Proposed tax reform program is pro-rich, anti-poor — IBON

The tax reform program proposed by the Department of Finance (DOF) will relieve the rich while burdening the poor and worsen inequality in the country, research group IBON Foundation said on Monday.

"The DOF proposed tax reform program seeks to raise an additional P600 billion by 2019. IBON noted that it will do this by raising taxes on the country's poor majority and reducing taxes paid by the rich and big corporations," the foundation said in an emailed statement.

According to IBON, the rich will benefit from lower income, property-related, and capital income taxes.

"The top personal income tax rate will go down from 32 percent to eventually just 25 percent ... This will result in P139.0 billion less revenues for the government in just the first year of implementation," IBON said.

In July, President Rodrigo Duterte said his administration will pursue tax reforms for a "simpler," "more equitable," and "more efficient" tax system which will lower tax rates from 32 percent to 25 percent, a system that remained unchanged since 1997.

The administration also plans to lower taxes on property-related transactions such as estate, donor, and transaction taxes.

"IBON observed that the DOF plans to offset lower taxes paid by the wealthiest Filipinos by increasing taxes on the poor majority. The poor will suffer higher prices from value-added tax (VAT) being charged on previously exempt items, higher excise taxes on petroleum products, and a new sweets tax," it said.

The administration said it will impose a 12-percent VAT on basic necessities such as raw food, education, and health.

"Consumers will pay P163.4 billion more for the same goods and services," IBON said.

"There will be higher excise taxes of P6-10 per liter or kilogram on diesel, LPG (liquefied petroleum gas), kerosene and the entire range of oil product prices. Consumers will pay P178.2 billion more when they buy oil products or pay for correspondingly more expensive goods, services, and transport fares," it added.

Duterte said the adoption of a comprehensive tax reform package is high on the 10-point recommendation of the business community.

The DOF earlier said it will submit its tax reform package to Congress this month.

It is looking at increasing government revenues by imposing taxes on "fatty foods," luxury items, and casino winnings.

But it is also readying a targeted subsidy program to shield poor consumers from the excise tax adjustments.

“We are currently developing a targeted subsidy plan, similar to that of Indonesia, where the most vulnerable, especially [when it comes] to the increase in transportation costs, will be protected in a manner like that of the 4Ps (Pantawid ng Pamilyang Pilipino Program),” Finance Secretary Carlos Dominguez III said in a separate statement on Monday.

“Tax reform is needed to achieve the larger goals of the administration and to make sure that everybody feels the country’s growth,” he added. — Jon Viktor Cabuenas/VDS, GMA News