MYTH #1: “The burden of the tax will be on the poor instead of the rich.”
Our proposed tax reform program will improve the lives of Filipinos, especially the poor. It promotes equity such that those who have higher incomes will shoulder more of the burden compared to those with lower incomes. Through our proposal, Filipinos will contribute based on their capacity to pay.
MYTH #2: “Lowering personal income taxes means more money in people’s pockets that boost consumption, and consequently, stimulate the economy. No need to increase taxes.”
TRAIN corrects and simplifies the current tax system, as well as make it fairer by lowering the PIT, reducing VAT exemptions, and adjusting excise tax rates on petroleum products and automobiles.
Through this tax reform, we have been and will continue to increase spending in public investment, such as by constructing school buildings, roads, and bridges, and funding basic social services and social protection. All these will stimulate the economy more and benefit the poor. This is a more inclusive way of spending our shared resources, rather than merely boosting individual consumption spending by lowering all taxes.
Every P100 spent by the government on social services, such as health and education, will have a multiplier effect of 1.9% and 1.2%, respectively on the economy; while spending P100 on infrastructure will yield a higher return of more than 2.0%.
We must balance investment spending and consumption spending if we want to create a more equitable society where everyone feels change.
MYTH #3: “Fares and commodity prices will skyrocket because of the proposed increase in oil excise.”
No. Prices of basic goods and public transportation will not skyrocket. In fact, inflation will be an additional 1.5% at the most. Our estimate shows that food prices may increase by an additional 1% in the first year of implementation while transport price may increase by an additional 2%.
MYTH #4: “The tax reform proposal does not resolve tax evasion of self-employed and professionals. This should be fixed instead of making additional taxes!”
The proposed tax reform program will simplify compliance through a single rate of 8% (in lieu of the income tax and percentage tax) for small businesses, the self-employed, and professionals.
To ensure compliance, tax administration measures are included in the proposal:
- Relax bank secrecy laws for fraud cases
- Use of electronic receipts
- Connect cash registers/point of sale machines to BIR servers for simultaneous reporting of sales and purchase data
MYTH #5: “The tax reform bill is regressive and anti-poor.”
Our tax reform program is pro-poor and progressive. It simplifies the system and makes it fairer and more equitable by restructuring the Personal Income Tax (PIT), removing unnecessayr Value Added Tax (VAT) exemptions, and adjusting the excise tax rates on petroleum products and automobiles.
Through the reform, 83% of individual taxpayers including minimum wage earners (P250k and below) will be exempted from paying income tax. The revenues generated from this reform will fund infrastructure, health, education, and social services.
Implemented together with social protection mechanisms such as Unconditional Cash Transfers, Pantawid Pasada cards, and free TESDA trainings, the overall impact benefits the poor and the vulnerable sectors.
MYTH #6: “The government is already underspending. There is no need to raise additional revenue.”
Underspending is a short-term problem being resolved through budget reform in concerned agencies. The present administration is addressing this. For 2017, reforms are in place to ensure proper spending and utilization of budget.
However, addressing underspending alone will not be enough to support the vision of this administration for a prosperous country with zero extreme poverty and a better quality of life for all Filipinos.
Although the overall goal of the tax reform is to address the inequity of the current tax system, it will also help achieve this administration’s vision through additional investments in social services, health, education, and infrastructure.
MYTH #6: “Only the personal income tax needs to be fixed! All the other proposed tax changes should not be pushed.”
It’s true that there is something wrong with our Personal Income Tax (PIT). Restructuring the PIT alone will not correct the tax system’s inequity. There are structural weaknesses that have been corrected, namely:
- Several taxes that have not been adjusted in 20 years;
- Excessive exemptions and special treatments granted without good basis; and
- Highly restrictive bank secrecy laws
Our goal is to correct our tax system’s inequity and make it progressive.