Ironing out our tax system

Advocating a flat tax: A few columns ago, I supported the suggestion of Senate President Juan Ponce Enrile and Albay Governor Joey Salceda to lower our income tax rates. This may sound counter intuitive given the widening budget deficit. I reasoned however that while this may initially result to lower government collections, it would produce a more stable and predictable revenue flow, lessen if not eliminate “friction costs” and eventually lead to higher income. As pointed out in the earlier column, high tax rates create an atmosphere conducive to misdeclaration and corruption.

In relation thereto, we should also take a second look at our progressive system of taxation. Constitutionally commanded under Article VI, Section 28, a progressive system essentially provides that a taxpayer who earns more, pays a higher rate. That same Constitutional provision mandates an “equitable rule of taxation”, but how can that be when close to 90 percent of taxes collected are withheld from salaried employees? Businesses and business people should bear their fair share of the tax burden.   

My four centavos is to seriously study adopting a flat tax scheme similar to what they have in Hong Kong where the income tax rate is pegged at 16 percent for all. Coupled with a simplified method for computing deductions and strict implementation of the law, taxpayers will be incentivized to pay the right amount of taxes and disincentivized to misdeclare their income. This will expand the tax base and eventually bring more revenue for the government.

In fact, the argument is similar to the logic of the recent law exempting traded stocks from the payment of documentary stamp taxes (“DST”). Our financial policy makers project that the DST exemption would increase stock market activity which in turn would result in higher tax collections. Moreover, this move would make our exchange more competitive with other Asian bourses and help attract more investments into the Philippines.

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Animo La Salle!: Two centavos are donated to the newly opened De La Salle University College of Law led by its dean, Jose Manuel Diokno, son and namesake of the legendary human rights advocate, Senator Jose W. Diokno. During its launch, DLSU President and Chancellor, Bro. Armin Luistro FSC emphasized that the unique feature of this new Taft Avenue based law school is that it will “seek to actively engage in the promotion, protection and preservation of human rights and environmental laws in the La Sallian tradition of excellence and service.” 

This augurs well for Philippine legal education as it demonstrates the unmistakable trend towards an earlier specialization in legal practice. This is also a positive development for future law students as it gives them more schools and law programs to choose from.

This new law school will be complementary to the pioneering MBA-JD program of the Far Eastern University Institute of Law and the De La Salle-Ramon V. Del Rosario Professional Schools at DLSU’s RCBC Makati campus which, in turn, seeks to attract students who wish to specialize in commercial and business law. Now on its sixth year, the pioneer batch of the MBA-JD program produced 24 new lawyers (who are also armed with MBA degrees) and its initial 77.42 percent bar passing performance was third best among the 100+ law schools throughout the country. Not a bad start for a new law program!

I am always asked whether there are too many lawyers in the country and my standard answer has always been, “we do not have enough good lawyers.” And by good lawyers, I refer to those that are not just technically competent but who are ethically motivated as well.

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Regulating Infomercials: One centavo goes to the Senate Economic Affairs Committee led by Senator Miriam Defensor-Santiago for conducting an investigation in aid of legislation of the television and radio infomercials of certain elected and appointed public officials. There are two main issues involved: 1) premature campaigning and 2) taking undue advantage of government resources. 

With respect to the allegation of premature campaigning, the main defense is that this can only be committed by a candidate (i.e., someone who has already filed a certificate of candidacy). And since the filing is not until November yet, then no legal violation has occurred. While this is a technicality that can be addressed by amending our election law, the larger debate to my mind is whether we should prohibit the practice in the first place. These infomercials represent protected expression both of the prospective candidate and the concerned media entities. Moreover, the prohibition creates an artificial restraint on the free interplay of ideas. My four centavos is to allow the airing and publication of these infomercials (for so long as they are being paid for with their own funds) and just let the voters decide whether such candidate has been excessive in promoting his candidacy. 

My bigger beef lies with the misuse of government resources. Public officials should not be allowed to use taxpayer’s money to advance their candidacies. Similarly, Congress should regulate the setting up of billboards by public officials claiming “pogi” points for projects funded by you and me. Public officials should be subtler in their ways and not underestimate the capacity of voters to properly determine whether they are doing their job well.  

In this regard, I wish to give half a centavo to Manila RTC Judge Marino De la Cruz for issuing a temporary restraining order (TRO) against the infomercials of the Department of Health. Why only half a centavo? Because the TRO should have also covered the infomercials of the other cabinet members and government offices. I promise to give him another half centavo if and when he expands his TRO ruling to include the others. 

“We must be the change

We wish to see.”

— Mahatma Gandhi

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