Home > Op-ed > ADVOCATE'S OVERVIEW > February 20, 2005 | To bottom

Squeezing the poor through taxation

Taxation is among the three inherent powers of a state. It’s the lifeblood of the state, tax experts claim. It is exercised primarily to collect revenues to run the government and in order for the latter to deliver services to the people.

Among the principles observed supposedly under the Philippine taxation system is progressive taxation. When the tax base is being increased you increase the tax collected. In short the more income you earn, the more that you are supposed to share it with the government in the form of taxes. The more you have, the more you should give the government for taxation purposes.

This system, progressive taxation, outlaws regressive taxation, that which imposes bigger taxes to person with little income.

* * * * *

The Philippine taxation system is however more of regressive taxation. I shall cite the value added tax (VAT) system and the tax imposed against foreign investors.

The VAT, either the existing or the proposed, is a regressive form of taxation. It does not screen the people it is taxing – rich and poor are taxed alike. And not according to their capacity to pay. The same tax can be imposed both on the rich and the poor. Despite their differences in economic capacity, they are imposed of the same percentage.

The VAT is preferred by the administration because it is easier to impose. As a means of indirect taxation, the moment the buyer of goods or pays services he is charged automatically of the tax. The seller’s role is to collect it and submit it to the government’s revenue office. This system is easier for them than the direct taxation imposed to taxpayers’ income or properties etc. And they are imposing it almost to the totality of the population.

* * * * *

While the government is exhausting all venues for its taxation, it adopts policies exempting tax imposition to foreign corporations. Yes, especially to corporations involved in the exploitation of our natural and mineral resources.

Under the Omnibus Investment Code of 1987, foreign corporations are granted incentives if they involve themselves in investments including mining. They are granted tax holidays or non-payment of taxes for four years. Imported equipment are free from duty free or tariff taxes. If the equipment depreciates, they can use that to lessen their tax obligations. If their business does not earn, they can use such losses for non-payment or lessened taxes. Privileges, indeed. But aren’t they already a privileged class? Is this not class legislation? Just asking.

The Mining Act of 1995 or Republic Act 7942 also grants privileges to foreign investors for the mining industry, including the tax exemptions. If a certain foreign corporation thinks of leaving the country, it can do it with repatriating its investment out of the country elsewhere. If it has profit, there are no laws prohibiting it not to remit all its income to its mother organization or part of its income to be retained in the country. It can, in fact, remit all its profit to its mother country. If it incurred foreign loans, the more that it can easily remit these loans to the foreign institutions where it incurred such loans.

Of course other privileges include that foreign investors’ freedom not to be expropriated from his properties. This includes freedom from government expropriation of its properties in case it failed to satisfy its obligations, like tax payment. Other rights granted to foreign investors include timber and water rights.

* * * * *

Any tax paying Filipino can observe the government’s bias on the issue of taxing. The government sold the country’s patrimony and its sovereignty to foreign states and investors, as claimed by Justice Carpio of the Supreme Court who voted against the constitutionality of the Mining Act of 1995.

If the government was sincere in taxation, it should lift the exemption of foreign investors. And if it is a government of, by, and for the people, then it will desist from imposing unjust and excessive taxes to the people. #

Home > Op-ed > ADVOCATE'S OVERVIEW > February 20, 2005 | Back to top