Pass lower tax bill to boost economic growth & gain higher tax collections!

BULL MARKET, BULL SHEET - Wilson Lee Flores (The Philippine Star) - September 13, 2015 - 10:00am

Winston Churchill once said, “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”

The great statesman was correct. It is not only grossly wrong for any government leader to think that higher taxes are the be-all and end-all solution to the state’s numerous revenue and budgetary needs; in fact, I think it is a wrong and lazy solution.

Let us entrepreneurs, professionals and concerned citizens voice out — via mainstream and social media — our strong support for House of Representatives Speaker Feliciano “Sonny” Belmonte Jr., Senator Juan Edgardo “Sonny” Angara, Marikina Congressman Miro Quimbo, Congressman Neri Colmenares and others for their progressive initiative and support in lowering our tax rates, which are among the highest in Southeast Asia.

I suggest that for social media, we use the hashtag #lowertaxesphilippines.

Let us also make support for this lower tax bill by our politicians into a major election issue, by remembering and voting overwhelmingly for the people I mentioned above and other good leaders with the guts and good sense to support this reform measure. I heard that Senator Angara has no need to run for re-election next year; let us nevertheless thank him for his gutsy tax-reform advocacy.

By the way, I disagree with some government leaders’ demand that in exchange for their support of lower tax rates, we should allow lifting or relaxing our existing bank secrecy law. I think this is wrong, impractical, anti-business and unenforceable. If our politicians lift the bank secrecy law in the Philippines, don’t they understand the negative impact this would have on the country’s investment climate? It might just encourage savers as well as businesspeople to instead remit funds overseas into foreign bank accounts. Please wake up!

Finally, our politicians seem to be doing their homework, comparing our tax system with those of our more economically progressive Asian neighbors. Our legislators’ reform measures will lower the existing rates for individual income tax and corporate taxes from 32 percent to 25 percent. There’s even a proposal to exempt lower-income segments of our population from taxes.

Why is a lower tax rate good for the Philippine economy and a win-win scenario that we should vigorously support?

First, of course, we small- and medium-scale entrepreneurs and professionals would be direct beneficiaries, thus freeing a chunk of our gross earnings, which will become either additional savings or more disposable income. Speaker Belmonte said that with the value of money nowadays going down, it is high time the government should lower the tax rates. A lower individual income tax rate would also mean less pressure to increase wages. More savings and more consumer spending would both be beneficial in stimulating economic growth.

Second, lower tax rates have been proven a good way to eventually boost the national government’s overall tax collections in the long run, so I believe the fears of our government officials that this proposed tax reform will lower tax revenues is not true. If we lower tax rates, this can boost our Philippine economy with possible higher domestic and foreign direct investments, which will result in bigger collections. Even the late US President John F. Kennedy made statements on the positive impact of lowering tax rates to boost businesses, economic growth and larger tax revenues. 

This idea of “lower tax rates, bigger tax revenues” reminds me of the wise advice of Landmark Department Store boss Enrique Cheng, who told me that as a youth he had the chance to ask the late China Banking Corporation chairman Dr. Albino SyCip what his secret to long life was. SyCip told Cheng in Hokkien: “Young man, eat less to eat more.” What SyCip meant was: if we learn to discipline ourselves by eating smaller volumes of food per meal, then we will be physically healthier to lead a longer life, which will eventually mean that we can actually eat more.

Third, lower tax rates would come across to taxpayers as fair and encourage more people to be dutiful and honest about paying their taxes, instead of the existing system of widespread tax evasion and underpayment.

Fourth, lower tax rates would indeed help government to promote the elusive goal of “inclusive economic growth.” On this point I have to agree with Rep. Colmenares. In our current tax system, big businesses, rich entrepreneurs, political leaders and other well-connected folks with access to top lawyers and accountants pay lower tax rates than many of us smaller entrepreneurs or ordinary professionals.

In addition to this inclusive growth goal, I have also proposed in past columns that teachers who practice the world’s noblest profession should be accorded the distinct honor and social prestige of tax exemption.

Fifth, lowering our individual income tax rate and corporate tax rate would make the Philippines more competitive compared to our ASEAN and Asian neighbors. In terms of taxes, investment rules and other policies, why don’t our leaders make an effort to research, compare and outshine our neighbors and direct economic competitors so that we can learn from their proven successes?

Again, I wish to remind our politicians to be more pro-people and pro-business with across-the-board, top-to-bottom cuts in personal and corporate income tax rates to strengthen the Philippine economy and in the long-term result in larger tax collections.

In the 1960s, President Kennedy said that too-high tax rates “reduce financial incentives for personal effort and risk-taking.” I wish to add that too-high tax rates also reduce the incentives for more people — whether professionals, entrepreneurs or big businesses — to comply and pay honest taxes.

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Thanks for your feedback! Email me at willsoonflourish@gmail.com, wilsonleeflores@yahoo.com, “like” Wilson Lee Flores on Facebook, and follow me on Instagram and Twitter.

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