High income taxes an election issue

The topmost annual income bracket of P500,000 consists of new college grads; it’s unfair to tax them 32%.

“It’s easy to grandstand ... what are the government programs that will be sacrificed?” Thus does Mar Roxas dismiss the cries to lower the unreasonable 32-percent personal income tax. His public posture as the Admin’s 2016 presidential bet being as P-Noy’s clone, he apes the latter’s stance against tax breaks. Sadly for Roxas the issue will hound him throughout the election campaign, as taxes are a major middle-class beef.

Today’s income tax bracketing is inapt. Set nearly three decades ago, it imposes on topmost P500,000-annual income earners a flat rate of P125,000, plus 32 percent on any excess. Half-a-million pesos was a stupendous amount at that time of P57-daily minimum wage; one could buy a brand-new sedan for P105,000.

Inflation has since eroded the peso’s value. The annual P500,000 today is only P38,000 a month, including the taxable 13th-month pay – the starting salary of a new college grad in a call center. It won’t buy much in these times of P130-, P165-, and P240-per-kilo retails of chicken, pork, and beef; P20,000 monthly apartment rentals, and P50,000 semestral school tuitions. The lowest company worker today takes home some P200,000 a year; most others – young professionals, supervisors – already are in the P500,000-upwards bracket, and so pay the highest rates. They are in the same rung as their managers and VPs earning P2 million-P5 million – yet the latter must make ends meet too.

It’s only fair to redo the tax brackets. Millionaires are now a devalued dime a dozen. The topmost 32-percent rate should be pegged at a realistic income level. That way, average salarymen would have more cash to take home.

They would have more reason to stay home too, instead of working abroad to enrich foreign companies and economies. Filipino professionals prefer to practice abroad where higher pays are coupled with lower taxes. In Hong Kong the income tax is only 15 percent; in Singapore it’s 20; and in Malaysia, 26 – yet their per capita incomes are ten to 25 times that of the Philippines. With the Philippine tax rate certain to stay as is when the ASEAN Economic Integration commences in Jan., expect local professionals to look for more productive out-country work.

Finance Sec. Cesar Purisima pooh-poohs income tax cuts for two reasons, both myopic. One, it supposedly would ruin the country’s international credit rating, a prime basis for foreign investments. Phooey! The neighbor-states mentioned above have higher credit ratings than the Philippines, and more foreign investors too, for their taxes. Besides, no less than the Joint Foreign Chambers of Commerce in the Philippines in a recent newspaper ad called for tax relief for their employees.

Purisima’s other alibi is that the government would lose P29 billion in yearly revenues. Double phooey! The more money the salarymen take home, the more they would spend on goods and services. For each expense they would pay 12-percent VAT (value added tax). The individuals or businesses from whom they buy also would spend – and pay VAT – and so on in economic multiplier. Even if the extra income is kept in the bank, there’s still income tax on interest. The government likely would rake in more than the P29 billion it initially will forgo.

It is Purisima’s unimaginativeness, from which P-Noy and Roxas take off in opposing tax breaks, that makes voters shudder to have “more of the same” beyond 2016. This early middle-class homeowners are telling their maids whom to not vote for if they expect a raise.

Roxas asks what expenses the government must give up for lowered income taxes. What else, if not the P30-billion annual Risk Management Fund? That odious item in the Admin’s national budgets used to be buried deep in the outlay for the Office of the President, until recently unearthed by Rep. Neri Colmenares (everyone’s favorite senatorial aspirant). The Fund is the source of arbitrary sovereign guarantees of profit – favors, in short – to selected “investors.” From it, Colmenares avers, come in part the:

• P7.5-billion reimbursement to the minority party in the LRT-1 extension, which has yet to commence precisely due to government delays;

• P8-billion annual electricity subsidy to one American and three Korean factories in the economic processing zones; and

• P650-million-a-year “balato (bequeathal)” since 2012 to P-Noy and Roxas’ Liberal Party-mates posing as MRT-3 maintenance contractors.

Incidentally, the Audit Commission has outlawed sovereign guarantees. Yet Malacañang inserts them anew in the proposed 2016 national budget.

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