may make very little sense to warn the Filipino public that they face the consequences of an impending economic collapse if the fiscal deficit is not immediately solved. Many think they have nothing further to lose in the event of an economic crisis.  They don’t see themselves as meaningful stakeholders in the present system. Not a few may even believe that a crisis is what the country probably needs to bring the national leadership to its senses.

The point is you cannot expect the public to pay for the debts of unaccountable government corporations that the government has indiscriminately assumed year after year.  The government must give a full accounting of these obligations, and assign responsibility, before it should even begin to pay a single centavo of public money to service them.   Only then can it begin to allocate the burden of paying these obligations.  It can sell the remaining assets of these GOCCs, fire their overpaid executives, and settle their debts once and for all, or it can hold on to them and continue to service their debts.  In either case, we all end up paying the costs in the form of higher tariff or higher taxes.  I believe we deserve to know at least whom to curse for this state of affairs.

I am certain that, in the final analysis, the present government will choose the path of privatization.  This relieves the political leadership of the heavy political cost of imposing new taxes to cover recurring debt service.  It may also restore to the national budget the flexibility it needs to address the requirements of a growing population.  But what a pity that government-run firms in our country should always be known as inefficient and graft-ridden.  In other societies, they do not have that stigma, and they do function well as the public’s best defense against the abuses of oligopolies.  As important, in the hands of a developmental state with a clear vision, such public firms can become the spearhead of a sustainable and equitable form of development.

I believe that the whole tax debate has focused too much on the need to raise additional revenue immediately to avert a looming crisis, and too little on the need to streamline mechanisms so that existing tax laws are fully implemented and various forms of leakage in the revenue system are plugged.  Just to give an example: rental from high-end accommodations is probably one of the most underreported earnings in this country.  One can say the same thing for the incomes of top practitioners in the legal, medical, and entertainment fields.  So much tax-evasion takes place at the upper levels of our society that it has become almost immoral to take every centavo of income and consumption tax from the majority who do not earn enough, for no better reason than because it is easy.

For the last five years, public school teachers have been demanding an increase in their monthly salaries.  Government says it understands their situation but that it has no money to pay the increase they are asking for.  I say, if you cannot increase their pay, stop withholding the 10% income tax from their salaries until the government can give them the level of remuneration they deserve. Why should tax privileges be the prerogative of the Independent Power Producers?

Only a thin line separates taxation from exploitation, and our government seems bent on doing everything to erase it.

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