Stealth taxation

Stealth refers to the act of moving or acting in a secretive or quiet manner to avoid detection. Stealth taxation is the manner by which a government imposes fees and charges that amounts to a virtual tax.

Taxation has always been a politically sensitive issue. People, understandably, don’t want any more taxes than what they are already paying. Politicians who advocate more taxes are punished by voters. Ask Ralph Recto. This is why our government has resorted to stealth taxation.

For example, the Bureau of Immigration wants to charge $4 or P240 per passenger coming in and another $4 going out of the country. That’s supposed to pay for the modernization of the country’s border management infrastructure across 11 airports.

There is no doubt we must modernize the processing of passengers at our airport immigration counters. But immigration processing in the civilized world is typically funded by a country’s national budget. It is a government function; the government must cover its costs.

This immigration processing fee is an example of stealth taxation. Our government must not get away with this the way it has been getting away with other instances of stealth taxes.

Let’s look at our Meralco bill or any bill from an electric distribution utility. There are so many charges that inflate the total amount we have to pay. And these are items that have nothing to do with the production and distribution of the electricity we use each month.

Universal charges, for example, covers the expensive mistakes of our government before EPIRA like the costs of electricity we didn’t use in the ill-advised take-or-pay contracts of Napocor.

Then there are subsidies for missionary electrification in off-grid areas using expensive diesel generators that enable subscribers there to pay a very small portion of their bills with the larger part being charged to grid-connected subscribers like us.

There are also the allowances supposedly to encourage renewable energy. There are two: the feed-in-tariff and the green energy auction (GEA). These are government programs whose costs should not be passed on to ordinary consumers.

Besides, it is claimed that the production cost of solar and wind is now grid-competitive. Can we trust ERC and Transco not to allow windfall profits?

Indeed, in the case of GEA, there is apparently no solid legal basis for it. Myrna Velasco, Bulletin’s energy reporter raised valid points in a recent article.

“The RE law contains no explicit provision establishing a green energy auction (GEA) system… The DOE’s administrative design of the GEA casts doubt on whether such additions are legally faithful to the law’s original intent…

“EPIRA is oriented toward eliminating subsidies. The layering of mechanisms like the GEA-All triggers policy tension: instead of easing the burden, these structures appear to be pushing the industry deeper into subsidy addiction.” But the government conveniently passes the subsidy cost to the consumer.

Unlike our ASEAN peers (except Singapore) that subsidize retail electricity rates, our government provides no subsidies to bring down rates. On the contrary, our government even increases power costs through stealth taxes.

High power rates have been our problem for ages. It has been an important disincentive for direct foreign investors. The least our government can do is take out all those subsidies for government social programs charged to the consumers that should be covered by national budget appropriations.

Technocrats at DOF will say our fiscal space is limited which while true, can also be remedied by more efficient implementation of programs. Corruption eats up a lot of funds that could be used to cover those irritating charges in our monthly power bills.

Over the last 15 years, it is estimated that up to P1 trillion may have been lost to systemic kickbacks, overpriced contracts, and “ghost” projects.

Perhaps, if we starve the beast, so to speak, our humongous bureaucracy can learn to prioritize needs properly. Because congressional leaders and DPWH bureaucrats see they can get away with plunder, they plunder.

Building infrastructure like expressways is another government responsibility that is now being done by the private sector, at a cost to users. In theory, we have already paid our taxes that should pay for the infrastructure we need.

I am all for public-private partnership if only because the government has proven itself so incompetent in delivering infrastructure like expressways. I am just saying that we, the taxpayers, are being shortchanged.

Our government has a tax collection efficiency problem. We have high statutory tax rates but low actual collection due to systemic compliance leakages.

Income tax collection also has an unfair enforcement structure. Some 82 percent of total personal income tax collections come directly from automatically withheld salaries of formal, middle-class employees.

High-earning self-employed professionals, taipans, freelancers, and business owners contribute only about four percent of the total collections. This imbalance is perpetuated by a collection system that preys on the middle class and MSMEs instead of focusing the BIR’s limited audit resources on high-net-worth taxpayers.

Today when trust in our government’s ability to work for our common good is at an all-time low, taxpayers, specially in the middle class, are asking what they are getting for the taxes they pay. Our leaders should give us value for money.

There is a comment from a reader of The New York Times that also applies to our case: “People are not mad we have to pay taxes; we are mad we have to pay taxes while billionaires don’t. We are mad we have to pay taxes but don’t see any tangible results of a functioning government…”

Winning back public confidence should start with more honesty in spending our money because every centavo paid in taxes, stealth or not, had been earned through blood, sweat and tears.

Let’s get rid of all those stealth taxes and make the government live with what it can collect and can reasonably borrow without endangering economic stability.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco