Why are we always taxed to the bone?

INTROSPECTIVE - Tony Katigbak - The Philippine Star

Do you recall the saying there are only two things certain in life — death and taxes? That came to mind this week when I read a variety of news items about our existing tax system and several proposed new changes for the year ahead. I’m sure I am not the only one left stumped as to our current system and, quite frankly, slightly alarmed as well.

Despite our government’s proud declaration that the Philippines is the next tiger economy in Asia, we remain extremely poor with more and more of our people falling below the poverty line. It’s enough to make this statement laughable. Why should we be considered a “tiger economy” when there are still so many things intrinsically wrong with our economy, including lack of trust in government and an ever widening gap between the rich and poor.

Plus don’t even get me started on the high (and rising) cost of basic goods and necessities. We pay the highest rates for power, tolls, fuel, and other basic services and our average citizens are barely able to send their children to school or receive proper health care. How is this a rising tiger economy? We still have poor infrastructure, unreliable public transportation, and businesses all over the metro lose countless pesos a day due to never ending traffic jams that see their employees wasting over 2 to 3 hours of their productive day in their vehicles instead battling to get to work. While some may say that due to mobile connectivity we can at least work from our cars, that statement isn’t true as well due to our slow Internet speeds and occasionally unreliable mobile carriers.

And add to that the rising feeling of unrest in the country due to rampant crime. If you turn on the television all you see is endless reports of kidnappings, car jacks, shooting, stealing, and scamming. It just seems like we are living in the Wild West these days with criminals being so bold as to just shoot someone point blank in broad daylight despite CCTVs and the fear of getting caught. How are we supposed to feel safe and secure in this type of environment when criminals are no longer afraid of the law?

It’s no wonder, that despite our democratic government and our proficiency in the English language (plus the fact that our Asean neighbor Thailand is in political turmoil), foreign investors still have major qualms about investing in the Philippines. Can we blame them? It truly feels like we are reaching a point where something has to give and hopefully turn us around in a more positive direction.

I personally wonder what it will take to get us there. Like many others, I tried to be optimistic when the current administration took office, but so far, nothing seems to have truly changed. And now, as we really begin to see how much of our hard earned money we have to remit to the government, we can’t help but feel discouraged even further. I have to commend Senator Juan Edgardo Angara for challenging the system with his proposed tax reform.

The Philippines has the highest tax rate in Asean. While many of us have probably complained about our taxes at some point, I don’t think everyone knew just how much higher our tax rate was compared to our Asean neighbors. As more and more information came out recently, more and more Filipinos felt despondent about how much of their hard earned income goes back to the government supposedly to fund projects that no one can truly see in their every day life.

Currently, in the Philippines at the tax bracket of P500,000 a year, individuals have to pay 32% income tax. It’s odd because corporations only have to pay the maximum of 30%. In other Asean countries, the rates are surprisingly much lower. In the same bracket Cambodia and Vietnam pay 20%, Lao PDR pays 12%, Malaysia pays 11%, Thailand pays 10%, Singapore pays 2%, and Brunei Darussalalam pays 0%. The rates are mind bogglingly lower than our 32%. Plus, there is now news about even more taxes in the making including taxing retirement benefits and even annual bonuses, which I can’t help but find unfair. For people who have worked their whole lives and paid their taxes fairly, how can the government demand more when they have already finally retired? Where is the justification in all of these extra measures on top of an already staggeringly high income tax?

As mentioned, they claim this is justified because the government says these taxes are needed to fund government programs and infrastructure being built to provide better services for Filipinos. However, even with this reason, so many have mentioned that the government does not foot the bill for major infrastructure projects including major toll highways, airports, mass transit systems, water and power plants, and more. These projects are still contracted out to the highest bidders and we end up having to pay high rates to make up for the costs.

In the past few days as well, more information about our Asean neighbors and their taxes versus their government initiatives have been shared on social media sites and it just makes Filipinos grow even more despondent seeing how other countries have much lower tax rates and still provide better facilities like better airports, functioning and safe mass transport systems, and education and healthcare. Why can’t we do the same? It’s so frustrating to see others achieve so much with so much less while we are all giving much more and coming up with nothing to show for it but roads full of potholes, an airport that is akin to an oven, and a metro rail transit system that sees Filipinos piled in like sardines.

I personally support tax reform and I think it’s truly an important part of how we can better shape the future. Most of those against it claim that if our income tax is cut then our EVAT will have to go up to make up for the loss of tax earnings, but my question is why do we need to make up for this loss at all? Isn’t it time the government learn to maximize what they get in the best way possible? Stop paying exorbitant amounts for facilities not worth their price tag and learn to budget better. After all, in the real world when we lose income we find a way to make do. Shouldn’t our government do the same?

I think in the end what is most aggravating to Filipinos is not the taxes alone, but the fact that we truly seem to have nothing to show for it. Not to mention the aggravation from PDAF, DAP, and so many more qualms we have with those we’ve entrusted to lead us. It all just seems to have come to a head, which makes everything even worse. Personally I can’t help but feel that the government needs to include the people in how their taxes are being spent. We need more transparency and accountability so that at least we feel our taxes are protected. Again, if we see the returns on what we pay I don’t think we would feel as cheated or as depressed about our high income tax rate.

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